Category Archives: data

Condos are hot again, buy two or three

CMHC has surveyed condo owners in Vancouver and Toronto and found that the number of owners with multiple units is growing.

…the total number of investors in the two regions who say they have purchased at least two condo units in addition to their primary residence has risen nearly 13 per cent over the past two years. Nearly a quarter of condo investors told CMHC that they owned least two units, with close to 10 per cent reporting that they owned three or more condos.

Buyers are looking for both rental income and appreciation, with some interesting math:

Among condo investors in Toronto and Vancouver, half told the federal housing agency that they had bought their investment unit for rental income. Of those, 56 per cent expect the value of their condo to go up, while only 8 per cent thought that it would go down. The share of condo investors in Toronto who expected their unit to increase in value fell to 60 from 64 per cent from a year earlier, while the share in Vancouver who expected their condos to increase in value rose to 50 from 41.5 per cent.

A slightly larger share of investors in Vancouver reported paying higher prices for units than in Toronto, although the survey found that the reverse was true of rents, which were higher in Toronto. Nearly 16 per cent of Vancouver landlords reported charging less than $1,000 in rent for their condos compared with fewer than 5 per cent in Toronto. By contrast, nearly 50 per cent of condo landlords in Toronto said they charged more than $1,500 for their units, compared with 33 per cent in Vancouver.

Read the full article over at the Globe and Mail. So how many condos do you own and how many are you thinking of buying this year?

CMHC looks to define foreign money

How would you go about trying to determine how much foreign money is going into Canadian real estate? The CMHC is now trying to figure that out.

A core team of analysts at CMHC held several meetings to discuss how best to tackle the data gap. Researchers had initial meetings with agencies including the Canada Revenue Agency and Fintrac, CMHC confirmed. The Financial Transactions and Reports Analysis Centre of Canada monitors money laundering and out-of-country transactions of at least $10,000. The documents show CMHC also planned or had meetings with the Bank of Canada, British Columbia’s housing and property assessment agencies, and the department of finance to start a data working group.

So why are we missing that information and how much real estate is owned by people outside the country?

After meetings with realtors, lawyers and condo developers in Vancouver, CMHC market analysts pointed to the lack of transparency in the market. Realtors often don’t see residency status or identification such as a passport, and that information isn’t stored electronically at the brokerage. Lawyers and bankers who run the transaction aren’t obligated to pass on residency information and buyers don’t regularly check a citizenship box when paying land-transfer tax.

“Conveyance is done through the lawyers and bankers,” minutes from a meeting show. “Money transfers should get passed onto Fintrac. Whether this is taking place or not is an issue.”

Previously, CMHC has tried to glean the scope of foreign investment with a survey of property managers that found less than 6 per cent of condos were bought by people who reside outside the country.

Read the full article over at the Financial Post.

B.C. Budget aims to fix real estate woes

There’s a new budget in BC and it includes some changes aimed at the real estate market.

For the first time the government has decided to start collecting data on foreign buyers and are offering a break on property transfer taxes for new construction under $750k.

The changes will see buyers save up to $13,000 from B.C.’s property transfer tax if they purchase a newly built home, condo or townhouse valued under $750,000, as long as they are Canadian residents who live in the home for at least a year. The tax break starts today.

It’s designed to boost the supply of new home construction and give people a helping hand to enter the market, said Finance Minister Mike de Jong. But it won’t cool the market enough for those who say they can’t afford to live in the Lower Mainland.

“If by cool you mean actually reduce the value of people’s major asset, their home, clearly we were not interested in taking that step,” said de Jong.

The tax break will be offset by a one-per-cent increase to the property transfer tax, to three per cent, on luxury homes that sell for more than $2 million.

Critics say the budget amounts to half-measures from a government that’s stuck between not wanting to intervene directly in the housing market and needing to look responsive to public frustration.

Read the full article over at the Vancouver Sun.

Your vote counts, we’re number 1!

