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June 4, 2017 | Market Update

A best-selling Canadian author of 14 books on economic trends, real estate, the financial crisis, personal finance strategies, taxation and politics. Nationally-known speaker and lecturer on macroeconomics, the housing market and investment techniques. He is a licensed Investment Advisor with a fee-based, no-commission Toronto-based practice serving clients across Canada.

 

For market watchers in the deepest real estate cauldron in the nation, Monday’s a biggie. Unless they chicken out, GTA realtors will unveil stats for May – normally one of the frenetic periods of the year, but in 2017 the Month of Angst.

In the final days of April the Ontario government followed that of BC and slapped on a Chinese dudes tax of 15%. Moreover, it imposed universal rent controls, just to spank condo speculators. And it opened the door to close cooperation with the CRA cops so flippers and short-term owners will be taxed without mercy. The impact was immediate. Within two-and-a-half weeks listings were up 47% and sales down 26%. Since then agents describe “a light going out” as open houses fall silent, bidding wars largely disappear, listings pile up and deals die. Desperate and panicked now are those who bought homes in March of April without selling their existing properties. Meanwhile untold numbers of recent buyers face the painful choice of paying way too much, or walking and being punished.

By the way, here’s a contribution from blog dog Jeff. It perfectly describes GTA real estate, circa February, 2017:

 

So, we’ll see. Will the Toronto Real Estate Board reveal a decimation of the market then beseech the politicians to lighten up? Or will it trot out Frankenumbers to try to bolster buyer confidence and staunch the blood?

Meanwhile, what’s the deal with Vancouver? Media late last week were slathering over the latest realtor stats showing sales have rebounded and prices are sticky. The house-humpers say the market is “on fire.” GreaterFool says phooey.

First, here’s blog dog John from YVR, with a great listing he found on Craigslist:

 

New laneway home…clean and cute. Would suit a shorter type or a flexible person. Cirque de soleil types. No utilities. No sublet or Airbnb. $375.00 reference needed.

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Yes, it’s true overall sales last month in the Pacific City of Delusia jumped 22% from the number of deals done in April. In fact, it was the third-best May on record. But facts are fact. As big as the month/month increase was, sales are still running about 9% below 2016 levels while new listings have increased 23%. More importantly, there’s a fundamental change happening in the sales mix – experienced real estate owners are sitting frozen in the headlights of change, while the moisters and first-time buyers rush in. Yes, the greater fools.

Look at the ratio of sales to listings: 94.6% for condos, 76% for townhomes and just 31% for detached. That means only 5% of condos went unsold while 70% of traditional houses with dirt languished. It’s a huge change from last year, now being reflected in prices. Because of the moister demand, condos jumped 17% year/year while detacheds gained just 3% – negligible with inflation at two per cent.

Why are the kids doing this? Especially when the NDP-Green anti-wealth, market-busting machine is set to roll over the entire province?

Well, the free-down payment scheme launched by the Libs in the last budget certainly helped stoke the fires, which is exactly the opposite consequence than intended. And the rental squeeze adds more fuel, as the vacancy rate falls and mortgage-stressed landlords up lease rates. Finally, first-timers are still labouring under the misapprehension that it’s different in Vancouver, prices will always rise and if they don’t “get on the property ladder” now they’ll forever be frozen out. This is what makes children so adorable. And scary.

Tomorrow: OMG.

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June 4th, 2017

Posted In: The Greater Fool

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