“The best way to make your dreams come true is to wake up.” -Paul Valery
THIS WEEK IN FACTS BY EMAIL: TRIP
Phoenix seminar on May 2 and 3. One full day of tuition. Next day – get familiar with what’s available. Call Lubna at 604-683-1111 to book ($199 tuition).
Will be up April 26, 2014 after 10 AM (Lost your password? Call Lubna at 604-683-1111. Best time to call? After 5 or on the weekend).
FACTS BY EMAIL THIS WEEK:
USA and Canadian house prices have diverged by 66%. Which will happen? US rise to meet us or we fall to meet them? Chinese investors pitch new hotel at
Sechelt Golf course! US investors note: New home sales in US plunge.
TIP OF THE WEEK?
Send in your real estate offering, your listing, or your deal. We may feature it below.
- Serious Decoupling Of Price Increases – US And Canada
- ‘Made Over’ Modular Homes Good Deal For Buyers, Not For Investors
- 360 Nicklaus-blessed Waterfront Acres For $7.9m
- China Investors Pitch Hotel At Sechelt Golf Course
- REITs Could Roar Back To Buying Binge
- Title Fraud And Foreclosure Fraud: Watch Out
- New Guidelines For Credit Unions
- Plots Of The Week
- Best Mortgage Rates
I N T E R N A T I O N A L: March New US Home Sales Drop Sharply
Historically, March should be the strongest month for new home sales. The Census Bureau released its new home sales report for March this Wednesday, April 23. New home sales
unexpectedly plunged 14.5% from February and 13.3% from March 2013. The 384k homes sold was 15.6% below the Wall Street consensus estimate of 455k and
significantly below the low-end estimate of 440k.
The reasons may be found in unseasonable bad weather, or housing market forecasters are wrong. Whatever. For us as investors we need to monitor ongoing
statistics very carefully. We always expect real estate markets (in Canada as well) to dip after April, but March is the strong month! So, investors watch
it and while we are not stock market advisors: Homebuilder stocks in the US may be overvalued.
Serious Decoupling Of Price Increases – US And Canada
Bank of Montreal’s chief economist Doug Porter created a chart that demonstrated the sharp gap between the average price of a home in Canada and the United
States in the first quarter of this year. In fact that gap is now so big that average Canadian home prices were 66 per cent above average U.S. prices. We
like that he uses used houses and condos as comparison – as there are 9 times the sales volumes in those rather than featuring the much fewer new homes.
It is an interesting graph but note this:
- Canadian average prices really reflect the strength in the major markets and do not really reflect the fairly sharp decline in small towns and the
extreme decline in all resorts – winter and summer.
- US prices are sharply on the rise – having risen between 13% and 30% last year – albeit from a very low. Also add to this the exchange difference
and there may a further adjustment you could make.
The point to ponder is whether the US prices will rise back to the comparative level (even with Canada) or whether Canadian prices will drop to meet the US
ones. JREI bet is that they do a little of both.
C A N A D A: ‘Made Over’ Modular Homes Good Deal For Buyers, Not For Investors
one of Canada’s largest owners of modular home parks, is now owned by the BC Investment Management Corporation – which controls the
pensions of provincial government employees – and is pushing to get more Vancouver homebuyers to consider mobile home parks rather than condo projects.
This week Parkbridge invited interested media to tour three Parkbridge modular home projects in Surrey and White Rock, all of which have been upgraded, had
some homes remodeled and new “trailers” erected.
The deal sounds good for first time buyers or retirees who can’t afford to buy in Metro Vancouver or who want to downsize and put more money in their
A brand new, three-bedroom modular house with vaulted ceilings,
stainless steel appliances, two bathrooms and about 1,200 square feet of space is offered at $99,000 and, according to TD Canada Trust, financing is available with 5% down and 25-year amortization and with rates just slightly higher than conventional
mortgage rates. “Buyers could get in for $5,000,” explained Lachlan MacLean, director of BC operations for Parkbridge.
Older renovated modular homes sell for around $70,000 for a two-bedroom doublewide. Pad rentals average about $820 per month at the Surrey parks and are
$900 at its White Rock park. All in, house payments could be less than $1,200 per month.
