Vancouver Condo Info

Canadian Mortgage Trends has an article about getting your mortgage approved before prices fall.

When home prices do fall, it makes it tougher for certain people to qualify for a mortgage—especially for refinances. When prices start dropping, appraisals come in lower, insurer valuation systems become more conservative, and lenders tighten up in general.

Vince Gaetano, a broker with Monster Mortgage, tells the Financial Post that people are already trying to get approved “before there is a correction in the real estate market.”

Of course prices may fall in the rest of Canada, but we all know they won’t fall here in Vancouver right guys?

Woodrow pointed out this excellent article over at News1130.com on how to get a good deal with these new high interest rates. Here are a couple of gems:

The easiest thing to do is to put down a larger down payment, which will help you pay less interest over the life of your mortgage — or make payments weekly or bi-weekly.

Well that’s easy! Just put down more money! But what if the credit card companies won’t let me take out another cash advance? Do you have any other advice on how to save money on a mortgage, perhaps in a jumbled form?

Bank of Montreal’s Carolyn Heaney says within in the next couple of years we’ll see more increases in the prime lending rate, so people may want to consider a fixed rate mortgage. “Let’s say we take an average 30 year and reduce it to 25, how much interest can we potentially save off on a $200,000 mortgage? The answer to that is roughly around $53,000.”

Heaney explains another thing people can do is cut their amortization by five years, from 30 to 25. She says potential homeowners can save over $50,000 on a $200,000 mortgage.

..Perhaps we’re all just too busy flipping condos to edit the news?

No, not the Realtors®.  Thieves have been posing as prospective ‘buyers’ and stealing small valuable items from homes being shown for sale including jewelry and electronics.  There have been a rash of thefts from Langley open houses according to a bulletin sent out to all FVREB Realtors.  I wouldn’t be surprised to hear of similar problems in Vancouver.  If you’re holding an open house you might want to keep an eye on your stuff:

Multiple thefts at Langley open houses and private showings

Langley RCMP are asking members to be on the lookout for suspicious “buyers” targeting showings in the City and Township of Langley and to remind homeowners to secure their valuables.

Between May 2 and 10, thieves stole jewellery (rings, necklaces and watches), designer sunglasses and electronics on counters and in drawers. No suspects have been identified.

Please report any suspicious activity to the Langley RCMP at 604.532.3200.

Hat tip to chilled for the link.

April 19th has come and gone bringing with it strong listings and weak sales. As of last night there are now at least 16,071 places available for sale in the REBGV area causing some to celebrate.  Time will tell if the Vancouver market is fragile enough to see a price top coincide with these rule changes.  Every market cycle needs a top and a bottom – those that buy at the top help to pay the bills of those that buy at the bottom.

Speaking of paying other peoples bills.. Strataman has an interesting post in the forum for anyone looking to buy into a strata property.  Apparently many condos have common areas where the utilities are billed directly to the strata without any sub-metering.  This can be a problem for residential condos with commercial properties attached that have heavy utility usage.

Once caught out the commercial strata will try to share the costs on a sq.ft division. Needless to say this is also a scam as restaurants, stores like Urban Fare, Costco use substantially more of “the common area” utilities per sq.ft, then a residential strata.Most combination strata s are weighted heavily in favor of the attached Commercial Strata. To actually solve this problem the residential strata has to manage all the utilities like they are a service provider. They have to pay for and install sub-meters where possible, pay for consultants such as myself to construct legally binding contracts,and generally fight fo recovering costs spent on SOMEBODY ELSE’S PROPERTY.

I have NEVER found a declaration in the strata titles that indicate the fact that services are supplying OTHER properties. The City of Vancouver refuses to discuss the issue.As all strata developments are signed off by the developers architects and engineers, no impartial inspection is ever done until exorbitant costs bring the strata to a consultants door. I have also never found a building inspector that does condo purchase inspections even slightly aware of this.Property managers are gradually becoming aware of this.

Tip: Buy only into single strata developments like one strata on ONE piece of land. Multiple RESIDENTIAL strata have the same problem. (Spectrum is three residential strata lots for instance).

Read the whole thread on this issue in the Forum, and if you’ve got questions or comments about strata living issues feel free to make your own thread in the new strata living forum.  This is where Strataman will be posting his tips and commentary about strata and building maintenance issues in the future.

Here’s a handy financial planning tip: Quit your job and start flipping condos.

You can not go wrong with this simple plan my friend, just look at the facts:

1. BC Jobs don’t pay well.  look at this chart, just look at it.  Our incomes have gone up, but not by as much as in Alberta or Ontario, both of whom get paid much better than us.   At least our houses cost more.

2. Your job may leave you.  Quit it before it quits you.  In January 2009 the Metro Vancouver unemployment rate was 4.9%.  Now it’s 7.8%.  See which way that’s going?  hint: it’s the opposite of house prices.  Make your own secure future in the real estate biz today!

