Thursday, December 13, 2012

Debt Update

Who would have thought this slow market would be so exciting to generate over a 100 comments a day?  Time for a new post so we can all save ourselves a click.  Just please keep it civil.  If you want to insult other commenters then please post on vancouvercondo.info instead where at least you can be voted down.

In the news, Canadians continue to pile on the debt, now at 164.6% of income, rising from 163.3% in the previous quarter.

Meanwhile in BC, Moody's has downgraded our credit outlook to negative, while it becomes increasingly obvious that the budget is nowhere near on track to be balanced.  In the article the loss of revenue is attributed to lower natural resource royalties.  As the housing market slows down, the loss from FIRE and construction industries will be another big bite.

Contruction + FIRE industries as percent of BC's total GDP - From theeconomicanalyst.com

108 comments:

koozdra said...

I guess Moody's didn't hear Christy Clark's speech that we are on track for a balanced budget. Perhaps if you say something enough times, it will become reality.

Introvert said...

Meanwhile in BC, Moody's has downgraded our credit outlook to negative, while it becomes increasingly obvious that the budget is nowhere near on track to be balanced.

Can't wait to see the BC Liberals' "balanced" budget in February. Sell off as many provincial assets as possible to "balance" the budget one time before an election. Now that's prudent fiscal management, folks.

dasmo said...

Shakes his head...I wish I had big buck and was in the club so I could have dibs on some of those prime assets...

Iggy_12 said...

Marko,
I noticed that a few other Realtors are starting with the cash rebates for buyers thing, even going to 75-80% cash back. Instead of racing to be the cheapest, have you ever thought about a system where the buyer's agent gets paid more the lower the sale price is? That way the incentive for the buyer's agent is to negotiate a lower price. It won't work for all buyers - some of them might want whatever it takes to get a specific house.

Just an idea - there has to be a better way then the current system.

Alexandrahere said...

This may seem like a silly question...when they say each person in Canada is $17,200 in debt. Do they actually mean that? Are they including children? So a family of four would be in debt by $68,800? I always wonder about these stats. Richest person in the world for instance....does that include his wife's wealth....including the half that would be his/hers if they divorced or separated?

CS said...

Thanks for the post. I'd wondered about bidding on a property, but that graph sure makes me nervous. When housing ceases to be the all-consuming obsession of a huge proportion of the population, there will likely be a huge economic contraction in BC which could make my prediction of a 40-60% slump in RE prices quite likely. That is unless something comes along to take up the slack -- such as ....

He Marko, how much, on average, do you think a skilled negotiator could talk down the price of a house?

caveat emptor said...

I'm not sure I understand the Statscan number?

Does the 165% correspond to say a couple making a combined 150,000 (gross) 100,000 (net) and with a jointly held mortgage for $165,000. If so that doesn't sound very alarming. Or to use a more modest earning level how about a couple making $60,000 net and owing 99,000. Still doesn't sound that alarming, provided it was mortgage debt and not high interest credit card debt

koozdra said...

The figure is "household debt to annual disposable income"

So lets say you have $1000 left over at the end of the month to spend in the economy. The average person owes $1646. If this doesn't sound alarming, consider that this is higher than the level reached by Americans before their crash. It is also the highest it has ever been since Stats Canada started collecting data.

caveat emptor said...

Koozdra I'm not saying it ISN'T alarming just that it doesn't SOUND alarming. Certainly the record levels and the comparison with the US are valid reasons to be alarmed.

My total household debt (100% mortgage, 0% auto or credit card debt) is about 180% of my household after tax income. Therefore our household is proportionately more in debt than the average Canadian household. Yet the level of debt we have is not at all onerous to service and could easily be serviced on one of our incomes (i.e in case of job loss) provided we cut back on frivolous spending.

That's what I am trying to understand: Why is a personally non-threatening debt level supposedly such an economy wide threat?

dasmo said...

My thoughts on negotiation:
It's kind of like asking a girl out. You have to do it your way and be honest unless you are a Rico Suave. The biggest thing is just going for it! You aren't going to trick anyone into doing something they wouldn't normally do. You are trying to find their actual lowest acceptable selling price, that's all. Do your research and come up with a number you are willing to pay. Make your starting offer below that so there is room for counter offers. Simple, honest.
Estate Agents are not trained in negotiation but can help you tremendously because they will bring your number to the seller and be a middle person. This is HUGE because it takes away the confrontation part.
Instead of looking for a professional negotiator (which doesn't exist for a negotiation of this scale). Hire a good and thorough appraiser to help you find your numbers.

Research the seller and the property. Estate sales for instance can mean there is more room to move since the seller is more removed from the sale. How much is left on the mortgage? A freshly listed property might be more difficult, unless it's not really fresh and has been listed before. etc etc... This is information your estate agent can get for you...

koozdra said...

