Questions, Questions

Q: I am very worried about the possible changes in how the CRA may treat US LLLPs. Should I make a move now? If yes, what do I do?

A: Our report was just a ‘heads up’. Nothing more. It is not law, there is no guidance from CRA on it yet. But keep your eyes open … or keep reading, we’ll keep monitoring the situation here.

Q: Ozzie, you must be really pleased about gold’s total collapse. A collapse that you forecast in 2012.

A: Blush … well actually NO, I did not forecast the direction of gold. I did have a debate on whether gold was a better investment than real estate. I think I proved conclusively in the debate that real estate outperformed gold historically in a dramatic fashion … mainly because of leverage. I did NOT forecast lower gold prices … even though that was the basis for my argument … I merely pointed out that gold was $800 in 1980 dropped like a stone and it took 27 years to get back to $800. A $100,000 invested in gold – after languishing for 27 years – was back to $100,000 in 2007 and $111,000 this week. A $100,000 invested in the average Vancouver home is now $1,300,000. Had you put down only 25% – or $25,000 you would have made a profit of $1,275,000. Gold made you $11,000!

Q: Did we ever have a run up in prices – like we have now? What was the outcome?

A: Percentage wise, yes, but nothing repeats the same. You can’t look forward by looking in the rearview mirror. However all booms are followed by downturns eventually. In 1978 the average price in Vancouver was $80,000, by spring 1981 it was $180,000. By fall 1982 is was back down to $120,000. The reason? Volker drove interest rates to 21%, Canada savings bonds paid 19% – all in an effort to kill inflation – he succeeded. Also the sharp run-up in prices from 1992 to 1995 was driven by the fleeing Hong Kong’ers (worried about China repatriating Hong Kong). That was followed by the 1995 – 1998 sharp downturn (prices fell 17%, some condos fell 40%) – when most went back to Hong Kong.

Why Did Our Central Bank Lower Rates? To Trash Our Dollar!

Last fall and particularly this spring and at every conference I mused that I did not understand Mr. Poloz. He told us last year that our real estate is 30% overvalued … plus he said that we are the most indebted people on earth … then he lowered interest rates by a quarter. Huh?! Me thinketh you schpeakest with forked tongue … I mused. In my Outlook issue this January I forecast that he would do it again (we thought April) regardless of our economy, but that he had another goal. He HAD to have had another goal – dropping the bank rate by .25% of which he then let the banks keep .10% – twice.

Why let the banks do that? This minute reduction has no impact on borrowing, but a huge impact on how our currency is perceived.  Ergo, his goal is to trash the dollar! 

Major Point: Talking down the dollar, regardless of the facts: the US is having a strong dollar and a booming economy. Canada keeps lowering our dollar (20% since last summer!) and our economy falters. Lowering the currency on a beggar-thy-neighbour approach (worldwide) has only a temporary ‘huh?’ effect. Long term as Margaret Thatcher proved in England … it does not work.

Banks Keep Almost Half Of The Rate Reduction!!!

If the Bank of Canada cuts interest rates, it will be an effort to jumpstart the economy by making it cheaper for consumers and companies to borrow money.

The central bank cut its rate by a quarter percentage point on Wednesday to 0.5 per cent.

The banks, in turn, cut their prime interest rate by 0.15 percentage points to 2.7 per cent. Why not the whole .25%?

This is the second time … so a total of a .50 reduction by Central bank … resulted in only a .30 reduction in mortgages – the rest goes into profits for banks.

Doesn’t matter? Listen, moves in the prime rate affect variable rate mortgages as well as  home equity lines of credit and other variable-rate forms of borrowing!

By not cutting the prime by the same amount as the Central bank gave to the banks, they pocket .20% (this year) on all credit lines, all variable forms of borrowing as well as mortgages. FREE gift from Mr. Poloz. We shoud be shouting from the rooftops.

