This week's VREB Monday numbers thanks to Marko Juras. These numbers are for the Victoria Real Estate Board's reporting area, including Sooke, Shawnigan Lake and the Gulf Islands.
November 2012 month to date
Net Unconditional Sales: 40
New Listings: 116
Active Listings: 4397
Sales to new listings ratio: 34%
November 2011
Net Unconditional Sales: 482
New Listings: 847
Active Listings: 4329
Sales to new listings ratio: 57%
Sales to active listings ratio: 11% or 9.0 MOI
Canada braces as housing slowdown takes hold (h/t koozdra)
That's about as bold a headline as we've seen in some time.
These quotes are just gold, especially coming from a local agent:
"Personally I don't see any revitalization of the market in the near future" - investors have left the market
“Sellers will commonly say, ’I’m going to wait until the spring, when the market is better.’ And I warn them that it could be worse... And of course buyers are saying ’It looks like things are bad, I’m going to hold off until the market drops another 10 or 20%.”’
When was the last time you heard an agent use the pronoun another in relation to a significant market drop?
I know, I know, there's more than a few folks out there telling themselves they don't have to sell so they don't have to accept a lower price. Fair enough.
But remember: it's the homes that sell that set the market value of the homes that don't.
Victorian's got away with a temporary drop in 2008/09. Me thinks this time it's different.
210 comments:
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An "absolute" bottom, maybe; but real estate is amongst the slowest and most predictable markets out there. If you can't figure out when to buy low in real estate, you have no business being in the stock, bond or forex markets... heck, might as well put all your money in a GIC and pretend like inflation doesn't exist.
PS. Believe it or not, I'm not picking on you Marko, I'd rather give you my real estate business than most realtors out there, but come on, we all know you are smarter than this.
Since it is so predictable I assume you were buying rental properties in 2000 and selling them all in 2010?
marko, could you show an example of a current condo for sale where its more economical to own than rent? please exclude any pre construction buys. For example from what i have seen, the current rent prices on a 500k condo is about 1800 a month.
Excluding pre-construction units doesn't make sense as they are vastly available but sure.
#307 - 845 Yates recently sold for $217,000. This type of unit rents for $1,000 to $1,100. Let's say $1,000 to be on the safe side.
At 20% down you are left with a $173,600 mortgage. 3% interest, 25 year amortization, equals $821.55 per month + $184 for strata fees + $85 per month for taxes = $1,090.
Approximately $395 per month, in the first year, goes towards principal and escalades throughout the mortgage. For example, in the 10th year over $500 per month goes onto principal.
We could argue until the cows come home about opportunity cost of the deposit, special assessments, cost of having to move as a tenant unexpectedly, and a lot of other factors weighing in on both sides.
I bought my condo, similar size, for less than 200k through a pre-sale and I lucked out in that I was able to get a variable mortgage in the low 2% a year ago; therefore, for me even if I don't factor in principal repayment it is still cheaper to own on a monthly bases by at least $150.
My friends are renting a $630,000 condo for $1,950; however, I also know an investor renting a $209,000 condo in the same building for $1,100.
High-end is definitely cheaper to rent; however, you are still blowing $2,000 per month.
Excluding pre-construction units doesn't make sense as they are vastly available but sure.
Hard to make an apples to apples comparison that way. How to compare renting vs renting for 2 years while waiting for your unit to be built then buying..
We could argue until the cows come home about opportunity cost of the deposit, special assessments, cost of having to move as a tenant unexpectedly, and a lot of other factors weighing in on both sides.
I think the main thing is how long you're going to keep the thing. Entry level condos can be comparable to renting for the monthly expenses, but realistically I bet most people keep them less than 5 years. That's what really screws the economics of it, nevermind any potential decline even if it is mild.
Quoting Robert Shiller:
"So it’s looking like the bubble is — or at least has been, until recently — still alive in Canada."
Robert Shiller is the economist who famously predicted the recent U.S. housing market crash as well as the stock market crash of 1987.
Shiller has nothing to gain or lose by stating his analysis of the Canadian housing market. Canadian bank economists, on the other hand, are motivated to deny the existence of a housing bubble in Canada.
It is extremely difficult to deny that Canada is currently in a housing bubble. Victoria is one of the most overvalued cities in Canada. Victoria is certainly in a housing bubble.
" People taking their homes off the market reduces supply. "
It also reduces demand, too, because many (perhaps most) voluntary sellers are planning to trade to another property. Others have already traded (accidental landlords) and will be forced to sell the extra property before too long.
That's the main reason why it has little effect on market direction.
Since it is so predictable I assume you were buying rental properties in 2000 and selling them all in 2010?
Predicting when the bottom will happen is completely different from identifying the bottom when it arrives. That's what he meant when he said "if you can't figure out when to buy low in real estate".
Also, it's impossible to predict bubbles going forward. It was easy to identify 2000 as likely being the bottom of the previous bubble, but not to identify it as the start of the next one. Nor is it possible to identify the top of a bubble until after the fact.
Sorry Patriotz, The Capital Region saw a positive immigration of 4,350 people in 2011 so it's not just cross lateral local movement...
positive immigration of 4,350
Which is quite weak.
For instance, here's the % population growth from 2006 to 2011 for:
Calgary 12.6%
Edmonton 12.1%
National average 5.9%
Victoria 2.5%
Saanich 1.4%
Oak Bay 0.6%
I would say it's mostly lateral local movement.
I think the main thing is how long you're going to keep the thing. Entry level condos can be comparable to renting for the monthly expenses, but realistically I bet most people keep them less than 5 years. That's what really screws the economics of it, nevermind any potential decline even if it is mild.
What screws economics is how little financial discipline people have. They buy condos with 5% down and then expect to trade up to a house in 3-5 years as some sort of given right.
Predicting when the bottom will happen is completely different from identifying the bottom when it arrives.
Very few people identified the bottom in 2000 because it was the worst year in terms of sales transactions in the last 25+ years, even this year with the dismal market is going 15% better than 2000.
What screws economics is how little financial discipline people have. They buy condos with 5% down and then expect to trade up to a house in 3-5 years as some sort of given right.
Sure, but to be fair many people also will start expanding their family in that timeframe. I don't think you will want two people and a baby (and all the stuff that comes with it) in 500sqft.
Very few people identified the bottom in 2000 because it was the worst year in terms of sales transactions in the last 25+ years, even this year with the dismal market is going 15% better than 2000.
Very few people buy condo pre-sales. That doesn't mean you yourself can't get a good deal.
The economy was still doing badly back then. There was very little interest in real estate. Everyone wanted to find the next dot com company. Financing was tougher to get and money cost a lot more that today.
So, why are the sales so low - today? And why is the volume of sales never likely to improve in the foreseeable future?
Well back in 2000, the typical home in the core was $215,000. Today it's around $575,000.
The cure for housing is simple - lower prices. In my opinion, the government knows this and are purposely deflating prices. Which is the opposite to what they have been doing over the last decade.
Again, my opinion, is that you can't fight the government on this. The only way to stimulate the economy is to get prices lower and increase sale volumes.
Because it is far better for the economy to sell four houses for a combined $1,000,000 than just one house for a million.
"They buy condos with 5% down and then expect to trade up to a house in 3-5 years as some sort of given right."
This is exactly the problem. What happens to condos when this delusional sentiment is removed from the minds first time buyers?
for simplicity of calculation on reet vs buy you can just assume that the entire purchase price is financed by the mortgage since u will be getting a similar rate on a fixed income investment as the rate on the mortgage. So with that said, and add in the cost of selling the condo down the road it will likely wipe out all the equity you've built if prices stay flat.. thats a pretty crappy deal imo.
"This is an important point. Real house prices, defined as house prices adjusted for inflation, tend to be flat over time. What these studies tell us is that periods where real house prices are rising - when house prices rise faster than inflation - are invariably followed by periods where real house prices fall."
http://www.theglobeandmail.com/globe-investor/personal-finance/mortgages/will-inflation-keep-boosting-house-prices-dont-bet-on-it/article4792362/
This is an important point. Real house prices, defined as house prices adjusted for inflation, tend to be flat over time. What these studies tell us is that periods where real house prices are rising - when house prices rise faster than inflation - are invariably followed by periods where real house prices fall.
Sorry, Kooz. Leo S or DavidL or somebody here crunched the numbers, and Victoria's real estate historically has appreciated at 4% a year in real terms.
Very few people identified the bottom in 2000 because it was the worst year in terms of sales transactions in the last 25+ years
That is precisely why it was the bottom. Bottoms in any market occur when market sentiment is most negative.
