What do falling rents mean for the condo market?

Southseacompany posted a few stories about our changing market and dropping rents as some people move away from city cores.

“People are leaving the cores of major cities, including Vancouver, and that has led to some rent drops.”

“The average monthly rent in Vancouver in October for a two-bedroom apartment was the highest in Canada at $2,712, but it was an eight per cent drop from a year earlier, the steepest fall in B.C.”

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Reading this forum, I take it the Fed and Prov synchronized rent whatever policy is jerkbait, primarily designed for repurposed covid flotilla of cruise ship migrants on their way over this spring?

paulb

N 160
PC 55
S 128
TI 12186

http://www.instagram.com/clivestevepaul

Oracle

Just like I predicted.

Asset prices going to the moon.

Stocks at record highs.
Real estate going up up up.

Basically we have a western world who is going to become like the other half. Brace for it.

NO MIDDLE CLASS

You will have an asset owning, non labour working, ‘management’ class. These families will enjoy fine wine, yachts, air travel, and leisure time.

Then you will have an non asset owning, labour working class. These families will be brainwashed; they must be happy eventhough they don’t own anything hahaha. These families will be scared out of their minds because of climate change. Hahaha. They will ditch their cars for public transit and rent. No disposable income left for air travel leisure etc. Because good for the environment. LOL

BTW DOW 30,000+

Ad Hoc

Where have you been lately?

Oracle

Building a place in Chilliwack. Might move there and put this old one in N Delta for rent upstairs and downstairs.

Big Bear

Then leave the country! What are you waiting for?

Oracle

Why? And sell my detached?

I’m just giving you guys a heads up for the last few years on what’s going to happen.

Your anger is forgiven.

Big bear

Why would like to live in such a society? I’ll move to Latin America if you’re right. So it’s win-win for me.

Shut It Down Already (original)

Oracle now owns a detached, a condo in Abbotsford, a vacant lot in Surrey, and a 5000sqft house in India.

Alternatively, he’s full of shit once again.

I’ll let you decide which….

Werner Stein

 >>>>>>>>>>>>>>>>>>>>>>CAUTION<<<<<<<<<<<<<<<<<<<

IF YOU ARE AN EMOTIONAL CRIPPLE/ MADMAN OR A SWINDLER DO NOT READ MY POSTS.

IRRITATION WILL RESULT

southseacompany

“How long can interest rates stay low once a vaccine arrives?”, CBC https://www.cbc.ca/news/business/vaccine-markets-interest-rates-1.5795620

“As Canadian mortgage holders and prospective home buyers will have noticed over the past decade, bad news has been good for interest rates. Good news has the opposite effect.”

“On Monday the publication The American Prospect suggested that Janet Yellen, was being considered by president-elect Joe Biden for the job of treasury secretary. Yellen knows a lot about the difficult job of raising rates after they have been cut to the bone.

“But once in a political role within the Biden administration, she might be inclined to support what will inevitably be a painful and unpopular, if necessary, process of raising rates in time for the economy to adjust before Biden or his successor goes back to the polls”

Werner Stein

Selective Memory:
“Guess that’s what negative returns look like, leveraged 20:1.”

Excellent point.
There are approximately 10 places on the entire planet that have such distorted ratios.
Approximately half of those places are in Canada.

It is a deviation in the process of returning to mean reversion.

The main players are the consumers, builders and speculators.
Guess who is going to get crushed.

Werner Stein

Very early signs of bond market crash.
But it is coming.
Bond prices and interest rates have an inverse relationship.

(US$151.8 million) in AAA rated commercial paper, triggering a wave of panic selling that sent its bond prices tumbling as much as 93 per cent.

The fixer upper in Strathaconat is selling for 1.8 million today could end up fetching 290K.

https://www.scmp.com/economy/china-economy/article/3110233/china-debt-defaults-stoke-unease-about-broader-market

Big bear

Interesting.

Shut It Down Already (original)

Is that your estimate of fundamental value then?

