The ‘average’ price has dropped due to fewer high-end home sales

Justin da Rosa
REP

The province may have recorded fewer sales and lower prices, but B.C.’s real estate board remains optimistic.

“The decline in the average home price was due to a change in the composition and location of homes sold in the province,” Cameron Muir, chief economist with the British Columbia Real Estate Association, said. “Fewer sales of high priced detached homes relative to all other homes sales in Vancouver as well as fewer Vancouver home sales relative to the rest of the province has caused the average price statistic to decline.”

Last month, a total of 8,945 homes were sold in British Columbia. That’s up 1.5% year-over-year but, as the board fails to mention, is also down from July’s total of 9,900.

The average price, meanwhile was $569,393 – down 8.1% year-over-year. It also fell 14% month-over-month.

The reason for the price decline, according to the BCREA, is due to the impact of the 15% foreign sales tax as well as a decline in high-end home sales.

“Strong housing demand across most regions of the province offset slowing home sales in Vancouver last month,” Muir said. “The newly introduced 15 per cent foreign buyer tax combined with the 3 per cent property transfer tax on homes over $2 million brought in earlier this year, slowed demand at the top end of the market in Vancouver last month.”

Copyright © 2016 Key Media Pty Ltd

Canada?s anti-money laundering agency conducted on-site examinations between 2012 and June 2016

Alexandra Posadzki
Mortgage Broker News

Canada’s anti-money laundering agency conducted on-site examinations of more than 800 real estate companies over four-and-a-half years and found “significant” or “very significant” deficiencies during 60 per cent of those visits, new data shows.

A document obtained by The Canadian Press through an Access to Information request shows that Fintrac conducted 823 examinations of companies in the real estate sector between 2012 and mid June of this year.

The federal anti-money laundering watchdog found “significant” deficiencies with the anti-money laundering and anti-terrorist financing controls at 468 of those companies, while 28 companies had “very significant” deficiencies.

Meanwhile, 324 companies had only “limited” deficiencies. None of the companies were named in the document.

When asked what constitutes a “limited deficiency,” the agency said it includes instances where the deficiencies are minor or the regulations are only partially being followed.

According to the watchdog, an example of a significant deficiency is when there is a “excessive number” of minor deficiencies found, or a number of more severe issues.

Very significant deficiencies include instances where there is an “unacceptable” number of minor and serious issues, or infractions that are “very serious” in nature.

Federal anti-money laundering and anti-terrorist financing laws require companies in certain sectors _ including banks, casinos and real estate firms _ to identify their clients, keep records and report large cash deals and other suspicious transactions to Fintrac.

There are roughly 20,000 companies in the real estate sector that fall under the regulations.

If violations are found during an on-site examination, that could lead to fines of up to $100,000 per violation for individuals and up to $500,000 per violation for companies, depending on severity.

However, the federal watchdog issued monetary penalties only nine times during the almost five-year time span, the document shows.

When asked why more penalties weren’t issued, Fintrac said it considers several factors when deciding whether or not to fine a company. Those factors include the business’s compliance history, the seriousness of the violation and the extent to which the company has taken steps to correct the problem.

There are a number of avenues the watchdog can pursue besides a fine, the agency said, such as establishing an action plan or conduction a follow-up exam.

“In the nine cases identified, it was determined that the most appropriate course of action was to issue an administrative monetary penalty,” Fintrac spokeswoman Renee Bercier said in an email.

“For the remainder, other enforcement actions were undertaken.”

According to the federal agency’s website, Pickering, Ont.-based Countrywide Generations Realty was fined $11,440 in July 2015 for six violations including incomplete record keeping and failing to identify clients in some instances.

In another case, Mississauga, Ont.-based ReMax Active Realty was fined $6,770 back in 2013 for four violations, including failing to develop and apply policies and procedures to detect money laundering.

In total, Fintrac has issued 12 monetary penalties in the real estate sector since Dec. 30, 2008, though in the vast majority of instances the companies were not publicly identified.

