Wednesday, January 2, 2013

Assessments drop and 2012 numbers

As already discussed in the comments, 2012 assessments are out and it's another year of drops.  The Times Colonist has it plastered over the front page of their website today, and it will be mirrored in print tomorrow.
"The majority of capital region homeowners will see values slide by two to six per cent." - Reuben Danakody, BC Assessment
For the average Victoria house that works out to $12,000 to $36,000 in imaginary value out the window.  Of course the level of impact depends entirely on the region.  Mike K over at VibrantVictoria posted a nice summary of the changes by region:


Region
Residential
Business/Other
Central Saanich
-2.04%
2.91%
Colwood
-2.31%
-8.22%
Esquimalt
-2.60%
0.38%
Highlands (SD61)
-3.62%
-4.60%
Highlands (SD62)
-3.03%
-9.60%
Highlands (SD63)
-3.36%
0.00%
Langford
0.47%
4.19%
Metchosin
-1.70%
6.25%
North Saanich
-3.65%
10.85%
Oak Bay
0.78%
10.31%
Saanich (SD61)
-2.63%
5.37%
Saanich (SD62)
0.00%
0.00%
Saanich (SD63)
-2.15%
3.87%
Sidney
-5.64%
2.35%
Sooke
-1.94%
0.51%
Victoria
-2.05%
2.62%
View Royal (SD61)
-0.75%
4.35%
View Royal (SD62)
-1.03%
0.00%

In other news, the VREB has their yearly summary posted.  The average price for 2012 came in at $603,298, which they correctly point out is a scant 4% under the peak of 2010 (8% in real prices).

However they also try to spin the current market conditions in a positive light, saying that "In December there were less active listings on the MLS system than in recent months", like, every single December in the history of Victoria.

As is their job, they come over all optimistic for 2013.  "What we heard at the local 2012 CMHC Housing Outlook Conference is that the market has bottomed and slow growth is in store for 2013".   Well.... we'll see.


117 comments:

koozdra said...

"A great opportunity awaits a Buyer with vision and means."

Well.. I've go one of those.

Listed: $499,900
Assessed: $787,000

63% of assessed. 10 acres in the middle of nowhere with an ageing house. What do you guys this house property should cost?

http://www.realtor.ca/propertyDetails.aspx?propertyId=12683637&PidKey=-1808322173

Chris said...
This comment has been removed by the author.
DavidL said...

Awesome chart, Leo!

Koozdra: I would have to tour the house and property to get a better feel for the resale value. It looks interesting, but with a walk score of zero - I would not consider it at this stage (young kids) in life.

SJ said...

VREB: Shelley Mann says. "What we heard at the local 2012 CMHC Housing Outlook Conference is that the market has bottomed out and slow growth is in store for 2013."

Do they actually believe this, or are they just continuing to try to pull the wool over our eyes? Either way, you have to wonder. Maybe they are thinking that the $50 billion of mortgage guarantees the government just put into the private insurance companies will ignite the market again.

On the other topic, it’s interesting to hear that property assessments have gone down. How about the property taxes? Have the municipalities adjusted the mill rate so that property taxes are more, even though the assessments are down or are they still the same?

patriotz said...

Municipalities make their budgets without regard to the value of the assessment base. The budget gets made first, then the mill rate is computed to raise the required revenue from the assessment base.

Mayfair Man said...

Have we ever heard VREB have a negative forecast? I remember reading the monthly commentary from VREB last year that things were going to continue to go up.

Also I have a question why is it that every realtor that I speak to is dead set against prices going down? Almost every single one has said “no market is balanced (even with MOI at a high level), prices won’t go down”. What is so wrong with admitting yes, things don’t look good?

Just Jack said...

A question about the graph. The shaded bar area for a balanced market shows between 5 to 7 months. Should that bar area be inclusive of all of month 7? Not just 60 days, but 90 days?

a simple man said...

Hmmm. Median for SFH in Greater Victoria last month was $515K.

dasmo said...

