September 8, 2021
“If you are not the lead dog, your view will never change!”
ELECTION OUTLINE OF EVERY PARTY’S REAL ESTATE PROMISES
THE NUMBERS, THE NUMBERS – August 2021, 2020, 2019, 2018
US/CANADIAN DOLLAR FORECAST
QUESTION BLITZ: Q AND A: REAL ESTATE, ECONOMY, BLACK SWAN
SF PRICES SOARED FROM $70,000 TO $1.9 MILLION BUT STUDY THE DIPS
SELL NOW AND RENT?
BANKS ONLY LEND ON INCOME – THE FUTURE?
SF CONTINUE DEALS SHIFTING INTO CONDOS?
ZOOM UPDATE FROM AUGUST 11
Full house watched the Jurock Case Investment Realty Zoom event (JCIR.ca).
Ozzie reviewed his 20-year stance on “This is the most unreported hard asset inflation of all time” (Never wrong). He walked the meeting thru the July numbers (yes, the world is still burning higher), highlighted the “last 4 years of July” and what the numbers meant (SF fast slow down, condo numbers still strong, pre-sales crazy hot, hot – still).
In that regard Ralph reviewed the last 4 pre-sale buildings that we invested in together, their performance and possible future. He also discussed the upcoming Highrise (likely late October), and he suggested to investors to check area, layout etc. now.
Many phone calls and emails about “Not getting the zoom link”. Well, we cannot send a zoom link to 23,000 plus subscribers. Also, the zoom meetings are held by our real estate agency. That is why we did advise that you needed to sign in at www.jcir.ca (You still can: Get on the list for the October zoom.)
The ‘Black Swan precursor event’ raised some hackles. Seven replies that were all in the vein of “let’s not be overstating this internal bank event”. Well, I think the Wells Fargo event is one that can foreshadow what may lie ahead. I stick with my “Black Swan possibility”. Watch credit and liquidity tightening on all fronts. Please note: my purpose was to alert people of possible changes banks can make at any time.
Not that they will but they could. If they called your credit line, go to another bank. Keep asking questions, keep working at it. Remember, your bank is NOT your friend. I have received 19 notices of Canadians having their credit lines ‘reviewed’, cut back and/mortgages denied. Although your bank may deny it, they no longer lend on your assets, they lend on your income…so if you are retired – even with good assets … good luck on getting a mortgage… (Look up Q and A below…our banks are tightening.)
Q: I heard you and Mike talk about MMT. What exactly is this?
A: Modern Monetary Theory (MMT) is a policy model for funding government spending. MMT pioneer and American economist Warren Mosler in his book The 7 Deadly Innocent Frauds of Economic Policy pointed out that there is no financial constraint on government spending as long as a country is a sovereign issuer of currency and does not tie the value of its currency to another currency. Countries like the U.S., U.K., Japan, and Canada, which spend, tax, and borrow in a currency that they fully control. Googled it and you will find a lot of proponents on the far left who like the idea of unlimited creation of money.
Now take a look at how much money the Trudeau government has created out of thin air (Chart on the bottom), and you can well argue that we are already in the midst of applied MMT. But to me it is nonsense. If you end uncontrolled money keep rates at zero percent, you will have an infinite upward spiral in inflation.
Money is destroyed since governments no longer sell bonds…and hard assets soar.
We now get into an election, and taking sides is normal and wanted in an election – it’s a democracy! But reading some Tweets and some FB posts…makes you shake your head.
If you are not voting for this party – then you must be this or that. Outrageous attacks on people. Small groups throwing rocks at the prime minister. Can you believe that? I am not keen on him either, but vicious personal attacks and throwing rocks? Who the hell are these people? Remember, democracy invites debate. As a government it has its flaws, but it is the best government system of any others.
I have put a summary of all REAL ESTATE election promises and threats by party at the end of this blog…
Q: THE WAY INTEREST RATES ARE HEADED YOU THOUGHT THE SURPRISE WOULD BE ON THE UPSIDE. I SAY THE SURPRISE WAS ON THE DOWNSIDE. WHAT DO YOU SAY?