That has nothing to do with how hard it is for an informed person to identify the bottom. Most buyers are stupid and would rather buy high than buy low.
I heard through the grapevine that Oak bay has recently passed a bylaw that makes renos to pre-1980s houses potentially exceedingly costly. They have mandated that they have an inspector come and if any asbestos is found it must be removed in a way that is very, very costly.
Has anyone else heard?
That is another knife in the heart of people wanting to sell - sure, your house in worth $650K, but it will take $75K worth of work to get the asbestos out, so I will pay you $575K.
I have also found it interesting that now the mainstream media has almost constant articles about the housing market and how it is now risky. This is a dramatic change from about a year ago when these types of articles were very rare.
Finally, it is happening.
Victoria's real estate historically has appreciated at 4% a year in real terms.
If we had enough historical data, you would see they are flat over the long-term. Shiller's research concludes the same for the US. He is, after all, a Yale professor and renowned economist.
If you think about it logically, it's next to impossible for homes to outrun inflation over the long-term. The rising cost of land and materials that make up a home are similar to what inflation measures.
Regarding the ~ 50yr data that shows the ~ 4% you mentioned. If adjusted for changes in house size, quality, among other factors, you would find they are fairly flat even over that shorter time frame. A 1960 box for example is no match for some of the luxury mansions being built today. Furthermore, depreciation of materials usually offsets rising land prices over these shorter terms. After all, technically, a home is a liability.
"you are still blowing $2,000 per month"
It's not cocaine Marko. It's a roof over your head. It's no more blowing money than shopping at Market on Yates.
Well, I can't find the data backing up OB's higher rate of appreciation. Maybe it is not true.
The US has this handy tool to demonstrate the differing rates:
http://www.neighborhoodscout.com/real-estate/investments/appreciation-rates/
As for this:
"Regarding the ~ 50yr data that shows the ~ 4% you mentioned. If adjusted for changes in house size, quality, among other factors, you would find they are fairly flat even over that shorter time frame. A 1960 box for example is no match for some of the luxury mansions being built today. Furthermore, depreciation of materials usually offsets rising land prices over these shorter terms. After all, technically, a home is a liability."
I don't understand. Are you saying that a 1960s home does not appreciate as fast as a luxury home of today? If homes depreciate and land appreciates then land values must be more than 4% per year. What are you adjusting out exactly?
75k for asbestos abatement? Sheesh, crazy talk like that just taints everything you say. I just had full on proper asbestos removal and certification done for 1000 sqft attic for 7k. Still very expensive mind you... (I did negotiate 5k off the purchase price after the inspection uncovered the vermiculite).
As far as having enough historical data, in my view, 50 years is enough. Social conditions and the economy were so different in 1900 from now that this is not a convincing statistical comparitor for me.
Dasmo - the attic is easy - I give you that, but it is the plaster, lino, ducting, etc. that gets you.
Please don't taint me!
if u were to buy the same place you would be "blowing" more than 3000 a month. i rather "blow" 2000 and have one of marko's clients take all the risk
I think it's funny how many people feel that new construction is always better than old.
With a new house, one may have a warranty--for a time--but that doesn't mean that many of the materials used weren't shoddy; that corners weren't cut; that things won't go wrong.
Frankly, I'm not so sure that houses built today will have a longer life and require fewer repairs than houses built in the 70s.
As far as having enough historical data, in my view, 50 years is enough. Social conditions and the economy were so different in 1900 from now that this is not a convincing statistical comparitor for me.
Total agreement from me.
Shiller's research concludes the same for the US. He is, after all, a Yale professor and renowned economist.
Wow--a Yale professor and renowned economist! My goodness. I had no idea!
I guess everything Shiller says and writes must be correct...
When other kids had Batman and Spiderman posters up on their wall, Dave had a Robert Shiller poster.
The poster showed Shiller, in a suit and tie, with the words below: "I went to Yale, bitch."
Tue Simple, A mansion with the full suite of hazards could cost 75k. Vermiculite in the attic and walls, asbestos in the plaster, lino, asbestos wrapped ducting etc. There might be a place out there like that and if there is I hope whoever buys it negotiates a deal!
Quoting from Macleans Magazine:
Yes, we’re in a bubble, and it will probably pop soon.
The signs of a bubble are unequivocal. At 13 years and counting, Canada’s current housing boom is one of the longest-lasting in the world, the Bank of Nova Scotia noted in a recent report. The real price of Canadian homes has increased by 85 per cent on average since 1998. Prices stagnated in 2008, at the height of the financial crisis, but they were back on the rise again as soon as 2009, when they grew by nearly 20 per cent, according to the Canadian Real Estate Association.
Even Robert Shiller says Canadian real estate is in a bubble (see my previous comment).
What caused house prices in Canada to enter well into bubble territory?
Excess credit caused our housing bubble.
Quoting whispersfromtheedge:
Consider how we got here:
•Prior to 1999 you needed 10% for a mortgage and that mortgage had a maximum amortization of 25 years. CMHC also had limits on how much you could buy with their insurance.
•CMHC then lowered the down payment to 5% down with price limits depending on the area. Amortizations were 25 years. There would be no price limit on what they would insure if 10% or more was put down.
•By Sept. 2003 CMHC allowed 5% down on 25 yr amortizations but they removed all price ceiling limitations. Now any mortgage would be insured regardless of the value of home purchased.
•March 2004 CMHC began allowing Flex-Down products which permitted the 5% down to be borrowed and 1.5% closing costs to be borrowed (essentially zero down, but 95% insured.
•March 2006 you had 0% down, 30 yr amortizations. This became 0% down, 35 yr amortizations later in the year. Interest only payments were allowed for 10 years.
•November 2006 CMHC began allowing 0% down, 40 yr amortizations along with interest only payments for 10 years.
•Canadian banks ramped this up by allowing up to 7% cash back offers is you would take on a mortgage with them. You could basically get paid if you bought a house.
All of these were exacerbated by the emergency actions taken during the financial crisis.
As we mentioned earlier, the Bank of Canada moved fast to slash interest rates to unprecedented lows, allowing banks to continue lending to businesses and consumers. The federal government established a $125-billion program to buy mortgages it had already insured from banks and financial institutions, providing even more liquidity. Ultimately the Fed's bought mortgages worth a stunning $69.4 billion.
CMHC had their lending cap increased. CMHC went from $100 Billion in insured mortgages in 2006 to $600 Billion in 2012.
if u were to buy the same place you would be "blowing" more than 3000 a month. i rather "blow" 2000 and have one of marko's clients take all the risk
I rather live well within my means in my own place for less than $900 per month (mortgage, strata and taxes included) and bank a few thousand dollars each month. I am pretty sure that puts me ahead of the person buying and person renting.
I heard through the grapevine that Oak bay has recently passed a bylaw that makes renos to pre-1980s houses potentially exceedingly costly. They have mandated that they have an inspector come and if any asbestos is found it must be removed in a way that is very, very costly.
North Saanich and Esquimalt have already been doing this for more than a year. Saanich has recently jumped on board too. The inspector does not look for asbestos, you need to hire a company, like Pacific Environmental, to produce a report. Lead paint is also becoming an issue.
If I am representing buyers looking to do major renovations or tear down we always make the offer "subject to full hazmat report."
Asbestos removal has dropped quite a bit in price as more players enter the business. Vermiculite removal cost is down approximately 40% from two years ago in my estimate and still dropping.
pretty sure the compariaon i made was for someone wishign to live in a 500k place. Marko we all know that you got a sweet deal buying your condo. But to put it in perspective i believe you bought a pre construction condo at the height of the financial crisis. you took a big gamble and it paid off! It could've went the other way, u also could've lost ur deposit and ended up with nothing. Most of the ppl on this blog are discussing whats a more prudent choice given the current market and economic landscape. I am not sure using your situation as an example is fitting in this context. Go take a look at the current listings in your condo building, i dont think u can find one place where ppl would come out ahead owning than renting.
thanks for the info, Marko and dasmo. Another variable to put on the offer sheet when it is time.
pretty sure the compariaon i made was for someone wishign to live in a 500k place. Marko we all know that you got a sweet deal buying your condo. But to put it in perspective i believe you bought a pre construction condo at the height of the financial crisis. you took a big gamble and it paid off! It could've went the other way, u also could've lost ur deposit and ended up with nothing. Most of the ppl on this blog are discussing whats a more prudent choice given the current market and economic landscape. I am not sure using your situation as an example is fitting in this context. Go take a look at the current listings in your condo building, i dont think u can find one place where ppl would come out ahead owning than renting.
Lose your deposit? Read the Real Estate Development Marketing Act. Would never happen.
