IN THIS WEEK’S FACTS BY EMAIL:
- THE NUMBERS – VANCOUVER
- THE NUMBERS – FRASER VALLEY
- EYEBROW RAISER
- HOT PROPERTY – SAANICH
Questions, Questions, Comments
Comment: I noticed the average price on the West Side hitting $4.5 million in July. In your 1998 book Forget About Location, Location, Location you predicted a 6-million-dollar price by 2023. You are right on track. Pretty damn good!
A: Blush. Actually I think I said $7 million and then revised that number in the What, Where, When and How to Buy Real Estate in Canada book in 2009 to $6 million. But think about it … I made that forecast when prices were $278,000! Some thought for all you nervous nellies out there: Prices will continue to climb because we are printing money (like crazy), but there are valleys (and have been -1998/2000, 2008/2009 etc.) and we are heading into one right now.
Tax questions … Galore this week. The big ones centered around my ‘UNFAIR retroactive tax article’, most liked it but had tons of questions, a few thought the retroactive tax was needed (unbelievable!) and one thought that my Hong Kong numbers were wrong.
I will deal with three particularly often-asked questions regarding the tax:
- Q: Should I now go to Victoria, Kelowna or Toronto, Ottawa to buy investment real estate?
What makes you think that a government that can put a retroactive tax on in Vancouver cannot bring it in retroactively in Victoria or Kelowna? It is also my view that BC is a forerunner for Ontario – we are a guinea pig – and it will be brought in across Canada. It also may apply to ALL Canadians within two years. I did mention to go to Seattle or the US, but if Bernie Sanders gets his way (in a Hillary win) they will have a speculation tax there as well … even on stock transactions.
It is not the tax, most people in Canada are not really currently affected by it. It is how we as a Canadian buyer crowd will react to it. The next few months will tell. Remember: Markets become the stories people tell about them.
- Q: My kids wanted to buy a house, but now they are worried. Should they wait?
The number one question … is answered by the above also. I would wait but look at the market closely. A sharp reversal in sales and prices spells: OPPORTUNITY!
- Q: Our house is my nest egg, should I sell now?
I already answered that question many times. It – of course you knew it – depends … If I am past 65 and I am sitting on a profit of $500,000 to $2 million (or more) … TAX FREE, it certainly would be something to consider and soon. I mean – enjoy your money! If on the other hand I am happy where I live and work and play and would not know where else to go, I might as well stay. House prices – over time – have always risen and particularly in this mad negative interest rate world, have continued higher for years and years (with blips in between).
I also was taken to task about my comment on Hong Kong and Singapore, that the 15% (late 2012) and 18% respectively speculation tax was responsible for falling home and land prices there. I was told that sales/prices were actually rising there. Well, no, yes, no and yes. Initially sales in the first month dropped as much as 45%, then did better but stayed low throughout 2013 (see Cushman quote below) and then indeed rebounded in mid-2014 right into 2015. So, far – year over year in 2016 – prices are down 9.8% with development land prices dropping by over 20%. Also, a subscriber mentioned that Singapore brought in three different taxes from 2010 to 2012 before they added the 18% tax. Quite right, prices did not fall the next day, but sales did sharply and prices have been down every year since. In fact, Singapore has seen falling house prices since 2012 – straight down and its economy is in dire straits. Hong Kong saw a sharp decline in sales volume into 2013 and 2014. Cushman … Hong Kong February 2014: “The measures to cool the market proved effective. Without doubt, the crazy rise in property prices would continue in the absence of a hefty increase in property tax,” said John Siu, managing director of Cushman & Wakefield (Hong Kong). “Raising transaction costs also stamped out the speculative fever for shops and car parking spaces,” he said. “As a result, transaction volume has sunk to a level last seen when Hong Kong was hit by the Sars outbreak in 2003.”
For our purposes as investors it is important to note, that whether it is Hong Kong, Singapore or any other market, dramatic changes were the consequence after the intro of the foreign speculation tax. There will also be dramatic consequences here. (Please review our articles on Hong Kong from earlier this year.)
Also, Hong Kong is different than Vancouver in that Mainland Chinese businesses based there use that city to funnel money overseas (i.e. to here) and that there is a special relationship to the rest of Asia as well.
The tax had an immediate effect on sales volumes and an ongoing effect on prices … because the sentiment of buyer expectation changed. We are not in Hong Kong, but we have similarities. Speculation taxes have been imposed worldwide. Why? Because prices – due to the continued and relentless creation of money – have soared in all quality cities WORLDWIDE. Just as we predicted.
Our Real Estate Action Group met Monday night. Here are some comments:
- The Vancouver Real Estate Board president was quoted as saying that some 437 transactions did not close so far because of the tax. But these numbers could be far larger, as the chain of deals is extensive in many areas
- Fraser Valley sales were down 25% over a 2-week period June 26 to July 10 but down 77% since the announcement (since July 25) from 318 sales to 57!
- Abbotsford sales dropped 27% also during that 2-week period and 72% after the announcement
- As we show below the sharpest drop came in single family detached home sales overall.
