It's a mixed bag out there, but negative across the board.
A whopping 10% decline in Metchosin, but who cares about those farmers, here in Oak Bay we are insulated. Yep, a paltry $2000/month decline in value for the standard house there.
Our assessment is down 4.6%. Interestingly enough, the bank assessment done in June 2013, was 5% higher than the 2013 BC assessed value which is supposed to reflect value as of July 2013. Seems like quite the variation. Either banks like higher assessments, or the appraisal procedure consists of taking the current BC assessment and adding or subtracting a random small number (Just Jack are you offended yet?). Also apparently the land lost value, while the building increased. Didn't know that buildings age like wine... Or maybe they noticed that I scraped the moss off the roof?
The more sophisticated measures of price have made it clear that despite static medians and averages, the market continues to decline. Assessments down 2% to 5%, and MLS HPI and Teranet both down 2.4%. As you can see, the median price declines have flattened out due to changes in the sales mix, while the months of inventory has recovered from our little government meddling last year. I would expect median prices to start declining again in 2014.
The VREB continues to expand the information they provide, which is great to see. Many real estate boards are very secretive with information, so despite the interesting spin in their summaries, I commend whoever is crunching the numbers over there for making them all public. Now please archive the full news release every month, not just the price summaries :)
Thanks to everyone for your contributions and comments on the blog last year. It'd be a boring place without your input.
384 comments:
«Oldest ‹Older 201 – 384 of 384Suffice it to say that you can't lose with real estate. It is a sure thing.. as long as you hold for ten years.
As you live in your forced savings plan and watch your savings erode every year, you can hope that next year the recovery will begin and pray that you don't need to sell.
Prosperity will be just around the corner.
It doesn't work for stocks or for RE when you're making a massive one-time leveraged purchase.
For a one time purchase in the stock market in the US there is NO recorded 20 year period where a one time investment at the beginning of the period failed to produce positive total returns (div + capital gains). That includes purchasing just before the 1929 crash. So yes time is a partial cure for bad investment timing (provided you don't buy an actual worthless asset like some 1999 era internet companies).
Of course it would be preferable to be the omniscient investor who is always in the right sector or asset at the right time.
"It is a sure thing.. as long as you hold for ten years"
Has any regular poster ever said that? Or is it strawman day today?
Not 5o forget that the capital gains on your primary residence are tax exempt, unlike other types of investments unless they are in a TFSA (which is limited).
I would think most home owners opt for a five year or 3 year mortgage.
That's interesting when you look back 5 years to the volume of sales in the core districts for detached homes.
2,222 homes sold that year. Every other year of the last 5 have had house sales under 1,800 in the core. Mostly because people have been holding back from selling, hoping for the market to return.
That's five years of a flat market where the only positive advantage to buying was from mortgage paydown.
Compared to other years this is significant because a larger than typical number of home owners are going to make the decision to crap or get off the pot this year.
Refinance another five years or sell. If the five years of pent up supply chose to sell, that could lead to a supply-driven downturn.
"Has any regular poster ever said that? Or is it strawman day today?"
Totoro believes it (correct me if I'm wrong). I remember Marco mentioning it a couple of times.
The stock market used to be capital gains free too.
I don't really think we as a society we can keep the loop hole of tax free home ownership for much longer. Some cap has to be placed on what is tax free.
If the national average home price is $350,000 then you should start to pay capital gaines on anything over that amount. If your home has increased by $350,000 then you get to keep the first $350,000 but you should be taxed on the balance.
Since, the government created home wealth it would be entitled to tax it too. As we can't be a nation of rich home owners while others go homeless in our streets.
If you don't like it - then you should move to a another country because that's the price you have to pay for living in the best place on Earth.
Mortgage brokers are reporting that the vast majority of first time buyers buying with 5% are using gifted money.
This will be a big part of the story when the kids start declaring banky's.
No-one has said anything is a sure thing except for koozdra and info. They are the only ones with a crystal ball - I believe they share it.
I expect the capital gains tax exemption will continue - homeowners make up a large percentage of voters. In the US you can also deduct your mortgage interest from your income.
No, if you buy and hold, similar to any other investment, history has shown that real estate has generated positive return even if a home was bought prior to a "crash".
Exactly like another investment. If I had bought $500,000 worth into the Dow Jones, I'd have recovered my money by now. In 10 years I will be significantly up. Does that mean it was a good investment? No. It was and remains forever a bad investment decision.
Just like buying in 1981 at the peak was a bad investment decision. What happens 20 years down the line does not change that decision. Why was it bad even though you'd be up 20 years later? Because the alternative was to wait and buy a couple years later. Of the options available at the time, buying was the bad decision
I'm okay with either of those scenarios.
But investment returns are not a binary system of ok and not ok. Is the guy with a lifetime investment return of 3% OK? Yes. Is the guy with a lifetime return of 8% OK? Yes.
Does that mean there is no difference between them because they are both OK? Of course not. Higher returns are better, and avoiding bad investments is how you get higher returns.
All this is parallel to the issue of whether it is realistic to time the real estate market. Possible or impossible, there are certainly bad times to get in no matter how long you hold.
Again, you are back to timing the market. There is only the deal of the day. Some people think there will be a huge crash. I'm not one of them.
Unless an unpredictable series of events occur which impact the economy negatively while interest rates jump, my best guess is prices will stay stable or fall slightly for the next 5-10 years and that in ten years values will be as least as high as they are now.
A crash is a possibility, but not a certainty. This is not 1981, many factors are different, including interest rates. In my view, rates may well go up further than what they have already risen which does impact your monthly payment and the amount of interest you pay overall.
Given that this is the case, and that interest rates may rise, now is not a bad time to buy for everyone who has a best guess and life circumstances like mine.
Timing the market is not within my control. I don't know what the next ten years will bring for certain. There is only the deal of the day and only the future will tell if it was a good decision or not.
What I do know is that I pay very little for housing currently and everything is cash flow positive. I am pleased with this.
The alternative of waiting and buying at the perfect moment is contingent on a crystal ball. I don't have one.
I have my best guess based on following the market, drafting spreadsheets and then taking the plunge. Much as you did.
So, can I live with the fact that prices might decline 10% or 15% from my purchase price? Absolutely. I'll wait it out and continue with my plan. In fact, I couldn't care less really.
I'm just grateful to have a nice affordable place to live that will be paid off one day.
If Patriotz ends up $100,000 ahead by waiting another two years, good for him. It is not a competition and I can live with it happily - because the truth is, nothing is certain until it happens.
"Unless an unpredictable series of events occur which impact the economy negatively while interest rates jump"
Prices are high because interest rates are low. Why are interest rates so low?
"So, can I live with the fact that prices might decline 10% or 15% from my purchase price? Absolutely. I'll wait it out and continue with my plan. In fact, I couldn't care less really."
Say 5 years from now this is true but interest rates have also gone up (which is highly likely without a crystal ball)and you are no longer cash flow positive...then what?
I have a ten year fixed rate mortgage. I will definitely be cash flow positive.
@Seth
"That leaves a balance of $353, but, according to my spreadsheet there are more expenses and monthly costs and you have not included them in your example. For starters, what about maint. / repairs?
Even with an income property, there is a time commitment and stress factor finding renters, and keeping them."
-------
Slight misunderstanding. It's not a rental property, I live here. The $1350 was my old rent. $997 or round off to a thousand is what I pay now for very similar place, possibly a little less, depending on tax reassessment.
Maint. / repairs is mainly included in the condo fee of 284 among other things. The initial repairs I make to the actual unit are included in the Transaction/PTT/Downpay line. Its part of the opportunity loss $143 of investing elsewhere. This one was a downpay of 39000, 3 for other transaaction and 4 for repairs. However I often get more back if you read how I do the repairs cheaply. That line also includes moving costs. After initial repairs there really aren't any ongoing repairs, unless I suppose an appliance dies. A burnt out lightbulb or liquid plumber is a expense when you are renting too. The only cost I may not have considered enough for is selling in a few years. I rarely use agents. I'm not saying things can't fall further as they often overshoot both ways but when you can get properties for more than a third off assessement, we are getting close.
Ten years from now I do not plan to have a mortgage to renew.
It was meant to be more of a general question because this isn't all about you.
In the US, house prices peaked in 2006. After crashing, prices there are still well below the 2006 peak, 8 years later.
Canada's housing bubble is much larger than the 2006 US housing bubble.
House prices in the US might take another 10 years before they reach the peak level of 2006. The total number of years that it could take house prices in US to recover to 2006 levels might be 15 years or more.
In Japan, house prices peaked in 1990 and are still losing value. 1990 was 24 years ago. It might take 50 years or more (in total) before house prices in Japan reach the previous peak level of 1990.
In Spain, house prices peaked in 2006 (8 years ago) and more price declines could be on the way. It might take 15 to 20 years or more (in total) before house prices in Spain recover enough to reach the peak level of 2006.
In Ireland, house prices peaked in 2006 (8 years ago) and the price decline seems to be continuing. It might take 15 to 20 years or more (in total) before house prices there recover enough to reach the 2006 peak level.
See world housing bubble charts here.
Once Canada's housing bubble bursts (all housing bubbles burst), house prices in Canada will go through a deep, multi-year correction. Canada's bubble is huge. It might take 20 years or more before house prices in Canada recover to the peak level (once the peak level has been established).
Buying and holding RE for 10 to 15 years guarantees nothing. As I have shown, you might have to wait 24 years (and counting) before your house regains enough value for you to break even on the purchase price, if you buy in a down market (think Victoria).
Buying and holding is not a fool-proof plan.
Having the "buy and hold plan" in mind is no excuse for anyone to feel safe about buying a house in Victoria at this time.
House prices in Victoria peaked in 2010. Since then, the average house ($650 K) has lost $1,625.00 per month, each and every month.
