Friday, December 18, 2009

Haven't you heard?

Dear Landlord,

I'd like to take the opportunity to thank you for your warm seasons greetings I received from you today. I'd also like to confirm that I received your notice of rent increase form as well. The four months notice you've given me is generous.

I also want to thank you for not increasing my rent by the maximum allowable amount, instead choosing to keep the increase below 3% of my total, or about the price of a cold case of beer. I like beer. I like all kinds, but I'm especially partial to the kinds that only come in 1s or 6s. The premium kinds in other words. I can afford them; I earn a decent income and thanks to you subsidizing my lifestyle with market rent well below equivalent ownership costs I am able to drink a lot of premium beer each month--ask my wife, who is constantly reminding me that premium beer is creating premium pressure on my waistline. But I digress, and while beer is worthy of writing about anytime, my note to you has other purpose.

It's with beer in my mind, not affecting it mind you, that I kindly reject your annual rent increase for 2010. Now I know that inflation eats into your bottom line. I know this because the price of a six-pack of Heineken has increased lately too. We're all affected negatively by inflation. But inflation seems to swing both ways in some markets.

You see, things have changed over the past several months. Lots of people like me have moved on, to jobs elsewhere, to houses bought, to who knows where, but one thing is for sure, more have left than arrived--the For Rent sign on the front door reminds me of that each time I come and go myself.

I'm a good tenant. I pay my rent on time, I keep things clean and tidy, I don't lock myself out in the middle of the night (or day for that matter) and when something breaks I fix it myself if I can. You're lucky to have me. So I won't be paying you more next year.

It's simple really: the vacancy rate has climbed to a point where you can't be as choosy as you once were. In fact, it's climbed to a point where you may be lucky to even be able to choose. Come spring, it may have climbed to a point where you may have to drop rents or offer incentives to get a tenant to fill your vacant units. The last thing you need is for me to leave you over a cold case of beer. But remember, I like beer. Enough to leave you. And I don't want to allocate funds from other uses to make up for an unnecessary rent increase.

You might be wondering how I've come to realize this? Let me tell you: some people like to walk into Future Shop regularly to see if that 60" plasma flat screen has come down in price. Me? I like to check out vacant rental suites and see what I'm missing. Just the other day I was in one nice enough to make me think very seriously about moving. Sure it cost more per month, but it was worth every penny. I tried to negotiate with that landlord--they'd been trying to rent their new basement suite for over 3 weeks; I smelt a deal brewing.

That landlord had a false sense of the market though. They'd just bought the house and renovated it to create a suite, told me they wouldn't be able to afford their mortgage without it. It was nice, but they were asking too much, and they wanted someone in right away. Long story short, we gave them a call the next day and told them we'd take it in the middle of the month if they dropped the rent by $50/month or they gave us a 6 month lease instead of 12. They didn't feel they should have to do either. That was three weeks ago. I checked Craigslist while writing you this note and sure enough, there it still is, still vacant, and still asking too much. The money they left on the table in December by rejecting my offer would have more than made up the difference between my lower rent offer and their asking price over the course of the lease. But apparently they can't add months together in their calculations--they're probably part of this new "can I afford it this month" culture.

Do you see where I'm going with this? There's a lesson here. You want more money. I don't want to give it to you. I know there's a lot of unit choice out there, many of them nicer than where I live now. I could move, costing you money to advertise, clean, lost rent etc, and me some time and beer for the buddies with trucks who will help me out on moving day. I think the cost will be much greater for you than me. I'm willing to take a stand on this. Are you?

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Best quote from that news story:

“It’s nerve-wracking because ... there’s not going to be anyone filling my place and that burden falls on you financially,” she said, adding she can’t afford the $2,130 mortgage without a little help.

“If I was to give anyone advice, it’s to not buy a place that you can’t afford on your own.”

I want to know how she got a mortgage for a two-bed condo she can't afford on her own? And they say there's no sub-prime lending in Canada. Sure.

40 comments:

PainInThe said...

I love Scott McGillivray on HGTV but the guy and his show have singlehandedly done more to ruin big houses and oversupply the rental market than anyone. With the sole exception of Broadmead, where the nosy neighbors WILL report you and WILL force you to sell your house if you ever try to suite it out for a single second, soon EVERY house in Canada will be carved up into as many suites as possible, with 50% of them sitting empty. Good luck making your mortgage then, OR selling to someone that can afford and wants a big house without useless extra kitchens.

