- HOT PROPERTIES – BUYER WALKS FROM $35,000
- OZZIE EXPANDS HIS TIMING PRINCIPLE – WHY ALWAYS REAL ESTATE
- QUESTIONS, QUESTIONS
- US CITIES LOSING PEOPLE: FOR TAXES, LIFESTYLE. WHERE DO THEY GO?
- VACANCY RATES REPORT
- MUCH LOWER CANADIAN DOLLAR?
- WHAT IS VACANCY CONTROL? LANDLORDS! IF IT COMES, SELL!
Comment: Your number is wrong under East Side?
A: Oops. You are right. The percentage increase etc., was correct, but the actual sales were 537! This is what it should have read:
Comment: Don’t listen to the naysayer. Your “Pollyannaish” view helped me stay in the game twice in 10 years.
Comment: Your inflation/deflation piece was too long, but after I read it twice, I had an epiphany! Ok, so inflation? Yes! But what and when is timing?
A: Look below
Comments: Love your “Truths”. I like to add one: Do something!
Comment: Many suggestions on my podcasts (I asked for them). “I think a podcast should be just you talking.” “Podcasts should be more regular, i.e. every Monday.”, “Love your guests, but also add beginners with success and how they did it.”
Comment: Those 4-year statistics really made me wonder? Why am I still negative? Thanks.
A: OK. But these are December numbers only. For my new forecast come to the World Outlook Financial conference on Feb 7 and 8 in Vancouver. Where I and many other outstanding speakers take a snapshot of the future. Look it up here: https://mikesmoneytalks.ca/world-outlook-conference-2020/
THE STATES THAT PEOPLE ARE LEAVING
One of our forecasting tools is to find out which states/provinces people are leaving and where they are going to. (Investors sell where they are leaving, buy where they are moving to.)
People move for jobs, lifestyle and when major employers move out of an area and into another…that spells opportunity for us as investors. Forecast: In fact, we predict that in future cities will grant a major employer (like Amazon or other high-tech firm) approvals only, if they guarantee they won’t leave in a certain time period or pay a huge penalty, if they do.
At the World Outlook Financial Conference, I will show you facts of cities that are leaking people and where they are going.
An example: New York, California and Illinois have been hemorrhaging residents. Almost 3.2 million more people left those states for elsewhere in the U.S. than arrived from other states, from 2010 through 2019. Nine other states saw net out-migration of more than 100,000 people over that period, but none really came close to the big three. The question we as investor should ask: Where are all these people going? At the World Outlook Conference, I will take our research and share with you the 3 cities – we think – will most benefit from that outflow and other factors.
The BOC left interest rates alone last week. It sees a much weaker economy ahead, even with a signed new NAFTA deal. Stephen Poloz foresees only lacklustre growth of 1.6 per cent in 2020. He further said: … interest-rate cuts might be necessary to offset deflationary pressures. So, for now, the central bank thinks the economy will pull out of this current soft patch, but the slope of the recovery will be gradual.
Major Point: It’s a shift for Mr. Poloz (who we at JREI still blame for keeping rates too low in our letter of 5 years ago – and creating the 2013-2017 inflationary real estate binge). Ok, if he is right, then we could see a cut of how much? Insiders think up to a half a percent! Which would mean…
A MUCH LOWER CANADIAN DOLLAR
Major Point: Upshot? Keep your US dollars. Buy your US investments NOW. Buy cash flow in the US and get returns in US dollars which will buy MORE Canadian dollars.
Major Point: WATCH YOUR SPRING NUMBERS: February – May.
RENTAL VACANCY RATES REPORT
While the CMHC vacancy report was unusually late it still is the best such report available … showing all cities, their increases in both rates and a detailed product outline. 1 bedroom, 2 bedroom 3 bedroom and overall vacancy rates. Such a report is not available in the US. Kudos to CMHC. Where do I get the report?
Look it up/download it here.
