Real Estate Market Update: Investor Or Speculator

Are you an investor or speculator? Both are professions open to all. Both require no formal education, credentials, or licenses. And both draw quick assumptions in one’s mind. An investor is seen as an individual that has done significant risk and financial due diligence before entering into a deal, while a speculator carries a stigma. The stigma of an irresponsible risk taker, an opportunist, or an individual who is dangerous to the marketplace.

For me, a simple but useful way to think of the speculator VS investor is this; investors risk 100% of their money in a long-term hold for the opportunity of receiving a 10% gain, while speculators risk 10% in anticipation of earning 100% in a short-term hold. This may be more dramatic than it needs to be, but I think you get the point. In layman’s terms, conservative VS risk/reward.

Politicians and pundits dislike speculators and throw the word “speculator” about so disdainfully. Last week the BC NDP legislated a number of new taxes aimed at the real estate speculator. But do they really know what a speculator is? These politicians and pundits think that the real estate speculator is the creator of shadow flipping, unaffordable housing, price hikes, multiple offer situations, and other real estate calamities in the Vancouver, Fraser Valley, and other BC Markets. To a degree, it’s true. However, a speculator is simply someone who sees or anticipates distortions in the marketplace and positions themselves to take profit from it. This is possible because a good speculator understands their cause and effect in the marketplace and decides to enter the market in the moment. The speculator is just taking advantage of a business opportunity created or caused by an event, person, or group of individuals.

The NDP and the Liberals before them have been throwing blame at the foreign and speculative buyers for what they think is a real estate market that is on a path of destruction. The end result from these buyers, according to the government, is the shadow flipping, unaffordable housing, price hikes, etc. However, I personally believe it is the various levels of government that have created the real estate frenzy that BC is in today.

Ronald Regan said it best with the ten most terrifying words in the English language, “I am from the government, and I’m here to help.” Government screws up almost everything it touches, especially capitalist ideas. Government moves slowly, are clumsy and are often out of touch at the grassroots. The real reason for shadow flipping, unaffordable housing, price hikes, and multiple offer situations can be traced back to the shortage of supply. Supply is regulated by good or bad government policy.

Provincial, Municipal, and City policies control the flow of development. Many developments can take upwards of 3-5 years to bring to market. By the time a developer has fought through all the red tape and bureaucracy, the market has either cycled into a slump or a full-on boom market. Currently, the BC market is in a full-on boom cycle and in the Vancouver and Fraser Valley it doesn’t appear like the market will ever have enough supply to meet the demands of all the buyers, which include first-time, move-up, move-down, right-size, investors, and speculators. High demand VS. low supply will continue to make it challenging for buyers to enter the market, at least until the supply can be increased dramatically.

Fortunately for us, the investor and speculator, supply will continue to remain low because of Municipal, City, and Provincial Government policies in place. The market is predictable and if we understand the boom, slump, and recovery cycle of the market, the opportunities are amazing. Are you an investor or speculator? The best speculations are always low-risk. Far from taking risks, speculators search for “sure things”. They tend to be rational and unemotional. The irrational and emotional that take chances don’t last long. Maybe you’re both, speculator and investor.

The market through February continued to favor the investor/speculator, with consistent and strong STR (Sell Through Rate) numbers of last year throughout the Fraser Valley and the majority of the Vancouver market. Other than a few of the higher priced single family areas – White Rock, Richmond, and West Vancouver resembling more of a balanced/buyers market – the balance of the market is in a seller’s to strong seller’s market. Or, should I say, speculators market. The next few months will be interesting to watch as the NDP roll out their new real estate rules and taxes just as the spring market usually kicks into overdrive. Please feel free to call, email, or text if you have any questions regarding the market.

If you would like to receive a copy of the statistical market report, contact us here or if you would like to be on our next Investment Bus Tour contact us here.

Randy Dyck
Personal Real Estate Corporation
604-807-4366 or randy@eximus.com

STR (Sell Through Rate) Formula = Sales ÷ Active Listings + Failed Listings + Sales