Mortgage-"helper", indeed. More like default helper.

Suiting houses is a bubble just like the larger housing bubble, and it's a poppin' too.

Double-Agent said...

I have a suggestion for Jen Anderberg, the condo owner in the article. Sell now and rent!

Take a look at the average prices for condos over the last few years in this VREB graph Even with a year of low interest rates prices have stayed flat. Things are only going to get worse as interest rates rise and condo prices fall.

There are lots of Realtors® out there that will help you unload. Get out now while you can.

Skeptic said...

HHV - great post. Writing style was humorous.

Keep us informed on how you make out with the landlord. Will he lose a tenant over 500-600 bucks a year?

jesse said...

Dear tenant,

I know this rent increase will be hard but let's face it. You are settled into your home. Your commute is predictable, you are close to shopping and have made friends in the neighbourhood. We both know for the case of beer you aren't going to hire a mover for $300+, spend the time looking for another place to rent, spend dozens of hours packing and moving, change your address, and, most important, take a risk with a new business partner AKA landlord. Over a case of beer, dude. Think about it.

It's tough paying these increases especially in an environment where people are losing their jobs and deflation is a reality but the city council you elected just forced a 4% property tax hike down my throat.

I hear what you're saying, though. It will be an inconvenience for me to advertise and interview tenants but we both know this day was coming at some point anyways. I'm a decent landlord and, to be honest, there are enough good tenants around who will seek me out. You are not irreplaceable, nor am I. The question is, who is going to blink first.

With the utmost sincerity, your Landlord

Olives said...

Wow, for $600.00 I bet you can still find your own place, a bachelor in an older building. Maybe she should get a foreign student - of course she'll have to feed them and drive them around them for that price.

My dad, an old banker, mentioned to me yesterday that back in the "old days", even if mortgage rates were artificially low, you still had to qualify at a much higher rate.

HouseHuntVictoria said...

Dear Landlord,

Thanks for your response note regarding my earlier rejection of your rent increase. I fear our lines of communication may have become cloudy as you say:

"We both know for the case of beer you aren't going to hire a mover for $300+, spend the time looking for another place to rent, spend dozens of hours packing and moving, change your address, and, most important, take a risk with a new business partner AKA landlord. Over a case of beer, dude. Think about it."

I fear you underestimate my love of beer. And my ability to use said beer to influence friends to help me move with their work trucks thereby saving me $300. And the enjoyment I get in looking at real estate. You see, I'm a bit of a nut. I actually find spending Saturday afternoon browsing rental units enjoyable. I do it even when I have no interest in moving. I'm just like that.

My wife and I have talked at length about this situation, and while we both don't mind living here, and appreciate the quality of the building manager, we don't *love* being here. We've always said should the opportunity to move to a nicer home present itself, we'd consider it. I'm merely letting you know that your annual rent increase is pushing us to seek another opportunity--out of respect, we're giving you the opportunity to compete for our business.

I'm inclined to think you don't feel it necessary to compete on price. I acknowledge your other "good points" and appreciate them. But our bottom line is the price increase isn't justified by the offering. We'll be actively looking for a new place over the coming months. We like new, and we're not afraid of change, in fact, change is often good.

Within a 10 block radius of our current location there are no less than 100 available units to choose from. We're confident we can find something we like more, at a price we like, within the coming months. We've reached out to half a dozen rental agencies this morning. Now we have commission sales people looking on our behalf for suitable suites. It's only a matter of time until another opportunity presents itself.

Now, I understand you have a bottom line. I'm prepared to throw you a bone. Here's my final offer: should you agree to not increase our rent in 2010, we will agree to sign a 6 month lease agreement giving you security in the event of one of those commission salespeople finding our perfect match even after we tell them we're not looking anymore (those crazy agents don't know when to quit), there will be a penalty to us should we abandon our relationship with you. I'll even sweeten the pot a bit further for you. If you agree to said arrangement, we'll sign the papers at the pub and I'll buy the beer.

Fozzie said...

What cracks me up is people asking $1200 for 1 bdrm rental in a Bear Mountain condo. Get real - so its brand new - who cares! You shouldn't pay a premium to be renting out there. I'm paying $1050 for a 2 bdrm, 2 bathroom, 4th floor in Swan Lake area. It's a nice place too with gas fireplace etc.

msr said...