A: There were rumours that Fed Chairman would announce the start of slow tapering. The Result? A 2% drop in stocks in one day LAST WEEK. Maybe that motivated him on the actual day to be very dovish. Not that this should be a surprise. He is up for another term, he is favoured by Yellen and Biden … No way will he rock the boat, he will stay soft dovish. However, it will not last forever. If just a hint of rumor can have a 2% decline … much more is in store… Aren’t you happy you are in real estate?
Q: YOUR CALL ON THE CANADIAN DOLLAR WAS RIGHT? WENT FROM 83 TO 79 CTS. NOW WHERE?
A: It seems like the way oil and commodities go – so does our dollar. I still maintain, the US dollar in this topsy-turvy world will stay the preferred currency … and will strengthen even more … with the loonie falling more – in relation to worsening economic conditions and falling commodities prices.
Q: SEVERAL QUESTION ON IMMIGRATION…
A: Were answered and re-answered.
REAL ESTATE Q&A
Q: 4 CANADIAN RESPONSES ON CREDIT LINES OR AMERICANS? SO FAR IT SEEMS LIKE JUST AN AMERICAN THING.
A: It has been getting harder and harder to get a mortgage and a good credit line. Things are toughening…You need advice from a top-notch mortgage broker. Look below some of the mortgages people have difficulty getting.
Q: HI OZ, HOPE YOU AND YOUR FAMILY ARE DOING WELL MY FRIEND. I JUST READ YOUR OZ BUZZ (AS I DO EVERY MONTH) AND THOUGHT I’D SEND A RECENT EXAMPLE OF WHAT HAPPENED TO MY PARTNER AND I. WE PURCHASED ANOTHER RENTAL PROPERTY IN XXXX. WHEN WE CALLED MY PARTNERS PRIVATE BANKER AND ASKED THEM TO FINANCE IT THROUGH THE HOLDING COMPANY, WE SET UP TO BUY SOME DUPLEXES WE OWN WE WERE TOLD THE FOLLOWING: – CAN’T USE THE HOLDING COMPANY AS IT WAS STRUCTURED. IT CAN’T HAVE AN OPERATING COMPANY WITH VOTING SHARES AS A SHAREHOLDER. WE HAD TO EITHER CHANGE THE STRUCTURE BY HAVING MY PARTNERS OP CO BECOME A NON-VOTING SHAREHOLDER OR SET UP A NEW HOLDING COMPANY. – BECAUSE IT WAS A RENTAL PROPERTY, WE HAD TO HAVE A 35% DOWN PAYMENT INSTEAD OF 20. WE PUT 20% DOWN ON THE 2 DUPLEXES WE PURCHASED JUST 3 YEARS AGO. WE NEGOTIATED THEM DOWN TO A 30% DOWN PAYMENT. SO, AS YOU SAY, THINGS ARE CHANGING AND DRASTICALLY. THOUGHT YOU’D LIKE TO KNOW…
A: Yes, thanks for sharing! Makes you wonder what banks worry about and why?
Q: HEY OZZY, WONDERING IF YOU THINK ITS TIME TO CUT BAIT IN THE SMOKANAGAN? WE HAVE A HOUSE DOWNTOWN xxx ON xxx THAT WE PAID 805K FOR, SPENT 65K ON RENOS AND NOW IT LOOKS LIKE ITS WORTH WELL OVER 1+MIL ONLY 11 MONTHS LATER.
A LOT OF LOCALS I TALK TO ARE WONDERING IF THE SMOKE IS THE “NEW NORMAL” IN THE OKANAGAN AND THAT MAYBE IT’S TIME TO MOVE TO WETTER PLACES LIKE VICTORIA ETC.
A: First time I heard that argument. I like both places. Not sure whether Victoria rites appreciate being called a wetter place. Ha-ha. But all of Canada is on the move to Victoria…not for the rain but the lifestyle, boating etc. Currently 60% of retirees in Canada, indicated in a survey a preference to retire in Victoria. However, you will have a shock…its not cheap anymore either.
