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ALWAYS CONSULT YOUR INVESTMENT PROFESSIONAL BEFORE MAKING ANY INVESTMENT DECISION

March 2, 2018 | Reckless

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.

Some notes to end the week. And thank God it’s ending…

He gets an A for honesty:

Kyle Kerr is putting the best face on it. You’d expect that. But for a realtor in a crapstorm, he’s also managing to hang on to his creds.

The boss of the Victoria Real Estate Board has a lot to moan about. Rising mortgage rates. The stress test, of course. Now a withering 20% go-home tax being imposed on foreign buyers. Plus that insane ‘speculation tax’ equal to 2% annually of a property’s value slapped on any non-local. Ouch. Upper Canadians and other interlopers have long enjoyed keeping a pied a terre in that crusty little city. Not for much longer, though.

Anyway, as published here yesterday, February sales sank more than 19%. Deals for single-family homes collapsed over 24%. Prices were up, based on a few fat sales, but Kyle can sure see the writing on the wall. Here’s what he had to say…

“We certainly anticipated that we would see some lower numbers this year compared to last. Right now prospective home buyers are met with many hurdles as they start shopping for their new home. They’re in a market that’s experienced long-term low inventory, which means more price pressure and competition on homes. Buyers are navigating increasing interest rates and the new mortgage stress test. These factors all combine to constrain our market. Like any changes to consumer experience, there is a period of response before consumers adapt to the new rules. We saw an increase in buyers in November and December who bought early to avoid the mortgage stress test, and this likely means less buyers in the current market. However, with continued historical low inventory levels, demand is still outpacing supply.”

But as supply increases, Victoria will be in trouble. A small market in the epicentre of the lefty tax-tax bullseye. The ferries will be busy.

How was this not obvious?

And here’s Colin Basran, trying to understand what possible benefit there may be to Kelowna – where he used to be a realtor and is now the mayor – of fleecing people who own properties just because they live in Alberta. Or Ontario. Or Washington state.

The NDP speculation tax, he says, “could have some very unintended consequences, and we need to take some time and make sure we get this right.” Of course, Premier Comrade Horgan doesn’t actually care, and the tax is already law. On a $700,000 house it will amount to $14,000 next year, and every year thereafter, giving out-of-towners a powerful reason to stop spending their money in Kelowna.

In essence, says his honour, this is just like the empty houses tax in Vancouver where people who use their properties consistently, but not full-time, are forced to hand over gobs of cash for no discernible reason. Local busineses worry this is a disaster in the making, Basran warns, “which is potentially going to stop people from investing in our economy.”

Good thinking, dippers. Just when Canadian trade is about to be Trumpcated, the cost of money is rising, credit’s being restricted and economic growth more than halved, you decide to cut off outside investment.

What were BC voters thinking? Maybe no actual thinking was involved.

The pendulum never stops in the middle.

Peter Norman, an economist dude I have known for years, now works for company which gathers and mushes housing data. His office is in Toronto, where on Monday the local board will announce a precipitous drop in sales in the wake of the stress test, the foreign buyer tax, higher rates and out-of-control household debt.

“The hand-wringing is much ado about nothing,” he says, bravely. Plus the turmoil is temporary. Norman joins other scared industry peoplekind in arguing the February massacre means we’re ‘just getting back to a normal market.’ That’s probably as naïve as those potential buyers who think house prices can collapse without an impact on their jobs, income or financial stability. When real estate accounts for about a quarter of the entire economy (housing and mortgage commissions alone equal 3%), everybody bleeds.

Speaking of blood, sales of detached houses in Vancouver plunged 39% below the ten-year average last month.

Booms almost always end in busts. Bubbles burst, they don’t deflate. House-horny, I’ll-pay-anything, FOMO turns into terror. Pendulums which swung wildly to one side never stop in the middle. Pete knows this. But he also knows who butters his bread.

Rest up. Another big week coming.

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March 2nd, 2018

Posted In: The Greater Fool

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