@koozdra, You would need to see it to assess. The listing says unfinished first off. What does that mean? What I do know is the type of house it is since it is similar to the house I grew up in. 1970's double pane windows were not very good. I can pretty much guarantee they are all shot as my parents were, fogging up on the inside... Judging from the size that's a lot of windows to replace. It also looks like everything needs updating and that's a lot of flooring, roofing etc. Not to mention the shady forest is not kind to the exterior of the house. The cedar was most likely not old growth quality it also looks like cedar shake roof. It most likely needs replacing as well unless they cleaned and treated it regularly, but I doubt it. An expensive reno in other words... Also note in that location, at that elevation they have SNOW! I would look at this as land value mostly. So somewhere between 380k-550k depending on property features and zoning allowances (maybe you can subdivide into 2 - 5 acre lots?). You can still get serviced lots in that area for much cheaper and unless you are farming what's the difference between 5 acres and 10 acres? Very long story short. IT could be a deal in the high 4's but maybe not...

These computerized assessments take land value plus building (slotted into narrow categories) and depreciation. They combine that with comparable sales in the area with the same specs. So this is a huge house (3 stry cstm, or whatever)that is "only" 30 years old. So... it's calculator comes up with 787k (ya right).
The other end of the spectrum is my hous. Built in 1933, it is also 3 stories but the top is an unfinished, full height attic with windows etc. The basement was most likely finished into a suite without a permit. The new roof, painting, new floors etc all don't need permits so to the assessment computer my house is a single story basic that has been depreciated to nothing over 70 years. There are also very little SFH's that are sold in VicWest. There has been none on my street since I bought. So there are no immediate sales to compare to. So my house is assessed about 30% too low that 70's, unfinished and aging monster home is almost 50% over assessed IMO....

BC assessment is a mass general tool to enable property tax distribution on a relatively fair basis. Zoomed out they reflect property values. They just can't be relied on the represent an individual properties value....

totoro victoria said...

I don't know about the market value of the home - it is outside what I look at. I do know that assessed values are often far off of market in both directions for reasons that are not immediately apparent.

I can see the appeal of this home though. It is a huge piece of land and a huge home. Someone who enjoys ocean views and nature might love it. The wood stove and 2 fireplaces are pretty nice. It might be good for a doomsday prepper :)

What might be bringing down the value is issues with water. This is likely on well water and there appears to be a huge green water storage tank in front which might point to issues with supply.

sosan usa said...

really a nice blog abt real estate i really appritiate it keep it up

One Ocean Drive | Midtown Miami Real Estate

koozdra said...

@dasmo @totoro thanks

Perhaps we are coming to a time when one sees a property for sale and the first thing that comes to mind is not "how much money can I make" but "how much money do I have to spend".

I'm sure the target market of a property like this used to be developers. As developer activity decreases, I would think prices on "undesirable" properties such as this would also decrease dramatically.

Leo S said...

@dasmo. "So my house is assessed about 30% too low"

And there you have discovered why we have over 13 months of inventory in Victoria. Owners in general are overly optimistic about what their places are worth. ;)

dasmo said...

My property is assessed at 340k...

jesse said...

Is there some aversion from tracking Victoria's MLS-HPI versus MOI? I expect it will correlate better than the rolling average median.

info said...

Oak Bay house has lost 40% of its price gains from 2003 to peak!

Quoting from Garth's blog:

But how are things across the water on the Island, you ask? Let’s ask Dan:

For several years now we have been getting the listings for houses in Oak Bay asking between $500,000 and $800,000. Since we sold our house in oak Bay we have seen prices drop around $100,000 for these homes. As an example a house just sold that a few years ago at its peak could have fetched about $740,000. It just sold for $596,000.


This Oak Bay house recently sold for 20% below peak value. It might be Middowne. So house prices are falling significantly across the entire region, including Sooke, Bear Mountain, Esquimalt, Oak Bay and everywhere in between.

What would this house have sold for in 2003, right before house prices in Victoria started climbing fast due to lax lending standards which created excess credit?

The average yearly price in the region before the steep curve of the price run-up was about $300,000. Let's assume that this Oak Bay house would have fetched $375,000 at that time. Basically, it doubled in price from $375,000 to $740,000 at peak. A reasonable estimate given that house prices in the area more than doubled over that period of time.

740,000 - 375,000 = 365,000

So the price gain from 2003 to peak was about $365,000.

What percentage of the price gains (from 2003 to peak) has this Oak bay house lost?

We know it has lost $144,000 from peak value.

144,000/365,000 = 40%

That Oak Bay house is already 40% of the way back to 2003 prices from peak.

