Author Archives: Brenda Kinnear

Vancouver Real Estate: Lack of Inventory in August 2017

As the world was falling down around us with wildfires, hurricanes, terrorism, violent political demonstrations Vancouver real estate just skipped along to yet higher prices overall and extraordinary demand in the condo market.

The big reason for continuing rising prices in the Vancouver real estate market is the total lack of good inventory. The State of the Market report from the Urban Development Institute tells us that there is not one new move-in ready concrete condo or townhome available within the city limits. Even outside Vancouver the inventory is at record lows. There are only 23 move-in ready concrete condos for sale in the whole of MetroVancouver as of the second quarter of 2017.

The pre-sale market of multi family homes reached a seven-year low in the second quarter with 1446 condos and 496 townhomes available in the entire Metro region according to an analysis in the Real Estate Weekly.

Anne McMullen president and CEO of the Urban Development Institute is quoted as saying "...Various independent and academic studies have proven supply is being throttled by restrictive single-family zoning policy and delays in permitting."

Real estate property sales rose 22.3%in August 2017 compared with August 2016 which was impacted by the newly proclaimed Foreign Buyer Tax. Last year’s sales were mainly in the detached segment. According to Jill Oudil President of the Real Estate Board of Greater Vancouver "First- time buyers have led a surge this summer in demand in our condominium and townhome markets. Homes priced between $350,000 and $750,000 have been subject to intense competition and multiple offers across the region."

"Conditions in our detached home market are distinct today from the dynamic in our condominium and townhome markets," Oudil said. "Detached homes have entered a balanced market. This means there is less upward pressure on prices and that buyers have more selection to choose from and more time to make their decisions."

The sales to active listing ratio for August 2017 is 34.6%. By property type, the ratio is 16.3% for detached homes, 44.8% for townhouses, and 76.3% for condominiums.

In August 2017 the benchmark price for a detached home in North Vancouver was $1,711,100 up 0.4% in one year, up 75.0% in 5 years and up 98.4% in 10 years. In Richmond the benchmark price was $1,676,000 down -0.9% in one year, up 70.3% in 5 years and up 138.4% in 10 years. In Vancouver East the benchmark price was $1,565,300 up 2.1% in one year, up 82.3% in 5 years and up 148.0% in 10 years. In Vancouver West the benchmark price was $3,654,500 up 1.0% in one year, up 72.5% in 5 years and up146.8% in 10 years. In West Vancouver the benchmark price was $3,189,500 down -6.3%in one year, up 66.7% in 5 years and up 109.1% in 10 years. Each year affordability declined for local buyers.

Vivagrand Developments, a real estate company out of southern China, has been using the Vancouver market as a springboard into international development. They recently cancelled Langara West, their pre-sale project at 59th and Cambie. 71 people bought pre-sale units at a price point of $750-$900 dollars per square foot.

The project will now not go forward as the financing was withdrawn due to the delays in getting a building permit from the city of Vancouver. The city planning department states that the developer did not submit revised paperwork as required after a tree on the property that was an integral part of the application was cut down anonymously.

The current price per square foot for new construction in the Cambie neighbourhood is $1200-$1400 a square foot. These buyers are receiving their deposit +50% back from the developer. No damages. Most will be unable to purchase a new unit in the area.

Delays in getting building permits in the city of Vancouver are notorious. Any prudent buyer should check the track record of the developer from whom they are considering purchasing a pre-sale product. Buyers are well advised to buy from a large builder who has access to guaranteed financing and who has the financial strength to withstand unusual delays. Vivagrand is not the only developer who has left buyers in the lurch. Chandler Development Group who has a checkered bankruptcy history is back in the news again for swindling some LA investors.

In the case of the Langara West project the developer has stated that they will be reselling the land and not going ahead with the project. Commercial realtors have estimated that the purchase price of $12.5 million in 2014 has risen three times since then so the developer will receive a large profit on the resale of the property. The trusting pre-sale buyers are out of luck.

In August 2017 the benchmark price for an apartment property across the region was $626,800. This was a 19.4% increase from August 2016. In August 2017 the benchmark price for a condo apartment in North Vancouver was $551,000 up 15.9% in one year, up 53.3% in 5 years and up 60.6% in 10 years. In Richmond the benchmark price was $594,100 up 26.4% in one year, up 70.7% in 5 years and 80.4% in 10 years. In Vancouver East the benchmark price was $529,400 up 20.4% in one year, up 72.3% in 5 years and up 90.9%in 10 years. In Vancouver West the benchmark price was $787,400 up 13.0% in one year, up 66.7% in 5 years and up 76.7% in 10 years. In West Vancouver the benchmark price was $1,128.000 up 10.9% in one year, up 54.4% in 5 years and up 56.6% in 10 years.

The NDP has brought down an interim budget that featured some money for affordable housing but did nothing to address affordability in the real estate market or raising taxes on non-resident buyers. We will have to wait until February 2018 and the full formal budget to see where those election promises are going. There is speculation that Andrew Weaver and the Greens are objecting to some of the planned implementation and so ideas need public consultation and input in the hope that will force some decisions.

Douglas Todd of the Vancouver Sun continues to report regularly on the shenanigans around real estate and the ineptitude of CRA in enforcing any tax provisions against those taking advantage of the easy rules on money laundering and tax avoidance. According to Census figures Vancouver with the most expensive real estate in Canada ranks #14 in average wages. Also interesting is the fact that Richmond, Burnaby, Vancouver West and West Vancouver with the most expensive real estate in Canada have the highest rates of poverty and the largest number of foreign born residents.

According to Richard Wozny,prominent immigration lawyer, this disparity is caused by "inappropriate reporting of family incomes" and governments need to crack down on residential property speculators. Todd reports that Wozny states that it is not logical that so many low-income residents buy expensive houses. The outcome is that Metro transit system costs, school funding is largely borne by residents of the suburbs where house prices are lower. Apparently residents of Port Moody which has average house prices have the highest taxable incomes in Metro Vancouver.

In comparing Vancouver to Seattle it is clear their house prices have not risen like ours even though they attract wealthy immigrants to their city. It appears that the difference between us is that the US taxes all residents on world-wide income. There is no escaping the wrath of the IRS. Maybe we should try that here. More anon.

DT00KV

Nothing is guaranteed in Vancouver

There's so much turmoil in the news today and so many extreme opinions on every subject that it does seem like a good time to be nice to those around you. The biggest issue in Canada at the moment is that of illegal immigration including refugees streaming into Quebec from the US.

Some legal immigrants who jump through all the hoops to get here are saying of Canada that it's one of the most difficult countries to get into legally and the easiest to get into illegally. The Prime Minister has reassured us that all Canadian laws will be applied to refugee claimants. Fairness is so engrained in the Canadian psyche that this issue and real estate affordability are probably the hot buttons in a discussion anywhere in the country.

Immigration ideas turned upside down

Douglas Todd of the Vancouver Sun who writes regularly on immigration issues interviewed Sanjay Jeram a political science professor at Simon Fraser University. Jeram states that immigration discussion in Canada is a taboo subject. He thinks that immigration to Canada should be examined from an economic not racist point of view. The discussion should be around the impact on overcrowding, housing, opportunities for domestic workers or the welfare state.

He talks about how federal immigration policy has brought in two financially opposite groups of newcomers. The rich and those with low incomes. There is competition between the low-income groups including international students for all rental spaces in both Toronto and Vancouver. The influx of wealthy foreign buyers has moved middle-income housing to the high-end. This means the local millennial buyers cannot afford to purchase or rent in the cities.

Jeram's point is that foreign investment should not be in housing but in activities that benefit the economy. There should be limits on purchasing by foreign buyers as there is in Europe since so much of the money they bring into the country is invested in real estate and homes are left empty and unused.

Jeram’s thesis is that corporations should be required to train local workers before bringing in skilled workers from abroad to fill available jobs. He is concerned that Canadian society will run out of tolerance due to the pressures on the social safety net.


Spyglass Dock on Granville Island at the east end near the Cambie Bridge, looking across False Creek to Marinaside Crescent in Yaletown. Photo by Viv Lynch

The search for affordable housing continues

A recent survey of millennial thoughts on real estate discovered that financially mature millennial buyers say they can afford $350,000 to buy a home. A different article projected that there won’t be enough homes available to buy at an affordable price until the bulge of the Baby Boomers reach their mid-80s.

Real estate activity in Metro Vancouver is stronger than in parts of the Greater Toronto area. In both cities, the investment surge is into the new condominium development. Partly because foreign buyer taxes can more easily be evaded, there is an upside to the price as the development gets built and there is a rental component that will return value to the buyer.

It is noticeable in many real estate offices in Vancouver that the large increase in listings of resale properties is heavily in the condominium sector. In Vancouver Westside new listings for modern livable houses that are not grand mansions come on the market for $4 million and more. Not affordable housing by anyone’s standards.

We are waiting to see if the new NDP government has time and energy to address housing when there are so many urgent decisions to be made. At the moment there are discussions in the financial sector as to whether there is inflation that requires rate increases actually happening. Anything that raises mortgage rates is like a rock thrown into a pond---the ripples go out forever.

Nothing is guaranteed in Vancouver

Last month we discussed how the Bing Thom Architects designed 57-storey redevelopment of the First Baptist Church property at Burrard and Nelson. Since then the application by Westbank Properties and First Baptist Church to develop the church property has been approved by City Council.

It's another lesson learned by those who opposed the application based on the obstruction of the view they paid a premium for when they purchased their nearby upscale condos. Having your water view dependant on overlooking empty space like the church parking lot is a recipe for investment loss.

Nothing is guaranteed in any way in Vancouver. Every piece of land is open to development. And every view can be compromised, even the street corridor views to the harbour which are getting narrower by the year.

True waterfront locations are at a premium in Vancouver. There are many buyers both local and offshore willing to pay top price for a larger unit with a guaranteed unobstructed outlook. If money is no object, search for a place in the very front row of condos right at the waterfront, where it's absolutely impossible to build in front of you. Another good option is to buy on a hillside so that anything that's built further down will not obstruct your view.

When buying a pre-construction condo, make sure to check out what will be going on around the building before signing a pre-sale contract, and be careful with parks in front of the view as parks can be rezoned.

SK00KV

Vancouver July 2017 Market Report: The Buyers are Shifting towards Condos

The lazy hazy days of summer have been in the ascendant in 2017. These have been the longest days of no rain and high temperatures since 1958. The fires in the Interior have blanketed the coast periodically with smoke impacting both tourism and breathing. The tourism stats show that there are still people coming to British Columbia but probably re-directing their trip from the national and provincial parks in the Interior to the cities on the coast.

The real estate market always slows down in July and August. This year not so much in the condo sector. According to Jill Oudil President of the Real Estate Board of Greater Vancouver "Housing demand is inconsistent across the region right now. Pockets of the market are still receiving multiple offers and others are not. It depends on price, property type, and location. For example, it’s taking twice as long, on average for a detached home to sell compared to both townhomes and condominiums." The sales to active listings ratio for July 2017 is 32.2 per cent. By property type, the ratio is 16.9 per cent for detached homes, 44.9 per cent for townhouses, and 62 per cent for condominiums.

The impact of the foreign buyer tax and the lower rate of return on detached homes

Last year in July the provincial government announced their foreign buyer tax. It was a mad scramble to close properties before the tax took effect which distorted the market at that moment. However, there was a slowdown in sales for several months afterwards while the market adjusted to the changes. The tax was eventually absorbed by the seller and the buyer of the higher end properties that attracted foreign investment. It did impact the number of detached sales.

