5833 replies to this topic

[LeoVictoria]

^not sure I agree with that, every time I think of Victoria real estate I thought of it as red hot as in prices skyrocketing

 

I think we are about to see the market enter a flat period over the coming 6-8 months.  I'm already seeing signs of projects being cancelled or significantly scaled back, although those projects are in the commercial sectors.  Some of the major generals in town are now starting to scramble for work too, although some remain busy.  Construction overall remains hot, but I am expecting that to start to cool as we head towards the end of the year.

 

The two are of course connected.  Hot market conditions lead to price gains after a short delay.  

 

Anyway, even if you wanted to define market "heat" as the rate of price gains, the market is also cooling, going from 15% annualized gains to 9% (and most of those 9% gains happened last year, with prices essentially flat in 2018).  

 

[Nparker]

The local market is not just single family houses. What would the above chart look like for condos over the same period?

[LeoVictoria]

The local market is not just single family houses. What would the above chart look like for condos over the same period?

 

Condos have not cooled as much as single family, but still significantly slower than a year ago.

 

Edited by LeoVictoria, 09 August 2018 - 10:28 PM.

[Mike K.]

Looks pretty good to me and the overall trajectory is overwhelmingly positive.

We can’t maintain a massive trajectory forever. The graphs are also unnecessarily dramatic, depicting nearly 10% in price increases for SFD’s as compared to 14%-16% as though prices have literally dropped off a cliff. Smooth it out a little and negate the immediate horror effect of showing a huge rise with a huge drop (all while annual profits are still equaling fat cash). A 10% increase is not a disaster considering so many markets appreciate at 0.1-0.5% on a good year.

[Nparker]

Does the above condo chart include pre-sale data?

[LeoVictoria]

Looks pretty good to me and the overall trajectory is overwhelmingly positive.

We can’t maintain a massive trajectory forever. The graphs are also unnecessarily dramatic, depicting nearly 10% in price increases for SFD’s as compared to 14%-16% as though prices have literally dropped off a cliff. Smooth it out a little and negate the immediate horror effect of showing a huge rise with a huge drop (all while annual profits are still equaling fat cash). A 10% increase is not a disaster considering so many markets appreciate at 0.1-0.5% on a good year.

The facts are “unnecessarily dramatic” and should be massaged until they appear more to your liking.

Ok

[LeoVictoria]

Does the above condo chart include pre-sale data?

Some but not most. You won’t find the presale market much different than resale, they are closely connected.

[Nparker]

Some but not most. You won’t find the presale market much different than resale, they are closely connected.

Still, I'd like to see the actual data for pre-sales included as they represent a good portion of the condo market.

[Mike K.]

The facts are “unnecessarily dramatic” and should be massaged until they appear more to your liking.

Ok

Yes, the way you present the facts can be overly dramatic. That graph creates the impression of a market in freefall by creating a very dramatic effect out of nothing more than appreciation moving from 14-16% to 9-10%.

Anyways, I suspect once the speculation tax is done away with by the next government the demand from people who were hoping to purchase ahead of retirement but who are now sitting on the sidelines will pick right up. Right now we have bureaucracy manipulating the market and creating uncertainty for people who have become scapegoats in a political game of optics.

[tjv]

according to VREB we are down to a 5.5% increase year over year for SFH for July.  Condos are 12.1%.  That graph needs some updating

[LeoVictoria]

Still, I'd like to see the actual data for pre-sales included as they represent a good portion of the condo market.

Me too, but that data does not exist

[LeoVictoria]

according to VREB we are down to a 5.5% increase year over year for SFH for July. Condos are 12.1%. That graph needs some updating

Different measures. This is 12 month rolling average of medians, they are talking benchmark.   The 12 month trailing average makes it a pretty lagging indicator.   Single family medians have actually been flat in the last 5-6 months.

Edited by LeoVictoria, 10 August 2018 - 08:44 AM.

[LeoVictoria]

Yes, the way you present the facts can be overly dramatic. That graph creates the impression of a market in freefall by creating a very dramatic effect out of nothing more than appreciation moving from 14-16% to 9-10%.

Anyways, I suspect once the speculation tax is done away with by the next government the demand from people who were hoping to purchase ahead of retirement but who are now sitting on the sidelines will pick right up. Right now we have bureaucracy manipulating the market and creating uncertainty for people who have become scapegoats in a political game of optics.