Jack Bensimon, the anti-money laundering adviser at Toronto-based Securefact, said he wasn’t surprised to hear about the results of the examinations, given the lack of knowledge about best practices amongst real estate professionals.

“There are very, very few real estate brokerage firms that I’ve come across that actually have dedicated compliance staff,” Bensimon said.

The low levels of compliance in the sector are problematic because real estate is highly vulnerable to money laundering, according to Bensimon.

“Canada is known to be a safe haven for parking investment capital,” he said, adding that it’s fairly easy for criminals to disguise the initial source of the cash by transferring several times, a process referred to as the “layering approach.”

The Canadian Real Estate Association said it has provided training for its members with regard to preventing money laundering.

Pierre Leduc, a spokesman for CREA, said the organization has asked Fintrac for information about the results of examinations but the federal watchdog has not provided it.

“Since we aren’t getting audit information from Fintrac we don’t know specifics of compliance challenges, which makes it incredibly difficult for us help our members address any shortcomings,” Leduc said in an email.

Copyright © 2016 Key Media Pty Ltd

Online service for rentals ignites bidding war fears

SUSAN LAZARUK
The Vancouver Sun

A Vancouver-based online service that helps landlords rent suites through sealed bids from tenants is strongly opposed by LandlordBC because they fear it’s going to encourage bidding wars and make it even tougher for renters.

Biddwell.com, launched four weeks ago, lists local apartments for rent for prospective tenants to bid on within a prescribed time period in the same way shoppers use eBay.

Co-founder and CEO Jordan Lewis said the new site will assist landlords in finding “quality tenants” and also give a voice to tenants to submit a lower offer if they have those strong qualities in the hopes a landlord would choose them over the highest bidder.

“We want tenants to be able to negotiate on pricing,” said Lewis, who has an engineering background. “Right now the tenant has no voice.”

There were more than 170 suites listed on the site recently, almost all in Vancouver, with suggested rents as high as $9,000 a month for a two-bedroom in Coal Harbour. The cheapest rent was $1,000 for a 460-square-foot studio on Kingsway.

The recently renovated Oceancrest Apartments at Jervis and Harwood streets listed all 38 suites on biddwell.com, said Lewis.

Jay Lirag, who manages the Oceancrest on behalf of owners and investors, said he elected to use biddwell.com exclusively for finding tenants because it was difficult to determine what to charge for his luxury suites because rents vary wildly in the super-heated market with a vacancy rate of less than one per cent.

“We wanted to know what is the market willing to bear and what do they (tenants) want to pay,” Lirag said. He added all the suites are freshly renovated and have an ensuite washer/dryer. The building is a block from the beach.

The Oceancrest website listed suggested rents starting at $1,480 for a junior one-bedroom to $2,600 for a two-bedroom and $6,200 for the penthouse suite.

“We’re catering to people who really want to live there,” said Lirag, who knows of one 400-square-foot studio in a 60-year-old West End building — which requires repairs — that rents for $1,750. He said feedback from potential tenants indicated Oceancrest is on the right track with its suggested rents.

He and Lewis insisted the sealed bids prevent bidding wars. The site allows prospective tenants to send landlords a “rental resume” along with their bid and gives them the opportunity to sell themselves and even negotiate a lower rent, he said.

“What is important is not only the rent,” said Lirag. “We need to get returns on investors’ money but it’s not only the rent that matters to us, it’s the quality of tenant.”

He said tenants could bid below the suggested rents but an email sent to prospective tenants warns: “Please be aware there may be multiple groups interested in the specific unit that you want.”

And an association that represents owners and managers, including those at Oceancrest, worry the website and pending app are a recipe for driving rents up, which is already happening with traditional ads.

“LandlordBC has concerns about any app that would facilitate or could encourage bidding wars,” said David Hutniak, of LandlordBC. “Our concern is that is what could very well happen with this app.”

“It’s going to make it more challenging for tenants to find affordable housing,” said Hutniak.

He said landlords are looking for long-term stable tenants and said if tenants are forced to pay higher rents, it would encourage tenant turnover and drive up landlords’ costs.