This brings up another point. When we talk about a 15% overall decline in prices from peak, it is actually a lot bigger of a number than it seems. A 15% fall from the peak is much greater than a 15% gain from 2003 prices. I will write more about this in another post.

Introvert said...

info certainly is a man on a mission.

Marko said...

For several years now we have been getting the listings for houses in Oak Bay asking between $500,000 and $800,000. Since we sold our house in oak Bay we have seen prices drop around $100,000 for these homes.

I don't think so.

Just Jack said...

Certainly two properties along Middowne Road have sold in the last two years, but they are not directly comparable with each other. The one that sold for $760,000 was situated on about a 20 percent larger lot. The quality of the updating appeared superior and more extensive. And while both had main floor additions, the property that sold for $164,000 less had an addition that was "handyman" quality constructed by enclosing a sundeck over the garage. Also the interior colors were too much of an individualistic taste rather than a more neutral palette that would appeal to a larger market.

No doubt that some of the value difference is associated with a weaker market, but not all of the $164,000.

And I don't think just re-painting the home would bring the home up into the $760,000 range either. Because $760,000 was a very premium price to pay for the first home. I think in today's market that home might only get between 90 to 95% of what they paid for it.

a simple man said...

There have been a number of sales on Larkdowne in the past few years that are only half a block from the Middowne home recently sold - a few were in "original" condition or needed some work done. Can anyone dig up those sale prices?

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

Note that the Oak Bay house that lost $144,000 in value from peak could be from any street in Oak Bay as no street was specified.

a simple man said...

Info, it was the Middowne house we had been talking about before "Dan" from the greaterfool. No other house has sold for $596K in recent memory.

BTW - I do think that houses in Oak Bay are about $100K down in that price bracket from peak.

dasmo said...

This is what places in OB went for in 2012. Hardly looks like a 40% drop in Oak Bay???

a simple man said...

Neat dasmo - I did not know you could do that with the eval site. This list is not complete, however.

dasmo said...

True, the list goes on though. Just "compare by sold properties". Handy. I guess I am cynical to both sides. Garth for making s**t up to at least appear right. (has he ever been?) and the VREBs of the world for constantly spinning the sell job. It's both BS...but the plain ol truth is boring. Low sales, flat prices. That is not a headline that sells anything....

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

“…the plain ol truth is boring. Low sales, flat prices.”

In the bidness world, we call this the distribution phase before markdown.

mrmike said...

Assuming anyone in their right mind wouldn't even think of selling in this market unless they had to...
Sure seems to be a lot of people that have to sell.
'sup with that? Is it the nearly dead or newly wed?

Alexandrahere said...

That house on Middowne, imho would have sold for over $400K in 2003. Probably around $435K.

Leo S said...

My property is assessed at 340k...

And you think it's worth $440k, based on, as you say, hardly any good comparable. The point is not that I care one bit what your place is worth, but that in general places aren't moving because everyone thinks that their places are worth more than they really are.

Leo S said...

@jesse
"Is there some aversion from tracking Victoria's MLS-HPI versus MOI? I expect it will correlate better than the rolling average median."

Where is the MLS HPI for Victoria?

I have another chart with the Teranet index, but overall it correlates pretty well with the median. More variability on the median of course, but it is more up to date.

Leo S said...

@info
Let's assume that this Oak Bay house would have fetched $375,000 at that time. Basically, it doubled in price from $375,000 to $740,000 at peak.

So you take a random guess for sale price of a house you don't know in 2003, then take someone else's random guess for sale price of that house in 2010, and then conclude that the house lost 40% of it's increase since 2003.

Hmm....

Leo S said...

@a simple man

BTW - I do think that houses in Oak Bay are about $100K down in that price bracket from peak.

I thought you were Dan!

Leo S said...

it's -> its Damnit!!

koozdra said...

For the home owners out there, how much higher are your property taxes than they were in 2003? I talked to a coworker in Winnipeg and she told me theirs had risen by about 40%.

dasmo said...

@ Leo I agree it's useless to discuss my house in particular... To get to our points then, I agree with you that most people over value their homes and thats why they can sit on the market for months. Do you disagree that assessments are not allways accurate?

info said...

Why house prices aren't coming back.

