Tuesday, February 16, 2016

Real Estate Bubbles for Dummies

Proving once again that wealth and intelligence don't necessarily go together, the latest poster child for Vancouver real estate excess is off the market, having fetched more than the asking price.

The property featured in the National Post two weeks ago sold for $2.48 million, $80,000 more than what was considered an outrageous list price.
Located on West 14th in the Point Grey neighbourhood, the house had a sale price that reflects a new upper range for land value.

It's certain the wrecking ball will soon land on the shabby little house sitting on the property, cheekily dubbed a "dream home" by local newspapers.

Two blocks away, a brand new four-bedroom, six-bathroom home perched on a smaller lot is currently listed for $4.3 million.
The average price of a Canadian home sold in January increased 17 per cent to $470,297 compared to the same month a year ago. Two large and hot markets, Toronto and Vancouver, skewed the national average higher.

If B.C. and Ontario were stripped out, the picture looks bleaker — the average price of a Canadian home would have dropped by 0.3 per cent in January to $286,911.
New mortgages rules, increased attention to evaded taxes and the practice of 'shadow flipping' will almost certainly temper hot markets.
Vancouver-area real estate agents and investors are making windfall profits through assignment sales, a legal method that allows a home to be resold before the original sales agreement closes. The practice was widespread in Vancouver a decade ago when it preceded the 2008 crash in the pre-sale condominium market.

Today the focus has shifted to detached-housing. The CRA (Canada Revenue Agency), which is studying approximately 128 transactions, suspects that income is not being reported by either real estate agents or investors.

There is a widespread belief the GST (Goods and Services Tax) is also being routinely evaded on new home sales.