Q: I REALLY APPRECIATE BOTH YOUR CONTENT AND TONE IN HOW YOU WRITE YOUR NEWSLETTERS. WELL, DONE. I HAVE A QUESTION. MY HUSBAND AND I OWN A BUSINESS AND SO ARE SEEN AS ‘SELF-EMPLOYED’ BY MORTGAGE LENDERS. WE ARE USED TO HAVING A LINE OF CREDIT AND COULD ALWAYS TAP INTO OUR EQUITY. ON THE LAST RE-FINANCING, WE DIDN’T SET ONE UP. TODAY, WE ARE THINKING OF MOVING AND/OR BUYING ANOTHER PROPERTY AS WE HAVE 75% EQUITY IN OUR HOUSE. TD TELLS US THEY ARE ONLY LENDING ON INCOME, NOT EQUITY ANYMORE. IN FACT, THEY SAY WE HAVE TO RE-QUALIFY TO EVEN PORT OUR EXISTING MORTGAGE. WE HAD A DOWNTURN DURING COVID AND ARE RE-BUILDING ARE INCOME AGAIN. ARE YOU SEEING THIS CHANGE OF POLICY AROUND SELF-EMPLOYED AND LINES OF CREDIT ACROSS ALL LENDERS? WHEN DO YOU THINK EQUITY WILL BE COUNTED AGAIN? WHAT HAS TO CHANGE?
A: Yes, the ‘lending on income’ in my view actually discriminates against all retirees. Generally, they may have massive assets but can’t get a mortgage. ALSO – AND THIS IS IMPORTANT – you need time to get ready… the information needed today to get (a still very cheap) mortgage is immense. Prepare.
Q: OZZIE, FOR MANY YEARS I HAVE THOUGHT THAT AT SOME POINT IN TIME I SHOULD DOWNSIZE AND EITHER BUY A MUCH SMALLER, LESS EXPENSIVE UNIT, OR SIMPLY RENT FOR THE REST OF MY DAYS. I BOUGHT IN XXXX IN 2007. 3 BDRM, 2.5 BATHS, 2 LEVEL HALF DUPLEX W SINGLE CAR GARAGE. THE PLAN WAS TO SELL BY AGE 73. I AM NOW 75 AND STILL HOLDING. ORIGINAL PRICE $415,000, IN 2008 IT DROPPED TO $350,000 AND HAD NOT FULLY RECOVERED 8 YEARS LATER. IN 2017 IT POPPED UP TO $690,000. THEN LAST YEAR IT JUMPED TO OVER $1,000,000. NOW I AM CONCERNED ABOUT BEING IN A BUBBLE. IF IT OCCURS AND WE CORRECT SAY 20% I MAY NOT RECOVER IN MY LIFETIME. CORRECT ME IF I AM WRONG BUT SEEMS LIKE A GOOD TIME TO SELL AND START RENTING. ANY THOUGHTS.
A: I selected this question because there were several in the same vein and also a lot of the middle class is facing this dilemma: I believe prices will eventually be higher – but there may be a dip…as in the past…do I sell now?
The difference is that this question concluded with: “should I sell and then rent now, as opposed to downsize?” To me the answer is simple…if the house is your only asset…rent now! At your age, it is all about enjoying every day and every moment…spend your money on YOU. If you do not live ‘cabin one’, your heirs will!
Q: SEVERAL QUESTIONS – SOME QUITE LENGTHY: WHAT DO YOU THINK OF REAL ESTATE IN GRANDE CAYMAN? WHAT ABOUT MEXICO? PANAMA? YOU MENTION THE PHILLIPPINES? YOU ARE GERMAN, WOULD YOU BUY THERE?
A: For the purposes of this blog, please note that 99% of our subscribers are either Canadian or American. They live in countries, where you should put your investment dollar. You understand the legal system, you understand the property law system and there is a tax treaty. Wherever else you go (for investment) you must understand that the real estate may be fine, but the ownership laws are often hard to understand. In some countries you need local partners, or you can own the house but never the land, in others the crime rate is unacceptable…So, I recommend staying only in those two countries. If you are thinking Panama or Mexico for a holiday in your condo on the beach…rent one. Rent a hotel for a month…enjoy the live style but keep your investments safe. And, yes, there a hundred horror stories…that I could tell.
