Monday, March 4, 2013

Will March Real Estate Sales be horrible because of HST/PST?




Everyone's favourite car cam salesman is without this vehicle in this clip, but Ian Watt's latest could be touching on what might emerge as a common theme this month.

The HST gets repealed at the end of March and we will see the return of the PST.  Many in real estate are expecting a significant impact for sales.

As we all know sales are down, but are the few sales that might occur this month being discouraged, sellers being pushed to hold closing off until April?

Conversely, will April see a Tsunami of new listings from sellers holding back for the same reason?

Could be an interesting month for statistics.

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11 comments:

  1. Everything is 'priced to sell':

    V992280 - *PRICED TO SELL*
    V964231 - Priced to Sell!!
    V988050 - PRICED TO SELL.
    V993603 - PRICED TO SELL!
    V979164 - TIME SENSITIVE BUYER BONUS
    V984371 - Priced below assessment!
    V950440 - Motivated Seller Not Miss this opportunity.

    CJM

    ReplyDelete
  2. Ian Watt is hillarious, just a couple months ago he posted a video saying people should buy a condo downtown with 5% down instead of renting. Showing some serious ignorance of vastly superior economics of renting at sub 2% cap rates vs. paying a mortgage at 3% or more. Today he just posted a video suggesting that some buyers who were getting approved 6 months ago aren't anymore. Nice to see the banks waking up and tightening their underwriting standards.

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  3. Disclaimer: I am not related to or work for Ian Watt, or neither do I related to or work for any real estate firm). I am just trying to share some calculation.

    V987251 - 749K CAD (928 Homer st, 2BR, 2BTH)
    Rent for 2BR,2BTH) in the same building - kijiji rent id (Ad ID 459883649 ) - 2780 CAD
    Cap rate = 4.45%
    If you buy with 10% down, that's 74.9K CAD cash outflow
    interest exp at 3% 5 yrs fixed mortgage- 94K for 5 years -1566 CAD per month
    Assuming Strata - +- 300 CAD per month
    Property tax -+ 200 CAD per month

    Assuming downpayment invested in a stock portfolio with 10% return - 7490/year - 624 CAD per month

    it doesn't make too much of a different between rent and buy:

    Rent (2780 - 624) >= interest expense + strata +tax (1566 + 300+200)

    However, if I buy now, I am likely to face price depreciation considering possible chinese real estate bubble burst, and market being overpriced in my opinion. What do you think?

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    Replies
    1. The rent is too high. They won't get that much. The ppty tax would be at least $300/month. Your strata est. is low. 10% return in the markets would require a high risk portfolio.

      Delete
    2. iPad ate my last response.
      Basically try your calculation in real rents not the dream rents you see at the beginning of a month or posting.

      I'm telling you right now getting a tenant to pay that kind of rent for a 2 bedroom and an extra bathroom to clean is a complete dream scenario and something that cannot compete with the avalanche of rental listings coming online right now.

      Delete
    3. Try again your calculation with a rent of $1900/month, which is what I pay in the same area for the same type of condo (I moved in 2 months ago, so my rent is the current rate of the market...

      Delete
    4. Yeah, sorry. There are a lot of postings on Craigslist and Kijiji asking pie-in-the-sky rents. The absolute max that unit would rent for is $2,300, and that would involve finding quite a sucker. Around $2,000 would be most likely.

      As an experiment, try picking a few rental listings with high prices and tracking them week after week. Eventually they'll start knocking $50 off, then $100, until they hit a price that is actually in line with the marketplace.

      Delete
  4. renting 1000sq ft concrete 2bd 2br in DT for $2,000 a month, moving into a better concrete 2bd 2br in April for $1,850 a month. Lots of negotiation room right now.

    ReplyDelete
  5. not a feng shui expertMarch 4, 2013 at 10:25 PM

    2780 / 1900 = 1.463

    Even that optimistic rough calculation gives a 46% edge to renting when using actual rents.

    You can see why The Economist thinks house prices in Canada are 78% overvalued compared to rents, 34% compared to income. That's just for Canada. You've got to think Vancouver is worse.

    http://www.economist.com/news/finance-and-economics/21569396-our-latest-round-up-shows-many-housing-markets-are-still-dumps-home

    ReplyDelete
  6. Hey, where's the dash cam? Did Watt have to sell his car?

    ReplyDelete
  7. not a feng shui expertMarch 6, 2013 at 1:26 PM

    "Will buying a condo leave me broke?

    Jason Heath | 13/03/06 7:24 AM ET

    ...Jeff asks: I’m recently divorced and trying to figure out the best course of action on purchasing a condo for myself. I’ve been approved for up to $330,000, but I don’t want to go that high as I’d prefer to have money left over to pay for any other expenses, travel, fun, etc. and of course be ready for any interest rate increases in the future. I’m assuming my new mortgage amount will be $290,000 to $300,000 with a monthly condo fee of $400. I will need to use my RRSP, my TFSA and my emergency fund.
    Am I squeezing myself too tight?...

    ...What happens if rates double from 2.50% to 5% on renewal of his mortgage in five years? His monthly mortgage payment will jump from $1,344 to $1,669 – an increase of 24%. What if rates triple to 7.50%? Payments will increase by 51% to $2,028 per month. And for those of you who think 7.50% is unheard of, it’s important to remember that prime was at 6.25% a little over five years ago, in November 2007..."

    http://business.financialpost.com/2013/03/06/will-buying-a-condo-leave-me-broke/

    ReplyDelete