A: On a $100,000 mortgage you should have saved $500 a year by now. What you are saving is $300. The other 200? The banks keep it

B: On the average mortgage of $400,000 in Vancouver … banks collect $800 more per year FREE. Money that should have been passed on to the borrower. Untold millions are kept on credit lines … How does that help the economy?

Iran Gets A Huge Benefit, Canada Gets A Slap In The Face

I wondered during the last few years about who advises the US president. Moving out old allies in Egypt, Libya (Iraq first) I felt was foolish. Our lilly-white democratic ideas are fine since we have a century of tradition behind it. Imposing it as a ‘thing to do’ on the fractured societies of the Middle East, was foolish. I mean, to put your child to school in Egypt you have to pay off the teacher … actually the whole system is a series of pay-offs, bribery and corruption. At least – I reasoned – the strong men of the Middle East know their people and are strong where necessary to keep them in place. Arab spring I mused – what about an Arab winter…? Singapore manages its 7 religions and 5 races with an iron hand, not a western-style economy … and it is a darling of the West. There is little democracy there and it works!

This week I wonder no more who advises Obama. He is doing it all by himself. He opposes long time war ally Canada and its  Keystone pipeline which transfers ‘honest clean oil’ through the US in favour of a ‘kill Americans’ society with proven liars and enemies at the top. And the oil? Collected from an oppressed people with no human rights, a government that treats women like cattle and playing a rock song invokes the death penalty.

Major Point: Iran gets its oil onto the open market (thereby depressing the already low price of oil further), it gets its money back when sanctions are lifted, and total access to trade again. The only clout the West had was the sanctions! What gives? I have been pro-American all my life. Proving it with placing real estate investments there when everyone was running for the hills. But I no longer approve of its president. He is the enemy of Canada. Approve and appease the mullahs of Iran and say no to Canada’s clean oil? This deal is a slap in the face to Canada and its Keystone pipeline. The kicker? This weekend the Ayatollah said that the deal does not preclude Iran to keep America as enemy No. 1. Well, say what you will, at least he is honest!

BC Inks A Deal With Petronas

$33 billion in investment. Tax deal guaranteed for 25 years (although future governments can change the tax deal eventually). $9 billion in taxes – all new – is the expectation. There will still be a debate in the government to study the whole package this week.

Major Point: At press time we have not been able to study this potential deal … but it is new taxes, it is thousands of jobs, there are training jobs. All money invested is private money! There is no government money involved. Even though gas prices are low, LNG is the future. The BC Government acted now and we will see a lot less of the USA scooping new clients. Think about it. If BC kept dragging its feet, Australia and the US and others get the jobs, the sales. All these deals that the US/others make diminish the value we have here in the ground.

The Numbers, The Numbers: The North

The BC Northern Real Estate Board reports 2376 property sales in the first six months of 2015, down from the 2637 sales reported in the first half of 2014. Active listings at the end of June stood at 4779 properties up from 4663 at the same time last year.

BCNREB President David Black comments: “The BC Northern Real Estate Board reflects all of the economic realities associated with the significant drop in oil prices. The communities that heavily depend on the oil and gas industries are experiencing some drops in volume; however they have been very strong markets in the past and will rebound. Those communities expecting to benefit the most from LNG had a great year in 2014 and have now returned to traditional volumes but at higher values. They will now have to wait for the beginning of one of these projects to actually realize the projected benefits.” Indeed. Well, this week’s announcement with Petronas (if approved by the legislature) would shorten the wait.


100 Mile House: 157 sales since January. This compares with 156 sales in 2014. It took 109 days for these homes to sell. Active listings at the end of June stood at 853.

Williams Lake: 185 sales compared to 179 in 2014. Homes took – on average – 78 days to sell. Active listings stood at 426.

Quesnel: 122 compared to 125 sales in the first six months of 2014. On average, homes took 94 days to sell. Active listings stood at 336.

Prince Rupert: 109 properties sold so far this year, compared to 197 properties in the first half of 2014. It took these homes 109 days to sell. Active listings as of June 30th stood at 186.

