Facts By Email – April 29, 2015 – May 6, 2015 #16

“Greed is a basic part of animal nature. Being against it is like being against breathing or eating.” -Ben Stein

THIS WEEK’S FACTS BY EMAIL:

JOIN THE REAL ESTATE ENTREPRENEUR POWER WEEKEND MAY 23/24 (LOOK BELOW)

VANCOUVER AND FRASER VALLEY REAL E STATE HAD A ROCKING MONTH

REAL ESTATE GIANTS STIRRING ON VANCOUVER ISLAND

CONDO EDGES GOLD IN NECK-AND-NECK GROWTH

VANCOUVER CONDO RENTAL SEMINAR SET
– Tips for novice condo renters

HOMEOWNERS NOW ARRANGING OWN LAND ASSEMBLIES

EVEN AT $500 PER BLOCK, DETROIT IS NO BARGAIN

OZZIE TALKS

1. AT THE REAL ESTATE INSTITUTE OF CANADA ON MAY 28 – BOOM OR BUST! DETAILS TO FOLLOW

2. AT THE REAL ESTATE ENTREPRENEUR POWER WEEKEND MAY 23/24 –DETAILS BELOW

Questions, Questions

Q: I read that you think it is tougher getting a mortgage. My broker says, not really. If you have good credit and a job nothing has changed?

A: He likely does not deal with investors. Investor mortgages are much tougher to get since 2012. From mountains of documentation to a brand new focus on income only, regardless of your assets. New mortgage tightening rules seem to coming into place daily. One of our subscribers is 70 years old with a net worth of $2 million plus investment income. Since he has no employment income he cannot even get a $150,000 mortgage! That is a dramatic shift (aimed at retirees?) or any other investor living off real estate income.

Subscribers please note: if you have views and examples of this … most welcome.

Q: A number of questions on this: Ozzie, when you advise to have 50% in cash, do you mean to have 50% of your net worth in cash?

A: Not total net worth. Essentially our newsletter is aimed at the real estate investor. The cash we refer to…would be your cash that you plan to invest
in real estate.

2 reasons:

There may be better opportunities in some markets later: Calgary/Alberta in general, US, and others where some cash may become king…

As we discussed at length on last week’s Hotline … these are extremely uncertain times. From long term forecasterBill Gross to George Soros to billionaire investor Stanley Druckenmiller all are forecasting stock reversals. A major crash would affect real
estate values. All three websites are thought provoking reads. We could add Harry Dent, but his focus is on Demographics.

Q: I read on your website that Booms are always followed by Busts. True today?

A: Yes, absolutely … but be careful as to what you define as a boom!

The Numbers, The Numbers – Vancouver

Major Point:
While down from the whopping number of sales in March (4,170), April’s numbers of 3,948 are still 29% higher than last year’s 3,055 sales – a very good
month. The average price reached a new high beating the previous month’s high of $893,300. The average used condo price was $462,000 in April 2014 and
clocked in down at $453,000 this April.

The new condo price is up however by 9% from $444,000 to $485,000. Keep in mind that the new condo price fluctuates with the size of units, etc.
and represents a much smaller portion of the market than the used condo sector. Also, foreign buyers like new! This month we sold 202 new condos versus
141 in April 2014. However, used condo sales clocked in at 1,377 sales (!) versus 1,031 last April or up by 33%! On those large sale numbers prices are actually down (a bit – 3%).

5 YEAR LOOK BACK:

Major Point:
A quick look back to 2011 shows that sales are up 18% over April 2011. The big winner? Single family homes! Condos are down however! After 4 years the
average condo price is down from $483,400 to this month’s $456,000 or by 6%.

The Numbers, The Numbers – Fraser Valley

There were 2,009 sales processed on the fine Fraser Valley Real Estate Board compared to 1,470 in April of last year. These volumes rank third highest of all time for the month with the next best in April 2004 and prior to that in 1991.

Active listings
stood at 8,384 properties, the lowest for the month of April in eight years!

The benchmark price of single family detached homes
continues to increase in most areas. In April, benchmark price of a detached home was $595,600, an increase of 5.2 per cent compared to April 2014 when it
was $566,000.

The benchmark price of townhouses
in April was $300,400, an increase of 0.6 per cent compared to $298,700 in April 2014.

The benchmark price of apartments
decreased
year-over-year by 2.6 per cent, going from $196,300 in April 2014, to $191,200 last month. Says Board president Maisey: “For apartment owners, take heart, the condominium market in the Fraser Valley is improving. We are starting to see more activity at open houses and
an increase in the number of sales; however, that market remains firmly in balance with plenty of selection and prices still flat or declining in
certain areas.”

