“The opposite for courage is not cowardice. It is conformity. Even a dead fish can go with the flow.” -Jim Hightower

REAL ESTATE ACTION GROUP INVITATION

“Springboard to Real Estate Action”

An Exclusive Workshop

A special invitation – details below

THIS WEEK IN FACTS BY EMAIL

  • QUESTIONS, QUESTIONS
  • CALGARY HOUSING: SALES SLIDE, INVENTORY SOARS – TIME TO BUY?
  • FARMLAND PRICES HAVE SOARED – TOO LATE TO GET INTO THE FIELD
  • ECONOMIC ‘BLACK HOLES’ EMERGING IN B.C.
  • MAJOR BC PROJECTS: THINK TLC, NOT LNG
  • BIG LENDERS COMPETING FOR CASH FLOW LOANS
  • FIRST TIME BUYERS A HARDY CREW
  • VICTORIA BOOMING?
  • SASKATCHEWAN BLOCKS FARMLAND PURCHASING BY PENSION FUNDS

Questions, Questions

Q: As a new subscriber I have been surprised as to how much information is on our website. I cannot believe it. I was interested in reading the
inflation/deflation items. It really looks like over the years you have been right … higher and high real estate prices. So, do I go maximize my
credit line and dive in? Even today?

A: I am happy you are reading my past issues. That’s why I have them there … review good and not as good forecasts. BUT, you have come to selective
conclusions. Read the opening Issue No. 1 2015 … then study items such as building cycles, timing, trends and yes inflation. Most of all study our
recommendation to stay 50% in cash (as an investor).

Q: There seems to be no inflation in the latest releases by the BOC?

A:
No inflation? I guess it depends what you think inflation means. Cost inflation, asset price inflation, core inflation etc. According to the BOC our
headline inflation rate is ‘in line’, yes, but also allows that the core inflation rate is ‘above target’. Indeed. Any housewife at the
supermarket has known that for 2 years. Meat is up 38%, all food is up between 10% and 60% as are a slew of other living costs. But then the bank hasn’t
been right much …

Major Point:
The BOC said a good level for the Canadian dollar was 86 cents in January. Last week they said that good level is 79 cents! Between our BOC
and Mr. Poloz conflicting statements I remain worried.

Q: What about china? Currently the Vancouver market is driven to a large extent by overseas money. Will it continue?

A:
As you may know I worked as president of a construction management company in Taiwan for 3 years. My former Vice President came through Vancouver yesterday
and he spent some time in China last 3 month. In his view the boom is over. Not slowing. Over! Cranes are idle, thousands of construction workers laid off,
steel and metal prices crashing and stock markets (in his view) in pre-crash mode. What does it mean for Vancouver? The very rich will flee to put money
out of the country (possible currency controls). Money will continue to flow in – selectively. In as much as markets become the stories people tell about
them, it will affect our overall markets positively too for a while longer.

Q: I know, you don’t talk stocks, but I ask EVERYBODY I know in the media as to the world stock and bond markets in view of Greece, overvaluations etc.?

A: The world markets, eh? Well, I am NOT in the stock market and I do not comment on the stock market, but if I was as worried as you, I would GET OUT!
Sell in May and go away … but it is more than that: DO you honestly believe when markets go down 300 points one day up 00 the next that is driven by you and
me individuals? Hell no, it is driven by computers. One day the flash crashes (now present) will go too far and everyone will try and find the exit at the
same time. GET OUT! Also … bonds? Pension funds needing yield to pay pensions are getting negative rates or at least very low rates of return. They are
leaving bonds in favour of cash flow. Most large European funds are heading into big real estate projects … the same in the US.

Q: You seem to be negative on office markets? Is that not an opportunity to buy?

A: Yes, we wrote about executives in Edmonton and Calgary sitting in their towers trying to get out of leases and or not moving into new premises.
Downsizing is new mantra. Same is true for Vancouver and Toronto (less so). Opportunity? Yes, but I would wait and make low bids in the fall.

Major BC Projects: Think TLC, Not LNG

It is condos and hotels, not big resource projects, which now dominate the actual construction taking place in B.C. according to recent profile of major
projects by the Association of Consulting Engineering Companies British Columbia.

 

1. The top 20 construction projects now underway in B.C. total $5.6 billion – and more than half of that, $2.94 billion, have a
residential or hotel component.