You're missing the key word here, disposable. Surely not all of your after tax income is disposable. You have to service your mortgage, pay bills, buy food etc.... After all of that, you have disposable income.

The main message here is that the more people spend on servicing debt the less they will spend in the economy. Also people are racking up the debt at these historically low interest rates. If rates were to shift then these people would have a harder time servicing their debts, further reducing their spending power.

CS said...

Why is a personally non-threatening debt level supposedly such an economy wide threat?

Presumably all debt, when entered into, is deemed "personally non-threatening." But as was apparent during the US housing bust, a lot of people miscalculated.

This BoC report shows that the risk is concentrated in those households headed by persons 31-35 years old, and that the size of debt carried by these households is approximately twice that carried by similar households a generation ago.

That is not to say that all those 31-35-year-old heads of households are destined for bankruptcy. But enough may be vulnerable to create a risk of a wave of mortgage foreclosures.

Also, it should be noted that the average household debt will generally be much lower than the debt of the most vulnerable households. It is the condition of those at the margin that determines the risk of widespread default.

caveat emptor said...

Koozdra - I believe that Statscan defines disposable income as essentially your after tax income (plus and minus some small adjustments). That's different from how the term "disposable income" is used colloquially.

I believe what you are talking about is "discretionary income"

This document - http://www.statcan.gc.ca/studies-etudes/75-001/archive/1991/5023154-eng.pdf has some definitions halfway down the first page.

I don't disagree with your point that debt servicing could grow to crowd out other spending..

MD80 said...

Apology in advance as this is a bit off-topic. I'm just going to leave this interesting perspective for Introvert. Then I will continue with reading the 200+ discussion points from the last few days :-)

koozdra said...

caveat emptor

Ah, I see. I did get the terms mixed up. Thanks for the link.

Just Jack said...
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Just Jack said...

Real estate negotiations are like asking a girl out. Except you can't talk directly to the girl. You have to go through her mother aka the agent.

That means, you get your mother (selling agent) to talk to her mother (listing agent).

And if you don't bring a good offer at the start, the girl is never going to know your name.

You're going to have to get past the listing mother. Make it attractive to the mom to introduce you to her daughter. Some chocolates, some flowers a full commission.

And that's the easy part. Wait till you have to negotiate terms, like sexual positions.

Leo S said...

That's what I am trying to understand: Why is a personally non-threatening debt level supposedly such an economy wide threat?

First of all, it isn't entirely clear how much of a threat it actually is. It is high historically and relative to our closest neighbour, but the exact level of danger is up for debate.

However the important part is that it is an average. So all the people that have zero debt bring it down, and the people that have the most debt to income are the ones in trouble.

dasmo said...

JJ, the middle man is a good thing. And if you do your research and find an honest number then you can make it with confidence. If they never want to talk to you again who cares, plenty of fish in the sea... Secret is to not fall in love before asking the girl out...

dasmo said...

And which city has the highest debt? Our favourite one to hate on: Calgary!
"Calgary’s average household income, at $119,681, was $23,000 higher than any other city, but don’t be misled: The average household in Calgary had $184,850 dollars of debt. That’s nearly $25,000 more than Vancouver, and more than double Montreal."

patriotz said...

I'm not saying it ISN'T alarming just that it doesn't SOUND alarming. Certainly the record levels and the comparison with the US are valid reasons to be alarmed.

The point you're missing is that there are many people who have no debt at all (like me). Thus if the average is 180% there must be a lot of people who owe much more and are likely to face serious problems going forward. That's where the problem always is - on the margins.

info said...

The BC government is really good at mismanagement.

It's deficit has gone 50% above forecast.

Perhaps it's time to drop the BC First-Time New Home Buyers' Bonus which provides up to $10,000 per year in tax credits to new buyers and put that money toward balancing its budget. They should also drop the property tax refund which gives BC home owners a massive refund each year.

The BC government needs to stop subsidizing the housing market and stop adding fuel to BC's already extreme, bubble house prices.

patriotz said...

The current BC government and its premier are more tied to the RE industry than any before in history. Christy Clark campaign contributors.

It's going to be pedal to the metal for RE at least until the next election. Not only because of political IOU's but because high RE prices are the only thing keeping the illusion of prosperity going for the masses.

CS said...

They should also drop the property tax refund which gives BC home owners a massive refund each year.

That would help crush the RE market and with it the provincial economy.

In any case, it is likely the Victoria core will experience escalating property taxes, as highly paid municipal bureaucracies drive boondoggles such as the Blue Bridge replacement and the billion dollar sewage treatment facility, while the continued decay of aging infrastructure will lead to escalating maintenance costs.

