Author Archives: Brenda Kinnear

Vancouver Real Estate: Sales Down Substantially in October 2018

Brenda Kinnear

"Trying to predict the future is like trying to drive down a country road at night with no lights while looking out the back window."
– Peter Drucker

It appears we are in Biblical (Genesis 41:27) times indeed. Unfortunately none of us believed Pharoah’s dream of seven fat years followed by seven lean years. Seven years of great prosperity followed by seven years of loss. Human nature has not changed much in the thousands of years that have passed since then. We believe that the good times will roll on forever despite the cyclical nature of real estate sales and price points. Canada is fortunate in that the prophecy of a soft landing for real estate seems in the process of being fulfilled.

In Vancouver, the drop in sales numbers and a slight rollback in prices contrast with good times in Toronto despite the fact that the Mortgage Stress Test is a federal regulation and applies across the country. According to the Financial Post taxes push luxury home sales down by 35%. In Vancouver buyers are choosing to invest in smaller luxury condos between $1- 2 million rather than buy an old house for the same price. Condo sales rose 6% over the past year. Detached home prices in Metro Vancouver are heavily hit by taxes and regulations set by the NDP-Greens government plus the empty homes tax enforced by Vancouver City Council. Provincial regulations include a raised foreign buyer tax, a speculation tax, a school tax on homes over $3 million. Locals are buying smaller city condos and Chinese money is staying home.

The mortgage stress test is pushing buyers to the unregulated mortgage market. Private lenders don’t have to comply with the federal lending rules. There is Bank of Canada concern for the high amount of household debt in Canada but there is little information available as to how much debt is being created by mortgages that are not issued by a major bank.


A little slice of peace by Reva G

According to the Vancouver Sun it appears that younger home owners have great confidence in their investment over the long term. They believe it will go up in value more than a stock portfolio despite a recent slowdown in sales. Sotheby’s has been gathering data on the generation aged 20-45 years that will inherit the baby boomer wealth and how this generation views real estate. According to Sotheby’s surveys it covers about 9 million people. Enough to make a big difference in the long term.

Although sales in general are down substantially in number it appears that like all dramatic changes people get used to them. There is a return to the Westside for condo choices. The slight drop in price has attracted buyers who prefer those neighbourhoods. The sales of detached homes has been devastated by the above-mentioned taxes and offshore investor concerns around disclosure. The affordability gap is wider than ever and is not solved by political posturing.

Overall it is a time of great opportunity in the housing market. Vancouver is never down for long.

Detached homes sales have declined 32.2% compared to October 2017. The detached benchmark price across the region is $1,524,000, a 5.1% decrease from October 2017. This includes a 3.9% decrease over the past 3 months.

Townhomes are desirable to downsizing buyers but the drop in the numbers of sales of detached homes has put many buyers plans on hold. Attached sales numbers are down 37.5% from October 2017, The benchmark price across the region is $829,200, a 4.4% price increase compared to October 2017. This includes a 3.1% decrease over the past 3 months.

Condominiums which were the choice of first time buyers last year have been heavily impacted by the mortgage stress test and the 5.8% price increase from October 2017. Apartment sales numbers are down 35.7% from October 2017. The regional benchmark price is $683,500. This includes a 2.8% decrease over the past 3 months.

"Home prices have edged down between three and five percent, depending on housing type, in our region since June," as stated by Phil Moore President, Real Estate Board of Greater Vancouver. "This is providing a little relief for those looking to buy compared to the all-time highs we’ve experienced over the last year."

The sales to active listing ratio for October 2018 is 15.1%. By property type, the ratio is 10.3% for detached homes, 17.3% for townhouses, and 20.6% for condominiums.

In October 2018 the benchmark price for a detached in North Vancouver was $1,594,700 down 6.2% in one year, up 65.6% in 5 years and up 91.3% in 10 years.

In Richmond the detached benchmark price was $1,634,800 down 6.6% in one year, up 69.4% in 5 years and up 118.7% in 10 years.

In Vancouver East the detached benchmark price was $1,480,700 down 5.5% in one year, up 74.3% in 5 years and up 135.6% in 10 years.

In Vancouver West the detached benchmark price was $3,267,800 down 9.9% in one year, up 56.5% in 5 years and up 127.3% in 10 years.

In West Vancouver the detached benchmark price was $2,758,400 down 10.9% in one year, up 44.5% in 5 years and up 94.8% in 10 years.

Each year affordability declined for local buyers. First time buyers are particularly hard hit by mortgage stress tests, high prices and lack of affordable inventory.

In October 2018 the benchmark price for a condo apartment in North Vancouver was $582,000 up 3.0% in one year, up 61.7% in 5 years and up 71.8% in 10 years.

In Richmond the condo benchmark price was $681,900 up 9.3% in one year, up 84.8% in 5 years and 101.6% in 10 years.

In Vancouver East the condo benchmark price was $569,100 up 5.7% in one year, up 85.5% in 5 years and up 102.5% in 10 years.

In Vancouver West the condo benchmark price was $809,600 up 0.4% in one year, up 73.3% in 5 years and up 89.3% in 10 years.

In West Vancouver the condo benchmark price was $1,157,200 down 0.5% in one year, up 61.9% in 5 years and up 74.5% in 10 years.

More anon.

BR00CR

Vancouver Real Estate: Affordability Impacted Sales in September 2018

Brenda Kinnear

"Never give up. Today is hard. Tomorrow is worse, but the day after tomorrow is sunshine."
– Jack Ma, Alibaba Group

In Vancouver it always gets better the day after tomorrow. We just have to hold on long enough to see the sunshine. According to Bloomberg we are a city awash in foreign money and it has distorted Life as we once knew it. There are cities all over the world experiencing massive infusions of foreign capital that have transformed their real estate markets and the cost of living for locals but Vancouver is the poster child for Chinese investment in real estate over the past decade.

After a recent period of falling investments from overseas Chinese buyers it appears that Vancouver is still a popular destination. There is a drive to invest their funds outside China and the main Chinese real estate website is showing reviving interest in Vancouver.

The recent civic elections have proven to be a backlash against the usual way of doing business. In every municipality the overriding concern was about increasing the amount of affordable housing. The question is, can things be changed enough to make Metro Vancouver affordable again? The Vancouver housing market has been affected by rising interest rates plus changes in housing policy and added taxes. According to Daphne Bramham of the Vancouver Sun there are opposing policies and ideas in every municipality.

Vancouver and Toronto have both risen in the international home-cost index.

This affordability question has heavily impacted the number of sales in the detached home market. Price does matter.


Feeding Frenzy by Reva G

There is lots of interest in buying at the lower end of the condo market but it requires passing the stress test to qualify for a mortgage. As interest rates rise that is more of a challenge. When prices decline to a point where more buyers can qualify for a mortgage numbers of sales will rise.

Overall it is a time of great opportunity in the housing market. Vancouver is never down for long.

Detached homes sales have declined 40.4% compared to September 2017. The detached benchmark price across the region is $1,540,900, a 4.5% decrease from September 2017. This includes a 3.4% decrease over the past 3 months.

Townhomes are desirable to downsizing buyers but the drop in the numbers of sales of detached homes has put many buyers plans on hold. Attached sales numbers are down 46,9% from September 2017, The benchmark price across the region is $837,600, a 6.4% price increase compared to September 2017. This includes a 2% decrease over the past 3 months.

Condominiums which were the choice of first time buyers last year have been heavily impacted by the mortgage stress test and the 7.4% price increase from September 2017. Apartment sales numbers are down 44% from September 2017. The regional benchmark price is $687,300. This includes a 3.1% decrease over the past 3 months.

"Metro Vancouver’s housing market has changed pace as compared to the last few years," as stated by Ashley Smith President-Elect Real Estate Board of Greater Vancouver. "Our townhome and apartment markets are sitting in balanced market territory and our detached home market remains in a clear buyers’ market."

The sales to active listing ratio for September 2018 is 12.2%. By property type, the ratio is 7.8% for detached homes, 14% for townhouses, and 17.6% for condominiums.

In September 2018 the benchmark price for a detached in North Vancouver was $1,620,300 down 5.4% in one year, up 68.1% in 5 years and up 89% in 10 years.

In Richmond the detached benchmark price was $1,662,600 down 5.4% in one year, up 71.1% in 5 years and up 117.5% in 10 years.

In Vancouver East the detached benchmark price was $1,502,900 down 4.0% in one year, up 76.9% in 5 years and up 132.6% in 10 years.

In Vancouver West the detached benchmark price was $3,254,200 down 10.9% in one year, up 55.5% in 5 years and up 117.7% in 10 years.

In West Vancouver the detached benchmark price was $2,777,500 down 11.4% in one year, up 47.3% in 5 years and up 85.2% in 10 years.

Each year affordability declined for local buyers. First time buyers are particularly hard hit by mortgage stress tests, high prices and lack of affordable inventory.

In September 2018 the benchmark price for a condo apartment in North Vancouver was $595,700 up 6.0% in one year, up 65.2% in 5 years and up 69.7% in 10 years.

In Richmond the condo benchmark price was $690,600 up 12.8% in one year, up 90.8% in 5 years and 98.8% in 10 years.

In Vancouver East the condo benchmark price was $575,700 up 7.5% in one year, up 91.8% in 5 years and up 99.2% in 10 years.

In Vancouver West the condo benchmark price was $804,100 up 1.0% in one year, up 69.2% in 5 years and up 82.6% in 10 years.

In West Vancouver the condo benchmark price was $1,213,900 up 5.2% in one year, up 62.8% in 5 years and up 74.5% in 10 years.

More anon.

BR00CH

Vancouver Real Estate: Affordability Concerns Continue in August 2018

Brenda Kinnear

"The pessimist complains about the wind.
The optimist expects it to change.
The leader adjusts the sails."

- John Maxwell

We are all adjusting our sails in this volatile real estate market. Even adjusting the sails can’t help when the wind dies and you are temporarily becalmed.

The Metro Vancouver real estate market number of sales declined by 36% year over year; the Fraser Valley sales declined by 39% and the Victoria market declined by 17%. The prices did not drop accordingly. There have been adjustments to some sale prices and we are not seeing the rising prices or multiple offers of last year or even this Spring. Many sellers made future plans based on an historic sale price of their property. When that historic price could not be achieved this year some have reduced the listing price, other homes have come off the market.

