IN THIS WEEK’S FACTS BY EMAIL:
- QUESTIONS, QUESTIONS
- NO, SPAMMERS CANNOT BE SUED AFTER JULY 1…
- $90 OIL COMING? THAT WOULD CHANGE THINGS
- WHERE U-HAUL TRUCKS ARE HEADING – Calgary more popular than Vancouver or Victoria?
- RED TAPE ON A NEW HOME: $39,000 AND 14 MONTHS
- FIX AND FLIP: THESE RENOS WON’T PAY OFF
- HOW LONG YOU LIVE DEPENDS ON WHERE YOU LIVE – B.C. seniors last years longer than elsewhere in Canada
- FIVE ACRES IN BC FOR $39,500: SIX ACRES LAKEVIEW $41,000.
- CHINA BUYERS DODGING CURRENCY CONTROLS
- WHAT IS BEING ADVERTISED ON JUWAI THIS WEEK
Q: July 1 is the date where all spammers can be sued and be thrown in jail for spamming. How will this affect the real estate business?
A: Well, yes the spamming legislation introduced three years ago (!) had as its final coup de grace the “being sued for spamming” option coming about this weekend. However, the Government already received over 1 million complaints about individual spammers that now could be sued upon. It faced a nightmare of an avalanche of often frivolous lawsuits. Guess what? The law has been repealed and will be newly debated in the fall. But for now … no one can sue a spammer, as envisioned.
Q: The disaster of Home Capital – could it be the harbinger of things to come – like in the US?
A: Anything could be a harbinger – a Black Swan, particularly when authorities act as as stupid as the OSC. Most of the investors had investments under $100,000 in Home Capital. All the head of the OSC or the Ontario Finance minister or the head of CMHC …ANYBODY! – all they had to do, was remind people that they were insured up to $100,000. There would not have been the run on the company.
JREI SUBSCRIBERS NOTE AND REMEMBER – as we have reminded everyone before: BC Credit unions are insured by the BC Government for much more than the $100,000 federal deposit insurance
Q: Is the much feared NDP/Green government really going to as bad as many predict and much different from the Liberals as far as housing in G.V. is concerned? In the 10 paged confidence and supply agreement there is hardly any mention of drastic measures on its way to derail housing:
a) Tighten rules that protect good landlords and tenants
b) Address homelessness and increase supply to create affordable accommodation
c) Deal with speculators and fraud in housing
Nothing quite so drastic as many had anticipated! That said, in your view will above measures be sufficient to derail the recovery that has commenced in G.V. after the F.B. tax was introduced in Aug 2016?
A: I have had quite a few subscribers taking issue with my Facts by Email #22 as above. It is true, so far none of these detailed measures have been introduced as law … but then there is no new government yet. Also, the details of what exactly is envisioned in a) b) or c) no one knows yet either. Facts by Email #22 outlines the platforms. Those are the STATED goals. Perhaps they will go easy at first …but make no mistake those are the goals! Just like the Federal government is seeking to tax home offices and would like to eventually do away with tax free capital gains – they are goals. All governments are indebted to the eyeballs and rather than cut costs, they look for new income sources. This will accelerate, as we get closer and closer to running out of money.
• International •
China Buyers Dodging Currency Controls
We mused before Christmas: China enforces controls or another HO Hum control announcement? Well, it is getting strange in China: Beijing continues to toughen its capital controls on overseas investments, but Chinese firms are pouring more money than ever into the European and North American real estate markets.
“I don’t see any relaxation of policies. They’re still very strict,” Paul Guan, a partner with global law firm Paul Hastings, told the South China Morning Post this week.
Guan specializes in advising Chinese institutional investors on outbound real estate investments. A week earlier he had helped China Minsheng Investment Group, a Shanghai-based developer, in its US$88 million acquisition of condominium development in downtown San Francisco.
China has been implementing tough measures to restrict outbound investments in the face of accelerating capital outflows since late last year. The measures include banning overseas investments of more than US$10 billion and halting foreign real estate deals by state-owned enterprises. It seems to be having little effect.