What's worse for those who bought near the peak is that most of those monthly payments would have gone toward the interest on the home loan, not the principal.
It isn't always a good time to buy a house, period. Real estate isn't always a good investment. There is nothing safe about buying a house at any time - there is always the risk that the value of your house will decrease.
Those renters who were thinking about buying in 2010 (but continued to rent instead) have avoided the 10.5% price decline. How much, in total, did these renters avoid losing to the declining housing market?
Let's look at the facts:
Since 2010, the average house in Victoria ($650 K) has lost 10.5% of its value. Those that rented since 2010 (instead of buying) would save a total of $68,250.00 (if they were to buy now). However, since the average mortgage holder actually pays 2.5 to 3 times the purchase price of the house by the time the mortgage is paid off, the total amount of savings would be 2.75 x $68,250.00 = $187,687.50 or about $188 K.
Those renters that chose to rent instead of buy in 2010 have avoided a total loss of $188 K so far. However, that amount will grow substantially as house prices in Victoria continue to decline.
Personally, I wouldn't call our market a "bubble". It doesn't have some the necessary criteria to make it a bubble.
It's not like the Tullips in Holland bubble. Where you had docks and fully loaded ships with Tullip bulbs and not being able to sell one bulb. Bursting bubbles need an over abundance of supply. We don't have that.
Maybe in the future we might - but we'll have lots of warning on that if it happens. In that way - you can time the market. Maybe not with a stop watch but certainly with a calender.
My apologies reasonfirst. It is difficult to tell from your post that you were not directing that question to me.
"Personally, I wouldn't call our market a "bubble". It doesn't have some the necessary criteria to make it a bubble.
It's not like the Tullips in Holland bubble. Where you had docks and fully loaded ships with Tullip bulbs and not being able to sell one bulb. Bursting bubbles need an over abundance of supply. We don't have that."
The highest levels of inventory came after the 2006 US housing bubble burst and prices began to decline.
Price to income and price to rent ratios are the main considerations for defining a housing bubble. When the price to rent and price to income ratios of a housing market are significantly higher than the long term averages of these ratios, a housing bubble is formed.
Such is the case in Victoria and the rest of Canada as well.
Canada's housing bubble is much larger than the 2006 US housing bubble.
Canada's price to income and price to rent ratios are much higher than the long term averages of these ratios.
The increase in these ratios in Canada (from 2000 to present) is much higher than the increase in the US (from 2000 to the peak of their bubble).
2. Increase in price-to-income ratio (first chart):
Canada: + 56% (2000 to late 2011)
US: + 24% (2000 to peak)
3. Increase in price-to-rent ratio (second chart):
Canada: + 73% (2000 to late 2011)
US: + 35% (2000 to peak)
This beautiful 3 bed, 1.5 bath condo in Pensacola, Florida is valued at $102 K.
Built in 2007, this spacious condo has 950 sq. ft. of living space. Look out your windows and enjoy the view of the Gulf.
In Victoria a similar condo would probably cost $400 K.
I don't agree that house prices are down 10.5% since 2010 in the area where I live, nor does it match the benchmark HPI, but I'll leave it at that.
You seem to forget the impact of the now higher interest rates and the fact that they may rise still more in the future.
Ex.
Buy 2012 at $650,000 at 3.79 for ten years. Term interest cost: $219,601.48. Amortization interest cost: $435,072.47
Buy 2014 at $575,000 at 4.38 for ten years. Term interest cost:226,259.62. Amortization interest cost: $454,316.63
You will pay about $6500 more in interest over the ten year period for sure based on that scenario.
Over the term, it is difficult to say as we don't know what 2022 vs. 2024 renewal rates will be.
The difference is certainly not 188K in interest costs when prices drop but interest rates are higher.
"I don't agree that house prices are down 10.5% since 2010 in the area where I live, nor does it match the benchmark HPI, but I'll leave it at that."
With so few sales in any one area of Greater Victoria, the MLS benchmark price isn't an accurate gauge of price decline for any one area, except, perhaps, in one or two of the largest areas, such as East Saanich.
Oak Bay, for example, has too few montly sales for the MLS benchmark price to be of much value.
As far as Oak Bay is concerned, the median for the first 6 months of 2013 was 8% lower than the median for the first six months of 2010. That is a more accurate indicator of the total decline from peak than the MLS benchmark, in my opinion, as it includes more sales. The actual decline from peak would be slightly more than 8% for Oak Bay.
Prices in Oak Bay have not increased since July 1, 2013. If anything, they have decreased like the rest of the Greater Victoria SFH market.
I agree that prices in Oak Bay are down from 2010.
It is definitely not eight percent in the $500 000 - $750 000 range of homes in OB as I was tracking the listings daily from 2008-2012.
It might be that there are greater price declines in higher value properties in this area - I wouldn't know.
"You seem to forget the impact of the now higher interest rates and the fact that they may rise still more in the future."
I gave a very general example.
Rates will rise, we all know that.
I don't think you understood what I wrote.
Buying now vs buying at the peak in 2010 would result in a person saving about $188 K by the time the mortgage is paid off.
Buying in 2010 would have amounted to a total of 3 more years of historically low interst rates compared to buying now (since rates will rise). This doesn't add up to much at all in comparison to the $188 K that was saved by waiting 3 years to buy in 2013, as a result of avoiding the 10.5% decline in prices.
Canadians’ excessive debt has made rest of world wary of loonie
"Foreign investors used to look at Canada and see a rock of economic stability in an uncertain world. Now, they see an economy that has been fuelled in large part by an unsustainable run-up in debt."
Someone's getting it.
Single family homes in Langford and Colwood, on the other hand, experienced a median price decline of 18% when comparing the median for the first 6 months of 2013 to the median for the first 6 months of 2010.
I think I did understand your example, but I don't agree with your math.
You will see that I am comparing 10-year term rates. This is what I have and what has become more popular in recent years.
You will experience that price benefit for the full ten years and pay about $6500 more in interest over ten years by buying this year at a lower price and higher rate, rather than last year at a higher price but lower interest rate.
I'm not saying you are going to recover the full benefit of a $75,000 drop, but it is not going to result in a magic $188 000 in extra interest charges.
In fact you will likely pay MORE interest if prices drop and rates rise.
In the supposedly value priced Swiss housing market here is a 1000 sq ft condo asking 750K CHF and renting for 2000 CHF/month.
http://www.homegate.ch/buy/104536238?a=default&l=default
Obviously that must be much cheaper than Victoria since we are after all the second most overvalued housing market in the world in the most overvalued country in the world....
"Foreign investors used to look at Canada and see a rock of economic stability in an uncertain world. Now, they see an economy that has been fuelled in large part by an unsustainable run-up in debt."
"Someone's getting it."
Everyone else in the world is getting it. Canadians aren't. Canadians are too busy being brainwashed by the assessments of Canadian bank-paid economists and others who regularly tell Canadians that there is no housing bubble and that there is no problem with all of that debt that Canadians have pigged out on since 2000.
"In fact you will likely pay MORE interest if prices drop and rates rise."
Not if the decline is severe. Worse than the states. A full blown credit crisis of our own. I'm sure glad the banks will be fine with their bail in program.
This beautiful 2 bed, 1.5 bath condo in Clearwater, Florida is valued at $86 K.
Built in 2008, it has 1150 sq. ft. of living space.
Enjoy Florida's warm and sunny climate, 365 days a year.
A similar condo in Victoria would probably cost $300 K and would come with 6 months of cold and wet weather each year.
That we have high prices is not in doubt. Interest rates certainly were a large component in getting to the price level we are now. But rising interest rates have not always signalled an end to a real estate cycle.
So what is sustaining us at this level? Sale volumes are in the toilet - why haven't prices followed?
What seems to be different this time, is that home owners have a lot of equity that they can tapped into. And when there is no more to be drawn from the home - they just walk away and leave the home to the banks. It makes the time at the top of prices spread out or flattend longer than past markets.
Prices are so high and people are carrying so much debt today that...
"One might as well be hanged for a sheep as for a lamb."
"You will experience that price benefit for the full ten years and pay about $6500 more in interest over ten years by buying this year at a lower price and higher rate, rather than last year at a higher price but lower interest rate."
Saving $6.5 K in interest doesn't compare at all to the $188 K that a person would save (by the time their mortgage is paid off) by buying now compared to having bought in 2010.
The average house in Victoria has lost 10.5% of its value since 2010. That is a total of $68.3 K. Multiply that by 2.75 and we get a total of $187.7 K.
The total amount of money saved by having locked in at a slightly lower rate in 2010 (even with a 10 year term) would not be much at all compared to the $188 K that would have been lost to the declining market from 2010 to now.
"What seems to be different this time, is that home owners have a lot of equity that they can tapped into."
How is that different than the situation in the US in 2006?
Americans also had a lot of home equity in 2006, but that didn't stop their market from crashing.
It isn't different in Canada.
The bigger the housing bubble, the bigger the correction.
Canadians have borrowed against the equity in the homes to a greater extent than Americans did up to the peak of the 2006 US housing bubble.
This 3 bed, 2.5 bath townhouse in St. Petersburg, Florida is listed at $199 K, after a recent price cut.
Built in 2004, this spacious townhouse has 1675 sq. ft. of living space, a two car garage and a community playground and pool.
A similar townhouse in Victoria would probably cost $450 K.
info - you are just wrong I believe.
there are a lot of free mortgage calculators online and I urge you to use them before you toss off your 2.75 x whatever back of the envelope guesstimate.
During the first ten years you pay $6500 more in interest if you wait for the price drop - more - not less.
