Wednesday, November 26, 2014

Nov 25 Market Update

MLS numbers update courtesy of the VREB via Marko Juras. These numbers are for the Victoria Real Estate Board's reporting area, including Sooke, Shawnigan Lake and the Gulf Islands.


Nov 2014
Nov
 2013
Wk 1Wk 2Wk 3Wk 4
Unconditional Sales137
234
357
412
New Listings195366516
698
Active Listings372236853639
4017
Sales to New Listings
70%
64%69%
59%
Sales Projection--468476

Months of Inventory
9.8



225 comments:

1 – 200 of 225   Newer›   Newest»
SJ said...

With Nat Bosa moving here from Vancouver and buying the Empress with big renovation plans, it makes you wonder if he has connections to the island bridge talks starting up again.

SJ said...

Ouch. Dasmo could have a Seadrill headache today down 20%. News says they completely cut the dividend which they had previously promised to keep until 2016.

mooselessness said...

The only bridge being discussed is Nanaimo to Gabriola. There's no chance of a bridge to the mainland. http://www.th.gov.bc.ca/Publications/reports_and_studies/fixed_link/fixed_link.htm

dasmo said...

Ya SJ. Genius play on their behalf though since part of their plan is a stock buy back. Cut dividend entirely, price plummets, buy back stock for much cheaper, reinstall dividend later at less cost. I bought more today actually @$16.17... That's One of the advantages of taking a position slowly over time...And not putting all your eggs in one basket! I see why the bailout happened. If you need that income now you have to move the money somewhere else. Maybe RSI-TO? ;-)

Leo S said...

Cut dividend entirely, price plummets, buy back stock for much cheaper, reinstall dividend later at less cost.

Yeah I think the SEC might have a word or two to say about that.

dasmo said...

Why? They aren't hiding the plan. It's in plane English as part of the announcement. "Seadrill Limited is suspending dividend distributions and focusing on debt reduction and value creating opportunities" then "Board authorization to buyback up to 10% of outstanding shares." What is the violation?

Marko said...

Stock is down over 22%....would not appear that investors are seeing this as a genius play.

Leo S said...

Very unlikely that they are cutting their dividend because of the share re-purchase. That is a mitigating strategy. Like they said, they are cutting because of “significant deterioration in the broader offshore drilling and financing markets over the past quarter.”

Dave said...

$50k total per year, a big enough down payment with enough help from mom and dad will 'get you into' almost anywhere?

Adding the caveat that you have to have a low enough outstanding mortgage for your annual income to support you owning is nonsensical. At a large enough down payment you're just paying for maintenance with no or a tiny mortgage.

So no, $50k / yr won't get you into Oaklands.*

*Without a big enough down payment.

Dave3

totoro victoria said...

I'm not sure what the point is?

Is it that if you have parents who are wealthy and want to help you buy a house, you can? Seems pretty obvious to me.

$50,000 a year and you will qualify for a mortgage of approx. $190,000 provided you have no other debt - credit card/car loan/student loans...

So, I suppose if you save up $300,000 or so to put down you could buy the house in Oaklands if your family income is $50,000.

I wonder how may families earning $50,000 a year save $300,000 in time to buy a $500,000 house in Oaklands before the kids grow up.


dasmo said...

Obviously investors are pissed. There is over 25 sector and dividend ETFs that hold Seadrill. The dividend was a big part of that. Could be a value trap but by their financial statements, if they liquidated everything and paid off all debts etc, the common share holder would make money right now. However, they are nowhere near a bankruptcy or disolving. They have a solid position. Offshore drilling isn't going away especially if land based extraction runs into more and more opposition. I've been to Kuwait. That region in general relies very heavily on oil. If the well runs dry that's it. Shoot, Kuwait turns oil into water by desalinating the sea. No oil, no water...Offshore is the next frontier for them... Seadrill is still leasing rigs they built in the 80's. This isn't a fly by night operation...I have a longer window so I see it as an opportunity to buy. Oil won't stay cheap forever. Am I going all in on Seadrill? far from it. Right now it represents 1.5% of my portfolio....

dasmo said...

I calculated what I needed to buy a house in Victoria the 90's. I was pretty thorough since I was using this data to get a big raise. It was 60k then...

Dave said...

Yeah my comment was mostly in response to LeoM from last thread and my point is that saying a neighbourhood is desirable if you're earning X per year is meaningless if you're always going to caveat with *depending on mom and dad chipping in, or *with a large enough down payment.

It's the size of mortgage you're left with that is the major limiting factor in being able to live in a certain area. There will always be people with small downpayments but large annual incomes buying next to people with large downpayments and lower annual incomes.

Dave3

Introvert said...

dasmo, are your taxes a jumbled nightmare, what with all that buying, selling, dividend-receiving, etc.?

Marko said...

dasmo, are your taxes a jumbled nightmare, what with all that buying, selling, dividend-receiving, etc.?

For me personally TD Waterhouse sends me the paperwork every March for the dividends so that is super easy.

Buying and selling lots can be a little annoying in terms of calculating everything out; however, the math is very simple.

I don't trade as much as I use to but if I did I would just do it under a TSFA umbrella...nothing to calculate at end of year.

dasmo said...

Yep most of my activity is in the RRSP and TFSA. Bank sends me my T5 and I give it to my accountant. I keep the paper trail just in case. I have a book keeper and an accountant so Its not too bad for me ;-) I have a couple properties, a business, sell stuff online and have a hobby i get paid to do or win contest money from... So my taxes are too much for me to handle alone...

SJ said...

Are you buying in again on SDRL this morning? I must admit it's getting tempting at these levels. I find it often takes three days after a dividend cut for a stock to purge.

Just Jack said...

Would anyone know where CMHC gets its information to determine affordability?

I assume, that the majority of information is taken from applications made to CMHC for high ratio financing. Since they don't have access to the bank's conventional applications or your personal income tax return.

That may be a reason why CMHC just doesn't "get it" when the average person says that housing is not affordable. The majority of the CMHC applications are approved and those applicants meet the requirements, therefor housing is affordable by CMHC standards.


When CMHC says housing is "affordable" they're not saying housing is affordable in the context that we have assumed.

dasmo said...

They must now have the lowest P/E in the entire market. And Amazon is up 2%! Their P/E is almost 800! SDRL is 1.72. This isn't an Internet startup where a stock crash will kill them. The only downside for them is aquisition power. Even then, they have the benefit of buying themselves for cheap. Anyway, it is without doubt oversold right now... I think I just might get some more...

totoro victoria said...

I don't think housing in Victoria is affordable for someone just starting out.

There are probably a lot homes that have parent co-signers. I expect I'll have to help my kids out with a home.

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

That may be a reason why CMHC just doesn't "get it" when the average person says that housing is not affordable.

I don't know how anyone can say that housing is not affordable. Many examples, here's the first one I pulled up.

870 feet for 129k, beautiful place, central location, waaaaaaaay cheaper than renting
http://www.realtor.ca/propertyDetails.aspx?PropertyId=14987932

Just Jack said...

That's right Totoro, both you and I agree that housing in Victoria is very expensive but according to CMHC our housing is affordable.

The question then arises affordable to whom?

I suspect CMHC is saying that housing is affordable to those that have made an application for a CMHC insured mortgage. But that would not include those that can't meet minimum lending standards to put an application into CMHC.

Or to put it another way. Given the way the data is collected could housing ever be unaffordable by CMHC standards?

And in my opinion, that's why we see this polarization between CMHC and say the IMF of what is and what is not "affordable".

Just Jack said...

That's an unsold listing on McKenzie. That has been listed now for 45 days.

If housing were affordable would it not be sold?

I don't know if this is or is not a listing of a property under foreclosure. Hypothetically if it were, then it is a good example of why you should be careful not to rely on listings. In order to get an offer, the law firm will reduce the asking price until it gets a bid to present in court. That means the asking price is likely to be dropped to below market value to encourage a Dutch Auction.

You can call that agent and say I'll buy it at full price. That doesn't mean you are going to get the condo at that price. The offer still has to be accepted by the bank and then has to go to court in 30 days. That means on the court date someone else may offer 150K and the judge takes that offer.

The listing agent must also tell anyone considering buying the condo, the amount of your bid. There is some question if the listing has to be amended to show the offer or not.

SJ said...

Vancouver's a different story because of immigration, but immigrants are typically smart with their money and will eventually realise they can live in Victoria for half price.
This also explains why Vancouver prices are higher than say Seattle.
New immigrants account for 70 per cent of the increase in Canada's population. With half of the new immigrants between the ages of 25 and 44, they represent the country's economic engine, the age demographic having the highest employment levels and the most likely to start families, the report says.
The number of Canadians aged 20-44 rose by 1.1 per cent in 2013, the fastest pace in more than two decades and almost double the Organisation of Economic Co-operation and Development's growth rate. Over the past decade, the number of Canadians in this age group has risen 75 per cent faster than in the U.S., the report notes.

http://www.newswire.ca/en/story/1448965/demographic-foundations-of-canada-s-housing-market-better-than-advertised-cibc-world-markets

Just Jack said...

