“Always remember that you are absolutely unique. Just like everyone else.” -Margaret Mead
THIS WEEK’S FACTS BY EMAIL:
- QUESTIONS, QUESTIONS
- HARRY DENT SAYS VANCOUVER IS THE BIGGEST BUBBLE IN HISTORY
- CMHC DISAGREES BUT WARNS ABOUT TORONTO
- FINANCING A PAST GROW-OP
- HOT PROPERTIES
- BEST RATES
Q: Someone called from your office regarding a cell number for texting?
A: Yes, we have a few people saying they cannot listen to our Hotline, or do not know when it is updated. Also, many subscribers are still not aware that
they can research the Insider Facts by Email online. So we are thinking of texting you a quick note – something like: “Hotline updated today at 10AM” and topic … or a quick note … “Facts by email uploaded” – no
more than 2 texts per week.
Q: Are you still down on Mexico?
I am not down on Mexico. As a matter of fact I spent almost a year in Manzanillo, loved the people, the beach, the fishing, the golf, the food. By all
means go there do that … BUT DO NOT BUY ANY REAL ESTATE! Our advice remains, buy real estate in the US or Canada … have a nice holiday in Mexico or
South America. You will remain happy. The horror stories about corruption – outright robbery by Notaries and a complicated antiquated Napoleonic legal
system abound. Said a very high up individual to me recently: “Take all the money you want to lose and buy real estate in Mexico. You’ll get your wish.”
Toronto, Regina And Winnipeg Too Hot … Vancouver Not?!
‘Thus sprach CMHC’ this week: “Toronto’s red-hot housing market is now at high risk and overvalued.”
and Regina are also all now considered high-risk markets. Why? Well, says CMHC: ”
In Toronto, the high overall risk reflects a combination of price acceleration and overvaluation. The high level of risk in Winnipeg reflects risks of overvaluation and overbuilding, while in Regina it reflects price acceleration,
overvaluation and overbuilding, particularly of condominium apartments.”
For Vancouver, the country’s most expensive housing market, CMHC said there is a low risk of any sort of correction.
“Despite high Vancouver home prices, demand for housing across the price spectrum is supported by a growing population and growth in personal disposable income as well as by the limited supply of land. First-time home buyers focus on
lower-priced options in suburban locales, whereas at the high end of the price spectrum, demand is supported by high net-worth residents or repeat
buyers with significant equity in their homes.”
It is surprising for CMHC to come out with this “high risk” warning. More surprising is that it does not give a warning for Vancouver. We felt last year
that Toronto was overvalued, but it stayed the course through immigration and a much lower cost base. For CMHC to single out these 3 markets (out of a
report on 15 markets) and not Vancouver raises my eyebrows. Well, there is another eyebrow raiser in Mr. Harry Dent…
Where Harry Disagrees
“Vancouver is my favorite city in North America … BUT … I’m not the least bit surprised that Vancouver has become a prime example of the
global real estate bubble, and one of the single most bubbly cities on the planet.”
The argument – he says – is always this: “They (Bubbly cities) ain’t making any more real estate. And the people still want what’s there, so the best spots will go up, up, up. Oh, and we’re the
best.” And he adds:
“I’ve heard the same thing in any bubble city I’ve been to. New York, Miami, San Francisco, L.A., Singapore, Shanghai, Beijing, London, and Paris –
they all think they’re invincible. And I’m sure Tokyo’s residents said the same at the height of their boom in 1989. Now, 26 years later, their real
estate is still down 60%. Commercial real estate, down 80%.
“Make no mistake, Vancouver will pop just like all the others.”(!)
He believes and we at JREI do not disagree that what’s happening in Vancouver and so many other bubbly cities … is that … tons of wealthy
international immigrants and speculators – and even some national migrants – come in and jack the costs up. Harry:
“Then the locals start demanding that the government restrict these real estate purchases. As citizens, they increasingly demand the government
represent them, not these ‘damn foreigner’. These ‘damn foreigners’ are primarily wealthy Chinese foreign buyers picking up the nicest real estate – in
this case, downtown areas and the poshest suburb across the Bay in West Vancouver.”