In March, Chongqing-based CC Land Holdings bought the Leadenhall Building in London, the Square Mile’s tallest tower known as the “Cheesegrater”, for £1.14 billion (US$1.5 billion). The deal marks the largest-ever Chinese purchase of British real estate.
In the same month, Beijing Capital Development Holding (Group) bought Free Place House, a London Class A office building, for £96.5 million.
So how are they getting around the controls? By having an office in Hong Kong or branches outside China so they can use overseas proceeds or financing to fund the deals, according to Darren Xia, head of international capital group at JLL China.
Major Point and answer to Ho Hum: Despite increased government scrutiny, Chinese outbound real estate transactions soared 84% in the first quarter of 2017 to US$7.5 billion from a year earlier (JLL report).
But: What Is Being Advertised On Juwai This Week
The irrepressible and very smart Tina Mak – founder and president of the Vancouver chapter of the Asian Real Estate Association of America – suggested this week that, even for wealthy offshore investors, Vancouver may be getting too pricey. “While the [Vancouver] market has been extremely strong, it has made real estate investing much more challenging than before. There are opportunities, but you need to look outside our local area,” she stated in a bulletin that was offering investors US$275,000 condo investments in Orlando, Florida.
Nevertheless, Juwai.com – the biggest China portal offering offshore property for sale – has about 300 listings this week for Vancouver real estate. Most of the listings are high-end houses (up to $10 million) and condos ($1-$2 million range) but a couple of listings popped out because they are for development sites. One is an $80 million “premium high-rise development site with a development permit ready in a prime Vancouver location.”
The other is asking $28 million for a 11,700-square-foot building site on West Broadway at Laurel Street in Vancouver. This pencils to more than $2,300 per square foot, high even for Vancouver.
$90 Oil Coming? That Would Change Things
We are not oil guys, but some bullish comments are coming now from those who are. We mention it because, if the bulls are right, the real estate market in Alberta and northern B.C. could change in a hurry.
This week Jean-Guy Desjardins, CEO of Fiera Capital Corp. told the Globe and Mail that oil prices are starting to rally. “The fundamentals of the global supply-demand relationship are favouring higher oil prices,” said Desjardins, “When it goes up it’s going to go up for an extended period of time. I think it can go back to US$90, not in six months but over a couple of years.” (Desjardins is the man who correctly predicted a rally in Canadian equities last year.) If oil prices did start to rise, even slowly but consistently, it would affect residential real estate prices, starting with Calgary.
Still, the oil bears are fairly entrenched. Most analysts are forecasting oil in the US$45 per barrel range for the foreseeable future. This week Stifel Nicolaus & Co. of NYC released a bulletin from their chief economist: “If OPEC doesn’t respond to recent price weakness with additional output cuts, the price of crude could fall further, potentially below $40 a barrel. Since the start of the year oil is down 18.2% and off 14.8% since the start of Q2.”
Notice the word “if”.
We also culled the latest oil forecast from MarketWatch that provides analysis on a broad range of resources. Its latest oil forecast is not very helpful: “Crude futures’ fairly tight trading range still signals that oil’s trading trend could go either way and will be marked by volatile swings in the coming weeks and months.” Yeah, thanks a lot.
Major Point: JREI will stay with Josef Schachter, the expert we have been quoting for over a year and whose forecasts have been spectacularly correct! He sees oil heading lower, but eventually (after oil breaks through $40) buying opportunity ahead! If you are in the bullish camp, trot off to Alberta: There are nearly 2,000 new and unsold condos on the Calgary market, according to CMHC, the biggest glut on record. If you are bullish on oil prices, low-ball condo bids could pay off.
• Canada •
Where U-haul Trucks Are Heading
We like U-Haul data. The biggest moving company in North America is different as it is used by middle-class consumers. The poor stuff everything into a borrowed truck; the wealthy use top-tier moving companies. The average working population goes with U-Haul. So it is interesting when U-Haul provides data on where its trucks are heading, because where people go is where real estate values go – and more people moving in can be a harbinger of which markets are set to improve.
