July 28, 2016

Thinking The Market Is Going To Go On Forever

The Business News Network reports from Canada. “Foreign investment accounted for about 10 per cent of Vancouver real estate transactions over a five-week span, according to data released Tuesday by the British Columbia government. Of the $8.8 billion-plus in Metro Vancouver real estate transactions collected between June 10 and July 14, more than $885 million came from foreign purchases, according to the report. Vancouver purchases accounted for 73.3 per cent of all foreign real estate transactions in B.C. over that time frame. The latest data on foreign investment comes a day after B.C. Finance Minister Mike de Jong announced a new 15 per cent property transfer tax on foreign nationals purchasing real estate in Metro Vancouver. That additional tax is set to take effect on Aug. 2.”

“The 10.9 per cent of Vancouver transactions involving foreign nationals marked a lower percentage than the numbers posted in Burnaby and Richmond, B.C. which saw 15 per cent and 19.1 per cent respectively in total investment from foreign nationals. Brendon Ogmundson, economist at the B.C. Real Estate Association says the unintended consequence of the tax implementation is the timing,as the long weekend fast approaching. ‘There’s a lot of deals currently underway that could fall through simply because they were agreed to under certain terms and now all of a sudden, a buyer may be subject to a pretty significant tax hit,’ said Ogmundson in an interview with BNN.”

The Globe and Mail. “Vancouver’s surprising new property-purchase tax for foreigners has generated a storm of coverage in Chinese-language media both in Vancouver and in China itself, with articles warning of dramatic new costs, analyzing the political motives of the B.C. Liberal Party and predicting a host of negative outcomes. But it was journalists and commentators in Vancouver who were the toughest on the new tax and who gave it the most coverage.”

“In the Sing Tao Daily, one article warned that foreign buyers would be able to hide their identities by asking local residents to buy properties on their behalf. Another article criticized the tax, which was much higher than anyone expected. ‘Increasing the tax to cool down the real estate market has limited effects,’ it said. ‘It won’t achieve its goal of reducing housing prices dramatically.’”

“The Ming Pao Daily News echoed some of that and went further. It ran one story about a Chinese buyer looking for contracts being abandoned by offshore buyers because of the new policy. Another story talked about the likelihood that buyers will shift their attention to Toronto, Vancouver Island or Vancouver houses priced under $2-million. ‘The new policy will have a strong impact on houses over $4-million, which are always favoured by offshore buyers,’ said Yongci Lyu, a realtor in Vancouver.”

The Daily Herald Tribune. “Grande Prairie’s current real estate market is great for those looking to buy a home, said Curtis Burbee. ‘In a typical week right now, there’s a lot more new listings than solds,’ the vice president of the Grande Prairie and Area Association of Realtors told the Grande Prairie Rotary Club. ‘That says a lot about our market. It is a buyer’s market right now where… the new listing inventory is outweighing the number of buyers out there.’”

“While it’s hard to predict how long the area will remain in a buyer’s market, Burbee said realistically it could be close to 12 to 18 months. ‘Stay positive. It’s a buyer’s market and the economy changes from buyer to seller’s (market) consistently like I said over that seven to 10-year cycle so it’s no new news and for buyers it’s great news,’ he said.”

The Innisfail Province. “After dodging the bullet for more than 18 months from the provincewide economic downturn, the home resale market in Innisfail, Penhold and Bowden is now bending from recessionary blows. The number of home sales in all three communities, along with total sales volumes, has dropped significantly for the first seven months of the year when compared to statistics from the same period in 2015. As well, there has been a sharp increase in the number of active residential listings, creating a buyer’s market but also reflective of increased worry over the economy.”

“‘It takes a while for everything to trickle down. Consumers were feeling the pain earlier and I think they are just continuing to feel it,’ said Sandi Gouchie, president of Central Alberta Realtors Association. ‘We talked to people and they were ready to hold on for a little while, but now some people just can’t hold on anymore.’”

The Rocky View Weekly. “The slumping economy has impacted Cochrane’s housing market, according to data from the Canada Mortgage and Housing Corporation (CMHC). Since the start of 2016, Cochrane saw 161 new starts of all dwelling types – down from 572 over the same period in 2015. ‘We’ve seen a decline in housing construction, and we’ve seen that right across the Calgary region,’ said Richard Cho, principal of market analysis for the Calgary area with CMHC.”

“Rocky View County realtor Dave Swanson said though a large inventory of higher-priced homes remain on the market, the overall market remains stable. ‘Our whole country is built on the middle class, and the middle class is, for the most part, working. I think the market is good. We’ve seen a little bit of downturn in pricing, but it’s so minimal,’ he said. ‘The multi-million dollar stuff, that stuff is dropping by 30 points. (But) if you want to move up, now is the time to move up. Interest rates will never be much better.’”

