All posts by VCI Admin

Will dropping house values help affordability?

According to RBC, Vancouver just saw the biggest back to back deterioration in housing affordability in 26 years of record keeping. So for those thinking they might want to be able to afford property, they might like to hear that the Vancouver market is apparently ‘softening’ according to TD:

A new study suggests the two hottest real estate markets in Canada appear to be headed in different directions, as Vancouver softens and Toronto looks to maintain its momentum.

In a report published Tuesday, TD Bank said Vancouver has started what is expected to be a modest correction, which will be reinforced by the recent implementation of the land transfer tax on non-residents.

“Home prices are projected to decline by about 10 per cent in the region by mid-2017, before stabilizing later in the year,” TD said.

Of course even with that predicted price decline, it’s not exactly going to bring Vancouver house prices into the really ‘affordable’ range.  Read the full article here.

Canadian economy is doomed

Do low oil prices and a real estate bubble spell trouble for the future of the Canadian economy? Jared Dillian, former Lehman Brothers trader and financial writer is predicting a continuously dropping dollar with a long drawn out housing market crisis:

Unlike the US market, the mortgage market in Canada is not securitized. This means the housing crisis in Canada won’t be quick the way it was in the US (6/2007 to 3/2009).

Dillian says a long, drawn-out “death by a thousand cuts” scenario is in the cards for the Canadian housing market. And, this economic pain will probably last years.

He also notes that nearly all mortgages in Canada are “recourse mortgages” (except in Alberta). This means in-the-hole homeowners are not as likely to walk away as they were in the US housing crisis.

Is this the time that the wolf actually shows up, or just another failed prediction of doom? Read the full article and view the video interview over at Business Insider.

Friday Free-for-all! August 26th 2016

It’s the end of another work week and that means it’s time for another Friday Free-for-all!

This is our regularly scheduled end of the week news round-up and open topic discussion thread for the weekend, here are a few recent links to kick off the chat:

Royal Bank ‘closely monitoring’ housing
CIBC can weather housing crash up to 30%
Pumping Tax Free Zones
Metro house sales plummet
Home sales down 63% in first weeks of August
Foreign buyer tax in four charts
How can Vancouverites afford to buy?

So what are you seeing out there? Post your news links, thoughts and anecdotes here and have an excellent weekend!

Rise of the amateur landlords

The Globe and Mail has an article on the rise of ‘mom and pop’ landlords – people that rent out portions of their homes to be able to afford their mortgage.

Online classified sites are filling with posts from pilots, lawyers, construction workers and people doing all kinds of other jobs who have tacked on being a landlord as an extra way to help cover their mortgage costs.

With cities such as Vancouver and Toronto struggling to cope with a housing-affordability crisis, many people are choosing to rent out secondary suites in, or attached to, their homes as they try to keep a handle on outrageous property prices.

The rapidly increasing cost of real estate, particularly in the Vancouver region, has rippled into the rental market, pushing vacancies near zero while causing rates to increase. At the same time, the number of units outside of purpose-built rental buildings has been steadily escalating.

The article goes on the examine some of the issues with bad tenants, bad landlords and the perceived lack of rights for both groups. Read the full article here.

 

Vancouver Market Summary so far for August 2016

yvr2zrh wrote a good summary of what the market looks like currently, how media headlines can get it wrong and where we might go from here:

With about 9 market days remaining in the month, we can start to look forward to how the month will end up. During the past two weeks, we have seen so many numbers in the media which highlights not only is the market falling but also that the intricacies of the underlying data are not well-understood by so many people.

The message (although correct in that the market is bad) is so poorly explained and supported and thus the true state of the market is not clear to people. So – here is the summary of what is really happening.

1.) Sales volumes will be down around 25% for unit sales but 33% for dollar volume. My model predicts a 10% decrease in condo sales (which is not much).
2.) The decrease in average price across the entire market is driven primarily by mix at this stage. It is not known how much is driven by actual price movement. Likely little so far.
3. ) Detached home sales are down significantly. This is likely more than a 50% decrease from July volumes and could be more than 65% down from August 2015.
4.) It is not clear what the benchmark price will do but we would expect that the condo price is probably almost unchanged. This market is mainly suffering from supply issues which will take time to resolve. Detached benchmarks are likely to fall in the higher-priced markets. The reason is that there will be buyers but only low-ball buyers testing sellers.
5.) The stats will be partially supported by the month-end date cutoff issues at REBGV. They report sales based on the date they get paperwork. Many of the sales recorded to beat the tax will actually show as an August sale, while they are actually July sales. Since these are from a period with a “different regulatory and tax framework” they are not really comparable and should perhaps be shown separately for accuracy purposes.
6.) Inventory will be up a bit but we still have a supply shortage in condos. Detached house MOI will increase to 10 or more.

Ultimately, this tax is taking money out at the top. It will take a couple months to see how it all plays out but the top of the market will now need to rely on move-up buyers and bona fide immigrants who are permanent residents.

We can already see the headlines coming but some of the intricacies of the stats will not really be understood.

I also have some stories from the front lines which I will get more info on next month and then write a more detailed update.

And – let’s try to keep the discussion on topic as much as possible – we have started to waiver a bit in the past few weeks.

Posted by yvr2zrh on Friday August 19th 2016 in the comments section.