2. The biggest construction project in the province is Concord Pacific’s $1 billion central condominium development on
the North Shore of False Creek in Vancouver. The mixed-use project includes 1,300 homes in eight towers, an expanded casino, 90,000 square
feet of community amenities and retail space.

3. Tied as the largest project is the $1 billion Tsawassen First Nation mixed-use development, which will include 1,600
homes in South Delta.

4. The $360 million Trump International Hotel and Tower on West Georgia Street in Vancouver is the sixth biggest active construction
site in B.C. The project includes 147 hotel rooms and 218 luxury condominiums, a spa and restaurants.

5. In the Okanagan, the $200 million, 600-home Skaha Hills (native lease land) residential development near Penticton and the $100 million
expansion of the Manteo Resort in Kelowna are ranked in the top 20 construction projects currently underway.

Major Point:
As a comparison, the largest resource project underway in B.C. is the $400 million Tilbury LNG facility expansion in Delta, where a new
storage tank is being added. Now that will change when the north gets going. In the meantime the action is in cash flow residential projects.

First Time Buyers A Hardy Crew

Genworth
and Environics polled some 1,800 first-time homebuyers recently to get a handle on this segment. Here are six findings of note about
first-time buyers: They’re paying more than ever!

  • The median price paid by a first-timer is now $293,000 nationwide ($420,000 in Vancouver)
  • 63% of today’s first-timers get insured mortgages down payment being $34,000 (12%) nationwide
  • 28% use a gift or loan to bolster their down payment. Contrast that with 40% in Vancouver
  • Prepayment privileges

    Just 1 in 4 first-timers (26%) made a lump-sum prepayment in the past year

  • It often takes two – 62% of first-time buyers purchased with a spouse/partner

    That means there’s generally two incomes (roughly $90,000 to $100,000 total on average, says Genworth).

  • They’re going to have kids

    Almost 6 in 10 (59%) are planning for children in the next five years and another 17% aren’t sure

  • Debt ratios are mostly conservative

    The average Genworth-insured borrower has a 34% total debt service (TDS) ratio. Genworth estimates the average first-time homebuyer’s debt ratios would
    increase 2 points (e.g., from a 34% TDS ratio to 36%) for every point that interest rates increased.

Other notable first-time buyer stats:

  • 80%+ choose fixed rates
  • 80% bought an existing re-sale house
  • 20% bought new construction
  • 55% bought a fully detached home
  • 17% bought a condo (47% in Vancouver, 40% in Montreal and 39% in Toronto)
  • 20% were born in another country
  • 39% strongly (10%) or somewhat (29%) agree that worry about making ends meet month to month
  • 61% pay off their credit cards in full each month
  • 7% pay only the minimum balance on their credit card
  • 86% of millennials “want to own a home”

(Source: Royal LePage survey)

Major Point:
But there is no inflation?! There sure is inflation in housing costs.

Victoria – Hot

“Evidence that we’re in a very hot Seller’s Market here in Victoria are all the current PENDING sales in the Saanich East neighbourhood of Gordon Head
(near UVIC),”
says Rick Hoogendorn, Ace Victoria Realtor. Of the 25 PENDING SALES (as of April 13th/2015) 12 sold for below list price, 4 sold AT list
price, and NINE sold ABOVE list price. Of those 9, the highest was $60,500 OVER list price, and another was $51,000 OVER
list price. So, adds Rick: “THE MAJORITY OF PENDING SALES IN GORDON HEAD have sold AT or ABOVE the list price. LOTS of multiple offers.” The homes
ranged in sale price from $489,900 up to $935,000.

Major Point:
But there is no inflation?! There sure is house price inflation in Victoria!

Calgary Housing: Sales Slide, Inventory Soars – Great Time To Jump In?

The once high-flying Calgary housing market thumped down during the first quarter, with total sales falling 32.7% from the same period in 2014 and average
prices down 2.3% in the city and 1.9% for the Calgary region, according to the Calgary Real Estate Board. In the city, the inventory of
homes listed for sale has soared 92.9% to more than 5,100 units.

In other words, a market that appeared to be running away is now returning as a prime investment.

Scared of oil prices? Calgary, the biggest city in Alberta, has shrugged off downturns before and it will this time too. The confidence can even be seen in
current average prices. The average combined price for a City of Calgary home in March was $467,468, down from $484,877 in March of last year, hardly a
rout and more reflective of the 44% drop in sales of high-end (million dollar plus) homes.