There is a nice unit in my building with 11' ceilings and a large terrace for $229,900 asking price. Similar unit rents for $1,100.
You have to take risk in life. A lot of developers did very well launching projects during the financial crisis while everyone on the blog was predicting doom and gloom.
my apologies, i am not familiar with the act so i mis quoted. But 1100 a month for a 1st floor unit with no parking? i live a block away and I pay 1000 with parking on the 6th floor. Also isnt the first few floors of 834 johnson meant to be low income housing?
historical data, in my view, 50 years is enough.
I'm glad 50 years is enough for you, but what if Herengracht in Rabidoux's G&M article, is suggesting we need a longer time frame. What if there's some sort of ~100yr lifetime pattern where we mostly outrun inflation for ~70yrs of it, followed by ~30 years of give back. Looking at the graphic for instance, what if they thought the same in the 1780s as we do now? If so, their belief would have been shattered over the next 30 years. Nobody knows where we're headed, but I'd be careful in believing the future will echo the last 50+ years.
Good sense of humour, introvert!
But 1100 a month for a 1st floor unit with no parking?
You won't find anything for $1,100 with parking unless the landlord has no clue what is going on. There are 5 people in the building right now looking to rent parking. With parking going for up to $200/month you are better renting it out seperately and advertising the unit for rent without parking. Much easier to get $1,100 + $200 than $1,300 with parking.
Some of the units I sell in the building we offer the unit without parking as I have a list of individuals wanting to buy parking in the $30,000 range.
But yes, rents on the lower end units are extremely high.
Also isnt the first few floors of 834 johnson meant to be low income housing?
Second floor is owned by the Beacon Society.
actually maybe i didnt mis quote, you could very well loose ur deposit from the drop in value of the condo when it finally gets built. And yes you have to take risks in life and i am glad it worked out for you. But different ppl have different levels of risk apetite, and most ppl view buying a pre construction condo at the height of the financial crisis a risk not worth taking. So when you bring up you own situation every chance you get when comparing renting vs buying condos, its not a fair comparison.
"I'm glad 50 years is enough for you, but what if Herengracht in Rabidoux's G&M article, is suggesting we need a longer time frame."
What if. I'll be dead by the time that plays out.
So long-term as to be irrelevant and as a predictor of future market behaviour I wouldn't give it any weight myself. Each to his or her own.
well one bed units in the astoria goes for 1200 with parking, so i am not sure why anyone would pay 1100 in your building with no parking...
The Province states that B.C. has the most heavily indebted population in the country.
Quoting from that article:
A growing number of B.C. residents are running this emotional gauntlet. Beset by stagnant incomes and rising prices, B.C. posted a 42 per cent increase in people going bust over the past four years - far higher than the 11-per-cent national increase.
It's little wonder insolvencies are surging: B.C. has the most heavily indebted population in the country. The average B.C. consumer has $37,879 in consumer (nonmortgage) debt. That's 40 per cent higher than the national average.
Victoria is one of Canada's most overvalued cities in terms of house prices. Add this fact to the high debt that B.C. residents hold and you can draw your own conclusions about the degree of correction/crash we will see in Victoria.
@Dave
If we had enough historical data, you would see they are flat over the long-term.
Extremely unlikely.
Shiller's research concludes the same for the US.
What makes you think that the trend for a growing city should be the same as that for an entire country?
He is, after all, a Yale professor and renowned economist.
He also said nothing about Victoria house prices.
If you think about it logically, it's next to impossible for homes to outrun inflation over the long-term
That depends. Dwelling prices cannot exceed local purchasing power over the long term, but when most people talk about prices they talk about single family detached homes, and those can definitely become more expensive as a city densifies and more people move to denser dwellings.
If adjusted for changes in house size, quality, among other factors, you would find they are fairly flat even over that shorter time frame
I would hesitate to apply this. The fact is people are buying what is out there. There just aren't new 50s boxes being built anymore, so it doesn't do anyone any good that a new house is bigger for the price.
Cars these days are much better than they used to be, but that doesn't justify a higher price. They're just better because of the advance of technology, but people still need to pay for them with their incomes and the lower quality is no longer available.
I rather live well within my means in my own place for less than $900 per month (mortgage, strata and taxes included) and bank a few thousand dollars each month. I am pretty sure that puts me ahead of the person buying and person renting.
Ahead in what way? As a student I paid $275/month to rent a basement suite. I guess I was ahead of everyone!
If someone has the income to buy or rent a $600,000 condo then good on them. I don't see the point of trying to judge what others want to spend their money on.
I'm glad 50 years is enough for you, but what if Herengracht in Rabidoux's G&M article, is suggesting we need a longer time frame.
The problem with that comparison is that Victoria 50 or 100 years ago was quite different than Victoria now.
The Herengracht data tracks inflation because that part of the city is no longer densifying. 300 years ago it was already established as a dense inner city area, same as now.
Exactly Leo! And at a million or more euros a pop they have been a high end neighbourhood for along while too...
I’m getting the feeling some people don’t agree with Shiller’s US and Heregracht city research showing flat real prices over the long, long-term. To clarify, I don’t think Victoria has seen flat real prices over the last 50 years, merely flatter than 4% once adjusted for certain factors (other than merely inflation of course). I do agree with Rabidoux if you outrun inflation for decades, then there will be a 'payback' period.
I’m actually wondering if it’s some sort of 30down/70yr up pattern for real prices. What first drew my attention to it was learning over dinner that Vancouver went through a bust period beginning 1913. Upon googling, here’s part what I found (a captivating read):
http://thedependent.ca/featured/land-destiny-history-vancouver/
Between 1913 and 1915....Vancouver’s real estate bubble burst…In fact, there is one recorded instance of a corner lot on Cambie and Broadway being listed for $90,000, and eventually selling for less than $8,000.
At any rate, I‘m not implying this pattern is about to happen again. However what’s fascinating, is it seems to fit a similar 30yr/70yr pattern as the Herengracht example and the US for real prices. Both show a similar real price pattern of -- 30y down/70y up -- offset slightly in time from each other and Vancouver‘s example. Although I would need to fill in the holes in Vancouver’s data. If there really is something to it, why would such a pattern exist? Is it something to do with lifespan? memory?
I think looking at historical trends is adding an unneeded level of complexity to our current situation. The recent run up in prices is due to loose credit and speculation. In the coming years that loose credit will be unavailable. A demographic shift will see many of the boomer generation sell of their properties. This will drive prices down. What's been happening in the last 50 years is irrelevant.
Examine the factors that lead to this bubble to understand what will be it's undoing.
I’m getting the feeling some people don’t agree with Shiller’s US and Heregracht city research showing flat real prices over the long, long-term.
It's not that I don't agree with it. There's nothing to disagree with, the data speaks for itself. What is debatable is how it applies to Victoria house prices.
I definitely don't think that 4% after inflation is sustainable, but 0% also doesn't make sense.
If 0% was a general rule for every city, then houses would cost the same everywhere.
In the coming years that loose credit will be unavailable.
Perhaps. Perhaps not. Interest rates are low and unlikely to rise in this economy. CMHC and OSFI have tightened credit, but it's unknown if they will continue to do so.
What's been happening in the last 50 years is irrelevant.
What it taught me was that the last rise in prices was not actually unprecedented, there is no such thing as a long term mean, and the only plausible cycle seems to be in affordability.
Here's that graph of affordability again. So far this is the only measure I've seen where you could believably call out a cycle around a mean.
Prices on the other hand, exhibit no such mean.
"What it taught me was that the last rise in prices was not actually unprecedented"
Yes, I agree. I've seen the data.
But I believe the reason for the rise in prices is unprecedented. Never have rates been so low for such a prolonged period of time. Never before have we had such a high home ownership rate.
It seems to me that the only reason for the increase is the intervention of the CMHC. If the CMHC would not be there this housing bubble would not exist. The only way to continue the way we are going is to increase the six hundred billion dollar cap on the CMHC. I predict they will not do so.
How willing would the bank be to give a regular person half a million dollars with a twenty five thousand dollar down payment? They will not want to take this kind of risk without insurance.
Where will people get the credit to buy houses at these prices?
Private Insurance will step in...
"Private Insurance will step in..."
Think about it from an actuarial point of view. It doesn't make sense. Your downside risk would be too great. When the CMHC is doing it nobody was doing the math. If you wanted insurance you would be granted it. A private company would charge an outrageous rate for a 5% down loan due to the risk.
Private Insurance will step in...
Is there such a thing in Canada? The only alternatives to CMHC are 90% government backed (and they have their own limit). I don't think there is any private mortgage insurance companies out there.