But since the announcement, the drop in sales is astounding on the Northshore:
As of 11:02pm on Monday August 8th, here are the single family home SOLDS for August 1 – 8 for both 2015 and 2016 in North and West Vancouver:
North Vancouver 2015 – 21 SOLD
North Vancouver 2016 – 5 SOLD
West Vancouver 2015 – 29 SOLD
West Vancouver 2016 – 1 SOLD
(8 days not a month make. We will update you.)
- Said one other realtor that did not have commission losses relating to the tax: “I nor any of my clients have had any deals go sideways due to the tax. My buyer clients are saying though; they’ll be waiting now that they ‘know’ the prices will drop? Like it wasn’t hard enough going up against 6-7 other offers as it was the past 4-5 months, now I’m up against perception that the market will drop (makes me want to retire sometimes).”
I blame Mr. Poloz entirely for our higher home prices, because he kept interest rates low and relentlessly talked down the Canadian dollar. I mused last year that he did that to help Ontario’s manufacturing sector and exports. I also argued that it would not work. Unfortunately, this week’s economic numbers proved me right:
- Canada’s manufacturing sector is struggling, despite all the support it’s received from cheap oil, the low loonie and s stronger USA.
- Factory sales fell in May by 1 per cent, the third monthly drop this year.
- Canada also suffered the steepest monthly decline in GDP since 2009 – economy shrank by 0.6 per cent in May. In three of the first five months of 2016 that we have data for, Canadian real GDP declined on a monthly basis, even when the beleaguered oil sands are taken out of the picture.
- Last Friday, Statistics Canada’s report that we lost 31,000 in July, was a stark contrast to the 10,000 new jobs that were expected. (Also we actually lost 77,000 full time positions, and gained 46,000-part time positions…not the same thing!)
- Ontario in particular was hit hard, losing more than 36,000 positions.
- Hourly wage growth went up just 1.8 per cent over last year, compared to an annual gain of 3.25 per cent in February.
- Finally, Canada’s trade deficit – widened to its largest in history. The trade shortfall hit a record $3.6 billion in June—in fact, of Canada’s 10 largest monthly trade deficits of all time, five have occurred this year alone.
- Non-energy exports suffered a fifth straight monthly decline, and fell 3.5 per cent from the year before, the biggest year-over-year decline since 2012.
Ok, ok, enough with the bad news. But this bad news shows clearly that Canada’s low interest and low dollar policy is not working.
Oh, you want good news? Go to the US. It created 255,000 new jobs, exceeding expectations of 180,000.
So, what will Poloz do? Only he knows, but it is possible (that’s why we mention the whole thing) that he will actually drop interest rates lower, plus make it even tougher for average Canadians to buy houses (double down payments from dollar one, shorten amortization to 20 years or lower) or …?
Only he knows. But he does not know best!
The Numbers, The Numbers – Vancouver
3,226 sales represented a decrease of 19 per cent from the 3,978 sales recorded in July 2015 and a decrease of 27 per cent compared to June 2016 when 4,400 homes sold. This is the first time since January that home sales in the region have registered below 4,000 in a month. However, note, last month’s sales were 6.5 per cent above the 10-year sales average for the month. “Home sale activity showed some moderating signs in late June and this carried into July,” Board President Morrison said. “We’ll wait and watch over the next few months to see if this marks the return of more normal market trends.” Ok, noted, look at the sales graphs and note the sharp decline in detached homes.
The MLS® Home Price Index composite benchmark price for all residential properties in Metro Vancouver stands currently at $930,400. This represents a 33 per cent increase compared to July 2015.
- The benchmark price for detached properties increased 38 per cent from July 2015 to $1,578,300.
- The benchmark price of an apartment property increased 27 per cent from July 2015 to $510,600.
- Sales of detached properties in July 2016 reached 1,077, a decrease of 31 per cent from the 1,559 detached sales recorded in July 2015.
- Sales of apartment properties reached 1,602, a decrease of 7 per cent compared to the 1,729 sales in July 2015.
|Total Avg Price||1,012,900||869,200||+16%|
|New detached price||2,115,600||1,922,800||+10%|
|Used detached price||1,752,900||1,374,500||+27%|
|New condo price||648,700||531,500||+22%|
|Used condo price||566,800||473,500||+20%|
Major Point: Overall, there is a SHARP decline in number of sales – particularly detached (30%), but still strong price increases between 24% and 29%. Also listings are down, which is generally a good sign. We will watch this ratio closely: Rising sales PLUS falling listings RESULT in HIGHER prices. Falling sales PLUS rising listings result in LOWER prices. Right now we have a bit of both. August/September will tell the winner.
Major Point: Rockin, sockin average price! But sales are slowing sharply in both condo and detached product sales. Yet, listings are also still sharply lower. Will be interesting to see what August listings look like. Will sellers flock to the sales desk? The West Side average detached price is now a whopping $4,271,000 up 25%! We think the Westside, West and North Van and Richmond will be most affected by non-closing (foreigner) deals this month.