The slowdown in detached home sales has cascaded down into attached and condominium sales. Townhomes that would have been purchased by downsizing sellers of detached homes are not receiving offers. Condominiums in the mid-high price range are affected by this and the lower-mid priced condos don’t match what first time buyers can purchase under the Mortgage Stress Test. Last year they could buy for $600,000. Under the stress test they qualify for 20% less financing so can only purchase for $480,000 so can’t buy a home to accommodate a family.

Given that over this same time frame the Toronto market sales number has risen by 8% the partial answer must be affordability. Their average sale prices for August 2018 are lower priced than Metro Vancouver. In Toronto a detached home is $1,244,275; a semi-detached (1/2 duplex in Vancouver) is $891,208; a townhome is $683,160; a condo is $585,355.


Vancouver Lookout View by GoToVan

Everyone in BC is concerned about affordability and how to provide more housing. There is no common agreement on how it can be achieved. The NDP government’s approach to the real estate market which in the recent past has funded much of the government activity is doctrinaire. The Finance Minister stated that she welcomed Finance Ministry data showing reduced revenue from property transfer taxes and sales declines since April stating that she believes the province has to move away from an economy based on real estate speculation. The Leader of the Opposition replied that he sees jobs losses and a sputtering economy in the near future. The Finance Minister stated that the government doesn’t control all the factors that relate to housing interest rates and mortgage rules but it does want property prices to moderate and vacancy rates to increase.

Their plan to make this happen is to apply a speculation tax on non-residents and residents who have a second home that they don’t rent out including cottages or condos in the Lower Mainland, the Victoria and Nanaimo areas plus Kelowna. Other areas are temporarily exempt leading to complaints by the mayors across BC that these unfairly applied policies are destroying the economies of their cities. In some the developers are leaving and in others the rise in a rush of buyers from higher priced areas is pushing the local residents out.

Andrew Weaver the Green Party leader in a coalition with the NDP states that the speculation tax is unfair to BC residents and other Canadians who are being charged a vacancy tax on recreational and secondary residences whether they are being held for speculative purposes or not. Especially since 70% of the people being taxed are BC or Canadian residents. Andrew Wilkinson the Liberal leader agrees that the speculation tax is a tax on retirement homes and family cabins.

According to the BC Government website: In 2018, the tax rate for all properties subject to the tax is 0.5% on the property value. In 2019 and subsequent years, the tax rates will be as follows: • 2% for foreign investors and satellite families; • 1% for Canadian citizens and permanent residents who do not live in British Columbia; and • 0.5% for British Columbians who are Canadian citizens or permanent residents (and not members of a satellite family).

In the recent past most higher end detached homes have been purchased by Chinese buyers looking to relocate the family while the husband worked in China or those wishing to purchase a second home for holidays and investment which is empty for most of the year or buying older homes as building lots. Those buyers have disappeared. China has cracked down on citizens moving money out of the country. Right now the renminbi, China’s currency is being devalued as a result of the trade war with the US. This makes Chinese exports more attractive but the Chinese government is worried that there will be a run on the currency as people move their money to a safer country so they are enforcing the rules against investing overseas. The BC government has instituted higher taxes on offshore buyers/investors or satellite families by increasing the Foreign Buyer property transfer tax to 20% of the purchase price. According to the firm Rosen Kirshen the 2018 Provincial Budget introduced an increase in the school tax, which is set to begin in 2019 on properties valued at over $3-million. There will be an increase of 0.2% on properties valued over $3-million, whereas there will be a 0.4% increase on properties worth over $4-million. This increase is based on the value of these properties, rather than gains created by sale. To enforce these taxes, the B.C. Government will be introducing a publicly accessible registry listing who owns real estate in the province. The registry is meant to boost transparency and minimize opportunities for tax evasion and money laundering. It is expected to go live in the fall.

Money laundering is a world wide problem. In the UK they are cracking down on illegal funds from Russia and Africa. In Vancouver the casino model worked for years and funneled laundered cash from Asia into real estate investments in Metro Vancouver.

There is now vigorous oversight in both the UK and Canada with changes to banking regulations so that the source of funds has to be proved by the depositor. This is a positive move by the formerly lax and trusting federal government and has mainly moved illegal money out of the real estate market.

Townhomes are desirable to downsizing buyers but the drop in the numbers of sales of detached homes has put many buyers plans on hold. Sales numbers are down 36,3% from August 2017, The benchmark price across the region is $846,100, a 7.9% price increase compared to August 2017.

Condominiums which were the choice of first time buyers last year have been heavily impacted by the mortgage stress test and the 10.3% price increase from August 2017. The regional benchmark price is $695,500.

"Home buyers have been less active in recent months and we’re beginning to see prices edge down for all housing types as a result," as stated by Phil Moore President Real Estate Board of Greater Vancouver. "Buyers today have more listings to choose from and face less competition than we’ve seen in our market in recent years."

The sales to active listing ratio for August 2018 is 16.3%. By property type, the ratio is 9.2% for detached homes, 19.4% for townhouses, and 26.6% for condominiums.

In August 2018 the benchmark price for a detached home across the region was $1,561,000. A 3.1% decrease from August 2017.

In August 2018 the benchmark price for a detached in North Vancouver was $1,649,700 down 3.6% in one year, up 71.3% in 5 years and up 88.3% in 10 years.

In Richmond the detached benchmark price was $1,669,900 down 3.8% in one year, up 69.5% in 5 years and up 115.5% in 10 years.

In Vancouver East the detached benchmark price was $1,529,200 down 2.3% in one year, up 80.2% in 5 years and up 133.7% in 10 years.

In Vancouver West the detached benchmark price was $3,278,500 down 10.3% in one year, up 57.5% in 5 years and up 114.5% in 10 years.

In West Vancouver the detached benchmark price was $2,832,600 down 11.2% in one year, up 51.5% in 5 years and up 82.8% in 10 years.

Each year affordability declined for local buyers. First time buyers are particularly hard hit by mortgage stress tests, high prices and lack of inventory.

In August 2018 the benchmark price for an apartment property across the region was $695,500. This was a 10.3% increase from August 2017.

In August 2018 the benchmark price for a condo apartment in North Vancouver was $596,400 up 6.7% in one year, up 66.6% in 5 years and up 67.7% in 10 years.

In Richmond the condo benchmark price was $685,500 up 12.8% in one year, up 87.5% in 5 years and 94.8% in 10 years.

In Vancouver East the condo benchmark price was $569,300 up 7.5% in one year, up 87.3% in 5 years and up 94.6% in 10 years.

In Vancouver West the condo benchmark price was $825,000 up 4.8% in one year, up 75.7% in 5 years and up 85.1% in 10 years.

In West Vancouver the condo benchmark price was $1,190,200 up 5.5% in one year, up 63.9% in 5 years and up 67.1% in 10 years.

More anon.

DT00SS

Vancouver Real Estate: Buyers and Sellers Chose a Wait-and-See Approach in July 2018

Brenda Kinnear

"No man is an island entire of itself; every man
is a piece of the continent, a part of the main..."

- John Donne

A little dramatic perhaps but a reminder that the Vancouver real estate market is not lived in isolation from the rest of the world. Although August is usually a sunny lazy break in the business of the year with modern communications it is impossible to escape from all that is happening outside our bubble. There are changes and drama everywhere that will impact how the rest of the world views a safe haven in Vancouver.

Canada itself offers what the British Empire offered...the rule of law. Also tolerance and acceptance in general. This attracts buyers from all over the world. Many are choosing Vancouver for a second home purchase so they can holiday in a beautiful, safe and inclusive place. Most offshore buyers have the financial resources to pay the provincial taxes levied against them. At the moment they are buying holiday homes in locations where the Foreign Buyer Tax is not applied, notably Whistler.


Robson Street by Colin Knowles

Taiwanese nationals were one of the 90s waves of immigrants to Vancouver. Their children were educated here, many adults took out Canadian citizenship and then returned home. We are now hearing anecdotally of Taiwanese-Canadian citizens returning to Canada because they don’t like their government and the threats against Taiwan from China who considers it their province, not an independent country.

So no matter if we are in a period of adjustment in the real estate market the location, climate, restricted land mass surrounded by ocean, mountains and the ALR of the Lower Mainland will always attract buyers. Prices may adjust off their astronomical highs but there still will not be the affordable housing that so many wish for. The government is trying to create more housing in urban areas by taxing local residents, foreign residents, out of province Canadian residents and causing a backlash from all the municipalities. The taxes are applied in an uneven fashion and Canadians are advocates for fairness. We shall have to see how the government is going to adjust its taxation program. Real estate related activities have provided more than 25% of the provincial GDP and real estate revenues for the government are plunging.

There was an interesting article in the Financial Post on the urgency of building rental housing in Vancouver and Toronto. The Haider-Moranis Bulletin offered some creative ideas including facilitating joint ventures between entrepreneurial developers who are looking for short-term returns, and institutional investors who are in it for the long haul. There was a discussion of building condo style rental buildings to attract long term millennial and downsizing senior renters. It referred to the deleterious effects on rental construction of rent controls as applied in Ontario. BC got rid of rent controls years ago so we are more set up for new ways to do things.

We can see that the slowdown in detached home sales has impacted every other type of housing. There was a controversial article in the Vancouver Sun giving a worm’s eye view of the detached housing market. Stuart Bonner who is quoted in the article is a highly regarded colleague and uber-successful Westside realtor. It gives an insight into how the recent slowdown is impacting the market in general. Despite the comments within it is clear that Benchmark prices give a more reliable trend line than using median sales prices that depend on too many individual components.

We can’t forget that the mortgage rules and stress test are also a huge factor in the changing market conditions. They have hammered all buyers since they instituted a stress test for buyers who have 20% down and would normally qualify for a favourable mortgage rate.

Townhomes are desirable to downsizing buyers but the drop in the numbers of sales of detached homes has put many buyers plans on hold. Sales numbers are down 34,8% from July 2017, The benchmark price across the region is $856,000, a 12.1% price increase compared to July 2017.

Condominiums which were the choice of first time buyers last year have been heavily impacted by the mortgage stress test and the 13.6% price increase from July 2017. The regional benchmark price is $700,500.

"Summer is traditionally a quieter time of the year in real estate," as stated by Phil Moore President Real Estate Board of Greater Vancouver. "This is particularly true this year. With increased mortgage rates and stricter lending requirements, buyers and sellers are opting to take a wait-and-see approach for the time being."

Each year affordability declined for local buyers. First time buyers are particularly hard hit by mortgage stress tests, high prices and lack of inventory.

In July 2018 the benchmark price for an apartment property across the region was $700,500. This was a 13.6% increase from July 2017.