The problem is accentuated by the councils like OB's, which puts a preservation order on any decaying pile on an acre or so where half a dozen or more single family units might be constructed. This limits the generation of new tax revenue while promoting urban sprawl that will create the demand for billion dollar transport solutions -- to be financed largely by property owners.

Marko said...

Marko,
I noticed that a few other Realtors are starting with the cash rebates for buyers thing, even going to 75-80% cash back. Instead of racing to be the cheapest, have you ever thought about a system where the buyer's agent gets paid more the lower the sale price is? That way the incentive for the buyer's agent is to negotiate a lower price. It won't work for all buyers - some of them might want whatever it takes to get a specific house.

Just an idea - there has to be a better way then the current system.


Not a great idea for several reasons. Almost impossible to implement; in certain situations there is limited room to negotiate (priced below market value, multiple offers, first day on market, etc.). What about overpriced properties? Are you getting a better deal paying full price on a home listed below market value or getting 10% off a home that is 15% overpriced?

Finally, the buyer's REALTOR®, no matter how capable, can only do so much. This is how negotiations work in this day and age.

Marko: "I have an offer from my buyers on your listing; can I come present it to you and your sellers?"

Listing REALTOR® (LR): "No, email it to me and I will discuss with my clients."

Marko: "Okay, my buyers are willing to offer xxx,xxx based on these comparables and based on these various metrics which show the market is tanking."

LR: "My sellers will counter at xxx,xxx and they have these other comparables and they don't think the market will tank and we have two showings tomorrow."

Back and forth and you have an accepted offer, or not. A lot of sellers simply ignore comparables and complicated market metrics. They have an idea in their head of what they want and that is their bottom line. This isn't sophisticated corporate negotiations.

The best system (theoretically) would be for buyers to pay their REALTOR® per hour. However, then would REALTORS® encourage their buyer's to offer too low so they can continue showings? Would buyers want to pay invoices every two weeks until they find a home? Probably not.

In real estate a lot of people completely waste your time and you make nothing and in turn you have to recover that on successful sales. Very few people are willing to pay upfront, especially on the buying end.

I would give people more cash back if they paid me a $1,000 retainer.

Marko said...

Hire a good and thorough appraiser to help you find your numbers.

If the appraiser is on the high side do you offer that to the seller?

Leo S said...

I would give people more cash back if they paid me a $1,000 retainer

I'd go for that. Realtors should start charging at least a couple hundred up front to sellers as well. Would cut down on the crappy listings where people aren't actually serious about selling.

brodahl jahren said...

Hvis appraiser er på høy side tilbyr dere at til selger?

huskatalog

dasmo said...

If the appraiser is on the high side do you offer that to the seller? No it's advice. Use your own head for making an offer. I haven't used an appraiser before. It was a suggestion if someone isn't comfortable coming up with an independent number themselves.

DavidL said...

Can anyone shed some light on the Appraisal Institute of Canada. I notice that many local appraisers belong to this institute. Also, what is the typical fee for appraising an average SFH?

info said...
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info said...

From Garth's blog:

In discussing the upcoming move of Mark Carney from head of the Bank of Canada to boss at the Bank of England, a leading UK money mag had this to say: “Forget about the idea that Carney is coming over here to save us. Quite the contrary. He’s escaping from Canada just in time.”

info said...

Also from Garth's blog:

The 2006 budget that ushered in zero down payments and 40-year mortgages, say the analysts at Pacifica Partners, as a defining moment. “This one decision may be remembered in Canadian economic history books as an extremely grievous policy error.

“Prior to the 2006 loosening of government insured mortgages; the Canadian real estate sector had already experienced a half decade of surging prices. Thus the policy change of 2006 was counter to basic Keynesian economics which advocates the use of fiscal and monetary policy for smoothing of business cycles. This is achieved by stimulating slow growth environments and enacting policies to cool excessively high growth economic environments. The 2006 policy change, however, served a contrary goal of stimulating an already surging market. What followed was a 26% increase in outstanding mortgage credit between mid 2006 and mid 2008. Meanwhile, Canadian nominal GDP grew by half as much, only 13% and weekly Canadian Wages grew at slightly more than one-quarter at only 7%.”


The price bubble had already formed by 2006, and was made much bigger by 2008. This was followed by the crash of 08-09, which was followed by the reinflation of the bubble from 2009 to 2011. This is where the Victoria market is at present having gone through only a minor correction so far.

Recently we have started to see houses listed for as much as 34% below assessed value in metro Victoria. The coming crash will be as surprising to us as the individual crashes that took place in Miami, Phoenix, L.A. and Las Vegas were to the people living in those cities.

