IN THIS WEEK’S FACTS BY EMAIL:
- China puts in exchange controls
- MacQuarrie warns of a peak in housing markets in 2017
- Some November Vancouver Numbers are grim
- Fraser Valley single family tough like Vancouver … condo sales up sharply
- Altus reports 26% decline in asset sales: Third quarter
- Middle East well-heeled prefer Toronto over New York in 2017!
Black Swan Or Ho Hum? China Puts In Exchange Controls
China added new restrictions on taking yuans out of the country. Why? A flood of capital is/may be destabilizing the financial system. NEW: Officials won’t approve requests to bring the yuan overseas for the purpose of converting into foreign currencies unless applicants provide a valid business reason.
The monetary authority is throwing up fresh administrative roadblocks to contain capital outflows before a likely U.S. interest-rate increase next month and the reset of Chinese citizens’ $50,000 annual foreign-exchange quotas in January. (It likely will be curbed further.)
WHY? Well, the equivalent of $275 billion exited the country via yuan payments this year through October, versus a $101.5 billion inflow in the same period of 2015. This at the same time as the Chinese currency weakened to an eight-year low against the dollar. The rumour that new restrictions are being imposed on capital flows accelerated the outflow. China also will further standardize companies’ outbound direct investment, strengthen inspections on whether related deals are real (!), and develop a system for firms to report big cross-border fund movements for ODI in advance, the people said.
Officials have also banned the use of friends’ currency quotas, curbed the cross-border activities of underground banks and made it more difficult to buy insurance policies in Hong Kong.
South China Morning Post says the restrictions will be:
- Requiring approval for outbound investment over 5 million
- Affect/halt all private foreign investment over 10 million
- Ban purchases by state run enterprises worth more than 1 billion till Sept. 2017.
China is boosting its defense of the Yuan against the dollar by using reserves. That means they are more concerned about money leaving China, rather than boosting exports thru a lower Yuan! Attempts to verify that yuan payments have a valid use will be hard for China to implement without disrupting the economy, said Michael Every, head of financial markets research at Rabobank Group in Hong Kong.
Black Swan? If they really clamp down on INDIVIDUALS exporting more than $50,000 (or the new limit imposed in January), really stop people using friends, really stop companies and wealthy individuals from paying off officials … then yes … Black Swan. Less money coming Canada way. That is not helping the already falling sales and falling price environment. BAD!
HO HUM. No one from China that was investing in Canada stuck to the $50,000 limits for 6 years. So, much more likely … it will be another paper tiger set of regulations.
Major Point: It bears watching!! Closely! We will!
Macquarrie Capital Is Worried. It Warns:
…”there is growing evidence that 2016 will be the year of ‘peak housing’ for Canada.” It bases its comments on its assessment that the annualized 5.5 percent decline in residential investment was also its worst quarterly showing since 2010.
The prime culprit for this downturn in residential investment, says MacQuarrie, was a subcategory that serves as a proxy for real estate commissions. The run-up in residential investment as a whole in years past, and this segment in particular, bears eerie resemblance to what transpired south of the border in the 2000s, again according to McQuarrie. If history repeats itself, moving past this peak in real estate commissions is not a harbinger of imminent doom, but rather an early warning sign that a key driver of economic growth has been tapped out — which could foster more widespread weakness further down the road. Ahead of the U.S. housing bust, the downturn in brokers’ commissions and other ownership transfer costs started in the fourth quarter of 2005, well before the beginning of the financial crisis. McQuarrie attributes a portion of the drop-off in this segment to the foreign buyers’ tax in British Columbia, but warns of further softness in the future tied to the federal government’s macroprudential tightening and beyond which is bad for Canada’s economy.
Major Point: MacQuarrie sees a softer loonie, and calls for the greenback to strengthen to $1.45 against the dollar by the end of 2017.
The Numbers, The Numbers – Vancouver
Sales totaled 2,214 in November 2016, an overall decrease of 37 per cent compared to November 2015 when 3,524 homes sold. The big decrease was in SF homes which saw a 52% collapse in sales over last year’s November results. Last month’s sales were 7.6 per cent below the 10-year sales average for the month. Active listings stand at 8,385, a 3.6 per cent increase compared to November 2015 (8,096). The first such official increase in 2016. As we have been reporting demand, relative to supply, for detached homes is lower right now than demand for townhomes and apartments.
Please study the actual year over year sales and price numbers as well as the numbers of November as they compare to April 2016. Surely eyebrow raisers!
- Sales of detached properties in November 2016 reached 638, a 52.2 per cent decline over November 2015.
- Sales of apartment properties reached 1,200 in November, a 23 per cent decrease compared to November 2015.