“With a large numbers of layoffs being reported in Calgary (Nexen,Talisman and ConocoPhillips announced recent
job cuts) and

provincial migration into Alberta slowing
, the real estate market faces heavy headwinds going into the second quarter of the year,” said a real estate board in a surprisingly frank release.

But, the rental vacancy rate remains in the 1.4% range, Calgary remains a job generator and its 1.4 million population creates a critical mass that can
more easily survive low oil prices. We see the city has a buy.

Calgary’s housing market is not overbuilt. New housing sales in 2014

were just short of a record high at 12,740, while completed and unabsorbed new supply fell to just 451 units at the end of December, a 25-year low. There
was only one completed and unabsorbed condo apartment at the end of 2014, down from 600 units in 2010, according to Canada Mortgage and Housing Corp.

And look at history:

  • From February 1986 to December 1986, oil prices fell 49%. During that same period, new house prices in the Calgary increased 8% annually on average,
  • From August 1991 to January 1992, oil prices dropped 29% on average, but new house prices were down only 2% on average.
  • Between September 1997 to February 1999, oil prices declined 27% on average, but Calgary new house prices increased 7% on average.
  • From June 2001 to March 2002, oil prices dropped 24% while new house prices increased 3% on average.
  • Between November 2008 to September 2009, oil prices plunged 50% on average and new house prices declined 7%. But this was during a global economic crisis
    when credit was cut off and the U.S. economy was tanking.

Major Point: Calgary posted $116 billion in GDP last year; the unemployment rate is among the lowest in Canada; the average wage is $1,153 per week, highest in the
country. If you had bought Calgary real estate during any of the previous “oil crisis” periods, you would have seen spectacular returns since. Keep your
eyes open – try to find the bottom (not yet) but eventually there will be opportunities in what will become known, again, as Canada’s come back city.

Farmland Prices Have Soared – But Not Too Late To Get Into The Field?

We have been advising to buy farmland everywhere and yes, also in the Lower Mainland at every conference for 6 years. Now price increases are visible.

An acre of operating farmland can sell for $57,000 in Abbotsford, even more in Surrey or Richmond.
Clearly, this is a reflection of potential future land development – not farming income – when one considers that Fraser Valley prices are more than 15 times the average Canadian farmland price, including in rural B.C.

Farms and ranches in Vanderhoof sell for $5,000 an acre, and as low as $1,000 per acre for pastureland. Across Canada, the average price for an acre of farmland increased 14.3% in 2014, and this followed increases of 22.1% in 2013 and 19.5% in 2012. The
average price of an acre of farmland in Canada in 2013 – the latest complete numbers – was $2,227 and is now estimated at close to $4,500.

B.C. has the highest farmland prices in Canada and they went up by 4.3% in the past year.

The biggest price increase last year was in Saskatchewan, where farmland values jumped 18.7%. As we noted here in February (WHO IS BUYING ALL THE FARMLAND? HINT: THEIR SHOES ARE CLEAN) Saskatchewan farmland sales have become dominated by institutional buyers and speculators.

But that could change after the Saskatchewan government this week but a f reeze on farmland purchases by pension plans, administrators of pension fund assets and trusts. Saskatchewan farmland purchases must now
also be made through a financial institution registered to do business in Canada. This is meant to stop foreign lenders from indirectly amassing a stake
through Canadian citizens.


British Columbia and Ontario have no restrictions on farmland ownership, but it restricts use of farmland through the Agriculture Land Reserve.

Alberta and Manitoba
have caps on the number of acres foreigners can own.

In Alberta, farmland prices in 2013 averaged just under $2,000 an acre. Since then they have increased nearly 25%, with much of the action coming close to
Calgary, Edmonton and Red Deer, where farmland is being bought for future residential and commercial development.

Major Point: Farmland remains a prime investment, despite the mounting regulations. The rules on investment will heighten demand and drive values up, we believe. Food
production will keep fundamental values strong and urban growth will increase pressure on land prices.

Big Lenders Competing For Cash Flow Loans

A super competitive lending environment is creating some great deals for Metro Vancouver real estate developers. We listened at the Vancouver Real Estate Forum as some of Canada’s biggest lenders gave examples of what is happening.

MCAP
managing director Herman Kwan said his company recently backed a townhouse developer in Metro Vancouver with 85% loan-to-cost financing
for $19.9 million, with no presales stipulations.