You now have, say, twenty years left on your term and using the numbers I provided:
1. 2022 - you now owe $507,909 on your home you purchased for $650 000. Let's say the rate for the remainder is 5%. You will pay $293,113.85 in interest for the remainder of the term (20 years)
2. 2024 - you now owe $458,152 on your home you purchased for $575 000. Let's say the rate for the remainder is 5%. You will pay $264,398.12 in interest for the remainder of the term (20 years)
So, you end up saving about $20,000 in interest overall for the entire duration of the 30 year mortgage. Nowhere even close to your $188 000.
Of course, we don't know that the renewal rates will be the same, that is a variable that go either way.
This 2 bed, 2.5 bath condo in Tampa, Florida is listed at $80 K, after a recent price reduction.
Built in 2004, this condo boasts 1328 sq ft of living space.
Relax and enjoy living in this condo knowing that condo prices in the area will likely experience price increases over the next number of years instead of price decreases (like in Victoria, BC, for example).
"info - you are just wrong I believe."
No, I'm not wrong. Try to understand what I am writing.
Single family home prices have decreased, on average, by $68.3 K since 2010.
A 2010 buyer would have paid about $68.3 K more for the same house that a recent buyer would have paid.
However, by the time the mortgage is paid off, the mortgage holder is forced to pay about 2.75 times the purchase price of the house. Morgage holders typically pay for the house 2.5 to 3 times by the time they pay off their mortgage.
As I have said, the purchase price of the average $650 K house in Victoria has decreased by 10.5% or $68.3 K. We can multiple that $68.3 K by 2.75 to get a total savings of $188 K.
A recent buyer will pay $188 K less in total mortgage payments by the time their mortgage is paid off compared to a 2010 buyer.
A 2010 buyer might have a slightly lower interest rate (on a higher principal amount) and that might translate into some savings, but nothing compared to the total amount saved (by the time the mortgage is paid off) by a recent buyer ($188 K).
This beautiful, never lived in brand new, 2 bed, 2 bath condo in New Port Richey, Florida is valued at $139.5 K and future price appreciation is all but guaranteed (unlike in Victoria, BC, for example).
Built in 2008, this spacious condo boasts 1287 sq ft of living space and has a pool and fitness room.
A similar condo in Victoria would probably cost $400 K.
I have simple solution for you info.... Move to Florida.
A crash is a possibility, but not a certainty. This is not 1981, many factors are different
We are actually talking about 1981 and not the present. You said buying in 1981 was not a bad decision, don't try to change the subject back to today.
Buying then was definitely a bad decision for the reasons already outlined. It has nothing to do with timing the current market, it is an assessment of the past.
Blog still going strong after 7 years :)
I don't agree that house prices are down 10.5% since 2010 in the area where I live, nor does it match the benchmark HPI
You actually have no way of knowing whether it matches the HPI because you don't have the data. VREB only published some point data for the individual regions. But sure, Oak Bay HPI is likely down only about 8%.
It is definitely not eight percent in the $500 000 - $750 000 range of homes in OB as I was tracking the listings daily from 2008-2012.
Ah yes. Human memory is well known to be superior to any and all indexes. Also if you narrow the range enough eventually you can claim you are correct.
Obviously that must be much cheaper than Victoria since we are after all the second most overvalued housing market in the world in the most overvalued country in the world....
I assume you realize that apartment is 20 min from Zurich? Didn't know Victoria was an international banking capital.
Info - you actually need to do the math. You are wrong in your calculations. I give up.
"We are actually talking about 1981 and not the present. You said buying in 1981 was not a bad decision, don't try to change the subject back to today."
Ok. I do believe buying in 1981 worked out to be a fine decision for those who held. I would have been very pleased to land up where they did.
In fact, looking back, I should have purchased a home prior to going to university. I would have been retired at 35.
The only really poor decision was buying high and selling at a loss.
I didn't realize we were being limited to the past btw.
"if you narrow the range enough eventually you can claim you are correct."
Actually, that is the only range I really know anything about. I couldn't be accurate about any other sub-area in Victoria because I don't follow them.
@ totoro
"Info - you actually need to do the math. You are wrong in your calculations. I give up."
I am 100% correct. Period.
You are wrong.
Nobody but you has challenged me on this. That should tell you something.
Your overall understanding of mortgages and RE investing, etc. seems to be very limited for someone who is so eager to tell potential buyers how it's always a good time to buy real estate and how it's all done.
I'll say it again:
A 2010 buyer will end up paying a total of (about) $188 K more in mortgage payments (by the time their mortgage is paid off) than a recent buyer (for the same house that was bought for $650 K in 2010).
Open your mind a bit, totoro, you might learn something of value.
I assume you realize that apartment is 20 min from Zurich? Didn't know Victoria was an international banking capital.
Pretty much all cities in Europe I've been to, including Zurich, that I would want to live in are more expensive than Victoria for condos on a per square foot basis, and not all of them are international banking capitals.
I have been following this blog for a couple of years now on and off and it is very informative and entertaining at times. I usually just skip over info's postings (they are too long and same thing over and over and over). However totoro, thank you, your posts have been very valuable and you are obviously doing well for yourself and it's evident you know what you're talking about :)
@ Marko
"Pretty much all cities in Europe I've been to, including Zurich, that I would want to live in are more expensive than Victoria for condos on a per square foot basis, and not all of them are international banking capitals."
This is another attempt by you to justify the bubble house prices in Victoria.
Victoria is a small, regional Canadian city with a metro population of about 330,000. In no way does it compare to Zurich or any other major European city with expensive RE.
Victoria's bubble house prices are not justified because you say that you wouldn't live in any European city that you've been to that has cheaper RE than Victoria.
I've been to several European cities that have cheaper RE than Victoria. My assessment is that many of these cities appear to be attractive places that many Victorians would enjoy as much or more than Victoria.
@ Spunki
"However totoro, thank you, your posts have been very valuable and you are obviously doing well for yourself and it's evident you know what you're talking about :)"
I was correct and totoro was wrong. Your assessment of totoro's RE acumen is obviously incorrect.
If totoro was enrolled in a class that was about RE economic fundamentals such as price to income and price to rent ratios, housing bubbles, improving your future net worth dramatically by renting in a declining market and leaving emotion out of a buying decision, she would fail.
"I assume you realize that apartment is 20 min from Zurich? Didn't know Victoria was an international banking capital."
Zug to Zurich is 35 minutes, but that's picking nits. Proximity to zurich explains a high price, but it doesn't really explain a high price to rent ratio 30+, especially as swiss tax policy heavily discourages owning (taxed on imputed rental income) versus Canada
@ caveat
"Zug to Zurich is 35 minutes, but that's picking nits. Proximity to zurich explains a high price, but it doesn't really explain a high price to rent ratio 30+, especially as swiss tax policy heavily discourages owning (taxed on imputed rental income) versus Canada"
The price to rent ratio of a housing market does not indicate whether or not a housing market is overvalued/undervalued.
I've explained this many times on this blog.
A housing market is considered to be overvalued if its price to rent and price to income ratios are significantly higher than the long term averages of these ratios for that market. Victoria is considered to be extremely overvalued because its price to income and price to rent ratios are significantly above the long term averages for these ratios.
Where did you get the price to rent ratio for Zurich? I'm guessing it was numbeo. I've explained many times on this blog that numbeo's information is not useful due to their methodology.
However, as I've said, the price to rent ratio of any housing market does not tell us whether or not that market is overvalued/undervalued.
"Where did you get the price to rent ratio for Zurich?" asks Info
Zug - Calling Zug Zurich is like calling Abbosford Vancouver.
The price to rent math is quite simple from the price I posted and the rent also posted.
This beautiful 4 bed, 3 bath house in Phoenix, Arizona is listed at $110 K.
Built in 2009, this home has 2,229 sq ft of primary living space and a 2 car garage.
A similar house in Victoria, with 2,229 sq ft of primary living space, would probably cost $500 K or more.
Resources drive the bus this side of the country. By looking at our resourceful index, I’d say the bottom is in. Wouldn’t you?
I hereby declare the 6 year bear and the wicked witch of the west is dead.
"The price to rent ratio of a housing market does not indicate whether or not a housing market is overvalued/undervalued."
Assuming you believe some countries should always and will always be more expensive than others and that price rent ratios are always mean reverting and can never have secular trends
"Resources drive the bus this side of the country. By looking at our resourceful index, I’d say the bottom is in. Wouldn’t you?
I hereby declare the 6 year bear and the wicked witch of the west is dead."
Victoria's economy isn't a resource based economy.
Victoria's economy wasn't responsible for the bubble price run-up since 2000. Starting in 2000, federal policy brought in lax lending standards and created an environment of excess credit, which resulted in bubble house prices.
Many credible studies have concluded that Victoria's housing market is extremely overvalued when price to income and price to rent ratios are compared to the historical averages of these ratios.
It is very unlikely that Victoria's housing price correction has reached bottom. It is much more likely that house values will continue to decline for some time in Victoria.
5-year mortgage rates stopped falling in 2013. Falling rates were providing an upward force against falling house prices in Victoria. That upward force has been eliminated. This will allow the downward forces at play in the Victoria housing market to provide even more downward pressure on prices.
"The price to rent ratio of a housing market does not indicate whether or not a housing market is overvalued/undervalued."
"Assuming you believe some countries should always and will always be more expensive than others and that price rent ratios are always mean reverting and can never have secular trends"
House prices alone are not an indication of overvaluation/undervaluation. Some cities are more expensive than others.
Victoria is considered to be extremely overvalued because its price to rent and price to income ratios are well above the long term averages of these ratios. House prices in Victoria are not supported by economic fundamentals.
There have been 50 examples of national housing bubbles worldwide over the past 40 years. In each case, the price to rent and price to income ratios of each country were significantly higher than the long term averages of these ratios.
