Spot The Speculator #83 – “Much to my surprise there is a for sale sign out front of 1923 Waterloo again. Asking price $2,288,000, a whopping $478,000 over last year’s sale price.”

“Last year we lived in the top floor unit at 1923 Waterloo St. Vancouver and was saddened when the owner decided to sell the house. The owner lived downstairs with his young growing family and we knew them since they moved into the neighbourhood. The previous owner had completely gutted the house and did a great job in bringing back this Kits Grand Dame back.”

“The house sold last July [2011] for $1,810,000 and the new owners did not want us as part of the package. Here’s the original listing:

“Much to my surprise, I recently drove by to see a for sale sign out front of 1923 Waterloo again. Asking price $2,288,000. A whopping $478,000 over last year’s price.”

“All the new owners did was take out the upstairs suite kitchen, removed the carpet and laid laminated wood floors, dry walled the unfinished basement, painted over all the nice wood beams and fire place in the downstairs living room, put in a new refrigerator, cut out all the privacy of the laurel hedge out front, and put up a large fence.”

“My back of the envelope math on this unit goes like this
:
Purchase Price $1,810,000
Transfer Tax $35,620
Renos $60,000+/-
Realtor (if sold) $61,700+/- (7% on $100K 2.5% on balance)

Total cost: $1,931,700 is their break even point (maybe a little less on the realtor fee depending on selling price).
Not including any interest cost if they had a mortgage.
Asking $2,288,000.
Comparable houses in this neighborhood are selling between $1.6-$1.8 million.

“They can try all the lucky 88’s they want but HAM does not buy in this area, they prefer a newer house with a view.
I guess someone forgot to tell the new owner that the market peaked last year.”

– from DJB, via e-mail to vreaa, 17 Apr 2012
[thank you, DJB -ed.]
—-

This’ll be one to track.
Possible ‘crispy flipper’ candidate.
Nice looking house. Currently serving as a trading chip.
Perhaps 800k to a million bucks in the trough?
– vreaa

57 responses to “Spot The Speculator #83 – “Much to my surprise there is a for sale sign out front of 1923 Waterloo again. Asking price $2,288,000, a whopping $478,000 over last year’s sale price.”

  1. Now that would be a flip.

  2. VREAA, the fact that you think this house might fetch as much as $1 million in a normal market, let alone “in the trough,” shows how much perspective we’ve all lost. Go look at Seattle. Go look at Chicago. Go look at Toronto, even. $1 million is a lot of money. Houses like this do not sell for $1 million except in bubbles.

    • An excellent point.
      I do believe that we have all lost perspective, even those of us who are bearish. We’ve gotten used to these massive numbers.
      At the same time, I don’t expect Vancouver RE to ever really be cheap. This is a 4000 sqft SFH very near downtown and the Kits area ‘beach’, we’d never expect it to be given away.
      So, yes, fair to take me to task on this.
      My 800k low range would be 60%+ off current ask, but then, of course, it hasn’t sold for that yet.
      66% off last years sales price would put it at 600k. Perhaps that’s a more accurate low end trough estimate?

      • A big, reno-ed house in Kits will never be cheap. 800 to a mill. sounds about right.

      • Of course the ‘4000 sqft’ includes (barely) finished basement, which wouldn’t be included in square footage calculations in most parts of the world.

      • True. Still, it’s Kits. Perhaps that’s not for everyone. But it is a desirable area… moreso than (for instance) Kerr and 49th. Definitely moreso than the insta-slums that vast portions of South Surrey are turning into.

  3. But it’s a healthy market, not dominated by flippers and speculators. Right?

  4. Also, note that the house was empty during the year of reno. All this “upgrading” pulls houses out of circulation in what is already an insanely tight market.

  5. Another way in which this anecdote is of interest:
    We don’t know anything about the current owner, but we’d fully expect them to be locals, wouldn’t we?
    Thus, another house sold in 2011 on the westside, not to foreign buyers, but in anticipation of foreign buyers.

  6. Renters Revenge

    Madness. Sheer madness.

  7. 4SlicesofCheese

    The house across the street is back up for sale. V943447 for 1,188,000.

    They did a complete gut job near the end of 2010 and put in 2 suites that bring in 2250 a month.
    I think I have seen 2 or 3 different renters go thru that place since it was renovated and funny thing is they just put up a for rent sign I think in feb.

