Tuesday, January 4, 2011

Running start

It's January 4, 2011. And there's already news about what a great time it is to own real estate in Victoria.

BC Assessment released property assessments online yesterday and you'll be getting paper values in the mail this week if you're a homeowner.

What should you do with them? Well, if you plan to stay in your home you should dispute the assessment to get it lowered so you pay marginally less property tax. They've got assessments up this year on average around 4%, but that's very unlikely reflective of true market value which is arguably up twice as much year over year. You'll probably not gain much, and all you'll lose is your time if you do dispute your assessment, but keep in mind BC Assessment values July to July, not January to January.

And if you think you might sell this year? You might want to seek a higher assessment. Especially if your assessment is outside of 10% of what you think your home should sell for. Nothing puts a buyer off more than seeing a home assessed for $400,000 with an asking price of $650,000. Except maybe a salesperson who suggests that will save them on the property tax bill ;-).

In case you were looking for a riddle to answer:

VREB reports that the value of all properties sold through their MLS system in 2010 was down 14% from 2009, yet "The overall average price for single family homes increased by nearly 8.5 per cent; the average price for condominiums rose over four per cent and the average price for townhomes rose over three per cent."

How could this possibly be? You guessed it, volumes down, prices up, see real estate in Victoria can only go up, even when fewer people want to get some!

Anyway, just having a little fun on this rainy winter day.

27 comments:

canoetoo said...
This comment has been removed by the author.
a simple man said...

How much inventory will we see enter the market this spring? Will the next four months see a flood of listings? I think so.

And after that, the grind down in price. The average price may be a little up year over year, but you can buy a lot more house now than you could a year ago with the same amount of cash. The stats don't reflect that reality and don't expect vreb to dig too deep to get to the truth.

This will be an interesting year.

Just Jack said...

The other problem is that the number of sales is too low in order to make a meaningful December to December comparison. As more and more data comes in, we will probably see 2010 as being a wash out in appreciation. As for condo's you lost about the equivalent of a smart car in value over the year. Not the smartest way to build equity.

The problem as I'm looking through the mls is that I find myself saying. "I can buy that -I can buy that"

Generally, I have had poor timing in buying things and guessing markets. So when I find myself saying I can buy that, I have to do a head thud onto my desk.

It hurts - but it works.

Marko said...

There is a house that I will be listing in Fairfield shortly and the 2010 assessment (537k) was increased to 700k for 2011. No improvements occurred in the home in the last year. How does this happen? Ha Ha

Just Jack said...

Property assessment are out, which brings up a pet peeve.

Why do we tax on value? This requires an army of assessors through out the province who are continuously adjusting, fiddling and crunching numbers each and every year.

Why don't we tax on what is physically there. You have a 2,000 square foot home, the size of the lot and the use of the lot. Your taxed at 2,000 square feet at a $1 a square foot. You have a suite in the basement - your tax is $1.10.
Of course, there is no way that one paragraph can replace thousand of pages of assessment regulations to value your home- but most people should be able to see the benefits and simplicity of a different system. Its cheaper, not open to various opinions of value, rewards people who take care of their properties and penalizes those who neglect their properties.

Not ready to throw the baby out with the bath water yet. Why assess the value of a property EVERY year. Why not once every two or five years. The city is just going to change the tax rate anyway each year, so why should the assessment be changed each year too?

I think its a little under a hundred bucks of your property tax bill that goes to run BC Assessment each year. Maybe we could fix some of the street pot holes with the savings.

Alexandrahere said...

Just Jack -- you are right about the condos....for the most part they have taken a huge hit. Probably more assessments than not are at a higher value than the owner would get should he decide to sell. I know my condo has lost approx $50K in value in the past year....yet it has been assessed at $10,000 more this year than last. For me the situation is certainly not a huge disappointment as I bought the condo knowing it would most likely drop in value. However, this is going to be my last home and I purchased this particular condo because it is in the perfect location for me and has a unique and fantastic floor plan.