Never have rates been so low for such a prolonged period of time. Never before have we had such a high home ownership rate.
Also previous corrections were mitigated by a reduction in interest rates. We're about halfway through a correction in affordability, but interest rates are bottomed out. The only way to continue the correction is via prices.
How willing would the bank be to give a regular person half a million dollars with a twenty five thousand dollar down payment? They will not want to take this kind of risk without insurance.
I agree, but you're assuming they won't be able to get CMHC anymore. I haven't seen a compelling argument that CMHC cannot continue to meet buyer demand for insurance given the new limits and suspension of bulk insurance program. A big reason they're so close to their limit is because they were taking on the banks' conventional mortgage portfolio in addition to their regular high-ratio business.
Canada's housing bubble deemed close to bursting.
(CBC, 2011)
Quoting from the article:
The company (Capital Economics) says Canadian house prices are overvalued by approximately 25 per cent, close to excessive levels seen in the frothy U.S. market at its 2006 peak.
Over-building is already visible; the number of unoccupied houses and condos is at a record high. It closely resembles the 1994-95 housing slump, when the construction industry experienced a severe downturn.
What makes you think that the trend for a growing city should be the same as that for an entire country?
The runup in prices in Canada over the last decade has been independent of growth rate of cities. Very slow growing metros such as (ahem) Victoria have appreciated as much as the fast growing ones such as Calgary and Edmonton.
From which it's easy to conclude that the price runup has nothing to do with population growth.
How willing would the bank be to give a regular person half a million dollars with a twenty five thousand dollar down payment? They will not want to take this kind of risk without insurance.
They are not allowed to take on this kind of risk without insurance. Uninsured mortgages from banks must have >=20% down.
Non-bank lenders can lend on any terms they want. Funny thing is, non-bank high-ratio lenders are going out of business. I wonder why.
For my purposes it doesn't matter so much WHY prices appreciated but rather that they did and now they aren't.
This real estate baby is getting ready to full on tantrum. You can see the lips puckering, the eyes starting to scrunch up, the little fists balling. The first deep breath has been taken and it won't be long before those ear piercing wails thunder across the room.
I dunno about anyone else but I can't stand a crying baby.
I love babies crying. It is a welcome sound of life.
But I agree - the market is about to tip hard.
From which it's easy to conclude that the price runup has nothing to do with population growth.
Yeah by growth I meant densification. If we're measuring SFH prices then those can and do appreciate faster than local incomes.
Yes!
Babies, kids laughing, old people smiling. Doggies! All good! I love it too.
What's the expression? Life is messy, clean it up.
This correction is gonna be messy but I think there are some real smarty-pants on here who are going to do jusssst fine. Cryin' babies n all.
Well Hurricane Market is hitting the shores of Sooke and it looks like it's after manufactured home parks -again.
The banks are tightening up lending requirements on this type of affordable home requiring that all must meet a specific CSA building code. Which I believe was adopted after 1998. No appropriate sticker, no loan.
And in a "soft" market with few home sales, manufactured homes are close to having zero appeal to home buyers. They also tend to have age restrictions and high pad fees.
Result, Prices are back to pre-boom levels that were last seen between 1995 to 2002.
Which brings up a thought about "character" style homes. Why are they so expensive when they cost so much to maintain.
It's nostalgia. The people buying these homes are after their past. Not necessary the home they grew up in, but the home they felt comfortable as a child in - like Grampa and Grandma's house.
But this next generation were raised in, and their grand-parents owned houses that were not character homes. So I don't expect character homes to retain their charm to the next generation of buyers. They don't want them - they want the side split home of the 1960's. The Brady Bunch home complete with shag carpeting and wrought iron staircase rails.
Is densification really happening?
If it was, wouldn't we see a disparity in the percentage gain of property values between rural and urban properties?
It seems to me that the run up has been uniform across all markets on the Island. Prices in Victoria have doubled but so have they in Langford and Metchosin.
If densification is occurring where is the unwanted rural property that people are giving up to live in urban areas?
After owning a character home on the prairies and renting one here in Victoria, I will never go back to them. Just too much maintenance and poor efficiency.
To me, densification is something that developers use to sell the city councilors on allowing smaller and smaller homes. By building smaller you can build more and prices will come down to where homes are affordable again. More units means more taxes for the city and that would make it easier for cities to balance their budgets without increasing taxes.
But the act of constructing more and more creates economic activity and makes prices increase. The city then has to hire more people to maintain the streets and more people to watch those that maintain the streets and more people to manage those that watch those that maintain the new infrastructure. And all these people need homes.
It's true that prices will eventually come down, but because of the glut created by the developers. By that time the developers will have sold out their units and the original purchaser will take the hit of falling values. City hall will then scramble to lay off staff, which further reduces economic activity.
And the pendulum swings.
the market is about to tip hard.
It's of course my obligation to rhetorically ask how many times this sentiment has been expressed in the last few days, weeks, months--and yes--years.
It's coming. It will hurt. The bigger they are, the harder they fall. It's going to be bad. Any time now. Soon. Just around the corner. When x happens, things will go south. When y happens, the jig is up. Look, here's a graph that matches an American graph. Robert Shiller is a renowned economist who went to Yale. Comparing the canals of Amsterdam to Victoria, British Columbia, is totally appropriate and useful. Victoria's situation perfectly matches that of others. Asbestos removal costs $75k. Fall will be bad. Winter will be bad. Spring will be bad. Summer will be bad. Old people will downsize. Everyone who wants to own a home already does. Interest rates will go up soon. A bank conducted a survey that produced scary statistics. Almost every owner has a HELOC. Densification in Victoria is a myth. What happens in Sooke is a good predictor of outcomes in the core--could the two be more the same? Same applies to the Gulf Islands. And Shawnigan Lake. And Colwood.
City hall will then scramble to lay off staff, which further reduces economic activity.
Or they will just take an extra few months to approve your plans bouncing them from department to department creating work for themselves.
Introvert, what is your prediction on the housing market in the near future?
How many times has that sentiment been espoused?
Probably thousands of times.
And yet you still keep coming back for more. You're like the sinner that keeps going back to church, hoping to be saved.
Introvert, change your evil ways. Rid yourself of the real estate demon. Save your soul before it's too late. Cast out Cameron Muir and find salvation in the arms of Robert Schiller. Love thy renter. Do not covet thy neighbors home.
Thine will be done in Victoria as it has been done in Sooke.
I have no doubt, that City Hall does this intentionally to make more fees off the developer. The home owner is the pawn in the game.
Or they will just take an extra few months to approve your plans bouncing them from department to department creating work for themselves.
This is criminal. Inefficiencies/deceptions like this benefit few and hurt many.
No private mortgage insurance in Canada?
Google it
City of Victoria is absolutely crazy. Three months to approve a simple building plan. Takes 7 days in Langford or Colwood.
We aren't taking rezoning or anything complicated. Three months is what you can anticipate if you bring a plan for a lot that meets the zoning bylaws.
Then dealing with the inspectors is nothing short of a nightmare. You'll buy two identical faucets at Rona (big company, you would think they know what they are stocking) and ONE will know have a "UPC - C" on the back, and the other one will just say "UPC." They'll force you to take it out or provide paperwork from manufacturer even though they are identical, the other one can stay because of the "C." Sure easy enough for a developer, installing 500 identical faucets, gets paperwork all 500 are covered. For the average Joe homeowner it a huge pain trying to get in touch with some engineer out east to send you paperwork.
Building a new home in the City of Victoria is extremely painful and extremely expensive.
Don't get me going on the other idiotic policies they have introduced in the last year....beyond stupid.
Last year I use to be able to call them up and get information on a home for my buyers or sellers. Now you physically have to go down there and pay $35 to get information. I have no problems paying $35, fair enough. But to force everyone to go down there? It is 2012!!! They can't build an online system? or email it to me, or fax? Not only do they create a ton of work for themselves they also collect the parking revenue I have to pay to go down there.
Genworth: Homebuyer 95 Program
Maximum Property Value:
LTV > 80%: Less than $1,000,000
Why does this match the CMHC rule?
http://www.genworth.ca/content/genworth/ca/en/products/product_overviews/Homebuyer_95.html
Introvert, what is your prediction on the housing market in the near future?
My prediction? More of the same. (No price crash.)
... Thine will be done in Victoria as it has been done in Sooke.
Nice.
@dasmo No private mortgage insurance in Canada?
Google it
Look closer. Both Canada Guaranty and Genworth are backed by the government to 90%. They are nowhere near private. Name one private insurance company that doesn't have government backing.
"Both Canada Guaranty and Genworth are backed by the government to 90%"
I guess that answers my question above.