3. The Government wants you to.  If the government didn’t want you to be speculating on real estate they wouldn’t hold interest rates at .25% and insure your mortgage with just 5% down (which the bank will give back to you in cash!) would they? It’s a pretty clear message, the only real road to riches is REAL ESTATE baby!  We can all be Donald Trump!

4. Real Estate Never Goes Down.  This is self explanatory.  Prices have risen tremendously in Vancouver which clearly means it’s a hot sector whose track record is proven.  In March 2010 the REBGV benchmark house price dropped by $455 to only $800,341.  I smell a buying opportunity!

Does this sound exciting to you?  Then YOU are the kind of financial intellect I’d like to work with!

I’m willing to offer you a very special deal for a limited time only.  Send me $15,000 and I will send to you, absolutely free, a handsome inkjet print of these words on a 8.5 x 11 inch piece of paper suitable for framing.  This will empower you to REMEMBER and BELIEVE the words so that they may bring you happiness day after day, even in the event of a completely unforeseeable market collapse.

Now go quit your job and start flipping condos.

There’s a book excerpt by Moshe Milevsky over at Globe Investor that makes the argument that many people would be better off renting and not buying their first home until age 50.  When housing is a hot investment sector many people overpay and the return to fundamental value hurts many.  In the US about 25% of homeowners owe more on their mortgage than their house is worth.  This is an obvious reason why renting early in life can be a better long term economic move, but it’s not the crux of the authors argument:

So, where does this leave us in terms of practical housing advice? For one, I think that a large proportion of individuals within the population should not own a house, or they should at least push off the purchase as long as possible, and instead rent. Anyone that followed this advice in the U.S. over the last few years, possibly the last few decades, would be much better off today. This is not just me being preachy or dispensing with advice that–with hindsight–proves correct. If you actually go back to one of the first principles I discuss in this book, namely Long Division and the spreading of resources over time, you can arrive at the same conclusion, but the reason is not as simple as you might think. It isn’t because housing is a “bad investment” or has performed poorly relative to other asset classes. Instead, it relates to the investment characteristics of your human capital when you are young and as you age.

In a number of recent studies, a variety of mathematical economists have developed a control theory model to derive the optimal or rational approach to housing over the life cycle. (I discussed Dynamic Control Theory in the Introduction.) You can think of their research as exploring how Mr. Spock (from Star Trek), who knows all the odds and can act completely logically, would behave. According to these researchers, most “typical” people under the age of 40 shouldn’t own a house but should rent, instead. But again, this isn’t recommended for the reasons you might think. Here’s the Spock argument against home ownership early in life: When you are young the vast majority of your true wealth is locked up in human capital, which is illiquid, nondiversified, and definitely nontradable. It therefore makes little sense to invest yet another substantial amount of total wealth in yet another illiquid and nondiversifiable item like a house.

Sure, if you could buy a house that has a bedroom in New York City, a bathroom in Los Angeles, and a kitchen in Chicago and perhaps a garage in Las Vegas, yes, your home would be diversified. Buying a house as an investment has strong similarities to someone being convinced that stocks are good investment in the “long run,” but they decide to buy only one stock for their portfolio. I don’t care how reliable that one stock is, or how large are the dividends, that stock portfolio is not diversified. The same goes for housing.

Read the full excerpt over at the Globe Investor website.

Joycer posted this on the weekend, but it got held up in moderation and is worth a second look.  According to his analysis the new CMHC qualification rules for rental income are going to have a big impact for anyone counting on a ‘mortgage helper’ to qualify for a larger mortgage.  If your eyes don’t glaze over at the math, see if you can see any holes in this reasoning:

Since we’re talking about how the new rules will affect rental income, I thought I’d do some math to see the net result. For those of you who aren’t interested in the math, here’s the punchline:
After April 19th your annual qualifying income is reduced by 30x(monthly rent).

For example, suppose there is a house for sale with a rental suite that generates $1000/month. If the potential buyers need an annual income of 70K to qualify for the loan before April 19th, then they will need to make 100K for the same loan under the new rules.

Here’s the math:
According to CMHC’s website, monthly housing expenses (which include taxes and heating) must not exceed 32% of your gross monthly income.

m = mortgage payment
r = rental income
i = gross monthly income
h = heating expenses
t = taxes

Under the current rules:
(m – 0.8r) + h + t = 0.32i

Under the new rules:
m + h + t = 0.32(i + 0.5r)
m + h + t = 0.32i + 0.16r
(m – 0.16r) + h + t = 0.32i

Comparing the changes, the difference between the old and new rules is (m – 0.8r) vs. (m – 0.16r). To qualify for the equivalent loan under the new rules the rental income would have to increase by 5 times. Since 50% of rental income is added to your gross income, that means your gross monthly income needs to increase by 2.5 times rent. For an annual salary that means 2.5 x 12 = 30 x rent.