Terrace: 144 properties sold in the first six months of 2015, compared to 201 properties in the same period last year. It  took these homes 70 days to sell.Active listings stood 209.

Kitimat: 40 sales in the first six months of 2015, compared to 94 at this time last year. Half of the 25 single family homes sold so far this year, sold for less than $310,000 and it took these homes 96 days to sell. At the end of June there were 102 active listings.

Houston: 35 properties sold this year, compared to 16 properties in 2014. As of June 30th there were 50 active listings.

Smithers: 132 sales in the first six months of 2015, compared to 134 sales at this time last year. Homes, on average took 80 days to sell. As of June 30th there were 273 active listings.

Burns Lake: 46 properties sales reported sold in the Burns Lake area, compared to 36 properties in the same time period last year. At the end of June there were 161 active listings.

Fort St. James: 29 property sales so far this year, compared with 18 properties at the end of June. There were 95 active listings at June 30.

Fort St. John: 374 sales took place in the first half of 2015, compared to 497 in the first six months of 2014. The 139 single family homes which sold so far this year had a median selling price of $403,500 and it took, on average, 39 days for these homes to sell. As of June 30th there were 556 active listings.

Fort Nelson: There were 17 sales since January 1st, compared to 28 in the same period last year. These homes took, on average,  108 days to sell. At the end of June there were 137 active listings.

Mackenzie: In the first six months of 2015, 36 properties sold compared to 39 to June 30th, 2014. Homes, on average took108 days to sell. As of June 30  th there were 87 properties active listings.

Prince George: 721 properties changed hands so far this year, compared with 695 properties in the first six months of last year. In the western part of the city, the median price of the 144 single family homes he median price was $249,000. In the area east of the Bypass, the 98 single family homes that sold had a median price of $205,000. In the northern part of the city 102 single family homes sold with a median price of $302,000. The 134 single family homes that sold in the southwest section of the city had a median sale price of $339,900. At the end of June there were 699 active listings.

June 2013
June 2014
June 2015
100 Mile House
Williams Lake
Prince Rupert
Burns Lake
Fort St. James
Fort St. John
Fort Nelson
Prince George

Major Point: Prices rose in Ft. St. John, Prince George, Terrace, Smithers and Prince Rupert. All areas that we recommended at one time or another in the last few years. Sales are up in Williams Lake, Houston, Smithers, Burns Lake, and Prince George. Sales are way down in Ft. St. John (201/139), Prince Rupert (141/80).

Hot Property

1. Kamloops 23 units in multifamily apartment building close to shopping, recreation and healthcare. Price: $2,650,000

2. Mesa,  Phoenix – 2 bedroom, 2 baths, 880 sq. feet FP – double carport – Price: $83,000.

Any deal that you think is a good deal (low DP, Owner carries, well priced, well located etc.) can be submitted to be featured here – FREE. Contact info will only be displayed on your password protected website (to stop you from getting bothered by non-members).

Best Mortgage Rates

Dustan Woodhouse (dustan@ourmortgageexpert.comace mortgage broker with Dominion Lending writes: 

“I remain a fan of the variable = Variable Prime – .75%. Net rate 1.95%”

Best rates:

1yr 2.24%

2yr 2.09%

3yr 2.24%

4yr 2.49%

5yr 2.49%

Dustan is a fan and not just from a market expectation, but due to the prepayment penalty increase when you lock in your mortgage. He has been steadfast for the last few years in suggesting going variable.


1. Take a $300,000 mortgage for instance for 5 year fixed. If you wish to break that mortgage at – say – 38 months … your penalty will be 4% of the balance outstanding.

2. Take a 5 year variable, break it at 38 months only a 0.45% of balance penalty.

The Difference? $12,000 vs $1,350!

Major Point: If you plan to break your mortgage, or move, or want to flip … clearly you must go variable. If you worry about the mad world we live in, potentially – even if not likely – rising rates and you want to stay safe and plan to stay where you are for at least 5 years – go long.