@Introvert The issue is that you want absolutes when nothing is like that. You extrapolate statements like "boomers will become net sellers" to "every boomer will sell their home". Nothing is ever that black and white.
In the end people are here to learn and make their own decisions. It appears you see it as some sort of argument where only one person can be right. It is not like that at all. Marko can be right to buy a pre-sale condo, whereas the exact same purchase would make zero sense for me because it's not what we need.
Both owners and renters can be financially correct in the same market.
For the average Joe homeowner it a huge pain trying to get in touch with some engineer out east to send you paperwork.
And they wonder why the majority of suites are illegal. Pure insanity.
I'm picking on one condominium sale that just happened to show how crazy some prices can get when the property is foreclosed on.
There is a 56 unit condominium complex in the Tillicum area that was built some 30 years. Not a particularly good neighborhood and not a particularly good complex.
The two-bedroom 850 square foot condo needed repairs. Carpet, paint, cabinets along with your time and $20,000 to $30,000 and you'd have a respectable suite.
Here its sales History
$108,000 April 1993
$106,500 Sept. 1994
$125,500 Feb. 2004
$167,900 June 2005
$210,000 Jan. 2008
And this week it sold for - $146,000
Originally listed at $225,000, the condo took over 400 days to sell.
Yet, as Marko has pointed out, much smaller downtown condos still sell at $315,000. This is what happens when the product your selling is just a half step out of sync with the rest of the general market.
For most of the last 20 years, the value of this condo went up and down like most other condos, because there was a lot of buyers and less supply.
Today, we're in a market different from anything that has ever happened in most of our memories. This shallow and dysfunctional market used to only happen at the edges of the market, like in Sooke, but today it can happen in your neighborhood depending on the age and type of property.
And in my opinion, these are precursors of a substantial correction coming our way. It would take a massive government intervention to change the current trend.
All of this is just my opinion, but there is a plethora of examples to support this opinion.
So, generally we know that if you live in the fringe like Sooke or Salt Spring, Sidney, own an older condominium, or a one-storey home, have age restrictions in your complex, a home over a million dollars, waterfront, acreage, a home that needs updating and repairs or god help you - a manufactured home your property is as marketable as stale bread.
That's a long list and growing.
Amen to that JJ!
Leo S, thanks the Kumbaya lecture.
You extrapolate statements like "boomers will become net sellers" to "every boomer will sell their home". Nothing is ever that black and white.
I had no idea. Thanks. Everyone else's statements are universally nuanced and not absolutist, so I can see how mine would really stand out.
It appears you see it as some sort of argument where only one person can be right.
No, not really. I'm mostly just identifying some of the statements that I read over and over, and which never seem to come to fruition.
But, Introvert, the market is tipping now. If you can't see it you are not looking hard enough.
There not coming to fruition?
First you have to prepare the garden, plant the seed, fertilize, water and weed then you have to wait until the fruit ripens.
An impatient Gardner will never see results and all he'll have for his efforts are sour grapes.
1650 York Pl in Oak Bay, a 1989 home, just sold for $1,460,000. Purchased in 2000 for $590,000. Sellers lived in a nice home for 12 years and pocketed a few tax free coins.
Leo S, thanks the Kumbaya lecture.
Come ere you big lug let's hug it out.
1650 York Pl in Oak Bay, a 1989 home, just sold for $1,460,000. Purchased in 2000 for $590,000. Sellers lived in a nice home for 12 years and pocketed a few tax free coins.
Increase of 247%. Right in line with the general market increase of 240% in that time.
Indeed, thanks a bunch!
Thats as relevent as talking about someone getting rich brcause they owned google since the ipo... or comparing current rent to buy by using an example where a condo was bought pre construction at the height of the financial crises vs current rental rates.... I understand that as a realtor your views are biased but come on man cant you tell that most of the bears here are fairly educated and informed of the market? In my opinion all your doing when you post stuff like this is losing credibility.
Sorry about the spelling and grammer mistakes though, i am typing on my phone.
I would have never expected that property to have appreciated at the same rate as the typical Victoria home. Because of the weak demand for million plus homes, I would have guessed a lower rate of appreciation.
If Victoria's bubble was primarily the result of loose credit, and the same loose credit conditions existed right across Canada, then why didn't Regina, Calgary, Edmonton, Saskatoon, Winnipeg, Hamilton, Windsor, Quebec City and Halifax also see their average SFH price exceed $600,000?
Just wondering. You know, because of course it's not different here.
Thats as relevent as talking about someone getting rich brcause they owned google since the ipo... or comparing current rent to buy by using an example where a condo was bought pre construction at the height of the financial crises vs current rental rates.... I understand that as a realtor your views are biased but come on man cant you tell that most of the bears here are fairly educated and informed of the market? In my opinion all your doing when you post stuff like this is losing credibility.
You do know that this blog has been going for almost 6 years with the same message? It lost credibility 5 years ago :)
When I bought my condo individuals on the blog where predicting the building would never get off the ground, everything would crash, I would lose my deposit, my ceiling height would by 6' instead of 8'8'' as promised by developer, etc. Now, somehow it is unfair to use my purchase as an example? Everyone had the opportunity to buy at the time; you didn't have to be rich either.
Every day I read totally incorrect information on the blog but who cares? This blog is a solid combination of entertainment and solid analysis by likes of HHV and Leo_S. You can't take it too seriously.
If I let the doom and gloom of the blog affect my decision making I certainly wouldn't be getting far.
FYI...whether prices go up or down doesn't affect me. I've gone from 28 sales last year to over 50 this year. The more equity people lose the more my type of business model thrives as people look to save on commission.
You do know that this blog has been going for almost 6 years with the same message? It lost credibility 5 years ago :)
It's funny because it's true.
last time i checked when you compare rent to buy, you would compare current property prices to current rental rates. Not property prices during the height of the financial crises 3 years ago vs current rental rates. If you can do some present dat examples that support your view then i am sure it would be much appreciated by everyone.
I did give you present data; I used the one bedroom condo that just sold on Yates.
I cant find the example on yates, do you mind posting it again?
"You do know that this blog has been going for almost 6 years with the same message? It lost credibility 5 years ago :)"
Ouch, Marko. That stings. Should we really dig up the past on this blog?
If Victoria's bubble was primarily the result of loose credit, and the same loose credit conditions existed right across Canada, then why didn't Regina, Calgary, Edmonton, Saskatoon, Winnipeg, Hamilton, Windsor, Quebec City and Halifax also see their average SFH price exceed $600,000?
All those cities also experienced a large runup in prices (arguably a bubble) in the same period due to the same factors. Only the starting point was different.
You do know that this blog has been going for almost 6 years with the same message? It lost credibility 5 years ago :)
Founded right at the time when affordability was worst. It's gotten better every year since. Prices haven't moved much, so whether someone is ahead or behind by renting in that period depends entirely on their rental costs VS ownership sunk costs.
That said, clearly many predictions did not come to fruition. I think the value of the blog is that it is diverse enough that no one gets a free ride. Unlike Garth's blog the reasoning does evolve, and the comments are on the whole interesting and trolls quickly stomp off in a huff. Quite rare, because even other sites with excellent content like theeconomicanalyst.com do not necessarily have a healthy comments section (mostly just name calling).
By the way, have a look at the sale on 1949 Waterloo. Sold for $510,000 after 82 days on market. Assessed at a whopping $810,000. In fact if you look at the tax data, even the 2006 assessment was $636,000.
Why would anyone pay such high taxes (up to $5000) for years when the house is clearly not worth anywhere near the assessed value? Bragging rights?
All those cities also experienced a large runup in prices (arguably a bubble) in the same period due to the same factors. Only the starting point was different.
Leo, why was the starting point different (higher) in Victoria?
It wasn't just Victoria, it was Vancouver too. The liberals had just gotten into power and were buying off employees to retire sooner. That meant the older government people were reluctant to put their homes on the market to sell as they were unsure of the future. But for every older employee that retired that made room for two new employees at half the cost of the old employee. And that caused demand for housing to increase.
BC was also coming out of a recession after years of stagnation under a government that alienated business. The new government altered the political environment and encouraged businesses to come back to BC.
Then there was the sewer expansion, that created jobs and opportunities for new housing developments.
Then two planes crashed into the twin towers and the USA had a president named "W" whose family operated some of the Savings and Loans companies that were facing financial problems because of a weak commercial market. What better way to get the country than to spark the market. And BC was ready to go with its pent up demand, all it needed was low interest rates.
Gordon Campbell was the Golden
Boy. An ex employee of Marathon realty he knew how to start an economic fire with housing.