In each case, once the peak was in, house prices corrected back to the point where the long term averages of the price to rent and price to income ratios were restored. All national housing bubbles burst and the correction continues until these two ratios go back to their long term averages.
This is what will happen in Canada.
"I’d say the bottom is in. Wouldn’t you?"
Not even close. We haven't experienced our long awaited national decline. Victoria's decline is nice little preview.
Arrears Rates
Mortgage brokers (or as I like to call them debt peddlers) love to talk about how arrears rates are so low. In fact they are historically low. Why is that?
Joe gets a house. With most home purchases comes the car purchase. After all rates are super low and a monthly cost of a car is pennies (nickels now) of the cost of the mortgage. The never ending barage of television/radio advertising turns them into good consumers. Credit card bills start piling up. Property taxes rise. Energy costs go up. But it's fine they are managing by dipping into equity that appeared by housing appreciation.
Finally the taps run dry. Credit card maxed out. Heloc drained. They can't even fit the new boat into the garage because the motorcycles and the atvs are in there already.
They pull a banky and have all their new shiny shit taken away.
Today it's a different story.
They sell the house and make money enough money to pay off the debt.
Of course I'm not talking about some of the worst performing markets in Canada like Victoria but a really well performing market like Winnipeg.
Arrears rates drop to all time lows.
Fewer Canadians planning RRSP contributions this year: bank polls
I just get so frustrated when I read these kinds of articles. Don't these "economists" understand that saving is something we did in the old economy. We have a new economy now. Money comes from housing and related industries. Putting money in a house is saving it.
Well... unless the house declines. But don't worry the value will come back, promise.
RRSP's and TFSA's are old hat. Housing, that's where money is made.
B.C. gained jobs in December while the rest of Canada…
Furthermore, 5-yr rates down 6% this morning and TSX/resource prices soaring. What more could a Victoria bear turned bull ask for this fine friday morn?
A housing market is considered to be overvalued if its price to rent and price to income ratios are significantly higher than the long term averages of these ratios for that market.
I disagree with this on the basis of globalization in recent decades. For example, the majority of inputs to build a home in Victoria are a global commodity. If demand for lumber goes up in China and the US it become more expensive here.
Same goes for jobs getting out sourced over seas, etc.
We don't leave in a bubble where the price to income ratio will always be 4.0x.
Spanky, did you even read that article?
"Statistics Canada says there were 13,000 more people working in B.C. last month, mostly in part-time jobs. The province shed 10,000 full time positions."
Are part time jobs supposed to pay for the extremely prices houses?
I've been to several European cities that have cheaper RE than Victoria. My assessment is that many of these cities appear to be attractive places that many Victorians would enjoy as much or more than Victoria.
I've been to Europe many times and visited over 50 cities.
Other than my parents all of my family is scattered across Europe and people just don't realize how good we have it here.
I have an uncle in Nancy, France (about 1.5 by train from Pairs) who owns a car dealership. I've spent a few weeks there in the past. This is the reality of living in Nancy. He pays his mechanics $1,100-1,200 Euros per month and their rent is $600/month. Good luck ever buying anything.
Also, there are countless cities in Europe much smaller than Victoria and way more expensive.
Dubrovnik, Croatia. Population 42,000. Condos are way more expensive than Victoria. Even less know cities in Croatia like Split aren't cheap by any means despite the average income being a fraction of what it is here.
"just don't realize how good we have it here"
Time to make it worse here. We're in an arms race for unaffordability and Canada is lagging.
Houses are expensive because of a bubble created by monetary stimulus and peoples willingness to go into debt. Not because people looked at Croatia and saw how "undervalued" homes were here.
Whenever you don't think there's a bubble, take a deep breath and say "Government insured 0-down 40 year mortgages". Then "government insured loans for multimillion dollar homes".
Then to really top it off say out loud "government insurance for borrowed down payments".
100% financing.
Saving is the facebook of this generation. I don't want it because mom and dad are doing it.
House Hunt Phoenix
"This beautiful 4 bed, 3 bath house in Phoenix, Arizona is listed at $110 K."
Apparently we have different standards of beauty.
I also like the fact that you can't actually look inside the house till you have bought it:
"Showing ONLY after accepted offer. DO NOT DISTURB OCCUPANT! DOGS ON PREMISES.
That is sure to be a big selling point!
"Victoria is considered to be extremely overvalued because its price to income and price to rent ratios are significantly above the long term averages for these ratios."
What are these long term averages we are speaking of? What is the price to rent or price to income in Victoria averaged over the long term? Say 1910-2010. Do we have that data?
We are in a bubble because there aren't any cheap houses. There are cheaper houses but they aren't cheap.
After the states crash there are now cheap houses there.
Soon we'll have cheap houses again. To the detriment of the land oligarchs and the debt laidened "middle class" (a difficult term to define).
Spanky:
7000 fewer working people in Victoria than 2008 and not improving....
Victoria Employed (,000s)
2008 - 190.6
2009 - 183.1
2010 - 183.4
2011 - 182.0
2012 - 186.1
2013 - 183.7
http://www.bcstats.gov.bc.ca/Home.aspx
Spanky re: commodities bottom - China slowing has only just begun.
There wasn't much good news in that job report either nationally or in BC.
The market now seems to be pricing in the possibility of a BoC rate cut.That would explain the plummeting dollar
What would be more interesting than the price to average income ratio would be if the income used was for mortgage applicants only.
In that way one could look at the price to mortgagee income ratio and determine if it has changed in the last few years.
An issue that I have with using average income is that the average person isn't buying homes. We have slid along the scale of buyers that now have a sizeable down payment because of the wealth effect of real estate acting on themselves and their parents.
We might be able to measure this indirectly by looking at sale volumes.
When it comes to sale volumes we have been in a bearish market for 4 out of the last five years. That causes a drag on potential price increases as home owners haven't realized equity gains through the marketplace but only through mortgage paydown.
When you look at the supply side of real estate, we haven't seen an enormous increase in listings. The Months of Inventory in the city has increased only marginally and the Sales to New Listings ratio has remained in balance between 40 to 60 percent for all of the past five years.
That leads (some might say misleads) me to believe that we have pent-up supply. As 25 percent more people should have listed their homes every year for the past four years. Possibly waiting for the market to return.
I'd call this shadow inventory and I think we have a lot of it waiting for a bump in prices (dead cat bounce) or some seemingly innocuous event that will convince them to sell now and take what the market offers.
Or they will rent like my friends did. They traded up and couldn't sell their existing place at the price they wanted. Instead they rented it for the rent they wanted. It pays for the existing mortgage and a good part of the new mortgage. Since renting is the new owning there are plenty of renters. (If the place is well located and nice). I don't have any problems renting my place out either.... Remember the affordability argument is a little ridiculous since renting in Victoria is relatively cheap. Imagine living in San Fran where owning AND renting is ridiculously expensive....
"Pays for the existing mortgage and a good part of the new mortgage."
As long as interest rates remain at levels designed to stimulate the economy because it is doing so poorly, this is a wise decision.
Bubble zen:
"Government insurance for second homes with 95% financing"
Sure, I know of several people who have become unintentional landlords.
But it isn't there long term goal to remain a landlord. When the mortgage reaches renewal they'll make a decision to sell or not. These are accidental landlords - and I think most will opt to sell.
Since most mortgages are 5 years or less, a lot more people will now be making that decision. Will it be enough to tip home prices from a balanced to a bear market, similar to what happened on Salt Spring Island and Sooke last year?
I don't have access to that kind of data, but I'm sure CMHC and the banks do. I would think if you hear that CMHC and the banks are laying off thousands of employees then they're preparing for an apocalypse.
Unintentional landlords are highly susceptable to increasing vacancy rates. They tend to be highly leveraged in this game and inexperienced with tenants.
Most are lucky with their tenants. But with higher vacancy rates come higher demands by the tenants.
An inexperienced landlord could easily have to wait 3 months to lease up his rental if it became vacant.
Even the best landlords will have a months vacancy every two years. As that is the average stay for a tenant.
And I would never replace a tenant's broken stove with a used one. That's just asking for a one months notice from your tenant.
How accurate are the 2014 BC Assessments?
The Assessments are as at July 1, 2013.
If we look at a neighbourhood such as Gordon Head and bracket the sales two months on each side of the assessment date and then compare that to the government assessment we find...
That for the 50 properties that sold during that time period. The Sale Price to Assessment Ratio ranged from a low of 81.8% to a high of 132.7% The median was 96.8%. The accuracy within 5% of the sale price was 20 out of 50 sales or 40 percent. And accurate within 10 percent, 66 percent of the time.
In the world of mass appraising for tax purposes that's pretty good. On an individual basis to make an informed decision - not so good.
You really shouldn't just rely on the BC Assessment when buying or selling your home. And asking prices can be quite deceiving too. When you look at the original asking prices relevant to the sale price, the accuracy can be off by 7 percent on average at the begining of the listing period and down to 2 percent on the final list price after having several price reductions.
As a prospective buyer, you just don't know if the property still needs a price reduction or two to be within 2 percent.
As for all of you, who say that you follow the market. You're simply following asking prices and the assessments. And a home owner will always value their property more than the neighbours. It's only human nature.
Your spouse is always prettier, your children always smarter and your dog the most loyal - until it comes to bacon.
They might have a lower rate on renewal since they are paying around 4% right now. I doubt they will have a problem renting because the location is walkable to downtown. They will be just fine... The same equation does not play out in Sooke or Salt Spring I give you that... Those markets equalized in price a bit too much to the core if you ask me.
"Victoria is considered to be extremely overvalued because its price to income and price to rent ratios are significantly above the long term averages for these ratios."
"What are these long term averages we are speaking of? What is the price to rent or price to income in Victoria averaged over the long term? Say 1910-2010. Do we have that data?"
