IN THIS WEEK’S FACTS BY EMAIL:
- NUMBERS: SALES WAY DOWN. PRICES UP OVER SEPTEMBER 2015, DOWN OVER APRIL 2016
- OUTLOOK CONFERENCE SPEAKERS OUTLINED THE 2017 OPPORTUNITIES
- OZZIE JUROCK: THE ECONOMY AND HOUSING MARKETS
- KYLE GREEN: GET REFINANCED NOW!
- CHARAN SETHI: SURREY IS THE FUTURE
- RAY LEVESQUE AND DAVID SEINBERG: INVEST WHERE YOU RETIRE.
- TREVOR BOLIN: THE NORTHEAST B.C. BOOM
- RICK HOOGENDOORN: VICTORIA REAL ESTATE OPPORTUNITIES
- BIG PENSION FUNDS BAILING OUT OF METRO VANCOUVER
- PRIZED ASSETS ON BLOCK AS BEAN COUNTERS PLAY ODDS
- TRUMP OPENING SIGNALS HOTEL BOOM ACROSS B.C.
The Numbers, The Numbers – Vancouver – Totals
Once more into the breach: Clearly Vancouver detached home sales and prices were in a freefall since April … nothing to do with the tax!!! The tax just aggravated the downturn. Single family home sales are down almost 50% across the board from last year … down up to 73% over last April!
|Vancouver||Sep. 2016||Sep. 2015||%||Apr. 2016||%|
Major Point: The overall average price is shown to have risen by 1% over last September but it dropped 22% against the price achieved in April! SF prices are still reported as being 9% higher than September 2015 but 15% lower than in April of this year! The numbers to watch? CHECK OUT SF SALES – THEY ARE 68% LOWER THAN APRIL AND STILL A WHOPPING 47% LOWER THAN LAST SEPTEMBER. LOOK BELOW AT THE WESTSIDE, EASTSIDE AND RICHMOND SF SALES COMPARED TO APRIL!
|SUBURBS SALES||Sep. 2016||Sep. 2015||%||Apr. 2016||%|
|West Side SF||62||125||-50%||229||-73%|
|East Side SF||67||141||-53%||211||-68%|
Major Point: While overall sales are down in August over April, that is not the case when April is measured against September. We are way down in sales in Richmond, the East and West side when measured against the April sales.
|SUBURBS PRICES||Sep. 2016||Sep. 2015||%||Apr. 2016||%|
|West Side SF||3,703,000||3,165,000||+17%||4,184,000||-12%|
|West Side Condo||820,800||677,000||+21%||911,000||-10%|
|East Side SF||1,590,600||1,341,100||+30%||1,703,000||-07%|
|East Side Condo||493,000||422,000||+17%||515,000||-04%|
Major Point: Well, we wanted to see September numbers and here they are. They are bad: SF sales down 47%, condo sales down 19%, listings are rising. Lower prices ahead.
As last month: Study the area you are interested in. Higher a quality Realtor. Maybe stay on the sidelines and check out October – see whether the slide continues. No need to rush … buy the deal of a lifetime only.
Outlook Delegates Heard The Facts As Speakers Outlined 2017 Opportunities
The 24th annual Jurock Outlook 2017 conference attracted a full house to the Marriott Pinnacle Hotel in Vancouver last week and the delegates and investors heard what they came to hear: where the opportunities and the pitfalls await in this pivotal real estate year ahead. A dozen experts provided information that was important, timely and, in some cases, eerily predictive.
Complete CDs of Outlook 2017 are available (Jurock.com – use Coupon Code CDS17) but here are some highlights of what was one of our most successful and thrilling conferences to date. Watch next week’s Insider for the rest of the Outlook report.
Ozzie Jurock: Best Investment Opportunities
Ozzie Jurock explained the inherent value of real estate as hedge against what he called the “massive unreported” inflation index that is rising much, much faster than Canada’s official core/headline rate of around 2%. He also expanded on his view that we live in an unusual world of higher inflation of hard asset prices while at the same time we are in a deflation of commodity prices (printing money versus real economy). In a far ranging discussion, Jurock predicted that Canada and the world will see more workers striking for higher wages in an effort to catch up with price inflation; he forecast that U.S. real estate will provide the best positive cash flow for investors in 2017; that Vancouver is becoming a financial power centre; and that virtual and augmented reality was the next big thing in consumer high technology…and yes…real estate marketing.