The assessment on the Waterloo property is incredible. It seems like BC Assessment was estimating the land as two building lots.
You ask yourself, why didn't the home owner appeal the assessment? I know that in Oak Bay some of the old timers want to see a high assessment as they believe it will make people pay more for their property. Proof that a better than average IQ and better than average wealth are not synonymous.
Leo, why was the starting point different (higher) in Victoria?
I think we've had this conversation, as I recall you didn't like my answer. In the interest of efficiency...
I too am hurt. This little blog has lost its credibility not just recently but five years ago!
Can you truthfully say Marko, that this blog has not increased your understanding of real estate. Has it not made you a better realtor(TM)? A better man?
A lot of real estate blogs have come and gone, but this one has survived. As far as I can recollect it was here first that CMHC was called out for its lending policies. It was here that tools such as the months of inventory and sales to new listings ratio were used to explain that its volume not prices that one should be watching.
Here too, Robert Schiller and the re-sale method of judging a market has been explored.
Fantastic graphs presented and some well known realtors (tm) taken to task. And I think Garth has lifted an idea or two from this insignificant blog too. Let's just call it "research" on his part.
From time to time, I also read Vibrant Victoria but it is mostly one sided and is more of a forum for agents to get together for a session of mutual masturbation.
Yes, some of us on this blog can be hard hearted. I think we may have made a few agents cry over the years. But every child has to shed a tear or two before they can..
RUN WITH THE BEARS.
I think we've had this conversation, as I recall you didn't like my answer. In the interest of efficiency...
Of course! How could I forget? It was the best cop-out answer ever: "It doesn't matter."
Thanks for rolling back the tape.
So, Leo. Some time has passed. Have you come up with a proper answer yet?
Haha. Nice one :)
VV is a good forum. Definitely a more critical environment, so some good, frustrating, but educational debate to be had there.
1949 Waterloo??? Assessment was way off. Hopefully the new owners know enough to get their taxes dropped...
In that old conversation, Leo S wrote:
Like I said, we know that Victoria will always be relatively high compared to many Canadian cities.
Leo, I think what you're saying here is that Victoria is different. I agree! More desirable cities do have relatively higher house prices (and always will).
So, Leo. Some time has passed. Have you come up with a proper answer yet?
I have nothing to add that wasn't covered in that previous thread. It was a pretty good one.
This is one of the best blogs I have come across. People are civil.
A friend sent this **wheel**to what season real estate is in.
The only thing I was told to change is we had an extended Autumn as it lasted until 2007-8. He said leaders always try and fail to keep the autumn sun shining. He explained it to me said Spring and Autumn are the best seasons for real estate. Summer is great for part of it but you have to know when to get out like 1981.
If you look at percentage increase, Winnipeg has risen proportionally to Victoria.
Does this story sound familiar?
http://www.winnipegfreepress.com/local/a-tough-slog-for-first-time-homebuyers-173650471.html
People don't have notions of "basement suites". I had never heard the term till I moved to BC. In Winnipeg people buy property with double incomes. It takes more than that now to afford a place here. You have to start your own business to support an asset you can't afford by yourself.
More desirable cities do have relatively higher house prices (and always will).
Nobody here is saying that Victoria shouldn't be more expensive than Winnipeg.
What we're saying is there is no good reason for every big city in Canada to remain more than twice the price that it was in 2002.
Nobody here is saying that Victoria shouldn't be more expensive than Winnipeg.
I'm pretty sure that some people on this blog, at certain times, have been saying this, but OK...
What we're saying is there is no good reason for every big city in Canada to remain more than twice the price that it was in 2002.
Fair point.
This blog is quite civil, thankfully.
I visited the Alberta Bubble Blog; lots of truly nasty invective being tossed around there.
The common mistake is the assumption that the higher the price the more desirable the property. That's only true within your local market and the type of property.
Not so true when comparing cities in different provinces or countries. A true comparison can only be made when that prospective buyer would be looking to purchase in either neighborhood, city or country.
So, comparing Victoria to Santa Barbara, Winnipeg or Toronto is just for entertainment purposes. Comparing Victoria to Sooke or even Vancouver is more reasonable and comparing your home to another home in your neighborhood is the best.
And that would also include types of properties too. Which is more desirable a million dollar condominium or a million dollar home? A hobby farm or a character home with an ocean view? As you can see using price as the measure of desirability can be erroneous.
@Intro.
"I think what you're saying here is that Victoria is different."
Of course. Every city is different.
Victoria is different from most because the city "centre" is at the bottom of a funnel. That means that for a given population the average commute is longer than is the case for a prairie city located on a plain (or plane?) with access to the downtown from all directions.
As a result, houses in the central core are more valuable, relative to the suburbs, in Victoria than in Calgary or Edmonton, i.e., because they are relatively closer to the center.
Then there's the waterfront and the mountains. Nowadays a million dollar view costs at least a million bucks. Given the number of waterfront properties in Oak Bay and Saanich East, no wonder the average price in those municipalities is high.
But wait for a tsunami. Then you'll be able to buy OB waterfront real cheap.
I often wonder why Langford doesn't develop their downtown into a thriving office/ business core. I am sure many families would appreciate working out there with cheaper housing, better commute, cheaper office leasing perhaps?
MC - I agree. If govt put some of their facilities out there they would save cash and make many people very happy.
Oddly enough, when it comes to house prices properties that are in the downtown area are less expensive than homes in say Saanich East. House prices generally follow along lines of the arterial roads in relation to car travel time from the downtown. Exceptions occur when there is a feature nearby like Beacon Hill park or the waterfront.
So you will find the highest prices are not downtown but still within a 30 minute drive of the core. After that prices decline, until you reach the next town epicenter.
For a lot of people living and working downtown is not a plus. They want a geographical break far enough away that they feel that they have left work behind.
Surprisingly, there isn't much difference for starter homes say around Mayfair mall and in Langford or Colwood. The same for rents.
The people who complain most about the commute between Victoria and Colwood are not daily commuters at all. They are people that live in the city and are occasionally inconvenienced by having to go to Langford.
Oddly enough, when it comes to house prices properties that are in the downtown area are less expensive than homes in say Saanich East.
The price difference between a home in Fairfield and Central Park is staggering...will it narrow in the next 25 years?
Fernwood also seems undervalued to me. A tear down on a gorgeous 6,450 sq.ft. building lot at the very top of Roseberry Street just went for 367k! Large character homes to both sides of the property. I was thinking about throwing an offer on it myself but it sold right away.
A lot like this would be 100k+ more in Fairfield and 150k+ in Oak Bay. Worth it?
I think that Victoria is quite coherent with the rest of Canada and I would definitely recommend to sell now rather than wait.
A Slowdown in Canada’s Housing Market is quite clear about that: The supply of existing homes will continue to grow during the rest of 2012 and active listings will approach an average of 27,000 units this year. Prices in 2012 will grow at a moderate pace due to the balanced market conditions that don’t favour sellers or buyers. The average price will grow by 3.5 per cent, settling at $325,000.
There is a slight chance that the prices will still grow, but the loss can be much harder in the end.
I like Fernwood (Stage is one of my favorite restaurants) but Fairfield is nicer on a few fronts.
-a nicer bike ride/walk to town
-closer to water front parks and beaches
-close to Beacon Hill Park
-the ultimate jogging route launch
-closer to groceries
Is that worth 100k more? Who knows....
Worth it?
Lot prices usually see the biggest % haircut in a correction. Safer if it's zoned higher density and your dad's a builder, but even so, very risky. The safest thing to throw lowballs at is existing multis that can come close to carrying themselves. The riskiest thing to ever try in a shaky market, is to build a spec -- even if you got 20% off last year price. There's many a past correction where city lot prices have become next to worthless, as profit margins become tight even when the land is 'gratis'.
Is it worth another $100,000 to live in Fairfield rather than Fernwood.
It is, when it's not your money!
Would you pay another $500 a month in a mortgage to live in Fairfield? I think most would. Would you pay another $1,000 a month?. I think most wouldn't. The difference is the cost of borrowing.
Charlize Theron is gorgeous. The lot on Roseberry is just dirt compared to her.
Right because there is s serious glut of building lots in Victoria....
Good point JJ.
I should add, the chances of say the Vanc type of correction below....is very slim, but if it did, you would be far better off owning something that can produce income.
http://thedependent.ca/featured/land-destiny-history-vancouver/
Between 1913 and 1915....Vancouver’s real estate bubble burst…In fact, there is one recorded instance of a corner lot on Cambie and Broadway being listed for $90,000, and eventually selling for less than $8,000.