Here is a chart of the number of condo sales in the core by year

Year Sales #
2004 1792
2005 1934
2006 1739
2007 1945
2008 1390
2009 1669
2010 1383
2011 1306
2012 1197
2013 1156
2014 1118

Would this show condos are getting more or less affordable?

I don't know.

Intuitively, I would think that low sale volumes should be a precursor to a deep price correction but low interest rates, easy credit approval and the ability to dip into the line of credit so that you don't have to sell has been a stabilizing force in condo prices.

Just Jack said...

Being smart in your field of study does not necessarily translate into being smart in what you purchase.

Smart people declare bankruptcy too.

Excuse me as i go pour myself another cup of Kopi Luwak

SJ said...

It means we're past the bottom for the same reason we were near the start of the millenium. An investor can buy the 120 unit and make a good return or a renter can buy it and live cheaper than they currently are. Simple math really.

SJ said...

Victoria's rental vacancy rates are now in a tightening cycle, another clue.

Just Jack said...

I take it you are looking at the vacancy rate for purpose built apartments as per CMHC.

Is the vacancy rate decreasing because more people are moving here to work or is it decreasing because more people can't find work and now need more economical housing?

This vacancy rate represents the lowest rung of rentals. Buildings such as 1970 built apartment blocks with 50 suites in each. The vacancy rate does not include condos which have become the "poormans/investors" apartment blocks.

Just Jack said...

Investors don't make up enough of the market to lead prices in single family markets and only a bit better in the condo market. Homes bought to be owner occupied dominate the marketplace. The investor has to match the price of a home occupier - not the other way around.

Investors just don't buy waterfront or acreage for the rental income. Home owners pay premium prices for these properties. The rental market does influence some of the marginal markets but has little effect on the majority of the homes for sale.

The rental market and the residential market are two markets that have a minor cross over in a small segment.

It's like the sleeping Mouse and Elephant. When the Mouse rolls over the Elephant doesn't feel anything. But when the Elephant rolls over...

SJ said...

Investors don't make up enough of the market

Renters sure do. This city is chock-full of renters. Which is why I said “a renter can buy it and live cheaper than they currently are. Simple math really.” Much cheaper, when you factor in a 5 year mortgage rate today at 2.05%.
http://business.financialpost.com/2014/11/28/black-friday-mortgage-specials-see-rates-dip-close-to-historic-lows/

dasmo said...

^ wow a five year fixed @ 2.59%

Just Jack said...

Sorry SJ, I was trying to say that investors don't have much of an effect on prices in the housing market. People buying for home occupation dominate the marketplace and drive up the prices. Investors have to match the price unless it's a real crapper of a place that a home owner wouldn't live in.

Another reason why sale volumes may be so low is that we haven't had the big appreciation in prices for the last few years. Those renters that bought in the last several years just haven't had the appreciation as those did a decade ago to move up the property ladder.

But at a median price of $580,000 in the core districts, you are going to need a large down payment. That down payment is most likely from the sale of a previous property or a sizable "gift".

Renters, who didn't have a property to sell, and are now buying into the market would be mostly purchasing condos under $300,000. That's about 23% of the marketplace or 875 mostly condos over the last year in just the core. So I WOULD say that renters buying for home occupation do have an effect but not investors.

Just Jack said...

Interesting article you posted about rates by J.J. Hunsecker

- I mean Garry Marr.

SJ said...

I WOULD say we are on the same page for once. The renter who buys that 120k condo above will soon have banked the equity to move up the ladder. Their monthly mortgage payment on a 120k mortgage @2.5% is $473 with around half of that going back into their pocket as principle payback.

SJ said...

"I don't think housing in Victoria is affordable for someone just starting out."

Give your head a shake!!!

Leo S said...

Their monthly mortgage payment on a 120k mortgage @2.5% is $473 with around half of that going back into their pocket as principle payback.

Plus condo fees... Plus risk of special assessments in an old building. That's basically the same as rent then with increased risk and decreased freedom to move. Plus transaction costs when you sell it spread over the few short years you will likely want to stay there.
Not saying it's a bad buy, but I don't see it as a no brainer.

Bitterbear said...

Thank you all for your commentary over the last six years that I have been following this blog. It has been instructive and insightful for the most part and otherwise entertaining.

I am bowing out of the housing market in Victoria. It is just too expensive to have it all and I would far rather put my money into educating myself and my kids, travelling and living my life.

Best of luck to you all!

Just Jack said...

You're counting your chickens before they're hatched saying the mortgage paydown is in your pocket.

You'll only see that paydown when you sell. And that would be the present value of receiving $120,000 25 years from now. That might only be $35,000 in today's dollars.

Of course this assumes that the property will be of equal or greater value in 25 years. That might not be such a sure thing anymore.

In fact the condo you're referencing sold for $135,000 in 2005.

They may not be making anymore land. But they can't seem to stop building condos. Every new condo tower built means the older condos lose value.

.

Just Jack said...

When you put too much value in things that's when you lose out on what is important in life.

Who gives a shit about owning a house.

Illegitimi non carborundum


Good luck BitterBear

https://www.youtube.com/watch?v=x83pyzLZn3c&list=PLLIBZCT3_1nPU9B30WRuEWraJ66eKy1iw

nan said...

As long as there isn't any abnormal deferred maintenance and the strata is around $200/ month (which seems reasonable), it makes sense to buy that place if rent on a similar place would be more than $500 (which it probably would). The higher the rent, the more sense it makes to buy. This assumes a 5 year holding period factoring in recurring & disposal costs, stock market opportunity costs, likely house price increase etc, etc, etc. That place seems like it could be a decent deal/ investment at face value.

Of course if strata is outsized or there's a 40k fee coming down the pipe, all bets are off.

DavidL said...

@BitterBear
I am bowing out of the housing market in Victoria. It is just too expensive to have it all and I would far rather put my money into educating myself and my kids, travelling and living my life.

Education, kids, travel and living life to its fullest are much more important than owning a house. Best of luck to you ...

DavidL said...

Given a choice, would you really want to live in a 40-year old apartment next to McKenzie Ave. for the next 25 years? Even if purchased as an "investment", the best case scenario would be to break even after five years of mortgage payments + condo fees + property taxes + commission to real estate agent + legal fees.

DavidL said...

Oil prices are rapidly dropping, inflation is rising, and US bond rates will be going up much sooner than expected. Fixed term mortgage rates (determined by the bond market) will be climbing.

It seems obvious to me that prices will be dropping accordingly. Consider a $400K mortgage over 20 years at 3% is $2215/month.

What kind of mortgage can you get for $2200/month for 20 years?
3% - $400,000
4% - $364,000
5% - $335,000
6% - $309,000
7% - $286,000
It all comes down to how much a homeowner can afford each month.

SJ said...

Oil prices are rapidly dropping, inflation is rising, and US bond rates will be going up

Wouldn't oil falling cause inflation and rates to fall? I just checked and 5-year rates have fallen about 10% in the last couple weeks as oil has been falling.
I think there's more chance of getting a 1% 5-yr mortgage rate before 3%. You can get 2% today.

SJ said...

You'll only see that paydown when you sell. And that would be the present value of receiving $120,000 25 years from now. That might only be $35,000 in today's dollars.

Oh dear Jack. Prices in Victoria have averaged 4% per year above inflation since 1960. That would make the $120,000 (1.04^25 x 120000) around $320,000 in today's dollars once you're mortgage-free in year 2039. Or around $580,000 in 2039 dollars assuming 2.5% inflation (1.065^25 x 120000). Tax free of course too.
For all the reasons we discuss here, I see no reason the condo above wouldn't perform as well or better than a house for the next 25 years - aging boomers, immigrants, living single trend, millenials, incoming retirees, downsizers.

Just Jack said...

I didn't realize that house prices followed inflation.

Maybe someone should have told them that for the last half dozen years. Then that condo bought in 2005 for $135,000 would be worth....

I guess it really doesn't work that way. Our local economy could be in tailspin and the inflation rate at %5. That doesn't mean condos are going up in price.

And we'll keep building more condos and more condos and more condos. Because people don't want the older ones - they want new. No big surprises in maintenance or repairs.

SJ said...

I didn't realize that house prices followed inflation.

Not only do they follow inflation, they have beat it by an average of 4% per year since recorded history :)
I believe this is Leo's graph of Victoria since 1960. 2014 is like 1987 and 2001 all over again. Don’t miss the boat again Jack.
http://i.imgur.com/E8l7q.png

Just Jack said...

Here are the last dozen or so years of assessment for that condo listed for 129K. I don't see a 4 percent per year increase. Do you?

Year Assessed
2013 $169,600
2012 $173,900
2011 $186,200
2010 $197,200
2009 $184,000
2008 $184,200
2007 $166,700
2006 $137,300
2005 $104,200
2004 $86,800
2003 $73,900
2002 $67,200
2001 $67,200

Many things may be correlated with inflation. Like men's waist lines. Both increase with time. But to infer inflation causes house prices or waist lines to increase may be less than accurate.