 

It's a chart that shows the decrease in appreciation rates.   Nothing further.  You are interpreting it as dramatic.  I don't think it is dramatic, it represents a gradual cooling of the market from red hot to lukewarm.   See 2008 for what I would call a dramatic cooling in the market where it went from relatively warm to ice cold in a matter of months (and back to red hot shortly after).   Now those were dramatic swings.

 

Spec tax impact is not behind this slowdown to any signficant extent.  It is adding some uncertainty, but mostly it is high prices and the reduced credit availability from the stress test and increasing interest rates that are curtailing demand.  

[Mike K.]

Demand is shifting, it is not being curtailed.

 

Those who can no longer afford a SFD, and who are under pressure with rising rental rates and the lack of rentals, are now shifting their sights towards townhomes and condos.

 

And as this happens, and as prices remain elevated, more buyers are further shifting their focus towards pre-sales as a way of buying into the market with the added opportunity of saving additional money over a 2-3 year period prior to possession. Interest rates remain low enough where they are not a major issue and will not be a major issue for a long time to come (but obviously they are forcing buyers to save more and budget more for monthly mortgage commitments).

 

In any given month there can be hundreds of sales unaccounted for by the VREB and which are significant enough to skew the statistics, but they go unreported.

[Nparker]

...In any given month there can be hundreds of sales unaccounted for by the VREB and which are significant enough to skew the statistics, but they go unreported.

I find this puzzling. Why are pre-sales not tracked as part of local real estate data?

[Mike K.]

The primary reason is the data is privately tracked and is not made available to the VREB via the MLS (which is how the VREB tracks sales; they only track transactions that are listed on their platform but the VREB doesn't often mention that their platform is only one part of the equation).

 

Developers like to hold cards close to their chests and they are not always willing to provide third parties information on how their projects are selling, what is and is not selling, and for now much. To have a sense of how things are going you need to have developed relationships with developers and each one has to be approached in a different way regarding the sales performance of their projects. And further to that, the property does not actually "sell" until the buyer secures a mortgage and takes possession 2-3-4-5 years from the date they drop their deposit and sign on the dotted line.

[LeoVictoria]

Demand is shifting, it is not being curtailed.

 

Those who can no longer afford a SFD, and who are under pressure with rising rental rates and the lack of rentals, are now shifting their sights towards townhomes and condos.

 

Well let's take a look at whether demand has shifted from single family to condos.   If it has, one would expect that either condo sales have not decreased, or not decreased as much as single family sales.  

 

For July 2018 compared to July 2017 in the Metro Victoria areas (core, westshore, peninsula):

Single family:     Sales down 22%

Condos + Townhouses:  Sales down 23% 

 

So no obvious indication that single family demand has shifted to condos + townhouses.   Sales are down the same percentage in both categories.  

 

It's not an inventory problem either.

Single family:  Inventory up 31%

Condos + townhouses:  Inventory up 46%

 

So condo inventory has actually increased more than single family inventory, which means that segment has actually cooled more.   Overall demand has definitely been curtailed.

Edited by LeoVictoria, 10 August 2018 - 11:39 AM.

[LeoVictoria]

On the topic of presales vs resale data.  Sure it would be great to have the data, but it's not like presales can go in a substantially different direction than resale condos.

 

Both are condos and buyers can and do substitute one for the other.  If resale prices go up, developers can charge more for their presales.  If the resale market tanks, presale prices/finishes have to be adjusted in order to compete.  Those two markets follow each other very closely.

Edited by LeoVictoria, 10 August 2018 - 11:55 AM.

[Mike K.]

We are nearing 2,500-units of condominiums under construction on the south Island. If we combine all market housing underway we're at the 3,000 mark.

 

Those 3,000-units do not exist as far as the Real-Estate Board's data is concerned.

 

We currently have 500+/- single-family-dwellings on the MLS listed for $1 million or above.

 

60 are listed for $600,000 or less.

 

Demand for the $600,000 homes isn't waning, but demand for $1 million+ homes can't keep up with the supply, and I don't think it ever would have even if we were still in the 2016 state of mind and mortgage climate and if we had 500 homes on the market at $1 million+.

 

You put a home on the market at $600,000 and there's a very high likelihood it'll disappear within two weeks if it's got it going on. But now we're seeing clunkers and fixer-uppers in that range, which isn't going to impress a lot of folks. 

[Mike K.]

A local pre-sale just went through dozens of units in a matter of days.

And not one of them will be included in the VREB’s stats.

And that’s just one project representing one segment of the market. You can see just how much is missing from the VREB’s take on the market where a solid third or even a half of real-world market activity for a market segment is totally unaccounted for it.