Quoting from the Globe and Mail:

Numbers don’t lie – especially about Canada’s overheated housing sector. Increases in home prices in recent years have not been matched by underlying increases in fundamentals. The market is due for a severe correction.

One particularly telling statistic is housing investment as a share of GDP. This ratio has steadily climbed toward a record high over the past two years. It is now more than 7 per cent of GDP versus a 50-year average of 5.8 per cent and previous peaks of about 7.26 per cent in the late 1970s and 7.18 per cent in the late 1980s. After residential housing investment as a percentage of GDP peaked in the previous two cycles, the housing market crashed within a few years.

a simple man said...

@Leo

I thought you were Dan!

Nope. Just a simple man here and true blue oak on VV.

I have asked Dan a few times to stop by here but so far I have not seen sign of him. If it is the same Dan, he is a savvy contractor that tells it like it really is.

Al + TOH said...

Why would you care if they are accurate in this case? If you don't want to sell, lower assessment should be in your favor. When you are ready to sell, you can always appeal it if you like, and BC Assessment body probably only be very happy to help, as almost all other appeals are to lower their house value.

We complained back in 2011, as they increased our house value much more than others on the street for no special reason. The lady on the line talked me out of an appeal, but the assessment value did drop more than our neighbours next year. This year most houses on the street including ours got a 3% haircut.

As for property taxes, it only matters if change on your house value is different from others/average. Otherwise even your house assessment drops, the tax will still increase every year, as city and police/firemen have to run, children have to go schools and garbage and recycles have to be collected, regardless which way the housing market is going or not.

Property tax compares with 2003? There may be special cases for individual houses, but in general, up and up, a bit more than inflation, unless the city wants to build more blue bridges. There should be records in each municipality for increase rate each year back to years, it would be much more accurate than individual houses.

info said...

Leo

The peak price was given by people who owned a house in Oak Bay and have been watching houses like this on MLS for years. Although it may not be a factual number, it is probably within 5% of the actual peak price.

The way it stands, these numbers only show a 20% price decline from peak. Not outrageous at all considering what has been happening in the market over the last 6 months.

I wrote that the 2003 price was a "reasonable estimate" and I think that it is.

Nowhere did I claim this was all factual, it is merely a reasonable estimate and it was done to make a point. Paper equity evaporates a lot faster than people think when prices are falling.

Leo S said...

Do you disagree that assessments are not allways accurate?

They aren't always accurate, but in general they are pretty good (keeping in mind they are a snapshot from midway through last year).

Currently SFHs under 550k are selling on average about 92% of 2011 assessments because of the slowdown in the market. Of the last 100 sales, 44% were within 5% of that average, and 74% were within 10%. Only 3% sold more than 20% outside the average.

Especially in this market, a place selling for significantly over assessment is essentially unheard of, unless it has been recently renovated. In the last 100 sales under $550k, only 1 sold for more than 15% over assessment. To find a place that sold for more than 30% over assessment you have to go back more than a year, when 727 Princess Ave sold for $270,000 (assessed $183,000). Likely a complete reno.

info said...

The Globe and Mail agrees that house prices in Canada are currently not supported by fundamentals, such as income. This situation is the same as any national housing bubble.

Price/income ratio is key.

An extremely important stat is housing investment as a share of GDP. In Canada's history, any time this number climbed over 7% the housing market crashed. It is now over 7% and closing in on an all-time record high. This means that a crash is inevitable.

Animal Spirit said...

Interesting - the house we rent in (an old character house in Fairfield) is assessed at 775,000. Funnily enough it is only listed at 3 baths when there are 3 suites + the owners one. hmmm - someone didn't get permits at some point in time.

koozdra said...

Are property taxes tied to assessments? or are people complaining less about property tax increases because their assessments are going up also?

Leo S said...

@JustJack A question about the graph. The shaded bar area for a balanced market shows between 5 to 7 months. Should that bar area be inclusive of all of month 7? Not just 60 days, but 90 days?

Maybe. The definitions seem to vary. This guy says 5-7 months which I took to mean 5.0 < MOI < 7.0. However looking at that graph you could interpret it as 4.5 < MOI < 7.5.

Other sites give various definitions for a balanced market like 5.5-6.5 months, 4-6, 3-6, etc. Doesn't seem to be overly exact.