Over the long term house prices should correlate to inflation but so will most things. But what is meant by long term? Usually it means some time in the future when both do correlate. However in between then and now prices vacillate substantially.

Tren said...

mark

dasmo said...

^^ No, I see an 8% per year increase...

totoro victoria said...

I wouldn't bet on the condo increasing 4% per year unless you own it for a long enough period of time.

Even then it is a bit of a gamble with an older condo in an undesirable area that:

1. has no rentals permitted
2. no pets permitted
3. $300 a month plus strata fees (pool & hot tub)

There are reasons this condo has fallen in price.

As for being cheaper than rent, the rent for a one bed one bath in this area is $750.

The mortgage you have indicated is $475 plus $300 strata plus approx. $60 a month tax (guess). You are at $835 a month provided interest rates don't rise.

You are subtracting the principal pay down which is say, $230 a month, so you get to $635.

Of course you have to add in the lost opportunity costs of your down payment and transaction costs too - but let's just call it $200 a month to the positive for buying.

That is all contingent on experiencing enough appreciation to offset the costs of purchase and eventual sale and no special assessments.

dasmo said...

^ true Totoro you could get caught in a valley. JJ's example was 8% over 12 years....

Just Jack said...

What is the economic rent of a condominium that you are prohibited from renting?

Obviously, you're invoking a hypothetical assumption that the property can be rented. But that doesn't make your assumption valid. To be a valid assumption it has to be likely to occur.

If you decide to "flip the bird" to the strata council and rent the suite then you will have to account for penalties and legal action taken by the strata council.

Just Jack said...

It's an interesting conclusion that property values follow the rate of inflation. But as you can see it is a lousy indicator of what a property would be worth in any specific year to come.

It is used in Discounted Cash Flow Analysis for some commercial properties. But that future value must also be discounted to today's dollars.

So you can assume 4% above inflation only if you reasonably demonstrate that is likely to occur and then you have to take that future value and discount it by a reasonably likely rate of inflation over the next 25 years to today's dollar.

And it isn't just because what happened in the past - then it must happen the same in the future. Of course the farther into the future you forecast the more likely will be the outcome.

The likelihood of property values being higher in 100 years is almost a certainty. And in this case if you went back to the year 2005 and said in 10 years this condo, now listed at $129 would be worth a lot more than its original purchase at $135K your analysis would be right off the mark.

Because your assumption that the past will match the future was unlikely to occur.

So in the short term any analysis is likely to be inaccurate and in the long term we will all be dead.

dasmo said...

^ agree....

S-J said...


Just Jack: "And we'll keep building more condos and more condos and more condos. Because people don't want the older ones - they want new. No big surprises in maintenance or repairs."

You should be assured of that when buying a new or newer building, but how about the leaky condo crisis? I suspect the people who bought into those new condos felt they had a place with no big surprises coming either.

You have to wonder about the standard of new building today, especially when there is so much of it going on. Are you guaranteed no repairs/maintenance just because it is new? Look at the glass balconies crashing off new buildings in Toronto recently. What other problems could be coming down the pipeline?


totoro victoria said...

Sorry - just realized I was incorrect on the math.

You are only net $115 a month ahead by buying without factoring transaction costs, interest rate changes, lost opportunity costs, appreciation/depreciation.

SJ said...

Jack, math is hard :)

Totoro, not prohibited, some rentals are allowed, not that it mattered to our discussion. Heat's included in fee. I calc $220 better than renting, opportunity incl. Almost no chance of a leaky condo special a$$ as before the code change of the 80s.
Ah, I forgot you're the one who owns houses. It must be hard for you to wrap your head around a 120k condo when you own houses for 5X. I get it now, tough to be objective towards condos when trying to justify your house values. Makes sense.

Just Jack said...

Special Assessments are not just for leaky condos.

Roofs, windows, boilers, etc.

Leo S said...

Not only do they follow inflation, they have beat it by an average of 4% per year since recorded history :)

You realize that you are comparing SFH's to condos right? Condos always do worse.

mooselessness said...

Has anyone seen this before? We received a hand-written letter from someone in Nanaimo, addressed to "Owner," offering to buy our Victoria house (which we actually rent). He seems to be associated with a company specializing in distressed properties. I would have dismissed it as common junk mail, except for the handwritten part. Does someone handwrite oodles of these letters and just mail them out to...?

Marko said...

Here is a chart of the number of condo sales in the core by year

Year Sales #
2004 1792
2005 1934
2006 1739
2007 1945
2008 1390
2009 1669
2010 1383
2011 1306
2012 1197
2013 1156
2014 1118


Not the most accurate chart as there have been a lot of bigger pre-sale projects in recent years. For example, at the Bayview Promontory alone there have been 163 sales and only 43 were MLS® reported.

Marko said...

Totoro, not prohibited, some rentals are allowed, not that it mattered to our discussion. Heat's included in fee. I calc $220 better than renting, opportunity incl. Almost no chance of a leaky condo special a$$ as before the code change of the 80s.

The envelope still wears out even on well-built buildings from 1980 prior.

Don't fall for the age/code trap. Any building could face large special assessments.

Part of the reason this building is so cheap is the four key bylaws buyers look at are all restricted. Rental restrictions, 19+ only, no cats or dogs, no BBQ.

From my experience buildings with the "quadruple restriction" as I like to call it have taken the market correction the hardest.

There is a reason why developers for the last 10 plus years have been almost exclusively pushing out bylaws for their buildings with very few restrictions.

I find buyers who intend to live in their condo unit are still taking a close eye at rental restrictions. People end up in job transfers, maybe they want to start a family, etc. If you have a rental restriction you are forced to sell; whereas, if you can rent it out you can sell it when you want on your terms.

Leo S said...

For example, at the Bayview Promontory alone there have been 163 sales and only 43 were MLS® reported.

Wouldn't that have been the case throughout the 2000s? Lots of construction in that period as well and I assume just as many off-MLS sales.

Leo S said...

I calc $220 better than renting, opportunity incl. Almost no chance of a leaky condo special a$$ as before the code change of the 80s.

Good joke. Calculating out 25 years of ownership of that condo is nonsense anyway. Most people will stay in a small condo like that for 3-5 years. So spread out $3000 in realtor fees that's another $60/month. If you're single you've just ruined your first time home owner status as well when you want to upgrade to a house.

SJ said...

Don't fall for the age/code trap. Any building could face large special assessments.

Sure, but a pre '82 is far less risky than post '82. The dorky gov of the day brought it the airtight codes partly due to their forecasts of for energy costs….right as energy costs were plummeting, go figure. I also like the less-efficient bigger windows pre 80s, esp if the units have views.

SJ said...

Most people will stay in a small condo like that for 3-5 years.

I know someone who caretakes condo buildings in Vic and he'll tell you there are oodles of people in the same units since he started over 20 years ago. Maybe they're often older with secure gov jobs, I don't know. If you're young and only planning 3 years, keep renting.

SJ said...

And yes his buldings have lots of 1 bed units with long-term owners. I will admit they may be in nicer locations conducive to staying.

You realize that you are comparing SFH's to condos right?

Yes sir, that's why I added...
“For all the reasons we discuss here, I see no reason the condo above wouldn't perform as well or better than a house for the next 25 years - aging boomers, immigrants, living single trend, millenials, incoming retirees, downsizers.”

Only time will tell if condos truly keep up or outdo houses over the next 25 years. It would be nice to know the difference versus houses for the last 25 years.
Damn the house owners are really jumping down my throat today. Was it something I said :)

totoro victoria said...

Condos don't appreciate as fast as houses simply because of the reduced land component. It is the land that appreciates and the building that depreciates - yep, houses have loads more land/building.

I don't expect that will change.

That said, if you are happy with this condo and plan to stay put no reason not to buy - it is affordable.

totoro victoria said...
This comment has been removed by the author.
totoro victoria said...

And ability to rent out really does matter.

It increases price, slows drops, and makes it so you have some flexibility if your situation changes so you can hold the property and not incur losses by having to sell.

I do understand wanting to live with other owners though.

Marko said...

Wouldn't that have been the case throughout the 2000s? Lots of construction in that period as well and I assume just as many off-MLS sales.

Would be true for mid 2000s, but for almost a couple of years (2009-2010) the only building pre-selling was the 834 on Johnson and then after the 834 the pre-sale market picked up.

Out of the last 5 years 2010 is showing as the best in terms of condo sales, but my feeling is if you adjusted for pre-sales it would be the worst, or close to.

Marko said...

Sure, but a pre '82 is far less risky than post '82.

It is never that simple. Do you buy a pre '82 building that hasn't had a full on exterior remediation or do you buy a 92 building that was fully re-mediated in 2008?

Marko said...

Only time will tell if condos truly keep up or outdo houses over the next 25 years. It would be nice to know the difference versus houses for the last 25 years.

The difference over the last 25 years is massive.

The condo at 1009 Mckenzie went for $90,000 in 1996. Now it is listed for $129,900.