Major Point: Why is it important to study? Well, if I buy a 20 suiter of one-bedroom suites I must check the vacancy rate in the city I am buying. However, that rate is an average of all vacancies. Maybe – using the report – if I find out that 2-bedroom vacancy stands at 1% but 1-bedroom vacancies are 8% … you get the point. It will help you negotiate the purchase better or decide not to buy at all.
UDI CONFERENCE FORECASTS
1,200 real estate groupies came to hear the ‘elite’ make its annual forecasts. They slammed MOST government policies (in my view: rightfully so), predicted a lot more tech companies making Vancouver their home and of course wanted all taxes since 2016 reversed (Past UDI pres.: Stevell).
The new chair of UDI Beau Jervis rant was more serious: “I’m getting sick of this bulls—”.
All speakers felt that costs have escalated “exponentially” while revenues are “frozen” and that fickle capital ‘hating uncertainty’, will leave for elsewhere.
Jervis interesting point was that banks loan based on land values, which are based on zoning, and that some municipalities were eroding some of these land rights. He is right of course (in my view), when you study what municipalities have done to literally take away rights of landowners in the last few years … and are threatening to do more.
A very fine presentation by presenters and predictions were aplenty – a sample:
- Office space is tightening in areas such as downtown Vancouver.
- Shift in anchor tenants to major technology and entertainment companies from San Francisco and Seattle (Chuck We, senior vice-president of Hudson Pacific Properties).
- Thousands of new executives and workers, who will need homes.
- Government and industry will get together
- Increase supply or die
The biggest fear: Vacancy control (see below).
In a funny speech Jon Stovell said that if he were to write a book it would be called: “Vancouver – a city of two tales” where there is a “war” between those for and against more housing, and “right now” there is a movement to become either a “museum city” or a “global city”.
EYEBROW POPPING OPENERS
UDI released a new report November 21 where it predicts that 12,000 new rental units under development would be at risk of cancellation if the “vacancy control” mechanism were to be implemented.
What is vacancy control? Vacancy control is a form of rent control that is linked to a unit rather than a tenant – meaning that the landlord would be restricted in the amount they could raise the rent between tenancies.
As of 2019, rent control has been capped at the inflation rate, set at 2.5 per cent, which means B.C. landlords can only raise rents by 2.5 per cent for sitting tenants. But if a tenant leaves, a new tenant could be charged market rents. However, not under vacancy control…
UDI reported B.C.’s major rental home builders were strongly against the introduction of “vacancy control” over fears that would make building new projects unviable, and therefore dramatically reduce supply. With respondents reporting 19,972 rental homes currently in development, the survey found that 12,631 of those would be at risk of delay or outright cancellation if vacancy control were implemented! Indeed!
Major Point: Who would wanting to be a landlord? Your taxes go up, your heating costs rise, the wages you pay go up, renovation and replacement costs rise … but you rent is totally fixed? Sell now!
PRINCIPLES – Continued from Ozbuzz 39
- Inflation or deflation? We did in Ozbuzz 39
- Timing? Today
- Trend? Ozbuzz 41
- Cycles? Ozbuzz 41
- Inward migration? Check at Stats Can and BCStats, Credit Union Central etc.
- Job creation? City websites and chamber of Commerce
- Affordability? Only matters in small towns. Vancouver, NY and London have never been affordable and never will be.
- Interest rates? Look below.
- Supply and demand? Check the numbers as we do for the area YOU are interested in.
We talked inflation now the real big one: TIMING
It is TIMING. Ask any person on the street about the secret of making money in real estate investing and you will hear an eager “location, location, location.” Makes one almost throw up. In fact, I got so disenchanted with that cliché that 21 years ago I wrote a book called “Forget about Location, Location, Location”. In it I ventured to say that for the average investor it was far more important to understand the principles of inﬂation or deﬂation, timing, trend, cycles and the local inﬂuences of interest rates, inward migration, job creation, demand and supply, over/under building and (in smaller markets) affordability…all guided by the principle of “you make the most money on the day you buy.”