In July 2018 the benchmark price for a condo apartment in North Vancouver was $599,400 up 10% in one year, up 67.4% in 5 years and up 68.6% in 10 years.

In Richmond the condo benchmark price was $683,600 up 17.4% in one year, up 91.5% in 5 years and 96.2% in 10 years.

In Vancouver East the condo benchmark price was $568,900 up 8.4% in one year, up 85.6% in 5 years and up 92.1% in 10 years.

In Vancouver West the condo benchmark price was $835,200 up 6.6% in one year, up 75.4% in 5 years and up 87.3% in 10 years.

In West Vancouver the condo benchmark price was $1,234,200 up 8.5% in one year, up 70.4% in 5 years and up 69.3% in 10 years.

More anon.

DT00SS

Vancouver Market in June 2018: Decline in Sales with No Decline in Prices

Brenda Kinnear

"Summertime, and the livin' is easy
Fish are jumpin' and the cotton is high..."

- George Gershwin

Not so much in Metro Vancouver real estate this year. There has been a decline in the numbers of sales of housing units with no corresponding decline in prices, but there is a sea change in attitude and expectations. Change on every front in Canada and around the world is in the air and the uncertainty is creating a lack of confidence in our short term financial future.

A recent report on the disparity of home price to income in North America encapsulates the Vancouver problem. As Andy Yan of SFU City Program, author of the report states: Vancouver is an expensive place to live and a hard place to make a living. Vancouver is the third most expensive area after Silicon Valley-Santa Clara CA at number 1 and then San Francisco area at number two. The median real estate price and income in San Jose-Sunnyvale-Santa Clara is the highest at $1,085,595 home price and $131,000 income. Vancouver median home price according to Yan is $800,220. The median income of $72,662 comes in at #50 out of 51 cities with populations over 500,000.

A recent Angus Reid survey as reported by CTV News states that more than one-quarter of Canadians are under financial stress and can’t make ends meet. These problems are exacerbated by real estate costs including rent. According to Padmapper the median rent for a one bedroom apartment in Vancouver dropped 4.3% to $2,000 per month while a two bedroom unit comes in at $3,200.

The tariff war initiated by the United States against most other countries is worrying the stock market. BlackRock CEO is concerned that globalization and trade are threatened with negative unintended consequences to the international community.

Despite denials by BC government interests and Stats Canada’s incomplete statistics everyone working in the Vancouver housing market knew that it was skewed by massive amounts of cash being invested from China, often by unidentified trusts and student nominees. It has come to light that much of the money fueling the rising prices in the Vancouver real estate market over the past 10 years were illegal funds laundered through casinos without any oversight by police or gaming officers at the direction of the Provincial Government. The billion+ tax dollars per year pouring into the Provincial Treasury made it possible to overlook signs of criminal activity.

China is struggling with US tariffs and other slowdowns so is no longer allowing huge amounts of cash to flow out of the country into real estate in Canada.

Although the government of the day came late to the party and succeeding governments have tightened the rules (as one experienced realtor has said the days of high living and real estate investment have passed and they are now regulating and strangling the new struggling real estate market). As a result of the imposition of the Foreign Buyer Surtax in July 2016 a well-funded lawsuit was initiated by a student who chose not to take out Canadian Permanent Resident status and was hit by the Foreign Buyer Tax on the purchase of a property in Langley. The lawsuit requests that based on racial discrimination the Foreign Buyer Tax be rescinded and all monies collected be refunded to the foreign buyers who paid the tax. The NDP government has based all their budgeting on raising tax revenue so to refund billions of dollars may be an impossibility for the BC taxpayer. Douglas Todd of the Vancouver Sun has made a strong refutation of the lawsuit premise and adds details of where foreign buyer taxes are applied around the world including China, the home country of the instigator of the lawsuit. He makes the point that the Foreign Buyer Tax is not xenophobic.

The detached home market has become price sensitive. Most homes in desirable locations are selling for slightly below their Assessed Value. The BC Assessment Authority bases their figures on sale prices of similar properties reported before July 1 of the previous year.

Currently the benchmark price for a detached home in Metro Vancouver is $1,598,200, a 0.7% increase from June 2017. The sales numbers for June 2018 are 42% below June 2017.

Townhomes are the replacement for detached homes for many families. Due to price and availability the number of sales dropped 34.9% from June 2017. The benchmark price for an attached home is $859,800, a 15.3% increase from June 2017.

Sales of apartment homes were down 34.9% from June 2017. The benchmark price is $704,200 which is 17.2% higher than June 2017.

"Buyers are less active today. This is allowing the supply of homes for sale to accumulate to levels we haven’t seen in the last few years," as stated by Phil Moore President Real Estate Board of Greater Vancouver. "Rising interest rates, high prices and more restrictive mortgage requirements are among the factors dampening home buyer activity today."

The sales to active listing ratio for June 2018 is 20.3%. By property type, the ratio is 11.7% for detached homes, 24.9% for townhouses, and 33.4% for condominiums.

In May 2018 the benchmark price for a detached in North Vancouver was $1,683,600 down -0.4% in one year, up 75.9% in 5 years and up 84.0% in 10 years.

In Richmond the detached benchmark price was $1,648,600 down -0.1% in one year, up 74.5% in 5 years and up 114.4% in 10 years.

In Vancouver East the detached benchmark price was $1,541,400 up 0.5% in one year, up 82.4% in 5 years and up 129.9% in 10 years.

In Vancouver West the detached benchmark price was $3,392,500 down -6.5% in one year, up 63.7% in 5 years and up 112.1% in 10 years.

In West Vancouver the detached benchmark price was $2,944,900 down -5.8% in one year, up 61.3% in 5 years and up 78.0% in 10 years.

Each year affordability declined for local buyers. First time buyers are particularly hard hit by mortgage stress tests, high prices and lack of inventory.

In June 2018 the benchmark price for a condo apartment in North Vancouver was $602,800 up 14.1% in one year, up 68.0% in 5 years and up 67.9% in 10 years.

In Richmond the condo benchmark price was $683,800 up 19.4% in one year, up 92.7% in 5 years and 91.1% in 10 years.

In Vancouver East the condo benchmark price was $573,800 up 13.0% in one year, up 88.1% in 5 years and up 91.2% in 10 years.

In Vancouver West the condo benchmark price was $842,600 up 9.0% in one year, up 75.3% in 5 years and up 82.0% in 10 years.

In West Vancouver the condo benchmark price was $1,286,500 up 10.1% in one year, up 81.9% in 5 years and up 72.4% in 10 years.

More anon.

DT00KS

Vancouver Real Estate: Detached Home Market Hit by Fewer Buyers in May 2018

Brenda Kinnear

"The Moving Finger writes; and, having writ,
Moves on: nor all thy Piety nor Wit
Shall lure it back to cancel half a Line,
Nor all thy Tears wash out a Word of it."
Omar Khayyam

Hindsight is always 20/20 and second guessing the real estate market is a fool’s game but that doesn’t stop the big sigh of regret when the rules and outcomes change.

In May according to the Bloomberg Nanos Canadian Confidence Index Canadian consumers have been affected by the global financial turmoil in general and concerns about the Canadian economy including the pipeline standoff between BC and Alberta and Ottawa, the stalling NAFTA negotiations and political turmoil in and outside of Canada. The uncertainty about the housing market and rising interest rates have played into these economic concerns.

The Vancouver Sun has discussed several points of view on what is impacting the housing market in BC, particularly in the Metro Vancouver area. In May both the Real Estate Board of Greater Vancouver and the Fraser Valley Real Estate Board saw a 35% reduction in the number of sales compared with May 2017. Cameron Muir chief economist for the BC Real Estate Association attributes it to new mortgage qualification rules, higher interest rates and high housing prices that have reduced the purchasing power of first time buyers. The Foreign Buyer Tax and Provincial Speculation Tax on second homes and City of Vancouver’s Empty Home Tax don’t affect enough properties to change the affordability factor now but they do contribute to an ephemeral change in attitude and confidence in the future.

Royal LePage is predicting a substantial drop in recreational property prices in BC in the most popular areas that are targeted by the Speculation Tax. Although it was supposed to affect out of country, out of province home owners it is a big enough net to catch mainly BC residents. At this time the taxes are popular with unaffected BC residents hoping they will make the market more affordable.

Affordability is one issue, the dearth of any kind of rental housing in the Lower Mainland, particularly in Vancouver is a huge social problem. Former NDP Premier Mike Harcourt contributed his opinion to the discussion adding that he wasn’t running for any office so he could state the obvious solution that would offend many single family home owners. He says that it’s not a crisis, it’s a permanent condition that has to be addressed by increasing the supply of rental and social housing and speeding up approvals for development of such. He would get rid of the single family zoning and fast track approval of row housing and two and three bedroom townhouses with increased density around schools, bus lines and rapid transit stations. He was speaking in Victoria at a forum on urban issues sponsored by the United Nations Association. Vaughn Palmer of the Vancouver Sun reported on the forum.


Vancouver Skyline by domo.k

Harcourt was critical of the Speculation Tax and the School Tax on $3 million + homes. His point was that the taxes should become a surcharge on income taxes so that low income seniors weren’t so hard hit. He warned the NDP about left wing doctrinal beliefs in soaking the rich and setting up class warfare confrontations which he said his government had done with a previous surcharge on the school tax and had to backtrack when they realized how unfair and divisive it was. However, the current NDP government thinks taxing the "rich folk" is politically advantageous to them at this time. Most would agree but they are not identifying the real "Rich", the foreign buyers who own homes, establish their families here and pay no provincial income tax.

Interestingly there is a sense that the Vision Vancouver majority on City Council is moving toward a huge change in the city plan and an enormous investment in affordable rental and social housing by contributing city owned lands to developers to build affordable projects. The ideas have been out there since 2017 but it is now the last gasp of the Mayor’s and Council’s terms and they want this legacy project approved.

According to Frances Bula of the Globe and Mail:
Vancouver is set to adopt a dramatically revised housing plan that will change the make-up of single-family neighbourhoods, promote dense new clusters of residences in designated areas and create a $2-billion affordable-housing fund.
The new initiative will allow duplexes automatically as a choice in most of the city’s single-family neighbourhoods, as well as aiming to ensure that two-thirds of a hoped-for 72,000 homes built in the next 10 years are rentals.
All of that will require dedicating about $2.5-billion of city land to housing and grappling with residents unhappy about such significant change, city housing officials admit.