You can verify this on the CMHC’s own calculator:
http://www.cmhc-schl.gc.ca/en/co/buho/buho_007.cfm

For example if you are using the $1000/month rent example it will increase your maximum monthly mortgage payment by $800 with the old rules.

If you put in $5000 for the monthly income (does not matter tax/heat you use), then change it to 5000 + 2.5 x 1000 = 7500 you will see the maximum monthly mortgage payment increases by $800 just like under the old rules. The difference though is an income of 60K vs. 90K!

Addendum: Above are the two formulas I came up with, one as change in principle under the new rules, and the other the change in rent. It’s interesting to play around with the numbers, for example a $600,000 mortgage requires $2650/month over 35 years at 4%. Assuming this is a typical detached mortgage for someone with a suite that generates $1250/month, the same people will now qualify for 22% less mortgage or 130K less. In order to make up the gap previously they need to increase their monthly income by $2500.

One change I can see coming from this is how the suites are valued when selling a home. In my example above, the suite adds an extra 130K to the mortgage a potential buyer can qualify for compared to the new rules. The only way around the rules of course is to come up with 20+% down… maybe Flaherty did effectively raise the minimum down payment for homes with suites to 20%.

This fixer-upper is conveniently located near the center of Vancouver BC host city of the 2010 Olympic and Paralympic games.  Just minutes from downtown, it can be yours for only $579,900.  You may be slightly put off by the pictures, but remember, many investors won’t be able to recognize a diamond in the rough, so you might not have to bid too much over asking price to put this baby in your portfolio of investment properties.

First time buyers, Investors, Builders. Corner lot with lane. Nice residential street. Close to everything. Central location. Handy man special. Needs TLC. Mainly Land Value. 21st Avenue and Prince Albert St. 10 mins to Downtown Vancover.

Thanks to crash and tincup for finding this gem!

Bob Rennie is the quintessential salesman and like most marketers he knows how to talk his product up.  Here he is expounding on the wonders of Vancouver condos on the Chinese news site xinhuanet.com.  This follows the template of most of his ‘news’ releases but includes one very interesting quote about the post-games market here in Vancouver:

“I’ll guarantee it won’t hurt our values. I’ll guarantee it will maintain our values. The frightening part is if values go up too much. We don’t have financial sector head office jobs, no manufacturing. If we are basing things on local incomes, how does housing keep up with local incomes if we have a shortage? We have to be very careful on the affordability side.”

This is a very generous offer.  If anyone has the financial resources to ‘guarantee’ that your condo won’t drop in value it’s Bob Rennie.  This could be exactly what anyone who fears the fallout of a housing bubble needs to get them to buy property in Vancouver.  After all, many people are leery of buying in a market where prices are near record highs and there are no ‘financial sector head office jobs’ and ‘no manufacturing’, particularly when that city has a history of volatility in house prices and has seen market crashes of up to 50% in the past.  Watching people in cities around the world go into foreclosure or make mortgage payments that are far beyond the current value of their property doesn’t exactly instill confidence either, even if it IS different here.

I’m not sure exactly what the contract on this deal would look like but I imagine that you’d ‘lock in’ your purchase price and it would be held on record for any future point you decide to sell.  If the market goes up, you’ve made free money.  If the market goes down, I’m guessing Bob Rennie would write you a cheque to cover the difference between your purchase price and the price you were able to sell for.

Nah, that’s just silly… he’d probably have an employee write you the cheque.

I’m not sure if there are any catches, but with a deal like that how could you possibly go wrong?

Yep, property tax assessments are out and the Vancouver Sun asks how did you do?

This year — unlike in January of 2009 when the system was turned on its ear by political interference — it’s fairly easy to figure out if you’ll win or lose when your tax bill comes out in July.

Let me illustrate with an example that, on the surface, looks scary: Say your assessment notice shows a 15-per-cent increase in the value of your home or business. What to do?

First, don’t panic. Take a moment to read this column, check our website and figure out what this really means.

You’ll find a 15-per-cent increase is no big deal if your home is in New Denver, Kitimat or Clearwater, or your business is in Peachland, Sparwood or Smithers. Because in these places the average assessment — not just yours — is up about 15 per cent. So the impact will be nil. Any hit on your tax bill in July will be due solely to increased municipal spending.

Phew!  But it’s a different story if you own property in a major urban center.

However, if this hypothetical 15-per-cent increase is for property in most urban centres — almost all of the Lower Mainland, the Capital Region or the Okanagan — then now might be a good time to panic. Because the average in these places hovers just a few points above or below zero. And if you have a significantly higher-than-average change in value, you get a bigger tax bill.

It’s how the change in your assessed value compares to the average for other properties in your community — not the absolute value of your assessment — that matters to your tax bill.

Well, I guess we’ll just have to hope that Vancouver City Council doesn’t want to raise any more tax money in the near future.  You can check the assessment online here if you haven’t received any mail yet.

UPDATE: Don and Larry point out that the REBGV stats package PDF for December is now available online.