Desire trumps economic negativity
According to this article on househunting.ca, the Canadian desire to own a home was the key to the quick recovery in the real estate market.
“While low interest rates were a principal factor driving home-buying activity, no one can discount the value that Canadians place in owning a home,” says Polzler.
Because of the increase in first-timer interest, the real estate industry was able to shrug off initial forecasts of a totally bleak year.
By the time the year-end national tally is complete — something that should come in the next week or so — 465,000 homes will likely have changed hands in 2009 in Canada, a seven-per-cent increase over 2008, predicts a Re/Max report.
“Some of the greatest percentage gains were reported in Western Canadian markets in 2009, demonstrating the higher the peak, the lower the valley,” says Elton Ash, executive vice-president of Re/Max of Western Canada.
“That said, the recession barely registered on year-over-year activity in most major centres — and the economic fundamentals in place going forward ideally positions the 10 provinces and the sector overall for further growth.”
“While low interest rates were a principal factor driving home-buying activity, no one can discount the value that Canadians place in owning a home,” says Polzler.
Because of the increase in first-timer interest, the real estate industry was able to shrug off initial forecasts of a totally bleak year.
By the time the year-end national tally is complete — something that should come in the next week or so — 465,000 homes will likely have changed hands in 2009 in Canada, a seven-per-cent increase over 2008, predicts a Re/Max report.
“Some of the greatest percentage gains were reported in Western Canadian markets in 2009, demonstrating the higher the peak, the lower the valley,” says Elton Ash, executive vice-president of Re/Max of Western Canada.
“That said, the recession barely registered on year-over-year activity in most major centres — and the economic fundamentals in place going forward ideally positions the 10 provinces and the sector overall for further growth.”
The higher the peak, the lower the valley?
January 22nd, 2010 at 12:25 am
@patriotz: "The kids think they're automatically going to be successful"
This is what eventually makes them successful. In thus thinking, they already _are_ more successful that those who visualise years of bleak, boring, pot- or alcohol-sugared wage slavery ahead.
January 21st, 2010 at 12:53 pm
@VRENGD:
It seems you guys are all arguing the same point as me. We all agree that the Powell River is an extreme. I never said I would provide a listing of all the cap rates for Vancouver proper, so I am not sure why you expect me to. I can tell you that the bulk of real estate has higher than a 2% cap rate. I'm not sure why some of you have to be so obtuse on this point.
Here is one such example:
http://www.REALTOR.ca/propertyDetails.aspx?proper…
If you rent this 1BR in Vancouver for $1,200 (less $150 maint), you would be just short of a 5% cap rate.
http://vancouver.en.craigslist.ca/van/apa/1558719…
If you put 25% down and locked into a 5 year fixed rate mortgage, you would be almost cash flow neutral on this deal. However, you are building equity with each and every payment, so really you are net positive each month. And as a bonus, the nominal rents keep going up and up every year.
If you go further out into Burnaby, New West of Coquitlam, you will find that the cap rates go up. You can get even better caps in Surrey or the Fraser Valley. If this Vancouver example is almost cash flow neutral, you can be sure that cash flow positive deals exist further out.
January 21st, 2010 at 12:40 pm
I suppose if you ignore realized gains on the investment. aka you allow net negative return on an investment then you can get some awsome cap rates but then that 10% they quote isn't the true cap rate because your not factoring in that element because it is infact integable and speculative however the propability of you recovering your full investment or even that cap rate is incredibly low.
An analogy would be if i got my friend to rent out my condo for 5x the price and then tried to sell it for 2x the price because the cap rate is "above average." Then if somoeone bought your friend would move out. Obviously this is a bad investment and the cap rate isn't a true representation of the future.
So yes. If you ignore investment research and take on extra risk you can get an "awsome" cap rate. Realistically though the typical cap rate ive seen is arround 2.5-3.5%. Once the risk free rate changes this will likely translate to more downward pressure on prices in two directions.
January 21st, 2010 at 11:21 am
Ok, Dave. Drachen laid out the 3 ground rules in #103 and VRENGD found an example of 2.4% following those rules. Please indicate ONE example that trumps VRENGD. Anything that sticks to those 2 simple rules. Doesn't have to be near your invalid extreme of 10%. I just want to see how high we can go and we can take it one step at a time. Let's stick to Best-Place-On-Earth(tm) examples here.
