The Housing Bubble

The National Post reports from Canada. “Less than a month after the B.C. government imposed a 15-per-cent tax on foreign buyers of residential real estate, sellers of a handful of multi-million mansions have slashed their asking price, in one case by millions. The slashing of the asking price on some high-end residences in exclusive neighbourhoods after the tax came into affect on Aug. 2 is remarkable. The biggest drop is $2.3 million on a Shaughnessy mansion. The owner adjusted the asking price to $16.5 million from $18.8 million on Aug. 23, three weeks after the tax became law, according to Zolo Realty, which tracks real estate data and publishes it in real time at zolo.com. That’s a 12.5-per-cent discount on the building at 1637 Angus Dr. that has been on the market for at least four months, according to Zolo.”

“The asking price for a ‘concrete modern mansion’ at 1708 Western Parkway at UBC dropped by $1.9 million, to $11 million, or 18 per cent, on Aug. 9, according to Zolo. ‘As a result of the uncertainty caused by the new tax, we are seeing this exact reaction in the high-end market, sellers putting their homes on market to see what they can get, but buyers are waiting to see the impact on prices before they commit,’ said Zolo CEO Barry Allen. The result is increased supply and dropping demand.”

From CBC News. “Sales of single family homes dropped by half last month across several parts of Metro Vancouver, but it’s too early to call a long-term cooling trend, says one industry expert. Nancy Beaton, the president of SnapStats, says one of the most interesting insights from the data is for the first time in three years, the West Side of Vancouver is ‘officially a buyer’s market’ for detached homes.”

“Beaton says if the tax has had any effect, it has been to hit the pause button on many deals. ‘Everyone is waiting to see. Should I buy? Should I sell? It is a bit paralyzed now.’”

The Victoria News. “Tony Joe, a realtor in Victoria and the president of the Asian Real Estate Association of America’s Vancouver chapter, said so far the implementation of the 15 per cent tax on foreign buyers in Vancouver has had little impact on the local housing market. However, he believes that will potentially change in the fall. Since the tax was implemented on Aug. 2, Joe said there has been a scare in Vancouver for buyers and sellers who wrote offers three or four months ago and have closing dates set for September or October.”

“‘They remain uncertain that they’re going to sell because they know that they have a foreign buyer and is that foreign buyer able to get their 15 per cent?’ said Joe, who specializes in foreign investors. ‘When asking buyers ‘are you going to be able to close’? They’re not able to give clarity. It’s a pretty significant grey area right now that are keeping a lot of people on their toes.’”

“However, if buyers choose to back out before the closing date, both parties will be left in the lurch. Buyers who back out of the sale because of the tax could face legal ramifications, lose their deposits, which are typically sizeable, or they could be sued. It would also impact the seller, who would need to seek legal remedy. ‘The implementation of the tax has really put a lot of people in a bad position,’ said Joe.”

The Calgary Herald. “While Calgary home sales were down year-over-year for a 21st consecutive month in August, with the biggest pains felt in the condo apartment and attached categories, according to the latest report from the Calgary Real Estate Board. ‘While overall sales have eased for detached homes, so too has the amount of new listings on the market preventing inventories from reaching previous highs and limiting the downward pressure on pricing,’ said Ann-Marie Lurie, CREB’s chief economist, in the report. ‘This is not the case in both the attached and apartment sectors which have recorded inventory levels near August highs.’”

From CTV News Calgary. “New figures released by the Canada Mortgage and Housing Corporation indicate that the number of mortgages in arrears in the province is up over 50 percent over last year. The CMHC says that almost 1,500 Albertans are struggling to pay for their homes and could soon have them taken from them. Earlier in August, CTV Calgary spoke with 71-year-old Peter Janzen and his wife Sharon. The couple had taken out a $375,000 mortgage to finish renovations on their home, but when Peter became ill and couldn’t work, they couldn’t make the monthly payments anymore.”

“They’ve now missed four mortgage payments and their home has been put into foreclosure. ‘With no money, it’s just out of the question to pay those kinds of payments,’ Peter Janzen said.”

“Faisal Karmali, a financial expert, says there isn’t much you can do if you’ve missed multiple mortgage payments, but you can be prepared. ‘Those who have equity in their home might want to look at getting a line of credit against your home right away because you may need that as emergency cash reserve if you don’t have enough.’”

“Meanwhile, the Janzens have put their home up for sale. ‘I knew at my age, the only way out would be to get rid of the house,’ Janzen said. They know that without the sale, homelessness could be a reality.”