Big bear

5 times the average household income.

Shut It Down Already (original)

LOL.

Oracle

Reality is going to hit you like a cement truck once you have to move from your parents house.

paulb
Werner Stein

oh boy, looks like somebody wants to trigger the racist SIDA

Ad Hoc

lol !

Big bear
Ad Hoc

We should get Meng out of here. She has done nothing to Canada and we are just acting like stooges for the US. Release conditions should include she sell all her Canadian properties and never return to Canada.

Oracle

She will be released. Bank on it. In January.

Orange man bad. Meng good. Minions will buy it up. LOL

southseacompany

“Condo buyers feel the bite as CMHC’s warning on low-down payment condo purchases comes true”, Mortgage Broker News
https://www.mortgagebrokernews.ca/news/condo-buyers-feel-the-bite-as-cmhcs-warning-on-lowdown-payment-condo-purchases-comes-true-335099.aspx

“Canadians who have made the minimum down payment for their condo purchases half-a-year ago are likely to have much reduced equity now.”

““Across REBV, the return on the minimum down payment for a typical condo is a loss of 56.49%. Vancouver East stands at a loss of 82.53%, and Vancouver West works out to a loss of 80.82%. While not as bad as Toronto, a similar observation can be made: city units are doing worse than suburban ones.”

Shut It Down Already (original)

A second-hand summary of a Better Dwelling article?

Is that where we’ve got to?

Selective Memory

Guess that’s what negative returns look like, leveraged 20:1.

Shut It Down Already (original)

Nobody re-appraises their house every day. People who bought 6 months ago will likely be staying there at least another 3-5 years.

You might as well say that they were underwater on day one due to the commission and fees due at the time they eventually sell.

southseacompany

“Vancouver condo owners exposed in virus crisis: RBC”, Western Investor
https://www.westerninvestor.com/news/alberta/vancouver-condo-owners-exposed-in-virus-crisis-rbc-1.24230224

“Declines in nationwide immigration flows and notable dips in local rental prices are among the top reasons Vancouver’s housing market is being upended amid the pandemic, according to a bleak new report from RBC Economics.”

Dave

This article shows why we’re not in a bubble because it shows the fundamentals are still driving the market. With Covid and WFH, many buyers have decided to live further out and prices it that segment have been rising. In contrast, condos have corrected because of falling rent and slowed immigration. That’s what healthy markets do. A bubble would mean that both segments continue up in lockstep because of speculation. It’s not there. If we still had open houses, I’d suggest you check them out to witness what the average buyer looks like (i.e. not a speculator). Come Spring, Covid numbers will be headed down, millions will have been vaccinated, deaths headed down, tourism on the mend and another North Vancouver every year. I expect you’ll see the condo market bottom within the next six months. Doubtful that gets many… Read more »

southseacompany

CIBC Deputy Chief Economist Warns that Housing Market Slowdown is Coming”, Toronto Storeys
https://torontostoreys.com/canadian-housing-market-slowdown-benjamin-tal-cibc/

Benjamin Tal, deputy chief economist at CIBC said he believes many people are taking advantage of the low-interest rates during “the most housing-friendly-recession ever.”

“However, in light of this sense of optimism, the housing market will slow down,” and subsequently, the economy, too.“Even the governor of the Bank of Canada is telling us, listen, don’t expect any growth basically over the next six months. The party’s over. You can’t have a o% increase in the economy with the housing market continuing to boom,”

“Tal said that if you ask any real estate developer or investor in the condo space, they’ll tell you the market isn’t actually that “hot.” “

Oracle

C’mon Hutchy, after the run up, who cares if it goes down 10%

Werner Stein

“You’ve yet to prove or even attempt to show that it’s a bubble.”

*Can you prove it is not a bubble?

*Trafficometer Readings & Equity Flow not acceptable as proof

Shut It Down Already (original)

Burden of proof is clearly on you, as you’re the one claiming (constantly, and without a shred of evidence) that there is a bubble. A genius like you would surely know that.