The Economist uses a 25 year average for these ratios. As long as you keep to one methodology it will allow you to compare city to city.
"Also, there are countless cities in Europe much smaller than Victoria and way more expensive."
"Dubrovnik, Croatia. Population 42,000. Condos are way more expensive than Victoria. Even less know cities in Croatia like Split aren't cheap by any means despite the average income being a fraction of what it is here."
Again, house prices alone are not an indicator of overvaluation/undervaluation.
A housing market (city, country) is considered to be overvalued when the price to rent and price to income ratios of that market are significantly higher than the long-term averages of these ratios.
More than one credible affordability study has Canada rated as the most overvalued country in the world.
Another study.
Vancouver is the second least affordable city in the world and Victoria is right behind it in that regard.
Some European cities may have expensive RE, but price alone does not indicate whether or not these cities are overvalued.
A condo in a certain European city may be more expensive than in Victoria, but that European city may not be overvalued while Victoria certainly is.
House prices in some expensive European cities are not overvalued because their price to income and price to rent ratios are in line with the long term averages of thse ratios. When the fundamentals support house prices, there is a lot less risk for buyers.
"We don't leave in a bubble where the price to income ratio will always be 4.0x."
Victoria's price to income ratio is more like 8.0. I don't have the exact number, but the 25 year average of the price to income ratio for Victoria might be around 3.75.
More important as a measure of overvaluation of a housing market is the price to rent ratio.
I don't have the exact number, but Victoria's price to rent ratio is significantly higher than the 25 year average of this ratio.
Victoria's housing market is considered to be extremely overvalued.
In the US, the most overvalued housing markets experienced the biggest price corrections. The same will happen in Canada. Victoria is Canada's second most overvalued city.
" Victoria's price to rent ratio is significantly higher than the 25 year average of this ratio.
Victoria's housing market is considered to be extremely overvalued."
Possibly, except that when its 353 dollars a month cheaper for me to own than when I was renting a couple months ago, I'm not even sure it's overvalued let alone extremely.
"An inexperienced landlord could easily have to wait 3 months to lease up his rental if it became vacant."
Why?
"Even the best landlords will have a months vacancy every two years. As that is the average stay for a tenant."
Not necessarily. I have not had a month's vacancy so far and I've owned rental property for more than six years.
Move-out inspections note any repairs needed and we do them asap. Tenants will agree to have someone come in to repair if you cannot do it within the 24hr turnaround period.
Totoro, you are good landlord. There are many that aren't. They have more vacancies.
"And I would never replace a tenant's broken stove with a used one. That's just asking for a one months notice from your tenant."
What makes a clean, nearly new used stove a reason to give notice? I've never had that happen and we upgrade old appliances with almost new used appliances.
What tenants do not like is:
1. being overcharged
2. not having matters attended to quickly
What tenants like:
1. a good deal
2. immediate repairs
3. immediate response to any issue
4. clean, well-maintained places with a few extras
5. places without carpet
The price to income ratio is used in the financial market. The near equivalent for residential properties would be the Gross Income Multiplier or GRM.
But there are substantial differences between real estate and the financial markets.
Most important you have to account for Vacancy and Bad Debt in real estate. That's the potential gross income less vacancy and bad debt which might be 3 percent in Victoria City but 6% in Sooke. The result is Effective Gross Income.
CMHC published the Vacancy rate at 2.7%. 20 years ago it was only 0.5%. It has changed over time.
Both the GRM and the Price to Income ratio were never suppose to compare different time periods. To do so, shows a complete misunderstanding of their purpose. They are to compare CURRENT earnings of properties or companies.
The GRM and Price to Income ratio are crude methods of valuation that DO NOT account for changes over time in vacancy, bad debt or expenses atrributable to the property or the investment. That's why you can only compare CURRENT income and current prices.
And real estate is more complex than the finacial markets in that you don't have water views, surplus land, contaminated sites, deferred maintenance and gas stations beside your stocks that would alter the ratio substantially.
It is just wrong to use Price to Income for residential properties. It is unacceptable appraisal practice in any country
to use a Price to Income ratio to estimate the value of a house or a condo. And there is no validity in using it to compare one time period to another. That's a fail on any real estate exam.
Hopefully that has put enough torpedoes into the Price to Income ship.
I'm not saying that homes are not expensive or that they will not correct. I'm saying that using a price to income ratio as your rational weakens or destroys your argument. It is too easy to torpedo and then anything else of value you have to say is tossed.
Victoria's vacancy rate was published at 2.7%. That's about a third of a month each year vacant.
You have chosen to charge under market rents so that you don't have that vacancy. But you still have tenant turn over. Remodelling of the suite such as painting and carpet and drapery cleaning. Maybe an NSF cheque or a tenant that skips on you. It happens to the best landlords.
I know some home owners that have left there suites empty for months because they personally haven't had the time to paint, clean, advertise and show the place.
You have also been lucky to find near new applicances that the tenants accept. But if your tenant is paying $2,500 a month and you show up with someone else's discarded stove - Well I'll leave you and the wife to talk that one out. Because I don't want to be in the same house when she gets mad. And neither do you.
"I don't agree that house prices are down 10.5% since 2010 in the area where I live, nor does it match the benchmark HPI
(Leo) You actually have no way of knowing whether it matches the HPI because you don't have the data. VREB only published some point data for the individual regions. But sure, Oak Bay HPI is likely down only about 8%."
It was interesting to view benchmark prices for OB.
http://www.vreb.org/pdf/VREBNewsRelease.pdf
60 months ago: $738,000
36 months ago: $788,200
last month: $744,000
$44,000 down from 2010; $6000 down from 2008. On that basis,
If the math is correct it seems like prices are down 5.5% from the "peak" - not 10%.
That seems about right.
JJ - I appreciate your comments and your humour, but, respectfully, you seem to speak from hypothetical scenarios you amuse yourself (and others) frequently.
Here is the reality of someone who has been a landlord for more than ten years.
1. Tenants need to leave at 12pm on the last day of the month. New tenants don't arrive until 12pm on the first of the month. We have time to paint on the last day of the month.
2. Tenants need to clean their places to the same standard that they are at when they move in. I take pictures prior to move in and do a move in inspection. If they do not clean to an adequate standard upon leaving this is reflected in the move-out inspection report. They are given the choice to use someone I hire at their cost, or clean it themselves. We have 24 hours to rectify this.
3. NSF cheques have occurred precisely once. This is because we have moved to e-transfers. The time it did occur the tenant had simply forgotten to deposit their paycheque and they paid the nsf fee.
4. I have no carpets, I dislike them.
5. What drapery cleaning are you talking about? I don't dryclean drapes, I vacuum them, and have many pairs in reserve should the need for replacement arise.
6. Tenants do not have the opportunity to "skip" on you if you manage things. You have a damage deposit. If they are late paying you serve a 10-day notice to vacate and keep the damage deposit.
7. I am the wife and am perfectly content with nice almost new appliances in perfect working order and do not view them as "discarded". I'd much rather have it then see it in a landfill.
"I know some home owners that have left there suites empty for months because they personally haven't had the time to paint, clean, advertise and show the place."
Really? I don't. My friends must be a bit more motivated by their life circumstances than yours.
We would have to part company, because I could not have you as my landlord. Paying $25,000 a year in rent and you show up with a $200 second hand stove - that's an insult.
That you don't realize that - is what speaks volumes. That stove would not be coming through the front door.
Sorry to sound harsh, but that would be a blessing. I'm pretty choosy about tenants and I wouldn't be happy to have someone who is unhappy with that.
House prices in some expensive European cities are not overvalued because their price to income and price to rent ratios are in line with the long term averages of thse ratios. When the fundamentals support house prices, there is a lot less risk for buyers.
So if a country/city has traditionally been expensive it will continue to be so and Canada will have to revert to traditionally being affordable? I don't think so.
"Fundamentals" don't support prices in expensive European cities at all. You think average incomes in cities like Milan, Vienna, etc., support real estate prices there?
@totoro
1. It's actually 1PM on the last day of the tenancy. The new tenant moves in whenever you agree with him / her.
2. This is just not true. The RTA is pretty vague, but all the advice I've found online is to leave the suite in a 'reasonable level of cleanliness'. Not exactly the same as it was when they moved in. It's unfortunate too many tenants get suckered into paying for someone to come in and clean the suite to the landlord's standard because they don't know their rights (I'm not saying you do this or have done this.)
Dave3
Victoria's price to income ratio is more like 8.0. I don't have the exact number, but the 25 year average of the price to income ratio for Victoria might be around 3.75.
Let's conveniently ignore numerous other factors.
I was doing research on a listing in Fairfield the other day and when the property was purchased in 1995 there were 102 SFH sales in Fairfield that year.
In 1995, the average sold home was 1,574 finished sq/ft and the average lot that year was was 6,165 sq/ft.
Fast forward to 2013 and 94 SFH sold in Fairfield.
The average home now 2,179 sq/ft and the average lot 6,283 sq/ft (didn't change much obviously). 32 homes had two kitchens.
How is the price to income ratio suppose to stay constant when the average house now has almost 40% more finished space than 20 years ago, interest rates are much lower, every third house has a suite, etc. Things change, ratios change.
toronto, just out of my own personal curiosity do you have a full time job?
To balance Totoro's "never empty" suites, I give you the anecdote of one friend of mind who has paid more than $60,000 to update a house and add a suite so that both up and down could be rented separately. That was in 2010. It has yet to be ever rented.
I am in no way stating that this is normal.
What tenants do not like is:
1. being overcharged
2. not having matters attended to quickly
What tenants like:
1. a good deal
2. immediate repairs
3. immediate response to any issue
4. clean, well-maintained places with a few extras
5. places without carpet
Cheap fast good. Pick any two.