Wow,

I just saw the most amazing thing today. ING raised its rates on savings accounts. A heralding of higher mortgage rates or maybe they're a little desperate for money to lend?

Mark said...

Fozzie, people can ask whatever they want....IF renters are stupid enough to pay it then they (landlords) are laughing all the way to the bank.

The problem has been that people have been willing to pay some pretty outrageous rents in Vic. Now I also know plenty of people that have shaved hundreds off a monthly rent by negotiating and signing a lease.

Houses be it to buy or rent are just like anything else in this world...NEGOTIABLE. people need to realize that.

All that said rents will come down (they already are) as more empty spec units sit empty. I really fail to see why some people ar willing to pay 1200 + to live in a basement when they can rent a new 2 Br condo for the same price. Victoria is a strange place indeed.

Bear Mountain is another story.....why anyone would want to live there is just weird BUT the fact that they are willing to pay a premium to do it is even weirder!

Ultimately the consumer/renter is in a position to negotiate the best price for themselves if they fail to do that they are morons. When does common sense start to factor in this craziness???

We looked at a brand new condo 2Br + den 2 Ba(Colwood Lagoon) that some poor bastard paid waaaaaaaaaaay too much for. He was asking $2000/month we said maybe we could 1700 but had to see it first.

It was nice but nowhere near 1700/month nice. We didn't bother negotiating for a further reduction because it is terrible location. The drive into town everyday would make me insane! My gut says we could have had it for 1500/month....still a lot but a $500 reduction from the original asking price.

My point is everything is negotiable especially if you are good tenant. So let the desperate owners of these spec condos ask for the moon. When this all plays out they will come to terms with the reality....or they will sell at a huge loss.

Either way who the hell cares. Renters will be back in the driver's seat very soon.

That story in the Times Communist about the nitwit girl that couldn't find a roommate was laughable! Why the hell would you buy a place you can't afford? And who the hell carries a $2000 + per month mortgage on a 2 BR apartment??? That you could rent for 1200 easy.

I don't feel sorry for her at all. Just plain stupid!

jesse said...

Dear Tenant,

I see you have already been looking around and you have obviously found many places for rent. I cannot attest to having the time or patience for looking at my competition. What I know is that in order for me to continue having a decent return I need to raise your rent. It is nothing personal.

It appears that my value proposition to you is not acceptable. My suggestion to you is that you seize the day and move to accommodations that best meet your lifestyle and budget. From what I'm hearing my offering is perhaps not the best fit going forward.

I think of myself as a fair landlord. I had thought we had a good working relationship and certainly I appreciate your competence as a tenant. Your kind offer for signing a marginally extended lease will be taken under advisement but, to be honest, it sounds like you are eventually going to terminate our business agreement anyways and I would not want in any way to hinder your future success and happiness.

Now with all the round-about talk out of the way... here's the real deal. I am raising your rent. You have the legal option to move. I am confident I am a cut above most landlords and I can secure a long-term and reliable tenant at the higher rent should you decide to move. Maybe I might have to lower the rent back to the original level, which I am allowed to do by law, to secure a tenant whose long term commitment to a business relationship is more promising.

All the best in whatever decision you decide to make

Your Landlord

Skeptic said...

The owner of the condo probably agreed to the interview because she thought it might be free publicity that would attract a roommate.

But someone else will be reading the article - Canada Revenue Agency (CRA). If she failed to report the rental income they will be auditing her returns for the last few years. But she won't end up paying more tax because a portion of her mortgage interest, condo fees and utilities can be used to offset the rental income.

But will happen is that a large portion of the capital gains exemption upon the eventual sale of the property will be lost. However, there won't be any capital gain unless she holds onto the place for a long time.

BTW - The roommate gets the best part of the deal. They get to live there with all the same benefits for $600. The owner gets to pay the mortgage, condo fees and other expenses. I wonder if the owner ever considers this or are they still blinded by "building equity" rationalization.

Just Jack said...

How/why could she even buy that condo if she can't afford it on her own?

I cannot believe that people have been saying Canada has no sub-prime market.

Did anyone else see the TC and the house that just sold for $5.5 million to a local buyer that had been listed in 2007 for $18.5 million. I am so sick of this level of greed and am watching as the market takes care of it.

S2

yoshi said...

