Friday, April 11, 2008

rebel sell

I had an e-mail asking whether there was any gain in waiting for the Canada Line to finish in order to sell a nearby house. Will there be greater appreciation? I think that appreciation would already be priced in.

I've always been a rebel though, and would cut off my nose to spite my face.

What do you think?

On 11/04/2008, Ben wrote:
Hi there, first of all I'd like to thank you for creating the blog. I really enjoy reading the valuable information and insight that I am currently lacking on the RE market. However, so far I can't really find much posts/commentaries on the affect RAV (Canada Line) will have on nearby real estate units. Please advise if possible since I'm not certain whether to sell my detached home now or wait until the RAV station (the one beside Oakridge mall) near my detached house is finished to get a price appreciation (if any at all). Thank you, it'd be really great to hear what your take is on this matter.


van unreal wrote:

Hi Ben,

Thanks for writing.

I couldn't say for sure, but my best, common sense opinion is that if the proximity of the RAV line to your house is going to have an effect on its value, that would already be realized. The line is, after all, already under construction, and is very unlikely to not be completed. The selling point would be something like "Just two blocks from the Oakridge Canada Line Station (to be completed August 2008...or whenever)".

By all reports, price appreciation is slowing drastically, as are sales. This summer could very well be the beginning of the end. You may just end up dropping the price repeatedly for the next year. I would say "SELL!".

I am not an expert, and I have been wrong for years, so my advice is worth what you pay for it, but why try to squeeze an extra $10k out of a $700k (or whatever it's worth now) house. Before too long, it will be worth $350k, and wouldn't you kick yourself then?

Good luck - whatever you decide.



greg said...

Not to be a contrarian, but hasn't proximity to some of the skytrain stations (ie metrotown, etc) hurt values, as they are perceived in some areas as hang-outs for punks?

On the other hand, if you didn't want to drive, it could be a selling point.

I tend to think living closer to where you want to be is a better solution.

For people living in the area of thwe RAV line, their houses are probably worth enough to move where they want anyway.

Interesting question worth thinking about for a buyer.

Panda said...

I think the train is a red herring. I would look at Paulb's inventory and make a decision based on where I think the overall market is going. I rising tide raises all boats and a falling tide will drop them all.

solipsist said...

hasn't proximity to some of the skytrain stations (ie metrotown, etc) hurt values

I had the same thought, but now there are armed(?) transit cops, and I think that the real trouble has abated somewhat.

...rising tide...


solipsist said...

By the way greg - aren't we - all of us contrarians here?

Chris said...

REIN researched and wrote a report on this exact topic, and there's two lifts in appreciation, one at the announcement and one after construction. There's also an area-effect to the stations. The area immediately around it is indeed a punk hang-out, but after ~80m it gets better. The benefit area beyond that is defined by how long it takes you to walk to the station....

It's a good place to buy, and REIN's research on the transportation effect has been spot on before.

patriotz said...

It's my call that all the ducks are lined up for a RE bust in 2009.

- end of Olympic and related construction.
- severe US recession.
- continuing (yes) US RE bust.
- continuing credit problems.
- supply glut (already in progress).
- rush to the exits by those anticipating a post-Olympic price decline.

And no, being near a transit station or other amenity does not give immunity to a general bust.

investah said...

Strongly disagree with patriotz!

Not with his reasons, but about the timing.

Inventory has already started to spike, and prices will start to fall by August. THIS AUGUST.

investah said...

In fact, if prices have not already peaked, I think they are doing so right now, and they'l be in freefall by August.

Fasten your seatbelts!

Andrew said...

i can't wait for the freefall! sold in 2005 and everyone has been telling me whan an idiot i was to sell my house that is now "worth" 30% more

Chris said...

Well, if anyone really believes it's going to free fall, I'll buy your property now. I'll even be nice and we'll just do it for 10% under appraised value, instead of the 50% you think it's going to drop.

I agree there's going to be a correction, but the real correction isn't going to be until after the olympics. There are also several areas in the lower mainland where prices will continue to rise, and will be minimally impacted by a drop in the $700k condos in Vancouver.

patriotz said...

Care to point any any areas where prices continued to rise during the late 90's bear market or early 80's bust, Chris?

I don't think we really disagree about the timing, investah. I think that it's very likely that prices will start declining in 2008.

But it's when the first YOY decline is announced that public sentiment will turn negative, the rush to the exits will begin, and the bust will truly be on. And that will be some time in 2009.

Chris said...

Read page 3. Condos and townhomes will continue to be the most affordable, and will be less impacted, and take longer to feel, any downturn. Pitt Meadows will be one area that's going to see a very positive effect from the train and still shows good potential for growth in the right areas and demographics.

The REIN transportation effect report is pretty bang on (which was the original topic of Greg's the post).

I'm not saying there can't be another 90's-like Vancouver bust, but it's a different ballgame today (and RBC points that out too). What I am saying is look at hard numbers from a variety of sources before predicting doom and market panic.

That said, I'm doing all my investing in Edmonton.

patriotz said...

I'm not saying there can't be another 90's-like Vancouver bust, but it's a different ballgame today

You bet it is. The US (and Vancouver) was experiencing the dot-com boom in the late 90's, but the US has now entered the biggest asset bust since the Great Depression.

Appropriate point of comparison is with the early 80's. BC forest industry is already there. Next up: tourism, film making, etc.

Strataman said...

chris "Condos and townhomes will continue to be the most affordable, and will be less impacted, and take longer to feel, any downturn. " I would strongly disagree with this. I expect condos to be much harder hit then SFH. My reasoning is the majority of condo owners bought in panick mode (witness the lineups nosubject to's etc). Condos built in the last 5 years are ALL budget affairs and maintenance costs will skyrocket, expect +5% increases every year for eternity. Many were bought by partnerships of singles with less then a year of personal committment. Many depend on two full time salaries (the majority) and with the recession, in the US any benefit real or percieved from the Olympics will be totally wiped out this year. 220,000 construction workers will drop to 20,000 construction workers a year from now. Downtown condo's will be devastated...except for a minority of ultra high end units. If your unit/tower is not one block max from waterfront it's history. 2 blocks will be discount housing 1 bedrooms at 140K in 4 years, one bedrooms at 30% less next summer after a 20 % drop this summer. The olympics will cause the slowdown in drop (only 30%), without them it would easily be 40. So you see I agree the Olympics will prop up things a bit!

solipsist said...

That all sounds about right. I especially like strataman's outlook, but i think we will see more than a 30% hair cut.

Chris said...

Fair comments. We will see a drop in some Vancouver areas, but there are still some positive things going on.

I suppose it's easier to point out the potential drops than to find and invest in more positive trends.