That's how the world works. So either you have so far been very lucky for the last 6 years of renting out places, or you're stretching the truth here and there.
You say
you rent for below market.
your tenants are all good.
your places are all very well maintained.
you attend to issues immediately.
maintaining the rental places is very little work.
maintenance costs very little.
All those things can't really be true at the same time. It all makes for a rosy story but I suspect each piece is a painted a bit more positively than reality.
60 months ago: $738,000
36 months ago: $788,200
last month: $744,000
$44,000 down from 2010; $6000 down from 2008. On that basis,
If the math is correct it seems like prices are down 5.5% from the "peak" - not 10%.
You've identified the flaw in your own logic by putting the word "peak" in quotes, and yet you don't come to the correct conclusion. Without seeing each data point you don't know what the peak is, so you have no way of knowing how far down Oak Bay is currently.
totoro said "Tenants do not have the opportunity to "skip" on you if you manage things. You have a damage deposit. If they are late paying you serve a 10-day notice to vacate and keep the damage deposit."
Of course you mean you serve notice and apply to the RTB to keep the security deposit or pet damage deposit?
S2 (JJ's wife)
totoro said "Tenants do not have the opportunity to "skip" on you if you manage things. You have a damage deposit. If they are late paying you serve a 10-day notice to vacate and keep the damage deposit."
Of course you mean you serve notice and apply to the RTB to keep the security deposit or pet damage deposit?
S2 (JJ's wife)
Here is the reality of someone who has been a landlord for more than ten years.
Vacancy rate is about 3.5% (property managers are reporting it is actually higher than that, but let's take the CMHC on their word). Assuming vacancies were evenly distributed that means 12 days vacant per year for the average rental or about 1 month every three years. Some will have much higher vacancies, some lower.
Maybe you haven't had vacancies, does that mean this is possible for all landlords to achieve? Obviously not, the average vacancy rate proves that it isn't. How did you get low vacancy? By charging less rent and putting in more work. Like I said before, nothing comes for free.
"Fundamentals" don't support prices in expensive European cities at all. You think average incomes in cities like Milan, Vienna, etc., support real estate prices there?
Apparently they do. High ownership rate in Italy and very small mortgage market. People have the money to buy clearly even though that income might not be declared...
It is not all rosy. I would have said all the tenants were good until I had one who was not due to, I believe, early dementia. I've posted about that experience on this board before. That was work to deal with and a bit sad to see even though it was resolved in our favour.
Can you get bad tenants, yes. You can also get lovely ones. I'd rather rent for less and have lots to choose from so I can do my best to make a good choice.
The reason maintenance now costs little is because these places are in good shape. In some cases they came that way but mostly they've needed work and once you do that there are generally fairly few issues. For a period of time.
Last year we had a dishwasher in a second floor suite break. We had to replace it and repair the ceiling. It was covered by insurance but the cost didn't warrant the deductible. Was it work? Yes, but we had a spare dishwasher and a good drywaller. My time was spent organizing and deciding whether to make a claim or not. I didn't mind, but I don't think everyone feels the same. Another place needed no repairs last year - yes, none - and the tenants maintain the yard.
As far as vacancy rates go it is a combination of location, condition and price IMO.
What I find to be work are renovations. I am not handy so I do unskilled labour, buy materials and design. This can be time consuming and expensive. And sometime hard to make final decisions.
Would I encourage other people to do this? Only if they felt motivated and willing to put time in to understand the res ten rules and follow them (yes s2 you are correct) and they are not all that straight forward. And they are strictly applied.
We've all read stories about horrible tenants and horrible landlords. You can't control for everything, but you can control a lot. If you don't want to actively manage risk and would rather not worry then it is probably not for you.
For all it is worth my parents have had 1 month vacancy (intentional to carry out maintenance) in 18 years on their two bed suite in the Fernwood (now Oaklands) area.
I think area is a key factor. If you can appeal to a variety of tenants such as students, hospital workers, downtown workers, etc., you have a much better chance at keeping your vacancy low.
Seems like toronto runs a great operation but when you have a pure rental property house (i.e. not a suite in your principal residence) I really think you have to work part-time or be semi-retired from your career job.
Maintenance, showings, etc., can be a drag if you are working full time. The older duplexes and triplexes found in Victoria are anything but passive income in my opinion.
I think a suite in a principal residence is much easier to manage as you are there every day.
Apparently they do. High ownership rate in Italy and very small mortgage market. People have the money to buy clearly even though that income might not be declared...
Homeownership in Croatia is over 90% and a professional couple is lucky if they can afford a small one bedroom condo in suburb of a bigger city like Zagreb or Split.
People clearly don't have money to buy anything. My friend is a computer engineer in Milan who works at the Bosch office there and no chance he could ever buy anything.
Why is home ownership so high in Croatia? Because everyone lives with their parents and then they take over the family home or condo that has been in the family for generations. The fundamentals don't make any sense and no people aren't making a fortune in undeclared income.
I have a cousin my age (late 20s) in Croatia that is equally as smart as me, has a university degree, professional job, still lives with my aunt.
I on the other hand have two properties, buying/building a third this year with maxed rsps and tsfa. I am not smarter than him but the opportunity in Canada is truly amazing in my opinion. In Croatia working hard gets you no where, here it actually does.
Without understanding the culture/context homeownership rates can be very deceiving.
@reasonfirst
"Spanky re: commodities bottom - China slowing has only just begun."
You ‘re kidding, right?
2007 Shanghai Index @ 6092
Yesterday Shanghai Index @ 2013.3
...just begun?"
I don't think you need to be retired or work pt but it helps to have a flexible schedule and you absolutely need someone who can do repairs if you are not there. The internet has changed a lot of things.
I have one place more than 400 km from here. I do go there every other month for other reasons, but last year I did spring cleaning and reorganized the garage. I also had some trees trimmed back. Nothing needed fixing. I had someone else that I trust do showings.
I personally would have done this while working ft. My neighbour who owns a triplex and lives elsewhere does work ft. My dh does as well and I travel fairly frequently.
And I strongly agree with you on how very lucky we are here. Prices are very high relative to many places in canada and the us but very affordable compared to elsewhere and you can get ahead.
The index is anticipating the slow down. A leading Indicator in other words. China is a big country and changes move slowly.
Top front page of the Times.
Victoria Jobless Rate Falls To 4.2%
Greater Victoria’s unemployment rate fell to 4.2%…one of the lowest rates in the country, and business leaders are raising flags about possible labour shortages this year.
I'm sticking with my 2013 bottom call. The 6 year Victoria bear is dead.
Homeownership in Croatia is over 90% and a professional couple is lucky if they can afford a small one bedroom condo in suburb of a bigger city like Zagreb or Split.
Could you lose the obsession with Croatia, Marko? Nothing personal but an ex-communist state with a recent history of hyperinflation and civil war, and a high level of corruption and organised crime is hardly a model for what we should expect in Canada.
The Economist reports that Austria almost next door is 13% overvalued with respect to rents and 16% wrt incomes. The comparable numbers for Germany are -12 and -17. Canada? 76 and 31. US? 5 and -10.
Economist house prices
NSF cheques have occurred precisely once. This is because we have moved to e-transfers.
OK, so the next time a tenant doesn't have the money in their account you get a NSF e-transfer instead. :-)
Listening to the radio the other day and some young people who can't find work are being told to create their own jobs. The problem these young people cite is that the banks are being very stingy with lending to start ups.
However they are very keen to lend to a homeowner.
Lending to a start up is risky while lending to a homeowner is not.
Bubble Zen:
There is no risk in real estate.
There are no nsf e-transfers.
You cannot do an e-transfer without the funds in your account - it won't go through.
Once a transfer has been deposited, it cannot be cancelled or reversed.
"Unemployment is low because people give up and leave. "
This is exactly it. The unemployment rate dropped because the participation rate dropped. Great news, more server jobs for the rest of us.
http://www.youtube.com/watch?feature=player_detailpage&v=i5_IcqrM96M
Did you read my earlier post about number of people employed in Vic? People give up and leave.
There are some regulars on this blog who will not accept the fact that Victoria's housing market is extremely overvalued.
Credible studies have rated Canada's housing market as the most overvalued. Examples:
The Economist
Deutsche Bank
There have been several attempts by regulars of this blog to come up with a country that tops Canada in terms of real estate overvaluation, however, all attempts have failed.
The studies done by the Economist and Deutsche Bank do not include every country in the world. However, only certain countries have had sufficiently stable economies and currencies (over the past 30 to 40 years) to make them suitable candidates to be considered for inclusion in these studies.
Let's look at what countries have been included in these studies:
The Economist: Hong Kong, Austria, South Africa, United States, Switzerland, Canada, Singapore, Germany, Australia, China, Britain, France, Sweden, Japan, Italy, Ireland, Netherlands, Spain
Deutsche Bank: Canada, Belgium, New Zealand, Norway, Australia, France, UK, Sweden, Finland, Spain, Netherlands, Austria, Denmark, Italy, Ireland, US, Greece, Germany, Korea, Japan
Some of the countries that made the lists have experienced extreme economic turbulance in recent years due to major housing market corrections, however, they continue to be included in these studies, probably because of their track record of economic stability prior to the bursting of their housing bubbles.
It really seems to be the case that no other countries have had sufficiently stable economies and currencies (over the past 30 to 40 years) to be seriously considered as part of these studies.
There are probably other reasons, as well, that some countries are not included on these lists. Some countries do not keep sufficiently accurate records of information that would be required for these studies, for example.
Both the Economist and Deutsche Bank studies rate the Canadian housing market as the most overvalued among the countries studied. This is factual information.
I will argue that there are no other countries in the world that have had sufficiently stable economies and currencies over the past 30 to 40 years and keep sufficiently accurate (and comprehensive) economic and housing market data to be deemed as suitable candidates for these studies.