Major Point:
An interesting number is the one that says sales in 1991 were also as high as this month. That year and 2004? In the meantime the population grew
substantially. Anyhow, a fine month with single family homes the winner in the Fraser Valley also. Maybe condo owners are getting disenchanted with ever
increasing condo fees? Nasty strata councils and restrictive ownership (no rentals, dogs or old people). Benchmark prices (which the board prefers) show
smaller increases, but no doubt the Valley is rocking and rolling – finally – too! That is: Abbotsford up 10% in detached
prices ($480,400), White Rock up 12% ($1,095,000), Langley up 8% (658,000), Delta up 9% ($573,000), Surrey central up 9% (641,600). Mission is even and Surrey north is up
only 2%. Condos down in Surrey by 4% and up in Abbotsford by 4%.

Real Estate Giants Stirring On Vancouver Island

As we referenced to recently here, real estate values on Vancouver Island have been down for several years. We profiled one Nanaimo homeowner who lost a
total of $95,000 on a detached house bought in 2008 and sold this year.

But, for those who believe in seven-year real estate cycles, Vancouver Island may prove the adage this year. A tour down the Island shows a lot of real
estate action stirring.

Campbell River/Comox:
As we quoted our long term subscriber Mary Douglas last week: Three of the largest construction projects in B.C. are taking place in the area:B.C. Hydro‘s $1.09 billion John Hart Generating Station Replacement Project at Campbell River; and the construction of two northern Island hospitals, worth a total of $607 million.

This is important because, as is true across the Island, it is government jobs (schools, police, hospitals and other public employees)
that now dominate employment, followed by the retail and wholesale service sector. The Island has turned away from traditional resources of mining and
logging.

The proposed Raven coal mine has been pulled from environmental studies; an LNG terminal proposed for Port Alberni is facing stiff
headwinds; and a lot of former forest lands on Vancouver Island are being parceled and sold out for other users.

About one-sixth of Vancouver Island is owned by two timber companies: TimberWest and Island Timberlands as part of a land
grant made in the 1880s in exchange for building the E&N Railway. TimberWest owns 803,000 acres on Vancouver Island (about 11% of the Island’s total
area and the land it has are up for sale for residential and commercial development including some prime real estate near Campbell River, Nanaimo, Coombs
and Ladysmith). Just outside of Campbell River, 100-acre lots with the Little Oyster River running through them can be had for as little as $399,000. Near
Nanaimo more than 100 acres on the Nanaimo River is behind sold: waterfront lots as large as 30 acres, serviced with power and telephone, can be had for
$549,000.

Yet big developers are apparently convinced the Island is prime for investment right now and are rolling in to pick up trophy pieces.

Recent deals include:

– The $7.9 million purchase by the Onni Group of Vancouver of the 360-acre Wyndansea Resort at Ucluelet on the West
Coast. The resort lands, zoned and ready for mixed development, had been listed for sale a year ago for $37 million.

– Developer Gordon Nelson of Vancouver recently bought the Pacific Sands resort at Tofino for $23 million. More than 18
acres of the oceanfront property could be developed.

– Parkbridge Lifestyle Communities, owned by the British Columbia Investment Management Corporation (BCIMC), bought Crest Estates in Nanaimo – a 180-unit modular home park
last month.

– Three Point Properties and Ian Laing Properties of Victoria have bought much of Port Renfrew.
The April deal includes the Port Renfrew Hotel building, 11 waterfront cabins, the Lighthouse Pub building, and the West Coast Trail Lodge. The plan is to
turn sleepy Port Renfrew into a surfing and tourist centre.

– Onni has bought the bankrupt Colwood Corners mixed-use development at Colwood, 10 km. north of Victoria. The 14-acre full-zoned
site sold for $17.5 million under court order.

– This month, construction started on the Colwood’s $90-million Pacific Landing development by Calgary-based Heather Bells Lands Corp. Pacific Landing’s first stage will see 33 condominiums priced between $399,000 and $499,000.

– In Victoria, Manulife has bought the downtown Bay Centre, a large shopping mall, for an estimated $100 million and has
redevelopment plans for the site.

– Vancouver-based Concert Properties and Victoria’s Jawl Properties, paid $34 million last week for a 6.2-acre site
right behind the B.C. Legislature building for a mixed-use condo and retail development.

So you can see, there is a lot of interest this year in Vancouver Island developments. And there are still very low housing prices, especially north of
Victoria.

In Nanaimo, for example, the current detached average house price is $398,345, according to Landcor Data Corp. This is up from $378,823 a
year ago but less than $30,000 more than in 2010. The average Nanaimo condo price is $189,000, which is actually $70,000 less than five years ago. The
rental vacancy rate in the Harbour City is around 4.3%.

Major Point: Look for deals and make low-ball offers
when investing on Vancouver Island. Prices are at or near seven-year lows north of Victoria and on the Gulf Islands.

The Island economy is skewing towards tourism and retirement, which means that coastal areas (Parksville, Qualcum, Port Renfrew and Tofino) likely offer the best appreciation potential.

For rental income, Victoria, Nanaimo and Campbell River are the best plays. In Campbell River, the average condo apartment price in March was
$164,300 and the average detached house price was $300,800, according to Coast Realty, both up marginally from a year ago.

Campbell River
condo sales are down 11% through the first three months of 2015 compared to a year ago. Only 30% of the condos listed for sale this year sold.