The detached home market has been heavily hit by fewer qualified buyers. The new provincial taxes are impacting the upper price ranges particularly in the high end market in Vancouver Westside, Richmond and West Vancouver. The builders are concerned that they won’t be able to sell a new home at $3 million+ so they aren’t willing to pay as much for a lot to build it on.

Townhomes are in demand but the prices have risen so high that that they are unaffordable to most buyers. Sales numbers are down 39,8% from May 2017, The benchmark price across the region is $859,500, a 16% price increase compared to May 2017.

Condominiums which were the darling of first time buyers last year have been impacted by the new mortgage rules and the 20.2% price increase from May 2017.

"With fewer homes selling today compared to recent years, the number of homes available for sale is rising," as stated by Phil Moore President Real Estate Board of Greater Vancouver. "The selection of homes for sale in Metro Vancouver has risen to the highest levels we’ve seen in the last two years, yet supply is still below our long-term historical average."

Each year affordability declined for local buyers. First time buyers are particularly hard hit by mortgage stress tests, high prices and lack of inventory.

In May 2018 the benchmark price for an apartment property across the region was $701,700. This was a 20.2% increase from May 2017.

In May 2018 the benchmark price for a condo apartment in North Vancouver was $603,600 up 18.6% in one year, up 69.3% in 5 years and up 68.8% in 10 years.

In Richmond the condo benchmark price was $670,700 up 21.4% in one year, up 89.6% in 5 years and 91.1% in 10 years.

In Vancouver East the condo benchmark price was $575,800 up 15.9% in one year, up 86.6% in 5 years and up 93.2% in 10 years.

In Vancouver West the condo benchmark price was $845,400 up 13.3% in one year, up 80.3% in 5 years and up 82.4% in 10 years.

In West Vancouver the condo benchmark price was $1,280,600 up 15.2% in one year, up 76.6% in 5 years and up 78.9% in 10 years.

More anon.

DT00KS

Vancouver Market in April 2018: More Listings but Fewer Sales

Brenda Kinnear

When I was a newbie realtor caught in the middle of a major market correction I worked with a client who insisted on listing their property much higher than the current market would bear. An old time realtor in my office said "I always tell them if they want to study ancient history they should go to university".

Across the country the Spring market has not taken hold. The Canadian Real Estate Association blames most of the slowdown on the mortgage stress test that was instituted by the federal government in January 2018.

Even those with 20% down and those renewing their existing mortgage are having to qualify for a rate 2 points higher than the mortgage rate being offered to them. The collateral damage has been heaviest in smaller markets where people don’t have deep pockets.

The new provincial regulations have raised taxes on second homes and investment real estate left empty in the middle of a housing crisis. Most of them are owned by BC residents although the original intention was to tax non-BC taxpayers. The rate is higher for out of province property owners.

It’s easy to be wise after the fact and right now there are more listings coming on the market but fewer sales than in the recent past. Many sellers put off making a decision thinking that the market would continue to soar upwards until they were ready to list their home. The detached home market has been affected by the absence of offshore buyers and investors. The Foreign Buyer Tax add-on to the provincial Property Transfer Tax plus the new government speculation tax has helped to cool that market.

According to Douglas Todd of the Vancouver Sun the top bankers are now saying that foreign wealth is contributing to unaffordability and that we don’t need foreign capital using Canadian real estate as a piggy bank. The National Bank of Canada has stated that "almost $13 billion was spent by Chinese investors in Vancouver" in one recent year alone. This has distorted the affordability factor for all local buyers in Vancouver.

The condominium market has been impacted by local baby boomers looking to sell their homes and gardens and move to easier condo living. They hope to have money to enjoy their retirement and help their kids. Not so easy to do if your main asset is difficult to sell for the higher price you were expecting.

The government is now realising that it gave investors a free pass on buying into pre-sale condominium projects and selling the contract before completion when the Property Transfer Tax was payable. The new rules require the developer to provide details of purchase contracts and assignments. This fear of legal liability has had most developers refusing to authorize assignments going forward. There were huge windfall profits for the first buyers in who had no intention of closing on the unit but were selling it and not declaring the tax liability. It’s clear that there were preferred realtors with clients who made multiple purchases which made life easier for the developer who got his money sooner plus a rake-off on the resale of the contract.

The big issue is affordability and availability of housing, for either rental or purchase. This is a problem throughout Metro Vancouver. All the new rules are slowing down the market and reducing Provincial income but still not making it possible for people to continue to live here. The City of Vancouver has designated City owned property for redevelopment for affordable rental housing stock. The problem is that there are so many more families that need accommodation than what can possibly be built for them. Most Vancouverites favour the Empty Homes Tax although it appears most people are paying it rather than renting out their property. It’s a windfall for city revenues.

In a classic Catch-22 situation the City of Vancouver is working to attract big tech companies with their myriad of employees for the tax base. Well-paid tech workers displace lower income existing tenants as the rents rise in the few available housing units. San Francisco is a case in point. The Silicon Valley workers that go by company bus into the city daily are paying $3500 per month for a one bedroom apartment according to people we know.

A big splash was made by Amazon taking on the Old Post Office by adding towers and 3000 employees in addition to the 2000 employees already here. The Prime Minister came out to make the announcement but did not address housing or immigration issues.

The stats are a bit misleading because the sales of detached properties in April are much lower than in March. In the high end detached market in Vancouver Westside, Richmond and West Vancouver it is the lack of Chinese buyers that is making a difference, combined with high prices and new government taxes.

"Market conditions are changing. Home sales declined in our region last month to a 17-year April low and home sellers have become more active than we’ve seen in the past three years." as stated by Phil Moore President Real Estate Board of Greater Vancouver. "The mortgage requirements that the federal government implemented this year have, among other factors, diminished home buyers’ purchasing power and they’re being felt on the buyer side today."





Each year affordability declined for local buyers. First time buyers are particularly hard hit by mortgage stress tests, high prices and lack of inventory.

In April 2018 the benchmark price for an apartment property across the region was $701,000. This was a 23.7% increase from April 2017.

In April 2018 the benchmark price for a condo apartment in North Vancouver was $611,900 up 23.1% in one year, up 73.2% in 5 years and up 72.5% in 10 years.

In Richmond the benchmark price was $684,100 up 28% in one year, up 92% in 5 years and 96% in 10 years.

In Vancouver East the benchmark price was $574,700 up 19.7% in one year, up 88.4% in 5 years and up 94.1% in 10 years.

In Vancouver West the benchmark price was $841,700 up 16% in one year, up 77.6% in 5 years and up 80.1% in 10 years.

In West Vancouver the benchmark price was $1,295,900 up 20.3% in one year, up 76.1% in 5 years and up 89% in 10 years.

More anon.

DT00KS

Vancouver Real Estate: Sales Dropped, Prices Are Still Rising in March 2018

Brenda Kinnear

"For they have sown the wind and they shall reap the whirlwind..."
― Hosea 8:7 Old Testament KJV.

It appears that the well-being of residents of BC has been compromised by an economy built around organized crime and money laundering through casinos and real estate. Provincial finances and credit ratings have been buoyed up by the annual billion dollar property transfer tax revenue.

A Vancouver Sun article from 2016 explains the windfall and how the Liberal government looked the other way when confronted about the source and out of control rising home prices.

The property transfer tax revenue has been budgeted by the NDP finance ministry to be greatly diminished going forward which will impact the current economy and spending. The government is projecting higher revenue from the increased foreign buyer taxes but that may be wishful thinking as home sales have fallen. Revenues will be impacted by the government review and enforcement of casino rules for high rollers mainly from China. There won’t be laundered funds available to invest in high end real estate. Taxes paid to the government by the casinos will be much reduced. These changes will impact the real estate sector including construction, sales, leasing, services, retail which was 18.36% of the provincial GDP in 2016.

As the gaming investigation winds down the Attorney General is ordering a similar investigation into the real estate industry. Sam Cooper formerly of the Vancouver Sun is now an investigative journalist for Global News and has produced a damning report of the BC government, the federal government, FINTRAC and the Supreme Court ruling that gives the legal profession a free pass on money laundering clients. In 1994 the federal government allowed Chinese Triads to establish themselves in Canada. They are the source of the Fentanyl/opioid tragedy wracking Vancouver. According to Australian intelligence services the ‘Vancouver Model’ is notorious for allowing organized crime to entwine itself through the economy and society.

Vancouver by Josiah Coates

The real estate market is moving at a much lower energy level than in 2017. Buyers have been severely disadvantaged by the new mortgage stress test. Even though the number of sales have dropped the prices are still rising. On a good day the Lower Mainland is unaffordable. Many buyers don’t qualify to buy at today’s home prices with a 2 point higher mortgage rate requirement even though the actual mortgage rate will be lower.

There is pent-up demand in the downtown core for condos. They usually sell over asking but there is little inventory available. This is the most affordable popular product for local buyers. The Vancouver School Board was blindsided in its projections of how many schools they would need downtown. Many parents are distressed that their children cannot be enrolled in their local school because there is no space available. The former chair of the VSB has an interesting analysis of school problems in Vancouver that impact real estate sales.

Townhomes are a rarer commodity in the Lower Mainland partly because Vancouver has a prohibition against homes that would be called semi-detached or row housing in Toronto. If the city was zoned for freehold property ownership with common walls density could be substantially increased and prices would be lower than detached prices. There is such pressure to find more housing options that the City of Vancouver is considering changing their longtime rules. They have devised a housing strategy that they are starting to implement in 2018.

Vancouver ideas for row housing include many models.

There is political movement advocating pre-zoning the Cambie corridor for multi-family housing ahead of their current timeline. The problem has always been the rise in prices to include windfall profits. Sort of negates the idea of affordable housing.

The stats are a bit misleading because the sales of detached properties in April are much lower than in March. In the high end detached market in Vancouver Westside, Richmond and West Vancouver it is the lack of Chinese buyers that is making a difference, combined with high prices and new government taxes.


"Even with lower demand, upward pressure on prices will continue as long as the supply of homes for sale remains low. Last month was the quietest March for new home listings since 2009 and the total inventory, particularly in the condo and townhome segments, of homes for sale remains well below historical norms" as stated by Phil Moore President Real Estate Board of Greater Vancouver.

Each year affordability declined for local buyers. First time buyers are particularly hard hit by mortgage stress tests, high prices and lack of inventory.

In March 2018 the benchmark price for an apartment property across the region was $693,500. This was a 26.2% increase from March 2017.

