July 11, 2018

It’s Back To Reality

A report from CBC News in Canada. “House prices declined in much of the Greater Toronto Area in the second quarter of this year, particularly in Richmond Hill, Markham and Vaughan, according to Royal LePage. The aggregate house price in Richmond Hill fell 12.4 per cent in Richmond Hill year-over-year to $1,132,722, while the aggregate house price dropped 8.8 per cent in Markham year-over-year to $1,004,095 and dropped 6 per cent in Vaughan year-over-year to $1,011,913. CEO Phil Soper blamed the sluggish market in much of the GTA on the federal mortgage stress test imposed in January 2018, which he said has reduced the borrowing power of buyers and forced them to lower their expectations. The rules have slowed the market particularly in suburban Toronto, with prices he described as ‘very soft.’”

From Bloomberg. “Canada set out to cool a hot housing market, and did it ever. Sales of homes above C$1 million (S$1.03 million) fell 46 per cent in Toronto and 19 per cent in Vancouver from a year earlier, while the number of homes sold above C$4 million dropped 51 per cent in Toronto and 47 per cent in Vancouver. In Toronto, on the other hand, sales of condos above C$1 million dropped 13 per cent to 658 units. Sales of condos over C$4 million slumped even more, down 40 per cent.”

The Edmonton Journal. “Edmonton’s housing market inventory has reached a 10-year high, according to Royal LePage. This kind of a surplus hasn’t been seen since the 2008 global financial crisis, the company said. Royal LePage Noralta Real Estate broker Tom Shearer said that while Edmonton’s current buyers’ market is a ’sign of the times,’ sellers shouldn’t despair. ‘Sellers just have to be super competitive in pricing their homes. There’s no room for error in overpricing a home,’ he said.”

From CBC News. “Sales of Calgary homes listed for more than $1 million have dropped sharply in the first half of this year compared with last year, says a Sotheby’s International Realty. The report also notes that mounting supply and slumping demand have put downward pressure on prices for higher-end single, attached and condo homes in Calgary. Brad Henderson, with Sotheby’s International Realty Canada, says that with an increased supply of homes in Calgary priced over $1 million, it’s a buyer’s market right now.”

“‘I think there was premature optimism in the market and people were thinking that things were getting better and that gave them confidence to go out and buy properties, but what we’ve seen as of late is that the properties are staying on the market a little longer,’ he said. ‘People are taking them off the market as they are not getting the price they want, so the activity level has subsided relative to last year.’”

The Regina Leader Post. “It’s the so-called perfect storm for the Calgary housing market, with the city still climbing out of the recession, high unemployment rates, sagging confidence and government regulatory intervention holding the market at levels not seen since the 2008 financial crisis. But, we’re not alone – the Calgary Real Estate Board (CREB) says many other Canadian energy-related municipalities in Alberta and Saskatchewan have had struggling housing markets over the past few years, resulting in price declines.”

“‘While our economy is no longer in a recession, persistently high unemployment rates, concerns over long-term growth, rising lending costs and stricter qualifications are all weighing on the housing demand,’ says CREB chief economist Ann-Marie Lurie. ‘Growth in new listings is starting to ease for some property types, but it is not enough to prevent continued supply growth and, ultimately, an oversupplied housing market.’”

The Goldstream Gazette. “A Langford development and property management company is cautiously proceeding as the speculation tax looms. Mayor Stew Young said he will continue to fight for Langford’s exclusion. He has received letters from U.S. residents informing him they are writing to their respective governors to push a 20 per cent tax on Canadians that have vacation homes in the U.S.”

“Some of that can be seen in the softening of the housing market at Bear Mountain, Young noted, as Albertans sell their second homes. Plans for new projects on the West Shore are also starting to slow as the market softens. ‘It’s just starting to happen now, I lived through the downturn in ‘08, and it’s happening,”’ Young said.”

“Blake MacKenzie, vice president of NorthWest Vacation Rental Professionals, said his business took a hit when the empty homes tax took effect in Vancouver 2017. ‘A lot of these [secondary] homes aren’t affordable, they are above that, so it’s not impacting affordability because a $3 million home on the water is not for somebody who can’t find a place to live,’ he said.”

The Star Vancouver. “In the past six months, realtors working across Metro Vancouver say they’ve seen market conditions go from highly competitive multiple offers and condo pre-sale lineups, to falling prices and developers offering up to $100,000 ‘bonuses’ in an attempt to lure buyers. The correction is taking some time to work through the market, but the realtors pinpoint April as the month when conditions began to change. ‘My advice to sellers is, it’s not 2017 anymore,’ said Ian Watt, a realtor with Sothebys. ‘It’s back to reality.’”