If only you’d spend as much time actually learning stuff as you do trying to sound important. LOL.

southseacompany

“Hudson’s Bay at Coquitlam Centre forced to close after defaulting on rent”, Daily Hive
https://dailyhive.com/vancouver/hudsons-bay-coquitlam-centre-closure-rent-default

“The largest anchor tenant at Coquitlam Centre has been forced to shutter its doors.
A representative with the shopping mall told Daily Hive Urbanized the lease for Hudson’s Bay Company (HBC) has been terminated after the retailer failed to pay rent.”

realist

southseacompany, thank you sharing your research. It is very informative, and much appreciated.

southseacompany

You’re welcome.

Werner Stein

Keep tinkering, and stay gazed on the Excel spreadsheet.

But do so at your own peril, as you will be run over by the forces of animal spirits.

Euphoria will turn to fear.

Not a prediction, just an historical backed observation. 

It is a bubble and it will burst.

Shut It Down Already (original)

You’ve yet to prove or even attempt to show that it’s a bubble.

Flipflop

Can you help us with your definition of “bubble”?

Shut It Down Already (original)

Werner is free to demonstrate that it’s a bubble under any reasonable definition they choose. But they already know this.

Werner Stein

No surprise, as usual, the emotional cripple returns to his default position.
You many be a bit smarter than the con man on this blog, but still transparent.

Shut It Down Already (original)

Let me know when you’re willing to pick a specific property, or a hypothetical one of your choice, and put a value on it using fundamentals.

LOL.

Werner Stein

“I already said “Interest-rate driven dynamics can (and likely will) reverse in the future.”

Just wanted you to repeat it.

Seems to me it puts your position at odds with that of your shyster buddy.

He is omniscient and has, many times, claimed he can tell the future which holds that with a new “North Van a year” prices will continue to rise indefinitely.

Even if it were true, as you often imply, that you have a prodigious intellect, you are clearly no match for him, and surely you will not argue with such irrefutable proof.

Shut It Down Already (original)

Of course it was intentional. LOL.

And now you’re trying to attack me for not thinking the exact same thing as somebody else?

You have nothing. So pathetic.

Werner Stein

“But of course government-enabled 20:1 leverage is all but impossible to find elsewhere. It makes a huge difference.”

Keep digging the hole deeper.

Leverage has two directions.

For the longest time its being kept going in one direction, by  massive intervention, but at some point it will reverse.

Shut It Down Already (original)

I already said “Interest-rate driven dynamics can (and likely will) reverse in the future.”

Stop being a moron?

southseacompany

“Delinquent Mortgages Break Resistance Levels, Signals Potential Trouble Greater Vancouver Real Estate. “, Eitel Insights

https://www.eitelinsights.com/marketupdateblog/2020/11/20/delinquent-mortgages-break-resistance-levels-signals-potential-trouble-greater-vancouver-real-estate

“Can owner occupied demand continue to lift prices to the previous peak of $1.830M in the detached market. The answer is no, since it was not solely owner occupied demand that enabled the market to achieve the all-time highs. There was clearly demand from locals along with many foreign buyers purchasing along with investors continuing to bid each other higher. Now the investors have stopped purchasing, and overseas purchasing has all but stopped.”

southseacompany

“Real estate prices in Canada to fall by up to 26%, Bay Street firm warns”, France 24 Newshttps://www.fr24news.com/a/2020/11/real-estate-prices-in-canada-to-fall-by-up-to-26-bay-street-firm-warns.html

Veritas Investment Research, a leading Canadian company, sent institutional clients a real estate forecast. The firm warned that drops in house prices are unlikely, except in the event of a supply shock. They now believe that the supply shock could come soon and cause prices to drop as much as 26%.”

“Real estate prices in Vancouver are expected to drop smaller than in Toronto. The company sees a potential price drop of between 10 and 17 percent. “

“The firm expects this price movement about six months after the inventory increase. The timeline brings it pretty close to when CMHC made the forecast.”