    So to sell this fast after getting a renter in means one of two things, they want the suite filled so potential buyers see the income potential, or they just can’t carry the costs anymore and need to sell.

    Poor tenants.

    • The spec mania has destabilized lots of rentals. Very inconvenient for those involved. All adds up to even more misallocation of energies caused by the bubble.
      Let’s get this giant RE-distraction out of the way so that the citizens of Vancouver can put more energy into productive pursuits.

      • I hope you don’t take this as a criticism, but this blog itself is also a misallocation of energy — we would all be better off if the bubble didn’t exist and we didn’t spend (waste?) time discussing the situation here.

        But, given that the bubble exists, the blog is valuable. It is one of the least biased sources of information about local RE, and therefore provides an important service to the community. I definitely learn a lot from the smart people here.

        I’d much prefer it if Vancouver were just an ordinary, boring city, with ordinary, boring houses, and I’d spend my work doing actual work rather than paying so much attention to RE.

      • Jeff ->
        You are absolutely correct; that is not a criticism, it’s a fair description.
        We have ourselves previously described this very blog as an example of one of the many, many misallocations of energy that results from a speculative mania.
        Everybody is a participant; even those who simply stop and stare.

        Example of prior comment in this regard:
        https://vreaa.wordpress.com/2011/06/05/nux-tix-or-mortgage-payment/#comment-10834

      • I would classify this blog as a form of research/academia – which is worthwhile regardless of topic if done in a mindful way. I’ve certainly learnt to see the world differently by following this (and other) blogs, in ways that go way beyond Vancouver RE. So thanks vreaa!

    • The house was sold in February of 2010 for $570,000 … and now is being listed for over double what it was bought for. Fuck, this is honestly unacceptable, especially for the East Side.

  8. Shocking as it may sound to us lay people, there are nibbles on the property at the listed price. It is a tougher property to sell to single foreign buyers but there are investment groups that have money and looking to invest.

    As part of the up-trend in RE market, buyers/sellers are not always individuals and more usually investment groups (some loosely structured).

    There is still a lot of money around looking for investments (cheap credit is geographically everywhere).

    • “Investment groups” buying Vancouver SFHs?
      Gets us saying “That’s all we need” in the same breathe as “Bubble top anyone?”.

      • One of the currently active investment groups on the westside is fronted by a recent UBC PhD graduate – money backed by family/friend connections.

      • MadDog -> Interesting. Tell us more.

      • Name ‘names’ – no way 🙂

        PhD in Faculty of Applied Science is the most you will get from me.

      • Okay, names aside..
        (Names are not that important here; .. behaviour far more important).
        How many properties? What type of RE?

      • He’s going to have lots of angry family/friends connections. Investment groups, including huge REITS feel pressure to make deals, because they have money to place. They spend more and make worse decisions in order to show activity.

      • @ MadDog
        It is widely known that those with multiple degrees (particularly those that end in ‘Sc’ and ‘Eng’) are THE worst people to do business with. Coming in a close second, of course, would be “friends and family”. 😉

    • What exactly would these “investment groups” be thinking?
      Clearly not buying for income; clearly a bet on future appreciation.
      They will get burnt, badly, and deservedly so.
      We’d trust they were:
      (1) not using taxpayer backed insurance via CMHC
      (2) fully responsible for the downside when the bubble implodes

      • Good humor on ‘fully responsible for the downside ….’ – I could not hold back the laughter when reading it while in meeting.

      • That’s my big question. Who the hell is buying *now* in the bubbliest, highest-priced areas when it’s widely acknowledged that we’re 1) Ridiculously overpriced compared to just about anywhere in the world, 2) At the top of a spectacularly massive bubble that’s already deflating all around us? Are “speculators” this stupid/brave/ignorant? Are we looking at the same mentality that bought Nortel at $110?

      • Investment groups have connections that funnel buyers.

        Cheap credit is producing mountains of cash faster than opportunities for parking cash.

        I recently came back after trip to SE Asia and Southern Africa – development changes going on there are phenomenal. We may feel that Vancouver is a special bubble zone – wait till you visit some of these countries! China is a big player in these regions as well – in fact, everywhere you go these days (even behind US’s backyard).