In all likelihood, Canada's housing market is the most overvalued in the world.
Victoria is the second most overvalued housing market in Canada.
All housing bubbles burst. Canada's housing market will bust soon. Canada's housing market correction will be deep and last for years.
The US housing market peaked in 2006. It has been 8 years since house prices began to decline in the US and prices there are still well below 2006 levels. It could take another 10 years or more before house prices in the US recover to peak levels, making the peak to peak recovery 18 years or more.
Canada's housing bubble is much larger than the 2006 US housing bubble. Canada's correction will be deep and probably take longer to play out than the US correction.
In the US, the housing markets that were the biggest price gainers as the bubble inflated turned out to be the biggest price losers after the bubble burst. Victoria's housing market is Canada's second most overvalued. Victoria's price correction will be among the deepest in Canada.
"Did you read my earlier post about number of people employed in Vic? People give up and leave."
More on that (for BC).
I agree with your statement that all housing bubbles burst.
However, we don't have an over supply or fear to sell quickly.
The correction we are experiencing is due to reduced demand likely from high prices, tighter lending policies, weak consumer confidence, or just fewer buyers ready to buy.
The logic would be that since the market doesn't have these necessary factors - the market can't burst. Since all bubbles burst - our market can't be a bubble.
Nor can our market be considered overvalued as there is a steady stream of buyers to pay at current levels. If you bought a Gordon Head box 3 months ago for $550,000. The chances are very high that you would be able to sell that property today for the same price. That's not an overvalued market.
This beautiful house in Phoenix, Arizona has 3 beds, 3 baths and is listed at $225 K.
Built in 2005, this house has 1,958 sq ft of primary living area. It is located in a gated community and has a 2 car garage.
I've searched for a similar house in Victoria with the following criteria:
* no older than 10 years
* at least 1850 sq ft of primary living area (above ground)
* a two car garage
* a gated community
* at least 3 beds and 3 baths
A similar house in Victoria would probably cost $1 - $1.5 million.
You could probably buy 5 houses in Phoenix for the price of a similar house in Victoria.
Why? Victoria's housing market is extremely overvalued and has not gone through its major price correction yet.
In the US, for the most part, house prices are supported by economic fundamentals. At the peak of the 2006 US housing bubble, house prices in the US were not supported by economic fundamentals. The inevitable result was a major housing price correction. The same will happen in Canada.
All housing bubbles burst. Once the peak is established (based on price to income and price to rent ratios), all housing bubble markets correct back to the point where the bubble started.
Canada's price to income and price to rent ratios are currently much higher than these ratios were in the US at the peak of the 2006 US housing bubble.
Price to income ratio (first chart):
Price to rent ratio (second chart):
Canada's multi-year housing market correction will be deep. Victoria's total price correction from peak will be among the deepest of any Canadian market. Victoria's housing market has already corrected 10-15% while all other major Canadian markets are either at their peak or close to it.
There are no nsf e-transfers.
You cannot do an e-transfer without the funds in your account - it won't go through.
You mean if there is not sufficient funds you can't do an e-transfer? Just like a cheque won't clear?
That is exactly what I meant.
@ Just Jack
"I agree with your statement that all housing bubbles burst.
However, we don't have an over supply or fear to sell quickly.
The correction we are experiencing is due to reduced demand likely from high prices, tighter lending policies, weak consumer confidence, or just fewer buyers ready to buy.
The logic would be that since the market doesn't have these necessary factors - the market can't burst. Since all bubbles burst - our market can't be a bubble.
Nor can our market be considered overvalued as there is a steady stream of buyers to pay at current levels. If you bought a Gordon Head box 3 months ago for $550,000. The chances are very high that you would be able to sell that property today for the same price. That's not an overvalued market."
As I've said, oversupply of inventory is not a necessary condition of a housing bubble.
A housing market is considered to be overvalued (in a bubble) when the price to rent and price to income ratios of that market are substantially higher than the long term averages of these ratios.
That is certainly the case in Victoria and the rest of Canada.
In the US, the oversupply of inventory came after prices began to decline across the country. The same will happen in Canada.
Victoria's housing market is definitely a bubble. It is impossible to dispute that.
Victoria's price to income and price to rent ratios are substantially higher than the long term averages of these ratios, therefore, Victoria's housing market is in a bubble.
Victoria's housing market is in a bubble and prices will, therefore, correct back to the point where the price to income and price to rent ratios are restored back to the long term averages of these ratios.
You can deny it all you want, but that will not change the facts.
What is the long term price to rent ratio? No one knows. We could be at it right now.
For example are the following current sales overvalued when it comes to price to rent ratios?
A four suite building along Fort Street. Gross Income of $62,300. Sold for $995,000. That's a GRM or Price to Rent ratio before vacancy and bad debt of 16.
A 4 suite residential conversion in Fernwood. Gross Income of $43500. Sold at $995,000. GRM of 23. Sold with the idea of re-developing the site. Big price for a corner lot with less than 10,000 square feet of dirt.
Fairfield 4-suiter. Grossing 52,400. Sale Price $880,000. GRM of 17
James Bay 4 suites grossing 48 large. Sold at $845,000. GRM of 17.5
Oaklands. four suites bringing in some $60,300. Sells for $770,000 at a GRM of 13
Hillside Avenue grossing $35K. Sells for $640,000. GRM of 18
I actually did speak with the fellow who wrote the Economist artcile and he agreed with me that you have to take into account the NET income not the Gross Income. For example, our property taxes have generally been lower in Victoria than say Montreal because we don't have costly snow removal.
It's just bad math and easy to discredit. Once you're discredited on this point, you've lost credibility on points that may have more validity in your argument.
No, not just like a cheque won't clear. An e-transfer is an immediate transfer.
A cheque takes time to clear and there is an NSF fee and notice back that it hasn't cleared. You then have to let the tenant know and get a new cheque which could result a repeat situation which takes days, if not more than a week, to sort out.
An e-transfer happens or it doesn't on the 1st of the month. You know right away and there is no nsf process - only non-payment of rent as no e-transfer is possible if you don't have the money in your account.
Three of our tenants always pay rent early - I don't know why but they prefer it. The others pay on time. Non-payment of rent has never been a problem. If it is in future we will know on the first. Seems like an okay thing to me.
I don't know why you are obsessed with being right about how nsf is such a big problem for my tenants when there is and has not been any such nsf crisis.
"What is the long term price to rent ratio? No one knows. We could be at it right now."
No, Victoria's price to income ratio is much higher than its long term average.
The Economist uses a 25 year price to income and price to rent ratio average to determine the long term averages of these ratios.
Without doing the math, I would estimate the long term price to income ratio for Victoria to be about 3.75. Currently it is about 8.0.
Victoria'a price to rent ratio is also much higher than the long term average of this ratio.
@ Just Jack
"I actually did speak with the fellow who wrote the Economist artcile and he agreed with me that you have to take into account the NET income not the Gross Income. For example, our property taxes have generally been lower in Victoria than say Montreal because we don't have costly snow removal."
There is no proof that you spoke with anyone from The Economist or that anyone from The Economist said anything like that at all.
"For example are the following current sales overvalued when it comes to price to rent ratios?"
You must look at the price to rent ratio of Victoria as a whole and then compare that ratio to the long term ratio in order to determine whether or not Victoria is overvalued based on price to rent ratio.
Based on a comparison between its current price to rent ratio and its long term price to rent ratio, Victoria is extremely overvalued.
@ Just Jack
"It's just bad math and easy to discredit. Once you're discredited on this point, you've lost credibility on points that may have more validity in your argument."
I have not been discredited in any way on this or any other point that I have made on this blog.
I think you are grasping at straws here.
However, if someone, for example, did provide information that turned out to be incorrect once or twice, that wouldn't discredit them.
You need to look at the specific information that they provide and decide whether or not that is true.
The worst liar in the world could post something on this blog that is entirely true and, as long as it is backed by sufficient evidence, we would all be forced to take it seriously. The information can be true regardless of whether or not the person posting the information, in your opinion, is trustworthy.
From now on I think we all need to question the data and information that you provide for this blog. You are, afterall, the only one who has access to that information. Nobody has questioned your data in the past, however, you have recently given us reason to question everything you write.
A housing market is considered to be overvalued (in a bubble) when the price to rent and price to income ratios of that market are substantially higher than the long term averages of these ratios.
Info has an idiosyncratic notion of a bubble. As the term is normally understood, a bubble entails an element of mania driven by the intent of buyers to benefit from a rapidly rising market.
That idea is quite different from some statistical notion about price to rent ratios.
Clearly, Victoria RE is not "in a bubble" by the conventional definition. Prices have been within eight to 10% of a horizontal line for the last six years. No mania there.
It might be argued that there was a bubble prior to 2008, but in that case there should have been a collapse in prices since then as those who profited from the irrational rise in prices sought to realized their gains after the market peaked. But instead the market has remained essentially flat.
It has been argued that prices are bound to fall when interest rates rise. But prices were slightly higher in 2008 when the five-year fixed rate mortgage was over 5%. Why, then, must prices necessarily fall if mortgage rates turn up by a percent or two?
It has also been argued by analogy with past real estate cycles that it will pay to defer purchase until prices fall. But the future never exactly repeats the past, which means there can be no certainty that prices will ever fall below the present level. Thus there is no foolproof way of timing the market. Prices may be high now relative to rents, but there's no certainty that they will not stay that way for a long time. Returns on investment generally are low: in stocks and bonds for example.
Perhaps returns on investment are about to turn up, but there is no certainty about that. For sure, we are in a very different economic world to that of the preglobalization era.
Spoke isn't correct. I replied on the site and he answered my comment on the site. It's on the web.
