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March 27, 2018 | The Shove Off

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.

With just a few days remaining in the only month that tells you what to do, things are looking dodgy for the nation’s biggest housing market. Exclusive numbers secured by GreaterFool operatives confirm the pattern of the last few months. Down. The FOMO is gone and sales are falling.

Up to Tuesday just 2,276 properties of all kinds had changed hands in the Kingdom of 416. If this holds until the weekend, it means a withering 36% plop in transactions over 2017. In fact, there could be fewer sales in March of 2018 than at any time since back in the spring of 2009, when the world was gripped by the credit crisis.

Prices? Don’t expect much change when the official realtor Frankenumber® stats are released at the end of next week. Down a couple more per cent maybe – but these are early days in the process. First sales tumble then, if conditions persist, sellers capitulate and the ask drops. This will be speeded up if overall listings increase, and delayed if they shrink. In any case, the sentiment is negative.

Ditto in Victoria. Sales so far in March are 28% below year-ago levels. In Calgary, sales this month have fallen 25% while the number of active listings is greater by 23%. So, it’s pretty clear where that market is headed.

Making things worse, as usual, are politicians. The latest to demonstrate their mental opacity are the Dippers in BC, where Comrade Premier Horgan has just admitted they  screwed up on their latest market-killing tax. The provincial government unleashed a tsunami of outrage and criticism when it announced everyone with a second home, cottage, cabin or lakeside lovenest who didn’t rent it out would be taxed as a ‘speculator’ even if they’d owned it for decades and had no intention of selling. It soon became clear this was a tax on anyone ‘rich’ enough to have two properties. On Planet NDP they therefore deserve to be Hoovered.

Horrified locals came to understand it would apply to them as well as those loathsome offshore buyers everyone hates, plus Albertans that they hate even more, along with those odious Upper Canadians. (Much hate in BC these days.) Evident to all was that the government hadn’t properly thought this out, had not modelled it and failed to understand the negative impact it would have on the economy – especially touristy areas included in the tax. Meanwhile it sent out a horrible message to fellow Canadians who pay income tax and may have bought a BC property which they finance like everyone else. That message: shove off. BC for BCers. Four legs good, two legs bad.

The big retreat (sort of) came yesterday. The geographic area the tax covers will be trimmed mightily (but not as much as places like Kelowna wanted – it’s still in), and citizens will be divided into two classes. Those who reside outside of BC, but in Canada, will pay double the rate locals face. Foreign buyers will be crucified as originally intended.

As with any tax, the spec levy is growing more complex by the hour. Now Parksville and Qualicum are out but Nanaimo is still in. Harrison Hot Springs and Hope are exempt. Not so with Chilliwack or Abby. People with cabins and cottages may be exempt, or maybe not. Places have to be rented out three months this year and six months in 2019. Locals will participate in an upfront tax credit program to offset the annual levy. People living across the line in Alberta need to pay it all in advance. Condo owners in buildings where rentals are banned, and who don’t live there full-time, will be temporarily grandfathered. And on and on. Just imagine the amount of red tape, government overhead and bureaucrats necessary to figure all this out, document it and force compliance – surely enough to eat up most of the revenue expected.

Anyway, what will this do to real estate prices on the left coast?

Beats me. But I’m convinced the market will slow to a morbid crawl. Sales of higher-end homes will be severely impacted – the kinds of properties nobody can buy. The declines in prices there will bring down the average, but not do anything to restore affordability to the region. The kids will continue to jump into condos, so don’t expect much moderation there. Areas like Kelowna will be injured disproportionately. The outflow of Albertan money will have a negative impact on resort and tourist areas – places with low population – which the NDP actually doesn’t care about.

So, no big increase in rental stock. No drop in rents. Certainly no collapse in urban real estate prices, but a wounded market with economic implications plus families with trapped equity. Remember – when assets lose favour, buyers go away.

The Dippers blew this in every possible way. Big surprise.

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March 27th, 2018

Posted In: The Greater Fool

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