However, the publisher of the Insider also warned that real estate financing will get tougher even as the Canadian government is forced to keep lending rates low. He believes with ace oil analyst Josef Schachter that the price of oil will fall soon to $35 – even lower – a barrel and the Canadian dollar, “which dances with the petro price” will also sink, he forecast … to as low as 68 cents (US) next year.
For 2017, Jurock is bullish on the U.S. real estate market. He still likes Phoenix because of the low housing prices, and made a strong recommendation for Seattle for 2017 because of buyers from China are driving prices higher. He believes the US Fed will raise interest rates late this year to begin a three-stage increase, but said the higher rates will not make much difference in a rising real estate market. “We believe in the U.S.”, he said.
In Canada, Jurock explained that some markets will benefit from a lower Canadian dollar, which will attract foreign buyers, including Americans.
Jurock’s top small town picks for investors in Canada include Whistler, where the Whistler ski business has been sold to the operators of Vail, Colorado. American investors are already helping in Whistler’s real estate recovery.
His other picks for investors include, the Sunshine Coast, Kamloops in the Thompson Okanagan and Nanaimo and Parksville on Vancouver Island. He also likes Langley, Mission, Surrey in the Fraser Valley and Coquitlam, where the Evergreen line begins running this year. New Westminster is also promising, as are condominiums anywhere in Metro Vancouver. The potential of defaults in Richmond – where he said some investors are underwater on mortgages – could provide opportunities, he added.
Buy manufactured housing parks in the Okanagan and Vancouver Island he said. Buy cash-flow positive rental condominiums in the same markets. Look at student housing investments.
He doubts that the “dastardly” retroactive foreign buyer tax on expensive residential property will fail by itself to cool Metro Vancouver’s housing market. The market was already cooling dramatically before the tax came in. He quoted Helmut Pastrick, BC Central CU chief economist as saying: “…the market may pick up once the initial shock of the August tax wanes – in 6 months or so.”
Jurock expects the foreign tax will eventually spread to Toronto and eventually to every major city in Canada. It is too sexy for cash strapped Governments not (while looking holy) to make the tax grab. But that grab together with other grabs (will be announced this week) and further tightening mortgages for the first time buyer (they are guilty for the housing crisis?!!) may well result in a recession. If they are overly successful … they will face their unintended consequences of a more serious recession … aggravated by their assault on housing. No initiatives are forthcoming for increasing supply nationally. BC is promising a low cost housing project investment of $500 million … a major mistake.
On a positive note, he noted that there are 350,000 Hong Kong residents that are holding a Canadian passport which can be foreign buyers – yet are not due to pay the tax.
He told investors to take advantage of Canada’s extremely low lending rates. Insured mortgages on commercial rental investments, he said, are available as low as 1.77% for 10 years. Jurock firmly believes that housing prices will continue to increase eventually. While Canada’s economic statistics are extremely poor (from manufacturing to retail to commodities), BC is doing ‘just fine’. In-migration and immigration are high and rising, B.C. has the strongest economy in the country and it has the lowest unemployment rate in the country. Also, there is low inventory of existing housing and recent housing starts are tracking lower, the rental vacancy is below 1% and rental rates have never declined in 25 years.
Still, he feels that (as he said in January – to have 30% to 50% in cash as an investor is a good thing in these crazy times). Further, sell your losers, go long on your mortgages. Do not fear higher rates, but fear getting your existing mortgages re-financed. Fear not being able to qualify for ANY normal mortgage, fear paying much higher premiums (who? The first time buyer), fear government intervention.
Major Point: He cautioned all investors NOT to do anything for the next two months. No need to rush … buy the deal of a lifetime only. Look at the statistics, evaluate more and more mortgage tightening rules, more and more pressure on housing markets. Make sure that we get out of the downturn that we surely are in now … first … before investing. But after the turn, the next 12 – 17 months following may be great times to invest in both BC and Alberta.
Trevor Bolin: The Northeast Bicolor
Just four days after Fort St. John councilor and Re/Max Realtor Trevor Bolin told Outlook delegates that now was the time to invest in northeast B.C., the federal government announced approval of the biggest liquefied natural gas project in B.C.’s history.