Jesse

When I sign a lease I am asked for references. I'm curious to know whether you as a landlord are ever asked for references. If that is the case then I would buy the argument that you are a landlord worth the extra money. But if you don't give references to prospective tenants then how would a prospective tenant know you are a good landlord and worth the extra cost?

Just Jack said...

Dear Landlord

Thank you for allowing us to rent your basement suite these last few years.

I understand that you couldn't have bought this house without the suite and we needed a roof over our heads so am very thankful that we have been able to help each other out.

Which takes me to the reason why we are moving out.

We understand that you paid alot for this house and so had to charge a large rent to help pay your large mortgage. We also know that this place has gone up by many thousands since you bought. You have now told us you will be raising our rent (by the legal percentage mind you) again this year. We feel we are being gouged.

We also feel that you have been looking down your nose at us renters and thought we were fools and you would take us for as much as you could so we would pay your mortgage.

We have now found a comparable place for far less money so please find this letter as our one month notice.

It's nothing personal. It's just business.

S2

Animal Spirit said...

Dear Landlady,

Thank you very much for letting us rent your suite. We understand that you are picky and are glad that we fit your needs. We also appreciate that our rent of $1100 for a 2-bedroom near the water in Fairfield has only gone up $40 in five years, while suites around us have gone up around $500.

Given this, we choose to put up with your intricacies and our inability to paint to our colour choices without significant negotiating. We also know that you choose not to fix things like the gas fireplace, but equally realize that your cheapness has also meant a relatively low rent for what is, quite honestly, a very good place to live.

It is true that I would have liked to have bought when my partner and I moved in, but given that my work was only for six months at a time then, it was not in my nature to take on that much risk.

Now that we have a beautiful young daughter, we would like to move to a place with a garden that we can call our own, a home where we could paint the walls, a floor that is wood, not carpeted (though we understand the noise issues for below if it wasn't carpeted).

At this time we choose not to buy (though the banks would let us) as the house across the street just sold for around 70 times our annual rent (though it does include a good suite and is in better shape than our place).

Thank you again for letting us stay. We appreciate that you want to help us - and you are. We will look for a house to buy, or a better place to rent (preferably near Prospect Lake or on West Saanich/Beaver Lake), but so long as the cost is too high, we'll be staying.

Your Good Tenants.

jesse said...

yoshi I am not a landlord but I do take issue with some of the conceit demonstrated in this post. From my experience trying to exert power over a business partner is fraught with danger and rarely ends well. HHV's ficticious situation has a subtext of contempt for landlords in general and writing a letter like that IMO shows there is more than just a small rent increase behind the desire to move.

I am sure more wiley tenants will and should fight tooth and nail to avoid rent increases however never underestimate the degree of hubris alive in the market. I would bet that most landlords will believe they can replace a good tenant with their "above average" business skills and guile. We know on average they will fail but it is naive to think a landlord must succumb to a tenant's perceived upper hand.

Leo S said...

Ooh this is fun. Can I play?

Dear tenant,

Get the **** out of my place.
You're wasting all my bandwidth posting on that silly blog, and even though I've told you many times, you won't stop digging up the backyard to hide your gold bars.

Best Regards,
Landlord

jesse said...

In this market why not ask for a landlord's references? If you are a good tenant and aptly demonstrate this a rational landlord will see the value of having you as a tenant. There are landlord's who purport to offer a superior service. If they say this ask for proof. If they balk you know it's a lie. I've negotiated enough business deals to know both sides need confidence the other is a good fit for their needs and goals.

yoshi said...

Jesse

I have been both a tenant and a landlord, so I understand the situation from both perspectives. I have had tenants paint my living room dark blue, pile garbage 25 bags thick in the backyard, bring home puppies that pee on carpets, invite their best friend, boyfriend and the best friend's boyfriend to move in with them "just over the winter months" and I have covered the cost of four blazing block heaters. I had one tenant demand a rent reduction of 75% so he could pay off his Sears card and when I refused he threatened to hang himself in the bathroom. I then spent hours counselling him on the phone and finding him services to protect and stabilize him.

I was a homeowner for 15 years but when I moved to Victoria I chose to rent for all the obvious reasons. I am not accustomed to being told I cannot have a pet, keep a garden, paint my livingroom etc. all of which I bear with gritted teeth because the house is not mine, so I must comply.