In March 2018 the benchmark price for a condo apartment in North Vancouver was $601,400 up 24.3% in one year, up 72.2% in 5 years and up 70.8% in 10 years.

In Richmond the benchmark price was $659,700 up 26.9% in one year, up 89.1% in 5 years and 90% in 10 years.

In Vancouver East the benchmark price was $577,600 up 24.3% in one year, up 89.5% in 5 years and up 96.4% in 10 years.

In Vancouver West the benchmark price was $844,700 up 20.6% in one year, up 81.8% in 5 years and up 81.2% in 10 years.

In West Vancouver the benchmark price was $1,278,600 up 18.5% in one year, up 70.3% in 5 years and up 94.4% in 10 years.


More anon.

DT00KS

The reasons behind falling sales numbers in Vancouver

There is turmoil in the air around us and is playing out in politics, trade agreements, carbon tax, pipeline protests, mortgage stress tests and real estate sales. At this time prices have risen not declined but affordability is still the unresolved conundrum of these times. Numbers of sales in each area have declined substantially in March although they were off the previous year’s sales numbers in January and February as well.

We are noticing that neighbourhoods with empty houses where offshore buyers purchased second homes or investment properties have been noticeably affected by falling sales numbers.

There are two explanations put forward, one being the mortgage stress test. This particularly applies to entry level buyers with low down payments but also hits move up buyers who have to reduce the house price they qualify for under the raised rate. Buyers now have to qualify for a mortgage two points higher than the actual mortgage rate that they will receive. This was instituted by CMHC in response to a worry by the Bank of Canada that too many people would not be able to pay their mortgages if interest rates rose. It has also been affected by the banks being forced in 2016 to be more responsible for their loans. In the past insured mortgages were on houses not borrowers and they were equal to gold plated government bonds. The Government of Canada was the guarantor of the mortgages and was liable for $484 billion in debt in the third quarter of 2017. Stats aren’t in yet as to the effect of the stress test on numbers of mortgages related to the Government of Canada guaranteed debt.

The second explanation for falling sales numbers concerns newly enforced rules in 2017 by the Chinese government on money being taken out of the country and spent overseas. As it stands each citizen is allowed to take US$50,000 out of the country every year. Chinese companies investing overseas and wealthy citizens removing funds to buy houses in Canada and the US and Australia and Hong Kong were depleting the Foreign Reserves of the country.

Chinese citizens were allowed to convert their funds to US$ online and transfer to an overseas bank account. No longer. Money has to be withdrawn at the Bank and a waiver signed that the money won’t be used to purchase real estate or securities overseas.

There are lots of creative ways to get around these rules and large corporations with funds overseas do so but for middle class millionaires who live in China there is fear that the enforcement will hit them at home. There was expectation that this restriction would impact sales in Vancouver and Toronto in 2017 which actually turned into an outlier year for price increases and sales. However, 2018 appears to be feeling the effects.

Restrictions and adjustments don’t impact greed however. Vancouverites weren’t as shocked as the rest of Canada who saw the news article of the 1922 original house with RM-5 zoning on a 33’x131’ lot in the West End being marketed at $6.98 million as a land assembly with a maximum building size of 6,484 s.f. According to the Vancouver Sun the land is assessed at $3.3 million, the house at $117,000.

Some holdout sellers got their comeuppance from the BC Supreme Court when they tried to delay the sale of a condo building being slated for redevelopment by the majority owners. Owners at Barclay Terrace built in 1992 had gradually been bought out by holding companies owned by Westbank and Bosa. BC strata property bylaws state that when 80% of the owners agree to wind up the strata corporation and sell it then it can be done. Two remaining owners tried to hold out for more money, one for $10 million. When the final sale price of the project was confirmed these sellers did not get from the judge’s decision what they thought they were owed.

It turns out that the original purchasers of individual units and the adjoining townhomes in Barclay Terrace, prominent local developers Bosa and Westbank, fell out over a plan for redevelopment of 1075 Barclay Street. They did agree to sell the property to a major development company out of Hong Kong for $105 million. The Globe and Mail analyzed the transaction and the enormous profit gained by Westbank and Bosa.

Land claim settlements are impacting communities in unexpected ways. UBC has settled with the Musqueam First Nation and will see the population of the endowment lands double. In Area D bounded by University Blvd, Acadia, Agronomy, and Toronto Roads plus Wesbrook Mall there will be 1.2 million s.f. of residential and 30,000 s.f. of commercial construction over the next ten years. The provincial government which administers the university endowment lands or UEL is studying ways to mitigate the impact of such a massive development on the rest of the UEL.

Good news is that Richmond may be coming to the party about mansions on the ALR. There’s nothing like outraged voters to change the Council’s mindset.

The maximum house size of 5,382 s.f. allowed by the provincial government has been modified in Richmond to allow 10,763 s.f. mansions. That was a reduction last Fall from the 12,000+ s.f. homes allowed plus outlying buildings and amenities. Richmond is inundated with applications to build $5 million mansions with amenities on the best farmland in Canada. Mansion owners can pay to have a few acres of blueberries grown on the land and then pay agricultural land taxes instead of residential property tax. There is vocal opposition to change from those hoping to receive windfall profits from their farmland.

We are still waiting for clarity on some of the real estate provisions in the February Budget. More next month. Check out the Stats Report for budget discussion: Vancouver Market in February: Low Inventory in Every Category.

DT00KS

Vancouver Market in February: Low Inventory in Every Category

Brenda Kinnear

There is a reason that certain sayings become famous: they are applicable to every high-minded solution to an intractable problem. In BC the problems are housing affordability and money laundering through casinos and real estate. The results of identifying the issues and trying to solve them fall into "Be careful what you wish for, it just might come true" or the Law of Unintended Consequences. Both these bits of philosophy apply in BC since the NDP government started tinkering with the system with the help of the Federal government taking a sledgehammer to the mortgage qualification process.

The February 20 Provincial Budget started the markets roiling. The Foreign Buyer Tax of 15% introduced by the Liberal government in July 2016 has been raised to 20% and applied to a much wider area in order that offshore investment doesn’t move from place to place and destabilize communities other than Vancouver. On homes over $3 million the property transfer tax paid by all buyers rises to five percent from three percent. Urban demographer Andy Yan states in the Vancouver Sun that Metro areas will feel the tax rise most and that it is designed to tax wealth coming into the province to buy real estate.

The Law of Unintended Consequences is showing up in the dramatic drop of detached home sales in February all through Metro Vancouver. In Richmond 52 detached homes sold in February 2018 compared with 92 homes sold in February 2017. In Vancouver Westside 53 homes sold in February 2018 compared with 93 sold in February 2017. These are areas with a large number of foreign buyers. Local sellers hoping to cash out for retirement are having to rethink their plans as the downsizing has gotten more expensive and elusive.

False Creek Sunrise by Gord McKenna

Prices for detached homes have risen 10.8% across the Lower Mainland since February 2017 but that figure varies per area. Vancouver Westside rose 2.3%, Richmond which is more affordable rose 8.8%. Vancouver East rose 9.5%, North Vancouver rose 6.7% while Coquitlam rose 14%.

The elephant in the room is the Speculation Tax, something that was devoutly wished for by left-out buyers and suggested by a group of economists trying for a way to make Vancouver real estate affordable to local buyers. Andrew Weaver, leader of the Green Party and partner to the NDP in keeping them in power commented that the ratio of house prices to incomes needs to be 3:1 to be considered affordable...In the city of Vancouver the ratio is at 37:1. There is almost no way to build more affordable housing except by rezoning single family neighbourhoods and restricting what can be built there.

The devil is in the details of the application of the speculation tax and the famous saying that applies here is "it all depends on whose ox is being gored".

Pensioners who are living in $3 million homes that they purchased 50 years ago will be paying .02% tax on the value between $3 million and $4 million and 0.4% tax on assessed value above $4 million. One couple profiled in the Vancouver Sun article purchased their house in Point Grey for $370,000 in 1987 which now has an assessed value of $6.5 million. Their school tax bill will increase by $12,000 next year. Many baby boomers are house rich and cash poor thanks to the meteoric rise in real estate prices fuelled by offshore investment in property.

There is a concern that many buyers who purchased at the end of 2017 to avoid the mortgage stress test coming into effect on January 1 2018 may be under water with the new tax rules.

The lack of affordable housing to buy or rent in Vancouver is creating a flight of younger people and retirees to towns outside the Lower Mainland. The new speculation tax is reaching the popular areas around Victoria, Nanaimo and Kelowna. The Law of Unintended Consequences strikes again. Residents of rural BC who have second homes in Victoria or Vancouver will be subject to the speculation tax if their apartment is not rented out on a long term basis. The finance minister says they are looking at tweaking the legislation but many Gulf Islanders and others are worried that they will have to sell their rural homes.

The purpose of the speculation tax (calculated at $5 per $1,000 of assessed value for 2018, increasing to $20 per $1,000 of assessed value in 2019) was to collect tax revenue from all homeowners that do not reside in BC, pay BC income tax and who don’t rent out their property. This has created a lot of anger from residents of other Canadian provinces who own second homes in BC. Alberta buyers are a big part of the real estate market in the Okanagan and most of them are upset by the new rules. The tax can be extended at the government’s discretion to any part of the province. The municipal governments around Kelowna are fearing a huge drop in real estate sales and prices plus general loss to the economy. Most areas that have been added to the speculation tax list are requesting to be exempted from the tax. Their "ox is being gored".

In the Metro Vancouver real estate market the Condo is King. As the prices have soared over the past year there is less and less room between detached home prices and newer condo prices. This has contributed to low inventory in every category. Detached home owners can’t lower their prices because they can’t afford to move if they do. Townhouses are scarce and larger ones are expensive even out in Maple Ridge and Pitt Meadows. Condos are selling at or over their list price, usually for quite a bit more than their assessed value. Recently in Steveston an unrenovated 1400 sf condo with a wonderful water view, assessed at $970k, in an older building sold for $110,000 over the list price. There are multiple offers on almost every unit in every municipality.

The sales to active listing ratio for February 2018 is 28.2%. By property type, the ratio is 13% for detached homes, 37.6% for townhouses, and 59.7% for condominiums.