“Swanson attributed the decrease in starts in Cochrane to homebuilders overbuilding to forecasted demand. ‘Everything goes in a cycle,’ he said. ‘When those guys overbuild, they’re thinking the market is going to go on forever.’”

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Comment by Ben Jones
2016-07-28 14:08:21

‘We talked to people and they were ready to hold on for a little while, but now some people just can’t hold on anymore’

Oil just a whisker away for the $30’s again. You don’t pour a century of cement in three years and expect to repeat it anytime soon.

‘Dr. Peter Venkman: “This city is headed for a disaster of biblical proportions.” – Ghostbusters, 1984′

‘Call Premier Christy Clark? You gotta be kidding. She’s afraid of those ghosts. But nonetheless, Clark is holding a paranormal summer session of the BC Legislature because she is even more afraid of something else — that she’ll be slimed by angry voters for not taking action to stop house prices from skyrocketing to completely unaffordable levels.’

‘And what spooks Clark is the thought of losing the May 2017 provincial election as a result.’

‘So on Monday the BC Liberals announced a surprise extra 15 per cent property tax on foreign nationals buying Metro Vancouver housing. It’s a complete flip-flop from what Clark said just back in May: “By moving foreign owners out of the market housing prices will drop.”

‘It’s amazing how quickly a premier can change her mind after seeing a ghost – or more likely a series of deadly internal polls. But this 15 per cent tax comes way, way too late. Prices already jumped 32 per cent in the past year alone and this 15 per cent property tax may not deter many foreign buyers who are fueling the rise. After all, it still leaves a 17 per cent profit every year!’

‘Horrendous housing prices are not surprising, given that the BC Liberals have steadfastly refused to deal with foreign nationals buying up billions in Metro Vancouver homes as a speculative investment, with no plans to actually live here – thereby driving prices up to astonishing levels, with detached houses in Metro Vancouver now at $1.4 million on average.’

‘Those insane prices have resulted in a windfall revenue surplus for the province, with the property transfer tax adding an extra $605 million more than budgeted – a 44 per cent boost to $1.53 billion.’

‘But in the housing affordability crisis, Clark saw the election defeat writing on the wall and had to act – whether real estate mogul and chief BC Liberal fundraiser Bob Rennie likes it or not. And he won’t. It was Rennie who recently said: “A foreign ownership tax of 10 per cent on a $5-million home will not stop a sale or create any affordability.”

‘Is Rennie right? Will a 15 per cent foreign national house tax make Metro Vancouver affordable again? No chance. It will only slow down the bleeding caused by not taking action sooner at best.’

‘And how far will B.C. go to help make Vancouver’s vacant homes tax – which is still very much needed with an estimated over 10,000 empty houses – have the effect it’s supposed to?’

‘Even the government’s other legislative action this short session is to fix a problem they themselves made. They will re-regulate the real estate industry – after the BC Liberals made it self-governing in 2005, with obviously disastrous results.’

‘And forget about my earlier proposal to ban all sales of residential property to foreign nationals for six months to cool down the market while finding solutions. The BC Liberals are too addicted to both the property tax and developer donation revenue they get from foreign sales to take really significant action like that.’

‘So when it comes to getting rid of the spooky characters haunting our housing market, Christy Clark is no ghostbuster. She’s just running scared.’

Comment by Ben Jones
2016-07-28 14:12:36

‘A Toronto economic analyst and former politician has blamed governments and “our own house horniness”—and not foreign investors—for sky-high Canadian home prices.’

“There’s simply no data showing foreign guys caused houses to go ballistic, and overwhelming evidence Canadians have done this themselves (with the help of politicians),” wrote Garth Turner on his blog, The Greater Fool. “Even the latest Van stats reveal locals and foreigners spent an identical amount per purchase, and Canadians outnumbered them by nine-to-one. Case closed.”

‘Turner, a former Conservative and Liberal MP, acknowledges that most readers of his blog are “on the side of stiffing the out-of-country buyers”. But he points the finger at public officials for pushing homeownership through some risky means.’

“In fact for decades, there’ve been strong pro-real estate measures enacted by every successive group of politicians, leading us directly to now—when the average family can no longer afford the average home,” Turner writes. “Artificially-low borrowing rates, government-backed mortgage insurance, legislated 5% down payments, RRSP homebuyer loans, first-timers grants, property tax rebates, land transfer tax exemptions—the list of interventions is endless. So now crap houses cost a million. Good job, government.”

‘Furthermore, Turner maintained that the housing market is teetering “even as most people are completely blind to the risks”. And he pointed out that lawyers, realtors, accountants, and advisors are already figuring out ways to avoid the new “head tax” on foreign investment. He predicted it will only result in the creation of a “bloated bureaucracy which may cost more than it collects”.