- Attached property sales in November 2016 totaled 376, 41 per cent decline compared to November 2015.
|Nov. 2016||Nov. 2015||%||Apr. 2016||%|
|Total Avg Price||901,100||933,200||-04%||1,092,200||-18%|
|Total Det. Sales||657||1,348||-51%||1,971||-66%|
|Total Condo Sales||1,211||1,555||-23%||2,113||-43%|
|Total Townhome Sales||338||568||-41%||658||-49%|
|All SF Prices||1,616,200||1,577,600||+02%||1,811,900||-11%|
|All Condo Prices||556,000||498,400||+11%||570,100 (May)||-03%|
|All Townhouse Prices||722,500||600,400||+20%||725,000||-01%|
|Westside SF Prices||3,962,200||3,357,000||+12%||4,180,000||-05%|
|Eastside SF Prices||1,460,000||1,386,000||+05%||1,704,000 (July)||-14%|
|Richmond SF Prices||1,709,700||1,543,800||+11%||1,976,000 (June)||-14%|
|Westside Condo Avg. Price||848,500||747,700||+13%||912,100 (July)||-07%|
|Eastside Condo Avg. Price||504,000||449,000||+12%||525,000 (June)||-04%|
|Richmond Condo Avg. Price||439,000||393,200||+12%||460,000 (June)||-04%|
|Westside SF Sales||69||165||-58%||229||-70%|
|Eastside SF Sales||79||145||-46%||219 (May)||-70%|
|Richmond SF Sales||69||191||-64%||257 (March)||-70%|
The Numbers, The Numbers, Fraser Valley
1,247 sales of all property types took place in November, a decrease of 29 per cent compared to November 2015’s 1,766 sales. Of the sales processed last month, 291 were townhouses and 348 were apartments, representing more than half of this November 2016’s market activity.
Active inventory continued to tighten at 5,602. Available listings decreased by 2.8 per cent over last November.
“As we move away from the record-setting demand seen earlier this year, sellers are sharpening their list prices to respond to the changing market” explains Board president Wiebe. “I’m pleased to see that homes are still selling at strong levels, especially for attached homes which are elevated compared to what we’re used to in November, thanks to both the levelling of prices and consistent demand for our region.”
|Fraser Valley||Nov. 2016||Nov. 2015||%||Oct. 2016||%|
|Gran Totals y-t-d||2016||2015||%|
|New listings y-t-d||33,937||29,704||14.3%|
Major Point: Detached sales down 48%, townhouse sales are down 24% but condos sold 23% higher. Detached listings soaring 46% higher, condo listings dropping by 51%. You do not need to be a genius to see where the market has shifted to. Condo sales all throughout the valley substantially higher. Benchmark prices raise your eyebrows? Look at the median and average prices… (14% and 16% higher) then compare to benchmark 31% higher. Logical? NOT!
Middle East Well Heeled Like Toronto Ahead Of New York For 2017!
Cluttons’ recent Middle East Private Capital Survey rated London as the top real estate pick for Middle East High Net Worth Individuals, followed by New York and Singapore, for 2016. Los Angeles was the only other US city to feature in the top 10, coming in eighth place. The survey also revealed that New York has dropped out of the top target locations for 2017; in fact, no US city appeared in the wish lists of Middle East investors for next year.
NOTE: Dubai overtook London as the most preferred property investment location for 2017, while Toronto emerged, in joint third place with Abu Dhabi, Singapore, Kuala Lumpur and New Delhi. Toronto was the only North American city named as a likely target for next year.
Major Point: Economic upheavals (elections, oil, Brexit) have a habit of fueling uncertainty. 2016 has been particularly volatile, so safety remains No.1 in the eyes of the well-heeled.
Chilliwack, legal fourplex, fully tenanted, professionally managed, fully renovated. Rents are $950 x 3 and 1 x $1,000 = $46,200 per annum. Units are separately metered, tenants pay for heat and lights. 8,052 square foot lot, 3,704 sq. ft. building. Each suite is approx. 925 square feet. Price: $699,900.
- Italy voted against the government, leaving much needed reforms wanting and Europe’s most bloated government in place. 63 governments in 47 years! Italy remains ungovernable. Eight Italian banks are in trouble … needing bailout by the ECB. Euro crashed (early Monday to $1.03).
- COMMERCIAL INVESTMENT – Asset sales decline in 3rd quarter by 26%. Residential Development Opportunities continue to drive Vancouver Real Estate Investment: 685 sales transactions over $1 million were recorded in Q3 2016, for a total investment value of $2.8 billion.
Commercial real estate investment The Vancouver market saw $2.8 billion worth of asset sale transactions took place in Q3 2016, a 26% decrease from the previous quarter but up 38% from a year earlier.
Read the fine Altus Group report here: Altus is a leading provider of commercial real estate services, software and data solutions. 3rd quarter report here
- US RATES STILL RISING!
According to Freddie Mac’s Friday Primary Mortgage Market Survey, the average U.S. fixed mortgage rate moved higher for the fifth consecutive week in late November 2016. Sean Becketti, chief economist of Freddie Mac commented, “The 10-year Treasury yield remained flat despite an upward revision to third quarter GDP. The 30-year mortgage rate rose 5 basis points to 4.08 percent, rising a total of 51 basis points in three short weeks. With mortgage rates at the highest we’ve seen this year, borrowers are now backpedaling on refinance opportunities. The latest Weekly Applications Survey results from the Mortgage Bankers Association show refinance activity down 16 percent week over week.”
BOOK of the WEEK
Famed author Peter C. Newman wrote incredibly factual and interesting books such as ‘The Inquisitors’, ‘Titans’ (In which he quoted Ozzie Jurock as a Real Estate guru), ‘Vancouver: The Art of Living Well’, and over two dozen more.
NOTE: He has a new book – “Hostages to Fortune: The United Empire Loyalists and the Making of Canada”
In ‘Hostages to Fortune’, Peter C. Newman not only recounts the expulsion and migration of these brave Loyalists but also, in his inimitable style, shines a light on the people, places, and events that set the stage for modern Canada. It’s a fabulous must read! Buy it here: https://www.amazon.ca/Hostages-Fortune-United-Empire-Loyalists/dp/1451686099
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