“It is a very good time to be a borrower,”
said Chris Enns, vice president of Trez Capital. (Its Chairman, Mr. Morley Greene was one
of our featured speakers at last fall’s Jurock Real Estate Insider OUTLOOK conference).

Trez
said it recently lent $30 million at 77% LTV for a 17-storey residential and retail tower in Burnaby.

Kingsett Mortgage Corp. has about 35% of its $2 billion asset base in residential and managing director Scott Coates said Kingsett is still requiring around 63%
presales on new condo projects, with 80% LTV on three-year construction financing. Coates said Kingsett plans to double its exposure in the Metro Vancouver
market this year and retreat slightly from Alberta.

Major Point: All of the speakers were bullish on B.C. and Ontario and bearish on Alberta. Enns said the extremely high land prices in B.C. are cause for concern. “We don’t know how long this can last,” he said, noting that “house prices in my neighbourhood are going up $50,000 per month.” (We don’t either and it will not
continue for ever … be ever vigilant)

Economic ‘Black Holes’ Emerging In BC

Aboriginal treaties are creating no-go economic black holes in British Columbia which real estate investors should be aware of.

While some aboriginal groups have embraced economic development and progress (the Tsawassen First Nations in South Delta and the Skaha First Nation in
Penticton are examples) others are turning their backs on the future and trying to reset their economy back 100 years or more.

An example is the Queen Charlotte Islands, now widely known as Haida Gwaii. At one time the Islands supporting a robust forestry and
mining sector. But, in the 10 years since the control of the archipelago was largely transferred to native governance, there has been a big change.

  • Half of the entire landmass is off limits to any kind of development.
  • Large commercial logging has been eliminated, as has mining.
  • There are no franchises on the islands.
  • The population has fallen by 25% to less than 4,500 and nearly half the population is over age 40.

And there is another economic wasteland emerging in the central Cariboo, west of Williams Lake where aboriginal title was recently awarded for 1,700 square
kilometers.

This week, the native band released its “affirmation” of what title ownership of the land really means. According to the document:

    • There shall be no mining or logging.
    • There shall be no commercial road building.
    • There shall be no dam construction.
    • And visitors to the area will require permits if they want to hike, camp or canoe.

Major Point: Putting large areas of the province out-of-bounds for investors will, in our opinion, doom the local residents to poverty and ignorance, a good reason
for all of us to pay more attention to what native treaties can really mean for the future of British Columbia. One to watch: the Haida Nation that is
preparing its own aboriginal title case for trial. They claim title not only to the land but the ocean around Haida Gwaii.

H
ot Property:

1. Richmond
Lowest price home in Richmond. 3 bdrm, 1 bath, 8000 sq. ft. lot. Solid old timer. East Richmond. Great for the buyer who uses Hwy 91 to commute;

2. Surrey 2 bedroom condo, Newtown $99,000.

Anyone can be here; there is no fee. They just look interesting to us … but you must check them
out yourself. Contact info is on your password-protected Insider website at Jurock.com.

Real Estate Action Group Invitation

“Springboard to Real Estate Action”

An Exclusive Workshop on Where and How to

Buy in 2015 for Huge Profits!

In case you missed it last month, We would like to invite you to our new workshop presented by Ralph Case called “Springboard to Real Estate Action” An Exclusive Workshop on Where and How to Buy in 2015 for Huge Profits!

In the Workshop, Ralph will review the 5 foundations and 5 critical skills for Real Estate investing success in any market. For more details and to
register please go to www.realestate2015.ca

This knowledge is essential to your real estate success, whether you are a new investor or a seasoned pro. Attend this workshop FREE as my guest.
Opportunities to learn are the building blocks every Real Estate Entrepreneur needs to lay the foundation for Success! This is a crazy world, but
principles are principles. If you apply the right ones this could be your best year ever in 2015!

      • On Tuesday
        April 21st Ralph will be holding 12:30 pm and 7:00 pm Workshops at the Executive Inn in Burnaby.
      • On Wednesday April 22nd Ralph will be holding 12:30 pm and 7:00 pm Workshops at the Executive Inn in Coquitlam.

For more details and to register please go to www.realestate2015.ca

HELD BY RALPH CASE OF THE REAL ESTATE ACTION GROUP –

OZZIE WILL ATTEND ONE OF THE EVENING MEETINGS TUESDAY OR WEDNESDAY