GET READY FOR THE EXTRAORDINARY 2017 LAND RUSH EVENT – MARCH 4, 2017
Land Rush 2017, held all day March 4 in Vancouver.
While the Springboard will get you started on taking action and achieving real estate success this year, Land Rush will deliver information that could serve you for a lifetime.
I am not kidding.
Land Rush 2017 is shaping up to be the one of the most important real estate events of all time, certainly in the volatile Vancouver market.
We have drawn together 12 expert speakers, including, ahem, Ozzie Jurock, and they will tell, in detail, where to make money this year (also where not to lose it!) and for the long term. Land Rush dissects local conditions, and Canadian and U.S. real estate markets to answer all the question investors need to know.
Some exhibit booth space is still available and ticket sales are already pointing to another full house event.
IN THIS WEEK’S FACTS BY EMAIL:
- QUESTIONS, QUESTIONS
- WORLD OUTLOOK CONFERENCE REDUX
- JUST SAYING: VANCOUVER SF HOUSE SALES AND PRICES MAY NOT RECOVER IN 2017
- FOREIGN-BUYER WORK PERMITS: NO JOB REQUIRED
- CENSUS EXPOSES VANCOUVER’S TROUBLING EXODUS
- VICTORIA’S MUSCULAR RENTAL MARKET
- PENTICTON PROMO MAY BE TOO LATE
- TOOLBOX: HERE ARE SOME FLIPPING TIPS
- TOP 5 U.S. HOUSING MARKETS IN 2017
- GET READY FOR THE LAND RUSH
Q: Your casual comment that a foreign buyer could buy a lot, pay the 15% on it and then build an expensive home in it, floored me. Last week’s piece: “pre-sale condo and assignment invisible under foreign buyer regulations” is in the ‘can’t believe it’ column. Now, you said on Hotline that all you need is a permit and even if you have no job – you avoid the tax?
A: Yep. Believe it. See the piece in this week’s issue.
• International •
Top 5 U.S. Housing Markets In 2017
We have gone through the annual “Top 10 Picks for best U.S. Housing Markets” from the usual suspects, including Zillow and the National Association of Realtors (realtor.com). The majority of the lists agree that the West is where the action will be, but we differ on which cities are the best. After researching, we believe the following five are the top buys this year, both for those seeking appreciation or rental income.
- Phoenix, Arizona
In our OUTLOOK Issue, we rated Seattle as No.1, Phoenix as No.2, and then added Portland and Tucson and had Las Vegas bring up the rear. We stand by our forecasts. We stand by that. The US magazines and Realtors have not the ‘feeling for Chinese buyers’ that we have in Vancouver. And Chinese buyers they are clocking to Seattle.
Word Outlook Conference Tidbits
We put this in the Hotline last week:
Armstrong sees – like JREI – the elections in Europe as crucial, but goes further: if Merkel loses in Germany the euro will collapse. If she goes, capital will flee in earnest. Greece is a ‘total disaster’ and may be kicked out or leave on its own. That also will rattle the euro. In that regard, even the Canadian dollar will go up against the euro but stay well below the US dollar.
The US dollar is “the only game in town” he says, it’s a reserve currency and thus the US is the only place in the world where you can park your money.
Politicians are clueless – the best place to be is the stock market in 2017 – emerging market problems will get a lot worse (US dollar rises – their debt rises) – Governments issue new debt to pay off old debt. Will break – we are in the age of civil unrest – the attacks on Trump are ridiculous. Clinton and Obama made far worse threats to immigrants. Clinton was ‘draconian’. There was a lot more … but on the whole: batten down your hatches – stay out of everything government.
Surprised the audience by saying that silver will outstrip gold. Bullish on Uranium.
Stays positive on his forecast of a higher US dollar and a lower Canadian and trades daily that way.
Caveat Emptor! Energy markets have significant downside risk as US lower 48 production rises and OPEC excess production continues despite rhetoric of compliance to 1.2M b/d quota cut. Glut will worsen once winter peak demand wanes in March. Storage will tighten in Q1 and may be at max in Q2/17. Oil will go back to $40.
Major Point: After two days of speakers your eyes begin to glaze over. What was clear is that NO ONE REALLY KNOWS for sure. Trump maybe the wild card, but it is the people worldwide.
• Canada •
Astounding facts: Vancouver prices are down already (as we forecast) by -19%. Sales of single family homes crashed 50%. Fraser Valley – Single family sales are also down 50% but condo sales are up 42%! Toronto, Calgary and Edmonton ARE UP!! Yep! UP! In sales and prices! (We published Vancouver and Fraser Valley in more detail last week, but thought to have the national comparison may be handy.)