Over several years there was a time of rising prices where investors made huge profits on the buying and selling of detached homes. Part of what slowed the market down in that category is the lower rate of return on detached homes. In July 2017 the benchmark price for a detached home in North Vancouver was $1,716,800 up 0.5 per cent in one year, up 75.5 per cent in 5 years and up 99.9 per cent in 10 years. In Richmond, the benchmark price was $1,682,000 down 1.7 per cent in one year, up 70.4 per cent in 5 years and up 140.9 per cent in 10 years. In Vancouver East, the benchmark price was $1,561,700 up 2.2 per cent in one year, up 81.1 per cent in 5 years and up 149.1 per cent in 10 years. In Vancouver West, the benchmark price was $3,666,200 up 2.1 per cent in one year, up 68.8 per cent in 5 years and up 150.3 per cent in 10 years. In West Vancouver, the benchmark price was $3,180,000 down 6.1 per cent in one year, up 64.4 per cent in 5 years and up 109.1 per cent in 10 years. Each year affordability declined for local buyers.

These rising prices coincided with all levels of government looking away from the illegal activities going on in the market. CRA did not inspect false claims of primary residence on empty houses which resulted in many investors, developers and speculators avoiding the capital gains tax and cheating the Treasury of billions of dollars. Nothing happened until the Globe and Mail wrote an expose of Vancouver real estate practices and the Superintendent of Insurance convened a committee to investigate and report back. There have been many improvements with more on the way. Now that CRA is looking closely at tax avoidance and requiring statutory declarations and proof of residence the desirability of detached homes has somewhat diminished.

The buyers are shifting towards the condo market

Foreign investment and local buyers have moved into the condo market. Particularly the pre-sale market. There are many complaints that planned developments are being pre-sold offshore so that there are no affordable units left unsold when the project hits the market in Vancouver. Local buyers are closed out. In July 2017 the benchmark price for an apartment property across the region was $616,000. This was an 18.5 per cent increase from July 2016. In July 2017 the benchmark price for a condo apartment in North Vancouver was $545,100 up 17.2 per cent in one year, up 53.2 per cent in 5 years and up 60 per cent in 10 years. In Richmond, the benchmark price was $582,200 up 26.5 per cent in one year, up 62.8 per cent in 5 years and up 78.8 per cent in 10 years. In Vancouver East the benchmark price was $524,700 up 20.5 per cent in one year, up 68.7 per cent in 5 years and up 91.7 per cent in 10 years. In Vancouver West, the benchmark price was $783,700 up 11.7 per cent in one year, up 64.2 per cent in 5 years and up 79.6 per cent in 10 years.

Metro Vancouver is the fifth most popular city in the world among wealthy Chinese investors

Douglas Todd of the Vancouver Sun reports regularly on the impact of offshore money on the real estate market in Vancouver. He writes that many immigration lawyers who travel to Mainland China state that the real cause of the flow of money into the Vancouver real estate market is the 10 year Visa instituted by the Government of Canada in 2014. It has allowed visits up to 6 months without any responsibility to pay taxes here and many parents are investing in real estate using their foreign student children as proxies. The 10 year Visas encourage money laundering and tax avoidance and have fuelled the booming Vancouver and Toronto real estate markets according to Immigration lawyer George Lee.

Todd states that Canada is the second most desired country for multi-millionaire Mainland Chinese according to the Hurun Report and Metro Vancouver is the fifth most popular city in the world for wealthy Chinese investors.

The new NDP/Green government has real estate in its sights. Their programs to create affordability have the support of the larger community of voters. They are looking to close the tax loopholes of "bare trusts" that obscure legal ownership and help avoid all taxes due and payable on a purchase of a property. They are looking to add the foreign buyer tax and all other taxes to pre-sales at the time of purchase. This would prevent buyers from selling their contract on for profit with no tax payable. Specific legislation should come down in the September mini-budget.

With the popular demand for accountability in the real estate industry and a left leaning government who ran on that platform, we will be following the outcome of the change in strategy closely. More anon.

SK00KV

Vancouver Real Estate: Low Inventory in June 2017

As projected in May the condo is King in June. The trend is for prices to rise continuously in the condo market because it is so in demand and the inventory is low. The detached home market has recovered in value from last summer's Foreign Buyer Tax slow down that followed its implementation but it has impacted the number of sales. Partly because prices rose and affordability dropped further. Suddenly the Hundredth Monkey Effect took hold and the buying public completely gave upon the idea of a detached home being necessary for a happy life and turned its attention to the townhome and condominium market as an alternative. There are multiple offers on almost every property. Some sale prices are 40% above last year’s sale price for a comparable unit. Condo sales all over seem to be coming out around $1000 per sq.ft. and even higher for the luxury market. The sales-to-active listing ratio in June was 24.5% for detached; 62% for townhomes and 93.2% for condos. When the ratio is above 20% for a few months it causes an upward pressure on prices.

The Aquabus making its rounds by David J Laporte

Anecdotally, as the government is still not keeping reliable stats, in Richmond and Vancouver the majority of detached home buyers seem to be from Mainland China. The home prices are higher than what most local people can afford. We are still not sure what the impact of the Chinese currency regulations will be in the long run. The problems of getting money out of China do seem to be real. However creative ways around the restrictions have worked in the past and may work again this time. According to the Vancouver Sun Juwai an important Chinese real estate website states that Chinese investors at home and abroad spent over US$100 billion on overseas property investments in 2016. Canada was in the top 5 countries after the US, Australia and Hong Kong.

In the upcoming month a lot of the historical data will be out of date because the government is stirring the pot again. The anxiety by the Bank of Canada around over-leveraged homeowners is moving the banks to require even more depth for borrowers that already are putting 20% down on their mortgage. Every mortgage transaction is going to require a stress test on the borrower to prove they can qualify fort he mortgage at two points higher than the mortgage rate that they actually receive when they apply. The consensus is that uninsured mortgages are a big risk to the financial market.

The Royal Bank has already raised its long-term lending rates for mortgages and the other banks are following suit. We may see a drop in the sales numbers as fewer people will qualify with these higher mortgage rates on the stress test. It is definitely going to put more pressure on the condominium market as it will be the only affordable source of housing.

There's also a big impact on housing expected of the incoming NDP government. The Green Party has made clear what they will support and the NDP has said that they are working for more affordable housing. The problem is that there is little land to build anything on and that is the largest component of any affordable housing program. There won’t be a Throne Speech outlining their plans until September when the new Legislature meets. Still no solution announced to the problem of appointing a Speaker from the government bench when the government NDP//Green partnership has a one vote majority.

The wildfires currently raging through the Cariboo and central BC will cause a change to government priorities. A lot of discretionary spending of the Liberal billion dollar legacy will need to be put aside to rebuild the shattered and burned communities and economy. Much of that region receives the majority of revenue through tourism which has had to be shut down as the forests burned and the towns were evacuated.

An activist Vision Vancouver councillor has been appointed the Chief of Staff for Premier-Designate Horgan. Geoff Meggs was the strategist for the successful NDP urban campaign platform in the recent election. There is going to be a lot of merging of NDP policy with Vancouver city policy. At the moment Vancouver is busy trying to implement a Vacant Home Tax and short term rental restrictions on all properties. They are trying to create more long term rentals through a huge property tax increase for any property that isn’t a principal residence and sits vacant. According to recent counts there are more than 25,000 empty residences in Vancouver. Airbnb and Expedia are considered the culprits in the lack of rental housing because so many investors would rather have short term rentals that don’t fall under the Residential Tenancy Act. Short term rentals of secondary suites, laneway homes and investment properties are now totally disallowed in Vancouver. It’s hard to predict whether investors will sell their second properties or live with the new regulations.

We are still looking good in the context of climate and political disasters around the globe. It doesn’t appear that house prices in Vancouver will fall to the Golden Mean of yesteryear. Wishful thinking all around. We will keep you posted.

JB00KV

Vancouver Real Estate Market Recovered in May 2017

It was once common to use the expression "as the world turns" to explain inexplicable actions. Today the wording has segued into "as the world spins"...off it’s axis. In some ways the old misogynist spirit is abroad in the land as either populist or progressive political theories move forward. It will be interesting to see how Chancellor Angela Merkel fares in the upcoming German elections. The stars of far right French politician and National Front President Marine Le Pen, UK Prime Minister Theresa May and BC Premier Christy Clark have fallen in the month of May and early June.

Political uncertainty is never good for business and the alliance of NDP and Greens following the BC election on May 9 plans to follow an agenda antithetical to resource development. The province divided between urban and rural voters who have totally different views of the economy. Urban voters want free or subsidized everything in order to compensate for the high prices of housing and commodities in the expensive Lower Mainland while voters in the north of the province are worried about their resource or energy industry jobs being lost to the urban agenda that put the NDP/Green coalition in a position of potential power.

It’s difficult to judge the impact of campaign rhetoric on real estate going forward. The real estate market has recovered its mojo on prices. Detached housing which was the big mover in 2016 has fallen off except in price while condos and townhomes have risen in sales numbers and price. Lack of inventory is what is holding back the market although home buyer activity overall returned to near record levels in May. If there is a big rise in the Foreign Buyer Tax which has been touted as going from 15 to 30% we may see a change in these numbers. The imposition of a projected 2% speculation tax will impact investor buyers, especially if added to a 30% Foreign Buyer Tax, all of which has been proposed by Andrew Weaver, leader of the Green Party.

Last month’s sales were 23.7% above the 10-year May sales average and is the third-highest selling May on record.

Benchmark price for Detached homes on the Westside was $3,588,300, an increase of 4.2% from May 2016 before the Foreign Buyer Tax was announced; in Vancouver East it was $1,513,800 which is a 3.9% increase over May 2016; in North Vancouver it was $1,656,500 which is a 3.0% increase over May 2016. In Richmond the benchmark was $1,634,800 a drop of -0.5% from May 2016 and in West Vancouver it was $3,080,600 a dip of -1.5% from May 2016. In Richmond many buyers are required to pay the Foreign Buyer Tax. Foreign buyers for Vancouver Westside where the tax seems to have had surprisingly little impact appear to have very deep pockets indeed.

Townhomes as an alternative to a detached home are much more affordable and highly sought after. Some areas have built more inventory over the past years than have other places but all are popular. The Benchmark price for Townhomes in Vancouver Westside was $1,154,200 an increase of 11.5% over May 2016; in Vancouver East it was $792,300 an increase of 9.2% over May 2016;in North Vancouver it was $917,500 an increase of 14.9% over May 2016; in Richmond it was $762,800 an increase of 11.3% over May 2016. West Vancouver does not offer a statistically viable number of sold townhomes.

As a matter of interest given that the rise in sales has been led by the condominium apartment market the May 2017 Benchmark price for condos follows: in Vancouver Westside the benchmark is $737,500 an increase of 9.6% above May 2016; in Vancouver East it’s $496,800 an increase of 23.1% over May 2016; in North Vancouver it’s $502,000 an increase of 18.8% above May 2016; in Richmond it’s $522,900 an increase of 26.2% over May 2016; in West Vancouver the benchmark was $1,033,000 an increase of 21.3% over May 2016.

As those aspiring to buy homes in Greater Vancouver have come to realize that the impact of world wealth on the prices of detached homes or luxury waterfront condos is not affected by penny-ante Foreign Buyer Taxes the demand for "affordable" housing has moved into the attached home market. These buyers are likely to be affected if the pillars of the economy are knocked down by a new government as has happened in the past as they are local residents dependent on the local job market. This is where the monetary policies of the Bank of Canada and the mortgage requirements of CMHC impact the real estate market. The BoC is concerned that the high levels of household debt and the surging real estate markets in Toronto and Vancouver will impact the entire Canadian economy. So far the economy is resilient but changing governments can make a difference to outcomes.

May 2017 was a wonderful month with a sales to active listing ratio of 53.4% across all residential categories, broken down as Detached 31%; Townhomes 76.1% and Condominiums 94.6%. May the good times continue.

JB00KV

Vancouver Waiting for the Final Vote in April 2017

Despite the media trumpeting stats that the real estate market is down the reports are referring to the numbers of sales, not prices. April sales were 4.8% above the 10 year average for the month but much below the megasales numbers of 2016. There has been little inventory coming on the market due to seller uncertainty about what would be available to purchase if they did decide to downsize in this market.

