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August 22, 2018 | Then There Was One

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.

More news from the Trenches:
Last month one, lonely new-build house sold in the city of Toronto. Yeah, one. I know, hardly any land exists on which to build new structures in the 6ix, but compare that to 114 units erected there two Julys ago.

Condos? Way more. But look at monthly sales – only 568 units. In the same time two years ago, 1,645 were snapped up. That’s a plop of 65.4% over 24 months. Ouch. Overall, sales of new detached and condo homes have fallen in the urban area 67.6% since 2016. In the GTA, where six million souls reside, the two-year drop in closings is now 70.9%.

Condo sales have tanked, yet the average price has soared 16.5% – to $755,759. That contrasts sharply with detached places which have declined by 13%, to $1.142 million. Now builders have started to respond – pulling in their horns, shifting into survival mode. New projects are scant, says the industry, because of “declining affordability of new condominium apartments due to recent price escalation.”

Crashing volume and swelling prices. Never a good combo. If new housing were a stock, you’d be shorting the sucker.

Here’s what it means: most people can’t afford new, single-family homes so they’ve stopped buying. Sales have crashed. Prices have started to follow, despite the massive built-in costs of new construction. Meanwhile rising mortgage rates and the stress test have restricted available credit, kicking the remaining buyers down the property ladder. Condo prices have spiked as a result (thanks also to a lot of moister-buyers willing to pay too much). Astonishingly, a small concrete box with no dirt and high monthly fees now fetches 68% of the cost of a brand-new single house – which comes with a lawn, a driveway, a basement, garage, and about eight times more space. Poor kids. They know not what they do. Big regrets ahead.

Hey dude, who stole my equity?
The melt continues in Canada’s most delusional province, currently run by hard-core Dippers and Greenies with an anti-real estate agenda. Realtors clearly understand what’s happening, and where the market is headed. Down. Way. Down.

The bulk of the population has yet to get it, thinking the war-on-houses with a slate of insane new taxes will drop prices, make houses affordable again and restore the middle class. Instead, the middle may well be destroyed in a blizzard of equity erasure. After all, nothing ever became more accessible by taxing the poop out of it. And with a negative savings rate in BC – thanks to families overreaching for houses – a property crash will have more impact than anywhere else in North America. How do BCers not see it?

Anyway, here are some thoughts from the house-floggers at Victoria’s Dockside Realty:

“We are experiencing strange times in the BC real estate market as the government is successful with their goal of slowing down the housing market.  Many transactions are not seeing completion, banks and buyers are overly cautious. If there is even the slightest deficiency in building inspections many buyers are walking away, and many buyers are being turned down on financing with the very strict lending climate.

The Speculation Tax Exemption in the Gulf Islands spurred this market in May, but this has now slowed down immensely.  The lower end properties in all communities are seeing the most interest.

The British Columbia Real Estate Association (BCREA) reports that sales were down across the province in July, a 23.9 per cent decrease from the same month last year. The average MLS® residential price in BC was down 0.4 per cent from July 2017. Total provincial sales dollar volume was $4.9 billion, a 24.2 per cent decline from July 2017.

This is just the continuation of a sales decline that started a year before the orange mob was elected. It’s far from over. And, no, it’s not good news.

 

One picture that says it all.
Sometimes one shot is all that’s needed to capture the immeasurable. It might be Terry Fox on an empty road. The sailor and the girl in Times Square. Kim Kardashian’s rump.

Well, here’s the defining image of the Van real estate bubble as it nears collapse. A stinky pile of burned-out 1912 rubble awaiting the next greater fool – for just under four million. The miserable little wrecked house at 2573 West 3 Ave in YVR has attracted a lot of attention this week since the listing emerged. No wonder. Even in Kits, this is a pile of money for a pile of crap. Land value only but, at just 6,000 square feet, it’s not even that much dirt.

The place burned a year ago in a three-alarm fire. Of the incredible assessed value of $3.713 million on the day of the fire, the house accounted for just ten grand. So now the arrogant and lazy owner who couldn’t be bothered to clean up this lot has bequeathed us all with a symbol of human avarice. And of how a society lost its way.

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August 22nd, 2018

Posted In: The Greater Fool

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