We have the U-Haul data for both Canada and the U.S. for 2016 (though it is not officially released until July 1) and there are some Canadian surprises. Not that Toronto was the No.1 destination for U-Haul moving trucks last year, but that Calgary is No. 2, well ahead of both Vancouver and Victoria.
U-Haul comments: Calgary saw a 10.2% decline in arrivals from 2015 when it was the top destination city, though it continues to be one of the busiest Canadian markets for incoming U-Haul trucks.
Here is the U-Haul list of the top 10 Canadian destinations in 2016 (with 2015 rankings in parenthesis)
- Toronto (2)
- Calgary (1)
- Montreal (4)
- Edmonton (3)
- Ottawa (5)
- London (6)
- Vancouver (7)
- Hamilton (8)
- Kitchener (10)
- Victoria (9)
And here is the list of the Top 15 U.S. U-Haul destinations in 2016 (2015 in parentheses)
- Houston, Tx (1)
- Chicago, Il (2)
- San Antonio, Tx (5)
- Orlando, Fl (3)
- Austin, Tx (4)
- Las Vegas, Nv (6)
- Brooklyn, Ny (7)
- Philadelphia, Pa (8)
- Kansas City, Mo (9)
- Charlotte, Nc (14)
- Columbus, Oh (15)
- Phoenix, Az (10)
- San Diego, Ca (13)
- Jacksonville, Fl (12)
- Tampa, Fl (16)
Major Point: Values grow where people go…and where foreign investor money flows…
Red Tape On A New Home: $39,000 And 14 Months
It takes an average of 14.6 months and costs an average of more than $39,000 to approve construction of a new home in the City of Vancouver, according to a new study by the Fraser Institute to be released shortly.
Nationally, Vancouver ranks third slowest for approvals and third highest for regulatory prices, said the study.
Toronto has the longest permit approval times and highest costs to comply with municipal regulations of any major city in Canada.
Montreal has the quickest approval times and lowest compliance costs.
The new study, New Homes and Red Tape in Canada: Residential Land-Use Regulation in British Columbia, Alberta, Ontario, and Quebec, uses builder data to compare the permit approval timelines and regulatory compliance costs in major Canadian cities and their neighbouring suburbs.
While Toronto’s permit approvals are longest among major cities at nearly one and a half years (17.7 months, on average), Ottawa is a close second (17.2 months). Vancouver (14.6 months), Calgary (13.5 months) and Edmonton (12.9 months), all longer than Montreal (12.3 months).
And Montreal also has the cheapest regulatory compliance costs ($8,917) for every new unit of housing built – dramatically lower than Vancouver’s average costs of $39, 848. Of the 10 municipalities with the lowest regulatory costs, nine are in Quebec.
Pitt Meadows is the cheapest jurisdiction outside Quebec, at $5,000 per unit of new housing, the study found.
|CITY||Approval time (in months)||Cost & Fees (per housing unit)|
Source: Fraser Institute: New Homes and Red Tape in Canada: Residential Land-Use Regulation in British Columbia, Alberta, Ontario, and Quebec
Major Point: If politicians were really concerned with housing supply and affordability these costs and timelines would be cut by 80%. But imagine $40,000 in fees times Metro Vancouver 20,000 housing starts and you get an idea where the real money in real estate is being made.
Fix And Flip: These Renos Won’t Pay Off
Those brave house flippers are still in the market – in Metro Vancouver the average detached house price is rising by 2.9% (that is more than $35,000) per month this year, so they aren’t that brave – must be careful about the lipstick renovations they do. Some renos simply don’t pay off, based on our own experience and that of appraisers.
Here are the reno jobs that don’t pay off:
- Extensive landscaping: Many homebuyers view expansive landscaping as a potential upkeep chore, and it will add little to the resale price. (Instead hang 2-3 hanging flowering baskets on the front porch.)