Good value for buyers, perhaps, but not for investors. Parkbridge discourages rental in their parks; the appreciation on
modular homes is very low since there is no land component; and Parkbridge has the right to veto any buyers that an owner may want to sell
(If you want to take the May 6 and 7 tours of the parks, contact Jessica Moran at firstname.lastname@example.org.)
Major Point: Parkbridge modular home parks are known as well-run, clean and community-minded and could become popular with homebuyers. The hard part would be getting
over saying “I live in a trailer park in Surrey.” (Just kidding!)
360 Nicklaus-blessed Waterfront Acres For $7.9m
Once aimed at being a $500 million resort development with a Jack Nicklaus designed golf course, the Wyndansea property on Vancouver
Island is back on the market – for less than $8 million.
The last time it was listed was two years ago, when the price was $14 million in a court-ordered sale.
Jones, Lang, Lasalle
of Vancouver (604-998-6001) put the 360-acre ocean-side site just north of Ucluelet on the market last week on behalf of the lenders.
“We’ve dropped the price to $7.95 million,”
said realtor Alan Johnson.
Once listed for sale at $37 million, in built-out condition it would reportedly be worth upwards of a half-billion dollars.
“The lenders are now looking back to the market for sale. They had been giving [the former owners] some time, but that time now has ended,”
Anchored by a partially complete 18-hole Jack Nicklaus-designed golf course, the property has three kinds of zoning: single family,
multifamily and hotel. Thirty lots make up the Signature Circle, half of those are waterfront, and all are serviced. The rest of the lots are roughed in,
with interior roads mostly done. (We remember those heady days when the lots were being listed at $500,000 and more.) “There’s a significant level of development that has been done,” Johnson said, estimating that $25 million or $30 million worth of investment and
improvements have been completed.
Major Point: Another example of how much resort developments have collapsed in the last 5 years.
China Investors Pitch Hotel At Sechelt Golf Course
There is a real estate buzz on the Sunshine Coast as Mainland Chinese buyers recently snapped up, as we reported here earlier, the Sechelt Golf and Country
Club, a 43-acre island at Pender Harbour and the old Garden Bay Resort and Marina. Some see it as master plan to link the Coast with Nanaimo as a
playground for Chinese tourists, since China investors are also building a $50 million luxury hotel at Nanaimo. Realtors note a fast passenger ferry from
Nanaimo to the mainland is expected to start this year. The China investors [a number company 0993104BC Ltd] fed fuel to the fire last
week when the developer rep, a Mr. Wang according to District of Sechelt documents, outlined plans for a 150-room hotel
on the Sechelt golf course site.
Meanwhile, the 240-room Nanaimo hotel is being developed by China-based SS Manhao International Tourism Group Co. which expects to attract
70,000 Asian tourists a year to Nanaimo. Manhao bought the city-owned hotel lot, which is right next to the Nanaimo Convention Centre, for $565,000 three
Major Point: The Sunshine Coast would need such a kickstart to get real estate sales and prices moving. Right now the market has yet to recover from the recession,
with prices down more than 5% from five years ago and sales still sluggish.
REITs Could Roar Back To Buying Binge
When mortgage interest rates threatened to go higher a year ago it had an immediate and chilling effect on real estate investment trusts. Share values
slumped and the notable REIT buying binge came to a sharp halt. We see that changing this year as mortgage rate fears have settled down and REIT values
An indication is office-sector Allied REIT, which has purchased $100 million worth of real estate in last three months, compared to $182
million in all of last year. Allied is buying in Toronto, Montreal and Calgary.
REITs, like sharks, have to keep moving, acquiring property to compete and to keep up with dividend payments so acquisitions are the rule, not the exception. And, as Allied shows, when they move
they make waves.
We see residential-link REITs getting back into the apartment market this year, picking off portfolios and concrete property in key
We expect Calgary-based Northern Property REIT to be buying in Edmonton, northern BC and the NWT/Yukon and developing on the 37 acres
(planned for 400 units) it bought in Calgary last year. NP REIT also bought a 26-unit property in Mission last year, an indication it may be scouting the
Lower Mainland market. Also watch for Canadian Apartment Properties REIT and Boardwalk REIT to be back on the acquisition
trail after a big pullback in 2013. They likely won’t be buying in Vancouver; think Victoria, Kamloops and Prince George.