The long-awaited greenlight of the $36 billion Pacific NorthWest LNG project will require hundreds of new gas wells, hundreds of miles of pipelines and thousands of jobs for the northeast and northwest underlined Brolin’s confident advice to investors.
Fort St. John is the biggest city in the Northeast. Only 22 square miles with just 22,000 people, it is packed with opportunity, Brolin explained. Just 7 km from town is the $9 billion Site C dam being built by BC Hydro, and close by are some of the world’s largest natural gas fields, holding 35% of all North American reserves. Recently, a giant oil discovery indicated the area may have the second-largest oil reserves in Canada outside of Alberta. And the surrounding country boasts the biggest and most productive wheat fields in British Columbia, Brolin explained.
The biggest Canadian Tire store in Canada has just opened, he said, and the commercial and residential horizons are endless. He pointed to new strata buildings, built for rental investors that have 0 per cent vacancies as an example of where the investment action could concentrate. “It’s still all about the North,” Brolin said.
Ray Levesque and David Seinberg: Invest where you retire.
Ray Levesque of Capital Street Capital and lawyer David Siebenga told delegates about a strategy of investing in a unique retirement living property that may (in their view) represent a wave of the future. The Innovation Village Community of Care, being developed by WestStone central Surrey – B.C.’s fastest growing city – allows investors to purchase units for retirees who are able to live with their spouses through all the stages of retirement. Not only do investors share in the ongoing income from the Innovation Village, but they are able to acquire a retirement home for themselves or their aged loved ones, the pair explained. “Couples that move in together can stay together,” Levesque said.
Innovation Village, adjacent to the Surrey Memorial Hospital, covers more than 555,000 square feet and includes medical offices, associated commercial space and a full spectrum of retirement homes from independent living apartments to those requiring full-time medical assistance. The investment is RRSP qualified and is presented to investors by a BC Securities Commission qualified offering memorandum. The projected earnings are 17% and with an estimated 3% per annum paid in 6-month installments. The minimum investment is $10,000.
Charan Sethi: Focus on Central Surrey
The founder and president of Tien Sher, one of Surrey’s largest developers, outlined the investment opportunities in Central Surrey condominiums. As many Real Estate Action Group members can attest, they have proved a strong real estate play. Tien Sher’s latest projects under construction include the Venue, where just 16 of the original 140 condominiums are left, most for less than $250,000. In future, Tien Sher will undertake a lot of quality development in and around King George highway and 108, including the Flamingo Hotel site.
Kyle Green, Mortgage Alliance Meridian Mortgage Service Inc.
All real estate investing depends on access to funding and Kyle Green, one of Canada’s top mortgage brokers, told the Outlook Conference that it is becoming more difficult to get financing for investment projects.
Green said that, with today’s high real estate valuations and low interest rates, now is the time to do refinancing. You will get the top appraisals today based on local comparables. He said, it is doubtful the Bank of Canada will raise rates for at least a year and lenders are more approachable now than they will be a few months from now. Green also advised that variable rate mortgages are the way to go now, with rates available at prime minus .5%, or 2.2%.
Mortgage insurers are getting nervous about housing values, particularly in Metro Vancouver, Green noted. He advised rental investors with multiple properties to consider commercial financing, which is based on the strength of the property, not on the individual’s income. Twenty-five per cent to 35% down payments are expected for commercial deals, he said, but low insured mortgage rates are available on commercial rental properties.
The major banks are busy rewriting their requirements for investor loans, he added. While most will offer 70% to 80% LTV financing, TD bank does not like to lend on more than three rental properties; Bank of Montreal and National Bank both cap at 16 doors; while CIBC will finance up to seven rental properties and RCB has a maximum of five rentals.
Scotiabank, once one of the more welcoming lenders, now offers 80% LTV on a maximum of 10 rental properties.
The message: As Ozzie stated … take action now to refinance existing properties and tie down financing on new deals before the lending window closes even tighter.
