Re/Max just released a survey stating that ‘speculation’ is now the main driving force behind the condo market in Canada.
“The impact of speculation, especially in Canada’s largest condominium markets, has yet to be determined but concerns for the future are relevant,” said Elton Ash, regional executive vice-president of Re/Max of Western Canada. “This is a major factor that could influence prices in the years to come.”
Full story in the Financial Post.
reknab: I was paying $850 until this Sept where I now pay $1000.Can you go into some detail? There are laws against such massive rent increases.
drachen,your back up comment can be found here.drachen said….
Re-diculousI need to find someone with access to academic papers, I found some abstracts a while back but without the whole paper it's not much use. The Motley Fool is where I originally found references to the studies.
I think P/E ratios are more significant than rental yields.Er, the P/E is just the reciprocal of the net yield. That's like saying the CAD/USD exchange rate is more significant than the USD/CAD exchange rate.Likewise the price/rent is just another way of expressing the same thing.With the caveat that you always have to compare gross to gross and net to net.
I've been renting a comparable unit downtown in the Firenze area,16th floor, 450 sq feet, mountain/harbour view facing NW since Aug 2004. I was paying $850 until this Sept where I now pay $1000. The owner recently bought an identical unit on the 18th for around $280-$300k. I think the rent for this unit is slightly more, maybe $1110 a month.I moved here from Atlantic Canada in 2004, I would not pay much more than I pay now, before I would decide to pack up and move back. I would not buy anything in Vancouver until there is value in the purchases, if that never materializes, I will move back eventually, but in the meantime I can invest my increased cash flow in other opportunties that I consider have value.
Drachen,Thanks for your 12:25 reply – interesting. Do you know where I can find more info on the statistics relating to lack of sustainability beyond 200?
I stole this from someone on another thread……..LINKIt is sad. Here's all anyone needs to know about real estate….at least for now.Real Estate: Buy, Sell, or Hold?But once the fervor fades, prices must fall to restore their normal, long-term relationship with rents. Rents exercise a kind of inevitable gravitational pull on prices. The ratio of prices to rents "behaves much like price/earnings ratios for stocks," says Yale economist Robert Shiller. "Like P/Es, price-to-rent ratios are mean-reverting." In other words, while prices soar from time to time, sending the ratio to exceptional heights, sooner or later the relationship is bound to return to its historical average.So what are rents saying about home values today? To answer that question, Fortune worked with Moody's Economy.com to estimate adjustments needed to get prices and rents back in balance. We'll go into detail below, but… Read more »
"Minute required 2/3 majority to pass the budget(similar to parliament procedure)So if most of owners say no then maintance fee can't go up." Very true statement, unfortunately that is not neccessarily good news to prospective buyers. A strata council dominated by flippers will in most cases make sure no increase happen. Once they flip and leave the new strata will find routine maintenance has been neglected. This is terrific for my business which thrives in neglected maintenance situations. Rule of thumb (no pun intended) no maintenance fee increases over a period of years? Don't buy there! 🙂
Gianni33,kind of agree with you little bit,but in occupied buildings maintainance fee can't be raised without voting system in the annual genral meeting for annual budget.Minute required 2/3 majority to pass the budget(similar to parliament procedure)So if most of owners say no then maintance fee can't go up.
Tulip-2That link is already up by "bcubbins" and that is a bussiness spin from realtors to turn the table.Actually last project for this side has been sold two weeks ago, you will hear those story too often now.definitely when there is no project to sell unit sales will slump downwards.what you need to see is what was available and what is being sold.
<a http://WWW.CANADA.COM/THEPROVINCE/NEWS/MONEY/STOR… HREF="" REL="nofollow">Condo demand trending downThis Province article by Paul Luke, mentions the Remax report, and contrasts it with a pricewaterhouseCoopers Report.For some reason the links don't work with blogger, but this is the complete story in today's Province:"The unsold inventory of highrise condos in Burnaby and New Westminster rose to 825 units at the end of September from 315 units in early July" URLhttp://www.canada.com/theprovince/news/money/story.html?id=4be1247e-20ec-403f-8073-544fa817d6ba
I thought this was interesting. There's a discussion on Rob's blog about migration and supply. Numbers being quoted are BC stats numbers.Have a look at it for yourself, see anything odd?http://www.bcstats.gov.bc.ca/data/pop/mig/rdcomp06.pdfSorry I'm running out and don't have time to tinyurl.*hint, look at the 04/05 numbers vs the 05/06 numbers. Looks like someone did a very bad job of cooking the books or "extrapolating"How much can we trust this information if they're just going to make stuff up?