Malory "Innocent Meat" Knox
The report you talk about is a CMHC report. Of course they will present market conditions as balanced. Why would they say anything else? That's like asking most realtors if prices will go up or down next year. What answer do you expect?
Try coming up with an independent source. A Canadian bank economist or the VREB will not do either.
Ok...this area of the earth is a little less speculative than back then
But we can all dream I guess.
Hey, I'm reserving some cash just in case ;-)
We had a real estate bubble in Victoria at that time too! Most of Fairfield was drained and homes built back then.
Then we went to war in 1914. Well I didn't but my great grand-father, Josiah Jack, did.
If your a builder and are land banking for the future, it's a good idea to have a home on the land to offset some of the costs. That's no guarantee that you will always have renters. Especially when their are so many newer condominiums available to rent.
@dasmo
... and look at all those building lots along Shelbourne Street in 1916 (note Mount Doug in the background).
There doesn't have to be a lot of empty lots in Victoria. There is a limited demand for lots.
A vacant duplex zoned lot on Balmoral just sold for $380,000. They started at $469,000 for the lot and it took 163 days to find a buyer at $380,000.
For 12 years that lot sat vacant after being bought for $120,000. The carrying costs on the empty lot probably amounted to another $120,000 over those 12 years too.
That doesn't sound like a hot market to me. And there is no shortage of building lots, because a couple doors down on Balmoral is a house on a lot that they are only asking $340,000 for today
Canada house prices to drop, stay down for a decade, causing unemployment, Scotia says.
Quoting from that article:
The bank also warned that “balance sheets heavily skewed to real estate leave Canadians vulnerable to an adverse shock, including a sharp rise in unemployment and/or a sharp drop in home prices.”
Scotiabank’s report follows several other warnings on the housing market from other banks. Many outside observers argue Canada is caught in a classic housing bubble, with a painful correction on the way.
The market’s excesses are becoming obvious. Vancouver was recently identified as the second-least affordable major city in the world...
Canadian banks are predicting a long housing market correction. If you consider the source, it magnifies the impact of the statement.
Vancouver, Victoria and Toronto are not far apart in terms of overvaluation (price/income ratio). Vancouver is the second most overvalued city in the world. Make your own conclusions about Victoria.
Remember, Mark Carney also stated that the Canadian housing market is 37% overvalued. He also uses price to income ratio.
If the USA goes into a recession again, maybe the best way to stimulate our economy is to chop prices down by 30 or 40 percent, so that people can start buying again.
That might make some home owners upset, but sometimes you have to take a hit for the team.
A vacant duplex zoned lot on Balmoral just sold for $380,000. They started at $469,000 for the lot and it took 163 days to find a buyer at $380,000.
We are talking Balmoral and Quadra here, not exactly the most appealing place to build a new home. $380,000 is about right.
That doesn't sound like a hot market to me. And there is no shortage of building lots, because a couple doors down on Balmoral is a house on a lot that they are only asking $340,000 for today
On a 2,700 sq/ft lot? ha ha...that is ridiculously expensive if you wanted to build new when you can buy a 5,500 sq/ft lot for $340,000 or a 6,450 sq/ft lot on a nice street for $367,000.
You two examples have futher enforced the fact that lots are extremely expensive in the core and have held up better than SFHs or condos.
Wow, Nice one DavidL. Crazy how much has happened in a century. Partly why comparing to the Canals in Holland isn't entirely relevant lol.
Actually JJ, at the rates as they have been it was probably more like 60k carrying costs if they borrowed the the full amount allowed, including tax... Not a lot of maintenance on a lot. So they were trying to be greedy and instead only made out with about 200k (minus capital gains)...they did ok.
Exactly, -10% and flat for a long time. Sounds like Scotia is a Halibut too!
Only one completed home in Victoria, 2008 or newer, on the market for under $1 million. Next closest is $1.25 million.
This keeps lot prices propped up. There is a non-existent supply of newer homes under $1 million.
How about all those building lots on Sinclair Rd?
Vacant lots are expensive in the core, that's why not too many sell and not too quickly either.
The demand for starter homes to live in, is far stronger that lots to build on.
When the demand for building lots is strong, then you'll see the starter homes being crushed by bulldozers. But that's not happening to any great degree.
There just isn't that strong of a demand for new housing in Victoria. So why would there be a strong demand for building lots?
Sinclair Rd is in Sannich isn't it?
Yes, Sinclair Road is in Saanich.
How about all those building lots on Sinclair Rd?
A lot of them have sold now. They have been going for 400k+HST to 500k+HST for most of them. The best two went for quite a bit more.
Bare Land Strata hurt those lots a bit plus a lot of prep work required on some of them, funny shapes too.
@Marco
Bare Land Strata hurt those lots a bit plus a lot of prep work required on some of them, funny shapes too.
Totally agree ... very strange lot shapes and a steep access road. I drive by that area every few days.
With $500K for a lot and another $500K for a $2500 sq. ft. house - where's the profit margin for a developer when a buyer can get something nice (but not new) for less in Cadboro Bay?
Marko, your right lot values in the city have held up pretty steady for the last several years. The last sale I remember was a starter home on Oregon that sold back in 2009 for $355,000. And they just started building on the lot last month.
But if you are trying to sell a vacant lot, you will generally have to wait a lot longer to get a buyer, than if that site had a starter home. And it's expensive carrying a vacant lot today and leaving it empty until the home is built.
But builders have to pay these high prices, because someone looking for a starter home will typically outbid them.
A builder in the city has to be creative in the way he builds. Like building the home for himself and living in it for a year or two before selling it.
a simple man said...
MC - I agree. If govt put some of their facilities out there they would save cash and make many people very happy"
As well as the numerous consulting and tech companies!
Here’s a quick land for sale search for Victoria. 377 red poka dots.
Here’s for Winnipeg. 116 polka dots. Same 7km scale (lower right).
The Winnipeg graphic holds roughly twice the population as Vic’s metro graphic (if you swap some Renfrew/Sooke dots with Mill Bay). I thought it was notable how much land is available in Victoria. Certainly no shortage. OR Winnipeg is running out of land. Depends how you want to look at it.
@Malory
I think that Victoria is quite coherent with the rest of Canada
Certainly not in the past few years. Victoria prices have been flat since 2008 while the Canadian average appreciated almost 20% in that time.
Dave, do you really want to kid yourself and compare greater Victoria, rural areas and islands to winnepegs urban core for a gauge of urban land availability? ( A lot of those polka dots are for properties that are off that map)
I've mentioned buying court ordered sales and how you can get them for a significant reduction from fair market value. But there is a risk because they have to be cash transactions and you accept the condition that there are when you walk through the door. Try to wiggle out of the deal and you may find yourself in contempt of court.
But estate sales are really the choice meat to dig those bear claws into. Especially if the rest of the family no longer lives in Victoria. And since most realtors (tm) are now so tapped out themselves, they can't scoop these deals for themselves.
Sort of like the sale of a condominium in the high rise tower along the 1000 block of View Street. The tower was built some 20 years ago. A 1,000 square foot skybox with a 14th floor view of the city that was originally bought in May 2004 for $323,000. And guess what? - it just resold for $335,000.
From that floor you can look down on all those urban professionals along Johnson street in their 600 square foot condos that they bought for $350,000. Or over to the Belvedere on Humboldt where they pay $550,000 for a six year old same size condo with the same view.
yes but you pay the extra 200k to not live on the same block as the crackheads...
Well, let's look at land availability in the Fernwood/Oaklands area. As mentioned earlier there was a sale on Roseberry that Marko calls a building site for $376,000.
Well, if $376,000 for about a 6000 square foot lot is a tear-down in that hood, how many tear-downs have been bought there in the last 12 months on 5,000 to 6,000 square foot lots. Well there was about 6 sales, were under $380,000 in just that area. 15 in all of Victoria City and 37 in all of the core districts.
No shortage of tear-downs here. Victoria has tons of crappy little tear-downs. The only problem, is that the owners rarely tear them down.
And that more than any other reason is why builders have to pay crazy prices for dirt in this town. They have to compete with people who think rats are just squirrels with a bad reputation.
As mentioned earlier there was a sale on Roseberry that Marko calls a building site for $376,000
$367,000 actually for a 6,450 sq/ft lot. When it comes to building a home in Victoria size makes a big difference due to large offsets.
5,000 sq/ft lot is cutting it really tight for a 3,000 sq/ft home and you really have to go three level as where on 6,450 sq/ft you have a lot more flexibility in terms of design including larger decks, etc.
The Roseberry lot had many things going for it. Larger than the standard 5,500 sq/ft city lot. One of the nicest streets in Fernwood. Flanked by well maintained character homes on both sides, plus views of the city off the back.