My experiences with landlords since moving here have been humiliating and degrading. I have been duped into signing leases, paying for repairs to the property myself, I have got down on my hands and knees and done the repairs myself. I have weeded gardens, mowed lawns, cleaned carpets, weatherstripped, helped neighbors and listened to lonely landlord's family problems. I have also been accused of all manner of wrongdoing such as failing to keep the house spotless for prospective buyers, requiring 24 hours notice to enter the property, not allowing real estate agents access in the evenings, cultivating mould in window sills, changing locks and parking my car where it came in contact with a landlord's baseball bat (OK that was a suspicion that the police could not prove).

So in fairness to tenants, I think it is a good idea to ask for references from landlords and if I am ever a landlord again, I will offer references up front.

Please forgive my skepticism. I speak from my own experience.

BTW, I see the google account on this computer is Yoshi and I do not understand how to change it to Bitterbear so I will sign,

Respectfully yours
Bitterbear

Village said...

All talk, or legitimate threat? And how soon?

http://www.theglobeandmail.com/report-on-business/flaherty-warns-on-mortgage-rules/article1407223/

As a potential FTB, I'd rather wait until after new requirements are imposed. Fewer people to compete with and more pressure on downward house prices as I see it.

Maybe I'm missing something, but I don't see how this causes houses to cost more. Temporarily sure, but people can afford $X and those who need to sell will gravitate towards $X. Higher interest, shorter amortization and larger down payments all look like a good thing to me. I'd rather buy at a high interest rate, low principal then the reverse. Even if I am a current $5/35yr looking buyer. =)

Village said...

Anyone able to point me at a mortgage calculator that includes CMHC, insurance and other costs? Lost the link to one I had, and most just include base costs not what I'm actually going to spend per/moth.

Thanks

Just Jack said...

"ITS DIFFERENT THIS TIME"

And it is!

The Canada wide increase in rental vacancy rates is cause for alarm for the Federal Government.

The low interest rate policy, while easing the depth of the Canadian recession is now having an adverse affect on rental housing.

As more renters are leaving the rental market than those arriving as evidenced by rapidly increasing vacancy rate that has gone from half a percent to 1.4 in Victoria. The current low interest rates are, for the first time in a decade, having a negative affect on the real estate market.

A vacant basement suite may not be the "mortgage helper" that it was in the past. And may not be seen by the lender as a "sure thing" when the lenders, with CMHC's approval, would apply 100 percent of the suite's income to the mortgage applicant's income.

With the tighter accounting rules coming into affect on January 1, I can imagine CMHC reducing the allowable income from 100 percent back to 60 percent (what is was five years ago) and not insuring secondary (rental)residences, which again CMHC started to finance a half dozen years ago.

CMHC's mandate was at one time "helping to house Canadians" that was dumped back in the mid 1990's when the government had instructed them to become profitable. CMHC became an underwriter, but with a massive difference. They did not have to report to stock holders and all of the debt instruments are backed by the Canadian government.

In a nutshell, they were charged to make a profit, without accountability or responsabilty. And then given almost unlimited ability to insure mortgages without holding reserves that are mandatory of other underwriters.

BAD, BAD, BAD

Why should I, as a Canadian taxpayer, be insuring, at discounted rates, a person buying an eight suite apartment building?

The simple answer is that I should not be. Either CMHC has to go back to its roots of helping Canadians buy their first home - or CMHC has to be privatized.

Skeptic said...

Village,

Here is a clickable link to the G&M article you posted.

Flaherty warns on mortgage rules

CTV carried the interview with Flaherty on this subject. Here is a link.

Flaherty considering measures to cool housing market

"If we see further evidence that there is excessive demand in the housing market or that there's an indication that people are taking on obligations that they will not be able to handle in the future when interest rates rise, then we will take some action," Flaherty said on CTV's Question Period, which will air this week.

He added that he's considering a few different options to cool down the housing market if it's deemed necessary.

"The likely action we will take is to increase the size of the down payment from 5 per cent to a higher number, reduce the amortization -- bring it down from 35 years to something less," he said.


I think this is a done deal - regulation changes are being prepared now. This can all be done without legislation. The government knows this will cool the housing market so they need to lay the groundwork for the announcement. This is the second time he has brought up this possible change to the rules in a week.

Just Jack said...

What kind of BoZo is this Flaherty (spit).

