May 23rd, 2012
Richard’s been looking for a condo in the Vancouver burbs, and Bruce the Royal LePage guy has been helping.
The search has focused mostly on New Westminster, where only a year ago people showed up at condo openings with sleeping bags, lawn chairs and the all-important empty jar with a good seal.
Today, all gone. The great condo implosion, destined to ripple across the country later this year and into 2013, is already being felt here. People who bought recently have realized nothing, and those who need to get out must do so at a loss.
Just take a look at the summary of listings Bruce emailed to Richard yesterday morning. And to think mere months most people (and all the media) were falling for the marketing crapola being spread by local promoters like Cam Good and Bob Rennie. The word then was that HAM – Hot Asian Money – was unlimited and unstoppable. Because everyone in Mainland China wanted to live in a regional city which excels at mould-growing and can’t build a decent highway, the locals would soon be priced out.
“Buy now or buy never!” was the realtor battle cry. Now it turns out the Asian invaders were Chinese-Canadian families from Surrey and Richmond who have jobs and mortgages like everyone else. Meanwhile we have the sad spectre of an entire local population who thought they were as special as snowflakes, and sold each other houses in a frenzy of indebted horniness until nobody could any longer afford. Guess they never read The Gift of The Magi.
In any case, the entire market will crumble over the coming months. Condos first.
We whisk you now to the godless GTA, where 85,000 new condos are currently in the develop/permit/marketing/construction phase, — enough to satisfy record demand (mostly from speckers and flippers) for the next 8 years. As you likely know, there are more residential towers being built in Toronto than anywhere in North America. Outside of the city, this is viewed as humorous.
To grasp it, take a quick drive past the downtown core on the elevated Gardiner Expressway (be very careful not to drive under it). Laid out before you are dozens and dozens of glass-sheathed condo spires, housing tens of thousands of people who once thought they were smart. But not only are their ‘investments’ being watered down daily as cooler versions of their units come to market, but we now know most of these towers will have be reglazed in a decade or so – promising condo fees that will make many of them unsaleable. People who live in glass houses, shouldn’t.
Anyway, here’s Assiz, a dude with a problem that’s the same but different:
I’ve been reading your blog for quite some time now. I did purchase a condo 3 years ago in Toronto. I purchased with the intent to actually live in it, unlike many speculators. The closing date has now been pushed out 1.5 years from the original completion date and when I drive by the building (Queen and Broadview) construction is slow. Work is never being completed on weekends or late into the day. After all, the developers don’t wouldn’t want to have to pay overtime hours so that it eats into their overall profit.
I did buy one of these units at a time before the Condo boom really started to take off, I purchased in the lull of the market in 2008/2009. I am fortunate in that I am not heavily leveraged into this asset, but it has been a frustrating process and I am just waiting for the next letter from the builder to say that the completion date has been bumped out another 6 months. Luckily, I have taken your advice and my own frugality into consideration and have been renting at a low low price of $650 per month (inclusive) allowing me to continue building equity and not exposing myself to any additional real estate.
Poor Assiz. His condo deposit sitting there for years. His dream home a hole. Living in some guy’s dank basement as the best, horny, oats-spreading swingle years of his young life slip mercilessly by. This is what the Greeks meant by tragedy. Or was that their bond yields?
Obviously a lesson in how not to buy. And three years into this morass, Assiz probably couldn’t even find a greater fool to buy the unit assignment from him. Maybe he didn’t even ensure he had one when he walked out of the now-long-forgotten sales centre with the hottie saleslady and the model erection covered in the red dots. I mean, who wouldn’t buy?
Finally, here’s Mike. This blog scared him. Which I can understand. Most days it terrifies me.
He wants mortgage advice. I’ll let you handle it.
I’m not a week into following your blog, and already you have my head spinning. Now I’m considering breaking our mortgage (we’ve got about a year left), and locking into a 10 year fixed at a still fairly low rate (4%) to avoid having to requalify after the new rules come into effect. I’m worried that we may not be able to requalify after the changes, as I’ve just started my own business this last year, so my income is low and not very stable, and on top of that, my wife is finishing up her job in the next few months (with or without a new one). Uncertain times for our family.
I’d be interested to know if you think: 1) Is pre-empting the new rules by breaking and locking into a new mortgage a worthwhile idea to give us some time to get better income flowing? and 2) Does locking in to a 10 year rate sound smart or ludicrous (my brother has a 5 year variable rate thats at 2.7% right now as a comparable, and I think I could negotiate the same). Any insight you could provide on this would be incredible.
More tales from the Real Estate War Zone…
What I will comment on is the CMHC graph at the bottom of the article.
Duly note the graphs “dog- leg” bend around the year 2006.
Analysis / Interpretation? = YOU, the Canadian Citizen, are the insurer of last resort for the CMHC.
From 2006 to 2011, Your/Our exposure to the mortgage/risk has more than doubled.
This will NOT end up well…