For singles/couples that bought a condo in the past couple of years for their first home? I'm afraid they will have a long wait until any equity builds up at all. In other words they are stuck there for quite some time. Hopefully they bought a two bedroom unit if they are planning on having a child in the near future.

DavidL said...

@Just Jack wrote: Why do we tax on value? [snip] Why don't we tax on what is physically there?

I guess the idea is that people who live in expensive homes can afford higher taxes - the same those who earn more. Are you suggesting taxes should be only based on the size of the building on a lot?

I think its a little under a hundred bucks of your property tax bill that goes to run BC Assessment each year. Maybe we could fix some of the street pot holes with the savings.

Good point about saving $$$ to fix potholes, etc.

@Alexandrahere wrote: You are right about the condos ... for the most part they have taken a huge hit.

One of my relatives bought a townhouse in Esquimalt three years ago for $330K. The 2010 assessment is for $302K. I wonder how long until the assessed value matches the sale amount - after factoring in inflation ... 2018 perhaps?

Marko said...

Lots of new listings in the last 48 hours, a number of "back on market" properties, few cancelations, few price drops, and some sales (understandable as not many people would have been shopping between Christmas-New Years).....

The next two weeks of Monday morning numbers are going to be important in trying to gauge the market going forward.

New Listing on Chapman in Fairfield today at $749,900, was on the market in 2008 for $895,000!

This is going to be an exciting spring market.

Robert Reynolds - GBA said...

Royal LePage "study" released today expects home prices to increase in 2011
link



Toronto Sun
Buying frenzy to push up house prices

Robert Reynolds - GBA said...

Dang I should move to Nova Scotia

http://www.realtor.ca/propertyDetails.aspx?propertyId=9679987&PidKey=145323030

3 Bed
2 Bath
1500 sq ft.
half acre waterfront lot
$329,000

Similar size population and economy, Nov-Jan are colder but the rest of the year is very comparable for weather.

Just Jack said...

I'm thinking that it may be better to rent long term, until its time to retire. Then buy cash. I could see myself retiring to a home in the Gulf Islands. I no longer see the attraction of retiring in the city with its crime, car pollution and wasteful city councils. Victoria is just Mississauga or Etibicoke 20 years ago.

I'm not confident in taking on a long term debt now with interest rates poised to increase. Especially when one of my mutual funds gave a 20 percent return last year. God love those little black hearted Republicans. If only the yanks had invaded Iran, I would be retired by now.

If real estate is not going up in price or even at Royal LePages optimistic 3% why buy something that costs so much money? When my stocks were stagnate, the desire for real estate was strong as I felt that I wasn't getting ahead.

I've waited so long, that my priorities are beginning to change. I'm seeing retirement in the future as a kayak, good quality road bike, very little car traffic and sandwiches with home grown tomatoes and baked bread.

And to hell with the million dollar Gordon Head box. Who needs it.

I wonder if others are feeling the same way as I am now that there is a lucrative alternative to real estate?

DavidL said...

@ Robert Reynolds - GBA wrote: Royal LePage "study" released today expects home prices to increase in 2011.

I can only imagine that Royal LePage is trying to stimulate the market and see it a few more underqualified buyers can be squeezed into buying before mortgage rules and rates are changed. After all, Royal LePage is a publicy traded corporation in the business of making money for its shareholders.

Changing the subject slightly - a year ago when I talked with family, friends and associates about my concerns regarding overpriced real estate - many were still sure that even if prices had peaked (wouldn't increase any more), they were convinced that they couldn't drop. A year later, most people I know think that real estate (particularly in Victoria) is beginning a downwards "correction". The discussion is now concerning how much will prices will drop, and how long the downward trend will continue. The tide of sentiment is changing.

After all, real estate is only worth what someone else is willing to pay for it ...

DavidL said...

Back in 2005, the Currents at Otter Bay (Pender Island) were selling 1/4 shares of their waterfront cabins for $100K to $120K. Prices peaked in mid-2008 - ranging from $175K to $250K ... but then sales dried up. The developer did a "bulk" sale of the 14 remaining shares to DTZ Barnicke. Units are now selling at fire-sale prices starting of $80K:
http://www.currentsliving.com/index.php
Vacation properties such as these are the canary in the coal mine ...

