Garth Turner - Real Estate in Canada

[augustabound]

 

Vancouver Island is just far enough away that it acts like a separate market. Residents are somewhat held hostage by BC Ferry access to the mainland. 

 

I knew of the cost but didn't realize the entire time involved. Not that it matters much to us. If we ever do make the move, my wife works in software and works from home.

I also looked at the demographics and read that Nanaimo isn't as diverse as the lower mainland. (no international buyers to drive the prices up)

 

A couple of years ago we thought about a place on Pender Island but the gulf seems like a world of its own based on what we found.

 

Thanks nodnub.

[mcliu]

Not sure if this means anything but apparently the COO of BMO and CEO of Scotia are putting their houses on the market.  ::)

 

http://torontolife.com/real-estate/houses/bmos-chief-operating-officer-is-selling-his-house-for-11-7-million/

http://torontolife.com/real-estate/houses/scotiabanks-ceo-is-selling-his-swanky-church-conversion-condo-for-4-million/

[rb]

In the latest Graham and Doddsville Marc Cohodes talks a bit about his Canadian Real Estate short - he's short via Home Capital Group

Do you have a link?

[rb]

Any particular names?

I like MIC for a short. They've been talking like they're the people's saviour because they're willing to insure and make dreams come true for those people oppressed by that tyrannical CMHC government agency who refused to insure their mortgages because you know they didn't have income verification. So I'm thinking that there's probably a festering pile of excrement on their books. But I've just started doing the analysis.

[Aberhound]

 

Vancouver Island is just far enough away that it acts like a separate market. Residents are somewhat held hostage by BC Ferry access to the mainland. 

 

I knew of the cost but didn't realize the entire time involved. Not that it matters much to us. If we ever do make the move, my wife works in software and works from home.

I also looked at the demographics and read that Nanaimo isn't as diverse as the lower mainland. (no international buyers to drive the prices up)

 

A couple of years ago we thought about a place on Pender Island but the gulf seems like a world of its own based on what we found.

 

Thanks nodnub.

 

The other factor is that Vancouver Island is mostly run by socialists so in many places the property taxes are much higher relative to the value and services offered. This is the legacy of a large timber sector and government sector which both are heavily unionized. Admittedly it is difficult to provide services cost efficiently at low population densities. You have to check the local market. For instance in Maple Bay, just south of Nanaimo my friends are paying only slightly less than I pay in Vancouver on about 1/4 the value and far less services. The result is lower property values and less appreciation over time and the Municipal governments claim that they are always short of money yet spending growth far exceeds inflation. Prices on the east coast of Vancouver Island are also distorted because of the railway belt which was in private hands but is now owned by the government pension fund since they acquired Timberwest in 2011 (unusually a brilliant move by government pension fund managers). The belt is 20 miles wide (800,000 acres) and should be densified then developed far more but try to get the zoning from the local governments!

[augustabound]

The other factor is that Vancouver Island is mostly run by socialists so in many places the property taxes are much higher relative to the value and services offered.

 

That's something I hadn't thought about. Thanks for that.

 

You would assume services would compare similarly across the province with the exception of anything that may need transport from the mainland.

[wisdom]

http://vancouversun.com/opinion/columnists/vaughn-palmer-nightmare-housing-scenarios-good-reason-for-government-caution

 

A good read. The numbers are along what I expected.

[Phoenix01]

Here is an interesting interview with a TD economist.

 

http://tdwealthmedia.com/videos/overheated-housing-in-canadian-cities/

 

[gary17]

http://www.bnn.ca/News/2016/6/28/Chinas-CITIC-Bank-tries-to-seize-real-estate-assets-in-Canada.aspx

[Ballinvarosig Investors]

The Guardian did a good article on Vancouver property prices, apparently up 30% in just a year? Is that true?

 

https://www.theguardian.com/cities/2016/jul/07/vancouver-chinese-city-racism-meets-real-estate-british-columbia

[gary17]

YES it is true LOL

 

  market price up 30% ;  20% downpayment (equity) means what....  ....30/20 = 1.5x! LOL

 

unfortunately it is looking very likely i will be joining the market soon....  hopefully BAC dividends will come rescue me when YVR RE collapses

[wisdom]

Game over - 15% tax for all foreigners in Vancouver starting Monday.

 

http://www.edmontonjournal.com/news/politics/premier+unveils+foreign+buyers+metro+vancouver+real+estate/12081555/story.html

 

Average house is over $1.7 mil.

[rb]

Game over - 15% tax for all foreigners in Vancouver starting Monday.

 

http://www.edmontonjournal.com/news/politics/premier+unveils+foreign+buyers+metro+vancouver+real+estate/12081555/story.html

 

Average house is over $1.7 mil.

It's somewhat encouraging that they're at least trying to do something. But...

 

1. It'll be interesting to see what the definition of a foreign buyer is.

2. I have a feeling that a lot of trusts are about to be opened in BC.

[gary17]

Game over - 15% tax for all foreigners in Vancouver starting Monday.

 

http://www.edmontonjournal.com/news/politics/premier+unveils+foreign+buyers+metro+vancouver+real+estate/12081555/story.html

 

Average house is over $1.7 mil.

It's somewhat encouraging that they're at least trying to do something. But...