How about this version with a super fancy gradient to denote the uncertainty?

dasmo said...

Definitely the gradient... I think in general assessments are fine but they can be off so to say a place is a HUGE discount if it sells for a lot less than assessment may not be the case...

totoro victoria said...

info - house prices are not down 20% in OB from peak. That I do know for sure because it is one of the markets I follow and have followed for more than 10 years.

That whole long post is just weird gobbledy-gook. Whoever Dan is, he is not very good at following the market.

Just Jack said...

The gradient is cool.

a simple man said...

Interesting that last month's median has not been seen since March 2009 or so.

caveat emptor said...

Leo or HHV

How about a "Prediction" post where anyone who wants to submits their real estate predictions for 2013.

Then we can review them in Jan 2014

We could predict some real estate related things like
1) SFH Sales for all of 2013
2) SFH Median for all of 2013
3) SFH Median for Dec 2013
4) BOC overnight rate as of Dec 31, 2013
5) Victoria's unemployment rate in Nov 2013
6) Anything else?

caveat emptor said...

@dasmo
would have to agree that 340 K seems low for a 3 story home in Vic west unless the location is terrible, the lot is tiny or there is another problem. Friends recently paid more that that for a MAJOR fixer-upper in Vic West albeit very nicely located and on a decent sized lot

info said...
This comment has been removed by the author.
koozdra said...

Forget open houses for selling, how about an open house for rental interest?

http://victoria.en.craigslist.ca/apa/3521996536.html

info said...

Most people don't realize how significant a 15% price decline from the peak actually is.

It only takes a 15% price drop from peak to wipe out a 32% price gain (from 2003 prices).

Let's take a closer look at it.

Victoria's peak yearly average price was about $630,000.

A 15% decline = $95,000.

In 2003, the yearly average price in Victoria was about $300,000.

What percent increase in 2003 would have been required to equal $95,000?

A 32% increase = $95,000.

dasmo said...

We aren't doing that bad relative to
global price/income ratio

New York = 10.09
Berlin = 5.25
Rio = 22.13
Beijing = 30.12
London = 15.31
Sydney = 9.32
Prague = 13.07

It certainly looks like a fantastic time to purchase real estate in a lot of US cities that's for sure. Also a couple of spots in the middle east and South Africa but that's about it...

info said...

Canada's housing market has reached an overvaluation of 57%.

Quoting from the Globe and Mail:

The ratio of house prices to income has historically averaged about 3.5 in Canada. It now stands at about 5.5. It is difficult to see how income growth in the future can bring this ratio close to the historical average within any reasonable period - so it follows that house prices will have to decline.


That is a 57% overvaluation. The US was overvalued by only 35% (Case-Shiller) at peak. Considering the massive correction/crash that the US went through while being less overvalued than Canada, the signs point to a much bigger correction in the works for Canada.

Let's compare.

US had a 35% overvaluation = 34% price correction

Canada has a 57% overvaluation = ? % price correction

National housing bubbles have always corrected back the same amount as their price/income ratio overvaluation. There are many examples of this, worldwide, over the last 40 years.

info said...

@ dasmo

Again, Numbeo has created a different type of price/income ratio. They have a much different methodology than what governments and economists in the western world use.

They make a bunch of assumptions and then come up with a net income price/income ratio. The ratio becomes a completely different thing when you attempt to replace gross family income with net.

Vancouver is the second least-affordable city in the world.

Quoting:

Vancouver is the second-least affordable city for housing among 325 major developed cities, a new study says.

Only Hong Kong was found to be less affordable than Vancouver among cities in a group of countries that includes Australia, Britain, Canada, Ireland and the U.S., according to a study from Illinois-based consultancy Demographia.


Victoria isn't far behind Vancouver in overvaluation.

info said...

Canada's housing market is the second most over priced in the world.

totoro victoria said...

I could only dream of a 54% drop in prices - with the same interest rates and income I would be one happy investor.

BTW - info - you do realize that you are repeating yourself in various iterations. Hey, some of us are a little obsessive but...

patriotz said...

We aren't doing that bad relative to
global price/income ratio

Rio = 22.13


Do you know what a "favela" is? That what they call the squatter slums where a large part of the Rio population lives. Another large part of the population lives in rental apartments.