Does he think that newlyweds Jonny and Jill are seriously considering anything he says? Do they even know who he is? All they want is a home, like all of their friends have gotten, because of the cheap credit Flaherty (spit) has provided. And now diamond Joe Flaherty (spit) says they can't have what their friends have!

I think the New Foundlanders say it best.

Blow it out yer arse Flaherty (spit)

omc said...

I think we have to be prepared that Flaherty is just giving lip service, and has no intention of popping the real estate bubble that is floating the economy. I think he is just passing the blame and trying to throttle the bubble just under popping level.

Just Jack said...

Flaherty (spit), should start by cleaning up his own mess, namely CMHC.

CMHC, is a crown corporation that is out of control. If CMHC, had stayed with the policy of assisting first time buyers, then we would not have gotten into this mess.

But instead, CMHC's mandate was increased to insuring bank profits, developers, recreational properties, apartment buildings; second and third homes. The banks could also extend the insurance to conventional mortgages. CMHC is now the largest holder of sub prime (high ratio) mortgages in the world. And you just wait until these mortgages are reset to higher interest rates when their 1,2 or 3 year term is up.

I think we should garnish every politicians salary who were involved in this deception of the Canadian taxpayer. Also, I would seize their passports so that will not be able to get a job as a Harvard professor.

So Joe, start practicing for your next job....

"would you like fries with that"

Skeptic said...

Financial Post put this article on their site a few minutes ago...

Flaherty bombs on housing bomb

He has already missed the opportunity to defuse the real estate bomb at an early stage

Think of Canada's housing market as a ticking time bomb. Think of Finance Minister Jim Flaherty as the unlucky bomb disposal expert called in to deal with the problem.

Flaherty is moving slowly - oh, so slowly - to snip a wire here and there in an attempt to defuse the mess. Problem is, the ticking is getting louder by the minute.

If the bomb explodes, home prices could plunge. In the worst case, plunging prices could bring on an economic downfall such as the United States, Ireland and Spain suffered after their real estate markets collapsed.

Double-Agent said...

There is a lot of concern being expressed by local mortgage brokers and RE agents after Flaherty's comments were reported. Globe and Mail says "Cure for housing market carries risk"

The housing market that led Canada out of recession is now so hot that Ottawa is talking about doing something to cool it off, a move economists say carries risks for the economy.

Such a move would have to be done cautiously, economists say, because the real estate market touches all parts of the economy, and anything that caps its growth could also temper the recovery.


Not surprising - some people are not listening to Carney and Flaherty

Tougher requirements could price out first-time buyers such as 28-year old Michael Maynard, who are vital to a healthy market as they buy entry-level homes and allow others to trade up to larger and more expensive properties.

The Oshawa, Ont., law clerk has been looking for a house with his wife Angela for most of this year. They intend to make a 5-per-cent down payment, which they managed to save while Angela was on a maternity leave.

“If the requirement went up, I'd be out of the market right now,” he said. “There's no way. We'd cool our heels. We'd come back eventually, but there's no way we'd be able to stay in the market. And we want to take advantage of low interest rates, so that would be a shame.”

Buyers like the Maynards, who rely on low down payments and extended repayment periods to afford their homes, are becoming more common. In a November report, the Canadian Association of Accredited Mortgage Professionals found 18 per cent of mortgages were amortized over more than 25 years – a gain of 100 per cent in two years.

kabloona said...

People who were vacillating will now be pressured by their realtor to jump off the fence and grab that condo before their 5% down becomes 10% and they need $20k instead of the $10k they just got off their folks. The last act of this asset bubble is about to be played out, methinks....

msr said...

Kabloona,

It's going to be like last year where they cut back on the 0/40. There will be a run-up until the cut off and then a sharp drop as demand borrowed from the future has to be repaid.

kabloona said...

Yup, demand gets drawn forward, kinda like cash for clunkers did with auto sales in the US.

;-)

By the way, thanks to Skeptic for the nice link to the Financial Post article, I hadn't read that one.

Skeptic said...

Deja Vu - Flashback to 2008

Reuters - Canada's Flaherty: no housing bubble

The Canadian government changed the rules for government-backed mortgages last week to avoid a U.S.-style housing market decline, even though the domestic market remains solid, Finance Minister Jim Flaherty said on Wednesday.

Officials were concerned about a recent trend towards long mortgage amortization periods and low down payments, which prompted the rule changes, Flaherty said in a Calgary speech.