DavidL said...

Gallery: Some of Greater Victoria's priciest homes

Let's see $10M home, with 10% down financed over 35 years at 3.99% = $39,619.17/month. I sure hope interest rates don't go up! ;-)

Leo S said...

I wonder if others are feeling the same way as I am now that there is a lucrative alternative to real estate?

My wife and I are definitely talking along the same lines. Although I wouldn't get too excited about your stock market returns in the last two years, since that was coming out of a pretty deep hole. They may go right back to being stagnant.

We were in a mostly cash position because the feeling was that we'd buy within the year timeframe and didn't want to risk downpayment money in that very short time. However if this is going to drag on downwards slowly we'd be better off just renting for a few more years and investing a good chunk for the long term.

Might have to move to a place with a garage though. No desire to spend time maintaining a place at this point in my life, but will need a man cave if it's going to be longer than a year.

Chickinvic said...

I'm feeling the exact same way JustJack. DH and I just got back from the Phoenix area (a week in beautiful weather). If anything can remind you that things are stupid here, it's a visit there. I couldn't take the summer months, but I'd be happy enough to hole up there in the winter.

Victoria RE is just insane. And I thought it was expensive before the insane run-up in prices. Now it is crazy stupid, and nobody seems to think that a half million dollars is a lot of money anymore. Are the nucking futs or what?

DH and I have decided that we'd rather have a life. We like being able to take trips and do things. We don't want to be slaves to a stupid box with a roof. Victoria real estate actually bores me for now. I don't know if I'll ever buy.

Chickinvic said...

I'm feeling the exact same way JustJack. DH and I just got back from the Phoenix area (a week in beautiful weather). If anything can remind you that things are stupid here, it's a visit there. I couldn't take the summer months, but I'd be happy enough to hole up there in the winter.

Victoria RE is just insane. And I thought it was expensive before the insane run-up in prices. Now it is crazy stupid, and nobody seems to think that a half million dollars is a lot of money anymore. Are the nucking futs or what?

DH and I have decided that we'd rather have a life. We like being able to take trips and do things. We don't want to be slaves to a stupid box with a roof. Victoria real estate actually bores me for now. I don't know if I'll ever buy.

Robert Reynolds - GBA said...

Stock markets have returned nicely this year, but yeah it was a big hole to dig out of. I expect interest rates to rise over the next few years (I just dropped all my bonds) but I expect equities to be dicey. So what's left? GICs? Hell no. I'm no gold bug (though it has outperformed) for me dividends, dividends, dividends.

Boring but oh well.

Oh and happy new years $5000 of TFSA contribution room!

/shamelessplug

omc said...

On the assessment thing;

As is pointed out, assessments are July to July. But, they are based upon the the sales of the year leading up to that point. That means sales form July 2009 to July 2010. In this period we had a time of crazed activity and peak prices. I have said it before many times; houses in my price range are down over $100k since the peak and I have pointed out examples of houses that have sold numerous times in the last few years as examples. They certainly diddn't go up. I am noticing that sellers wanting to sell are pricing at 2010 assesment.

Just Jack said...

The Assessments are as at July 1, 2010. But, BC Assessment will use sales three months before and three month after July 1 to assist in estimating an "actual value" for your home. They will use other sales too, they just have to adjust them for changes in economic conditions. So, if you are appealing your assessment, you can use August or September sales too.

Actually, you have a lot of latitude of what you can use, the appeal board does not expect you to be an expert.

If you feel your home is not worth the assessed value, you should appeal. Appealing your assessment is an important part of the system to keep the assessments in line with reality.

Just Jack said...

Rumor is that the US banks will only start lending if the US government increases the minimum down payment to 30 or 40%.


The yanks have got it right. The only way to stimulate the economy is to trash house prices to a level that people start to buy again. The faster you can get to the bottom, the faster the recovery.