One big difference however, will be that the Bank of Canada will not be able to slash interest rates to emergency levels in an attempt to stop the crash as rates are already there.

Just Jack said...

I've tried to answer your question about the Appraisal Institute of Canada half a dozen times.

And each time, it comes across as though I am soliciting business. And that's not what I want to do in this forum.

Best just to direct your attention to the Appraisal Institute of Canada's web site for information.

Fees for mortgage appraisals are cheap in Victoria- but so is the quality of the report. $200 to $350 for a mortgage appraisal. Generally speaking the lower the fee the closer the report gets to a standard where a real estate agent does a "free" market evaluation.

Obviously if you are just curious about your home's value - call a realtor.

If you're dividing the assets in a divorce - call an appraiser.

a simple man said...

JJ ... Have I missed this? Are you an appraiser?

DavidL said...

Thanks JJ. Actually, this is the first time I've asked about the IAC.

dasmo said...
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dasmo said...

There is still room to drop rates. .75%, .5%, .25%, even 0%. Don't discount the possibility, but don't count on it either, flat is what they want... Banks can even lower rates without the BOC lowering them. Their spread is 3 to 1 right now which is why they are reporting record profits right now.

koozdra said...

"There is still room to drop rates. .75%, .5%, .25%, even 0%."

I don't think that would help that much. Without the CMHC in the picture the banks will retreat their lending.

In other news:
S&P downgrades rating for 6 Canadian banks

dasmo said...

Downgraded to A+ "obligor's capacity to meet its financial commitment on the obligation is strong".

Leo S said...

Banks can even lower rates without the BOC lowering them. Their spread is 3 to 1 right now which is why they are reporting record profits right now.

I think this is extremely unlikely. Now that banks are no longer able to offload their conventional mortgage portfolio to CMHC their funding costs are rising (especially since they are being downgraded at the same time).

No way are they going to cut their profits voluntarily while their costs rise.

Leo S said...

Detailed summaries of the latest bank earnings reports with interesting mortgage related information.

Introvert said...

Forgive me for once again pointing out that S&P rated the insurance giant AIG as AAA until nearly the day it went bankrupt.

patriotz said...

So we're supposed to feel more confident about the banks because S&P has rated them a notch lower?

SilverSurfer said...

dasmo said: "Estate Agents are not trained in negotiation but can help you tremendously because they will bring your number to the seller and be a middle person. This is HUGE because it takes away the confrontation part."

That might be ok for the average person who may not have good or even basic netogiation skills or who can't handle a little confrontation, but what about everyone else? I do contract negotiations 2 or 3 times per year for relatively large $$ sums, as part of my job. With several years of experience under my belt, I'm quite confident I can do a better job of this than a good number of realtors.

More importantly, I find it a conflict of interest that you have two parties (realtors) directly negotiating with each other, both of whom stand to make a profit from a transaction taking place.

So now you have people whom as you said were not trained in negotiations, with a clear conflict of interest, doing your negotiations.

So yeah, I agree, I also consider it "HUGE"... a huge frustration.

If middle men negotiators were so great, all corporations would go out an hire these, and yet, such an industry is practically non existent. In short, if you have the skills, it's always better doing it yourself... but unfortunately, if you or the other party hired a realtor, even if you have the skills, you are SOL as they will not step out of the way in the vast majority of the cases.

/end of rant

Marko said...

Building lots in the core continue to fetch big money.

638 Victoria Ave, Oak Bay on a 49 x 110 lot sold in 2011 for $500,000. The new home is currently listed for $1,395,000.

893 Victoria Ave, Oak Bay, on a 43 x 100 lot just sold two days ago for $512,000.

Marko said...

What is happening to this theory that building lots are the first to tank in a downturn?

Seems like everything but building lots is coming down.

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

Hey Coastal - why don't you enter into discussion with us on this blog rather just on Garth's?

dasmo said...

Business has many layers of middlemen. You yourself are one of those middlemen. Your companies owner or owners aren't doing your negotiations. Selling someone's home is layered with sentiment, emotion, and guesswork. Good luck with your negotiating skills going face to face with an individual selling their home. I think it would be an entirely different ball game. Anyway, you could focus your effort on for sale by owner and see how you fair!

info said...

In 2001, Los Angeles and Victoria were very close to being on par in terms of house prices. This is around the year that lax lending standards were introduced in both the US and Canada which caused prices to more than double in both cities in a relatively short period of time.

This 1085 sq. ft., 3 bedroom house in Pomona, CA, is currently listed for $180,000, slightly above assessed value. Pomona is a suburb of Los Angeles.

I'm estimating that this same house would be listed for upwards of $700,000 in parts of Victoria and around $500,000 in Langford.