      • Mad Dog,

        Confused by this post.
        You talk of mountains of cash available for credit in one breath (local buyers) – in the next you claim that Chinese (cash buyers) buyers are everywhere.
        Please pick a bubble theory and stick with it. I can’t keep up with the volume of different theories posters here use to blame the high prices

      • I have heard of these too, though funny that with all the properties being offered for sale, these “investment groups” aren’t more active. Probably because there are far better places to invest these days (cough ‘merica cough).

      • When we hear the words “investment group” we would normally associate that term with a savvy group of individuals with means who are capitalizing on an above average investment opportunity. Perhaps even an opportunity not available to the typical person. We might imagine them better informed than the crowd, even expect them to profit handsomely on this opportunity that is not available to small investors.

        Truth is we would be wrong to think they have a half clue what they are actually doing though. The facts are that these fools are buying heavily into fixed assets in an overbought market that is already showing signs of decline. They are the most foolish of greater fools.

        In this case they are fools with little imagination and no foresight whatsoever. There are surely other great investment opportunities available but it is always risk that dissuades this particular pack of followers who only see past gains and then use that bias to speculate on ideals (fantasies) of even greater future profits.

        Not so surprisingly these folks see capital appreciation as the future when they should instead be thinking of rents and income. A lot of good money will be wasted as a result. They will kick themselves afterwards as reality sets in but in the meantime, don’t even think of discouraging them.

        The fools won’t listen. Their heads are full of pixie dust.

      • I saw it too Mad Dog. Even the Chinese are amazed at the energy levels and the youth. I think people here would be stunned by what is taking place in Africa today and yet it is so difficult to explain in mere words how communities are going from stone age technology to 21st century modernism. Sometimes in a matter of months.

        Off the charts growth. Higher even than China’s. Go and see it they say.

        We are so buried in our own daily problems here. People just don’t get it. I think this is similar to the transformation that China itself went through twenty years back. More dramatic though.

        This time the Chinese themselves are the propulsion and they have no bleeding heart liberal ideology holding them back from investing and taking hold of opportunity. Cheap wage environment…Meet Chinese money. Like I said here before, Africans want investment, not charity. China wants lower wages and a relief valve from its own tremendous growth.

        They are embracing the Asian model and happy for the leg-up they are getting. They feel the West with their bags of free flour and food drops on refugee camps are an insult. What the hell!

        Did we actually think those people had no pride and would prefer food banks, Christian flyers in English and charity tourism over actual jobs?

        Stupidist thing the West ever did for Africa. Enough with all the free meds, flu shots, endless lectures on Aids prevention, empty schools and churches built by missions with guilty pleasure. Africa wants to work.

        Look at the population charts, pyramid and demographics. The whole continent is median 16 and ready to riot. It might be explosive but the Chinese have come on the scene with billions upon billions of dollars in investment funding.

        They are putting all that energy to work.

        So it is no wonder Chinese firms are signing off on business contracts, land leases and mineral exploration rights at a rate 20 times greater than the US. No wonder they are there building the worlds biggest dam there, paving highways between the continents major cities, constructing airports, railways and electrifying the poorest countries in the interior while taking the cream of the crop in resource wealth in exchange.

        Go figure. They will reap as they sow. The West is on the outside now.

      • For Farmer, et al… From the WealthOfNations to the RiseAndFallOfGreatPowers nobody does it like Niccolò…

        Ergo, a brief history lesson courtesy of Machiavelli… (who probably would have put and kept Schneider in Goal much earlier in the season)…

        Florentine Histories (1532):

        “It may be observed that provinces, among the vicissitudes to which they are accustomed, pass from order to confusion, and afterwards pass again into a state of order. The way of the world doesn’t allow things to continue on an even course; as soon as they arrive at their greatest perfection, they again start to decline. Likewise, having sunk to their utmost state of depression, unable to descend lower, they necessarily reascend. And so from good, they naturally decline to evil. Valor produces peace, and peace repose; repose, disorder; disorder, ruin. From ruin order again springs, and from order virtue, and from this glory, and good fortune.”