In 1996 the average home in the Oaklands area went for $197,000. This year the average home is going for $520,000 in the same area.

I would say homes have done slightly better.

I own several condos. They are a horrible appreciation play in my opinion. However, they do have other their advantages for the purpose I use them for.

Marko said...

Buying a condo as a stepping stone into the market only works if you plan on increasing your income to finance your single family home in the future, while keeping the condo as a rental and hopefully you bought something that is rentable and cash flow positive.

If you are buying a condo that you'll have to sell to buy a house for the most part you are probably better off renting until you can afford the house. The days of the property ladder driven by market appreciation are gone for the time being.

Leo S is bang on with realtor fees, loss of PTT exemption, etc.,

Leo S said...

I know someone who caretakes condo buildings in Vic and he'll tell you there are oodles of people in the same units since he started over 20 years ago.

Fair enough. If you're staying for a long time that condo would be a good option.

Curly Fry said...

Interested in how many people actually will indeed stay in a condo.

My spouse & I have been considering buying the 2 bedroom condo (from owner) that we have rented x a few years - corner unit, top floor, never hear neighbours, feels like a house.

If buying, it would be under the premise:
-A condo is most definitely not a good investment. But is a good place to live.
-Being able to do something that is not a good investment comes down to if you can financially afford to do such things (ie. enough left for proper savings)
-I am a big fan of the Mister Money Mustache mentality (thanks Totoro for reminding me about that site!) It seems logical that a condo can help maintain lower spending (no physical room to buy things you won't actually use) but then you also spend money on silly strata things.
-Realize that renting is cheapest but value some stability.
-Condo fees are a bad deal. But I do irrationally enjoy a lot of things about a condo - for some reason I really like the security of it (though I realize this is not South Africa). Really like the open-concept (had a galley kitchen once & barely went in there to make toast) & large windows (hard to find in houses <$500k). Hydro is (only slightly cheaper?) average $55. Able to walk everywhere.
-Willing to live here forever. Partner & I have no desire for grass or kids. We have a wall bed for guests so even a 3rd room seems useless (ie. not worth the price -unless one is reselling then obviously that is a plus)

I'm assuming the biggest flaw is assuming that one doesn't have to care what resell price is (which is only true if I sell when I am 90 & have enough funds that it doesn't matter.)

If at age 60, I decide I want to live elsewhere, I realize my whole rationalization goes out the window. Seems like it comes down to math math math- Except the math of life is unpredictable (maybe later I will like grass?) Or develop a chronic disability which limits future savings abilities.

LeoM said...

Interesting conversation going on here about condos.

I'm just pondering what will happen to the SFH market in suburbia when more and more people change their mentality from "My house is my home and my investment" to "My new high quality condo is my lifestyle and I don't care if it appreciates"

We can already see the devaluation effect that the new quality condos are having on the old wood frame condos. But what about SFH in suburbia?

It seems to me that the new high quality concrete and steel condo buildings are changing everything we thought we knew about real estate.

Leo S said...

the new high quality concrete and steel condo buildings

That remains to be seen.

dasmo said...

I've watched the Era be built from the hole up. It's a very high quality concrete build... Suburbia is out. This is why I have bought SFH's in the core.

Leo S said...

Have we ever had a condo building fall down? The concrete is just as high quality as the wood frame. What fails is always something else.

Leo S said...

And if determining whether a building will have any flaws was as easy as watching it get built we'd never have any problems with anything :)

Marko said...

I've watched the Era be built from the hole up. It's a very high quality concrete build

Good to hear as I picked up a unit in there :)

Marko said...

As mentioned above it is not just about the numbers. When I complete on the Era in a few months I'll have three condos (834, Promontory, ERA) that I paid a combined $610k for.

A $610k single family home investment property would definitely be a much better appreciation play and may even provide for a little more return (no strata fees as expense). But then I would have to worry about things crapping out as anything in the core will be an older house, regular maintenance itself is a pain, neighbors complaining that I am breaking a bylaw renting a home up an down, etc. (in most municipalities to rent a suite owner should be living upstairs).

For my career/lifestyle new condos just make so much more sense for the purposes of rental properties. If I was semi-retired or had a 9 to 5 job I would have probably go the route of the single family home for investment.

totoro victoria said...

People with kids/pets usually don't prefer condos and this is a large market segment.

I think the SFH will continue to have strong demand which will keep prices stable/appreciating over time at a higher rate than condos due to the land component.

There is definitely a market for condos among those that cannot afford SFHs, do not care about living in one, or are downsizing as their kids leave home. I just don't see it growing dramatically unless appreciation prices even more folks out of the market.

dasmo said...

It's not about watching it get built, it's watch how it gets built...

LeoM said...

Leo S said...
Have we ever had a condo building fall down? The concrete is just as high quality as the wood frame. What fails is always something else.
--------------
Maybe you're right... but probably not if we get that big quake that is overdue. The wood frame 4-story buildings and old brick buildings will suffer major damage but most concrete and steel buildings will survive intact, just like they do in Tokyo and Taiwan, with just a few broken windows, unless they are at the epicenter or at a shear zone. So say the engineers...

SJ said...

The difference over the last 25 years is massive.

Yes, it was 'boomer' obvious the last 25 years would favour houses. Next 25 is not so obvious as the boomer downsize approaches along with other counter trends.
Also, condos tend to swing more wildly than houses during the cycle. For instance that condo for 90k in '96 would have fallen to nearly 60k by 2001'ish (similar happened this cycle especially on older condos). If it was timed right that's roughly 10% per year appreciation to 2010, same as say Oakland houses. Young realtors (hint, hint) may not have as much experience in their timing, which could potentially possibly probably maybe taint their view of condos :) You may be surprised in 2039 Marko that your 3 condos returned the same %/yr as your house. Maybe more due to your pre-con deals. Time will tell.

SJ said...

LeoM, pretty sure that wood-frame are better at withstanding earthquakes due to higher ductility than rigid masonry.

Leo S said...


It's not about watching it get built, it's watch how it gets built...


Just like lots of people thought the leaky condos were an improvement as they were being built. Until they weren't.
Not saying there's a flaw in the new condos, but claiming you can deduce quality by inspection certainly doesnt hold up.

LeoM said...

SJ said...
pretty sure that wood-frame are better at withstanding earthquakes due to higher ductility than rigid masonry.
--------------
"pretty sure" you're wrong in the context of this ongoing discussion about older wood frame condos.

In January 2009, building code changes were implemented to address the inadequacies in wood frame condo buildings; but immediately after these new changes were implemented the Association of Professional Engineers and Geoscientists of BC (APEGBC) concluded at the end of March 2009 that, in addition to the code change enacted in January, more was needed to ensure a reasonable level of assurance of seismic safety risk.

So on April 3, 2009 the BC Government admitted that its seismic building code for typical multi-story wood frame condo buildings were still inadequate after the January changes, and they immediately upgraded the building code requirements for seismic reinforcing of new wood frame buildings.

One of the main problems prior to 2009 in wood frame buildings was the lack of engineered shear walls which are designed to prevent a building from twisting and collapsing.

Old buildings are 'grandfathered' and need not be upgraded with engineered shear walls unless major renovations are undertaken. So these old 4 story wood frame buildings will suffer major twisting damage in the big quake. Buildings that twist in a quake or during high winds often collapse.

Every concrete wall in a concrete and steel building is, in effect, a shear wall with 100x the strength of a wood wall.

patriotz said...

Next 25 is not so obvious as the boomer downsize approaches along with other counter trends.

What is obvious is that the supply of new condos in desirable locations is essentially unlimited.

Also pretty obvious is that if the price of a condo is not a lot less than the price of your house there's not much incentive to move.

SJ said...

Baaah... I'll take real quake examples of wood-frame standing up over concrete over a bunch of dorky APE engineers trying to 'retrofit' more money in their pockets. Engineers are almost as bad as lawyers.

SJ said...

What is obvious is that the supply of new condos in desirable locations is essentially unlimited.

Ummm, I'm gonna go with no. Desirable locations are actually dwindling fast. Haven't you seen the new movie Interstellar? Even Uranus has no desirable locations.

LeoM said...

SJ said...
What is obvious is that the supply of new condos in desirable locations is essentially unlimited.

Ummm, I'm gonna go with no.
-------------------
Wrong again SJ...patriotz is right that the supply of new condos in desirable locations is essentially unlimited

The old adage that “House prices will keep rising because they aren’t making land any more” is meaningless if the migration to condos becomes a major trend. The same land that allowed four house lots (one acre), will now accommodate 177 condo units; or one city block of land near the downtown core could accommodate about 400 to 800 condo units.

Simple math... the number of potential new concrete and steel condos in the downtown core's most desirable areas is practically unlimited.

SJ said...

I was trying to point out that the planet is quickly losing desirable places to industrialization, pollution, urbanization, climate change....

Your practically unlimited limiting factor is simple economics. Believe it or not condos too are tied to land. Marko's 200k Era condo will rise as more condos are built for the same reason the next phase of houses further down a street will rise as more are built. The next developer to buy a same-size parcel along that block of Yates may have to pay twice as much, 20M rather than 10M.

