May 14, 2024
Episode 193 – Steve Saretsky – Market Mechanics: Mastering Investment Amid Inflation and Taxes
“Capital goes to where it is treated the best. Where it is welcomed. Right now, in BC and Ontario, it’s not treated well so it’s flowing to the path of least resistance ultimately.” – Steve Saretsky
- In this episode of the Everyday Millionaire podcast, Patrick Francey and Steve Saretsky take a deep dive into Vancouver and British Columbia’s real estate markets, uncovering critical challenges and emerging trends that all investors and homeowners should know about. Despite efforts to curb speculation, Vancouver remains one of the most expensive cities in North America due to high immigration rates, a persistent supply-demand imbalance, and strict financing conditions that restrict developers from increasing new housing supply.
- Landlords face increasingly harsh rent control measures, which often limit them to the point of either selling their properties or moving in themselves. The government’s recent flipping tax imposes a 20% levy on pre-sale contracts, even if purchased before the new legislation took effect. While designed to reduce speculation, it ends up discouraging investment and penalizing skilled tradespeople who are restoring older properties that could increase housing supply. Combine that with the fact that roughly 30% of new home construction costs are eaten up by government taxes and fees, and it’s clear why new projects struggle to get off the ground.
- In this engaging conversation, Francey and Saretsky highlight why diversification is essential. They explore how, when denominated in gold, Vancouver real estate prices have actually declined, underscoring the value of precious metals and foreign currencies in safeguarding investments. Maintaining liquidity, too, is vital amid rising inflation and a potential recession. With developers eyeing US real estate markets due to friendlier regulations, they discuss how Alberta remains a promising option domestically, but with a cautionary note about potential overbuilding.
- Curious about how these insights can help you navigate the turbulent market ahead? Tune in to the podcast to hear how Saretsky’s deep understanding of market dynamics can give you the edge you need. Learn about strategic opportunities, emerging trends, and critical risks in the ever-evolving world of real estate.
- Show Notes
- [00:42] Patrick introduces his returning TEDM guest, Steve Saretsky.
- [01:41] Steve and Patrick reconnect with mutual accolades, then get right into the British Columbia economy, the off-the-charts taxation and what he’s observing in the current real estate market.
- [05:45] GDP, population growth, unemployment, interest rates and housing prices. Patrick and Steve have a robust conversation about how it’s affecting developers and builders across BC.
- [09:29] As governments and their policy decisions continue to squeeze developers, Steve explains how this looks short term, and the reality of how it may impact long-term project growth. Recent incentivizing may be too little too late.
- [13:21] Steve shares a couple of anecdotal stories about how policy, interest rates, and the landlord/tenant rules are also negatively affecting smaller investors who have BC properties.
- [18:23] “The bureaucrazies have taken over the world and it’s really shutting us down.” The incoming BC flipping tax and pre-sales. Steve unpacks how pre-sales and development really works within the industry and how uninformed government decision makers will hurt the investor market. Hence, the market outlook on pre-sales and new builds becomes very unattractive and frankly dismal.
- [25:01] Steve has seen the writing on the wall for some time with the policy that has already come in over the last several years, and comments on the reality of how small the flipping market really is.
- [29:09] Patrick and Steve riff on the real estate landscape, and unintended consequences of policy, for the new generation of what could have been new homebuyers in Canada.
- [32:28] Single family houses in Metro Vancouver are a premium and Steve explains why he’s bullish in that market.
- [35:50] There is light at the end of some of this, with opportunities for educated investors to help solve problems for those who may have gotten into the market with record low interest rates and find themselves in trouble.
- [38:45] The difference between inflation and hyperinflation is speed. In the environment of real estate, how do we stay ahead of inflation? Steve shares a fun little exercise he does to measure real estate and gold.
- [44:08] Critical thinking is so important right now, and educating ourselves to put our capital to work is essential in this market. There are a lot of struggles across Canada and Steve shares how he feels, it may get worse, before it gets better.
- [48:03] The prairie provinces are coming up strong with solid leadership behind them, and Patrick wonders – hey will BC leaders maybe look over at those provinces, see how right they’re getting it and follow suit? Steve doesn’t think so – capital goes where it’s treated the best. There is also a large flow of development capital heading south to the US, where investors are welcomed with open arms.
- [53:30] Steve talks about a small development he’s undertaken in Calgary, the importance of being strategic, and we’re privy to the first TEDM Patrick Prediction on condos in Calgary (a cautionary note.)
- [57:42] Steve shares his view of diversifying and how he’s hedging his investment portfolio outside of real estate.
- Selected links and people mentioned from this episode:
- The Loonie Hour
- Ben Rabidoux
- Lynette Zang – TEDM Episode 189
- Jim (James) Rickards
- Connect with REIN Canada
- REIN Canada
- [email protected]
- REIN Channel
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