Q: OUR MAJOR MISTAKE WAS TO BUY A TIMESHARE. THERE IS AN EXIT COMPANY XXX THAT PROMISES A SALE, BUT WANTS A DEPOSIT?
A: I am on A long record (22 years) of telling people timeshare is not real estate. It’s at best a holiday and at worst a self-inflicted wound. Any company that wants to be paid ‘up front’ to sell your unit…really? Go google “timeshare fraud” and timeshare exit fees… I cannot make any comments on a particular Timeshare resale company. (If an old subscriber, look up previous long opinion pieces on timeshare.
Q: DO YOU THINK (IF ONE COMES AVAILABLE), THAT BUYING A PARKING SPACE IN DOWNTOWN VANCOUVER AND THEN RENTING IT OUT WOULD BE A GOOD MOVE? READING ( A Hongkong article) HAS ME DRAWING SOME PARALLELS TO VANCOUVER, AND SO IF I COULD BUY SOMETHING NOW, HOLD IT AND THEN SELL FOR A PRETTY PENNY (NOT SAYING IT’LL BE $1.3M) DOWN THE ROAD, IT CAN BE A GOOD INVESTMENT?
A: Indeed, parking places have increased dramatically. but Hong Kong and Vancouver have different issues. There is no space in Hong Kong. Vancouver actually has more and more high-rises with half their parking spaces empty. However, personally, I just bought an investment condo. I always look for a second parking spot. Good investment? Likely, yes. 1.3 million…not likely.
Q: WHAT DO YOU THINK ABOUT THE LIBERAL FLIPPING Policy
A: Do as I say, not as I do? The Liberal candidate in the riding of Vancouver Granville has flipped more than 20 properties after less than a year of ownership since 2005, which has critics pointing to contradictions between his actions and the Liberal platform on housing. According to British Columbia’s assessment records, Taleeb Noormohamed has sold 41 properties since 2005 — 21 of them after less than a year of ownership — making $4.9 million in the process. Look up the story here: https://www.cbc.ca/news/politics/vancouver-liberal-homes-flipped-1.6158955.
What we need is more supply, not stop Canadian homeowners sell their homes the way they want. What about owners’ rights? Let’s face it, says CREA: “Open bidding is still bidding. For example, in Australia where they have implemented open bidding, housing prices are still high and continue to rise. Homeownership remains out of reach for millions of Canadians because there is not enough housing supply to meet demand.” Indeed!
Can’t get away from Crypto. Not my field…but then…Crypto in Real Estate?
Last month Spain announced that it is investigating whether to allow borrowers to pay their mortgages using crypto. There is even legislation introduced for the use of all digital currencies. It even envisions that the real estate industry could use crypto to invest in mortgage. El Salvador made crypto legal…so where will it go…? One thing is sure, if it gets used by the big boys it will be become mainstream…
Your thoughts – AS ALWAYS – are most welcome. WRITE QUESTIONS HERE: INFO@JUROCK.COM and put OzBuzz in the subject line. I try to answer ALL questions, but not all will be featured here.
THE NUMBERS, THE NUMBERS
It has been a confusing month in the Lower Mainland. SF sales are lower but so are both active and new listings. We are adding the NEW listings (only came to market in August), whereas Active listings are all properties for sale at the end of August no matter when they were listed.
Why this slide? It was a wild ride from the mid-70ties to $1.8 million by 2016. That was the peak…we then were sliding sharply into $1.6 million by 2020 and this month new high of $1.9 million. But note the DIPS! Blow up the slide and study them! Timing matters in the short term (1-3 years). In the long term, always higher.
VANCOUVER/ FRASER VALLEY AUGUST 2021, 2020, 2019 and 2018
Again: A strange month:
Sales of SF homes were down by -14%!