"There is no bubble in the Canadian housing sector, that has not been our concern," he told reporters after the speech.

"Our concern has been a tendency for longer amortization period of 40 years and purchasers putting very little money down."

The changes, due to take effect in October [2008], include ending government-backed mortgages with 40-year amortization periods, and a new requirement that buyers have a minimum down payment of 5 percent.


Jim is singing the same song now. Bears - 10% down 30 year amortization is just around the corner.

Vic said...

Dockside Green developer sells out, what kind of signal does that send to the market ?

Mr.4AM said...

Vic, For a second there I thought you meant that they sold out of all their residential units hinting at a "hot market", but it wasn't until I read an article explaining the developer of Dockside Green sold 100% of his shares to Vancity, the credit union.

I have to wonder, what's a credit union doing getting into real estate by the hundreds of millions, not to mention at near market peak?

From what I've seen, Vancity has a knack for trying to get their hands in too many pies, only to then realize they aren't profitable anymore as was the case in 2007 when a new CEO came in and cleaned house by lying off some 2/3's of all their senior executives (yikes!).

Can't wait to see their 2011 year end numbers after taking on 650 Million at Dockside.

Mr.4AM

Skeptic said...

You always get the latest housing news on HHV.

Expect a mortgage rate increase in a few days. Benchmark 5 and 10 year Canadian bonds are rising fast - 17 tp 20 basis points (bps) in a week. Take a look at how steep the yield curve has become over the last year. Big pressure for interest rates to rise.

Bond rates - click here

Mr.4AM said...

lying off = laying off, but you knew that :)

talus said...

Bahahahaha!! HHV's post is soooo timely.

We just found a new house to rent at a 30% reduction in rent over our current rental.

I would call them comparable although it is a very slight downsize.

We will loose the 4th bedroom (spare room) and single car attached garage that we currently have. In total we are loosing about 350 sq/ft of space.

We are gaining double pane windows, insulation, a water view, a shorter commute to work, and a much quieter street. Plus it still has one of those old drive down basement garages that will work fine for the bikes (although not as handy as the separate garage).

I would say that rents are currently running about $1 sq/ft -- at least for the houses I have been looking at.

Our new place is discounted by 15%.

nin-vic said...

As a landlord I find this blog amusing.
Many forget or do not know that the larger buildings (15-20+ suites) sell on an income basis and say may average ~$120-130k/door currently. So these landlords have HUGE cost advantages when compared to market priced condos and or basement suites in market priced houses run by small time landlords.

A 2 bedroom that cost in theory $130k in a large building can always be renovated for say an extra $10,000 and for $140k compete with a basement suite or newer condo at only $1100 per month, often with hot water and or heating included in the older buildings.

So the threat of a tenant to move out to cause some sort of "harm" to the landlord who raised their rent 3.2% is pretty insignificant as the landlord may be able to re-rent the suite to a higher bidder in the end. Who knows... Or if the price is reduced $50 per month ultimately the landlord is still in business and no where near financial hardship, unlike what the tenant who moved out may think.

The CMHC statistics are for larger buildings anyways and do not measure the 1-2 unit buildingds/houses. I suspect the rate for these properties may be higher than CMHC's statistics but it is somewhat flawed to transpose the data to another type of property that may or may not be relevant.

Inglishmagor said...

Nin-Vic, thank you for your input from the other view. I like your information and I think what you are saying fits in with the general idea.

1. There are different options for rentals.
2. People will pay a premium for better rentals... to a point.

That business landlords are a very different type of landlord to what is being talked about. Namely a business landlord looked at the income potential of the property versus the asking price.

The landlord that is being warned or scorned is the one that bought a house they couldn't afford, but added in $1500 a month in suite rental income to make it fly.

After reading this blog for a long while now, I'd say most people are not anti landlord nor anti real estate. They are just against the landlord auto increasing the rent not based on over all rental rate increases, but because they need more money to cover living.

Olives said...

I've had a basement suite in my house in the past and we would never have raised the rent for a great tenant.

We only had a few different tenants, but everytime one would move out it was very stressful - we didn't care if we could get a bit more money for the suite, it was the unknown factor of not knowing who was moving into your house.

Why in the world would you risk losing someone great (especially in your own home) for a potential problem (financial,noise, personality conflict, cleanliness, etc.) for an extra $25 per month?