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A Purely Speculative Venture That Did Not Pan Out

A report from the Globe and Mail in Canada. “The average price of a detached house in the 416 area code of Toronto has fallen 20 per cent from the high water mark of $1,578,542 set in April, 2017. In March, the average price of a detached stood at $1,267,598 in the 416. Patrick Rocca of Bosley Real Estate Ltd. often deals with infill builders who are trying to sell a project completed since the market turned. They often tell him the number they ‘need’ in order to make a sale.”

“‘What you need and what your value is could be two different things,’ he says.”

The Spectator in Canada. “The 16,000-square-foot, five-bedroom, six-bathroom house in West Vancouver’s Sandy Cove neighbourhood features a roomy three-car garage, an elegant white interior-design scheme and a state-of-the-art ‘chef’s kitchen.’

“For two years, the minimansion with a mock-Tudor roofline has been sitting at the end of its stately driveway empty, unsold and forlorn, and it’s now in foreclosure. BlueShore Financial, the credit union that loaned the homeowner and his stepson the money to redevelop the property, recently won a judgment in B.C. Supreme Court allowing it to sell the home to recoup the loan.”

“According to the judgment, Chandler and his stepfather, Richard Baker, decided to redevelop the West Vancouver home Baker had owned for nearly 40 years, hoping to increase its value from $2 million to $6.5 million. Those were heady days for the West Vancouver real-estate market. A historic run-up in prices that would push many houses up into the multimillion dollar range was just starting; prices would later peak in the spring of 2016.”

“Chandler and Baker are not the only developers to find themselves in trouble as Vancouver’s 2016 real-estate bubble bursts. Michael Geller, an architect and developer who has worked in the industry for 45 years, says this is the worst downturn he’s ever seen. But Ron Rapp, the CEO of the Homebuilders Association of Vancouver characterized Chandler and Baker’s plan as ‘a purely speculative venture that did not pan out as foreseen.'”

From Nine Finance in Australia. “Property values across Australia have plunged by more than seven per cent since the 2017 peak as the housing slump deepens. New CoreLogic research shows dwellings lost $40,590 in value – a 7.4 per cent drop – since October 2017. But the declines across the combined capital cities are even more stark, with values plummeting 9.2 per cent – or $59,478 – since September 2017.”

“Perth and Darwin suffered the biggest losses, with values down by 18.1 per cent and 27.5 per cent respectively. In the biggest property markets, Sydney and Melbourne, values were down by 13.9 per cent and 10.3 per cent respectively. CoreLogic research analyst Cameron Kusher said seeing the declines as dollar figures ‘is a stark reminder of the actual losses.'”

“‘While the recent declines in markets like Sydney and Melbourne can be put in context of the significant increases over recent years, this is little comfort for home owners that purchased at or near the peak of the market,’ he said.”

From Domain News in Australia. “Rents in more than two dozen Sydney suburbs are now the same price or cheaper than five years ago, with tenants saving up to $120 a week, data shows. Apartment rents in 14 suburbs are now lower, with the biggest decline seen in North Ryde, where rents dropped $120 — or 18.5 per cent — over the five-year period. It was followed by Kingsgrove and Peakhurst, with drops of 13.5 and 12.4 per cent respectively.”

“‘The rental price adjustment has really happened in the last year or two,’ said Domain senior research analyst Nicola Powell. We’ve had an undersupplied market in Sydney for such a long duration, then the construction boom played catch-up … and that supply has now flooded the market.'”

The Daily Telegraph in Australia. “Sydney and Melbourne prices may have begun to plummet but they would have to fall considerably further to be anywhere close to the largest in the country. Western Australian resource towns had the biggest drops in home values since 2013, with prices falling by up to $875,000 in some areas.”

“The towns with the biggest price drops included Newman in the iron ore rich Pilbara region in the northwest of WA and Derby in the Kimberley region. Median house prices in these areas more than halved over the five-year period, shrinking from over $600,000 to under $200,000, the CoreLogic data showed.”

“Even bigger losses were recorded in the WA coastal hub of Port Hedland and sister town South Hedland. The typical value of a home in the port 1523km north of Perth was $1.27 million in 2013 but has since shrank to about $395,000. South Hedland houses had a median price of $865,000 in 2013. Now the median is $195,000.”

“Falling home values have dealt a particularly devastating blow to property investors who bought into resource towns during the height of the mining boom. The owners of a four-bedroom house on Port Hedland’s Styles Rd have been trying to offload their property since 2013, but even after slashing more than $500,000 off the price have still been unable to sell. They bought the property for $1.08 million in 2008. If they sold for their current listing price of $749,000 they would still lose $331,000.”