So, you probably noticed some issues with the site over the last few days – mainly the comment voting system was broken.

We’ve got a temporary fix in place, so it looks like you can go back to voting on comments for now.

Meanwhile TD says BC is the most susceptible to economic shocks due to housing:

B.C. has topped TD’s list for the most financially vulnerable households in Canada for 16 years in a row. With the most expensive housing market in the country, B.C.’s households spend the largest share of their monthly budgets on paying debt, devoting 9 per cent of their income toward interest payments alone. The typical B.C. household would have to spend more than half its income in order to afford an average-priced home. Stretched affordability has meant the province has an above-average number of homeowners who are delinquent on their mortgages, TD says. Households in B.C. hold a disproportionately large share of their overall wealth in their homes, having fewer non-housing financial assets than other provinces. On the bright side, those housing assets are considerable given the soaring cost of real estate in the province. Homeowners have also adjusted to high home prices by renting out portions of their homes to cover their mortgages, TD said.

Read the full article here.

 

How big can debt loads get?

It seems like every few months there’s more news about Canadians taking on record levels of debt – a recent story linked to by southseacompany is on this topic:

Evidence Canadians are on a debt-fueled spending spree.

Canada may have spent the first half of the year stuck in an oil-driven recession, but you’d never know it looking at Canadians’ spending habits.

Consumer spending was 6.68 per cent higher in the third quarter of this year compared to a year earlier, payment solutions provider Moneris reported in its latest quarterly report.

British Columbia and Ontario led the way in spending growth, with B.C. up 10.2 per cent and Ontario up 9 per cent.

Even in recession-ravaged Alberta, which lost 2.6 per cent of all its jobs in the past year, consumer spending is up by 0.3 per cent compared to last year.

Any one else getting bored with the repetition? Is it really different here and can Canada pull off this trick indefinately?

Here’s the full article.

Can someone please explain this market?

The following was posted by ‘Whistler or bust?‘ in the comments this weekend:

I will be the first to admit I have been very wrong about the direction of Van RE in the past 2-3 years. That disclaimer said, lets examine some facts to see if there is any upside left:

These are the incomes required to be in each % (Source CBC)

10% of income earners $80,400*
1% of income earners $191,100*
0.1% of income earners $685,000**
0.01% of income earners $2.57 million*

So with the average Vancouver detached home at $1,408,722 (Source Yatter Matters)

A DP of $281,744 is required to buy
PPT is $26,174
Misc Closing $2,000
Total $309,918

Mortgage $1,126,978 @ 2.59 for 5 yrs = $66,072 Annually ( I will note these are record low rates)
Assume 1% Annual Maintenance (This is a standard benchmark over many years) $14,080
Property Taxes – These can vary but lets assume $7,000?

So Annual carrying costs total $87,152 AFTER TAX – I am excluding heating and hydro which vary but in no cases less than $3,000 annually for a detached home

Back to our chart above – Lets assume a 30% avg tax rate for the 10%, 35% for the 1% and 45% for the 0.1 and 0.01%.
After Tax
10% of income earners $56,200* – This house would take up 155% of the after-tax income
1% of income earners $124,215* – This house would take up 70% of after-tax income
0.1% of income earners $376,750* – This house would take up 23% of after tax income
0.01% of income earners $1.413 mil – This house would take up 6% of after- tax income

This is assuming all of these people have $310K for closing. This is assuming they are buying the average house of $1.4 mil. I think we all know what kind of house $1.4 mil gets on the West Side and even on the East side nowadays.

So the conclusion – Even the 1%ers are realistically priced out of the average Van detached home. Only the 0.1% and and above can really afford to buy.

Put another way – 99% of people are priced out. As families combined lets assume 95% are priced out.

So to all you bulls out there, please answer the questions: Is this a healthy market? Is this a market with any upside left?

I think we all know the answer.