In February 2018 the benchmark price for a detached home across the region was $1,602,000. An 8.2% increase from February 2017.
In February 2018 the benchmark price for a detached in North Vancouver was $1,686,800 up 6.7% in one year, up 81.4% in 5 years and up 88.6% in 10 years.
In Richmond the benchmark price was $1,697,900 up 8.8% in one year, up 82.6% in 5 years and up 130.2% in 10 years. In Vancouver East the benchmark price was $1,560,400 up 9.5% in one year, up 92.1% in 5 years and up 137.5% in 10 years. In Vancouver West the benchmark price was $3,500,600 up 2.3% in one year, up 74.8% in 5 years and up 123.6% in 10 years. In West Vancouver the benchmark price was $3,141,900 up 5.9% in one year, up 72.3% in 5 years and up 98.5% in 10 years.

Each year affordability declined for local buyers. First time buyers are particularly hard hit by mortgage stress tests, high prices and lack of inventory.

In February 2018 the benchmark price for an apartment property across the region was $682,800. This was a 27.2% increase from February 2017.
In February 2018 the benchmark price for a condo apartment in North Vancouver was $580,700 up 24.4% in one year, up 67.7% in 5 years and up 65.4% in 10 years. In Richmond the benchmark price was $657,800 up 30.5% in one year, up 89.5% in 5 years and 91.4% in 10 years. In Vancouver East the benchmark price was $565,300 up 26.7% in one year, up 87.4% in 5 years and up 94.1% in 10 years. In Vancouver West the benchmark price was $835,800 up 20.5% in one year, up 81.0% in 5 years and up 79.7% in 10 years. In West Vancouver the benchmark price was $1,237,100 up 26.2% in one year, up 70.7% in 5 years and up 83.7% in 10 years.

According to the Vancouver Sun David Eby, the Attorney General will be in Ottawa to speak before the House of Commons committee on finance which is working on changes to the Proceeds of Crime and Terrorist Financing Act. One of the concerns of the BC government is gang violence engendered by their ability to launder funds through the casinos. BC is looking for enforcement support from Ottawa.

Money laundering is a big component of the offshore investment in real estate in Metro Vancouver, particularly in Richmond and Vancouver Westside. This has fuelled some of the fast rising prices of the past few years and contributed to shadow flipping of expensive properties. Much of the wash and rinse of funds was done through the casinos where the tax revenue flowing into the provincial coffers was so overwhelming that much questionable activity was overlooked for a number of years.

The Vancouver Sun states that a confidential report commissioned by B.C. Lottery Corp. estimates that B.C. casinos could lose up to $88 million in revenue each year if the government bans large cash transactions by VIP gamblers at high-limit betting tables. This could impact government programs outlined in the recent Budget.

More anon.

DT00KS

Vancouver Real Estate: Lack of Affordable Inventory in January 2018

Brenda Kinnear

Charles Dickens once wrote "And though home is a name, a word, it is a strong one; stronger than magician ever spoke, or spirit ever answered to, in the strongest conjuration".

A home is one of the most sought after, wished for, impossible dreams in Metro Vancouver today. Affordable home ownership or rental accommodation is unavailable to most of the local younger population, even those with stable jobs and professions. Family formation is put on hold for lack of available housing. A perfect storm of world wide circumstances has created a situation that governments are only now starting to address and they can make little headway without a complete reordering of the existing tax and real estate ownership laws.

The high prices and lack of affordable inventory mean that the basic building blocks of an active informed working community are not there. Nobody can afford to move here to work. Those who already live here can’t afford to stay. Nurses and teachers and social workers and first responders are shut out of the housing market by the high prices. There is no time for a teacher to take on extra-curricular activities when the drive to and from work can be hours long. The Vancouver School Board has had difficulty filling job openings because when teachers have an opportunity to work in a school district closer to home they take it. In Richmond schools are slated for closure because there are no young families moving into the multi-million dollar homes available, many of which are owned but empty.

Douglas Todd of the Vancouver Sun has explored the connection of the 1% vacancy rate in Vancouver to the increased competition of Vancouver’s young adults with international students, foreign workers and financially supportive offshore parents to buy a home or find a place to rent. In Metro Vancouver the number of non-permanent residents has doubled to 140,000 over the last 10 years. A CMHC report shows international students and temporary workers under the age of 25 are responsible for 10% of the bank mortgages issued to that age group in Toronto and Vancouver.

Vancouver City Centre from above by Alex Costin

Construction workers are at a premium because no one can find a place to live within a reasonable driving distance of a project; commuting times are aggravated by the lack of infrastructure and highways. When workers are enticed to Vancouver from other cities they almost never want to take up the opportunities offered. The traffic and the housing costs are a huge deterrent.

Employers in desirable expensive locations such as downtown Vancouver or the North Shore cannot get employees because no one working at a lower hourly rate is willing to spend the money or the time to commute the required distance for these jobs. Highways and bridges are jammed at rush hour with workers leaving jobs in places where they used to be able to live to commute to far flung suburbs.

Tech entrepreneurs are finding it difficult to recruit new qualified employees because of the housing crisis. Potential employees are attracted to the urban centre of Vancouver but there is no affordable housing available to rent or buy. Everyone is wondering where the thousands of Microsoft and Amazon employees are going to reside.

There is a huge outpouring of younger families to other cities in BC where housing is still more expensive than most parts of Canada but much more affordable than the Lower Mainland.

Benjamin Tal, deputy chief economist for CIBC Capital Markets when comparing Toronto and Vancouver stated that Vancouver is an island with no place to build or grow so no reasonable way to moderate housing prices.

"Demand remains elevated and listings scarce in the attached and apartment markets across Metro Vancouver," as stated by President Jill Oudil of the Real Estate Board of Greater Vancouver. "Buyers in the detached market are facing less competition and have much more selection to choose. For detached home sellers to be successful, it’s important to set prices that reflect today’s market trends."

A disturbing unknown is the effect of the new mortgage stress tests. Anecdotally they are having an impact on the number of sales as many buyers can no longer qualify for the same mortgage loan as before. They now have to qualify for a loan 2 points above the loan they actually qualify for under today’s lower rates which have also gone up in the last month.

The Globe and Mail has published another series of investigations into the extensive drug money laundering mortgage loans at extremely high interest rates to Mainland Chinese citizens who buy or own property in Vancouver. The borrowers are loaned cash in Canada to be repaid in Chinese currency through the shadow banking system in China. Often the drug dealer mortgagees take the clients to court to get their usurious fees repaid. Canadian courts accept false affidavits and order properties sold to repay these illegal loans. These mortgages are enabled and registered by Canadian lawyers who do not ask questions about the source of funds. The Supreme Court has allowed lawyers to police themselves and not be forced to disclose any damaging information about their clients. It’s only public demand for change that will force the governments to act.

The Vancouver Sun published an article linking money laundering, drugs and guns in Metro Vancouver.

The sales to active listing ratio for January 2018 is 26.2%. By property type, the ratio is 11.6% for detached homes, 32.8% for townhouses, and 57.2% for condominiums.

In January 2018 the benchmark price for a detached home across the region was $1,601,500. An 8.3% increase from January 2017.
In January 2018 the benchmark price for a detached in North Vancouver was $1,670,100 up 5.5% in one year, up 80.0% in 5 years and up 89.1% in 10 years.
In Richmond the benchmark price was $1,690,500 up 8.2% in one year, up 80.2% in 5 years and up 132.9% in 10 years. In Vancouver East the benchmark price was $1,564,000 up 8.6% in one year, up 91.1% in 5 years and up 140.2% in 10 years. In Vancouver West the benchmark price was $3,548,400 up 3.8% in one year, up 77.6% in 5 years and up 129.1% in 10 years. In West Vancouver the benchmark price was $3,099,500 up 5.7% in one year, up 70.8% in 5 years and up 99.3% in 10 years.

Each year affordability declined for local buyers. First time buyers are particularly hard hit by mortgage stress tests, high prices and lack of inventory.

In January 2018 the benchmark price for an apartment property across the region was $665,400. This was a 27.4% increase from January 2017. In January 2018 the benchmark price for a condo apartment in North Vancouver was $567,200 up 22.9% in one year, up 64.7% in 5 years and up 62% in 10 years. In Richmond the benchmark price was $649,900 up 33% in one year, up 89.1% in 5 years and 90.9% in 10 years. In Vancouver East the benchmark price was $552,300 up 25.9% in one year, up 84.4% in 5 years and up 91.4% in 10 years. In Vancouver West the benchmark price was $812,400 up 21.9% in one year, up 76% in 5 years and up 76.9% in 10 years. In West Vancouver the benchmark price was $1,179,400 up 20% in one year, up 66.2% in 5 years and up 70.9% in 10 years.

The BC Government has been promising action in their Budget to be presented in the Legislature on February 20. They may bring in regulations to require full disclosure of financing sources for mortgages, of disallowing bare trusts where beneficial ownership of properties is undisclosed, adding a speculation tax and forcing absentee owners to pay full taxes. We shall see what really comes down and how enforceable it may be.

More anon.

DT00SK

Vancouver Market in 2017: Affordability Declined for Local Buyers

To paraphrase Mac Davis: Happiness was Vancouver real estate prices in our rearview mirror...

The elephant in the room in today’s market is the steep decline in affordability over the past few years. The Vancouver Sun reported on the 14th annual Demographica list of severely unaffordable world wide cities. Vancouver came third after Hong Kong and Sydney. Survey is prepared by U.S. firm Demographia and New Zealand firm Performance Urban Planning. They state that Vancouver became severely unaffordable faster than any other city on the list. They measure unaffordability by the "median multiple" achieved by dividing the median house price by the median household income. It works out to 12.6 in Vancouver. A median multiple of 5.1 which means a house costs 5x the average annual income is considered severely unaffordable. In 2004 the median multiple for Vancouver was 5.3, unaffordable but manageable. Today Victoria is at 8.1, Nanaimo 7.2, Chilliwack is 6.8 and Kelowna is 6.6. Toronto is at 7.9 up from 3.9 in 2004. The most affordable median multiple in Canada was Moncton NB at 2.1.

Vancouver at Dawn by Murray Foubister

"Market activity differed considerably this past year based on property type" as stated by President Jill Oudil of Real Estate Board of Greater Vancouver. "Competition was intense in the condominium and townhome markets, with multiple offer situations becoming commonplace. The detached home market operated in a more balanced state, giving home buyers more selection to choose from and more time to make decisions."

"Strong economic growth, low interest rates, declining unemployment, increasing wages and a growing population all helped boost home buyer demand in our region last year," said Oudil.

Here we are in the New Year that is looking slightly different than the last one. 2017 ended on a bang with the second best December on record. Most of it was triggered by the impending rise in interest rates and mortgage qualification levels.