      • Very fitting, Nem. I had to read that quote twice but it was well worth the time. There is so much truth in it for what it discusses is the very rise and fall of great civilizations. We can only imagine what part of the great cyclical event we now find ourselves in. My fears may be more real than imagined as we all descend into a pit of cynicism and grovelling greed. When we hear statistics that those over 50 control the greatest portion of wealth while those under Thirty live close to poverty by comparison we do wonder how it will all turn out. Ideas of the so-called 99% are badly misplaced. For in fact what we are seeing is a generational rift in the distribution of wealth that is far more personal than that suggests. It is closer to home than most are willing to admit and that is where the blood boils. Young people today are not resentful of Wall street. What a damn Red Herring that is. They are indeed resentful of their own parents and grandparents who dangle the carrot of inheritance while gleefully spending it all into selfish oblivion while taunting their offspring. That is a kind of soul corrupting betrayal that most younger people accept with not just disdain but outright disgust. This society of ours is ripe for trouble and the breakdown of the culture of family that began long ago in the Sixties was always at its heart. We should all be worried. This is a very dangerous part of our future that is now coming in to sight. Instead of thinking that the next great trauma will happen in Europe (as it did so many times in the past), or in some other far flung nation we only see on the internet,….this next time we might just discover that the tragedy will take place right here in our own back yard. We are in that part of the cycle now where cynicism rules and there is no virtue in maturity or age and little real respect remains between people of any class.

        What else would we expect in exchange for the destruction of family unity and the basis of love and loyalty; an idea so foreign that most will barely comprehend what that even really means.

    • SFH on westside generally for the one you are querying about. But most of the Asian flippers are parts of investment groups – especially when dabbling in multiple properties.

      The investment groups are ageed on handshakes – no paperwork; same like how it is done in the old country. But you must have known this 🙂

  9. Musical chairs! When the music stops, many will get burned!!!!!!!

  10. This home should be max 1 mil. Kits is a great area with very low inventories. You fools should start predicting a meltdown when prices actually starts declining. No meltdown, but a correction large enough to destroy the lives of ones who bought after 2008.

  11. As I just posted over at VCI, I’m VERY much liking the looks of this piece:

    http://vancouver.24hrs.ca/News/local/2012/04/17/19645806.html

    Key quote:

    “The bottom has fallen out of Vancouver’s high-end homes,” according to immigration expert Richard Kurland. “When you have the high end blown apart, people who would buy a house for $2 million now wait. That has a cascading effect. That keeps trickling down. If that trend continues you will see $800,000 down to $600,000 and down and down.”

    Kurland said foreign investors are fleeing the local market because the Canada Revenue Agency is on the verge of cracking down on overseas tax reporting and the Canadian government is seriously looking at 400 Chinese fugitives living in the country and attempting to send them home by July.

    ***

    I have no idea as to its validity (though I can guess), but the RE industry/MSM juiced the market for years by influencing perception in the opposite direction, so anything that this strongly suggests an end game to the local bubble (blimp?) is okay in my books. And the obligatory realtor commentary near the end? Even more bullshitty/deceptive than usual.

    • I like the “trickling down” theory of price changes. Like the world’s rich somehow command thus what the wretched shall do. In almost every city on the planet I would laugh hysterically at the idea.

      • “What the wretched shall do.” Nice imagery, J.

      • CanuckDownUnder

        Jesse, you may like this statistic from the Sydney market then. While prices were down 0.8% in the last quarter the sharpest declines were in the city and east where median prices tumbled 9.5%!

        For those unfamiliar with Sydney geography there are a lot of beaches and waterfront in the east.

    • Revenue Canada sadly does not have the political clout – I think Harper is for it, but he is worried about the next election.

      • Prosecuting tax cheats with tangible and expropriatable assets on Canadian soil… sounds like a vote winner to me…

    • “The bottom has fallen out of Vancouver’s high-end homes,” according to immigration expert Richard Kurland”.

      “Chinese investors are cooling on Vancouver real estate, leaving luxury homes languishing on the market, which some experts say will lead to downward pressure on prices overall”.
      —————————–

      Thanks for the link, Gord. That one came as a surprise. I have my doubts though. The article makes a few dramatic assertions without really offering any backing evidence. What the writer is saying is not jiving with reality at this point. Buying of high end homes by foreigners is still strong last I checked. The story has not been picked up elsewhere either so maybe I can assume it is manufactured around one persons bias.

      While I would like to believe the Federal Government is indeed taking serious steps to catch hundreds of wealthy foreign tax cheats from abroad and deport criminals I do not think that the actual effort matches the level of energy implied in the article.

      This may just be one more case of more barking than actual biting.

      Look at Toronto as it bubbles and booms and threatens to become the new Vancouver. Do you see the money shrinking away yet on any fear at all? I don’t either. There is a river of wealth that will destroy that city just as surely as it has ripped the living beating heart from Vancouver’s body.