$500 would push 16% of homeowners into default

A recent Bank of Montreal poll finds that approximately 1 in 6 Canadian homeowners would be pushed into default if payments rose $500.

According to the bank, 16 per cent of respondents said they would not be able to afford such an increase, while more than a quarter, or roughly 27 per cent, would need to review their budget.

Another 26 per cent said they would be concerned, but could probably handle it.

Such an increase would be generated in the case of a three percentage point hike in interest rates — from 2.75 per cent to 5.75 per cent — on a $300,000 mortgage with a 25-year amortization period.

Given that interest rates are likely to increase in the foreseeable future, the bank said there was no better time to put together a detailed debt management plan.

Read the full article here.

The crash? It’s in BC Immigration.

The number of BC immigrants is down 66% in the first half of this year and has crashed to a 15 year low.

From Business in Vancouver:

As a panel discussion on foreign home ownership prepares to convene next week in Vancouver, the latest statistics show that international immigration to British Columbia has crashed to 15-year lows.

The first half of 2015 has seen a net increase of less than 6,000 immigrants into B.C., compared with more than 18,000 in the same period last year.

This was the first time in more than 15 years, BC Stats said, that B.C. experienced a net loss of non-permanent residents.

If the current trend continues, immigration to B.C. will fall below the annual inflow that forms a key foundation of housing demand forecasts.

The dramatic decline began in the fourth quarter of 2014 when net immigration fell to negative 1,808 people – meaning that many more people left B.C. for other countries than arrived. This was the first net loss of immigrants to the province in more than a decade.

Read the full article here.

Canadian personal finances bleak.

According to a recent poll by the Canadian Payroll Association, nearly half of the workers in Canada are struggling month to month to cover their living expenses.

Nearly a quarter say they probably couldn’t come up with an extra $2k if they needed it for an emergency in the next month.

More than one-third of respondents – 36 per cent – said they feel overwhelmed by their level of debt and 12 per cent indicated they doubt they will ever be completely free of debt.

Forty-eight per cent of those surveyed said it would be difficult to meet their financial obligations if their paycheque were delayed just one week, up slightly from the annual poll’s average of 47 per cent over the past three years.

The report, released Wednesday, comes in the wake of economic data indicating Canada experienced two consecutive quarters of contraction – technically speaking, a recession – although home sales in August (except in Alberta) were strong and a report last week showed 12,000 net jobs were created last month.

Clearly the answer to the debt problem is more debt in the form of a home equity loan! Read the full article here.

Realtors not hungry

RFM has updated the Realtor Hunger Index over at VancouverPeak.

The VANCOUVER REALTOR HUNGER INDEX is the percent of realtors who earned no commission income for the stated month. For August 2015 the VRHI was 49%. How does this compare? The 18-year average for August is 50%. At 49%, the 2015 August VRHI was higher than 8 years and lower than 9 years since 1998.

Despite turmoil in the speculative equity markets, an ‘official’ recession in Canada, oil prices that are plumbing the bottom of the barrel, foreign money-laundering investigations by the Canada Revenue Agency, corrupt politicians, greedy realtors, rapacious real estate marketing firms and a plethora of other factors that should cause a collapse of the Vancouver housing bubble, continued lower-than-average inventory and strong demand forced already high prices higher, especially in single family homes, where the HPI increased a whopping 17.5% from August 2014 to $1,159,600. Endlessly-low interest rates (and clueless BOC leadership), a flood of foreign investment money and knee-jerk buying by uninformed and delusional buyers, the August sales rate is extraordinary! And unsustainable. My official opinion of all this is available 24/7/365 for US$0.05! Call now! Operators standing by! However, for a more detailed and scientific analysis of the market dynamics of this firestorm, consult the DSM-5! (The Diagnostic and Statistical Manual of Mental Disorders (DSM-5), published by the American Psychiatric Association, offers a common language and standard criteria for the classification of mental disorders.)

Details and comparison data for 18 years at: http://vancouverpeak.com/showthread.php?tid=64