You create a lot more jobs when you sell five homes for a total of a million rather than one home for a million.

Those that bought their homes already will still make the payments. They won't walk away unless they get behind, which they would even if their property didn't drop in price. And they would always have the thought that their home will go up in price over the next decade.

The government created the wealth in housing, it can take it away as well.

Introvert said...

If you feel your home is not worth the assessed value, you should appeal.

Just Jack,

With the exception of not wanting a tax increase, why would a homeowner want to appeal her home's assessed value? Does a CEO generally want her company's valuation reduced?

It doesn't matter what I think my home is worth; what matters is what someone is willing to pay for it when I put it on the market.

Appealing your assessment is an important part of the system to keep the assessments in line with reality.

Um, reality is in the eye of the beholder. The reality that homeowners see is that they want their home/investment to increase in value. And as someone mentioned earlier, if one's home is listed for $600k, and the assessment is $450k, the seller has a problem. So whose reality are you talking about? A seller's "reality" is not the same as a buyer's.

You say we should try to keep assessments in line with reality. Quoting the BC Assessment Notice: "Property values are determined by local real estate market conditions." So assessments = market. So then, by substitution, you're effectively saying that we should try to keep the market in line with reality. Again, I would ask: whose reality? That of buyers? That of sellers? There is no one "reality" because everyone is coming at it from their own unique angle.

Alexandrahere said...

What a joke in this mornings paper re: condominiums have gone up in price the most here in Victoria. Yep the average price of condos probably has gone up. Why? Because the million dollar ones were selling for half price. And enough of those $500K properties (and similarly down the line) sold to increase the "average price" from the year before. However condos that have been around for awhile, and a year ago were going for say $365K are now going for $290K. Maybe things will return to a more "balanced" market once the glut of the new condos have been sold off.

Olives said...

Just Jack - where did you read about that rumour please?

Just Jack said...

Wow!

Um, I think its "beauty" is in the eye of the beholder. Although reality could be a bit stingy, say if it were as real as a sharp pointy stick.

Needless to say, that this may not be not be the same reality as in another plane of existence and should not be confused with real(ity) estate. As indeed there is no reality in real estate except in the first four letters and that's because most of the other four letter words to describe real estate in Victoria were taken and a bit rude. Nor should you ever allow your reality to get in the way of another person(s)reality. Because that would just be an unreal assumption on your part - and not much fun at all. Neither should you park your car beside reality as this usually leads to little dings in your door followed by the expression "I can't believe somebody would actually park that close to me!" Which is an unrealistic thing to say as some one really did park that close to you and repeatedly opened and closed their door 72 times.

I therefore reject your reality and substitute my own.

Just Jack said...

I've not been able to find anything in print about increasing the down payment for homes in the USA. It was just a rumor.

The US banks like Canadian banks want universal rules that would apply to every lender. And one of them is to have higher down payments. The difference between the states and Canada is that the US banks are reluctant to give out mortgages on properties that they expect to fall in price.

Which of course, causes prices to fall which is why they are reluctant to lend. In order to reverse this downward spiral, the lenders would like the US government to have the FHA implement higher down payment guidelines that all lenders have to adhere to.

I don't think most of us can grasp the shape the American banks are in. A guideline such as this, appears ridiculous to us, but desperate times require desperate means and this may be necessary to get American banks lending again.

Just Jack said...

The median price for a non new 800 to 1000 square foot non view condominium in the core municipalities for the last 90 days of 2010 was $255,000.

The same median for the same period in 2009 was $272,000. A year over year drop of 6 percent.

The volume of sales also dropped 32 percent from this time last year.

The number of days to sell also increased 156 percent from 23 to 59 days.

The last time the median for this condominium grouping was at this level was the last 90 days of 2007 when the median was $252,000. The number or sales was also 30 percent higher then and it only took some 16 days to sell.

Condominiums have failed to build equity through appreciation for the last three years. The best way to insure that you will be priced out of buying a single family home is to buy a condominium.