$180,000 vs $500-700,000. What fundamentals exist in Victoria's housing market (that do not exist in L.A.) that justify house prices being that much higher? I can't think of any at all.

Los Angeles experienced a price crash that reduced prices to the point where they are now close to being supported by income. Although I contend that their crash was stopped prematurely by the dramatic slashing of interst rates to emergency levels mid-crash. Interest rates in Canada will not and cannot be slashed below the already historically low, emergency level that they are at now.

In my opinion, Victoria has already started to crash.

Introvert said...

...see how you fair!

fare.

Introvert said...
This comment has been removed by the author.
Introvert said...

What fundamentals exist in Victoria's housing market (that do not exist in L.A.) that justify house prices being that much higher? I can't think of any at all.

Probably because you're not thinking very hard.

Differences between countries matter. Victoria has the mildest climate in Canada, is a top Canadian retirement destination, and is regarded by many western Canadians as an aspirational place to live (although many cannot afford to move here as it is now too expensive). L.A., on the other hand, is one of several thousand nice-weather cities in the U.S. (i.e., L.A. is not unique in its country the way Victoria is in Canada).

Interest rates in Canada will not and cannot be slashed below the already historically low, emergency level that they are at now.

Arguing with you is like arguing with a brick wall: dasmo already refuted this claim of yours that interest rates cannot go lower. They can.

Keep up the lame talking points.

vawr said...

@Introvert

md80 included in his Dec 13, 1:24pm post a link provided especially for you.

Did you read it?

hap pychucky said...

Info

Since you like to data mine, I got a california house that could be had for 600 to 700k here so if u compare our realeste to california
we are undervalued. Just using your stupid logic.

http://idx.siliconvalleyrealestateteam.com/idx/4897/details.php?idxID=108&listingID=81228945

dasmo said...

Hey Introvert, that's not fair!

patriotz said...

Victoria .. is a top Canadian retirement destination

So why is the 55+ RE sector tanking so badly in Victoria, as JJ has repeatedly pointed out?

Just Jack said...

That's a good point Marko. Why are vacant land prices not falling?

You would have to calculate the value of the lot using a Development Cost Approach to determine the value of the infill lots that you just described. Obviously construction costs and profit margins will vary from contractor to contractor.

So, what do you think that new home will sell for?
And what do you think the hard and soft costs are to build that home?

What is left over is what the builder can pay for the lot and still make a profit.

It makes sense to me to buy an infill lot in the City even at a premium price these days. Especially with all the unsold new homes in Langford. Taking a little less profit by paying a little more on the land in the city where there is a lot less competition for your build is more desirable than to be stuck with a home that isn't selling in the Westshore with twenty identical homes surrounding your build.

Worst case scenario for a builder is that you live in the house for a year and sell it capital gains free. That makes overpaying for the lot acceptable too. And if your building it for yourself there are lots of ways to bring down your costs with materials not used at some of your other sites.

If you're a builder do you stop building houses and lay off your workers when there is no cheap land? Nope, you keep them working on your home. Or you can take less profit and squeeze your suppliers and subcontractors. If good trades are hard to find, you don't want to lay them off and have them working for your competition when you do find a lot.

In my opinion.

SilverSurfer said...

Come on down to Victoria retired folks. That's right, sell your houses wherever you live in Canada today, and come on down to Victoria where you will need twice that amount to buy a similar property here.

Once here, enjoy the loneliness of leaving all your life-time friends behind, and enjoy spending Christmas, birthdays, anniversaries and all those other special ocasions alone. Well ok, I guess you can afford to fly out East 3 or 4 times a year for $700 a pop so you don't miss out on those special occasions.

And hey, when your older friends call you on a rainy day from their sunny Florida condos that cost 1/8th the fraction of what you are paying for housing, try not to sound too jelous.

Just Jack said...

I think Victoria has always been ranked as a top retirement destination. That our prices increased so dramatically in comparison with some other cities over the last decade is one indication of Victoria's desirability to retirees or soon to be retirees.

But that wave has likely crested and we are on the downside of the graph now. Retirees and soon to be retirees are still coming to Victoria but in fewer numbers. The prices don't make things easier either.

I knew quite a few people who moved here in their 50's to be near their grand children. Now those kids have grown up and gone to Alberta for jobs. So now 10 years later, they are moving back to be with their old friends. My neighbor has been here for 20 years; and now she's planning to move back to Ontario to be with her sisters and brothers. That's not uncommon.

Marko said...

Why are vacant land prices not falling?

You can't ignore our geography compared to other cities in Canada. Even if you go further out development is extremely expensive. For example, look at Bear Mountain and the cost for infrastructure, then on top of that almost every building lots needs engineered rock walls, etc.

Dave said...
This comment has been removed by the author.
Dave said...