Port Alberni
is a bit of an anomaly on the Island: an unapologetic blue-collar town with a pulp mill and plans for a multibillion-dollar LNG (liquefied natural gas)
terminal. It also has the lowest housing prices on the Island, with condos available for $100,000, even less, and the average detached house price at
$201,000. Condo sales are down 24% from a year ago and detached sales are off 3% and it takes an average of 100 days to sell a house, an indication perhaps
of the confidence in the LNG plant and its many jobs ever materializing. Caution!

Vancouver Condo Edges Gold In Neck-and-Neck Growth

Lawrence D. Fink, chairman of BlackRock Inc., one of the largest asset managers in the world, recently touted condominiums in ” New York, Vancouver and London” as a better investment than gold during a Singapore financial conference. How does that claim
stack up?

In the Metro Vancouver, the return on a condo – looking strictly at price appreciation – has been stronger over the past few years but not by a huge
amount.

The gold price has risen about 1.2% per year since 2013, the year the value fell 23%. Today gold trades for $1,193 per ounce (as of April 25),
compared to the 2011 peak at $1,921.17. The average Metro Vancouver condo price has increased 4.5% in the past five years and 3.3% since March 2014, to
$390,200, which is a new record high.

Major Point: Well, yours truly has made that point for 15 years! Also, never mind prices … unlike passive gold, a Vancouver condominium rented at $1,200 per month
for the past two years would have generated $28,800 in income.

Condo Rental Seminar Set

The only real competition to rental apartment buildings in Metro Vancouver is condo rentals, which account for about 17% of all condos and represent a
healthy shadow rental sector. Rental demand is huge: Canada Mortgage and Housing Corp. estimates that only 0.7% of Metro Vancouver rented condos are
vacant, a rate that rises to only 1.8% in Victoria and 1% in Kelowna.

The big challenge for rental condo owners is scale:

75% of condo investors own only one condo rental unit, so management often comes down to the owner. (Though we recommend using a property manager.)

In some cases, issues are raised over the amount of rentals allowed in a strata building and there can be confusion over aspects of renting within a Strata
Corp.

To this end Landlord BC and the Condominium Homeowners Association are presenting a free seminar focused only on strata rentals It
is held May 6 at the Vancouver Public Library from 6:30 p.m. to 9:30 p.m. Advanced registration is required due to space limitations

Phone 1-877-353-2462, ext. 2; or email info@choa.bc.ca to register.

Major Point: Tips for novice condo owners

1.
Check the bylaws and advise strata council

2.
Advise your insurer, this is very important as you may not be covered for a problem if the insurer does not know the condo is being rented

3.

Contact the city to change the status from principal residence to rental unit. If you live in BC, you will lose the homeowner grant and have to pay
higher property taxes.

4.

If you are only going away for a few years and may come back, you can make an election with Canada Revenue to keep your principal
residence status and therefore protect your tax-free capital gain.

5.

Hire a property management firm. The fees are usually around 6% to 8% of the rent, but you get professional service and someone else screen tenants and
answers those “my toilet is leaking” calls at 1 a.m.

Homeowners Now Arranging Own Land Assemblies

There has been a rush of land assemblies in Vancouver and subsequent media reports about it. Formally, the assemblies often started with a developer
scouting for opportunities, or with realtors who would work with a block of homeowners to list adjacent lots for an assembly. But, as land assemblies have
been seen to double the per-lot value in some neighbourhoods, homeowners are now banding together themselves to present entire blocks directly to developers.

Here is an example that was emailed to us this week:

A group of five detached house owners in the Knight/28^th Avenue area want to sell en masse. We checked the assessments and the
typical house is 50-60 years old with a lot value around $720,000.

“[We are] looking to assemble the properties as a sale. We are not interested in listing with realtors but rather have a developer put an offer, then
go through the rezoning process. Looking for $2.5 million each home,”

the email states.

Major Point:
The owners believe a developer could get rezoning for townhouses on the land, but the developer would be speculating in that there is no guarantee the city
zoning could be achieved. In this crazy world they may just find someone! If you get it, go for it. But do not be a buyer of the assembly! They are
foreigners and they will get rooked. In the end the value in the finished product has to be competitive. We are barely keeping our averages prices the same
as in 2011 and we are paying twice as much for land. Something will give!

Vancouver To Create Website To Report Empty Houses?!?

This just in:
The increasing number of vacant homes in Vancouver (mostly the result of land assemblies) is to be tackled by a new initiative announced over the weekend
by the City of Vancouver‘s chief housing officer. Mukhtar Latif said that a new website will be created allowing
residents to report empty properties in their neighbourhood. No idea on what action the city plans to take, however.

BEST NORTGAGE RATES

FROM ACE MORTGAGE EXPERT DUSTAN WOODHOUSE (dustan@ourmortgageexpert.com)

Says Dustan: The trend of low rates staying low appears to be with us for some time to come.

• 1yr 2.84
• 2yr 2.09
• 3yr 2.24
• 4yr 2.49
• 5yr 2.59
Variable P-.70 or a net rate of 2.15%

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