      I suspect the article you found is more fluff than substance (no offense to you intended. I realize you didn’t write it…..I just have my doubts about its veracity and authenticity)

      My opinion is this; The speculative capital is flowing East to better and happier hunting grounds. Toronto’s boom will continue well into the next year until the panting orgiastic energy runs out and other better opportunities beckon.

      The bride of T.O will get dumped at the altar too.

      • Beyond Debt

        You seem to be saying it can’t happen because, well, it just can’t. Kurland is highly respected in his field, and even by the Chinese immigrant community. This is no lightweight talking.
        Here’s the deal, the Federal Conservative political agenda is to wipe away anything “Liberal” that they can get away with. They want to stick a stake into the heart of the Liberal Party. They are capable of many things in pursuit of this goal, and much of HAM is seen as resulting from Liberal immigration policies.
        BTW BNN picked up this story and grilled David Choi about it.

      • Kurland who? Sorry BD but I have never heard of him. Maybe you can fill me in on his credentials if he is, as you say, highly respected in the Chinese community and elsewhere. All I am saying is that the article was just fluff in my opinion. Innuendo and suggestions. No hard data. No real facts.

        Why should I accept it?

    • Straight from the horse’s mouth – there’s no better source than immigration consultants for the most important information affecting Vancouver RE in my opinion. And the CRA will get their pound of flesh eventually. They always do in cases of 5 or more zeroes because the return on investment is excellent.

  12. Hello All,

    If anyone knows of a situation where taxes related to RE matters (or I guess anything else!) are being evaded, and you want to tip off the CRA, here’s some information and the Canada Revenue Agency number to phone, taken from their website. Found under “About the CRA > Programs and Services > Enforcement and DIsclosures”:

    “How to report suspected tax evasion: You can report suspected tax evasion by contacting the Informant Leads Centre. Your identity will not be disclosed and you may provide information anonymously.” [Then there is a link you can click entitled “What to tell us”].
    Tel.: 1-866-809-6841 (toll free)
    Fax: 1-888-724-4829 (toll free)
    Office hours: 8:15 a.m. to 5:45 p.m. (Eastern time)
    Mailing address:
    National Informant Leads Centre
    St. Catharines Tax Services Office
    32 Church Street
    Post Office Box 3038
    St. Catharines ON L2R 3B9

  13. Dedicated Vancouverite

    Tax evasion – swing a cat and you will catch a bunch (higher level among the richer newer arrivals)

  14. my misallocation for today. you’ll need to recalibrate the metaphor ‘bear attacks f1 during pit stop’ for vreaablog-specificity

    ps. never heard of a battle of collingwood and naming battles after ski wear and pastries always weirded me out walking to school.

  15. I used to be a harsh bear on RE, but then I got married and bought in 2005. I grew complacent about the rapid run-up in house prices and in the back of my mind I always new these days would come. I kind of just ignored things until a couple months ago and then started to research things and came along this site and some others that are very thoughtful and detailed. Anyways, I googled the address of this Kits home to see if anyone had caught on to the speculator and low and behold I was surprised to see the original April listing at $2.288M. I saw it for the first time a couple weeks ago listed for $1.988M (should be on Van price drop to watch) thinking this was a lot for current conditions.

    VREAA above wrote:
    Another way in which this anecdote is of interest:
    We don’t know anything about the current owner, but we’d fully expect them to be locals, wouldn’t we?
    Thus, another house sold in 2011 on the westside, not to foreign buyers, but in anticipation of foreign buyers.

    … so when I was looking throught the pics I noticed something “familiar” about the furniture, the light fixtures, the placement of the pictures, the painting of all the woodwork and the overall style etc. Then it dawned on me that we do know something about them, they are flippers (duh). This was their previous house, which was beautifully redone. I suspect that they were planning on putting in a basement suite in the Kits house similar to this and generally finishing things to a higher standard (what’s up with the black fridge!) like the West 17th (probably hoping to get $3M+), but are now scared shitless and getting out. $1.988 looks like approx break even price. Enjoy…I’m sure they made good money on this one so don’t feel too badly for them now… just giving back a little of their tax free profits from the good old days.

    http://www.clairrockel.com/RecentSales.php/Details/296#viewdetail

    You can also see the Kits listing on this realtors site as she must have been buyer’s agent for these flippers. Look under “recent sales” about pg 5.

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