What is happening to this theory that building lots are the first to tank in a downturn?

Marko, I’ve only heard condos fall first. I have heard building lots will fall furthest. Makes sense from an income yield perspective. I’ve heard building lots fell hardest here, in their correction. No place needs more stability engineering than Nippon. I like the comparison since their whole country has a similar population density to Vic’s CMA. Of course early nineties, they thought they were running out of land too. I remember it seemed logical at the time.

I agree, retirees seem to be moving back to where the grandchildren are and now only flocking south to their 50k stratas for the winter.

patriotz said...

For example, look at Bear Mountain

I thought we'd established that SFH prices at Bear Mtn. are down substantially, which means that lot prices there are down substantially, since building costs haven't changed appreciably.

And it follows that the price of a lot is driven by what the finished house sells for, regardless of the cost of developing the lot. A lot cannot sell for more than a builder is willing to pay for it.

Leo S said...

But that wave has likely crested and we are on the downside of the graph now.

I don't think it's even up for much debate anymore. When you see a community like Sidney, which lives and breathes retirees actually _decreasing_ in population you know that argument is dead.

Even if you go further out development is extremely expensive.

I'd like to see some comparative numbers. I really doubt Victoria is out of the ordinary.

Leo S said...

@hap pychucky
I think the demographics is changing. More youger people want to stay here.

Here's what the CRD has to say about that:
" The Elderly Dependency Ratio (population 65+ relative to population aged 18–64) is higher than the provincial average and is projected to continue growing from the current 2006 ratio of 29% to 53% by 2036"

"On the other end of the age spectrum are declining numbers of children and youth under 14."

"The age group in the middle, 25–44—the bulk of the workforce—is experiencing the most noticeable decline in numbers."

In other words, more house sellers, fewer house buyers. I think those people that think the next 50 years of real estate history will look anything like the last are in for a big surprise.

Just Jack said...

Is land expensive?

An hour drive from downtown Victoria you can buy 2 acres of land for $85,000. $125,000 will buy you a city sized lot in Sooke Village. $175,000 buys a city sized lot in Langford. $350,000 will get you almost any city lot in the core.

And then some dude pays over $500,000 for a 4,300 square foot lot in Oak Bay?!

dasmo said...

Interesting, This is Victoria's take on it...
"Despite the image of victoria as a city of retirees, the proportion of people aged 65 and older has recently declined. at the same time, the proportion of people between the working ages of 20 and 64, which includes the entire post Second World War baby boom generation, is growing."
The retiree is leftover. It's too expensive to retire in Victoria, unless you come from Van...

Leo S said...

Sounds more like a shift from the city of Victoria proper to other areas. Makes sense that the densifying core will have more younger working people while the older population lives in areas like Oak Bay and Sidney. Median age is up quite a bit overall.

Introvert said...

Maybe it's the strange and liberal use of quotation marks; maybe it's the vaguely sexual picture; but this
mortgage broker's ad does not inspire confidence.

Introvert said...

I've never seen this before; check out this gimmick.

What next? Midget-friendly realtors? Vegan-friendly realtors?

Leo S said...

Haha good find introvert. Wonder what she was trying to communicate with all those quotes. Whatever it is it isn't working.

As for the pet friendly agent, there is a note on the site saying "PROPERTY LISTINGS COMING SOON !".
I'm gonna say when your only qualifications are that you like dogs and live in Victoria that statement might be a little presumptuous.

patriotz said...

Better than the Sunshine Girl! Keep up the good work Introvert :-)

Mrs. W. said...

Just Janice here

In the Condo market it seems pet friendly might be a bit of a niche....a bit silly when it comes to houses unless you are likely to run afoul of city byaws.

The mood definitely seems to have shifted. Still, we're happy to have bought when we did (private sale this past May), albeit I wouldn't have touched anything else with a 10 foot pole at this time, and even the place we bought (plan to rebuild in 10 years) we went with a 10 year term....and I think we got a 'good' deal.


SJ said...

Here's a "good deal" for today's market - Towner Park Road in North Saanich.

Assessed at $1,457,925. It was listed at $989,000 and has gone to pending at $820,000. I wonder if it will be seen as a good deal in the years to come. It needs work, but an interesting purchase for somebody.

I wonder if they will be able to successfully appeal their assessment to get the taxes reduced.

patriotz said...

I wonder if they will be able to successfully appeal their assessment to get the taxes reduced.

2013 assessment is based on the market as of July 1, 2012. You are not likely to succeed on appeal based on a sale 6 months later.

Next assessment will reflect this sale, and others in the neighbourhood.

Dave said...

re: Victoria's take on it "...proportion of people aged 65 and older has recently declined.... ages of 20 and 64..growing."

