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ALWAYS CONSULT YOUR INVESTMENT PROFESSIONAL BEFORE MAKING ANY INVESTMENT DECISION

August 2, 2018 | Beaten

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.

People are so predictable. A new survey asked the confused citizens of YVR if real estate is in crisis mode and who’s responsible.

No surprises. As reported yesterday, 60% said housing is a mess. And 84% blamed foreign guys.

The pollsters shook their heads. “As the housing situation reaches crisis proportions, there is no shortage of scapegoats to blame, despite studies that show foreign buyers and money laundering are minor factors in the equation,” said Steve Mossop.

Almost everybody outside Vancouver knows what’s going on. Sales in that city crashed last month (as we’ve been telling you for the past few weeks). Detached deals tumbled 33%, with a lowly 637 properties changing hands. Condos are tumbling too. Sales off 26%.

The big news is the chasm between June and July. Wow. Almost a 15% drop in the course of a single month. Meanwhile the number of homes listed for sale has mushroomed 32% year/year. The final death-spiral number you should watch is the sales-to-active listing ratio. Just 27% of available condos sold, while the stat has now dropped below 10% for detached homes. So nine in ten did not sell. And it foretells lower prices. Values have dropped only 1.5% in a year, but half of that came in the last few weeks.

From the outside, it’s easy to see why. Prices are still extreme and affordability is a joke. It takes more than the average family earns just to carry the average home – and that’s assuming they had a 25% downpayment. The moisters are completely shut out – even from condos, which now average over $700,000. Markets that have been destroyed by speculation, over-borrowing and sheer house lust will always wobble and fall.

The external factors are also too much to overcome. The stress test more than doubled the effective qualifying rate for a home loan. Recall that a few days ago we reported over 100,000 buyers have been locked out by the new 2% hurdle. And then the Bank of Canada has raised its rate four times in the past year (with more to come), making mortgages harder to service. Never forget the negative correlation between house prices and the cost of money.

On top of this, taxes. BC’s awash in them. Our leftiest province is populated with politicians who want to enslave, control, pillage and redistribute wealth. In that zeal, real estate equity is bound to be destroyed. The speculation tax (which has nothing to do with speculation) has driven away and alienated Albertans. The Foreign buyer tax, at 20%, is an extreme reaction to a minor problem. In Vancouver the empty houses tax is simply a levy on wealth, as is the uber property tax premium being forced on people with expensive homes.

As a result of the above, detached digs worth $1.8 million to $3 million sit idle and are losing value daily. But they’re still out of reach. Condos average more than seven hundred grand, and have increased in price 14% in the past year. At this level they, too, are beyond the grasp of younger buyers who must pass the stress test. Political policies birthed by leaders who have no idea what they’re doing – and have chosen to blame mythical foreigners for all the bad stuff in the world – have made the situation far worse.

So, yeah, most people think it’s a crisis. They should. It is. But they parrot the false anti-foreigner statements. They cluck, complain and carp while tolerating public policy which makes everyone’s life worse. BCers are now so invested in the Dippers’ propaganda – that ‘strong government action’ (more taxes) is required to fix the real estate morass – that they won’t back down. Comrade Premier Horgan continues to ride a wave of popularity, confirming that if you tell people what they want to hear, again and again, they’ll fawn. Look at Trump.

There’s no doubt Vancouver real estate will roll over. It’s started. It was inevitable. But that won’t be accompanied by a wave of buyers rushing in to scoop what they could not previously afford. Falling markets scare people. Many bought high. Many will sell low. Most will stay paralyzed. And 84% will feed their prejudice, no matter what happens.

A shame. BC used to rock.

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August 2nd, 2018

Posted In: The Greater Fool

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