- High-end, one-off upgrades: Installing an expensive stainless steel fridge will not add value unless the kitchen is redone to match. Ditto for that fancy faucet package or the built-in surround-sound speakers.
- Carpeting: It is often better to rip out the carpets and replace with hardwood flooring or tiles (or just polish up the exposed wood). For many Canadians, wall-to-wall carpet is passé and potentially harmful due to chemical compounds and allergies.
- Do not spend money on the back yard
- Do not spend money – other than paint – on bedrooms
- Do not spend money on fixing basements (maybe draw your plan on the concrete floor … sell the sizzle – but don’t spend the money
All High-end, one-off upgrades
- Installing just an expensive stainless steel fridge will not add value unless the kitchen is redone to match.
- Fancy faucet package or the
- Built-in surround-sound speakers systems
Lipstick renos that do pay off
- Mirror – in entrance (Ladies like to see themselves)
- Brass – mailboxes, house numbers – big bold
- Totally update kitchen: New cabinet fronts and new hardware with new stainless steel appliances and flooring. The kitchen is the money room.
- Update bathroom: Mid-range renovations should include modern showerheads and faucets, a new sink and counter top. No bidets!
- Fresh painting: A fresh coat of paint works wonders on the overall impression and resale value.
Major Point: Keep the renos to a minimum if you are flipping in Vancouver. In all likelihood it is the land and the location that will dictate your profit.
How Long You Live Depends On Where You Live
B.C. seniors last years longer than elsewhere in Canada
I know a lot of you are thinking about retirement and wondering if you will outlive your savings. (Of course if you have followed our advice for the past 30 years, your real estate investments have taken care of that.)
But it turns out that where you live in Canada makes a big difference on how long you live past age 65, even more than genetics or income. The new numbers were recently crunched by Statistics Canada and the Canadian Institute of Actuaries (CIA) based on the 2016 census. The CIA looked at how long people live on average after they reach age 65, based on where they live.
According to the findings, B.C residents live the longest, for another 19.7 years, on average. Ontario is next, at 19 years, followed by Alberta at 18.8 years, which is also the Canadian average.
The shortest life span after age 65 is in the Nunavut (14.6 years) but folks in Atlantic Canada (average 17.6 years) also kick off earlier than the rest of us.
Major Point: Remember, it is not how long, but how well you have lived that is the main thing. Take a bubble bath with a friend and dive naked into the lake together this weekend.
FIVE ACRES IN BC FOR $39,500: SIX ACRES LAKEVIEW $41,000.
If you are spooked by the runaway real estate prices in Vancouver – where $50,000 buys you less than eight square feet of a typical condo – remember that B.C. is a very big place and that money goes a lot further if you are willing to travel.
We asked Niho Land & Cattle Country (niho.com) to provide us with B.C. rural listings they have for less than $50,000. They sent three pages of them. Now, granted, most of these are in the north Cariboo and can mean a 10 or 14-hour drive, but you can use it for recreational purposes and you will be a landowner in the best place in the world to live.
Here are our picks of the buys from Niho’s under $50,000 list:
5.1 acres near Fort St. James (LNG industry potential) with power and phone to lot line and all-season access. Price is $39,500.
6.8 acres on Francois Lake with lakeview. The power is in to the lot line and there is nearby resort with a restaurant, store and boat launch. Price is $41,000.
5.1 acres, walking distance to Stuart Lake (near Fort St. James). Power and phone at lot line and road access. Price: $40,500.
Another one is priced at $52,000, but includes a powered cabin on five view acres near Francois Lake.
Major Point: For the average price of a 450-square-foot condo in Vancouver you could buy all five of these properties in the Cariboo and still have about $200,000 to spend.
Get ready for the annual Real Estate Outlook 2018 conference, held September 30 in Vancouver.
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To subscribe to Jurock’s Facts by Email call 1-800-691-1183 or 604-683-1111 or fax 604-683-1707. While the above information is compiled from sources believed to be reliable, its accuracy cannot be guaranteed. Any type of investing carries inherent risks; as such, JREI cannot assume responsibility for any subscriber’s actions.