Rick Hoogendoorn: Victoria real estate opportunities
In an entertaining address spiked with celebrity impersonations, Rick Hoogendoorm, joined by partner Cheri Crause of Royal LePage Coast Capital Realty in Victoria, explained why B.C.’s capital is the place to be buying residential real estate right now. The average price of a Victoria detached house is now $543,000, he noted, which is $1.5 million less than the average house in Vancouver. And Victoria, he said, is still way undervalued. He cited numerous examples of Victoria houses that faced multiple bids and sold for up to $330,000 over the list price. The downside is that there is a severe shortage of both houses for sale and apartments for rent: many popular Victoria neighbourhoods have no homes for sale and the overall rental vacancy rate is near 0 per cent, the pair noted.
Fortunately, there is room for rental investors. Hoogendoorm and his team are building investor-ready rental apartments in the fast-growing Colwood area. They have completed and fully rented a 20-unit complex and recently finished a second, a third is in the works. The apartments are all two-bedroom units and aimed squarely at the retiree market that is growing rapidly in the Victoria area.
Big Pension Funds Bailing Out Of Metro Vancouver
PRIZED ASSETS ON THE MARKET AS BEAN COUNTERS PLAY ODDS
It could be argued that the acquisition managers at Canada’s biggest pension fund are the smartest guys in the real estate room. Responsible for billions of dollars in investing over long-term horizons, it is their job to pick the right property in the right place and decide when to buy and, more important, when to sell.
Which is why it is interesting to see two of Canada’s fattest pension funds cashing out of Metro Vancouver, selling some outstanding income-producing assets.
- Healthcare of Ontario Pension Funds (HOOP) has shoved Willingdon Park, a one million square foot, nine-office tower business park in Burnaby onto the market. Asking price is in the $400 million range, sources say. It was valued at around $160 million when HOOP acquired it in 2004.
- Ivanhoé Cambridge, the real estate investing arm of Caisse de dépôt et placement du Québec, is selling Metrotower 1 and 2, in Burnaby’s white-hot Metrotown neighbourhood. The combined price of the two new towers – 28 storeys and 30 storeys – is also in the $400 million stratosphere. Ivanhoé Cambridge sold a much smaller Burnaby office tower last year for $205 million and has already sold the Hotel Vancouver.
Kirk Kuester, vice-president of Colliers International said the big pensions funds are not only looking to cash out into the unprecedented high prices in Metro Vancouver but are spooked by the skinny capitalization rates. Cap rates, a measure of yield on property investments, have fallen to as low as 3.5% for office properties in Vancouver, compared to 4.3% a year ago.
The pension funds are not alone in looking for a Vancouver exit.
- This year, giant Brookfield Property Partners LP’s sold the Royal Centre office tower in the heart of downtown Vancouver for $428 billion; and the
- Bentall Group unloaded four downtown office towers to a Chinese insurance company for $1 billion in May.
“The vendors are looking for better long-term yields,” Kuester said, and suggested that Calgary, where low real estate prices and a rising oil prices and potentially higher returns, could prove tempting.
Major Point: We have advised small residential apartment building owners to sell since February. Now (some) are clamoring to get out … at much lower values.
Trump Opening Signals Hotel Boom Across B.C.
The Trump International Hotel and Tower is preparing for the grand opening of the $360 million project by mid-November (timing with the U.S. election is purely coincidental) and it is indicative of a hotel building and acquisition boom across B.C.
“The lift in hotel investment in BC is because the market is performing really well,” said analyst Carrie Russell of HVS International. “RevPAR (revenue per available room) is up throughout the province. That is compared to some really poor performance in Alberta and Saskatchewan so investors need to find somewhere to put their money and BC seems like a much better option.”
According to the most recent data there are four hotels that have opened in the last 12 months in B.C.
- Holiday Inn Express & Suites Victoria Colwood
- Sandman Abbotsford Airport
- Holiday Inn Express & Suites Terrace
- Home2 Suites Fort St John
And more are under construction:
- Trump hotel in Vancouver, these include the
- Douglas in Vancouver, the
- JW Marriot Parq next to BC Place Stadium, Vancouver; a
- Best Western in Fort St. John and a
- Marriott in downtown Prince George.
Major Point: BOOM!
Once more: We have created the handout for our OUTLOOK CONFERENCE:
- 100 homes under $100,000 in Canada and
- 100 homes under $100,000 in the US (primarily Washington and Phoenix)
Write to firstname.lastname@example.org for your copy of each in PDF format
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 email@example.com … and read the disclaimer!
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