Only the upper middle class and the rich live in owner-occupied housing. Is it any surprise that when you compare the price of such housing against the median income, you get a large number? It's completely meaningless for any comparison against Canada.

totoro victoria said...

Ooops - 57% correction... even better... can't wait.

a simple man said...

I won't be greedy - I will be happy with a 25% from peak correction!

Marko said...

you do realize that you are repeating yourself in various iterations.

info thinks if he posts the same thing enough times eventually half of Victoria will read it, conclude he is right, and the market will collapse :)

Marko said...

It is difficult to see how income growth in the future can bring this ratio close to the historical average within any reasonable period - so it follows that house prices will have to decline.

Histroically have we had as many two income earners in a family? Have we ever had this many basement suites?

The world has change quiet a bit and I don't think we will return to the 3.5 ratio, especially at these rates.

Doesn't make sense to apply a 3.5 ratio historical norm based on a one income family, no basement suite, 7%-8% interest, to an economy where you have two incomes, basements suites, and 3% interest.

a simple man said...

No time can be compared to the past because each is unique.

We do know that home ownership is at all-time highs, that consumer debt is stratospheric, that price to rent ratios and price to income ratios are really favouring not buying, that baby boomers are starting to sell, that interest rates will be going back up to historic norms eventually, that the CMHC has dramatically changed its position and is largely tapped out, that govt intervention this time is unlikely, that limitations to banking practices have now been mandated by OFSI, and that the masses are now believing there will be a drop in prices over the next few years, so emotions are now negative towards housing as an investment.

Yes, this is a unique time.

mrmike said...

Who cares about CMHC? I'd like to know what percentage even need it in Vic? Very small I'm sure.
Also who cares about OFSI? probably no one!

a simple man said...

I guarantee all realtors in town care about CMHC and OFSI. They are having a big impact on the market here.

mrmike said...

They will raise the ceiling on CMHC and they will increase the term back at least 30yrs probably back to 35.
IMHO anyway.

a simple man said...

I don't think they will change amortization length any time soon. CMHC has said it will not increase its ceiling.

Lots of price reductions today - emotion is starting to take hold.

Right animal spirit?

koozdra said...

"They will raise the ceiling on CMHC and they will increase the term back at least 30yrs probably back to 35.
IMHO anyway. "

They won't need to. Prices will come down.

Just Jack said...

They won't increase the ceiling for CMHC. They will likely raise the limit for private insurers like Genworth.

mrmike said...

Bet ya they do! Probably see cash back to cover the DP again too!
Think they'll sit back and watch Canada melt? Don't think so.

koozdra said...

Mr Mike,

Why do you think they have been tightening rules? The government wants a slow down in housing.

Trent Sze said...

The govnt has no incentive to reduce the price. They want to property tax. It might come down but it will recover itself thru time.

mrmike said...

They tightened the rules only to find its not going to work.
They will kick the can...just like the states. It's the new norm...the new growth. No other choice.

a simple man said...

You can have a depreciating asset that has its mill rate increased and tax income remains stable.

mr Mike - the govt knows it created this monster and is slowly trying to diet it down so it can control it before it destroys the city (a la Godzilla). The last thing they want to do is reverse themselves again.

JJ - I read the govt increased GenWorth's celiing by $50B.

mrmike said...

This Govt relies on perpetual growth.
You really think they'll kill the driving force...they will not.

koozdra said...

I don't think the government will return to super lax lending. They saw what happened down south and they don't want a repeat up here. If I understand their thinking correctly then they are attempting to prevent a bubble using policy change. The question will be, did they pop the bubble while trying to prevent it?

mrmike said...

Govt workers create NO revenue as they are funded by tax payers. Who is the tax payer? For the most part construction workers and the spin offs created. They will stimulate this bubble before they pop it.

koozdra said...

They've been stimulating the bubble for years. Consumers are addicted to credit and they want more. Let this go on and we will have a full blown bubble. Stop it now and appear in control.

mrmike said...

Not saying its a good thing...but it is what it is and they WILL stimulate this issue. Credit IS the new growth. Pulling the future forward is the NEW WAY.

a simple man said...

Hopefully that is the old way and the new way is responsible consumerism, responsible government and truly affordable housing.

Leo S said...

Histroically have we had as many two income earners in a family?