 

1. It'll be interesting to see what the definition of a foreign buyer is.

2. I have a feeling that a lot of trusts are about to be opened in BC.

 

Definitions in relation to additional tax imposed

2.01  In this section and sections 2.02 and 2.03:

 

"controlled", in relation to the control of a corporation, means controlled, directly or indirectly in any manner whatever, within the meaning of section 256 of the Income Tax Act (Canada);

 

"foreign corporation" means a corporation that is one of the following:

 

(a) a corporation that is not incorporated in Canada;

(b) unless the shares of the corporation are listed on a Canadian stock exchange, a corporation that is incorporated in Canada and is controlled by one or more of the following:

(i) a foreign national;

(ii) a corporation that is not incorporated in Canada;

(iii) a corporation that would, if each share of the corporation's capital stock that is owned by a foreign national or by a corporation described in paragraph (a) of this definition were owned by a particular person, be controlled by the particular person;

"foreign entity" means a foreign national or a foreign corporation;

 

"foreign national" means an individual who is a foreign national as defined in section 2 (1) of the Immigration and Refugee Protection Act (Canada);

 

 

 

[leftcoast]

Game over - 15% tax for all foreigners in Vancouver starting Monday.

 

http://www.edmontonjournal.com/news/politics/premier+unveils+foreign+buyers+metro+vancouver+real+estate/12081555/story.html

 

Average house is over $1.7 mil.

It's somewhat encouraging that they're at least trying to do something. But...

 

1. It'll be interesting to see what the definition of a foreign buyer is.

2. I have a feeling that a lot of trusts are about to be opened in BC.

 

It only applies to people who are neither Canadian citizens nor permanent residents. It's the same definition of "foreign" that the BC gov't has started using to measure the impact of foreign buyers. Early data showed that only 3-5% of Vancouver home purchases met this definition of "foreign buyer." The vast majority of foreign capital flowing into Vancouver is coming through immigrants with PR status, and/or Canadian-registered corporations and trusts. So while this new tax will generate big headlines ahead of the upcoming election, it will probably have very little direct impact on the market... which is exactly what Liberal gov't wants.

 

Here's an article from 2 years ago on this exact subject:

http://www.scmp.com/comment/blogs/article/1385078/why-hk-style-property-tax-may-not-cure-vancouvers-china-syndrome

 

[wisdom]

I believe majority of the buyers to be locals who have taken on ridiculous amounts of debt in the belief that foreigners will keep buying at any price.

 

My understanding of a bubble bursting is that the belief that is creating the rush to buy breaks down. The market locally has already slowed down considerably since April. Houses already sit for a while now. You don't have houses going up $100,000 in a day or even a month anymore.

 

Most people who bought earlier in the year were expecting the prices to keep running. Not only has that stopped, but, now there is this law that attacks their belief. Most locals cannot imagine paying another $150-200,000 on top of the current prices and taxes.

 

This is why I believe that this is the end.

[gary17]

I wonder if residential REITS in Canada will now be attractive alternative LOL

[Liberty]

http://www.macleans.ca/economy/economicanalysis/canadas-economy-is-hostage-to-the-housing-bubble-2/

 

 

[Yours Truly]

I believe majority of the buyers to be locals who have taken on ridiculous amounts of debt in the belief that foreigners will keep buying at any price.

 

My understanding of a bubble bursting is that the belief that is creating the rush to buy breaks down. The market locally has already slowed down considerably since April. Houses already sit for a while now. You don't have houses going up $100,000 in a day or even a month anymore.

 

Most people who bought earlier in the year were expecting the prices to keep running. Not only has that stopped, but, now there is this law that attacks their belief. Most locals cannot imagine paying another $150-200,000 on top of the current prices and taxes.

 

This is why I believe that this is the end.

 

As the real estate market is different based on location, my area (Richmond Hill, Ontario) has experienced a 25% y/o/y increase and houses are sold within an hour of an open hours.  Again, the buyers are all Mandarin-speaking families so i'm not sure if they are considered "foregners" or not.

[scorpioncapital]

"It would be tragic to unnecessarily impair this key economic force.”

 

(this statement from that article seems to suggest some real moral/cheating risk, not to mention ripe for all kinds of hypocrisy, such as the very next line...)

 

"You’ve got to be careful about having the state intervene to try and regulate pricing, or depress pricing. That will have consequences for a lot of families.”"

 

Now count the number of ways the government regulates prices in other areas in the country :)

 

[Liberty]

"It would be tragic to unnecessarily impair this key economic force.”

 

(this statement from that article seems to suggest some real moral/cheating risk, not to mention ripe for all kinds of hypocrisy, such as the very next line...)

 

"You’ve got to be careful about having the state intervene to try and regulate pricing, or depress pricing. That will have consequences for a lot of families.”"

 

Now count the number of ways the government regulates prices in other areas in the country :)

 

It's not even about other areas. Without the government's intervention over the past 10-15 years, it's doubtful things would've gotten quite as bad. The period of zero money down for 40-year mortgages (which has now been changed to 5% down for 25 years), low interest rates, low oversight of lending and real estate industry, etc... These are all policy choices too.

[alertmeipp]

house prices up 20% and 30%.

A responsible government should not let this continue.

 

Either this will end ugly or really ugly now.

[Hoodlum]

Either this will end ugly or really ugly now.

 

It's no longer a question of if but when.  A few years back I was saying the government needed to intervene before it gets to this stag but it is too late now.

[wisdom]

The first day this news was released, the local real estate industry was in denial. Some actually argued why this would lead to a increase in prices.

 

The last 2 days there has been a change, they are starting to squeal and put pressure on the government to make amendments as they are now worried. Apparently, some pre-sales/sales have been cancelled because of the tax, etc.

 

They are complaining that it will result in job losses - 30% of local GDP is construction/real estate related. They did not need any amendments when the government was stimulating - as always.

[Liberty]

Looks like HCG isn't doing too well, which isn't what you would expect in a red hot market. Canary in the coal mine?