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New Strata Rules

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There are new strata regulations in BC, here’s the PDF and here’s an article with an overview:

In October 2009, the B.C. government passed the Strata Property Amendment Act, Bill 8. Under the act, many of the changes taking place were to be introduced by implementing regulations. Unlike Bill 8, which required the approval of the legislature, regulations are approved by provincial cabinet as an order in council. Within Bill 8, there were provisions that affected long-term planning and information certificates. Part 15 of the bill, applied to long-term planning, has just been adopted through the regulations as mandatory depreciation reports.

A depreciation report is basically a planning tool used by property owners (the strata corporation) to clearly understand what the strata is responsible for maintaining and repairing as part of its building system (a physical component inventory); the age of the building system; the projected life expectancy; when it should be planned for renewal; what it will cost when the time comes to renew the component; and how the strata will pay for it.

The new regulations provide a two-year window for strata corporations to comply with the mandatory requirement – by Dec. 13, 2013. Strata corporations of less than five units will be exempt, and strata corporations of five strata lots or more that wish to be exempt from the requirement must essentially pass a ¾ vote at an annual or special general meeting for each one-year period the depreciation report is required to be obtained.

Read the full outline in the Province newspaper.

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Anonymous

@Alum: ….The low rate would prevent any noticeable drop in RE prices…

Just like it has in the US?

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patriotz

@jesse:

"The US provides some example of what could be done."

What's being done in the US is lenders taking haircuts on mortgages which have no realistic hope of being repaid in exchange for USG backed insurance on the remaining balance.

There is no potential counterpart to this in Canada, the taxpayers are already on the hook for the high ratio mortgages and failure to honour this obligation to the lenders would be a Big Fat Sovereign Default.

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jesse

@VMD: It's amazing to me the 5% down government guarantee is so sacrosanct. It can't be discussed let alone vetted.

The big problem is in the low ratio market. 25 year will help but still results in accommodative lending conditions if rates stay depressed — banks are still lending non-amortizing product to those with questionable/low income sources. That web needs to be better aligned with CMHC guidelines. I think the banks have "room for improvement".

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VMD

In case you missed it..

[RBC follows TD, hints at prospect of mortgage rule re-tightening]

Dec 19, 2011

Craig Wright, RBC's chief economist, said he fully expects domestic demand, including housing will cool, given that household credit debt reached an all-time high of 150.8 per cent in the third quarter. He points out that in the past year consumer household debt grew, but at the slowest pace since 2002.

"We're already seeing some signs that debt accumulation is moderating," he said, "and the housing sector will cool down as housing affordability becomes more of a challenge.

Wright said Finance Minister Jim Flaherty may need to take further steps to tighten mortgages requirements — by hiking the minimum downpayment or reducing the amortization period from 30 to 25 years — if the housing market does not cool.

http://www.cbc.ca/news/business/story/2011/12/19/…

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chilled

@Troll:

From Garths Blog today;

"I patiently pointed out that the 50% drop most misfits on this pathetic blog cheer for would plunge us into a recession deep enough to make house prices irrelevant. Like they are in the States. But that disaster ain’t happening. I didn’t forecast it. You made it up. So live with it."

Am I the only one that remembers Turner flogging survival gear, predicting GD2 and rambling on about having manual can openers and cash?

Am I the only one that remembers the title "Turncoat Turner?"

I wish I could forget.

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Anonymous

http://www.cbc.ca/news/canada/british-columbia/st…

850/month rent for a 300sq pencil case

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ReadyToPop

@Yalie

I agree that they should tighten more, but I’m still not so sure they actually will. The government is terrified of the prospect of falling prices, because 70% of Canadians are terrified of the prospect of falling prices..

I would guess that some who bought in the last few years would be "terrified" about a drop in prices, and would be a fraction of current ownership. Not necessarily as risky politically compared to delaying further and risking an all-out, US style rout. (I'm personally not ruling that out either)

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jesse

@patriotz: The US provides some example of what could be done. There will be big pressure from the construction lobby to get people buying houses again. I expect that will be the drive, not to bail out poor homeowners.

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Kosta

Affordable rentals?

http://www.huffingtonpost.ca/2011/12/19/vancouver…

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crashcow

China's housing bust
http://www.ritholtz.com/blog/2011/12/the-2012-bli…

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paulb.

New Listings 92

Price Changes 44

Sold Listings 118

Those CRF reports will be a huge issue. I came across one during a recent sale and it was alarming. Every component of a building has it useful life assessed and the end result is a bunch of projected future assessments and/or large maintenance fees increases. This and condos are already a bitch to sell. ha ha

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patriotz

@jesse:

"I think debt forgiveness in its various forms is inevitable to some degree"

You mean the government is just going to give people money because they are having problems (or claim to be having problems) paying their mortgages? Even if it were good politics (and I don't think it would be) the money is not there. There would also be a massive moral hazard involved which should not be too hard to figure out.