“Steve Saretsky, a realtor with Sutton Group West Coast, estimates Vancouver condo prices have declined four to five per cent since the peak of the market in January 2018. But as inventory continues to build because of the dramatic drop in sales, a much bigger price correction could be on the way, Saretsky warned. ‘Prices are always sticky on the way down,’ he said. ‘Fifty per cent of listings today are recycled,’ meaning that the property has been listed, removed, and re-listed, usually with a change in price. ‘It’s almost like price discovery: what is my home worth.’”

The Huffington Post. “You’ve likely heard about the slowdown in the once-hot housing markets in Toronto and Vancouver, but what you may not know is that — unlike with many other aspects of the economy — virtually all the data about housing comes from the industry itself. In the face of a slowdown that’s hitting realtors right in the pocketbook, we have word that maybe some of the data these realtors are providing may not be all that reliable.”

“A recent article in the Globe and Mail (behind a subscriber paywall) flags a disturbing trend: Realtors in the struggling detached home market in Vancouver are ‘recycling’ listings — pulling homes that aren’t selling off the market, then bringing them back as supposedly ‘new’ listings at a lower price: ‘[A] newly built house at 296 N. Gamma Ave. in Burnaby’s Capitol Hill was first listed on Oct. 13, 2016, at $2.599-million. The listing expired seven times and reappeared at a lower price until it sold this past January for $1,999,888. The listing agent boasted on his website that the house only took 89 days to sell at the asking price of $1,999,888. He made no mention on his website that the house had been listed and relisted several times, for more than a year, and had come down in price by $600,000.’”

“Vancouver realtor Aaron Best justified the lack of information in the Globe article like this: If a house sits on the market for long, ‘there tends to be a certain type of buyer who starts sniffing around, so they think maybe your client is desperate now or maybe there’s something wrong with the property.’”

“In other words, you get offers from people trying to get a better deal on their home! How shocking! How outrageous! How DARE they?”

From Global News. “Laura Gillanders would like to meet the neighbours a few doors away from her Richmond rental home but in six years she’s only seen one sign of life. ‘About three years ago, I did see somebody here in the summer and I saw them leaving with a suitcase,’ she told Global News. ‘I was like, ‘Oh, do you live here?’ And they just said they are going to the airport and didn’t talk so that was the only time I’ve ever seen anybody here. It’s just a shame to leave a house sitting empty for six years, it should be rented out.’”

“Longtime city councillor Harold Steves estimates Richmond has some 500 vacant homes, including two in his own Steveston neighbourhood. ‘It is a provincewide problem all the way through all of Metro Vancouver and it should be solved as a provincial problem, rather than a local one,’ said Steves, who wants to see an expanded empty homes’ tax.”

From Castanet. “For more than a decade, the B.C. Liberal government chose to ignore a cycle of money laundering linked to organized crime, the overdose crisis, the red-hot real estate market and skyrocketing housing costs. Attorney General David Eby released an anti-money laundering report, commissioned by our government and authored by former RCMP Deputy Commissioner Peter German.”

“That independent review details large-scale, trans-national money laundering that has been happening at an alarming rate in B.C. casinos. British Columbians saw disturbing footage of bags of money being dropped off at casinos with the express purpose of being cleaned up. Despite being warned multiple times about these activities, the former B.C. Liberal government didn’t care.”

“It could have been a scene from a mobster movie, but it was real life. B.C. casinos have unwittingly become laundromats for an infusion of dirty money into the province. Organized crime used something often called the ‘Vancouver model’ to take advantage of Lower Mainland casinos and other sectors of the B.C. economy – including real estate – to launder money. German describes the money-laundering situation in B.C. as a ‘collective system failure.’ The situation worsened year over year.”

“Instead of accepting responsibility for this failure, the B.C. Liberals have blamed everyone but themselves. And when they were criticized for their 2009 decision to shut down the integrated police task force responsible for casinos, the B.C. Liberals even tried to blame the police.”

From News 1130. “The hits keep coming for the former BC Liberal government in the wake of last month’s scathing report on money laundering. The latest report by Auditor General Carol Bellringer shows several Crown-owned properties were sold off for only two-thirds what they were worth to help balance the budget between 2013 and 2015. Current Citizen Services Minister Jinny Sims is calling out her predecessors for failing to properly assess values.”

“‘You’ve got an offer that comes in from one buyer that’s at only 66 per cent of the assessed value and you don’t even wait for other offers? I look at a city like Surrey, very fast-growing, where we have [more than] seven thousand students sitting in portables because the Liberal government –they kept selling the land that we could build schools and hospitals on.’”