SF home prices up dramatically by 21% over last year as well as over 2019 and 2018.
SF Listings are down by 20% and new listings down a whopping 33%.
Sales of Condos were up by 22%, condo prices up by 7%.
Condo Active listings down by 36% and new listings also down 26%.
Vancouver Major Point: Normally when sales slump listings increase. Not in this hot summer in Vancouver. We pointed to a shift in the last few months from SF to condos.
There were 952 SF homes sold but a strong 1,631 condo sales … outperforming all previous year’s reporting. Condo August sales were up as much as 39% over August 2018’s. Realtors still tell me that they see a marked slowdown. Again, vital to get a good professional realtor in this market peak.
THE FRASER VALLEY
Fraser Valley – all SF in August (new and used sales)
Sales of SF homes in FV down 13%, but both active and new listings also down (vendors will wait for better price?) Prices remain much higher.
August SF sales down 13% over 2020 but up over 2019, 2018.
Prices UP 33%.
FV SF Active listings down by 38% as well.
FV new listings down 41%!
FV condo sales up a whopping 44%
FV Condos August price up 19% and UP all years.
FV Condos Active Listings down 52%!! All years down.
FV August new condo listings down 25%.
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LIVE LIFE LARGE
I grow into my future best!
Yesterday’s dreams formed today’s realities.
Tomorrow’s reality comes from today’s dreams.
big goals – big rewards.
ELECTION PROMISES WHERE REAL ESTATE IS CONCERNED
Here then is an outline of what party promises are. I leave it to you to understand what that may mean to your vote.
Had a discussion with Jared Dreyer Ace Valley broker at Verico – Mortgage Co (email@example.com) regarding the various platforms of parties. He provided this fine summary of what the parties actually ‘promise or threaten’ they will do:
Conservatives – Erin O’Toole
- 1 million new homes in 3 years
- Leverage Federal Infrastructure investments
- Releasing 15% of federally owned properties for housing
- Include a “for indigenous, by indigenous” strategy
- Incentivise builders and investors with tax programs
- Investigate office space conversion
- 2-year ban on foreign, non-resident investment of residential property
- Stress test exemption for renewing borrowers
- Stress test ‘fix’ for small business owners, contractors, and other non-permanent employees
- Increase the $1 million insurable eligible cap (unspecified), and indexed to home price inflation
- Encourage 7–10-year terms
- Reimplement Housing First approach
- $325 million over 3 years to create 1000 residential drug treatment beds
- 50 recovery community centres across Canada
Liberal – Justin Trudeau
- 1.4 million homes in 4 years
- Indigenous housing strategy promised
- $2.7 Billion over 4 years to National Housing Co-investment Fund
- $600 million for office space conversion
- Additional $567 Million to end chronic homelessness ($2.2 billion previously committed)
- 2 year ban on foreign, non-resident purchases of residential property (excl. recreational)
- Flipper tax – 100% capital gains tax if owned < 12 months
- Mortgage Qualification
- Increase insurance eligibility cap to $1.25 million from $1 million, indexed to inflation.
- 25% Mortgage insurance premium reduction
- Double the Home Buyers tax Credit
- $40,000 tax free First Home Savings Account
- Reno tax credit of 15% (max $50,000 / $7,500) for family members
- Rent to Own Program – $1 Billion
- Home Buyers’ Bill of Rights:
- ban on blind bidding
- disclosure of representation of both buyer and seller by same realtor
- Right to a home inspection
- Require consumers to be informed of options, including FTHBI
- Lenders must provide up to 6 month mortgage deferral for life events
NDP – Jagmeet Singh
- 500,000 affordable units over 10 years, 50% in 5 Years
- create a fast-start fund to streamline project start ups
- dedicate federal resources and lands
- waive the federal GST on construction of affordable rental units
- 20% Foreign Buyers Tax for non citizens / non-permanent residents
- 30-Year Amortizations for First Time Buyers for Starter Homes
- Easier co-ownership funding through CMHC
- Double the Home Buyers tax Credit
Bloc Québécois – Yves-François Blanchet
Green – no plan yet
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