Vancouver by Kyle PearceVancouver by Kyle Pearce

The stratospheric detached home prices have resulted in a huge surge in the numbers of condos and townhomes sold. The benchmark price for an older ordinary detached home, considered mainly as a building lot, on the Westside of Vancouver is $3,500,000. In North Vancouver and Richmond the benchmark price is $1,600,000. Lack of affordable inventory has created a multiple offer scenario on almost every sale. For the first 4 months of 2017 condominium and townhouse sales have comprised 68.5% of the residential sales market on average. For 2016 in the comparable sales period condominium and townhouse sales were at 58.2% market share. A 10% increase in one year.

After the May 9th Provincial Election the real estate market has leveled off while everyone waits to see which party forms the government and which wild real estate scheme will come to the fore. There was a split in the province as the resource based north looked for development projects and jobs, the Lower Mainland population worried about Affordability. A huge portion of the population feels uncertain of their future in the Greater Vancouver region. There is little affordable housing to rent or buy, the cost of living is high, transit projects are not being funded, infrastructure is being neglected and people who grew up here, who moved here no longer feel like they have a safe future. Vancouver is hurtling down the road of becoming a world wealth resort city.

There is resentment in the population over the perception that outside money is distorting the real estate market due to the negligence and greed of the Federal and Provincial governments who look away from dirty money pouring into Canadian real estate and being laundered clean when the properties are sold. Canadian banks are complicit too. There is a short term focus on share holder value and none on the longer term effects of no families,no young people, no life in the heart of our cities. This fear is endemic in London, in Sydney, in New York, in San Francisco, in Toronto and elsewhere. Canada has the Immigrant Investor Program operated by Quebec, the US sells Green Cards to foreign investors who invest in mega real estate projects through the EB-5 Visa program.

In the election the Liberal party opted for tweaks to the status quo, not wanting to diminish residents equity in their homes. The idea being to keep home owning voters onside and hoping that more people can afford to fund their retirement from their home sale. They also focused on their economic record and balanced budget. They were successful outside the Lower Mainland.

The NDP offered to raise taxes on corporations and high earners and remove user fees from almost everything. No bridge tolls, no healthcare costs, subsidized daycare, renters subsidy, to build 114,000 units of affordable housing etc. Higher Foreign Buyer Taxes, forced rentals of empty homes were also part of the program. Local voters who closed their eyes to the costs of the platform just wanted it all to happen for them. These promises swept many seats in the Greater Vancouver area. If the recounts give more seats to the NDP we may see how they implement these pipe dreams.

The Green Party is holding the balance of power and their main goal is to change the way the voting process occurs so they can get more seats in the future. No First Past the Post even though that current system has been reaffirmed by referendum in BC in the recent past. The Greens plan to force whatever party they support to implement Proportional Voting without a referendum. They have also got a pie in the sky housing platform but it seems to have slipped down the To-Do list along with their environmental concerns. A recent post-election survey showed that many people have voters remorse already. What they thought was a protest vote has upended the system and tied the Legislature’s hands.

The real estate market is still busy but it’s waiting for the other shoe to drop. The final vote count and appointment of a government will occur before the end of May. May the Games Begin!

JB00KV

Prices Driven up by Competition and Location in March 2017

The raging fire of unsustainable rising prices seems to be consuming the Greater Toronto housing market including satellite cities like Barrie 90 km away and Hamilton 65 km away. The big concern for Stephen Poloz,Governor of the Bank of Canada is the effect a real estate collapse would have on the Canadian economy. The Greater Toronto Area (GTA) economy is larger than many of the smaller provinces combined. Right now it is being sustained by a soaring housing market with a 35% price increase for detached homes between March of 2016 and 2017.

Although the hot housing market in BC is included in the mix of BoC worries the Vancouver home market in the higher detached end has not been leveraged by local speculators as much as the Toronto market. The Vancouver buyers have deeper pockets. Vancouver has more international buyers some of whom may be impacted by CRA enforcement of FINTRAC and money laundering laws, the principal residence crackdown on exemption from capital gains rather than mortgage debt. 

Vancouver Skyline byVancouver Skyline by Jerry Meaden

It does seem like the Chinese government imposed restrictions on sending funds outside their country is having an impact on the ability of some buyers in the $2million price range to access money in a timely fashion. Deals are falling apart over the availability of deposit funds and the heightened requirements around down payments by Canadian lenders. Many corporate and ultra-wealthy individuals who have money in foreign banks are able to avoid these restrictions and can and do purchase homes in the $5million+ price range. There are bona fide buyers in the $20million+ price range. The benchmark price for detached homes on the Westside of Vancouver is currently $3,461,700. This is a 12.7% increase from March 2016. The low Canadian dollar makes the costs of purchasing here about 40% less than in comparable high value currency locations.

The concern now is the pressure on condos and townhomes. There are so few listings that the prices are being driven up by competition and location. There is one recent sale of a 450 s.f. condo near Kits Beach being listed at $399,000 on an assessed value of $365,000 selling with 21offers for the extraordinary price of $700,000.

BC Assessments are finalized by July 1 of the previous year. In 2017 the assessments are reflecting sale prices of 2016 before there was any interference in the market by the government in the form of the Foreign Buyer Tax. The imposition of the FBT created the expectation that sale prices would be considerably lower than assessments and many home owners who are house rich and cash poor rushed to appeal their assessments. It turns out that homes are now selling just below or considerably above the BC assessment price. In the lower price ranges condos and townhomes are selling higher because there are between 2 and 20 offers on every property. In North Vancouver and Richmond townhouse prices are up over 17% between March 2016 and 2017.

According to the Real Estate Board of Greater Vancouver the sales-to-active listings ratio for March 2017 is 47.2%, a 15% increase over February. Generally a downturn in price occurs when the ratio dips below the 12% mark and home prices rise when the ratio surpasses 20% over several months.

Many buyers are moving out of Vancouver and other close-in locations like Richmond and Burnaby to buy in outer areas like New Westminster and Abbotsford which were quite affordable for 2 and 3 bedroom condos for a long time. Prices are rising there due to demand. Year over year prices in March for condos rose +17% in New Westminster; in North Surrey or Whalley +18%; in Abbotsford +30%. In new developments buyers are willing to pay more than the original price for an assigned contract. If buyers are willing to accept the inconvenience and expense of ferry travel they can buy a detached home in Powell River on the Sunshine Coast for under $300,000. Prices and demand is rising due to buyers leaving other once affordable areas like Squamish where detached home prices went from $450,000 to $700,000+ in a short time span.

Jay-Banks-March

In the Vancouver Sun there is a big discussion going on about the role the City of Vancouver under Mayor Gregor Robertson has played in the rising unaffordability of new construction. The cry is for more affordable homes so that young families and employees can live in the city. The problem is that Vancouver didn’t want to upset the political applecart or their major campaign donors so placed no restrictions on rezoned land. The idea was to build more affordable family friendly larger condos near transit but the land along the main streets and particularly the Cambie corridor got bid higher and higher until the only units built in the approved condo buildings sell for over $1million and are available to foreign buyers and downsizing baby boomers. They listened to their voters who didn’t want low-rise development on the fringes of their neighbourhoods and still placed no restrictions on the rezoning so any lowrise condos or street entry townhomes will be predictably unaffordable no matter where they are built.

The planners and City Council are projecting demand along the UBC subway line which may never get built and allowing developers to buy up existing commercial properties and start lobbying for higher heights and more density on the property. Over many years no City Council has defied the voters to preserve the character of the city and to enforce high architectural standards. As a result beautiful neighbourhoods are blighted by huge mansions of no redeeming style. Vancouver charges the lowest property taxes of any major city in Canada. There is never enough money to support worthwhile endeavours and all that there is available is directed away from solving the middle class housing crisis.

In the current provincial election campaign promises for housing solutions are being offered by all sides. Some are draconian in method and may have the result of destroying the momentum that all facets of the real estate industry have contributed to the best provincial economy in Canada.There is a rising public demand for a solution but no easy answers after 30 years of mismanagement by the Social Credit, NDP and Liberal governments. Expo86 was the watershed moment when things went wildly awry. It used to be that Vancouver was a city where you could enjoy a champagne lifestyle on a lemonade purse. It’s wonderful to be wanted by the world but we could have made less self-centred choices. Singapore is a wonderful example of a forward thinking,forward planned city that benefits all its residents despite enormous international demand to live there. Australian regulators are worried that it’s housing bubble is about to burst with great damage to the economy. The prices in Melbourne rose 14% and in Sydney 19% in the past year. The conditions of a resource based economy with low interest rates, high levels of consumer debt and international investors resonates with that of Canada.

Around the world it is a damned if you do and damned if you don’t list of financial choices and regulations. Finance Minister Morneau is huddling with the Premier of Ontario and the Mayor of Toronto to try to prevent a possible meltdown of Canada’s two turbulent housing markets of Toronto and Vancouver.

More anon.

JB00KV

Vancouver Housing Market Still Strong in February 2017

There’s an old Scottish saying that ‘you should cut your cloth according to your stipend’ meaning to live within your means. It appears that local buyers are taking that idea to heart and making housing decisions based in reality, not dreams.

The Vancouver housing market is still going strong, not gangbusters like it did a year ago when offshore money was pouring into the detached housing market, but extremely active all the same. The detached market is recovering its mojo but the real demand is for townhomes and condos. Properties at each price point in all areas are receiving multiple offers and selling over the asking price.

Vancouver Housing Market Still Strong

Condo properties in the city, close to transit, restaurants, and other amenities sell at a higher price point than further out. Buyers go where they can get a mortgage so North Vancouver near the Seabus is next on the desirability list. Richmond, where units are a little larger and less expensive per square foot but close to shopping, transit, and community centres, is attracting buyers. It’s 25 minutes from Brighouse across from the Richmond Centre to Waterfront Station with no downtown parking costs when you arrive.

With this change of attitude of buyers and with sellers worried that there is nowhere to go if they do sell the inventory is at a 14 year low for February. We are back to a Seller's market with the sales-to-active-listings ratio at 31.9% for February 2017, a 10 point increase from January 2017. A buyer’s market with lowered home prices occurs when the ratio goes below 12% for a sustained period of time, while a seller's market which we have enjoyed for the past several years occurs when the ratio is above 20% for that time frame.

No matter how it’s looked at affordability is a huge issue in Metro Vancouver. The MLS composite benchmark price for all residential properties in Metro Vancouver is $906,700 in February. This price is down 2.8% from the high of June 2016 and up 1.2% from January 2017. There is international financial institutional concern that the high price of homes and the amount of debt that borrowers are carrying is a danger to the Canadian economy.

In an effort to bridge the affordability gap the provincial government instituted a program called BC Home Owner Mortgage and Equity (HOME) to help qualified younger buyers with the difference between what they have and what they need as a downpayment to purchase. They can borrow up to $37,500 interest and payment free for 5 years. As always the devil is in the details. The loan has to be factored into the debt service ratio of 35% of household income required to qualify for the mortgage by the bank and the new federal mortgage rules require the borrower to qualify at the posted 5-year bank rate. This limits the number of buyers who can get a mortgage even with a minimum downpayment. It does assist younger first time buyers with a good paying job and closes to what’s needed for the downpayment. There is anecdotal evidence that this program is contributing to the number of multiple offers and sales over the list price on condominiums in the lower to medium price ranges. Everything that comes on the market sells if the building can be approved for CMHC financing. In some cases, the location or condition requires a higher downpayment but overall it is open season for condo homes.

There is a demand for investment apartment buildings as the rising prices in all home categories preclude purchasing by a large segment of the population. Rents are rising as fast as possible under the Residential Tenancies Act and any available loophole is being utilized. This includes fixed rate one year leases that can be increased without restriction at renewal. There is a rising concern in older buildings that new owners can evict long-term tenants in order to repair the units. The tenant can have first chance to move back in but most cannot afford the new rent. There is pressure on the municipalities to rezone for dense high rise rental buildings but many older walkup buildings will be razed in the process with old people, young people, new immigrants, disabled people with low incomes being unable to afford their neighbourhoods. The new town centres being developed along the Burnaby Skytrain line are replacing old with new in order to house the increasing numbers of people moving to the Lower Mainland.

