IN THIS WEEK’S FACTS BY EMAIL:
- LAND RUSH 2016: EXPERT SPEAKERS REVEAL OPPORTUNITIES
- WHY VICTORIA IS IN A BOOM AND HOW TO CASH IN ON IT
- FINANCING IS TOUGHER. YOU SHOULD BE TOO
- OPPORTUNITES IN VANCOUVER’S “CRAZY, SCARY” MARKET
- DEMAND OUTSTRIPPING SUPPLY IN PHOENIX
- MILLENNIAL EXODUS FROM VANCOUVER “A MYTH”
- OK, LET’S LOOK AT NOVA SCOTIA
- BEST RATES
Questions, Questions, Comments
Q: The news in Alberta seem to get more and more down. You said you are looking to buy in Alberta. Why?
A: Well, I said we are looking carefully at Alberta with a view that (likely next year) there may be a time when it turns into a good buy again. We always like to buy, when things are down (like we did in Phoenix, etc.).
Interestingly, now Alberta’s premier Notley wants to pursue the northern pipeline … when the NDP as a whole is totally opposed. Reality reigns in Alberta again. But – overall – we always have liked Calgary and Edmonton and still do … but still time to wait.
Q: You said the world is awash in cash and that’s why it is running to hard assets. When will it stop?
A: Well, I do not know that it will. The printing of money makes money cheap and that money is looking for yield. Some of it crazy yield. Last week Argentina (which defaulted on over 600 billion of loans) floated a 70 billion bond and sold it in one day! It’s crazy that this country defaulted on every loan in history. Yet the cash is looking to be applied and with negative interest rates looming everywhere, investors are chasing more and more risky deals. As long as Central banks are into zero or negative rates this will continue. However, the smart money is pouring into real estate all over the world.
Q: I keep hearing that the stock market is overvalued, that real estate in Vancouver and Toronto is overvalued, that oil is going down … and all I see everything s higher? I feel like I missed the boat and want to get back into the stock market.
A: I keep saying I do NOT forecast stock markets. BUT the old adage is “Sell in May and go away”. Watch it! Also Bill Johnson at the World Outlook conference forecast the Canadian dollar to hit 80 cents before going back to 68 cents in September. It’s a mugs game trying to predict interest rates, the dollar… The only thing that is certain is – hard assets are heading higher.
Realtor Never Took The Exam! Licensed Thru Fraud!
As most of you know, my son Marc and his lovely wife Fion (who is fluent in Mandarin and Cantonese) are professional Realtors with Re/Max in Richmond. Last year Marc, Fion and a group of others realtors sat around and discussed the state of the market and its agents. Marc wondered: “I do not know what some of these agents have learned, or who their managers are. Offers are written improperly, subject clauses are used that are not recommended by the RE Council and RE Boards – SOME YOU CAN’T EVEN READ.”
Indeed! Well, now we know why…some realtors never took the exam! One in particular was just suspended for having someone else at the University take his place and write the exam for him! The Real Estate Council of B.C. suspended the license of a Langley realtor last week. According to an order posted on the council’s website, the realtor admitted he didn’t take the test himself after he was confronted with a discrepancy between a passport photo shown at the exam and the photograph on his website.
More Land Rush 2016: Expert Speakers Reveal Opportunities
In this issue we present highlights of the remaining speakers at Jurock Land Rush 2016 held April 2 in Vancouver, with experts discussing opportunities – and challenges – in Victoria, Metro Vancouver, Phoenix and today’s mortgage market. (CDs are still available at subscriber discount. Ask firstname.lastname@example.org.)
Why Victoria Is In A Boom And How To Cash In On It
Victoria soared 53% this spring compared to 2015 and, while prices are accelerating, values in the capital remain very low compared to Metro Vancouver – the gap is so pronounced that cashing-out Vancouverites are now the biggest buyers in Victoria, according to Rick Hoogendorn, a developer, investor and realtor with Royal LePage Coast Capital Realty in Victoria.
There is now a $768,000 spread between the average detached house price in Victoria and Metro Vancouver, Hoogendorn told Land Rush and the gap widens to more than $2 million if you compare the west side of Vancouver to Victoria, he said. He noted a mortgage-free retiree could sell their old 2-bedroom bungalow in Vancouver’s Dunbar area and purchase a 7-bedroom ocean view home in prestigious Oak Bay and put $1.4 million in the bank, tax free.
Buyers from Metro Vancouver bought 25% of all homes sold in Victoria this year and 52% of the more expensive houses, he said. In some ways, Vancouver buyers are to Victoria what China buyers are to Vancouver. (Only 3% of Asian immigrants move to Victoria.)