January 21st, 2010 at 10:23 am
@Dave:
Oh my god Dave, are you really that thick? Yes it probably sits between those numbers but since one number isn't even relevant your 'input' to the discussion is completely useless.
You might as well make up a pretend house in Dave's Private Land of Unicorns and Sunshine that makes 100%, the value of the example would be the same and the lesson would be the same, since 2% is one extreme the average is probably higher. How much higher is not answered by your false and misleading example, nor does it help us come any closer to recognizing where the actual average cap rate is. As such (and as always) your input to the discussion is less than useless, you're simply a distraction for those trying to find answers.
January 21st, 2010 at 10:14 am
Dave is a fool. 2-3% cap rate is normal in Vancouver. The place I rent has a cap rate of 2.4%. We are talking about VANCOUVER here not Powell river, for god's sake. Try to pay attention dave, its not difficult.
Dave, post a list of VANCOUVER properties that have a cap rate significantly higher than 2%. You have been asked you have not done it. Once again, you prefer to spout BS rather than evidence. But then what would you expect form a Bull if not Shit!
are you this annoying in real life?
Burnaby House: 1954 $14,000 … 2009 $750,000 « Vancouver Real Estate Anecdote Archive Says:
January 21st, 2010 at 10:01 am
[...] from Ulsterman at vancouvercondo.info 19 Jan 2010 8:56 pm [...]
January 21st, 2010 at 9:54 am
Drachen, 2.000000001% is "somewhere between" 2% and 10%. Without Dave actually bringing anything but his faith to the table, I'm going to assume that's what he's suggesting.
January 21st, 2010 at 9:42 am
@Drachen:
Blaaa, blaaa, blaaa professor….
You need to start using that noggin a bit more. The point was to show an orange, not an apple. I have made this point three times already and it keeps going over your head.
Once again, a 2% cap rate is the extreme as is 10%. A penthouse in Shangra La gets you a 2% cap rate. A wood frame rental building in Powell River gets you 10%. Most of the real estate in Vancouver sits somewhere in between those two extremes.
This isn't difficult. Try to keep up.
January 21st, 2010 at 9:16 am
@Dave:
No, no you didn't give the other extreme, you went entirely outside of the lower mainland which is not 'extreme' it's out of bounds. It's also a multi-unit which is not what people here are talking about so it's out on two counts. Patriotz's example counts because it is on target for what this blog is about, unless you can find a comparable unit to COMPARE you're talking apples and oranges and, as always, you LOSE. For all the comparative value you might as well start looking in Bangladesh.
1) If you can't find anything in the GVRD to present your case then you don't HAVE a case.
2) If you can't find a single unit to compare to single units then you don't have a case.
Sometimes I think Dave is trying to be some kind of quizmaster, putting up completely flawed arguments to see if people can figure out what's wrong with them. I can't actually recall him EVER pushing an argument that didn't have serious logical flaws.
Everything Dave proposes is:
a) Based on Fallacies.
b) Based on inaccurate or intentionally misleading and irrelevant information.
c) Based on flawed analysis.
d) One or more of the above.
January 21st, 2010 at 8:19 am
@buff_butler:
My point is that a 2% cap rate, as suggested by Patriotz, is not the norm. He gave one extreme and I gave another. The real cap rate is somewhere in between.
January 21st, 2010 at 1:40 am
Wow, the tone has sure changed on the comments section of CBC sites et cetera.
Speculation is all about perception, and oh boy, it's not looking so hot right now. Maybe this thing is going to go down faster than I thought. Especially when the Fed MBS purchace program ends and FHA tightens up. Don't underestimate our ties to the US.
January 21st, 2010 at 12:37 am
@Dave: dude… Dave if you do research into the city its in economic decline… It had a paper mill thats been constantly laying off people and most importantly a contracting population and income! Its best diversification has been "tourism."
I'm kind of confused on how this makes your point. The dividends were great on Lehman Brothers 2 months before KO too….