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June 4, 2018 | The Conundrum

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.

Is Dippernomics finally hitting the Left Coast housing market? Hmm, maybe. Ontario should take note.

The NDP’s draconian anti-real estate measures have really not even taken effect yet, but the psychology certainly has. You don’t increase the tax load on homeowners by hundreds of millions a year and expect (a) no change in human behaviour or (b) cheaper houses. And so it is – sales are falling in Vancouver and listings are bloating while prices are stuck. Vancouver’s empty house tax, meanwhile, has done zip to change the vacancy rate and the province has been successful in fueling a class war between the Wealthy and the Wrest.

Last month the number of transactions crashed more than 35% from year-ago levels (but up over April) and sit 20% below the 10-year average. Active listings were the real story – up more than 38% over 2017 and a big 15% jump from April. The news here is probably this: homeowners who previously believed the market would get better now understand it won’t. Things will only get worse, since four long years of Dipperdom lie ahead. So it’s get out now before prices and buyers grow more anemic, or wait and watch while mortgage rates increase and the new taxes bite.

Even the kids appear to be learning. Condo sales fell 29% from last year and that big spike in prices appears to be over as values stayed flat from April. (By the way, detached are in desperate shape – sales off 40.2% and a sales-to-listing ratio which is abysmal.)

In the nation’s biggest market, where real estate is also a political issue, sales have similarly crashed – 22% overall, with detached houses taking a 30% hit. Prices are still lower than a year ago – by 12% (last month it was 14%) – but again the real story is listings. While they’re multiplying in YVR, in the GTA it’s the opposite. New listings were 26% lower last month which puts this market into a more balanced state – fewer buyers and fewer sellers. The fact prices are falling is due mostly to softness at the top end of the market (over $3 million), and a whole lotta hurtin’ going on in York Region.

In that area the realtor Frankenumber shows a 17.5% price plop, with average sales numbers telling a worse tale – off about 25% from last Spring.

However, the average Toronto detached still costs $1.426 million and a condo comes in at $602,800. Those are unaffordable numbers. If the NDP wins on Thursday (which appears to be statistically impossible) you know what comes next – a tax on second properties, higher incomes taxes and legislated rents. If the Tories take it and Ford makes good on his promise to deregulate, including ending the tax on foreign capital, the bottom of the current cycle might be in the rear view.

As regular, addicted readers with no lives will recall, this blog was turned into a bloodied pulp by the rabble two months ago for suggesting a 30% price plunge in certain areas populated by desperate sellers might be the bottom. If you have been waiting for a correction and feel like vultching, we said, then give it a shot. The time might never be better to achieve success with a low-ball offer made to poor, over-leveraged owners eking out a terrified existence in their suburban McMansion.

So if the Cons take it this week, I’d say that was a prescient call. If the Dippers win, the bottom yawns before us. If it’s a minority, well, expect a mess.

By the way, here is a scary note in this week’s official GTA realtor media release:

“Home ownership remains a sound long-term investment.  Unfortunately, many home buyers are still finding it difficult find a home that meets their needs. In a recent Canadian Centre for Economic Analysis study undertaken for the Toronto Real Estate Board, it was found that many people are over-housed in Ontario, with over five million extra bedrooms. These people don’t list their homes for sale, because they feel there are no alternative housing types for them to move into.  Policy makers need to focus more on the ‘missing middle’ – home types that bridge the gap between detached houses and condominium apartments,” said Tim Syrianos, TREB President.

Five million empty bedrooms in Ontario? And here we have renters moaning about a zero vacancy rate, lease costs exceeding 30% of incomes and the largest demographic (the moisters) overwhelmingly in support of leftist engineering. Even the realtors know what’s inevitably coming – a dramatic increase in the taxation of land, real estate, housing and, yes, empty bedrooms. A wealth tax, based on property. Give serious thought to moving your bling elsewhere, while time remains.

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June 4th, 2018

Posted In: The Greater Fool

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