Sort of like the sale of a condominium in the high rise tower along the 1000 block of View Street. The tower was built some 20 years ago. A 1,000 square foot skybox with a 14th floor view of the city that was originally bought in May 2004 for $323,000. And guess what? - it just resold for $335,000.
I know two people renting in this building, one for $1,500 and one for $1,550 or you can buy for $335,000, getting closer.
Do you have any old links that work Marko? I'm curious. Sounds like a pretty good buy. Was the house rentable? (you know, to cover cost while you design and wait for city hall)
Do you have any old links that work Marko? I'm curious. Sounds like a pretty good buy. Was the house rentable? (you know, to cover cost while you design and wait for city hall)
I doubt it was rentable.
Hm, then really it's lot value minus 30-40k for carry cost and demo since it sounds like there is no chance to sell/move the house.
You have the same carrying cost with a vacant lot. I figure about $10,000 to demolish ($12,000 to $13,000 if there is lead paint) + any asbestos abatement. Given the age of the home probably not too much.
You have to keep in mind some vacant lots need a lot of prep (blasting, etc.)
Quiet in Oak Bay. Astounding how many people are away to Hawaii, So Cal and Mexico right now or are going soon.
Lots of it on LOCs.
People have not heard the message.
a simple man
Perhaps these people think that this sinking market will be rescued the way it was in 2009.
That will not happen this time.
I agree that people are not getting the message, that's why this information needs to be posted more than once.
Has there ever been a time when there has been access to this much credit juxtaposed with a time of so low fiscal literacy?
We are headed for the rocks!
(not you, introvert)
Or they are continuing to go on living their lives and are probably better off for it. Are you sure their not off to their places the all bought on the cheap in AZ?
No, they have not bought properties in AZ.
I am living in OB and hear it all the time - they openly state that they are going away to "recharge" and that they are using their LOC ti fund it.
And then say things like they will worry about how to pay it back when they return.
Most people don't even know the reason interest rates are so low.
Low interest rates are a form of economic stimulus. They are low to avoid a recession. Kicking the can down the road. Well, that only works for so long. Eventually your middle class gets tapped out and you have a credit bubble burst.
Koozdra said:
"...Eventually your middle class gets tapped out and you have a credit bubble burst."
---------------------------------
Agreed...BUT...the question then is "Who pays?"
People who took on too much debt? That is, they pay for their own sins...
OR
Do they ( governments under the auspices of 'fairness' ) hand the bill to savers? or someone else?
Savers are paying for the sins of others already with ZIRP. Will it really be different as things get worse?
I had never heard the phrase "strategic default" until the US Housing Crisis.
Now people can live in their AZ homes (with granite countertops, natch ), not pay their mortgage and the banks ( by way of forbearance agreements, can't prove title lien because of admin screw ups, gov pressure to be 'fair', you name it ) can't do anything. It's so common now...
I now fear that even with price declines I'll still get screwed and won't be able to buy a home.
Any thoughts on how to prevent "BAILOUT II - This Time it's Personal"?
We aren't at ZIRP yet but heading there I think (thus the other restrictions on borrowing besides raising rates). This is why I have gotten rid of all my GICs and converted almost everything to equities, gold and some -low cost debt- funded real estate. I also got rid of all my mutual funds. What a bore those were. They only lost value over time. I am gambling that we have low rates for at least another four years, long enough that I can renew at another low rate and get ten years of sub 3%.
Anon,
"Any thoughts on how to prevent "BAILOUT II
The best thing is if prices keep deflating slowly for 10 years at about the same rate as the last 3 years, <5 percent a year. That way not as many owners will default. BTW 2013 should see the big percent drop and highest defaults as much of world double dips. BUT the thing is, it won't be fast like the States bout of jingle mail, because BC defaulters know their wages will be garnished until the losses are paid. Harper's government may throw a small bone here and there, but not a chance would they let owners off the hook. Besides, they in no way can afford to. The best advice, keep enjoying the spoils of renting and invest some of the difference you are saving.
BUT the thing is, it won't be fast like the States bout of jingle mail, because BC defaulters know their wages will be garnished until the losses are paid.
Most US states are recourse like Canada. Didn't stop people from defaulting.
? Allllrighty then
Here are a few big NON-recourse just south of us that led to lots of jingles! Luckily that won't happen here as the humperrs won't get off that easy.
Arizona
California
Idaho
Oregon
Texas
Utah
Washington
Falling prices do not make people default on their mortgage.
People default because they don't make their payments.
If prices fell 20 or 30 percent, nothing much would change.
Except those buying would not be so over extended. Realtors (tm) would sell more. And more jobs would be created.
Lower prices are GOOD for our economy.
Here are a few big NON-recourse just south of us that led to lots of jingles!
There was no RE bust in Texas because there was no bubble.
Here are a couple of recourse states for you: Florida and Nevada.
People default because they don't make their payments.
Or need to sell and have negative equity.
Number one factor correlated with defaults is unemployment rate. So far no danger there in Victoria.
Number two is negative equity.
JJ; if prices fell 20-30 more percent, I don't think realtors would be making more. If prices were to fall to that extent, many homeowners would not be able to sell and for many years they would have to bite the bullet and continue paying mortgage payments on a home that they absolutely have no equity in.
And any new buyers wouldn't be so over extended? No, what you would get is a lot of new buyers whom wouldn't have previously qualified jumping into the new market, and they too would over-extend themselves just as those did before them.
529 Swanwick Rd just went for $5,000,000, a steal for someone!
Crazy. Considering it was originally for sale for over $20 million. Then 18.5....14.5....8.9 and finally $5 Mil.
If only I could afford the taxes, utilities and staff! Any guess on how much it cost to build?
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If only I could afford the taxes, utilities and staff! Any guess on how much it cost to build?
Probably more than 5 million, plus they paid 1.7 for the land.
Definitely below replacement cost.
I'm sure. They were punished fro being greedy at starting the listing at 24 million I guess... selling for 80% off the original asking price! Now that's Bear food folks....
My guess is it cost around 8 million. say 5 million for the main house, 500 k for the guest house, 100 k for the tennis court, and 500 k for roads, landscape and dock. I think they were trying to sell it for 3x cost.
Visited the house on Waterloo. An estate sale - the garage in far better shape than the house, the house not having had work done on it for probably 20 years.
Just to get the place into liveable shape would entail: new kitchen, installing grounded wiring in places, new windows, fixing basement water leak, removing extremely old space carpet, interior painting, redo bathroom etc. and then you are left with a 2BR house with a really small kitchen and a weird suite (or extra family space) down. Great lot. We figured it would take around 80-100K to get it to where we would want it. Wouldn't have that kind of capital remaining after downpayment, so it wasn't for us.
Assessed is out to lunch - likely that the dear soul was on elderly tax rates and so a wild assement didn't get appealed.
Good luck to those that bought it. Likely could be torn down and a high-end house put in its place.
One of the owners of swanwick died two weeks ago. Sad. Their dream turned into their nightmare.
Rest in peace.
Maybe they enjoyed planning and building their dream estate. I am sure lots of employment was generated also. Often things don't work out the way we want.
I know a guy in Sooke who was priced 80k for asbestos abatement. It was everywhere, big shack.
Needless to say he didn't move forward with his renovation...through the permit process anyway.
I feel sorry for the death of the family member, but not for them losing money on the house. If you spend millions of dollars to build a custom house you'd better not count on getting it all back.
Actually I'd go further and say that anyone buying a house today had better not count on getting it all back.
One of the owners of swanwick died two weeks ago. Sad. Their dream turned into their nightmare.
Rest in peace.
You could also pass away under worse circumstances, poor and in a crappy house.
Not sure how a $5 million dollar house would contribute to the tragedy of death.
but not for them losing money on the house. If you spend millions of dollars to build a custom house you'd better not count on getting it all back.
When you have that kind of cash does it really matter whether you lost 1, 2, or 5 million? You won't be at a food bank anytime soon.
I imagine there are worse investments such as private jets and yachts.
Who keeps the proceeds from the sale of 1895 Landsdowne Rd mls # 311602:
Grow-op found in home near Camosun College
www.timescolonist.com/mikeholmes/Grow+found.../story.html10 May 2012 – ... a marijuana grow-op in an up-scale home on Lansdowne Road across ... Officers searched the home at 1895 Lansdowne Road today after ...
It cost $100 a ton to dump asbestos. Rent the hazmat suit, rent the air test kit and do it yourself if you get an 80k quote. Then to get it all tested and certified afterwords....80k is ridiculous regardless of how much there is.
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