The activity in the townhome market has already burst its bounds. A 3 bedroom + den townhome in Langley listed in the low $500ks attracted 23 offers and sold substantially over the list price. Local buyers cannot get a break anywhere.

Foreign buyers and investors are blamed by many for overheating the market. Calls have been made to follow New Zealand in forbidding any foreign ownership of real estate in that country. Diane Francis of the Financial Post supports this position and makes the point that Canada is clueless about the extent of foreign manipulation of the real estate market. Premier John Horgan who is now in the position of leading the entire province, not just the political left, has stated that BC is the gateway to Canada and it is not planning to restrict foreign investment.

Douglas Todd of the Vancouver Sun writes regularly on immigration and the lack of responsibility that the federal and provincial governments have shown for overview and supervision and enforcement of immigration and financial services laws including those concerning money laundering.

There has been so much discussion with so little concrete information that a recent court case between two wealthy immigrant Chinese families has surprised everyone with its details of the illegal scams some immigrants to Canada use to become citizens. Douglas Todd did a full report on the judge’s ruling.

There appears to be some blowback from exposes about immigration fraud and tax evasion around real estate. The BC Real Estate Council is expected to be more forceful in charging realtors who enable clients to avoid the law.

The sales to active listing ratio for December 2017 is 29%. By property type, the ratio is 14.4% for detached homes, 38.8% for townhouses, and 59.6% for condominiums.

In December 2017 the benchmark price for a detached home across the region was $1,605,800. A 7.9% increase from December 2016. In December 2017 the benchmark price for a detached in North Vancouver was $1,679,700 up 5.2% in one year, up 81.7% in 5 years and up 92.6% in 10 years. In Richmond the benchmark price was $1,692,500 up 7.1% in one year, up 78.4% in 5 years and up 136.9% in 10 years. In Vancouver East the benchmark price was $1,559,900 up 7.1% in one year, up 88.2% in 5 years and up 141.6% in 10 years. In Vancouver West the benchmark price was $3,556,100 up 3.3% in one year, up 77.2% in 5 years and up 132% in 10 years. In West Vancouver the benchmark price was $3,093,200 up 4.0% in one year, up 73.6% in 5 years and up 102.4% in 10 years.

Each year affordability declined for local buyers. First time buyers are particularly hard hit by mortgage stress tests, high prices and lack of inventory.

In December 2017 the benchmark price for an apartment property across the region was $655,400. This was a 25.9% increase from December 2016. In December 2017 the benchmark price for a condo apartment in North Vancouver was $560,600 up 22.2% in one year, up 62.4% in 5 years and up 60.5% in 10 years. In Richmond the benchmark price was $637,200 up 31.7% in one year, up 86.3% in 5 years and 88.9% in 10 years. In Vancouver East the benchmark price was $545,600 up 25.4% in one year, up 79.9% in 5 years and up 90.7% in 10 years. In Vancouver West the benchmark price was $807,100 up 20.2% in one year, up 73.4% in 5 years and up 75.8% in 10 years. In West Vancouver the benchmark price was $1,171,000 up 19.5% in one year, up 65.0% in 5 years and up 65.6% in 10 years.

The Provincial Budget will be introduced in the Legislature in February. Premier John Horgan and Finance Minister Carole James have stated that new rules to curb speculation in real estate will be presented then. We shall see. More anon.

DT00SK

Vancouver Real Estate: Wishful Thinking in November 2017

Despite all the doom and gloom in mortgage news and desperate world news buyers and sellers in Vancouver are still singing...’Santa baby, I'm filling my stocking with a duplex, and cheques. Sign your 'X' on the line Santa baby, and hurry down the chimney tonight’...
(lyrics by J. Javits and P. Springer)

Lots of wishful thinking going on out there in the real estate market. Vancouver continues to experience above average demand and below average supply.

False Creek, foggy by Colin KnowlesFalse Creek, foggy by Colin Knowles

The sales to active listing ratio for November 2017 is 32%. By property type, the ratio is 15.9% for detached homes, 36.4% for townhouses, and 67.8% for condominiums.

In November 2017 the benchmark price for a detached home in North Vancouver was $1,697,600 up 3.7% in one year, up 79% in 5 years and up 95.1% in 10 years. In Richmond the benchmark price was $1,671,600 up 4.3% in one year, up 72.8% in 5 years and up 134.6% in 10 years. In Vancouver East the benchmark price was $1,573,500 up 6.7% in one year, up 88.6% in 5 years and up 145.1% in 10 years. In Vancouver West the benchmark price was $3,573,700 up 1.5% in one year, up 75.9% in 5 years and up 135% in 10 years. In West Vancouver the benchmark price was $3,146,100 up 2.9% in one year, up 76.9% in 5 years and up 105.8% in 10 years. Each year affordability declined for local buyers.

As prices were rising to the stratosphere the Liberal government was like the police chief in Casablanca who professed to be shocked, shocked sir, as Rick’s Cafe was raided for illegal gambling just as the croupier approached with his winnings.

NDP Attorney-General David Eby can profess to be shocked at the amount of money that was laundered through the large BC casinos but his government is happily spending their way through the $2 billion surplus in the treasury inherited from the previous Liberal government. Any government having their resource development plans held up by First Nations land claims and foreign supported environmental groups would have been relieved to make $1 billion a year from the Property Transfer Tax on real estate and several billions from the gaming taxes. Unfortunately the supervision by the gaming branch was lax by government design and no agency saw the extent of the illegal money flowing through the casinos. Once the first washing was done then the funds were largely invested in detached homes in Vancouver for the final rinse.

It’s clear that nobody in the government or outside of it appreciated the extent of foreign investment underwritten by criminal elements. When Andy Yan an urban planner with Bing Thom Architects at the time, now of Director of SFU city program, studied all the sales on the west side of Vancouver in November 2015 and correlated Chinese names that weren’t Anglicized as being foreign investors who were impacting the rising prices in the Vancouver real estate market he was called racist (he is Chinese) and loudly booed by the Liberal government and Mayor Gregor Robertson of Vision Vancouver. Now they’re all jumping on the bandwagon of trying to stabilize the prices. It’s a clear case of closing the barn door after the horse has bolted. Mayor Robertson is hoping the senior governments will allow Vancouver to restrict foreign ownership of property as is done in Australia and New Zealand.

A blue-sky idea floated almost two years ago by a group of academics offering solutions to the housing crisis in Vancouver has now come around to being considered a reasonable possibility. The concept of a property surtax according to the Vancouver Sun would take aim at ‘free-riding homeowners’. Proponents say the people forced to pay more under the change would be wealthy foreign owners who purchase Vancouver real estate to stash their money or those who avoid paying Canadian taxes in various ways. Residents paying income tax would be allowed to deduct the surtax.

The NDP government has promised a full housing report in the February 2018 Budget. Premier John Horgan has stated that housing is the No. 1 issue on his desk. All levels of government are focused on building affordable rental housing to keep families and workers in the province, especially in the Lower Mainland. It would be helpful if they outlawed shadow flipping of pre-sale condo contracts and set up the same rules as for the detached home market. They would collect more tax dollars and probably keep the price per square foot closer to the builder’s original estimate.

The Financial Post stated that the market for condo and attached properties surged in Toronto and Vancouver, as buyer interest in expensive detached homes has withered according to recent data.

In November 2017 the benchmark price for an apartment property across the region was $648,200. This was a 23.9% increase from November 2016. In November 2017 the benchmark price for a condo apartment in North Vancouver was $566,500 up 23.5% in one year, up 61.1% in 5 years and up 62.7% in 10 years. In Richmond the benchmark price was $612,900 up 27.4% in one year, up 77.2%in 5 years and 82.4% in 10 years. In Vancouver East the benchmark price was $540,300 up 23.4% in one year, up 75.2% in 5 years and up 90.1% in 10 years. In Vancouver West the benchmark price was $811,200 up 17.0% in one year, up 72.8%in 5 years and up 77.2% in 10 years. In West Vancouver the benchmark price was $1,154.700 up 17.4% in one year, up 65.3% in 5 years and up 62.3% in 10 years.

It appears that the Bank of Canada is holding interest rates steady at this time. Increases are expected throughout the New Year but right now the mortgage stress test which depends on current interest rates is still doable. According to the Financial Post the International Monetary Fund in October stated that Canada has the second highest gross debt to income ratio in the Group of 20. Royce Mendes, an economist at CIBC World Markets thinks that some of the big international organizations focus too much on one metric. The quality of the debt in Canada is high, the proportion of non-prime mortgages is 10% compared to the 33% in the US before the crash. Distribution of debt is important according to Mendes and if everyone holding debt has a well-paying job and some money in the bank then it could be managed easily. So we shouldn’t worry quite so much about mortgage debt. It would be great if the mortgage debt could be lower because property prices were lower. Wishful thinking indeed. More anon.

Wishing all of you a wonderful Holiday Season.

DT00SK

Vancouver Real Estate: High Demand Continues in October 2017

And the band played on... Julie and I were recently in the Halifax Maritime Museum and viewed the stories of the sinking of the Titanic.The belief was that the Titanic was indestructible, therefore did not need lifeboats for every passenger. When the rescue ship Carpathia that was 4 hours away arrived on the scene the passengers wearing life jackets in the water were dead of hypothermia, the passengers in the life boats survived.

The Vancouver housing market reminds me of the Titanic saga. At the beginning of the story mistaken assumptions were made as to the safety and buoyancy of the Vancouver market. No thought was given to the Law of Unintended Consequences. The City did not think of zoning restrictions because of voter backlash; the provincial government wanted the windfall income from the Property Transfer Tax, the federal government wanted to borrow money from new immigrants so set up the Immigrant Investor program with no mechanism to enforce residency requirements or income tax payments or rules to keep the money as an investment in Canada. Now we have our two major cities Toronto and Vancouver full of the Haves and the Have Nots mainly broken down along generational lines. And the market continues to rise. The MLS Home Price Index composite benchmark price for all residential properties in Metro Vancouver is currently $1,042,300, a 12.4% increase over October 2016.

The sales to active listing ratio for October 2017 is 33.1%. By property type, the ratio is 16.8% for detached homes, 44.8% for townhouses and 66% for condominiums.