Selective Memory

We can cut through this “equity flow” malarkey with a simple thought experiment: let’s suppose you buy an investment property in cash. First, it’s trivial to see that there’s been zero change in your net worth. You exchanged a million dollars in other assets for a million-dollar house. Second, it’s easy to analyze the investment. You have income (rent) less expenses (taxes, fees, maintenance). Net income divided by purchase price gives your return on investment. This is the best-case scenario for your ROI. If you buy the house on credit, that just adds the expense of interest. Unless you’ve found a banking leprechaun to give you a negative-rate mortgage, your return will be lower. So if the ROI is unappealing in the all-cash scenario, a mortgage can’t add some magic ‘equity flow’ that somehow makes it better. Before you say… Read more »

Big bear

Amen.

Shut It Down Already (original)

Leverage absolutely comes into play because otherwise you have significant opportunity costs to consider on day one.

Selective Memory

Any investment can be leveraged, so it doesn’t change the equation. Unless your thesis happens to be that real-estate is a great investment because it’s easier to leverage it 20:1. If that’s your argument, be honest about it.

When you talk about the opportunity cost of buying real estate, what you’re really saying is that there was some other investment that would have given you a better return on your capital than buying a house. And if that’s the case, why exactly did you buy a house?

Shut It Down Already (original)

I’m not claiming that real estate is the best investment class out there (there are significant transaction fees and it can take weeks or months to sell, for instance). I’m saying that I can appreciate why some will accept slightly negative cash flow knowing that by the end of the term they have an income-producing asset for which they effectively paid relatively little.

But of course government-enabled 20:1 leverage is all but impossible to find elsewhere. It makes a huge difference.

Selective Memory

They didn’t pay relatively little, though, did they? They paid more. A million in cash up front, or a million plus interest buying over time.

20:1 leverage looks like a genius opportunity, as long as prices can only go up. If you acknowledge they can also go down, then it starts to look a lot more like gambling. “Safe” investments leveraged to the tits to multiply thin returns — sounds a lot like 2008 to me.

Would you leverage your stock portfolio 20:1 if your broker allowed it? Before the crash of 1929 margin buying got up to around 80-90%. That’s only 10:1, and there were a lot of people jumping out of windows.

Shut It Down Already (original)

In the cash flow negative scenario under discussion the article amount paid is roughly the same as the monthly deficit (multiplied by the number of months). Nothing magic happens when cash flow turns negative. If the deficit is $10 per month then you can’t argue that they didn’t pay very little to acquire the property.

(I say “roughly” because there will be expenses which aren’t paid on monthly basis, such as maintenance).

Leverage is 20:1 on the first day of the mortgage, but it decreases over time as equity is built. Major real estate crashes (Vegas style) are rare, and generally the banks would prefer that you kept paying rather than foreclose. Systemic risk is an issue for all investments, of course.

Werner Stein

When you boil it down, the three swindlers’ prediction of ever rising prices is basically anchored on the expectation of low Interest rates, and high levels of immigration.

Interest rates do change, so can the level of immigration and its effects can be offset by increasing supply.

In spite of their constant promotion of the myth, we are not running out of land or sky.

Prices have ascended to these levels on sentiment rather than the true value and earning capacity of the asset.

Nothing based on reality to sustain the current prices.

Shut It Down Already (original)

Another strawman. I never said there would be endless price gains or that we’re running out of land. I’ve actually said many times that prices increased as interest rates dropped while others were still trying to persuade themselves and each other that it was due to foreign influence. Pay attention, and try to stop being so dishonest.

Interest-rate driven dynamics can (and likely will) reverse in the future. We just have no idea when, aside from that the BoC claims it won’t be any time soon.

But for now prices aren’t that unreasonable given that you can get a 5yr fixed for 1.5%.

paulb

N 130
PC 44
S 118
TI 12377

MTD Sales 2140 Listings 3136

http://www.clivestevepaul.com

Big bear