February-Market-JB

In Metro Vancouver, a large portion of the rental housing stock is condominium investment properties. Unless the investor is a first owner and grandfathered as a landlord the strata council can hold a properly constituted meeting and the owners can vote to restrict the number of rentals. This also lowers the inventory. Almost any condo that comes up for sale is purchased by a user not investor. A recent Federal Court decision allows licensed medical marijuana users to grow their own drug inside their rental unit despite restrictions from the landlord and any ensuing damage. It creates fire danger for all the building residents but is now the law. A tenant can grow up to 60 plants, the landlord can lose his insurance and cannot evict the tenant. Sellers have to declare the past or present marijuana grow-op in their property when listing it for sale.

The Provincial Government is addressing the unintended consequences of the Foreign Buyer Tax on the recruitment of employees in IT and other specialized industries. With changes in the US business visa system, there may be more opportunities in Canada and local companies are trying to convince international talent to come to Vancouver. Everyone loves the city but not the housing prices, especially if a 15% surcharge is added to the existing property transfer tax. A work permit and paying Canadian taxes will exempt the non-Permanent Resident/Canadian citizen from paying the Foreign Buyer Tax.

There is a class action lawsuit from a group of Chinese buyers who are suing not to pay the Foreign Buyer Tax even though they are not Permanent Residents. They contend that the tax is discriminatory and that BC historically discriminated against people of Asian origin. Interestingly, as of November 2016, Hong Kong charges everyone buying a property a 15% Stamp Duty on the sale price. Only exceptions are Hong Kong Permanent Residents buying their first property. The HK property market was overwhelmed by Mainland Chinese buyers scooping up multiple homes at a time. Not that any level of tax is a deterrent to the most wealthy buyers in Hong Kong. A corporate buyer just paid HK$1.08 billion for a 9,950 s.f. house on The Peak and owes HK$324 million on the 30% Stamp Tax levy which includes the 15% "buyer’s levy" from 2012.

Douglas Todd of the Vancouver Sun writes that Canada Immigration has reported a large increase in Permanent Residents renouncing their status after 5 years. More than 21,000 immigrants over the past two years, mainly from China, India and South Korea, who qualified for Canadian citizenship refused it. They don’t want to meet Canadian requirements or pay Canadian taxes or declare income. They choose the 10-year visa program introduced by the Harper government. Under this visa, they can come and go on their passport of origin with no questions about working in Asia or spending sufficient time in Canada. Usually, children and spouses are living in Canada with the children going to school here until they graduate. Many return to Asia to work.

Todd in the Vancouver Sun also wrote on innovative tax schemes to cool the real estate market and create affordability. Some are practiced elsewhere to good effect. The idea is to level the playing field. People who don’t pay Canadian taxes and use loopholes in the tax system to evade CRA are speculating in Vancouver, Victoria and Toronto real estate. One option put forward by Ryan Kesselman, SFU policy specialist, advocates for a progressive property tax. Homes valued below a certain amount would be exempt. Percentages would increase to a maximum on houses over the limit. He suggested 0% below $1 million and 2% over $3 million. Those who pay Canadian income tax can offset the property tax. This way non-resident owners; those who own properties out of line with their income tax payments; speculators in residential properties; tax evaders; aggressive tax avoiders; criminals; astronaut families; nominee purchasers would all be paying an increased share of the tax burden. This system has been under discussion in Toronto where they are suffering the Vancouver syndrome of many foreign buyers and escalating prices.

Todd discussed the London purchase tax that has cooled the market there lately. The Stamp Tax is charged on a sliding scale from zero percent to 10 to 15% on more expensive properties. David Ley of UBC who wrote the book "Millionaire Migrants" proposes to tax the class of buyer, not the ethnicity. It’s clear that offshore investors will be returning to the Vancouver market and it would be a huge advantage to the provincial government to be pro-active on this issue. They can expand the effects of the Foreign Buyer Tax to actually help restore affordability to the third least affordable city in the English speaking world according to Demographia.

More anon.

JB00KV

The End of the Gold Rush Housing Boom in Vancouver

The End of the Gold Rush Housing Boom in Vancouver

It’s hard to get excited about the end of the Gold Rush Housing Boom in Vancouver when the rest of the world seems to be going up in flames on a daily basis. In fact

"The time has come," the Walrus said,
"To talk of many things:
Of shoes--and ships--and sealing-wax--
Of cabbages--and kings--
And why the sea is boiling hot--
And whether pigs have wings."

(Lewis Carroll)

Such topics seem just as relevant as last year’s housing news. The detached market is still out of reach for local buyers and the offshore buyers have vanished. Sales are down about 40% from January 2016. Prices are down about 10-15% but they were up 35% mid-2016 so single family homes continue to be unaffordable. The benchmark price for North Vancouver is $1,564,200; for Richmond $1,566,000; Vancouver East $1,440,500; Vancouver West $3,419,800; West Van $2,907,100. They are all up 16-18% except West Van at 9% in price from January 2016.

The listing inventory is up about 9% over January 2016 but is not fulfilling the demand in the affordable price ranges. There are multiple offers on almost every property under $500,000 but there are serious constraints on bank approval for purchases. Vancouver and suburbs are full of older condo buildings that are now being analyzed for the Depreciation Report required by the BC Government Housing Ministry. These reports are an eye opener to buyers and a red flag to lenders. Now that CMHC mortgage insurance requires more liability to be covered by the bank it has triggered a 20% downpayment policy for many condo buildings. According to the BC Government website: A depreciation report tells a strata corporation what common property and assets it has and what are the projected maintenance, repair and replacement costs over a 30 year time span. Common property is just not buildings. Seeing future costs laid out in black and white is a sobering experience.

The costs of buying and the higher downpayments is depleting the RRSP reservoir as buyers take their tax-free savings to buy homes.

The sales numbers are down mainly due to the fall off in detached sales as there still is demand for certain products. According to Dan Morrison, President of the Real Estate Board of Greater Vancouver, "Conditions within the market vary depending on property type. The townhome and condominium markets are more active than the detached market at the moment. As a result detached home prices declined about 7% since peaking in July while townhome and condominium prices held steady over this period." The sales-to- active listings ratio for January 2017 is 21%; the lowest since January 2015. Prices don’t usually drop seriously until the sales-to-active listings ratio is below 12%.

In Richmond over the Chinese New Year there were surprising sales in nice neighbourhoods of older homes. The $2 million price range was popular. The empty $3 million mansions did not sell. These may have been visiting buyers who got their money out of China before the new currency controls went into effect. Controls have been tried before and have usually been ineffective at preventing enormous amounts of capital fleeing China.

Market-Report-January-2017

The government has taken a much more interventionist approach this time and Chinese citizens looking to convert their money and send it overseas must go into the bank to do so and sign a waiver stating that they will not use the funds to purchase real estate or securities while travelling. The enforcement is heavy handed and those middle class Chinese buyers who have impacted the housing markets in Vancouver, London, Sydney are now afraid to defy their government and do not have the off-shore funds available to complete new home/condo purchases around the world. The developers who have Chinese pre-sale clients are being left high and dry with half-finished buildings. The mega rich corporate tycoons already have money stashed in banks around the world so are not so affected.

The perceived catalyst for sending buyers from Vancouver to Toronto and elsewhere is the BC Foreign Buyer tax of 15% added to the existing Property Transfer Tax for non-resident buyers who aren’t Canadian citizens or Permanent Residents who buy in the Lower Mainland. Although this was pointed out at the time the tax was enacted the government ignored the problem until closer to the upcoming election and are now back tracking on levying the Foreign Buyer Tax on those buyers coming to Vancouver to work. Many tech people and others recruited here by their employers were sandbagged by the additional tax levied without notice. No legislation yet but Premier Christy Clark has said that they will exempt working foreigners and may refund taxes to those who already paid.

The City of Vancouver has discovered that the population has shrunk in high-priced neighbourhoods and that vacant homes are up 15% since the 2011 census. In both Vancouver and Toronto buyers are flocking to the suburbs where housing is newer and prices more reasonable. Surrey and Langley are having huge growth spurts. A successful realtor in Barrie, Ontario which is 100 km north of Toronto was saying that most of detached home sales there are to Chinese buyers. Not every foreign buyer is ultra-wealthy and if they are planning to move to Canada they are looking for neighbourhoods of well-maintained or newer homes and good schools.

There are warnings coming from economists that in the housing markets that aren’t Vancouver or Toronto home prices fell over this past year. There is worry that the buoyant housing markets that carried Canada through the oil price drop of 2016 may be slowing enough to drag down the national economy. According to David Madani of Capital Economics there is no macroeconomic catalyst or trigger including the Foreign Buyer Tax that caused the sudden slow down in the Vancouver market. He says the market was largely driven by "unpredictable investor mania". Also the lax enforcement of money laundering laws and primary residence requirements by CRA. All coming under much more scrutiny now as many investors head for the hills or Toronto.

SK00SK

2016 the Third Highest Selling Year of Metro Vancouver Housing Market

A new day has dawned. Just not the one that all the pessimists were expecting. Properties have come off their mid-2016 highs; numbers of sales have declined from the end of 2015. Given that sales were already slowing by June 2016 it is a continuation of that progression of the market. A one year price increase of 35% mid-year for detached homes has fallen off to about 20% (except in West Vancouver where the one year increase ended at around13%) so no huge loss there.

There is currently a battle raging between home owners and the BC Assessment Authority over the 2017 tax assessments. The BCAA uses sales figures at July 1 of the previous year to set the valuations for the next year.This means that the 2017 assessments are set at the highest point in the market before the Foreign Buyer Tax crashed the party. The province had to raise the limit for the Homeowners Grant to $1.6 million in order to partly pacify their voters. The BCAA is about to be inundated with individual appeals of the assessments which have gone up 35-55% in one year. This means that municipal property taxes have gone through the roof.

The Metro Vancouver housing market of 2016 was the third highest selling year after 2015 and 2005. 

2016 the Third Highest Selling Year of Metro Vancouver Housing Market

The MLS Home Price Index (HPI) composite benchmark price for all residential (detached,attached and condo) properties in Metro Vancouver finished 2016 at $897,000.This is a 2.2% drop over the past 6 months and a 17.8% increase over December 2015.

However, it is an active orderly marketplace. The big difference is the change of focus from detached homes to townhomes and condos. With all the offshore buyers looking for investments in high end properties there was a strong draw to that product. It wasn’t until unethical and illegal real estate practices by some companies/realtors/developers/investors were exposed by the Globe and Mail investigative journalists that the provincial and federal governments were forced by public opinion to close loopholes that had made Canadian, particularly Vancouver, real estate attractive to money laundering and abusive investment strategies. The province stopped the process that allowed contracts to be sold before completion and then resold at a higher price with no tax paid, commonly called shadow flipping. CRA finally had to deal with the laissez-faire approach they took to dealing with unpaid taxes and illegal claims of permanent residency with no capital gains tax being paid on the sale of empty homes.

These mechanisms to slow the high end of the market were topped off by the Foreign Buyer Tax imposed in late July that added a 15% surcharge to the existing Property Transfer Tax to be paid by non-resident buyers. The FBT has moved foreign investor funds from the Vancouver to the Toronto market that is now in the same position that Vancouver was in 2015/16.

Although homes are still selling with the Seller absorbing the Foreign Buyer Tax in the sale price the interest in detached homes has waned. There are newly built mansions in the $3 million range languishing on the Richmond market. According to the Vancouver Sun in BC only 8 properties over $3 million were sold to foreign buyers in November 2016 while 304 properties under $1 million were sold to foreign buyers.

Overall it appears that foreign buyers are also looking for cheaper real estate. This may become more apparent with the upcoming Lunar New Year celebrations when a billion Chinese go on the move throughout China and around the world to observe the New Year with family and friends. Those who come to Vancouver often use the visit to choose a home here.