Real household income is only up 5.5% since 1976. Yes there are more dual income households, but apparently it isn't actually making much of a difference. So either those two incomes are less, or there are more single-adult households dragging down the average.

Have we ever had this many basement suites?

Depends how many of these landlords illegally hide their income from the suite. Otherwise it would show up in the household income stats.

The world has change quiet a bit and I don't think we will return to the 3.5 ratio, especially at these rates.

Agreed. It makes no sense to expect the price/income ratio to be the same when interest rates are half.

Leo S said...

They will raise the ceiling on CMHC and they will increase the term back at least 30yrs probably back to 35.
IMHO anyway.


I'd be willing to bet they won't. They are trying to de-emphasize the role of CMHC. They will raise the limit of the private insurers and leave CMHC to work under the current one. I also wouldn't be surprised if they introduce a new measure to support real estate if there is a crash, but I really doubt they will backpedal on the recent changes. That's bad for their image.

mrmike said...

It wont be responsible...70% reside in a home they own (Mortgaged). Now tack on annual Municipal tax, Strata Fees, Home Insurance, Daycare or Student loan payments,CC debt, Car loans, Other misc...bullshit.

I understand there is no 'jingle mail' in Canada, BUT people can walk away (secured or not)declaring personal bankruptcy on all obligations, and WILL if you sink their ship enough.

I think the FED will pump some $$$ to stimulate Real Estate, which will in turn, stimulate the entire economy.

a simple man said...

I agree, Mr. Mike - life is very expensive here. Exactly why values need to come down to earth.

dasmo said...

Why? It's cheap to rent here. Just and fair does not predict the future, that is for sure....

mrmike said...

Cuz renting sucks!
Also difficult to plant roots with children as a tenant.
Money is cheap and would rather pay the bank than a landlord.
IMHO anyway.

Seth Perry said...

@koozdra $2800 / month rental and they can't afford a camera that takes larger photos for their free craigslist posting? Come on people. We need CSI. "ENHANCE"

http://victoria.en.craigslist.ca/apa/3521996536.html

DavidL said...

@koozdra
How much higher are your property taxes than they were in 2003? I talked to a coworker in Winnipeg and she told me theirs had risen by about 40%.

The property tax on my Saanich West SFH in 2002 was $1802 (after deducting the Home Owners Grant [HOG]). In 2011, it was $2334 (after HOG) - an increase of $532 or 29.5% over ten years. This works out to an average of 2.6% (compounded) each year - which seems completely resonable to me ...

DavidL said...

@Seth

That $2800/month rental at 4918 Cordova Bay Road is assessed at $829K. It was previously used as the "Villa Blanca Bed & Breakfast", so you have to wonder why it is now being rented out?

DavidL said...

Whoops! 2012 taxes were $2334.

totoro victoria said...

I don't really wonder. What is there to wonder about? Someone's private life?

As for the impact of the assessment news, this is, imo, more significant than other things we have been discussing. In particular, more significant than the global comparisons. This is local news and markets are very susceptible to local conditions.

I think it could be a good time to buy come spring if you have been waiting. Course, you could always hold out for the imminent 57% drop.

StalJ said...

As soon as you see this onCanadian House & Home mag you will know the bottom is in.

StalJ said...

2017 is my bet.

koozdra said...

@DavidL

Are property tax rates influenced by assessments?

Chris said...

Mike said
“I think the FED will pump some $$$ to stimulate Real Estate”

With prices up 7% past year where most of Canada lives, I wouldn’t get your hopes up on more govt stimulus. Besides stimulus can’t cure what starting to ail us. We’re entering a decade of falling youth and cashin in boomers and they know it. Even doubling immigrants would hardly make a dent, if i could find the article.
At any rate, I think we’re still just an ndp lovin side show to them.

totoro victoria said...

Property tax rates are related to assessments ONLY in relation to the municipal budget.

The budget is made based on set criteria plus special expenditures (ie. sewer system upgrade)and if the budget is the same as last year and assessments are down the mil rate goes up.

So, to be blunt, whether or not your assessment goes up or down will probably make NO difference to how much you pay in taxes.

What does make a difference is if you are assessed to high you are paying too much taxes no matter what. You can appeal the assessment in this case. If you are assessed too low then most folks leave it as is.

a simple man said...