I've said before that the only debt forgiveness anyone is going to see is bankruptcy.

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jesse

@Yalie: "I fully expect the government to come up will all sorts of ridiculous programs to “save” the housing market from further collapse."

I think debt forgiveness in its various forms is inevitable to some degree but we're talking about the magnitude of the problem that needs to be mopped up. My guess is the focus of the Bank of Canada right now is convincing the federal government that the best-case scenario of prolonged but manageable federal deficits and stagnant growth in the medium term is fast becoming impossible. That's not to say the government can choose to avoid the warning but Flaherty has indicated he's concerned. The last time he was concerned he tightened CMHC lending requirements.

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Yalie

@jesse:

I agree that they should tighten more, but I'm still not so sure they actually will. The government is terrified of the prospect of falling prices, because 70% of Canadians are terrified of the prospect of falling prices..

In fact, whether or not they tighten the rules this spring, I don't think anything will stop the bubble from bursting regardless. China, Europe, etc. means 2012 is shaping up to look a lot like 2008, only worse. And when the inevitable finally happens, I fully expect the government to come up will all sorts of ridiculous programs to "save" the housing market from further collapse. Which likely means throwing even more money at buyers as they try to encourage them to catch the falling knives.

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jesse

@Alum: "The low rate would prevent any noticeable drop in RE prices"

The ratchet theory of price appreciation. The set of necessary conditions keeping Vancouver prices high includes a nightly ritual sacrifice to the Gods.

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fixie guy

@19 Yalie Says: "What the government really wants is…flat prices for the next few years until rents and incomes catch up to prices. Unfortunately that’s tough, if not impossible, to engineer. "

Just impossible. Wages catching up to home prices means high inflation, which would kill the Canadian housing market instantly.

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N

Krugman on Chinese RE:
http://www.nytimes.com/2011/12/19/opinion/krugman…

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Alum

@Troll:

The low rate would prevent any noticeable drop in RE prices

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fixie guy

@16 Troll Says: "You should put that disclaimer on all your posts."

Given your consistent history of useful and informative posts, I'm humbly chastised.

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jesse

@Yalie: "If I had to guess I’d say they’ve already decided to do nothing this spring in the hopes that the continuing easy money will cause prices to flatline rather than dive" There are big risks with such a position. If debts increase in the face of lower rates in 2012, it may be game over. I think the government will act to mitigate that risk: pay a lot now or pay a lot more later. Despite all the problems in the US, they are slowly deleveraging and absorbing previous speculative excesses. That will run its course, even if it takes a few years. If they are successful at this and construction employment starts returning to normal, rates are going to rise and Canada could be caught significantly short. In my view Canada best to try to reduce debt loads… Read more »

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Anonymous

@patriotz:

I agree that the Cons are probably going to ignore the debt problem and just hope it doesn’t blow up in earnest before the next election. That strategy has worked before.

Is that like playing russian roulette and the first spin of the chamber resulted in a click? Time for another spin…

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patriotz

@Yalie:

"What the government really wants is the “Goldilocks” scenario of flat prices for the next few years until rents and incomes catch up to prices."

As we know, incomes are already falling and that's before TS has HTF in earnest in China and Europe.

I think the bears are going to have Goldilocks for dinner.

I agree that the Cons are probably going to ignore the debt problem and just hope it doesn't blow up in earnest before the next election. That strategy has worked before.

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Devore

Can't really argue with these new strata rules. They're essentially enforcing better strata management. Inventory your systems, their condition, life span, and maintenance and replacement costs. And since you know these, also how you're going to pay for them. For buyers, it's like having a house inspection report with a 10 year maintenance budget. I wonder how accurate and up to date these will be, and what we'll see in terms of enforcement. How do you pursue under the strata act? Private action? Government?

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Devore

@Troll: Funny you should mention Garth. I was just thinking of him as a real estate contrary indicator. Can't remember the last time he used "vulching" in a sentence.

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Yalie

@jesse:

What the government really wants is the "Goldilocks" scenario of flat prices for the next few years until rents and incomes catch up to prices. Unfortunately that's tough, if not impossible, to engineer. They were clearly too loose with their last few rounds of mortgage restrictions, since prices just kept going up.

Right now I'm not sure they're going to do anything, since there's a good chance prices have peaked anyway. So reducing amort durations or increasing down payments at this time might make the "problem" of falling prices even worse.

If I had to guess I'd say they've already decided to do nothing this spring in the hopes that the continuing easy money will cause prices to flatline rather than dive. And maybe that will actually work, though I doubt it.

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