Timing matters. Bought a property in the US in 2004 – any location, sold it in 2006 made money – kept it – you lost money. Bought it back in 2011 same house, same location you made money – ANYWHERE in the US! Location did not matter as much as any of the other major principles – in this case timing! Had buyers looked for what cycle we were in and what our timing should be accordingly, they would have taken different actions. But for some reason some people like to buy high and sell low. I can’t tell you how much razing I took, when I – talk after talk – said the US will not only survive but thrive.
Closer to home, the average price of a Vancouver home went from $13,500 in 1960 to $1.4 million in 2015 … but not in a straight line. Throughout that time, we had periods of rising prices, falling prices and stagnating prices. For the average person it would have been far more important to understand the inﬂuences that created those up and downturns and what time the cycle was at, than where the house was located. In 1990 pretty well any SF house in Burnaby sold for about $290,000. It rose by 1995 to about $400,000. By 1998 it gave back all of its gains…back down to about $290,000. Any house, anywhere in Vancouver went thru the cycle. Why? In the early 90’s many Hongkong Chinese Canadians came back (as now) thinking that the repatriation of Hong Kong into Mainland China would be terrible. So, they left Hongkong and came here. By 1996 or so and certainly by 1998 it was clear that Mainland China was doing a great job, creating ‘2 Chinas’ etc. etc. Result? They all went back.
However, from 1998 we stayed down for 3 years and only recovered when Gordon Campbell was elected as premier. In 2007-2009 we were slowing again and reversed. You get my point? When to buy and when not is more important than location!
Major Point: We wrote in 2016. “… Vancouver and Toronto still added values, but overall though, it was only the big cities that did very well in 2015. When one considers that over 60% of the National price increase in 2015 came from the price increases in Toronto and Vancouver – not everything will be rosy in 2016 either. Timing? We are getting close to an end of this cycle – if it wasn’t for the foreign buyer. Buy cash ﬂow only.”
Where are we now on the timing cycle?
- Guildford, Surrey. Presale assignment. Buyer will leave $43,000 on the table and walk from his down payment. Paid $350,000, will assign for $310,000
- Langley. Buyers will assign their purchase, at the original price from 2 years ago plus builder assignment fee, buyer will walk from rest of deposit.
TED TALK OF THE WEEK
30 years ago, my favourite mentor Leland Val VanDeWall (from Edmonton) talked about your bearing and how you be attractive (or not). Also, how to read people thru their body language. Well in this fine Ted Talk Amy Cuddy (yes same name as Dr. House boss) says that Body language affects how others see us,
but it may also change how we see ourselves. She argues that “power posing” — standing in a posture of confidence, even when we don’t feel confident — can boost feelings of confidence and might have an impact on our chances for success.
OZZIE SONGS OF THE WEEK
LIVE LIFE LARGE
Look after your body!
If you do not
Where are you going to live?
I eat for vitality, longevity and health
I work an exercise program designed
For energy, stamina and strength
I can and will do my program
I will grow into my future best
WANT TO PARTICIPATE?
Go to www.realestatetalks.com – Some 2,500 members (47,009 posts) talk real estate. Ozzie created this bulletin board in 1998!
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OZZIE’S YOUTUBE CHANNEL
You can watch all videos and podcasts on my YouTube channel at https://www.youtube.com/jurockvideo. It is a great way to check on what I said 10 years ago.
Ozzie is on air with Michael Campbell on the fabulous MONEYTALKS every Saturday sometime between 8:30AM – 10 AM. The radio station is CKNW and the best way to listen to it is WHEREEVER YOU ARE IN THE WORLD, just visit www.cknw.com at 8:30 am every Saturday (PST), click on live and you’re good to go. The Hot Property that we discuss there, is available by subscribing to the Oz Buzz Dispatch at Jurock.com
Why subscribe if I can just go to the website at Ozbuzz.ca? Hot properties and the latest podcasts are DISTRIBUTED TO SUBSCRIBERS FIRST– posted 2 weeks later on website.
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