If you are assessed too low then most folks leave it as is.

Until they want to sell.

I agree - the govt will tax you at a whatever rate in needed to fulfill their budget mandate.

Just Jack said...

I have spoken with a few people in the last few days that are mad at BC Assessment for lowering their property's value estimate for tax purposes.

They feel that the government is intentionally lowering the value of their home.

This underscores how much reliance people place on the government assessment. While, the assessments are intended to report market/actual value, some feel that they "create" market value.

Personally, I don't think we need a "market value" assessment system. And definitely it isn't necessary to provide a new assessment roll every year. A new roll every two or five years is adequate for tax purposes.

It is an expensive system, approximately $50 of your property taxes are paid to BC Assessment for providing your home value each year.

And, our current system encourages crappy homes to be retained while penalizing those who improve their properties.

Leo S said...

It is an expensive system, approximately $50 of your property taxes are paid to BC Assessment for providing your home value each year.

Massively overcomplicated I agree. Some article said they have 680 people working there. What for exactly? This seems like such an obvious example where you could replace it with a computer model and run the whole operation with a quarter of the resources.
It doesn't have to take everything into account. Estimate market value by comparable sales, then modify up or down based on land size, finished size, and some other quality metrics.
BC Assessment is a case where you could probably get to 90% of the quality for a small fraction of the cost. They're trying to get that last 10% of quality with massive additional resources, and the result isn't exactly anything to write home about.

a simple man said...

I'll bet a lot of that workforce is dealing with appeals.

Reality is starting to hit home for some people. One of my neighbours was out in the driveway yesterday and is livid - they bought last summer and their assessment is about $100K less than what they bought for. Another neighbor is down $40K following purchasing a year and a half ago. Of course, these numbers are really only real when you sell, but it is a departure form what people had become accustomed to in the past 10 years here. Two years ago when I suggested that values in Victoria may drop I almost needed a flack jacket for the laughter and barbed responses.

Now there is anger for another reason - reality.

dasmo said...

But it is interesting since 2012 was pretty much flat for SFH so it does seem like a push.

a simple man said...

I should state that both neighbours really paid to much for the market, but both were from out of town and in a time crunch.

a simple man said...

sorry for all the grammatical/spelling errors, Introvert. Three in a row - I should read my posts before pushing publish.

Leo S said...

A push? In what way? BC Assessment has no reason to favor higher or lower assessments. Assessments are down an average of 3.5% and only a percent or so last year. That reflects the average drop from peak pretty accurately

dasmo said...

I guess it's from spring 2011 to spring 2012? So that probably is -3.5% (is it?) So it probably does reflect that. I was just looking at 2012...

Just Jack said...

While it's irksome for home owners, it's a serious problem for computer software for the quick mortgage approval process. The assessment had set the baseline for the computer valuations. The theory being that properties are always worth more than their assessed value.

Now that property values are declining and will be lower than assessed value for years to come, where is that baseline for conservative lending?

95% of assessed value?
90%?
85%?

The assessments set a baseline for a lot of the financial products, like home equity loans, credit lines, etc.

This won't be too much of a problem in Flin Flon, Manitoba but in a city with FAT prices like Victoria, 5% is a LOT of money.

This just causes more puckering of the financial sphincter.

Just Jack said...

While BC Assessment has no reason to favor higher or lower assessments, they are paid by the Province and there values can be set by legislation. As the Province does for the Agricultural Land Reserve.

Everyone remember, the assessments that were put in abeyance a few years back.

dasmo said...

For my LOC The bank did their own assessment of my house which was 420k. This compared to the BCassessment of 350k (at the time) so I don't think they use the tax assessments at all.

Just Jack said...

If your bank used a computer software program like EMILI, then your assessed values were part of the approval process.

The program would also take all the sales in your postal code and compare each one of them to their assessed value to get a ratio, that could then be applied to your assessed value.

So, you see - the assessed values are crucial to any software program being used.

So, what happens when there is very little or nothing selling in your neighborhood to provide these ratios?

Introvert said...

Hopefully that is the old way and the new way is responsible consumerism, responsible government and truly affordable housing.

Now that is the funniest thing I've read in a while!

a simple man said...

I said hopefully...

mrmike said...

Do you click your heels while you hope?

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