SJ said...

Regarding the wood-frames, the only things an engineer told me to watch out for here is tuck-under parking creating a weaker ground floor and slopes and soil types. You have to be especially careful in Fairfield as you can see in this map.

http://www.empr.gov.bc.ca/Mining/Geoscience/PublicationsCatalogue/Maps/GeoscienceMaps/Documents/composite_map.pdf

SJ said...

Yates, Humbolt, wherever the heck Era is??

patriotz said...

I was trying to point out that the planet is quickly losing desirable places to industrialization, pollution, urbanization, climate change....

By desirable places I meant the parts of the city which are the most convenient locations, as opposed to the burbs - re the house vs condo discussion.

As for what you mean by desirable places, people have always moved where economic opportunities dictate and will continue to do so. The English countryside was a lot nicer than the cities in the 19th century (the difference being much greater than today) but that didn't stop people from moving.

SJ said...

people have always moved where economic opportunities dictate

You're only considering an economic angle. Once people have seized those economic opportunities they're able to live where they desire. Technology also increasingly allows people live where they desire while still realising their opportunities. That wasn't much of an option in the 19th century.
I don't think you could argue Victoria is one of the more desirable cities. A hefty percent of this city are millionaires many times over, having the financial means to live anywhere in the world.

Also pretty obvious is that if the price of a condo is not a lot less than the price of your house there's not much incentive to move.

Not quite that simple. Numerous people continue to move into much more expensive Vic condos than the houses they're leaving behind.

LeoM said...


Marko – is this true from your experience?
SJ said “Numerous people continue to move into much more expensive Vic condos than the houses they're leaving behind.”
--------------
I realize that the SJ’s phrase “numerous people continue to move” is probably conjecture, but the implication is clear that he thinks a statistically significant number of people have been selling the family house for say $500k and buying an urban core condo for say $600+k

Has there really been a statistically significant and continuous stream of people selling their house and then moving into “much more expensive” condos?

I’m sure a few people upgrade to more expensive digs when they migrate to an urban core condo, but my sense is that it’s just a statistically insignificant ‘few’ who upgrade after selling the family house. I would have guessed that most people who sell their house and move to a condo, spend less on the condo than the sale price of their house.

What’s your sense Marko from what you see as a very active Realtor in Victoria?

dasmo said...

"Just like lots of people thought the leaky condos were an improvement as they were being built."

And many knew they were poorly built... Inspection is totally valid. Seeing the foundation as it's built. Seeing how they have waterproofed the entire concrete deck before any pavers are put down. They did the steps in two stages. A foundation ramp, waterproofed then cast the steps. The wall fountain is totally isolated from the wall with a rain screen... Etc etc. All details of proper build quality that you can't see when it's a finished product. You would however know it was built wrong when the parkade roof started leaking...

SJ said...

LeoM, take a look up through your windshield some night driving around downtown Vic and estimate how many thousands of condos have sold for 500k to million-plus. Heck I have an aunt and uncle that bought one for more than they sold their house back east (only about a 150k more, but still more). I don't think it's a stretch that “numerous” Victorians and elsewherians have done similar. I do however agree with you that “more” would typically pay less than what their house sold for. I must add though that I'm not happy about agreeing with you :)

Leo S said...

And many knew they were poorly built

Just like many are raising concerns over the glass-heavy modern designs.

Toronto glass balconies shattering. Not possible to predict or determine if you watched one get built and not even clear exactly why it happened, whether due to faulty materials or inadequate standards.

Seals on the large expanses of glass in modern designs. Could last 30 years or could last 10. Can't tell by looking at it get built.

Chinese drywall looks like drywall going in...

You could go on forever. Yeah it's not going to fall down in an earthquake and probably won't leak (one would hope), but history is littered with new building techniques that seem perfectly fine but end up causing problems.

LeoM said...

It's ok SJ, that's what makes this blog worthwhile, everyone shares their opinions and knowledge, the opinions get debated, and we all go away a bit wiser, even though we sometimes are left wondering if someone is sharing opinion or knowledge. And we all know a couple bloggers who like to spread a bit of bovine fertilizer just for fun.

dasmo said...

The Era, I might add, is a windows in walls style build not window walls ;-P

Marko said...

Mon Dec 1, 2014 8:20am:

Nov Nov
2014 2013
Net Unconditional Sales: 465 412
New Listings: 682 698
Active Listings: 3,631 4,017

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

Just Jack said...

Here are the number of condos sold by price group in Victoria City only in 2014.


Sales, Number of
Sold Price 2014
$0 - 200 ( 92)
$200 - 300 (310)
$300 - 400 (169)
$400 - 500 ( 71)
$500 - 600 ( 44)
$600 - 700 ( 29)
$700 - 800 ( 15)
$800 - 900 ( 2)
$900 - 1,000 ( 4)
$1,000 - 1,250 ( 3)
$1,250 - 1,500 ( 0)
$1,500+ ( 5)

As you can see, the high end million dollar condo market is quite small.

Personally, if I had a million to spare to buy a condo. I'd buy in South Surrey/White Rock before Victoria.

Just Jack said...

Most of the markets for condos and houses have a right skewed distribution. That's "normal" for real estate. If there was an influence of high end sales then it would likely show up in the distribution of sales.

And it does!

Oak Bay has the only Bi-modal or double peak distribution in house sales. The second peak fluctuates considerably from year to year.

This year the modes are near $700,000 and $1,250,000.

How that second mode spikes and flat tails has significant effect on the reported median price. Such as in 2009 and 2010 when the difference between the two medians was nearly a hundred grand.

The division between the two distributions is where we would expect it to happen with the CMHC cap on mortgage insurance - right at the million dollar mark.

And I suspect that the second peak is influenced by non Victorian buyers that bring a lot of capital but little brains to the market.

There's the smoking gun for you SJ

Just Jack said...

Will lower Oil be good or bad for Victoria's real estate market?

For the last decade the big ticket homes have been selling mostly to Albertans. Lower Oil may just hurt that Oak Bay market and make the million plus homes drop in price.

Buyers are likely to get more home for their 1.3 million, six months from now.

SJ said...

Condo sales up 21.2% and condo median price up 7.0% since last Nov.
7% price increase is not too shabby.

http://www.vreb.org/pdf/VREBNewsReleaseFull.pdf

Oil fell by over 30% since last Nov.

Marko said...

Condo sales up 21.2% and condo median price up 7.0% since last Nov.
7% price increase is not too shabby.


When you take a look at individual buildings you won't find much reselling at a 7% price increase over last year.

There have been a lot of newer condo sales reported this which has swung the median up.

The re-sale market has been flat give or take.

SJ said...

Says the realtor who wants stable re-sale prices as he believes that will keep the higher sales (commissions) numbers rolling in :)

Leo S said...

Yeah that makes about zero sense

Curly Fry said...

SJ, it appears you really like to antagonize?

(perhaps your use of smiley faces evens it out?)

totoro victoria said...

Agree - zero.

SJ said...

I thought that's essentially what Marko agreed with a week ago when he +1....
I wasn't trying to antagonize. Realtors don't always want rising prices for similar reason they don't want plunging prices. Both can lead to meagre sales (commissions) depending on buyer/seller dynamics. Like he said, the majority don't grasp the concept.

Marko said...
Selling more properties is much better than higher prices with lower sales volume. ie more commissions.

+1....Volume of sales is far more important, but the majority don't grasp the concept.
November 23, 2014 at 6:48 PM

Marko said...

For an individual REALTOR® selling more properties is more important than the selling price (to an extent). What I was trying to articulate last week was I don't have an incentive to pump up a sale price for the pure sake of a marginal increase in commission. Different context.

If you look at the basic metrics for the VREB over the last 20 years there is a direct correlation between higher year over year prices and increased sales volume.

Says the realtor who wants stable re-sale prices as he believes that will keep the higher sales (commissions) numbers rolling in :)

Makes absolutely no sense as flat prices equal lower volumes.

totoro victoria said...

My experience is that sales volumes rise in a hot market where bidding wars occur - not a flat market.

Marko said...

Quick example,

2007 saw condo prices in Victoria jump 11.16% with a total condo sales volume of $756,129,494.

2013 saw condo prices drop 3% with a total condo sales volume of $438,410,917.

Jack and Cate said...

Wonder how "Hungry" the realtors are in Victoria...? According to some writings on this blog everthing is rosy...but I doubt that. Lean Christmas for many and into the new year....

Vancouver Realtors Hunger index @ 62%

Marko said...

This year we'll end with the highest Total Sales $ volume in 5 years and the 4th highest Total Sales $ ever at approximately 3.25 billion.

If REALTORS® are going hungry right now it is really more about individual performance than the market.

SJ said...

Makes absolutely no sense as flat prices equal lower volumes.

??
November houses show flat prices with a 15% increase in sales equalling higher volumes or more combined money in realtor pockets this Nov over last Nov. You have to understand the microeconomics of the current market before determining what effect price will have on sales volume.

SJ said...