“The tense sales environment has evaporated real estate empires seemingly overnight. Property investor Ryan Crawford had amassed 40 properties spread mostly across the Pilbara region by 2013, which he reported at the time as having a combined value of $32 million-plus.”

“Much of his property portfolio has since been foreclosed by banks, according to the West Australian. Part of the Crawford property empire was sold at a fraction of the buying prices, with documents filed in the Supreme Court in 2017 showing the proceeds fell short of what was owed.”

This Post Has 17 Comments
  1. ‘The typical value of a home in the port 1523km north of Perth was $1.27 million in 2013 but has since shrank to about $395,000. South Hedland houses had a median price of $865,000 in 2013. Now the median is $195,000’

    And every year since 2013, the media has said “it’s bottomed!” All of these markets have to go through a foreclosure stage. And they’ve been shouting “it’s bottomed” in Vancouver since 2016 and Toronto since 2017, but now here come the foreclosures.

    1. The Chinese need to get back to building ghost cities! So all those Australian miners can have their jobs back. And housing values in those remote dumps, err I mean towns, can get back to where they should be.

  2. More from the Globe and Mail:

    ‘As just one sign of the erratic performance of Toronto’s real estate market, the action in a sought-after midtown condo building has suddenly cooled. Patrick Rocca of Bosley Real Estate Ltd. considers the building north of Yonge Street and St. Clair Avenue a bellwether because sales there are so steady.’

    ‘But four units have been listed for sale recently and all four were still on the market after more than one week. “They’re all sitting there, which is weird,” he says.’

    ‘Normally, units in that building sell for $1,000 a square foot within a couple of days. Now, in the second half of April, “not everything is a slam dunk,” he says.’

    In Vancouver and Toronto, the most expensive detached shacks fell first and hardest. Typical of a bubble, BTW. The REIC exclaimed, “oh but condos are still on fire!” Then the condos crashed.

    ‘Chandler and Baker are not the only developers to find themselves in trouble as Vancouver’s 2016 real-estate bubble bursts’

    Left out is prices spiked 30% that spring, then dropped like a rock. A blow-out peak followed by a sharp drop – classic bubble. Same thing happened in Toronto spring 2017.

    1. What if it’s not a bubble? – Real Estate Marketer Bob Rennie addresses UDI – Part 1

      Published on May 22, 2012
      ‘Leading Vancouver Real Estate Marketer, Bob Rennie, responds to recent public discourse of a ‘bubble’ in the Vancouver housing market. Mr Rennie’s speech to over 900 members of the Urban Development Institute was given on 17 May 2012′

      https://www.youtube.com/watch?v=NCSIg51DLDk

      Bob? Bob!

      Bueller?

    2. Chandler and Baker and their ilk are the ones that need to be driven out of the housing business. The “flip luxury homes for profit” model is the worst cancer that has ever been inflicted on the economy.

  3. “…Toronto has fallen 20 per cent from the high water mark of $1,578,542 set in April, 2017.”

    Sux to be a recent buyer, now $300,000 in the hole…

    1. “…but now here come the foreclosures.”

      Maybe this time is different, but normally the really big price declines don’t start until the onset of widespread foreclosures.

  4. ‘Sounds pretty dire there Down Under and up in the Great White North. Does all of this mean anything for the U.S. market going forward?

    Down Under
    Men at Work
    “Do you come from a land down under
    Where women glow and men plunder
    Can’t you hear, can’t you hear the thunder?
    You better run, you better take cover”

    Take Off
    Bob & Doug McKenzie
    “Take off to the great white north
    Its a beauty way to go
    Take off to the great white north”

      1. Any invading alien organization worth its salt would surely use agents who are totally DNA-homologous with the target population. Executive summary: DNA testing will not turn up anything to indicate the difference between aliens and victims.
        OTOH any sensible alien organization would have nothing to do with Planet Earth, as crazy and intractable as it is.

  5. New CoreLogic research shows dwellings lost $40,590 in value – a 7.4 per cent drop – since October 2017. But the declines across the combined capital cities are even more stark, with values plummeting 9.2 per cent – or $59,478 – since September 2017.

    Gosh, it seems to me that throwing away money on rent would’ve been a lot more cost-effective.

  6. The owners of a four-bedroom house on Port Hedland’s Styles Rd have been trying to offload their property since 2013, but even after slashing more than $500,000 off the price have still been unable to sell.

    Few things in life are as delightful as the pure schadenfreude that comes from watching the “I’m not giving it away!” greedheads chasing the market down.

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