Major Point: Listings are way down in Toronto (used to be as high as 23,000, now 5,000!) 2,000 less than the much smaller Vancouver market! Listings are down in Calgary and Edmonton too … the real surprise.
“House Guarded by Shotgun 3 Days A Week. Guess Which Days.” –Unknown
• British Columbia •
Victoria’s Muscular Rental Market
Landlords cashing out of Metro Vancouver’s apartment rental market can find opportunity in Victoria, where capitalization rates are higher, per-door prices are lower, and the vacancy rate is about the same at less than 1%.
There are 1,344 new purpose-built rentals underway in Victoria along with 1,600 new condo apartments, all to be delivered within the next 24 months. But the inventory of existing apartments – 25,000 apartments in the Victoria region and the heated demand for tenants still offers landlords with older buildings an edge.
With landlord investors, able to access Canada Mortgage and Housing Corp.-insured financing at as low as 1.63% for five years and 2.38% for 10 years (amazing really!) and Victoria rental cap rates averaging 4.38%, there is room to make capital in the capital.
As well, new federal mortgage rules make it much tougher for condominium investors to qualify for financing and the new B.C. government first-time home buyer’s incentive, which started in January, does not allow buyers to rent out their home (most likely a condo) for five years. This should help weaken the biggest competition to Victoria’s apartment landlords.
Also, there are no AirBnB restrictions or foreign-buyer taxes, as in Metro Vancouver’s rental apartment sector.
The excellent Greater Vancouver Multifamily Market report from Colliers International’s Victoria’s office, released this week, shows that the average price per door for a rental apartment building in Victoria is $224,030, but it also notes that many buildings even close to downtown sell for less than $150,000 per door (an example is a 19-unit building on Douglas Street that sold at $14,316; and another on Fort Street that sold for $121,905 per suite.) These are among the 80% of Victoria area rental apartment buildings that were built 40-50 years ago,
Major Point: A couple of cautions: Victoria’s multifamily cap rate is down nearly 1% from the five-year average and, especially in the Esquimalt area, there are some old apartment buildings that need a lot of work.
Penticton Promo May Be Too Late
The city of Penticton in the Southern Okanagan is promoting itself as the place to invest in residential real estate. This is usually a sign that the market has already peaked and we believe this is the case in Penticton, a lakefront town, which we like very much as a vacation destination. House prices, however, have shot up too fast and it may be too late to see a further updraft this year.
Canadian Real Estate Wealth magazine selected Penticton as one of their blue-chip real estate investments for 2016, citing a 4.7% spike in home prices through the first half if last year and the $312 million expansion of the Penticton Regional Hospital as pluses.
The typical Penticton detached house sold in January for $493,227, but there were only 41 sales out of 426 listings. This translates into about a 9% sales success ratio, and it now takes an average of 100 days for a Penticton house to sell, sure signs that the market is cooling. Condos sell for an average of $246,700 and townhouses for $335,380 but the sales-to-listing ratio for all stratas is less than 20%.
Major Point: For investors, Penticton has a limited rental pool and questionable further price appreciation over the next year, based on current list prices and the large number of listings. Okanagan investors have likely a better chance in Kelowna or Vernon in 2017.
• Vancouver •
Just Saying: Vancouver SF House Sales And Prices May Not Recover This Year
There is mounting evidence that the slow-motion train wreck of the Vancouver detached housing market is far from over. In fact, it may be accelerating. In January, more detached houses sold in tiny Parksville than on the West Side of Vancouver and Kelowna had more detached sales (103) than all of east side (52) and the west side (37) of Vancouver.
A common argument for the anemic Vancouver house sales performance over the past seven months has been a lack of inventory. In January, though, 628 new listings for detached houses flooded into the Vancouver market, the highest level in a year. There are now 1,875 detached listings in the city but only 89 houses (East and West) sold in January and many of these had likely been on the market for months.
On the West Side of Vancouver, where the median detached house price is now $3.1 million (down $200,000 from last August), just 37 houses sold in January while new listings increased five-fold from December, to 309 houses. On the East Side, where the median price is down $150,000 from last summer, at $1.37 million, only 52 houses sold while 226 new listings joined the estimated 600 already on the market.
Yes, we are talking a sales-to-listing ratio across Vancouver of less than 1%, perhaps the most spectacular buyer’s market ever seen. But buyers aren’t buying and, unless some big price corrections are seen, we don’t think they will be for most of this year.
Major Point: Price fatigue is the main factor in Vancouver’s detached housing market, a fact exposed by the virtual elimination of foreign buyers and speculators since the second half of last year. With assignment sales banned and foreign buyers facing a huge tax hit, it is left to local buyers to carry the weight of Canada’s heaviest mortgages.