Price appreciation in Victoria, which has been flat for seven years, took off in 2015 and is now being seen in multiple offers – even “bully offers” wherein a buyer bids over list with no subjects in a one-hour take-it-or-leave-it offer – with houses selling for tens of thousands of dollars over list price. Which sounds a lot like Vancouver.
A common strategy for Victoria vendors now is to hold an open house on Thursday or Friday, collect all the bids by Tuesday and then decide which one to accept. Two years ago that would have been a fantasy.
Yet, Victoria prices are just now getting back to what they were before the 2008 crash – and Hoogendorn suggests there is plenty of room upside, especially in higher-end housing. There is a lack of inventory, with MLS listings down 30% in March from a year earlier, to just 2,600 units. Many neighbourhoods have no homes for sale.
For those who want to play in the Victoria market but lack the cash for a luxury home, Hoogendorn and his partners are offering limited partnerships in new rental buildings in Langford. Investors can get with $25,000 to share in, for example, a purpose-built 30-unit rental project in Langford. The Greater Victoria rental vacancy rate is back to below 1%, Hoogendorn noted, and their new rental projects are renting out quickly.
Major Point: Victoria is not the only Island centre going great guns this year. In March, the benchmark price of a single-family house on the Island north of Victoria was $379,375, up 13% from one year ago. Nanaimo’s detached prices rose 5.9% to $367,000; Parksville-Qualicum prices rise 8.6% to $391,400; the Campbell River house price is $281,800, a 2.6% increase, and the Comox Valley, is $354,100, up 9.39%. In March, 520 detached houses sold on the Island, a 24% year-over-year increase. Active listings were down 26% to 1,599.
Financing Is Tougher. You Should Be Too
Kyle Green, the No. 1 mortgage broker with Alliance Meridien Mortgage Services Inc. – and a savvy investor in his own right – told Land Rush that it is harder for investors to get financing today. Eighty five per cent of Green’s clients are investors.
“Hard stop. RBC won’t finance an investor who has more than five rental properties,” Green said, adding that other major banks have always restricted multi-property financing.
Still, with prime at 2.7% and Metro Vancouver home price rising by 24% in the past year, investors are clamouring to get into the market or expand their portfolio, he said.
So how do you get the money if you are poor credit, are self-employed or a full-time investor? If the banks say no, Green advises tapping the line of credit on your own home, the advantages being there is no qualifying and the interest paid on it is tax deductible when you use the LOC to invest in other properties.
Private lenders are also in the mortgage market and, though their lending rates can be 5% or more above prime, the financing could still make sense amidst the “insane” appreciation being seen now in Metro Vancouver, he said.
Having flexible financing in place is important now, Green said, because of the feeding frenzy in Metro Vancouver. “I have clients who have been outbid on 12 properties,” he said.
Green also made a further observation: when he tracked the movement in the Canadian dollar he found that there was a direct correlation in the fall of the loonie and the spike in Metro Vancouver house prices. “When the dollar fell to 70 cents, home sales took off,” he said. Further evidence, Green said, of the power of foreign investors in the market.
Opportunites In Vancouver’s “Crazy, Scary” Market
Brent Roberts of Royal LePage is the No. 1 realtor in the Fraser Valley and he told Land Rush there are great opportunities in today’s volatile Valley market, where prices are increasing rapidly and many properties are seeing multiple bids above the list price. “Our real estate is making more money than we are,” he said.
While calling the Valley market “scary” and “crazy” he also said investors would have to be nuts to not jump in.
“There are great opportunities,” he said, “but you have to take action now. Don’t hesitate. Look for deals under every rock.”
He said some vendors simply don’t realize what is happening, that their house is now worth $50,000 to $60,000 more now than it was in January, when they first thought of listing. “You don’t want to take advantage of people, but should take advantage of this market.”
Roberts, who bought two Valley houses the week he spoke at Land Rush, is a long-term investor but he said flippers could also make a lot of money in the Fraser Valley this year.
Kelly Fry, of Kelly Fry Personal Real Estate Corp., is an investor who specializes in “rent-to-own” strategies and is also active in the Fraser Valley. Fry said the current conditions are good news and bad news for rent-to-own investors. The good news is there are a lot of investors, including cash-heavy former homeowners who recently sold. The bad news is it is so hard to buy houses because of the multiple, no subject bids that are being seen across Metro Vancouver. Rent-to-own, she conceded, works best when you have motivated vendors, which is not the case in the current seller’s market.