With local buyers at the fore a different product mix is selling. Mainly due to high prices and the changing mortgage requirements by CMHC.

2016-december-JB

In Richmond and Burnaby where there is still a preponderance of Chinese buyers attractive livable homes under $1.5 million are selling well. Prices are down about 10-15% from their high. In Vancouver on the Westside, the most expensive location in Canada large properties are not selling at the pace they once did. With a benchmark sale price of $3.4 million the change is demonstrated in the number of sales in December 2015 (133) and 2016 (64).

Local buyers who have to pass the bank’s mortgage stress test to be qualified are being forced to consider townhomes and condos. This has put pressure resulting in multiple offers on well-priced properties. Yaletown in Vancouver with its high walkability score is particularly popular. Recently a mid-sized condo in an 8 year old building listed for $718,000 received 6 offers and sold for $780,000. Over 100 buyers attended the Open House.

According to the Vancouver Sun most surveys have shown that BC, especially Metro Vancouver, is the Canadian capital of loans from the Bank of Mom and Dad at 42% of first-time buyers receiving help from family. It would be impossible for most first-time buyers to put together a downpayment for the mortgage if not for this help. There has also been an uptick in bundled mortgages where buyers go to an unregulated mortgage company (MIC) for a secondary loan in order to qualify for the first mortgage. All legal but a sign of property prices being unaffordable without extra funds.

A danger on the horizon is the oppressive monetary policies of the Chinese government. Business news sources in the Vancouver Sun, Globe and Mail and elsewhere state that China has instituted new rules against transferring money out of the country to buy real estate around the world, particularly in Canada. Some see the new rules as inspired by the reports of Chinese investment in Vancouver real estate much of it funded from corrupt business and banking practices in China. The longer view is that China is trying to stabilize the yuan renminbi as a solid international currency in competition to the US dollar after allowing more overseas investment over the past two years. They now prefer to increase consumption and business expansion in China rather than see their citizens invest in other countries.

According to China-watching sources the government is concerned about its diminishing foreign reserves so no Chinese citizen can now convert their yuan renminbi into US dollars by transferring funds online. They have to go into the bank, sign a document requesting the funds, state why they want to move money out of the country. Apparently the requests are mainly refused. One person posted an application online with the reason stating he wanted to breathe again and live longer so was going to Canada.

The rule in place was that US$50,000 was allowed to be sent abroad by each Chinese citizen each year. Many family members would pool the money when it got to its destination. Now in addition to the increased disclosure requirements those exporting currency have to sign a pledge that it won’t be used to purchase real estate or securities.

The general consensus is that big corporations and investors who have substantial sums in foreign banks are not affected by this but the middle class buyers who have been purchasing most of the real estate in Metro Vancouver are affected. What impact this will have on the local markets is still an open question.

It may be that the optimistic forecast for a stable real estate market in 2017 was a bit premature. More anon.

JB00DT

Jay and Brenda’s Newsletter: January Jump Up

Cheers to a New Year and another chance to get it right.

— Oprah Winfrey

Jay & Brenda News

Humans jump into an optimistic mind space at the beginning of each New Year with resolutions, with hope. After the surprises of 2016 we are still shell-shocked and battle-weary but back in the trenches with more realistic expectations.

The real estate market in Metro Vancouver has had to remake its expectations too after the gravy train of international buyers ground to a halt thanks to Premier Christy Clark and her band of merry men and women in the cabinet anticipating the May 9 2017 election. The detached house market has dropped like a stone in sales numbers, prices are still unaffordable for local buyers and foreign buyers have left the building.

There is a report on the 2016 real estate results and an explanation of the impact on real estate in Vancouver of the new China currency controls in my website article. Link below.

2016: The Third Highest Selling Year of Metro Vancouver Housing Market

Efforts have been made to compensate for this unaffordability factor by offering a government loan to qualified buyers who need a little help to get to an acceptable down payment on a property. The maximum of $37,500 loan to first time buyers toward the 5% downpayment under the BC Home Partnership Program is limited at the top end to a $750,000 home purchase with the government anticipating that most home purchases will be in the entry level range of $300,000-$400,000. The 25 year loan will charge no interest or repayment for the first 5 years and an interest rate based on the RBC prime rate + 50 basis points, reset every 5 years for the following 20 years. The concern from those who think that housing needs to be affordable and in good supply (wishful thinking without a wholesale change in attitude by the municipalities and their NIMBY voters) was that this government loan would fuel the market and create multiple offers on every affordable property.

Jay and Brenda Boxing Day 2016Jay and Brenda on Boxing Day 2016

Probably true. Program is just getting underway now. Buyers are heavily concentrated in price ranges for which they can qualify for a mortgage. The new mortgage stress tests mandated by CMHC for buyers with less than a 20% downpayment has resulted in most buyers being approved for less mortgage than they would have been approved for in 2015 and early 2016. That combined with the buyers preference for high walkability scores and access to rapid transit has resulted in multiple offers on mid-sized, mid-priced condo units in downtown Vancouver and on newer townhomes in the suburbs.

The BC economy is divided regionally with rural areas suffering lower growth and fewer jobs partly caused by lack of resource development, slowdown in the oil industry and the softwood lumber dispute with the US with some potential job-creating projects being litigated by First Nations and the environmental movement. The growth in the tech sector which offers urban employment has created jobs in the Lower Mainland, Victoria and Kelowna. Recruitment and retention are challenging for all employers because the high cost to rent or buy makes it difficult for most younger employees to move to Vancouver even though they love the place. It’s a huge circle going round and round.

Julie snowshoeing at Crooked Creek New Year’s 2017Julie snowshoeing at Crooked Creek New Year’s 2017

Interestingly the Urban Development Institute’s annual forecast lunch which attracts all the movers and shakers in the real estate and development sector focused on an entirely different part of the market at their January 2017 conference. After 14 years of Bob Rennie, marketer extraordinaire, giving the keynote address on the future of real estate in Metro Vancouver the UDI 2017 presentations were on master planned communities and transit oriented development.

Douglas Todd of the Vancouver Sun wrote on the long history of unaffordable housing and outcry against too much inflow of people to Vancouver with the various remedies tried at different times. All politicians including progressive leaders like Mayor Art Phillips, Alderman (later Mayor then Premier) Mike Harcourt and conservative Premier Bill Vander Zalm blamed the federal government for actively encouraging immigration and foreign investment. Nobody was concerned with political correctness and Phillips is quoted as writing in his mid-1970s book The Housing Crisis: "I maintain that the primary approach to solving the housing crisis in the Greater Vancouver area lies in the immediate reduction and future control of immigration". Harcourt wanted the federal government to lower the limit of 200,000 immigrants allowed into Canada annually and to create conditions that would discourage in-migration from other parts of Canada by making the present locations of the potential in-migrants more desirable. After Expo 86 the numbers moving to Vancouver exploded.

Alec with Thor in the mountainsAlec with Thor in the mountains

Vander Zalm created the Property Transfer Tax in 1987 as a way to charge investor buyers. He explained his reasoning this way: "Foreign investors, many speculatively, are driving up home prices beyond the reach of British Columbians. These people paid no tax and most have never paid a BC tax of any kind. These welcome newcomers should also contribute to the needs of the province, and this should be done through some sort of ‘property transfer tax’".

Plus ça change, plus c'est la même chose. The more things change, the more they stay the same!

Until Brian Mulroney became Prime Minister and ramped up the immigration rate the federal government under all leaders adjusted the immigration flow to suit the economy and the labour market. Harcourt pointed out that one of the outcomes of Paul Martin, Finance Minister in Chretien’s government, taking draconian action to lower the deficit in the 1990s was the jettisoning of federal funds for social housing programs in Canadian cities. This has contributed to the serious housing deficiency in Vancouver today.

Lucia and Constantin at a jazz concertLucia and Constantin at a jazz concert

Prime Minister Justin Trudeau has stated that increased immigration into Canada is necessary to replace our aging workforce and population. He also promised an affordable housing strategy for Canada which unfortunately will be running into the same headwinds as the 1990s when the debt got out of hand and many programs were cancelled. We shall see.

Family News

We are busy with clients, listings and sales in these early days of 2017. Activity is across the board for area and price range but there is a slowdown in the sale of older detached homes which in the past have been purchased for redevelopment. The Foreign Buyer Tax has had a major impact there. Building bylaw changes in desirable Vancouver neighbourhoods and the cancellation of Land Use Contracts permitting setbacks and heights that imposed on neighbouring properties in Richmond have altered what size and style of home can be built to replace the existing homes. This in turn has discouraged high end buyers who want large imposing new homes with 3 garages and gates.

Julie, Brenda, Jay and Mary Christmas 2016Julie, Brenda, Jay and Mary Christmas 2016

Jay does make time to walk the dog, cheer on the Toronto Maple Leafs and enjoy the wide range of films and concerts available on Netflix. His birthday is February 6 (also that of Ronald Reagan and baseball hero Babe Ruth) and we are very much enjoying the big screen HD/4G TV that he received last year. It was great for all the political action of 2016, the Trump Inauguration and the Women’s March on Washington. I have managed to wean myself off my addiction to television political news and just watch occasionally when Jay wants to see it.

Effi is doing well and enjoying her walks with the Woofer Walkers. Justin takes the gang in rain, snow, ice and sunshine. He said that on one snowy freezing day someone left a big pile of frozen fish parts on McDonald Beach near the airport where the dogs walk. They discovered it first and ran around with frozen fish pieces until Justin corralled them. He said that he attached their leashes and took them a long way away from the fish but that one Lab/Shepherd X ran back through the woods to find the fish again and he had to chase her to get the piece from her. I’m sure it was some kind hearted neighbour who thought they should feed the raptors, seagulls and geese not realizing that other animals would be injured by eating fishbones. Effi loved all the action around Christmas and the coming and going of family, friends and guests.

Effi at Garry Point Park, Steveston December 2016Effi at Garry Point Park, Steveston December 2016

We had a wonderful time with Julie and Mary here for the holidays. They celebrated with a trip to Whistler and one to visit friends in Victoria. The 3 days at Whistler with fabulous snow conditions culminated in time spent with Jane and a day of skiing with Rory and his pals. She said it brought back memories of the year she lived at Whistler, skied through the week and sold expensive children’s ski clothes on the weekends. And was the top salesperson in the department!

Julie, Mary and friend Tracey at Whistler December 2016Julie, Mary and friend Tracey at Whistler December 2016

The trip to Victoria was a thrill for Julie. The rough return ride wasn’t Mary’s favourite excursion. They went by Harbour Air Seaplane from the Fraser River Terminal to Victoria Inner Harbour where their friends met them. Instead of hours on the ferry and long lineups they were there door to door in 30 minutes. We marked their return with lunch at the Flying Beaver Grill adjoining the terminal.

Mary on Harbour Air Fraser River dock enroute to Victoria December 2016Mary on Harbour Air Fraser River dock enroute to Victoria December 2016

Julie’s Uncle Russ organized a big cousins party at the Yaletown Pub which was catch-up time and a highlight of their visit. The main event was the wonderful Bellinger Family Christmas dinner at Jane and Rory’s home. We all got to admire Ronan, their 6 month old grandson.

Julie and Mary returned to Toronto to enjoy New Year’s at the cottage with hours of snowshoeing punctuated by hours without electricity. Fortunately they have a Honda generator for just such emergencies and managed to keep the fridge operating and the house warm with their airtight wood burning stoves.

Julie, Mary, Murphy and Mickey out walking at Crooked Creek New Year’s 2017Julie, Mary, Murphy and Mickey out walking at Crooked Creek New Year’s 2017

We were sorry not to be spending Christmas with Alec, Lucia and Constantin. They celebrated the completion of their Kittsee renos and Christmas with Lucia’s family at their home in the Slovak mountains.

Constantin at Christmas dinnerConstantin at Christmas dinner
Constantin and his first snowman he built with LuciaConstantin and his first snowman he built with Lucia

Kath and Stef hosted Christmas for friends and family members at Crooked Creek. They had a lovely time enjoying the days away from Toronto in the snowy Ontario woods. Lots of dogs to walk for exercise and fun.