He really gets going with this: “…but when real estate gets so expensive that even hardworking, upper-middle-class residents can’t afford to live there? Let alone buy a house?
It’s crazy! I knew Vancouver had issues. I’ve been saying it’s in a bubble for years.”
Vancouver West, the most expensive downtown area, has seen prices go up 88% from 2010 to 2015. In Canadian dollars, that’s from $1.58 million to about
$2.97 million. Or in U.S. dollars, close to $2.26 million.
West Vancouver, a separate spot across the bay, is nearly as high at $2.37 million Canadian dollars ($1.825 million USD). And the somewhat more affordable
east section of downtown has gone from $755,000 to $1.238 million ($953,000 USD). Is that ridiculous or what!?”
His conclusion: “I don’t need to beat this horse to death, but anyone with eyeballs can see that what’s going on in Vancouver is a bubble, plain and
simple. The whole damn city is inflated! Vancouver is ready to pop!” Oh and he adds: “I guarantee it!”
Major Point: Harry hasn’t liked real estate for a while. He told subscribers to his newsletter to sell as early as 2002 to get out of real estate and was vindicated
in the US in 2009. But he continued to forecast a new collapse in the states and in Canada – even in the face of a strong real estate price recovery (when
we at JREI preached buy the US in 2011).
He also has written numerous books … the latest being the “Depression of 2010” in which he sees the DOW as low as 6,000. This week he re-iterated that
forecast by saying “Take Immediate Action – we’ll
see an historic drop to 6,000 … and when the dust settles – it’ll plummet to 3,300. Along the way, we’ll see another real estate collapse,
gold will sink to $750 an ounce and unemployment will skyrocket … It’s going to get ugly.”
His prime focus is demographics. We believe that that basis alone will not predict real estate values. Real Estate is primarily local in nature. Unlike in
the past older people are staying in their homes, preferring the single-family home to a condo. Inward migration distorts the local picture further.
However, while we do not have to agree with all of his conclusions we do NEED to listen to Harry. He is the only forecaster who was steadfast in his
prediction of interest rates staying low as well in his view that a strong US dollar will be the outcome.
Best Mortgage Rates This Week
“Lately I have had a few ex grow op files come onto my desk,”
says Kyle Green of Mortgage Alliance (778-373-5441, Kyle@GreenMortgageTeam.ca). “I figured it would be a good idea to let people know what to expect when financing an ex grow op.”
“First of all, most major banks will not touch them at all. Most of our success with getting these financed has been through Credit Unions. Of the ~40
lenders we work with, there are only about 3 that will consider an ex grow op. We found that lenders were very nervous and even if the property had
environmental study done and re-occupancy from the city, these are still not a slam dunk even with these lenders. In fact, they often require:
1. Higher interest rate. Varied from .15% – 1% of a premium
2. CMHC insurance even with 20%+ down. On one of our files this was over $8,000.
3. More down payment, 25%+
4. A combination of the above
If you are getting an awesome deal on the purchase, it may still be worth it even with these additional costs, but make sure some of these expenses are
factored in when making a decision to write an offer on an ex grow op.
Also, bear in mind that if you wish to sell the property at a later date, it is highly likely that future purchasers will run into the same problems with
financing which may negatively impact resale ability.”
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The Teranet/National Bank house price index hit a new record high in July, largely due to strong growth in the Toronto area and
Vancouver, while many other cities struggled with falling house prices.
The index rose 1.2 per cent over the past month, with Ontario the clear leader in house price growth. Hamilton (up 2.7 per cent on the month), Toronto
(up 2.3 per cent) and Ottawa (up 2.25 per cent) saw the strongest price growth in the last month, among 11 major cities surveyed. BUT: The
Teranet/National Bank house price index shows house prices outside Toronto and Vancouver declined slightly, by an average of 0.1 per cent, over the
Conclusion: Take out Toronto and Vancouver … prices are actually falling everywhere else across the country … slightly.