‘Meanwhile, Canada Mortgage and Housing Corp. issued a report this week saying “overvaluation and overbuilding remain the most prevalent problematic conditions observed in 15 centres” in Canada.’

“Strong evidence of problematic conditions is seen in Vancouver, Toronto, Calgary, Saskatoon and Regina,” the report stated. “In Toronto and Vancouver, this is due to the combination of price acceleration and overvaluation. In Calgary, Saskatoon and Regina, this is due to the combination of overvaluation and overbuilding.”

Comment by butters
2016-07-28 16:42:10

I have never been horny for a house.

Comment by Ben Jones
2016-07-28 16:54:56

Almost every day I read someone say, (Canadians/British/Australians/Dutch/Swedes) are ‘obsessed with houses’, or ‘their love for houses’. Californians are the same way. You would think they’d realize they’re bonkers just for saying such a thing.

Comment by CEO Of The Couch
2016-07-28 17:03:54

If Canada is home to house hornyness then California is a Housing Homo’s dream date.

Comment by azdude
2016-07-28 17:21:20


(Comments wont nest below this level)
Comment by CEO Of The Couch
2016-07-28 18:07:22

I’m living in your head…. rent free.

Comment by Professor Bear
2016-07-28 19:27:53

House horniness is a transient feature of the Housing Bubble, similar to floral fetishes during Holland’s Tulipmania.

Comment by Ben Jones
2016-07-28 14:15:05

‘The Real Estate Council of B.C. has told a Vancouver real estate agent to stop advising clients on how to avoid the proposed 15 per cent foreign buyers’ tax announced earlier this week by the provincial government.’

‘The council is investigating Century 21 realtor Mike Stewart after he circulated an email to clients that describes how a foreign buyer of a pre-sale condo can skirt the new transfer tax, chiefly by selling their contract to buy the pre-sale unit to friends or family who are Canadian citizens or residents.’

“For those of you who do not have that option, we may be able to sell the pre-sale to a third party at a profit to you,” the email goes on to say.’

Comment by Ben Jones
2016-07-28 14:17:28

‘Meet the mysterious tycoon at the centre of half-a-billion in B.C. property deals’

‘A Chinese property tycoon linked to a massive banking scandal in China’s industrial north is at the centre of more than $500 million in B.C. property deals, a joint investigation by Postmedia and global due diligence firm IPSA International shows.’

Comment by butters
2016-07-28 16:44:49

US probably has at least 100 of those.

Comment by Ben Jones
2016-07-28 14:20:13

Drip, drip. I just got this email:

Good Afternoon Ben-

Fannie Mae just announced their changes to HomeReady mortgage, their low-down-payment program. These new changes are set to expand access to credit, broaden options for borrowers to meet the homeownership eduction requirement as well as new borrower one-on-one assistance. On top of these new changes Fannie Mae will be making future changes at the end of 2016.

The current changes are in full effect, and Matt Weaver VP of Finance at Finance of America Mortgage, a Blackstone Company can give his insight on these new changes and what they mean for homeowners:

-Ownership of other residential properties
-Removal of homeownership education for limited cash-out refinance transactions
-Removal for landlord education for HomeReady loans secured by two-,three,or four-unit properties
-Deleting references to post-purchase early delinquency counseling requirements
-Accepting homeownership education from Community Seconds or Down Payment Assistant Program Providers

Comment by CEO Of The Couch
2016-07-28 15:39:34

Subprime on steroids. It’s another nod and wink for more fraud.

Comment by Senior Housing Analyst
2016-07-28 15:59:15

Santa Barbara, CA Affordability Surges As Housing Prices Crater 12% YoY



Comment by azdude
2016-07-28 17:26:09


Comment by CEO Of The Couch
2016-07-28 17:57:48


Comment by CEO Of The Couch
2016-07-28 19:49:56

Ozzy at his best….. with Randy. Keyyyyyrank it.


Comment by phony scandals
2016-07-28 20:12:32

Cankles had a bad case of mythomania.

Comment by Professor Bear
2016-07-28 22:37:39

“The latest data on foreign investment comes a day after B.C. Finance Minister Mike de Jong announced a new 15 per cent property transfer tax on foreign nationals purchasing real estate in Metro Vancouver. That additional tax is set to take effect on Aug. 2.”

That’s awesome. I can’t wait until President Trump announces similar measures on foreign nationals purchasing U.S. real estate!

Comment by Professor Bear
2016-07-28 22:45:28

“In the Sing Tao Daily, one article warned that foreign buyers would be able to hide their identities by asking local residents to buy properties on their behalf.”

Wouldn’t that constitute fraud, putting the perpetrators at risk of prison time? Not to suggest that fraud ever stopped a real estate deal.

I am sure the Sing Tao Daily was quick to point this out.

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