Julie, Auntie Mo, Mary toasting the Season December 2016Julie, Auntie Mo, Mary toasting the Season December 2016

That same group is going on holiday together to Palm Springs in early February. Julie and Mary are going separately to their own place but will be seeing the gang plus David and Pam Bellinger who will also be there at the same time.

FYI: We find that working with clients at every stage of life: buying first condo homes, moving up to family size townhomes or detached, then downsizing from the large family home to a condo again is very satisfying. We hope that Life is good for you too.

Brenda on Marinaside Seawall January 2017Brenda on Marinaside Seawall January 2017

Real Estate News

For those interested in the tax rates of the Metro Vancouver municipalities Jay has compiled them and posted them on our website.

The complete December 2016 Stats Package from the Real Estate Board of Greater Vancouver is also posted: 2016: The Third Highest Selling Year of Metro Vancouver Housing Market.

Dan Morrison, President of the Real Estate Board of Greater Vancouver states "It was an eventful year for real estate in Metro Vancouver. Escalating prices caused by low supply and home buyer demand brought more attention to the market than ever before. As prices rose in the first half of the year, public debate waged about what was fuelling demand and what should be done to stop it. This led to multiple government interventions into the market. The long-term effects of these actions won’t be fully understood for some time."

"The supply of homes for sale couldn’t keep up with home buyer demand for much of 2016. This allowed home sellers to raise their asking price. It wasn’t until the last half of the year that prices began to show modest declines." Morrison said.

According to the Real Estate Board of Greater Vancouver MLS residential property sales of detached, attached and apartments reached 1,714 in December 2016, a 39.4% decrease compared to 2,827 sales in December 2015.

December sales were 8.1% below the 10- year sales average for the month.

In December 2016 the number of residential properties listed for sale on the MLS in Greater Vancouver was 6,345. This is an increase of 5.3% from December 2015 (6,024).

Benchmark

The REBGV Home Price Index includes Benchmark Prices for consistent comparisons. Benchmarks represent a typical property within each market. The benchmark property descriptions have been updated to reflect current buying trends.

Home Price Index / Benchmark Prices
Detached December 2016 1 year change 5 year change
North Vancouver $1,578,000 19.3% 67.0%
Richmond $1,581,100 21.9% 56.9%
Vancouver East $1,456,700 19.1% 76.1%
Vancouver West $3,443,100 19.3% 62.2%
West Vancouver $2,948,200 12.7% 63.2%
       
Townhouse December 2016 1 year change 5 year change
North Vancouver $831,400 18.2% 41.7%
Richmond $721,300 22.4% 41.6%
Vancouver East $731,900 12.2% 46.0%
Vancouver West $1,061,500 18.3% 55.1%

The following schedule shows the change in sales volume from December 2015 to 2016:

Detached Home Sales
  December 2016 December 2015
North Van 48 78
Richmond 59 177
Van East 63 122
Van West 64 133
West Van 31 72
     
Townhouse Sales
  December 2016 December 2015
North Van 16 29
Richmond 47 90
Van East 25 31
Van West 23 47
     

Change has already begun with new mortgage rules. We’re still advising clients to take advantage of the continuing low interest rates available now whether you are moving up or down in the market. You will be glad that you did so at this time!

We thank you for your referrals and look forward to assisting you or any of your friends and family with future real estate needs.

"And now, let us believe in a long year that is given to us, new, untouched, full of things that have never been."

Rainer Maria Rilke

Sending warmest regards and all good wishes for a Happy New Year.

Jay Banks & Brenda Kinnear

JB00DT

Why the Foreign Buyers Tax Isn’t Solving Vancouver’s Housing Crisis

realtor brenda kinnear 300 1Brenda Kinnear 

Legislated into effect on August 2 2016, with the hope that it would cool down the Lower Mainland's property market, with its sky high prices and empty houses, the Foreign Buyers Tax adds 15 per cent to the cost of BC property purchased by persons outside of Canada.

The Foreign Buyer Tax was really enacted to calm down the people in Vancouver, and the Lower Mainland in general. It was largely a political decision by the Premier in order to position the government as being pro-active on the housing file before the May 2017 election. The goal of the tax was to assist the middle class to be able to buy houses in Vancouver, to make them more affordable and accessible. Furthermore, the provincial government would use the revenue from the Foreign Buyer's Tax to fund government housing initiatives for renters, low income earners and first-time buyers. All popular ideas.

It's safe to estimate the market is already down 10-15 % from last year which saw a 35% rise in prices. However, selling prices have not gone down that much, even on the sales that are coming through. There are not much lower prices. There are just fewer sales.

The tax has had the intended effect of cooling the market down. In many cases at the higher end of the market, the seller absorbs the tax in the sale price. Houses have been selling for less than they would have six months ago because of an extra $400,000 to $600,000 or more added to the sale price. The existing Property Transfer Tax applies to every transaction registered at the Land Registry and is paid by every buyer. The 15% Foreign Buyer Tax is paid in addition to the existing property transfer tax.

the effects of the foreign buyers tax

Why was it implemented? The market was exploding the way it was, so there had to be some kind of a lid put on it. Nothing is settled yet. It seems that the buyers are just watching and hoping for new opportunities. At this time the changed mortgage rules are impacting buyers ability to qualify for a mortgage and make a purchase more than any potential price adjustments have done so far.

It looks like the high demand for housing across the board will continue. The real concern is whether the Lower Mainland will have the supply to meet it. There are so many people coming to Vancouver, and so many people who live here, and so many young people who would like to stay here, whatever goes up, can sell. But really the deep problem is that all the Lower Mainland municipalities, except probably for Burnaby, have been very difficult about rezoning and density.

Are people changing to rentals? They are if they can find one.

While the Foreign Buyer Tax's revenue is intended to go to government housing initiatives for more rental housing, the plan may not be large enough to have positive effects. The City of Vancouver has started offering up its own land to developers for lower cost housing to provide accommodation to that large section of the population that cannot afford market rents, or find space for families. The City is working with the developer of the new River District on SE Marine Drive near the Burnaby border to build a rental community to City specifications.

The provincial government is also moving to build more affordable rental housing near transit hubs. However due to the infinite amount of unfilled demand it doesn't seem possible that the Foreign Buyer Tax will eventually lead to improvements in Vancouver's low rental vacancy rate. It might change the number of buildings that sell, or at what price they sell, but it won't change the vacancy rate.

The solution to Greater Vancouver's housing problems lies not in regulations and taxes, but in rezoning and densification. The Urban Development Institute, forecasts 40,000 people moving into the region per year, and an aggressive increase in development, not taxes, would be the most effective way to improve the market.

There can't be competition when there's no supply. The tax was a step towards controlling the skyrocketing prices after the shocking 35% increase last year in prices of detached homes but it does not add to the housing stock.

The tax will not change the vacancy rate

Burnaby is rezoning old low-rise buildings with affordable rents to high rise density. There will be more people housed but the rents are much higher than in the old buildings that were affordable for seniors, immigrants, young people with lower incomes. There is nowhere in the neighbourhoods they are used to for all these low income people to find rental housing:

There is a tsunami of seniors coming who have no pensions or savings except the government pension which is not enough to live on. Many are losing their rental accommodation after many years because the building gets inherited or sold and the new owners want to upgrade the units. It's called "renovictions". The former tenants have to be given first shot at the updated suites but they can't afford the new rents.

The City is very late to respond to the problem. In the past the City has focused on homelessness and providing housing for those with mental and drug issues. It took them awhile to wake up to the fact that working families could not find housing or reasonable rentals in the city. All the municipalities around Vancouver are looking at encouraging developers to build rental units but they do not return the same profit to a developer. There is such a demand for housing along the transit lines that both rental and condo units are snapped up immediately.

Large lots and low density are the problem

The real estate development industry where permitted has begun to create more density in the city, which is a better solution to the housing shortfall. In Vancouver, the Aquilini family owns properties around BC Place. Two years ago, they submitted plans to the City of Vancouver to build condos, which the City delayed. The Aquilinis studied the market and found the demand was for rentals, and they reconfigured their buildings accordingly. There is a big drive among pension funds and investors for new rental apartment buildings providing large cash flows. In Vancouver the land prices are too high for a decent return on the investment except for developers who already own their land. Toronto offers more opportunities to build large scale rental accommodation.

Much of the problem is a result of Greater Vancouver's policy of large lots and low density housing. The inner ring of the city is apartments and multi-family housing and as you go out, you get into lower and lower density. Most of the city is single-family-zone density and very big lots. In Toronto, big houses are on forty-foot lots. It's a shock to go into any other city to see that people manage quite well on much less property.

the overall message is wait and see

There is a strong resistance everywhere to rezoning or densifying existing residential neighbourhoods. The City of Vancouver is is increasing density on single family lots where they don't tear down the old house. Both neighbours, owners and buyers hate the new program and do not want to follow it.

Governments live to be re-elected and have so far buckled under protests to rezoning applications. It's starting to appear that will change. As things are going only the very wealthy will be able to live in a detached home and there are few other options in the nice parts of the city. There is a lot of work going on but there is strong blow-back.

Let’s "wait and see"

These changes have been rough on both real estate professionals, sellers and buyers, as the top-end of the market has effectively been cut off by the Foreign Buyer Tax plus the fact that it has become more difficult to knock down an existing building or older home and replace it. It's a big shock to go from the level of activity that we had, that did trickle down because people would sell at the top, buy another property, or give money to their children to buy their first home. This slowdown has impacted the whole market.

The Foreign Buyer Tax is just one of many factors influencing the long term outlook for the Lower Mainland's real estate market. New types of housing like laneway houses and heritage houses, changing mortgage qualifications, and the failure of municipalities in the Lower Mainland (except Burnaby) to increase urban density, have also affected the market. Policy changes from the new US administration could alter or end the North American Free Trade Agreement, or the lumber dispute, and have a profound impact on Canada's economy.

Once it's all shaken out, it'll be a lot better for everybody in that there will be more stability in the market. People will be pressed to rezone areas so that there's more housing available.

PT00DT

Vancouver Market in November 2016: Detached Home Sales Dropped

It’s a Blue Christmas for detached homeowners across Metro Vancouver. It’s challenging for sellers to become accustomed to the new normal after the historic rise in prices and sales over the past two years. Overall for detached homes the number of sales are down 52.2% from November 2015 while prices are up 23% from November 2015 to a benchmark of $1,511,100. Prices are declining slowly. Affordability of detached homes for most buyers is still well out of reach.

In North Vancouver the detached benchmark is $1,625,800, up 27% in one year with a drop in numbers of sales from 102 in November 2015 to 61in November 2016. In Richmond with a benchmark of $1,610,500 that is up 27.2% in one year with a reduction in numbers of sales from 192 to 65 between November 2016 and 2015. It’s a similar story across the Board. In Van East the benchmark is $1,473,900, an increase in price of 21.9% with numbers of sales dropping from 144 in November 2015 to 77 in November 2016. Vancouver Westside still has the highest benchmark price at $3,521,000, a 22.9% increase over the November 2015 figure. Number of sales fell from 165 to 68 in that period. West Vancouver is noticing the numbers. The benchmark is $3,016,600, price increase is 17.7% over the year and sales in November 2016 are at 26 compared to 82 in November 2015.

Vancouver

The largest contributor to the decreased number of detached home sales is the 15% Foreign Buyers tax imposed in July 2016. That and actual high real estate prices. And mainly bad world wide political and economic news.There is anecdotal evidence that some buyers from Mainland China have chosen to invest in Victoria or even further south in Seattle. The pre-sold condo market is also being affected by offshore buyers who do not want to/can’t afford to pay the Foreign Buyer Tax. Many are walking away from properties as the closing day draws near and Property Transfer Taxes will be due and payable at Land Titles on registration.