Demand Outstripping Supply In Phoenix
It may be hard to lure Canadian investors away from white-hot Metro Vancouver, but ace Phoenix realtor Todd Smith of the AZ Performance Realty Team said the fast-growing Arizona city is still a good buy.
Smith said the new Phoenix boom started slowly in 2004 and has built up steam, fueled by a population boom and demand from “boomerangers” (the 350,000 former Phoenix homeowners who lost their houses during the 2008 crash and are now able to get back in the market), and the 63,000 millennials from across the U.S. who rushed to fill jobs in Phoenix last year alone.
But home listings are down, falling to 22,000 in March from 29,000 last year. Builders have bought 1,085 new spec homes to the market this year so far, but at prices much higher than resale values because of soaring land values. Meanwhile, rents are rising “some tenants are bidding higher than the rent to get in,” with average detached house rents now at $1,500 per month, compared to $1,300 a year ago.
The average resale detached house in Phoenix now sells for $288,000, compared to $262,000 in March 2015, Smith added.
Major Point: Todd just sold one of my condos for double what we paid for it 3 years ago. But that is still 50% where the price was in 2008.
Millennial Exodus From Vancouver “A Myth”
Media speculation that millennials are leaving Vancouver in droves because of soaring house prices is a myth, according to the BC Real Estate Association and we hardily concur.
Note this: the highest U.S. concentration of those aged 20-34 is in Manhattan, which has the highest home prices and rents in America.
If you have to ask why a millennial would want to live in the big Apple, you don’t remember being young. The same holds true in Vancouver. Sure, it is cheaper to buy a house in Abbotsford or Spuzzum, but that is not where the action is and the jobs are. The action is in Sunset Beach and Robsonstraus and the clubs and pubs of Granville, Yaletown and Gastown; the jobs are in high-tech, which is spinning more high-paying Vancouver positions than LNG and mining.
The BCREA laid out the hard numbers.
- Millennials are now the most populous age group in the City of Vancouver.
- The population of 20-34 year olds has grown significantly in both the City of Vancouver (+9.5%) and Metro Vancouver (+18%) over the past decade.
- The rate of home ownership for younger households was up significantly during the last two census periods.
- Millennials are the largest demographic cohort since the baby boomers.
- In 2015, there were an estimated 569,000 people aged 20-34 residing in Metro Vancouver.
Major Point: As I mentioned at Landrush, millennials are the future. Next to foreign buyers, millennials will be a driving force in the Metro Vancouver housing market for years, in both sales and rentals. Many of them are getting help from the “bank of mom and dad” to buy homes, with the parents tapping into their own home equity.
But make no mistake – their likes and dislikes better be studied and listened to…in real estate and most other purchases as well.
Ok, Let’s Look At Nova Scotia
Nova Scotia is about the only Atlantic province seeing economic growth this year, albeit mostly because in a rise in the price of lobster, which is a rather fragile hook. A lot of former Alberta oil workers are also streaming back to Nova Scotia, which has aided the rental and housing market.
We like Nova Scotia. Halifax is fun and lively, there is plenty of accessible waterfront and real estate is inexpensive. In theory, you could sell your mortgage-free house in Vancouver and buy a nice home and four rental properties in and around Halifax with the same money.
The average detached house price in Halifax-Dartmouth is now $289,245, which is up 4% from this time last year. The luxury-detached market is defined at $500,000 and up, and these can include large old Victorians on the Halifax Peninsula waterfront.
Several new condo developments are being built on the Dartmouth waterfront near Halifax, with prices in the $250,000 to $300,000 range being the top sellers. In Halifax, the overall vacancy rate is 3.4%, down from 3.8% in October 2014, according to Canada Mortgage and Housing Corp.
The Nova Scotia Association of Realtors reported 719 MLS sales in March 2016, up 18.7% on a year-over-year basis. The average price of homes sold across Nova Scotia in March dipped 1.3% from a year earlier to $223,520. New listings numbered 1,866 units in March, up 29.9% from a year ago.
April 27, 2016
1. 5 Residential Lots and One Commercial building lot in the city of Wells, BC. $9,900 each. They can be bought separate or as a package deal! Wells is located northeast of Quesnel close to historic Barkerville and is surrounded by Lakes and a Park.
2. Blackwater Spruce Ranch in the Blackwater Region north of Quesnel, 80 acres, Ranch House, 4 cabins, barn, corrals, water rights, great setting for a B & B or Guest Ranch. Asking $399,000.
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