Yes, recently. Partly why prices were increasing recently. However, that ratio is now radically shifting countrywide.

Here's the Dept of Finance take on it:

"...even if the fertility rate were to rise to the replacement level of 2.1 or net immigration (immigrants plus returning emigrants minus emigrants) levels were doubled, the share of the elderly in the total population would still increase sharply...
...raising the fertility rate to 2.1 or doubling net immigration levels would both be challenging, given the low fertility rates in almost all OECD countries and given that Canada already has one of the highest immigration rates in the industrialized world."

koozdra said...

Another investment property horror story.

"Charges are being prepared, but no one has been arrested and it’s believed that a renter, not the owner, is responsible for the grow-op, he said."

Big marijuana haul on quiet Saanich street

totoro victoria said...

The Towner Park property was a teardown in an area with community restrictions which do not allow any of the properties to be mortgaged. That is why it went for so low - only a cash buyer could purchase this property. The restrictions mean that no bank or lender can use the property as security for a loan - ever. There are a few of these type of communities around and they drastically reduce values.

CS said...

Why are vacant land prices not falling?

In OB, because most of the houses are old and decaying, which means that there is a strong demand for new houses, which means it is still possible to turn a large profit building in OB — if you can find a lot to build on.

Of course you can buy an old house and tear it down. But why pay the extra $50 or $100 K representing the market value of the existing home, if you can find a vacant lot?

It will be interesting to see if this sector of the construction business stays good, for if it does, we might look forward to seeing the whole of Oak Bay torn down.

Now if the OB council would come up with a sensible plan for increasing the population density from a static 1700 per km2 to something more like that of a city with an economic future, we could really get something going here.

Then, of course, they'd have to figure out the transportation problem, a fairly simple matter really. A bus service from the Empress to the East end of OB avenue, running every two minutes would get most of an extra ten or twenty thousand OB inhabitants out of cars and into public transit – provided the fares were reasonable, say 50 cents a ride.

a simple man said...

CS - I agree - both on the densification and on the transit solution.

There should be a large number of high volume trunks like that coming down to Oak Bay (ie. to Colwood, Langford, Royal Oak, Gordon Head, etc.) - and the fares should be cheap to encourage use.

I love taking the bus, but with my large family the cost is actually pretty prohibitive, so we drive.

Leo S said...

Re: the grow op. "Several residents said they were worried about calling police for fear of retaliation"

If only the police had some way to notify them without giving your name...

Just Jack said...

How many new homes have sold in Oak Bay in the last 5 years? -17

In Victoria it was 49

Esquimalt had 16

View Royal had 80

Saanich had 186

That's a total of 348 for the core.
The Western Communities had over a 1000.


The typical newer home in Oak Bay sells for $1,620,000. It has some 4,100 finished square feet and located on 10,240 square foot lot.

Meanwhile, the typical newer home in Victoria is 2,650 finished square feet on a 5,000 square foot lot and sells for $860,000.

In Saanich, the typical newer home is 2,600 square feet on a 6,300 square foot lot and sells for around $756,000.

In Langford its 2,150 square feet home on a 4,000 square foot lot and sells for $510,000.

Just to keep things in perspective.


patriotz said...

The Towner Park property was a teardown in an area with community restrictions which do not allow any of the properties to be mortgaged. That is why it went for so low - only a cash buyer could purchase this property.

Glad you've come around to the idea that the high prices in Victoria are simply a result of easy credit.

totoro victoria said...

There is an obvious difference between "easy credit" and no available credit at all. Co-ops are the same.

I've never said that availability of credit was not a factor in prices. In fact, I believe it likely that as soon as interest rates rise prices will drop.

totoro victoria said...

"Maybe it's the strange and liberal use of quotation marks; maybe it's the vaguely sexual picture; but this
mortgage broker's ad does not inspire confidence."

Thanks, made me laugh.

totoro victoria said...

Chatter has slowed... will prices rise?

Introvert said...

Chatter has slowed... will prices rise?

LOL. Well done.

Just Jack said...

There are a few re-sales that are showing that prices in Oak Bay may be drifting lower, and yet other sales seem to indicate the opposite trend.

A recent sale on Woodburn that sold for 5% less than it did July 2011.

Another home on Beach Drive that sold for 19 percent less than it did in January 2008.

St. Patrick down 2% from March 2011.

And a home along Guernsey down 4% from September 2010

And there are also a few recent sales showing that prices are up.

Like on Central Avenue up 2% from June 2011.

Or on Island Road, up 15% from June 2007

All this with just 4.5 months of inventory available in Oak Bay. And with MORE sales than new listings happening today too.

Oak Bay does seem to be different, as it appears to be bucking most of the trends for the remainder of Greater Victoria.

Just Jack said...