It’s not only the FBT that is affecting the market. Scales have fallen from regulators eyes thanks to all the investigative reporting done on the Vancouver real estate market. Governments who have been stupid and lax in enforcing money laundering and tax regulations are under public pressure and since the goal of all governments is to be re-elected at last they are paying attention.

A recent front page article in the Vancouver Sun equates Canada with Kenya as the countries with the lowest requirements for registering a company with hidden ownership. According to Transparency International almost half of Vancouver’s 100 most expensive homes are bought through shell companies that obscure the identity of the real owners. BC and Canadian law allows unemployed relations or friends (students and housewives) to be the registered purchaser of multi-million dollar homes. This nominee can claim principal residence exemption and low income tax when he sells the house on behalf of the beneficial owner. The government and Canadian taxpayer is defrauded of millions of dollars of tax revenue. Because Canada has not closed loopholes that aid and abet financial crime it is becoming a popular place to park illegal funds.

There is no way to know how much money is coming into the Vancouver property market but it is clear beyond government nay-saying that it has flowed in while blind eyes were turned. A memorable quote in the Transparency International report says

In Canada more rigorous checks are done for individuals getting library cards, than for those setting up companies.

Many jurisdictions including the UK are moving to require all buyers of real estate to declare the beneficial ownership on the transaction record.

The market does seem to be morphing into a buyer’s market.Still difficult for sellers to get their minds around the changes, especially since the townhouse/condo move down market has remained stable. This market is heavily local in origin except for new condos in Richmond.

Many existing homeowners are feeling hard done by the end of the boom market and declining home prices that are not being taken into consideration by the BC Government Home Owner Grant Program. The Home Owner Grant Program was established to assist BC homeowners to pay some of their property taxes. Every year the threshold is established by the authority. With the rising home prices many owners were house rich and cash poor. In 2016 the grant threshold is set at $1.2 million property evaluation and many owners no longer qualify for it. This has created hardship for some and general bad feeling for most of those excluded. It combines with the July 1 cut off date for home sale data to be considered by the BC Assessment Authority when setting the basis for the mill rate and municipal taxes. Because the information is retroactive taxes are based on higher home prices this year again disadvantaging local owners. Many owners see it as a government tax grab and think that assessments should have been frozen at the 2015 levels.

As a result of the demand and rising prices of 2015 and early 2016 Metro has set a record in housing starts. It’s expected to slow in 2017 as market realities hit. Housing starts in 2016 are expected to reach 27,500. New building rules contemplated in Metro municipalities are also impacting the future of detached homes.

The City of Vancouver has affected the market with their new heritage rules for pre-1940 homes. They are not allowing demolition but are allowing increased density on the lot when the old house is renovated and preserved.That is impacting the values of larger lots that have attracted builders/buyers in the past who want a new large home. As one prominent Vancouver realtor commented "the City should be regulating what they allow to go up, and not focusing so much on what may be coming down." Preserving neighbourhoods with a consistent look that reflects Vancouver style would make sense. The new density allowances appear to be turning every heritage house into a high end condominium development. Increased density by stealth. There are many unhappy homeowners (read voters) out there. Realtors working in those areas affected by RS -5, 3, 3A zoning feel that it is affecting sales of pre-1940 properties.

Mortgage requirements for those with less than a 20% downpayment are making it difficult for buyers to qualify for homes they would like to purchase. Having to qualify at the posted combined rate of the 5 big banks lowers the potential purchase price of a new home for many applicants. Those re-financing or renewing mortgages where there is equity in the property are not having these problems.

This is the Season of Joy and Celebration historically reflected in a generally slower real estate market (except in 2015). There will be unexpected changes in the New Year that will be reflected in sales and activity that will be reported here in 2017. In the meantime we give thanks for living in such a blessed country as Canada.

JB00DT

Vancouver Market: Wait and See Attitude on the Rise in October 2016

The party's over
It's time to call it a day
They've burst your pretty balloon
And taken the moon away
It's time to wind up the masquerade
Just make your mind up the piper must be paid...

— by Betty Comden, Adolph Greene, Jule Styne

Detached home sellers all over Metro Vancouver are paying the piper for escalating prices, loose legal and financial rules and unrestricted offshore investment purchases that resulted in unsustainable growth and today’s hangover from all the excess. Around the world wealthy countries are pulling the welcome mat out from under buyers who distort markets and make them unaffordable for local residents. People in Vancouver have been saying for years that the provincial and federal governments were enabling offshore immigrants and investors to purchase luxury properties and to treat Vancouver like a holiday resort instead of the vibrant active city with a unique culture that it is.

Vancouver by Imogene HuxhamVancouver by Imogene Huxham

The Foreign Buyer Tax of 15% added to the existing Property Transfer Tax (The PTT is charged on the fair market value of a property at a rate of: 1% on the first $200,000; 2% on the balance up to and including $2,000,000; 3% on the balance greater than $2,000,000) has made buyers more wary of purchasing in Metro Vancouver. Not because they can’t afford it but investors no longer see their way to use the weak enforcement of existing laws to work in their favour. The provincial government has outlawed shadow flipping whereby Contracts of Purchase and Sale for properties can be resold multiple times with a bump at every level until the final purchaser pays the increased price, registers title and pays the statutory taxes. Wholesale money laundering through real estate sales is becoming more difficult. The legal profession that got a pass from the Supreme Court on having to disclose the shady financial affairs of their clients based on the concept of privacy and self-incrimination is now getting a closer look from the Canada Revenue Agency (CRA). The honour system of reporting a sale of a principal residence without triggering capital gains taxes has been exploded by CRA after investigative journalists reported the number of non-residents and builders who were claiming multiple empty homes as their principal residences and therefore paying no tax on the increase in equity between purchase and sale prices. There has been a thirty-five percent bump in prices between 2015 and 2016 alone.

Hong Kong which wins the prize for the most unaffordable real estate in the world and is under siege by Mainland Chinese buyers who want to own multiple properties there has just raised its Stamp Tax (analogous to our Property Transfer Tax). Currently in HK it is 8.5% on all sales over HK$2 million to be raised to 15% flat rate on all properties for non first time buyers. The Stamp Tax is not levied on Permanent Residents buying their first home. Initial reports are that this sudden announcement has slowed the real estate market there.

2016 octoberVancouver Market in October 2016

In Canada Toronto is currently the darling for offshore buyers investing in Canada. There is a huge condo building boom that has attracted massive investment. Single family house prices are closing in on Vancouver prices; there is no inventory in single family homes even a two hour commute from Toronto. The Premier of Ontario has said they won’t enact a Foreign Buyer Tax there but Premier Christy Clark said the same thing until she was forced by political reality to do so in BC. In fact it has severely reduced the Provincial Treasury takings from the real estate Golden Goose.

In Vancouver the culprit for high prices is the lack of available land to build on. Eighty per cent of the city is zoned single family with high rise construction at the centre downtown. The City has subtly increased density by allowing a laneway house and a basement suite in every detached house in Vancouver. The downside is that title to the property remains single family. The other residences on the property cannot be severed or sold. The rezoning of main streets for low-rise multi-family homes has caused speculation in land prices as groups of owners get together to sell as one package. The high land costs mean high development costs which means even multi-family properties are prohibitively expensive. Vancouver is also infamous for the amount of red tape tying up any building applications. Surrey and Burnaby are much more development friendly.

The changes by the Federal Government to the mortgage rules and CMHC guaranteed mortgages for buyers with less than a 20% downpayment has impacted sales across Canada. The purpose of the changes was to lower levels of household debt so the economy would be less vulnerable in a downturn. The Governor of the Bank of Canada has stated that these changes were more useful than adjusting the bank interest rate. The new mortgage stress test requires borrowers to qualify for a mortgage at an average of the posted rates of the 5 big banks. In Metro Vancouver including the suburbs where buyers could afford to buy a home based on a mortgage at the discounted rate those buyers are now left hanging because they don’t quite qualify for the same amount of mortgage at the higher rate. Formerly the buyer may have been offered a mortgage at 2.2% and after October 17 had to qualify at 4.65%. According to many realtors there are unhappy clients out there whose future plans have been derailed. Purchases have had to be tailored to the new mortgage requirements and some buyers have had to drop their approved price range from $650k to $450k.

There seems to be a wait and see attitude of both sellers and buyers to the changing market conditions. Prices haven’t dropped as much as the number of sales has tapered off. Buyers are hoping that prices do come down to make homes more affordable. There was a big drop in October but it appears that buyers are starting to make decisions again. There is a strong push toward townhomes with many new projects being built in Surrey, Langley and White Rock. The single family home closer in is still unaffordable for most buyers. There was a 55% drop in sales of detached homes in Metro Vancouver when comparing the months of October 2015 and 2016. The benchmark price in October 2016 is $1,545,800 which is a 28.9% increase from October 2015. In Metro Vancouver’s two highest priced residential districts Vancouver Westside and West Vancouver the benchmark price is $3,570,000 and $3,200,000 respectively.

There is a noticeable difference in the number of detached sales: in Vancouver Westside in October 2015 there were 163 sales vs 78 sales in October 2016. In Richmond there were 194 sales vs 61 sales. In North Vancouver there were 130 sales vs 61 sales.

We shall have to wait to see how the arc of history bends next month.

JB00DT

Jay and Brenda’s Newsletter: November Nocturne

It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of light, it was the season of darkness, it was the spring of hope, it was the winter of despair.

— Charles Dickens: A Tale of Two Cities

Jay & Brenda News

The Two Cities are Vancouver and Toronto and the response described above includes the shocking US election results; the effect of the new mortgage rates on Canadian buyers; the effect of the City of Vancouver empty home tax plus its heritage home demolition bylaws on upscale neighbourhoods and over all the snuffing out of the high end market by the Foreign Buyer Tax. Vancouver is feeling the pain; Toronto is still riding high.

It’s becoming clear that the whole edifice was built on sand. All the regulation in the world cannot create supply where there is no willingness on the part of any level of government to require or rezone existing residential areas for high density street townhomes or low-rise multi-family units. Governments cannot go back and erase decisions that led to the unaffordability of real estate in Canada’s most popular cities.

There was gross malfeasance on the part of the Federal Government with the Immigrant Investor Program selling Canadian citizenship at bargain basement rates with no enforcement of the existing tax and residency rules required by law. This blatant money grab was not even well-executed. The payment for citizenship by Immigrant Investors turned out to be an interest free loan to the government by the applicant on the understanding it would be returned to them after a set period of time. This craziness was originated by the Liberal government of the day, continued and upgraded by the federal Tories until cancelled in 2014 only to be taken up the Liberal government of Quebec who takes the money and scares the Immigrant Investor with French language requirements so that they run to Vancouver and Toronto taking their tax avoiding ways with them.

JayAndMikeAn old pic of Jay and his friend Mike Andruff at the RE/MAX office in early 2000s

Thanks to the ongoing Globe and Mail newspaper exposure of fraud and abuse in the Vancouver real estate market by dishonest investors, builders and realtors the Provincial government has had to respond to numerous charges of avoiding responsibility for the fallout and lack of affordability in the Metro Vancouver market. In order for Premier Christy Clark and the Liberals to be re-elected and avoid a Trump-style pushback they have to appear to have the best interests of the voters (not the financial well-being of their contributors) in mind. Hence the ban of shadow-flipping; imposition of the foreign buyer tax and now cracking down on the abuses in the Agricultural Land Reserve where buyers are pretending to run a blueberry farm to claim the agricultural reduced tax benefits. Many buyers of farm properties are turning them into estates and boutique hotels using the ALR loopholes.

There is some too little/ too late investigations of suspicious real estate transactions in Vancouver and Toronto being undertaken by CRA for a total of $240 million to date. They have audited 13,400 Ontario residents and found mainly GST/HST and New Home Rebates illegally claimed to the tune of $210 million. More audits occur in Ontario but thanks to all the publicity CRA is setting its sights on investigating British Columbia real estate deals starting with 500 suspicious high dollar transactions. The federal revenue minister said the government is aiming to recoup more money in B.C.