Foreign-Buyer Work Permits: No Job Required
After the Vancouver detached housing sales swoon that followed the introduction of the foreign-buyer tax last August (sales are down 70%) the provincial government has eased the regulations.
And it has opened a generous loophole with a new rule that exempts foreigners with a Canadian work permit from the 15% sales tax on Metro Vancouver homes. The loophole could be big enough to drive a housing recovery through.
The bottom line with the exemption that was announced on the Chinese New Year last month is that the foreign buyer doesn’t need a job, just the work permit.
Richard Kurland, a top Vancouver immigration lawyer, explains that a work permit does not require you to work if you don’t want or need to. “If you’re a student, say at UBC, your spouse can get an open work permit. It’s as common as pie,” said Kurland. “Or you can easily have a Canadian work permit and never even be in Canada. I’ve had cases like that,” he said.
He said the province has simply created an incentive for some foreign nationals to find legitimate ways to seek a work permit so they can receive the tax exemption when they buy a Metro Vancouver home. “It would require some effort, but if, hanging in the balance is a quarter-million-dollar tax bill for buying a property, then I think people can afford to hire lawyers and accountants to get a work permit.”
Major Point: A more realistic alternative would be the requirement for a Canada Revenue Agency notice of assessment and T-4 or T-1 slips to show a person is actually working and paying taxes in B.C. But we suspect the real reason for the exemption is not to protect foreign workers but to shelter the tax-generating Metro Vancouver housing market, and its government-friendly beneficiaries, from further harm.
Census Exposes Vancouver’s Troubling Exodus
The most recent Census shows that Metro Vancouver posted a 6.5% population increase from 2011 to 2016, which ranks it as the eighth fastest-growing urban region in Canada, just ahead of Greater Toronto. But the Census also shows that Metro Vancouver’s growth pace has plunged 30% from the previous five years, since the population had increased by 9.3% in the 2006-11 period.
We dug into the numbers and found that a lot of people are leaving the Metro region and immigration is apparently the only thing keeping the population levels from falling. Last year, for instance, almost 30,000 immigrants arrived in B.C., 95% of who settled in Metro Vancouver. Take that over five years, and it accounts for nearly all the 6.5% population increase. People talk about the inflow of people from other provinces, but it is really a wash: in the third quarter of 2016, for instance, more than 14,000 B.C. residents packed up and moved to another province, meaning the net increase from other provinces was only 3,500 people, while the net increase from other countries was nearly 18,000 people in the three-month period.
Major Point: As we have noted before, high housing prices could be driving people out of the Metro region, especially from Vancouver. A recent survey showed that about 34% of Vancouver homeowners said they planned to sell and move to another, more affordable, area within the next five years. Judging from the latest Census numbers, they apparently are not bluffing.
Toolbox: Here Are Some Modern Flipping Tips
Buy an old house. Fix it up and flip it. It is a tried-and-true strategy that has started many successful real estate careers. It is bit harder to do these days because of the high detached housing costs, but even in the Lower Mainland, some pockets exist:
We like Port Coquitlam (you can still find detached houses under $600,000 and SkyTrain has arrived nearby); North Surrey (fast growing municipality and fixer-uppers in the $600-$670,000 range and where we found one old timer this week (MLS R2131208) near SkyTrain for $429,800; and Delta (new bridge coming).
Or, nearly any good-size town east or west of Metro Vancouver, such as Chilliwack or Nanaimo.
But you have to fix the houses up to attract modern buyers, who are all apparently following the same design trend: this means opening up the space.
Whatever price point you are targeting buyers are expecting a more open floor plan. You need to figure out how to connect kitchen, dining room and living space into a place where family and friends can gather and interact while still meeting all the needs of cooking.
If you can’t completely take out walls, create other openings that give an illusion of openness so at least those in the kitchen can see into the living room or family room.
Major Point: Never, ever forget that kitchens and bathrooms sell houses. Those are the best places to put your money to turn a better profit. Don’t spend any money in the backyard or upstairs. Use modern colours and stay away from pure white. Use a feature wall colour to blend with the floor boards.
WONDERING ABOUT THE HOTLINE?
Hotline Text Alert System and Hotline Code Changed
To get on the Hotline Text Alert System and receive a text update when the Hotline is ready, please text ‘Jurock‘ to the number ‘393939‘ and you will be added to the system. You will receive no more then one text a week.
The Hotline Code has also been changed. Our new Hotline access code is 8080. The Hotline phone number is still 778-328-8887.
To subscribe to Jurock’s Facts by Email call 1-800-691-1183 or 604-683-1111 or fax 604-683-1707. While the above information is compiled from sources believed to be reliable, its accuracy cannot be guaranteed. Any type of investing carries inherent risks; as such, JREI cannot assume responsibility for any subscriber’s actions.