This is truly a bizarre market.

There are more house sales just in the City of Victoria, than ALL of the Western Communities. And yet the city has only 103 homes listed for sale. The Western Communities has five times as many (525) listed!

The core districts of Oak Bay, Saanich, Esquimalt,and Victoria have about the same total listings as the Western Communities. But these core areas outsell the Western Communities 3 to 1.

I suppose what I am trying to describe is a very shallow market that is dependent on a few sales in a few neighborhoods that seem to be supporting prices levels.

Al + TOH said...

JJ, good info on new house/lot size and price comparison.

One interesting thing about the house size though, in most other cities, people never count basement size (on sale), regardless it is finished or not; but in here listed house size always includes finished basement, regardless the finishing quality or the ceiling height. Maybe it is another Victoria (and Vancouver?) special :-)

Marko said...

Monday, December 17, 2012 8:05am

MTD December
2012 2011
Net Unconditional Sales: 186 339
New Listings: 294 505
Active Listings: 4,118 3,780

Please Note
Left Column: stats so far this month
Right Column: stats for the entire month from last year

koozdra said...

Canadian home sales decline 12% over past year

a simple man said...

Thanks for the stats, Marko.

dasmo said...

well, people can still make grundles of money in real estate. Here is an example
This property was bought for 620k. Selling 20 RV lots for 109k each with more than half sold. It's the property I missed and made me think a new price point was set for the area (It wasn't as you can see by the rest of the listings in the area). Who knew there was such demand for private ocean front RV parking spots...Our plan for the spot wouldn't have made so much money but would have been much nicer...

caveat emptor said...

"in most other cities, people never count basement size"

Agreed - when I was moving here I thought prices weren't too bad. Then I quickly realized that "1500 sq ft" meant 750 sq ft plus a basement of barely adequate headroom.

The oddest place I looked at had a fully finished basement that ranged in ceiling height from about 6'1" to 5'6"

StalJ said...

@dasmo
"This property was bought for 620k. Selling 20 RV lots for 109k each with more than half sold."

I have stayed at that one. It would have easy cost in the millions to develop so I don't think you can quickly assume it was profitable. If they had to carry that many unsolds for this long suggests to me the developer actually lost money. 109k is probably now thier breakeven. Stateside resorts have really put pressure these.

copied from their website
*Resort has a store; open mid June through mid Sept.
*31 fully serviced RV sites with power, water, sewer, 60 channel cable TV, laundry and washrooms
*Modernized cabins with fireplaces, all with telephone hookups

dasmo said...
This comment has been removed by the author.
dasmo said...


I think you are confused. This was the Sea-Esta Campground sight. It's only an RV zone and the developer just finished it's new incarnation this past year. It wouldn't have cost much to haul away the garbage and demo the small house. Then update the septic and build a small washroom house. The place has sold 14 out of the 19 total "lots" it has for sale. @1.52 million in sales already. They have made at least 550k profit so far...

StalJ said...

..it must be just down the road from the one I stayed.
btw its actually the servicing that costs the most. Do you have access to their books or have you done "lots" of land development in your day? hehee

I always keep an eye out for potential mobile & rv sites myself. 620k may work for rv there but it would be borderline. Granted it would be interestiing to see their sales prices and expenses.

dasmo said...

The campsite was already pretty well "serviced" landscape was ready to go for an RV parking lot, Road was fine. They needed to demolish the existing structures (3 small), haul garbage out, put in new septic, build a fence, build a washroom building, and do better hookup mechanical for each site. Doesn't look like they did any extras as far as landscape. I think I am being gracious at giving that plus misc expenses at 350k...

What we wanted to do 620k was borderline. What they did, not so much. What can I say, they were much smarter business people than I. Crap...

StalJ said...

"was already pretty well "serviced" landscape

I meant servicing to each new lot..power, water, septic. On-site systems for sewage can also be very costly esp oceanside. A final thing to consider ..I know a developer recently who did a 24 unit strata who admited that between assoc companies and family they bought up over half the units to make sales look hot. It is more common practice than many would think alhtough I am not implying that in this case.

If you want a real chance at making money on an rv park without any development risk, you should buy this 20 unit fully serviced paved Gold Beach, Oregon one for 370kUS. Only 18,000 Cd per lot, more amenties, swimmable beach, longer season. I think it would cash flow.

http://www.rvparkstore.com/rv-parks/101766-gold-beach-rv-park-for-sale-in-gold-beach-or

StalJ said...

woops, i think the Oregon one is 22-24 units... so only 15k Cd per lot.

Now you got me interested!

dasmo said...

I don't want to be an RV land baron LOL!

dasmo said...

the Oregon one has an airport between it and the beach...No development risk, just risk.

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