"We are making a clear effort in British Columbia and our goal is to recover as much money [as in Ontario], if not more," Diane Lebouthillier told the Globe and Mail.

According to CRA, it is looking into five areas of concern, including:

  • Questionable source of funds.
  • Property flipping.
  • Unreported GST/HST on the sale of a new or substantially renovated property or on the GST/HST new housing rebate.
  • Unreported capital gains.
  • Unreported worldwide income.
At the cottageJulie, Brenda, Sondra, Mary at the cottage in November 2016

Last year an unlicenced criminal Immigration Consultant based in Richmond BC was tried for fraudulent activities including immigration applications where the Chinese immigrant lied by stating that he was resident in Canada while working in China. The consultant set up false addresses and accounts to make it appear his client was actually living in Canada as required by the Immigration Act. By investigating the client list the government has lined up a group of residents to be deported for lying on their application. All of them are complaining they were misled, the documents were in English and they only read Mandarin, their families live in Canada, they own high end real estate in Vancouver etc etc. The federal court appeal process usually takes one year. However, the government does not recognize "I was misled" as grounds for staying in Canada. When they are deported they cannot apply to come back for 5 years and have to disclose they were thrown out for illegal documentation when they do apply.

FYI: the immigration consultant got 7 years in jail and a $600,000 fine. His sentence was just upheld on appeal.

However, these few clients are the tip of the iceberg. For years realtors and the public have been reporting that many Chinese immigrants are "astronauts" who are working in China while their families live in Metro Vancouver using all public facilities including medical services and schools while reporting minimal incomes to CRA and paying less tax than many poor refugees. CRA has said in the past that it does not plan to check up on world wide income but it seems they will be forced to do so by public demand.

As a result of increased regulation and surveillance of real estate transactions the high-flying Vancouver market has been taking a breather. Anecdotally it appears that those buyers who are required to pay the 15% foreign buyer tax are taking it off the sale price of a property. A home listed at $4 million in April may be listed at $3.5 million today and sell for $3 million to account for the $450,000 Foreign Buyer Tax added to the existing Property Transfer Tax for a total of $500,000. Plus any applicable GST if it is a new home.

Some buyers cannot afford or are unwilling to pay the Foreign buyer tax on pre-sold condos as they are being completed and are ready for registration at Land Titles with all taxes due and payable. There is no grandfathering of an earlier transaction and the buyer must be a Canadian citizen or an immigrant with Permanent Resident status in Canada as of the date of purchase to be excused from the tax. We are seeing collapsed sales being reported on the MLS by the Real Estate Board of Greater Vancouver.

Constantin brushing his teethConstantin also learned to brush his teeth. He's not quite as accomplished as he looks in this picture but he's a keen student.

Areas of Vancouver that fall under RS-5,3 and 3-A zoning are also hard hit as the City has denied demolition permits for pre-1940 homes. This includes Kerrisdale and Shaughnessy. Most foreign buyers, either investors or residents, are looking to build a new home suited to their needs. A lovely old Vancouver home, even when renovated is seldom configured the way they prefer. There is a premium being paid for newer homes that were built before the bylaw changes.

The Vancouver Sun had a spread on a home at 5387 Cypress Street that has been bought and sold 6 times in the last 13 years, last sold in Fall 2015 for $4.55 million. It is currently listed for sale at $5.28 million. However, it is impacted by the new bylaw. A realtor was making a comparison with this property and one across the street and down the block at 5468 Cypress Street. That property as an older home sold in February 2011 for $2.998 million. It was razed and replaced selling at $8.074 million in April 2012. In June 2016 (before the Foreign Buyer Tax applied) the 6,500 s.f. home sold for $12.26 million. Built before the new bylaw with its size restrictions and heritage requirements changed the market for older homes as candidates for redevelopment.

Needless to say, those owners who did not take advantage of the wild west marketplace before it was shut down are disgruntled by what many of them think is the capricious application of zoning bylaws and the Foreign Buyer Tax. Many think it should have been applied to more areas in BC than Metro Vancouver to more effectively spread the restrictions throughout the province. It does not apply to Squamish, Whistler, Victoria or Kelowna which are busy real estate markets.

I will report on the impact of the new mortgage rules next month plus the tragic rental market. We are still awaiting the announcement of Trump’s trade policies. In the meantime let’s celebrate the Season in gratitude for our many blessings.

Family News

Jay is busy with clients and calendars. There is action in the real estate market with the right product and price point. He has lots of interest in his listings. Buyers have to go through more hoops today to get a mortgage and there must be many applications in the system because it is taking the banks much longer to appraise and approve properties. In the meantime there are joyful seasonal visits to be paid to past clients and news to be caught up on. He always has an attitude of gratitude.

Lucia and Constantin with Thor The hunters come out in force on the weekends from end of September until after Christmas. Lucia and Constantin with Thor in a hunting jacket.

Effi is recovering from a sudden onset urinary tract infection diagnosed at an after hours trip to the emergency vet. We found Burrard Animal Hospital & Emergency (open 24 hours) to be outstanding in facilities and staff. They are equipped to do lab tests, X-rays and surgery on the spot. Fortunately after tests the treatment turned out to be antibiotics for canines and she is all better now.

Since Jay’s 2016 birthday gift of a big screen HD/4G TV his movie going has been a bit curtailed. He says it’s mainly because there aren’t that many great movies that need the large cinema screen to enjoy. He likes the Fifth Avenue Cinema for its civilized presentation and lobby cafe where you can get an expresso to take into the flick.

Late October coloursThat's Thor there in the middle who's scented either a bear or another dog. Late October colours in Slovak mountains.

After the election I lost all interest in TV news. I still read the Washington Post, NY Times, Globe and Guardian online to keep up with our wildly spinning world. I do better without graphic visuals that you can’t get out of your head.

When I was in Toronto Julie reminded me that she and I had experienced the great 2016 anti-globalization election outcomes together. We were in the Eastern Townships at Manoir Hovey in June when we heard the EU shaking Brexit results in the middle of the night and then on November 9 when Trump unexpectedly won the Electoral College even though Hillary was well ahead in the popular vote. It was like remembering the Kennedy assassination for our generation. Ontario was dry and warm for the week I was there. Mary, her mother Sondra, Julie and I had a great time at the cottage. It’s always fun to walk through the woods and crispy leaves with the dogs. The Royal Winter Fair was another highlight. Held at the Canadian National Exhibition grounds we enjoyed the crafts and vendors and dressage and driving and jumping competitions. All held in Victorian era buildings with high ceilings and much molding. It was wonderful to spend time with family and dear friends.

Royal Winter Fair1aRoyal Winter Fair Jumping Competition

Even with a rocketing real estate market that kept the JKT busy, Julie’s birthday was celebrated regularly throughout the month so she and Mary have been enjoying an active social life. Mary hosted Julie at a popular restaurant in Toronto owned by Julie’s clients. Guests were Julie’s friends including many from school and camp days. Mary is enhancing her retirement with advanced culinary courses at George Brown College. Right now Central Italy is on the menu.

Mary with her new pasta machine1aMary with her new pasta machine

We are excited to be spending Christmas with them in Vancouver. Lots of festivities planned. They will have a day at Whistler with Julie’s college roommate Tracey who now lives in Vancouver as well as a trip to Victoria to see Mary’s longtime friends who live there. I pointed out the possibility of being stranded by weather related ferry cancellations but Julie just told me to have a more positive attitude. So no rain or wind in December by decree. The Bellinger family is gathering at Jane and Rory’s home for a traditional Christmas dinner.

Julies birthday1aJulie’s birthday party with longtime school and camp friends. Front from Left: Jen Palacios; Sarah; Back from Left: Kate; Julie; Stephanie; Heidi.

Alec and Lucia are wearing themselves out with work and renos. Alec sent us a funny story with pics about their busy lives and Constanin’s antics. They are fortunate to have such great support from Lucia’s parents who took care of Constantin and Thor while Alec and Lucia recovered from late Fall colds. They also agreed to keep Thor while the work was going at home and there were builders in the yard. Thor has to wear his orange vest to be safe from hunters both at home in Kittsee and in the mountains around Lucia’s family’s village. All grandparents think their descendants are brilliant so Constantin is no exception. It’s amazing how the modern child has taken to technology. It seems to appear in their DNA today.

Constantin in the trainHere is Constantin aged 19 months. Alec took the pics in the train and thought they made a set that demonstrated his personality quirks.

Kath and Stef are planning Christmas celebrations at Crooked Creek while Mary and Julie are on the West Coast. They are hosting Stef’s family and recently bereaved friends plus many dogs. They are looking forward to a trip to Palm Springs in the New Year. They took me for dinner at the Keg Mansion in Toronto which was Julie’s Mansion in the 1970s/80s when I lived there. It’s a big heritage house so looks just the same 30+ years later. However, the guests are not as glamorous and well-dressed as in the old days. In Toronto as in Vancouver tall condo buildings are being tucked into every vacant piece of property so it is getting harder and harder to see the Toronto of old.

A delightful smileA delightful smile - just like Daddy’s

FYI: We find that working with clients at every stage of life: buying first condo homes, moving up to family size townhomes or detached, then downsizing from the large family home to a condo again is very satisfying. We hope that Life is good for you too.

Real Estate News

For those interested in the tax rates of the Metro Vancouver municipalities Jay has compiled them and posted them on our website.

The complete October 2016 Stats Package from the Real Estate Board of Greater Vancouver is also posted.

Dan Morrison, President of the Real Estate Board of Greater Vancouver states "Changing market conditions compounded by a series of government interventions this year have put home buyers and sellers in a holding pattern. Potential buyers and sellers are taking a wait-and-see approach to try and better understand what these changes mean for them."

"While sales are down across the different property types, it’s the detached market that’s seen the largest reduction in home buyer demand in recent months. It’s important to work with your local REALTOR to help you navigate today’s changing trends." Morrison said.

According to the Real Estate Board of Greater Vancouver MLS residential property sales of detached, attached and apartments reached 2,223 in October 2016, a 38.8% decrease compared to 3,646 sales in October 2015.

October sales were 15% below the 10- year sales average for the month.

In October 2016 the number of residential properties listed for sale on the MLS in Greater Vancouver was 9,143. This is a decrease of 4.5% from October 2015 (9,569).

With the sales-to-active-listings ratio at 24.4% in October 2016, it remained a seller’s market which typically occurs when this ratio exceeds 20 percent for a sustained period of time.

Benchmark

The REBGV Home Price Index includes Benchmark Prices for consistent comparisons. Benchmarks represent a typical property within each market. The benchmark property descriptions have been updated to reflect current buying trends.

Home Price Index / Benchmark Prices
Detached October 2016 1 year change 5 year change
North Vancouver $1,658,400 34.7% 78.9%
Richmond $1,673,300 34.8% 65.8%
Vancouver East $1,516,900 29.1% 83.7%
Vancouver West $3,569,700 28.7% 59.7%
West Vancouver $3,210,100 29.6% 79.3%
       
Townhouse October 2016 1 year change 5 year change
North Vancouver $842,300 25.7% 43.0%
Richmond $714,500 24.5% 39.0%
Vancouver East $771,000 27.9% 50.3%
Vancouver West $1,123,800 35.4% 66.6%

The following schedule shows the change in sales volume from October 2015 to 2016:

Detached Home Sales
  October 2016 October 2015
North Van 61 130
Richmond 61 194
Van East 65 149
Van West 78 163
West Van 22 116
     
Townhouse Sales
  October 2016 October 2015
North Van 32 36
Richmond 68 132
Van East 28 52
Van West 30 78

Change has already begun with new mortgage rules. We’re still advising clients to take advantage of the continuing low interest rates available now whether you are moving up or down in the market. You will be glad that you did so at this time!

We thank you for your referrals and look forward to assisting you or any of your friends and family with future real estate needs.

As we express our gratitude, we must never forget that the highest appreciation is not to utter words, but to live by them.

John F. Kennedy

Sending warmest regards and all good wishes for a Blessed Holiday Season.

Jay Banks & Brenda Kinnear

JB00DT