This year we'll end with the highest Total Sales $ volume in 5 years and the 4th highest Total Sales $ ever at approximately 3.25 billion.

Again displays how sales $ volumes can rise in a flat market. As houses are 4-5x greater volumes than condos, it's not a stretch to call the entire market essentially flat.
I believe some realtors now realize the price gap between houses and condos has reached such extremes, that my original point was they may try to defuse any talk of rising prices (house or condo), similar to how they do of falling prices, so as to not risk falling sales $ volumes on houses.

totoro victoria said...

It appears to me that increased sales volume in a flat market is likely correlated with decreasing and already very low interest rates rather than to a bunch of realtor wizards using their magic powers of silence and diversion.

SJ said...

Sounds like someone's knickers are in a knot about condos being up 7% while house medians down -1% since last Nov :)

Seth Perry said...

Oak Bay Beach Hotel pushed into receivership

The hotel side of the operation is successful, but a changed real estate market following the recession led to financial troubles, Walker said. There are millions of dollars worth of unsold condominiums and strata-title hotel rooms.

Lenders brought in their own sales and marketing people from Vancouver in June 2013 to try to move units, he said.

“It was a dismal failure. I think we just have to conclude that market conditions have shifted dramatically from when we started this project.”

Guest rooms were sold as strata-title units that owners lease back to the hotel company. Some buyers hold title to their units. Others joined a bond fund that allowed them to move in prior to taking title. About 30 per cent of rooms fall into one of those categories. Fewer than half the condos have been sold. Two condos, priced at $3.5 million each, are unsold.


Full Article

Just Jack said...

That's too bad about the Oak Bay Hotel.

The condo prices were never realistic relative to the local market. Yet there is a small group of buyers for these types of properties. Unfortunately, this market was saturated with product before the Oak Bay condos were ready to sell.

You're almost guaranteed to lose money if you're the first buyer into these projects be it in Oak Bay, downtown or Bear Mountain.

But now there may be an opportunity for some investors. If you are thinking of buying one of these condos, you have to concentrate on the income and not the physical composition of the property. You have to look over the last three years of operating statements, vacancy rates that can be as high as 50% and high costs for strata fees and hotel maintenance. Buy the steak and not the sizzle.

And that's where the initial investors had problems when the Hotel was new. There was no established financial records to rely on. They bought on emotion and hype.

A couple years back, I had a bank manager ask me to explain this to a customer wanting to buy in a different complex. I found that the customer filled in gaps of what the sales person said with what he "wanted" to hear. The sales person just never corrected him in his assumptions. The sales person was NOT a real estate agent but worked for the marketing company. So don't blame this one on real estate agents.

However, I certainly would like to take a look at these Oak Bay condos now.

Leo S said...

they may try to defuse any talk of rising prices (house or condo), similar to how they do of falling prices, so as to not risk falling sales $ volumes on houses.

Realtors don't influence the market

Marko said...

The 4th highest sales volume ever means very little when you put it into perspective, other than realtors are not starving any more than they would have in the last 5 years. Last 5 years have been dead slow. Then 2003/2004/2005 when the market was blistering the average price wasn't high enough for the huge amount of sales to beat out a year like 2014 (low/moderate number of sales, but higher average price than 2003/2004/2005).

I own three condos, why wouldn't I want condo prices to be up? Reality is condo prices adjusted for individual buildings are flat. It just happened that this year we had a lot of new high-end buildings with lots of units completing and selling reasonably well.


Realtors don't influence the market

100% correct. Otherwise markets would just keep going up.

Marko said...

Victoria flat over 7 years while Vancouver up more than 25% and Toronto up more than 45%....are REALTORS® in other market better in talking up prices? Or are in Victoria REALTORS® better at "desfuing" increase prices?

SJ said...

Notice that I said they may try to defuse, I didn't necessarily say they can influence markets. Nevertheless, the masses at times still try to blame realtor associations (ie. David Lereah) for influencing markets.

totoro victoria said...

Yes, it is a shame about the Oak Bay beach hotel. Lovely building and location but too expensive and the condo/hotel does not usually make sense for an investor. Seems like the debt exceeds the assessed value.

SJ said...

I own three condos, why wouldn't I want condo prices to be up? Reality is condo prices adjusted for individual buildings are flat.

I thought I should mention Marko, individual buildings seem to be all over the map since last autumn. The main reason was likely the depreciation report scare. The bldgs that were unfairly hammered past few years have seen significant gains with new transparency. I suppose it's no different than uncertainty for a stock, once transparency returns so typically does its price. There likely was no 'depreciation' fear with your newer builds, therefore no effect.

dasmo said...

I have a pal that owns an 80s condo. They just redid all the windows on the building. Cost him 50k. My Apple stock isn't going to send me a 50k bill...

Marko said...

Monday, December 8, 2014 8:00am

MTD December
2014 2013
Net Unconditional Sales: 112 355
New Listings: 148 437
Active Listings: 3,455 3,554

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

Marko said...

I thought I should mention Marko, individual buildings seem to be all over the map since last autumn. The main reason was likely the depreciation report scare. The bldgs that were unfairly hammered past few years have seen significant gains with new transparency. I suppose it's no different than uncertainty for a stock, once transparency returns so typically does its price. There likely was no 'depreciation' fear with your newer builds, therefore no effect.

Depreciation reports haven't helped older buildings, if anything the transparency has further highlighted concerns to potential buyers.

The reason prices are up on paper is more high-end newer condos sold this year, not because older condos are selling at higher prices.

I encourage you to show some examples of older buildings that have seen a bounce.

Just Jack said...

When I graph downtown condo sales over the last year, it's apparent that there are two different distributions with the modes around $300,000 and $600,000. This certainly agrees with Marko's observation that this year there have been more high end sales affecting the mean.

More so than any other year in the last decade for downtown condos.

Chris said...

Speaking of, does anyone know what 202-1280 Newport went for? Asking was 519 assess around 380. The reason I’m curious is the owner would not counter my offer for their old dated %#*!@. I’m hoping they only got 450. I dislike getting the cold shoulder and not a token counter.

Just Jack said...

Sorry Chris, but you can't go by the Assessed value in this building since there hasn't been a lot of sales in the complex since this suite sold fourteen years ago. In contrast the median price for condos has more than doubled in that same time.

However, the full price offer will likely trigger a re-assessment of the entire complex with higher taxes in the future for everyone.

Marko said...

Speaking of, does anyone know what 202-1280 Newport went for? Asking was 519 assess around 380. The reason I’m curious is the owner would not counter my offer for their old dated %#*!@. I’m hoping they only got 450. I dislike getting the cold shoulder and not a token counter.

The condo sold for full price 14 days on market (including conditional period).

The seller made an excellent business decision not working with your offer as they ended up with full price and a very quick sale.

It always boggles my mind that both buyers and sellers get emotionally caught up buying and selling. I just don't understand why there would be anything to "dislike." If a seller doesn't counter your offer just go buy something else.

You can't force a seller to sell below what they want to sell at (irrelevant of market value) and likewise the buyer can't be forced to pay a number above what they want to pay.

SJ said...

Depreciation reports haven't helped older buildings

If I were to show you the closing cheque in my hand you would probably agree the engineering reports played a part. I'm not saying it was entirely the reports, many factors aligned...incoming oil $ this Spring, falling loonie, blistering US prices (seattle, Portland... all of Calif) diverting buyers attention back here.
Disclosure: I have had held title to 45 properties during my career, right now I have title to 1. That doesn't make me an expert, so none of the above is investment advice :) Happy holidays!

Marko said...

You still haven't provided me with one example of an older condo building where prices are up year over year.

If condo prices are really up 7% year over year it shouldn't be a problem to find at least a few complexes to reflect such.

Should be noted the median hasn't actually done much which further supports that the average price is being driven up by the higher-end sales this year. Median is still lower than it was 8 years ago.

2007 Median - 274,900
2008 - 289,900
2009 - 282,500
2010 - 292,250
2011 - 291,000
2012 - 270,000
2013 - 269,000
2014 - 272,900

Chris said...

Thanks.

Chris said...

“incoming oil $ this spring“

Lumber, not oil, drives the Van Island economy. To demonstrate holding West Fraser Timber in since 2012 has tripled your money. Good ole American demand.

Marko said...

My observation with depreication reports has been along the lines of

"This building will probably need significant work in the future," (before depreciation reports) to "this building will need a ton of work and I also totally didn't think about the new $400,000 elevators in 10 years too."

They've helped buyers make more informed decisions perhaps, but I don't think it has has a positive impact on the average market price of an older condo.

There was a very short period of uncertainty where some buildings had depreciation reports finished and others didn't but for the most part they are now done.

Just Jack said...

Here's an example of a sixth floor, 1996 built condo in a steel and concrete high rise along Yates that sold in May of 2005 at $238,000. And just resold for $248,000.

It's tough out there on older condos as we went from a shortage a decade ago to a glut today.


In contrast around the corner from this high rise is a newer house bought in December 2007 at $502,000 but resold this week at $585,000.