Major Point: Richmond average detached prices are up 31% but sales of detached homes are DOWN 42%!!
Major Point: Detached prices are up 33%! Listings are down, but only by 9% over last July.
The Numbers, The Numbers – Fraser Valley
For the first time this year, monthly sales did not break a historical record for the Valley. There were 1,962 sales of in July, a decrease of 10 per cent compared to the 2,184 sales in July 2015, and a 32 per cent drop compared to the 2,864 transactions processed in June 2016.
The Board received 3,226 new listings in July, an increase of 15 per cent compared to July of last year.
- The total active inventory for July was 6,012, down 22 per cent from last year’s 7,681 active listings at this time.
- The MLS® HPI benchmark price of a Fraser Valley single family detached home in July was $881,400, an increase of 42 per cent compared to July 2015 when it was $621,100.
- The benchmark price of apartments also increased year-over-year by 25 per cent, going from $192,700 in July 2015 to $240,600 in July 2016.
Crazy detached price increases – in Abbotsford, Mission, White Rock all up 34%. Langley 37%,
Surrey Central: 51%!!!!!!!!!
Strong statistics, prices much higher, sales much higher and listings lower. But multiple offers gone, sales come in more like full price or close to it. The capital city? She is still hot!
10,000 sales – best July ever. Prices for detached are up 21%. Prices for condos are up 9%. Active listings down 31%. Classic scenario for even higher prices. Market very strong. (Foreigner tax here next!)
Sales and prices weaker. 1,746 units in July, a 12.3 per cent decrease over last year and the 20th consecutive month of year-over-year sales. Detached prices 4.5% lower, condo prices 7% lower.
EDMONTON: Even Steven, sales down 15% but prices for detached homes up 4% and condo prices down 3%.
Again, from one end of the country to the other, we have astounding real estate salsas statistics.
Vancouver, the Fraser Valley and Toronto have spectacular price gains! Calgary is down and Edmonton is surprisingly holding in there!
Eyebrow Raiser: Clint Eastwood Says We Are A Pussy Generation
Clint Eastwood, a respected elder statesman in Hollywood, and iron man does not mince words. So, it isn’t surprising that Eastwood would say something incendiary about the current U.S. election. (Interview Esquire magazine). Commenting on the widespread negative reaction aimed at Republican nominee Donald Trump, Eastwood said, “He’s said a lot of dumb things. So have all of them. Both sides. But everybody — the press and everybody’s going, ‘Oh, well, that’s racist,’ and they’re making a big hoodoo out of it. Just f—king get over it. It’s a sad time in history.”
He did not actually endorse Trump (yet), but when asked who he would vote for he said: “I’d have to go for Trump …you know,’ cause she’s declared that she’s gonna follow in Obama’s footsteps. There’s been just too much funny business on both sides of the aisle.”
Our eyebrow raiser is this: He also commented on the difference between the current generation and his: “Secretly, everybody’s getting tired of political correctness, kissing up. That’s the kiss-ass generation we’re in right now. We’re really in a pussy generation. Everybody’s walking on eggshells. We see people accusing people of being racist and all kinds of stuff. When I grew up, those things weren’t called racist.”
Major Point: I agree with him on this: “We are supposed to be free to ‘express our opinions”, but I guess our forefathers did not reckon on social media and the political correctness it imposes.
Try and dare ask: “How much money has been lost on climate change initiatives in Ontario that did not work, or how much are we spending on natives.” Or say: “I like Trump.” You are instantly an antichrist (Environmentalists are holy), a racist and/or an idiot, when all you want to do is ask a question or start a discussion. So, we – the middle class – shut up. We let small interest groups demonstrate the limelight from us often with money we the tax payer provide. We do not have the time to protest, we are too busy making the money to pay the taxes to fund all these ‘necessary’ expenditures.
Least expensive single family home in all of east and west Saanich. 3 bedrooms,1 bathrooms, 1,335 finished, 713 sq. ft. unfinished (downstairs ceiling height 6’11”), square feet, 6,000 sq. ft. lot (50×120). Price: $429,900, reduced from $450,000.
WE RESERVE THE RIGHT to accept or not to accept a specific deal. What makes it a deal? We look for: Low down payments, special discount, and owner carries mortgage, etc. Also note…we do not vet any deal, we just think it may be of interest. You MUST do your own due diligence. Please get contact info from your password-protected website or e-mail Max at firstname.lastname@example.org … and read the disclaimer!
It is finished. Thank you all very much. We will release it shortly … but with all the other thigs going on we put it on the back burner. Shortly you will see the implementation of some of the many suggestions you made.
REAL ESTATE OUTLOOK 2017
MARK YOUR CALENDAR – JUROCK REAL ESTATE OUTLOOK 2017 ON SEPTEMBER 24, 2016 IN VANCOUVER.
Our 24th annual Outlook could be the most important ever. Twelve expert speakers will tell where the opportunities – and the dangers – lie in Canada and the United States in the year ahead.
For early bird tickets (your guests only $30), special seating and more information, click onto www.reoutlook.ca
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