So what does this mean to us, small and mid-size investors? If you are buying income-producing residential property, you will have more competition. If you
are selling a portfolio or even a well-placed building, there could be multiple bids.
Title Fraud And Foreclosure Fraud: Watch Out
By Doug Bastin
Imagine coming home to find your house has vanished into thin air. In some ways, this is what happens with title fraud, where a criminal assumes your
identity and uses forged documents to sell your house or get a new mortgage. This kind of fraud is often perpetrated against houses that are mortgage
free-which means it often targets seniors. Scammers can also use personal information to impersonate you when applying for a loan or mortgage, leaving
you-the unsuspecting victim-on the hook for the loan.
Foreclosure-rescue and home equity fraud
preys on those struggling with their mortgage payments. The homeowner pays up-front fees and transfers the property title to a new lender in exchange for a
consolidation loan and/or lower monthly payments. The scammer then has both the victim’s monthly payments and has the option to sell or
re-mortgage the house without the victim knowing.
Here are some tips for protecting yourself:
- First and foremost, make sure you are following best practices in protecting your personal information. Protect your SIN, shred documents before recycling, and put a lock on your mailbox. Don’t give personal information over the phone
unless you initiated the call. Learn how to protect yourself from phishing, update security software regularly, and change your
passwords on a regular basis.
- Be skeptical in all transactions – scammers are successful because they engender trust. Rely on your own team of experts to
verify the fine print. Know and understand what you are signing. Ask questions. Never sign incomplete documents.
- When money changes hands, ensure the funds are held in trust until the paperwork clears.
- Do some basic research on the property. A land title search can show you the name of the owner, mortgages and liens, and a
record of previous transactions.
- Regularly check your credit report to make sure there are no surprises. Consult the provincial land registry office to make
sure your house is in your own name.
- Consider purchasing title insurance to protect against title fraud.
Remember the golden rule of investing – if it sounds too good to be true, it probably is – and there’s no such thing as guaranteed returns.
Don’t be swayed by fancy marketing. Do your research, get professional third-party advice, and you may well reap the rewards.
– Doug Bastin is a partner and management consultant with Grant Thornton Consulting. Visit www.grantthornton.ca
New Guidelines For Credit Unions
“After discussions for the past year, the Financial Institution Commissions of BC (FICOM) has announced that they have created a proposal for new
guidelines that in many cases, mirrors the B-20 guidelines set out by OSFI which governs federally regulated financial institutions,”
says Kyle Green of Mortgage Alliance (778-373-5441, email@example.com). A link
for the new proposal can be read here. The proposed changes
- No more Home Equity Lines of Credit to 80% Loan-To-Value, as it would be reduced to 65% financing (although similar to the B-20
guidelines, you could still get 80% financing as long as at least 15% is amortized on a mortgage portion).
- Credit Unions will have to obtain 2-3 years of full tax returns for self-employed borrowers, unless significant evidence allows them
to make an exception not to request them.
- Amortizations over 30 years will be on exception only
- Variable rates and terms of less than 5 years may have to qualify at the Bank of Canada rate (currently 4.99%). Due to B-20
guidelines federally regulated lenders have to qualify variables and fixed terms less than 4 years at the BoC rate, but Credit Unions have discretion
and usually use their 3yr or 5yr regular fixed rate to qualify.
This is a proposal only, but it shows that governments are concerned about our housing market and will make it more difficult to get financing – for all
home buyers – particularly investors. Kyle: “So, although exceptions may be granted, note that if FICOM monitors this like OSFI does, then each lender is likely to have a quota of how many exceptions can be granted which may mean a reduction in the “uniqueness” of the Credit Unions as an alternative lender when the bank says NO.”
Major Point: As we have been saying over and over … it is not that you should worry about ‘wither the rates’ but whether the money will still be granted to you
when you need to a) buy b) refinance c) get a home equity loan. Get pre-approved – in writing, refinance sooner rather than later – particularly if you are
self-employed or a current marginal risk.
BEST MORTGAGE RATES:
PLOTS OF THE WEEK:
Anyone could have a property featured here, if you think it is a good deal. There is no charge and absolutely no warranties given either. You have to check
it up yourself.
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