At this point, I don't see prices getting better for condos. Every time another tower is built, the older condos drop a little in price.

If I had bought a condo, as an investment, I'd take a feather pillow and bucket of tar to the next City Hall meeting.





Leo S said...

Haven't looked at the condo construction pace recently but I think older condos will continue to take a beating for a while. Too much new and superior product coming online at all price points

Phil said...

I'm now thinking this financial advisor - not Garth - is going to finally get the timing right. I see a full blown crash by the time his book hits store shelves.

http://www.cbc.ca/news/business/housing-market-a-bubble-set-to-burst-hilliard-macbeth-says-1.2784511

“ MacBeth says, a hard landing means prices could decline by between 40 per cent and 50 per cent, causing an economic recession.’

Phil said...

If foolish enough to buy a house this year your about to lose min 200000, a skybox 100000, and a oil stock, electric car comp or solar corp your about to lose whatever you put in.

dasmo said...

Sweet! Sounds like a buying opportunity coming up! get your cash ready folks!

b84b said...

As someone with cash ready who is looking to buy in the next 12 months, I really hate reading these kinds of articles.

Just Jack said...

A quick look at the turn over rate for houses in the core districts. Or the 7 year itch.

30% of the houses listed for sale in the core have been owned for more than a decade.

And half the homes up for sale today were bought in the last six years.

That sounds about right from what I've heard over the years that people on average move every 6 or 7 years.

Sample was of 100 random house listings in the core districts.

What was a little different was that 4% of the homes were bought just in the last year. 9% in the last 2 years.

2 years seems to be a short time to me. Hardly enough time to unpack. This might suggest an affordability issue. While it is fairly simple to buy a home today, it is a lot more difficult to retain the home with escalating home ownership costs.

Generally, the higher the turn over rate the more unsatisfied are the owners.

Interesting to think that half the people buying a home today will be moving 6 or 7 years from now. And 70% will be moving within the next ten years.

So much for putting down roots in a neighborhood.

Just Jack said...

And we seem to be slightly less satisfied with condo life.

15% of the condos listed today were bought more than a decade ago.

While almost 60% of those listed were purchased less than 5 years ago. And 10 percent were bought under 2 years ago.

Nearly 60% of the condo owners buying today will be wanting to sell in less than 5 years from now. And one in four will want to sell in under 3 years.

Sample size was 101 random listings.

Not a scientific sampling but still interesting.

dasmo said...

I think you would need to look at this in reference to the total stock and the length of ownership of unsold units. If the trend is to own for a lot longer, it won't show up in your "report" since the units aren't for sale...

Just Jack said...

They are a random selection of properties currently up for sale.

Bigger data would be nice, but it can't get much bigger as there are only 400 house listings and a little over 500 condos for sale in the core today.

Because of this limitation, I think the data size is adequate.

What it does show is that those that buy and hold a home for more than 10 years is less than one out of three for homes and one out of five for condos. Most people won't own their home for 25 years. Maybe then we shouldn't being using 25 years in some of the calculations.

dasmo said...

"What it does show is that those that buy and hold a home for more than 10 years is less than one out of three for homes and one out of five for condos."
No it doesn't. It shows that less than one out of three for homes FOR SALE right now have been held for more than 10 years.
What if 50% of the home owners out there hold their properties for 30 years or more. They don't even show up in your report.

Just Jack said...

I suppose that could happen.

Your assumption being that the sample is not a true representation of all properties.

That can happen. This could be a "one of" It's possible to flip a coin ten times and get ten heads in a row.

You would have to repeat this analysis several times possible at different times through out the year and with more data. Like I said this is a back of the envelope look at the turn over rate in the city.

And I suppose that how long people hold a property before they list it again for sale will not always be the same in the future.

Leo S said...

What if 50% of the home owners out there hold their properties for 30 years or more. They don't even show up in your report.

The ones that sold will. But yes, the percentages are not the same. Looking at home sellers will tell you how long home sellers stay in their homes, not home owners.
To get home owners, you need to sample home owners.

dasmo said...

Exactly Leo...

Nathan Stretch said...

@dasmo: Amazon's P/E is a pretty useless metric. They have large and growing cashflows, but have a policy of reinvesting everything in the company, effectively keeping profits (aka earnings) near zero. So P/E is bound to be an astronomical number. They could stop investing in new warehouses and such, and would suddenly be very profitable, but they have decided that these investments will result in a greater payoff in the future. (Whether that's a correct decision is of course debatable, but the point is that it's a decision; they are in no way limited by revenue or cashflow.)

It's kind of like looking at a startup company. Just because a startup doesn't (yet) have positive earnings (and therefore it technically has a negative P/E, which is basically meaningless) doesn't necessarily mean it doesn't have value.

Anyway, I don't own Amazon stock (or any individual stock, except as part of broad market index funds), but I figured that was worth pointing out.

totoro victoria said...

"While it is fairly simple to buy a home today, it is a lot more difficult to retain the home with escalating home ownership costs."

In my experience the reverse is true.

It is very difficult to save to buy a home. There is a big barrier to entry.

Once purchased, the costs of home ownership become more affordable over time as incomes rise and principal is paid down.

DavidL said...

CBC News: Stephen Poloz says debt and overvalued house prices remain biggest risk to economy
The model includes data from 40 housing cycles in the past, looking at conditions before and after housing corrections in Canada and abroad. Based on what that model is suggesting, the bank reckons house prices today could be as much as 30 per cent overvalued today.

Just Jack said...

But is that the same question? Since you cannot canvass home owners as they are still in their homes and are not currently selling. You'd be calling home owners and asking them how long they have owned their home - so far? That's not what I was trying to answer.

Home owners are not part of the residential marketplace unless they are actively selling.

The question was how long are people holding their properties before selling?

The follow up question then might become can you extrapolate that sample of active sellers to all home owners?

Maybe - maybe not?

The number of active listings only makes up 2, 3 or 4 percent of the total inventory of all housing. The marketplace isn't made up of all home owners. The marketplace is only that fraction.

That can become a misunderstanding when you hear people are buying at 8 times the average income. The 3 or 4 percent of the marketplace may not represent average people at all. Similarly the sample I picked may not represent all home owners as to how long they will own a home.

Perhaps that's why CMHC doesn't consider there to be an affordability problem as those making an application are above the average household income or have a large down payment in order to qualify. CMHC doesn't publish that information.

CMHC is taking their information from the loan application and the rest of us are taking our information from Stats Canada. In other words they are testing the current marketplace while we are looking rightly or wrongly at all housing.

Maybe it all comes down to is a better wording of the question.


DavidL said...

@Just Jack

Maybe HHV or Leo could create a poll? It would be interesting to determine from HHV readers the percentage of ownership (versus rent), duration of ownership, and type of real estate.

For example, I have owned my SFH for almost 13 years. When purchased, it cost about 2.2 times our family income.

Just Jack said...

The amount of your monthly mortgage payment doesn't go down until you refinance. Yet property taxes, utility fees, electricity, cable, telephone have risen considerably over the last decade. You may be getting mortgage paydown but the check you write the bank each month stays the same.

And that ties into my previous question. Should we be looking at a holding period of 25 years? Since half the sellers today have owned their homes for less than 6 or 7 years?

As it seems that very few of us will own the same house for 25 years or even 10 years.

Buy anything and if you hold it long enough it will likely be profitable at the end.

dasmo said...


"The question was how long are people holding their properties before selling?"
Then you need to poll people that own property not people selling property. Otherwise you are solving for the question "how long are people WHO ARE SELLING holding their properties before selling?

Just Jack said...

Since you've owned your home for 13 years you would have seen the owners along your street change too.

What I've noticed along my street is that those that bought a decade or so before stayed are still living in the same house. But, homes bought in the last decade or so seem to be rotating back onto the market again and again.

Maybe the buyers of a decade or so ago did buy and hold longer. But is that true of current buyers? And why are today's buyers not holding real estate as long as a previous generation did?

I think a higher turn over may have to do with dissatisfaction. The generation before could buy the home they wanted at a reasonable price. That may not be the case for today's buyer. They are buying a house or condo that doesn't meet there needs for the immediate future. They are buying only what they can afford.

That's not true of all buyers but perhaps enough to lower the average length of home ownership. Or it may be due to the age of the buyers or that there are more first time buyers than before.

Or it could just be a bad sample.

Seth Perry said...

Canada's housing market overvalued by as much as 30%: BoC

"The Bank of Canada has acknowledged that the country’s housing market may be overvalued by as much as 30 per cent as a long-awaited soft landing remains elusive."

"The bank based the estimate on a new model it has developed, details of which are contained in its twice-yearly assessment of threats to the Canadian financial system released Wednesday."

I'm not sure if the BoC has ever chimed in on the overvaluation / bubble topic. I was a little surprised to see this headline today.

Full Article

Seth Perry said...

Bank of Canada Says Home Prices Overvalued as Much as 30%

Another view from Bloomberg.

Full Article

also, how about that tsx eh... blood in the streets this week.

Just Jack said...

That's right Dasmo. I'd agree with that.