I welcome your questioning. Most of what I wrote about your methodology can be found here
"Introduction to Statistics with Applications to Real Estate"
Published by the Sauder School of Businesss by Dr. Johathan H. Mark Revised 1999
And here
"Real Estate Appraising in Canada"
Edited by Samuel A. Martin
Published by the Appraisal Institute of Canada Third Edition 1987
I can't locate the question and response online by the Economist. As I used my real name for that - I don't want to direct you to it anyway. But you could likely dig it out yourself.
Marko has the same access as I have. If you look back you'll find that he is quick to find a fault in any data I present.
House prices in Victoria have declined 10 to 15% since 2010. This indicates a declining market.
Victoria's housing market overvaluation is at least as extreme as some of the bubbliest US market as the 2006 US housing bubble inflated.
Canada has experienced a bigger increase in real estate investment in the formation of its housing bubble than the US did. This suggests that Canada experienced more investor mania than the US did in the formation of their bubble.
Canada's housing bubble is much larger than the 2006 US bubble and Victoria is Canada's second most overvalued market.
In the US the big price declines took place when all cities were experiencing price declines. Victoria will experience its biggest price declines once all other Canadian markets are declining.
Victorias housing bubble is huge. A deep price decline is inevitable.
The surest sign of a real estate bubble is when it's obvious to everyone that there isn't one.
Nothing personal but an ex-communist state with a recent history of hyperinflation and civil war, and a high level of corruption and organised crime is hardly a model for what we should expect in Canada.
And most recently joined the EU :)
I was merely trying to point out that the ownership rate can be very misleading. Reason I use Croatia is because I am a dual Croatian-Canadian citizen and visit Croatia frequently so I am familiar with the reason behind the 90%+ ownership rate.
House prices in Victoria have declined 10 to 15% since 2010.
Maybe a great time to take advantage of the drop and buy?
In a time of unprecedented monitory stimulus in the form of low rates what does it say about a place that see price declines for 4 straight years?
It means it's a great time to buy.
For prices to tumble you are going to need a lot of motivated sellers needing to sell now. And you'll need an over abundance of supply so that prospective buyers have many many options of what to buy.
Where is that fear in sellers? Where is that over supply in houses?
And where is that greed in buyers that are willing to wait to get a better price. The average days on market in December was 68. That's not buyers holding out for a better price.
Why do stores need to clear inventory with discount sales. There is no need to cut the price of Wallmart Waffles if they have no waffles to sell. But if the warehouse is filled with waffles then you get a sale.
Why would real estate be any different.
A bubble in real estate has to be supply-driven. We don't have that in the detached home market.
We just have expensive homes. Homes that trade commonly on the open market.
That isn't to say that the market can't go bubble. That's a good possibility when you look at unemployment and vacancy rates climbing while population trends are reversing and shadow inventory and pent up supply is increasing.
There are apartment buidlings that have never had a vacancy in 20 years now having to dust off and put the for rent sign up.
Are we more susceptable to an event that could trigger a bubble. Oh yeh, sure we are. We're playing the last few hands before the casino's lights come on.
When the Vancouver market went bubble in the early 1980's, the MLS (r) listing cataloque was as thick as the Vancouver telephone book. Now that was an oversupply.
.Percentage price increase / decrease since June 2010 . .
. . . . . . .Victoria vs. Canada (without Victoria). . . . . . . . .
. . . Teranet HPI (composite 11) - All property types. . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 15 %
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 14 %
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . *. . . + 13.41 %. . Canada (without Victoria)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 12 %
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 11 %
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . +10 %
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 9 %
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 8 %
. . . . . . . . . . . . . . . . . .* . . . . . . . . . . . . . . . . . . . + 7 %
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 6 %
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 5 %
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 4 %
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 3 %
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 2 %
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 1 %
*. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 %
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 1 %
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 2 %
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 3 %
. . . . . . . . . . . . . . . . . .*. . . . . . . . . . . . . . . . . . . . - 4 %
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 5 %
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 6 %
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . *. . . - 7.29 %. . Victoria
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 8.0 %
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 9.0 %
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 10.0 %
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
June 2010. . . . . . . . . . . . . . . . . . . . . . . . November 2013
"For prices to tumble you are going to need a lot of motivated sellers needing to sell now. And you'll need an over abundance of supply so that prospective buyers have many many options of what to buy.
Where is that fear in sellers? Where is that over supply in houses?"
Victoria's inventory will increase dramatically once prices begin to fall at a faster rate. That is how it worked in the US.
Fearful, motivated sellers, panic selling and a spike in inventory will all be part of the equation for Victoria's housing market when house prices in other Canadian markets are also in decline.
Victoria's housing market is currently a buyer's market. Conditions will worsen.
Since June 2010, housing market conditions in Canada have been conducive to price gains.
The Teranet HPI composite index (Canada without Victoria) has increased 13.41% since June 2010.
Victoria's housing market has been extremely weak since 2010. Since that time, it has experienced a total price decline of (at least) -7.29% while the rest of Canada has experienced a price increase of 13.41%.
Since June 2010, Victoria's housing market has underperformed relative to the rest of Canada by -20.7%.
I will argue that if the rest of Canada had been flat since June 2010, Victoria's housing market would have experienced a total price decline of -20.7%.
Victoria's market weakness will not disappear any time soon. When the rest of Canada is experiencing price declines, Victoria's extremely weak market will follow that trend and probably perform even worse from that point on than most other Canadian markets.
In the US, the housing markets that began to decline first experienced some of the fastest rates of price decline once other American markets joined in on the price decline parade.
Perhaps our market is just becoming more local than global and detaching from other cities in Canada.
There really isn't any logic for increasing prices in Mississauga to have an affect on home prices in Fairfield.
The real estate industry uses the term "buyer's market" quite a bit. But do we really know what that means?
To me, a buyers market suggests that the seller has to make concessions in price and terms to affect a sale. Prices would be trending lower and listing times would be longer.
In contrast a sellers market would be when the buyer is at the mercy of the seller? Leading to increasing prices and short marketing times.
A balanced would be in between the two with stable prices and marketing times typically ranging from 30 to 90 days.
We likely have a buyers or bear market in some types of properties and some locations in the Greater Victoria area. And a sellers or bullish market in others.
Right now, the market is just not consistent over all types and all locations to emphatically say it's a buyers or sellers market everywhere. Price movements seem to be more seasonal for some properties.
The Winter market is a tough one to get an idea of what 2014 has in store for Victoria. There have been a lot of properties pulled from the market and sales are still slow. Some properties that have been listed for six months or more - all of a sudden get a near full price offer in the Winter.
Most people list their homes in the spring. And that's the most important market to watch.
So you want to by a condo.
These seem to be good asking prices for condos today.
If you're over 19 and can spare the time at court on January 16 there's a 1265 square foot water view condominium in a steel and concrete tower on the Gorge listed for sale at $215,000. Two bedroom and a den bring paint and your imagination.
Want to live in Oak Bay and not have to pay Oak Bay prices. One-bedroom condo on Newport. Asking $169,900 bring your golf clubs.
Old enough to drink, then you're old enough to buy a 1,176 square foot condo near Beacon Hill Park on Collinson. Asking $229,900.
Then there's the funky. Not good prices but in complexes that rarely come up for sale.
Like the Deco converted apartment building along Academy Close. It's early funky crap for $299,000 - bring cash and BC Bud. Two for sale in a building that rarely has any available.
A top floor corner co-op with a water view of the Marina!!! $219,000. Co-op's are tough sells so if you buy it - consider it the last home before Ross Bay Cemetery. Two to chose from with this Beach Drive address.
Still not too sure about living in a co-op. How about two-bedrooms and 1,020 square feet in Oak Bay and you have waterfront. Asking $415,000 on Satellite Street. 209 days on the market. Need to be 25 or more to live here. Worth trying a low ball offer and see what happens.
With the Baby boomers departing this Earth there are lots of swell places coming on the market.
So to recap:
1) cheap properties in Florida and Phoenix - somehow very relevant to Victoria
2) expensive properties in Switzerland and Croatia - somehow very irrelevant to Victoria
3)don't know what the current price to rent ratio is
4) don't know what the "long term" price to rent ratio is either
5)long term could mean as little as 25 years
6) there can be no trend in these price to rent ratios over time in a city that barely existed 150 years ago and now houses 300,000
We don't need to compare to any other market. Take a look at the causes of the high prices and tell me if those causes are sustainable.
Are low rates here to stay?
Maybe, but probably not.
It's time to throw the housing market under the bus and start focusing on manufacturing.
The Canadian government would like to thank all the homeowners that went into ridiculous amounts of debt so that we could delay avoid our recession.
ugh, it stripped out my strikethrough tags. We need more html in the comments!
"Take a look at the causes of the high prices and tell me if those causes are sustainable."
Possibly sustainable for a while, but in most cases the "causes" are unlikely to strengthen and thus the likelihood of stagnating or declining prices in the medium term.
IMO it will only become a crash if some sort of self-reinforcing dynamics (price falls causing more price falls) come into play.
Monday, January 13, 2014 8:00am
MTD January
2014 2013
Net Unconditional Sales: 71 294
New Listings: 362 1,080
Active Listings: 3,295 3,870
Please Note
Left Column: stats so far this month
Right Column: stats for the entire month from last year
"IMO it will only become a crash if some sort of self-reinforcing dynamics (price falls causing more price falls) come into play."
I totally agree. I see this happening because of the strength of consumer confidence in the housing market. When that confidence starts to waiver interesting things start happening. If we weren't so vulnerable to any kind of economic shock I would say that this wouldn't be a problem. But with the amount of outstanding debt, people depend on appreciation to further their credit accumulation.
Not you, maybe not even anybody you know. But there are enough out there to cause trouble.
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