In October 2017 the benchmark price for a detached home in North Vancouver was $1,700,200 up 2.1% in one year, up 76.9% in 5 years and up 95.8% in 10 years. In Richmond the benchmark price was $1,690,000 up 2.3% in one year, up 73.4% in 5 years and up 139.4% in 10 years. In Vancouver East the benchmark price was $1,566,700 up 3.3% in one year, up 86.2% in 5 years and up 145.3% in 10 years. In Vancouver West the benchmark price was $3,626,300 up 1.8% in one year, up 75.8% in 5 years and up 140.3% in 10 years. In West Vancouver the benchmark price was $3,095,300 down -5.4% in one year, up 68.4% in 5 years and up 102.4% in 10 years. Each year affordability declined for local buyers.

There was news this month of Amazon expanding their workforce in Canada. They have expanded by 1000 people in Vancouver and 750 in Calgary. Many observers feel that this expansion is in replacement of a new head office that if it opens in Canada will probably be in Toronto. According to the Amazon vice President for Canada and Mexico the jobs in Vancouver are 90% for software engineers and programmers. The very people who will be looking for homes and rental apartments. Of which there are very few available in Vancouver so again there is another competition for relocating employees to either buy or rent accommodation.

In October 2017 the benchmark price for an apartment property across the region was $642,000. This was a 22.7% increase from October 2016. In October 2017 the benchmark price for a condo apartment in North Vancouver was $556,900 up 21.5% in one year, up 56.5% in 5 years and up 60.6%in 10 years. In Richmond the benchmark price was $609,600 up 26.3% in one year, up 76.2% in 5 years and 82.2% in 10 years. In Vancouver East the benchmark price was $538,500 up 19.7% in one year, up 74.6% in 5 years and up 90.6% in 10 years. In Vancouver West the benchmark price was $806,500 up 18.5% in one year,up 66.4% in 5 years and up 62.4% in 10 years. In West Vancouver the benchmark price was $1,163.100 up 18.5% in one year, up 66.4% in 5 years and up 62.4% in 10 years.

Jobs are prized by municipal authorities but there are many openings and few applicants because of the lack of affordable housing. The Vancouver School Board cannot fill open teaching positions because no new teachers want to bear the cost of living in the city. The City of Vancouver is looking to license and control short term accommodation such as Airbnb in order to open up more long-term rentals. The big question is around enforcement. Every action has an equal and opposite reaction and the cost of implementing new ideas can often be the deterrent to doing so.

Douglas Todd of the Vancouver Sun wrote that statistics Canada data shows 140,000 non-permanent residents residing in Metro Vancouver including international students and temporary workers competing with locals for a few rentals and pushing the prices up and up and up.

According to a recent Century 21 report the west side of Vancouver is the most expensive area in Canada. It has increased 400% in 20 years and currently a typical benchmark home comes in at $1,200 per square foot. Using this model downtown Vancouver comes second at $863 per square foot and Toronto follows at $819 per square foot. The purpose of these numbers is to give consumers a realistic idea of how much money they need to buy a home in different areas.

Of course if a buyer cannot qualify for a mortgage under the new stress test where a borrower has to qualify for two percentage points higher than the mortgage for which they are approved all the information is moot. The Financial Post had an article on the rush to qualify and purchase a home before the end of the year. Most buyers if they have a substantial down payment don’t want to jump through the hoops of the new mortgage rules. The question arises in the article as to whether there will be any buyers left in the New Year when the stress test kicks in and the easily qualified buyers have already purchased.

The Bank of Montreal chief economist forecasts continuing action in the housing market from move-up buyers who have built up equity. He believes that Canada is a huge draw to international buyers and that immigrants will be the source of new buyers at every level.

According to SFU Assistant Professor Josh Gordon, writing in the Vancouver Sun, fairness to the next generation of buyers would require a surtax on all homes in Vancouver which is refunded to those paying Canadian income tax. His estimate is that the Canadian citizens who can’t afford to buy a house are subsidizing these non taxpaying residents to the tune of at least $100,000 per year thanks to Canada's lax and unenforced tax laws.He says that it’s no wonder vast numbers of wealthy foreign individuals are lining up to buy properties in Canada. The idea of a surtax is popular but the application of one is more difficult. The devil is in the details. When Professor Gordon hears objections to possible economic turbulence caused by a surtax he wonders how we can think that BC’s economy should depend on tax avoidance.

He writes: "Ultimately, young working Vancouverites are subsidizing the global elite that is pushing them out of their childhood city –an incredibly toxic dynamic."
A chilling statement that brings us back to those few lifeboats floating off the doomed Titanic so long ago.

DT00KV

Vancouver Prices Rising in Every Category in September 2017

September stats on the housing market are history in the rear view mirror. Changes in the financial world are coming so fast and so furiously that historical information may not apply. Sale prices have risen in every category. Particularly in condo and townhouse segments. Detached homes have gone up a smaller percentage but are still out in the ether as for price.

The sales to active listing ratio for September 2017 is 29.8%.By property type, the ratio is 14.6% for detached homes, 42.3% for townhouses,and 60.4% for condominiums.

In September 2017 the benchmark price for a detached home in North Vancouver was $1,713,000 up 1.9% in one year, up 74.8% in 5 years and up 97.7% in 10 years. In Richmond the benchmark price was $1,695,000 up 1.5% in one year, up 73.3% in 5 years and up 139.4% in 10 years. In Vancouver East the benchmark price was $1,564,900 up 1.8% in one year, up 84.3% in 5 years and up146.2% in 10 years. In Vancouver West the benchmark price was $3,653,500 up 0.8% in one year, up 74.7% in 5 years and up 144.0% in 10 years. In West Vancouver the benchmark price was $3,136,600 down -8.5% in one year, up 67.7% in 5 years and up 105.1% in 10 years. Each year affordability declined for local buyers.

Bentall Tower by Colin Knowles

There is a sudden realization among the Vision Vancouver city councillors that all the posturing on social and homeless housing took their eye off what was happening with the rezoning projects along transit corridors. Their naivete allowed no restrictions on buildings along the Cambie corridor which should have been zoned for rental housing. The city planner thought that home owners would sell for modest prices so that moderately priced condos would be built there. Instead the Canada Line was built with funds designated for Olympic transit and doubled the prices of the lots. Owners with attractive mid-century and heritage homes sold them for $3 million in 2009 with expensive condos going in all up and down the Line. Now in Phase 3 Mayor Gregor Robertson is bemoaning the lack of rental housing for residents earning between $30k and$80k per year and maybe they should rezone some of the Oakridge area for rentals.

In September 2017 the benchmark price for an apartment property across the region was $635,800. This was a 21.7% increase from September 2016. In September 2017 the benchmark price for a condo apartment in North Vancouver was $553,500 up 19.5% in one year, up 54.4% in 5 years and up 60.0%i n 10 years. In Richmond the benchmark price was $598,600 up 26.4% in one year, up 73.5% in 5 years and 79.7% in 10 years. In Vancouver East the benchmark price was $535,600 up 23.4% in one year, up 75.3% in 5 years and up 90.6% in 10 years. In Vancouver West the benchmark price was $796,100 up 15.8% in one year, up 70.4% in 5 years and up 77.6% in 10 years. In West Vancouver the benchmark price was $1,153.700 up 15.2% in one year, up 66.5% in 5 years and up 60.0% in 10 years.

Westbank Corp, a prestigious developer with philanthropic goals, is under fire for maximizing their return on Joyce, a luxurious Eastside development that could have been built to reflect the working class neighbourhood around it and been affordable for local buyers. The City did not even try to fit an enormous project to their goal of affordable middle class housing by adding zoning requirements for social and market housing.

Again Westbank is in the news. The newest idea from Mayor Robertson’s platform is to offer pre-sales in Vancouver to local buyers for 30 days before they can be sold to outsiders. He held up the Westbank model in Horseshoe Bay West Vancouver as the template. According to people connected with that project they are discovering that people who signed agreements that are unenforceable are selling their pre-sale contracts and not planning to reside in the community. Even with the restrictions it appears that the price has risen from the original $875 per square foot to $1875 per square foot and nothing is built yet. Local politicians are bemoaning the fact that they did not require a percentage of rentals or market housing units within the project.


An enormous impact on the housing market will be the new tougher rules for mortgage lending that were announced on October 18 to begin on January 1, 2018.

As prices have risen the income required to afford a mortgage has risen too. Under CMHC rules any mortgage that did not have a 20%down payment required mortgage insurance. This insurance has been confused bythe public as being in their best interest. It is not life insurance on the mortgage it is financial insurance for the bank against loss. The outcome has been that the mortgage loans are government backed securities. CMHC started to worry that the Canadian government would be on the hook for $100 billion in guaranteed loans if borrowers cannot continue to pay their debts. In response the government requires all insured borrowers to qualify at a higher posted rate. This stress test usually uses the five year combined posted rate of the five large banks. It usually means a borrower has to qualify for two percentage points higher than the mortgage for which they are approved.

CMHC suddenly became aware that mortgages that were not insured because they had a 20% down payment were a debit against the financial system as a whole.They made up a huge portion of bank assets. As they worried they designed a program to address this problem. The Office of the Superintendent of Financial Institutions requires all borrowers to now qualify at the Bank of Canada 5 year posted rate. According to the Financial Post a borrower with 20% down can get a 2.97% mortgage today but will require 20% more income to qualify for the same mortgage under the new stress test rules. Independent analysts have added that the higher income requirement may be mitigated by a longer amortization period. The OSFI did not specify a certain length of time although they did comment that amortization periods still had to be within the allowable mortgage rules.

The concern of many is that borrowers will turn to the alternative financial markets not regulated by OSFI as the banks are. These mortgage specialists could become a much larger portion of the market. OSFI is only interested in the financial health of the banks in relation to the high level of consumer debt according to Superintendent Jeremy Rudin.

The real estate industry as a whole is concerned that the higher sales prices are limiting the number of buyers and that the stress test for mortgages will limit them further. This means that fewer younger Canadians will be able to afford to buy a home.

Garry Marr of the Financial Post reported that CMHC when discussing the influences on their portfolio as they performed stress tests to see how it would stand up had a list of potential problems. The new addition to the list was anti-globalization. They were looking at the rise of populism and the damage to economies by increased trade barriers. They looked at other influences but they did not combine the influences. They considered earthquakes, a steep decline in oil prices as well as an American style housing market meltdown as occurred in 2009 in the US.

Combined with China's limitations on their citizens taking money out of their country to invest in property overseas it may well be that this perfect storm does in fact impact prices in the Vancouver marketplace. We seem to be between a rock and a hard place.

High home prices, lack of inventory, crazy single-family zoning restrictions add to the mix. We shall see how it all comes out if the different levels of government finally get their acts together. Will let you know along with news of the Second Coming.

DT00KV