Half the people selling their homes today have owned their property for on average less than 6 or 7 years.

That sample may not be representative of all home owners. I don't know if it is or is not. Do the sellers in today's market represent a cross section of all home owners? Why wouldn't they? Or is there something fundamentally different between someone who is selling their home and someone who is not selling their home?

But it might be an idea to do the sample in reverse to see if those that bought in each year of the last 10 have since resold? So instead of looking at today's sellers, now you're looking at yesterday's buyers and how long they have held real estate.

Just Jack said...

"how long are people WHO ARE SELLING holding their properties before selling?

Would it be possible to estimate the inverse ...

"how long are people WHO ARE (NOT) SELLING holding their properties before selling?

That would likely answer the question for a current home owner who bought say in 2001 but have not re-sold. The answer might then be for those that bought in 2001, X percentage still own that home.

I suppose you'd have to do that analysis for every year. Then you might be able to find out if DavidL is typical of most buyers of 13 years ago.



Leo S said...

Since you cannot canvass home owners as they are still in their homes and are not currently selling

Well, you could just need the right data. Get the BC Assessment data and you will have that information. Mean time between sales for all properties.

However your numbers (about 6 years) are not far off of other data I've seen on this topic (around 7 years between moves, but that includes renting).

dasmo said...

Unless the other data is not "people" but rather people that are moving. Again, if a portion of people never move, or rarely move they don't show up in your sample of "people"...

totoro victoria said...

The stats from the states show more than 50% of people stay in their home 10 years or longer - 27% more than 20 years.
http://www.nahb.org/generic.aspx?genericContentID=110770&channelID=311

Just Jack said...

The assessments aren't going to help. Knowing that a property sold in 2005 and then in 2007 doesn't really help you to know what is happening in 2014. Unless you make the leap to think that the turn over rate is carved in stone. Personally, I think your grand-parents likely moved far less than your grand-children will. However, I don't know.

6 or 7 years may likely be not far off because as other sources could be making the same error that I'm making. Assuming today's sellers represent all home owners.

What brought this to my attention was when I was speaking with a salesman who told me that people live in a home on average for only 3 years now. And I thought "where did that come from?" And that's why I tried to calculate the turn over rate for housing.

I think it is a lot easier just to re-write the question to get the answer that agrees with the data.

Just Jack said...

That report actually says a lot more than that.

Surprisingly, a lot of what we have been talking about in determining a sample is in that report. That the length of home ownership can vary significantly.

If we look back 7 years ago, the real estate market was quite hot. As in the report you referenced that could be a reason for what I think is a high turn over rate for our city.

Or not.

If an Economics professor can get it wrong - I certainly can too but in half the time it took him.

Chris said...

Canadian stats would not deviate much from American. I suspect Victorians remain put for longer durations, as the majority move here for their forever home so to speak.

The stats from the states show more than 50% of people stay in their home 10 years or longer - 27% more than 20 years.

dasmo said...

"re-write the question to get the answer that agrees with the data" Or describe the data result accurately...

Just Jack said...

Dasmo, it was implied right from the beginning when I described what I was doing.

That you chose to read something else into the analysis is your problem.

I explained right from the beginning the size of the sample, how it was done and how it could be inaccurate.

However, I am not convinced that your "solution" is any improvement. In fact what you're suggesting probably isn't even workable and if it is, there is no compelling reason why the results would be different.

Just Jack said...

I did a back of the envelope analysis that suggested half the buyers hold a house on average for 7 years.

An American report says 10 years for parts of the USA.

Until someone does the number crunching for Victoria no one knows the answer.

totoro victoria said...

That report for the US also shows that those in the West move slightly more frequently than those in the East.

As for Victoria, I don't know. Every seven years is a figure I've heard as well. Seems on the high side to me for an average.

dasmo said...

Sorry JJ, It's how you presented your conclusions ;-)

"half the people buying a home today will be moving 6 or 7 years from now. And 70% will be moving within the next ten years."

"So much for putting down roots in a neighborhood."

"Nearly 60% of the condo owners buying today will be wanting to sell in less than 5 years from now. And one in four will want to sell in under 3 years."

Chris said...

Help! Anyone know why everything is going so quick & for full price right now? There seems to be no seller fear whatsoever. Is it interest rates?, retardtaion???!! Are the Yankees moving in again? Retirded oilmen who lost their job?!

202-1280 Newport, 101-27 Songhees, 1103-788 Humbolt, 401-1969 Oak Bay, 306-280 Douglas. All went FULL price or OVER list this week. WTFacts!

nan said...

Trying to figure out average ownership period and use it for anything seems pointless to me - it is a dependent variable, not an independent one.

i.e. a decision to move is a result of economic conditions & personal preferences, not an indicator of them.

I guess I'd rather see other topics discussed...?

How about this: what is your opinion on the impacts of current stock market, commodity & currency markets on interest rates, local jobs & ultimately demand for Victoria RE?

Just Jack said...

The number of people that move here for their forever homes isn't known.

Most properties bought here are purchased by Victorians and they tend to be more or less evenly split between condos and houses too.

Of the 1305 core condos bought in the last year 83 did not show where they were from and 855 said Victoria. 65 maybe 70% are from the city.

For houses 1,504 showed Victoria. 81 were blank and the total was 1925. Someone moving from Esquimalt to Victoria would not necessarily be counted as from Victoria or they could be. 80 to 85% are home grown buyers.

These are rough estimates, but gives you a general idea. The largest group of home buyers in Victoria are from Victoria. They set the market value.

And for those Oak Bayers.

174 out of 253 Oak Bay homes were bought by people from Victoria. About 70 to 75% The out of towners would fit comfortably onto two buses.

Chris said...

“How about this: what is your opinion on the impacts of current stock market, commodity & currency markets on interest rates, local jobs & ultimately demand for Victoria RE?”

I figured on a negative impact showing up by now. Like I said I’m scratching my head why everything I go to look at is soon gone and for full price. I would love to know who these nonchalant buyers are and where their money came from. My guess is none of them need a job when they move here.

dasmo said...

@ Chris,
"Help! Anyone know why everything is going so quick & for full price right now?" Perhaps it's everyone exiting the stock market and moving to RE...

totoro victoria said...

Wait a minute - 401-1969 Oak Bay Ave sold for full price! That is 1.25 million for a 1595 square foot condo on the corner of OB Avenue and Foul Bay...

Just Jack said...
This comment has been removed by the author.
Just Jack said...

There is just so little supply in Victoria City and Oak Bay. Under 3 months of inventory. With not enough coming to the market creating a sales to new listings ratio way up at 80%.

That's crazy person market conditions with buyers making irrational decisions. If you want a house bad enough you're going to pay over market value to get that home. Depending on the property you need to go in 5 or maybe 10 percent over assessed value.

If you're going to swim with the sharks be prepared to get bitten.

dasmo said...

@ Nathan I get that with AMZN. But I still don't have faith. They are far from a start up! Their PSR is not bad but you could say it's easy to generate so much sales when you are seeing at a loss. Look at AAPL's balance sheet. Now that's a company!

S-J said...


@ Just Jack: "And why are today's buyers not holding real estate as long as a previous generation did?"

One reason is there have been more buyers looking at buying property as a way to make money. Buy a house, renovate and, hopefully, sell it for a profit. This probably represents only a small percentage, but it is a factor.

Just Jack said...
This comment has been removed by the author.
Just Jack said...
This comment has been removed by the author.
Just Jack said...

Nan, I suppose it's how you interpret the findings.

For example. Would knowing the condo complex you may be buying into has a higher turn over rate of owners than other complexes affect your decision to buy?

In contrast, I've seen numerous listings play up the fact that the complex has a low turn over rate.

Or how about if you are thinking of buying a particular home and find out that this property has been listed and sold substantially more often than other properties. Would that cause a red flag in your opinion?

I'm sure there are people that wouldn't care and consider a high or low turn over rate as meaningless. However, if you were buying a commercial property or apartment building a high turn over rate will effect your net income and the property's market value.

Or suppose you're a real estate salesman or mortgage broker and want to minimize your expenses while maximizing your income. Would you spend more of your advertising budget on a hood with a high turn over rate or in an area with a low turn over rate.

Or a moving company? or home renovation company?

nan said...

@ Jack - my view is that turnover is a symptom of other things that may be positive, negative or even misunderstood.

I would prefer to understand what matters to me and pay for a property with those attributes. If those attributes cause others to buy and sell the property more or less frequently, it won't change what I feel is important.

If I went in to a place and loved it but didn't buy because turnover was relatively high, sure I'd ask why but I wouldn't let the fact that turnover was high deter me from a purchase. Or live there for 30 years.

It's just a symptom not a cause of a properties attribute(s) but you are right - the measure can certainly give you a heads up on something that might be of value to you that you might not otherwise think to ask.

Just Jack said...

During a seminar put on by BC Assessment, I listened to one presenter explain that the typical buyer only looks at 6 or 7 attributes of a property before making a decision to buy or not to buy.

So what are the attributes you look for?

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