Jesse:Are we talking bong, or crack pipe? 🙂
"I digress, apparently you can earn an acceptable return in Prince George."That's great to know. I'll pack my bags tomorrow 😉 300K for 2K rent in Vancouver city is a pipe dream.
Jesse, I digress, apparently you can earn an acceptable return in Prince George.
Where ever there is no strata there is more property tax.lets say 3000 maintainance fee per anum for condo will convert into 3600 property tax for house.Parking and garage are more secured in the condo's than the house.The strata may choose to raise the maintenance fee at any time, and condos and townhouses also have to pay property taxes. So that $3000/yr maintenance fee could easily jump to $4000/yr. And the strata limits what you can do to your home, whether you want to own a pet, remodel your kitchen or put up a satellite dish, you have to request approval from the strata.And show me any kind of proof that a car is safer in a condo parking lot than in a SFH garage. I know people who would rather park on the street rather than their "secured" parkade… Read more »
tony – PG rental market is fairly strong at the moment – I think that might change with the depletion of the pine forests over the next few years. I know people in PG and visit a couple times per year. A $250k house can rent the upper 3 bdr for $1400-1500 and the lower 2 bdr for $500-600. There are situations that are even more attractive than that but there are also risks that go along with it.
Re-diculous:A simpler method for use with housing is to simply divide price by monthly rent. In your case it's 281, this doesn't factor in strata, upkeep etc, it's meant to be a rough measure.However studies have shown that price/rent ratios over 200 are absolutely unsustainable, in all the years that this method has been used (since the '70s) in all the cities NO city has EVER maintained a ratio over 200.Normal ratios are around 100-150 depending on local conditions.
If the ownership of condos is at > than 50% for speculators. I wonder how they would react to a flat or negative market? Any guesses?
I think P/E ratios are more significant than renatl yields. P/E for my current $450K+ condo renting for $1600/month E = (annual rent)- (strata fees+ taxes) = (1600 x 12) – 4500 = $14,700(low estimate) P/E = 450000/14700 = 31x.It would be interesting to know the average P/E of Vancouver real estate over the last number of years – anyone know where one finds such info? Note: the TSE is considered expensive at >16x
Mohican, I didn't know the rental market was so strong in PG. I'm just using my knowledge of the rental market throughout the Island, Okanagan and the Kootenays. Where do you find rental listings for $2000/month in PG?
U.S. housing slump worst since Depression: Wells Fargohttp://tinyurl.com/3arfbn
Damn, it feel good to be Idiot than smart. I bet it does, let me know how that works out for you.
Nice cherry picking Satv, here's some OTHER listings on that site.FALSE CRK 1 BR+ den, 1000 SF, $1600 incl h/wtr, w/d, pool, gym,WEST END BACH character building, reno'd, $925 incls utilsAnd I don't think the examples given match the description of YOUR find "HUGE 1 bedr, 2 bath"I think anything that can be described as huge will have to be a LITTLE over the 479 square feet listed in the previous example.But I have to give you all credit, anecdotal cherry picked evidence is as close to a logical argument as you've ever come. Hell with logic like that you could convince people to go to war in Iraq!
tony – I could buy a decent 25-30 year old house in Prince George for $250,000 that rents for at least $2000 per month. Maintenance would be a pain and there are costs that would make this not such a great deal for a non-local landlord but there is real estate in BC that is priced somewhat according to yield.The whole province isn't in the same kind of bubble as greater vancouver but it certainly has spread to some of the outlying areas. The Price to Earnings ratio for real estate in Prince George is roughly 10:1. In the Fraser Valley it is roughly 20:1 and in some parts of Vancouver it is 40:1. Price growth of these properties better be freakin' phenomnal in the future to justify those valuations.