“It (bidding) is not good for anyone,” Hutniak said.

“Just because the bids are sealed doesn’t mean it’s not a bidding war,” said Andrew Sakamoto, executive director of the Tenant Resource and Advisory Centre, which advocates for tenants. “There are still going to be outrageous bids that some tenants aren’t going to be able to afford. It’s still going to drive rents up.”

He called it the “commodification of housing” that needs to be further regulated. He said landlords should be able to make a profit from their properties but “there has to be a balance. We don’t allow price gouging. Tenants have a right to find housing at a reasonable price.”

Rents have skyrocketed in the past year and Sakamoto said there needs to be some “mechanisms in place to keep them in check,” such as a ban on the “loophole” of six-month tenancy contracts with vacate clauses that some landlords are using to do an end-run around limits to rental increases (2.9 per cent) set by the province in 2016.

Lewis said the online service, which is being developed into a mobile app, will also allow landlords to collect potential tenants on a waiting list on the biddwell.com site and offer renters virtual reality tours of the available suites.

Rentberry, a similar app in San Francisco, doesn’t seal the bids and charges tenants $25 once they successfully rent an apartment.

“They’re (Rentberry) the Hunger Games for the rental market and they’re very much on the side of the landlord,” said Lewis. “They want to maximize ROI (return on investment) for the landlord.”

He said biddwell.com would advocate for the tenant but said the revenue for the site would eventually come from landlords. He didn’t see a conflict of interest.

He said since the launch a month ago, the site has registered 600 users, 40 per cent of which are tenants. He said he’s had interest from Toronto, Edmonton, Squamish and Whistler to expand the service to those cities. He plans to eventually expand to the U.S.

© 2016 Postmedia Network Inc.

Housing Action for Local Taxpayers HALT

Naoibh O?Connor
Vancouver Courier

Justin Fung, a tech worker in his mid-30s, is one of the organizers behind the HALT (Housing Action for Local Taxpayers) housing rally taking place at 2 p.m., Sept. 17, at the Vancouver Art Gallery. The group wants housing to be a top issue in the 2017 provincial election. Guest speakers include SFU professor Josh Gordon, lawyer Christine Duhaime, heritage activist Caroline Adderson and Generation Squeeze’s Paul Kershaw. Fung grew up in Vancouver and lives in a two-bedroom condo with his wife and pre-school-aged daughter. The Courier talked to him about the rally and his concern other residents are being pushed out of the city.

When did HALT form and who’s involved?

It’s been about a half a year. I’ve been the public face of HALT, but there are folks in the team who put in a huge amount of effort to get everything going like planning the rally. All of us are regular folks who have day jobs who have never planned a rally before. There are about five of us that are really actively involved and there’s several other folks on the fringes — people who’ve come out and said we really want to be involved, but as I mentioned, everybody has day jobs.

Is HALT affiliated with any other groups?

We certainly see ourselves as a sort of spiritual continuation to the work [Eveline Xia of #donthave1million] had done with her first couple rallies to bring this [issue] to light and say this is a problem and citizens’ voices need to be heard. We’re not affiliated with her, but we’ve taken a lot of advice from her and a lot of inspiration from her. The one group we’re most strongly affiliated with would be Generation Squeeze run by Paul Kershaw and Eric Swanson. We’ve signed their Homes First policy principle pledge.

Is HALT affiliated with any political parties?

HALT is a non-partisan group. Certainly, individuals have their own political leanings and we have conservations around politics and we have our views in terms of who we think are going to be most impactful in terms of making changes. There is a lot of anger and resentment towards the current governments simply because there’s been so little that’s been done.

Is HALT focused on renters or potential homebuyers?

We’re focused on both. Our stance is really [that] people who work here and want to live here can afford to do so. If you’re going to contribute to your community, if you’re going to contribute income tax to the tax base, you deserve to have an affordable home. That’s a really simple premise. Whether that’s a rental or whether you own a home, it doesn’t matter.

What’s the best case scenario?

Best case scenario is there are a reasonable amount of vacancies in the rental market, that renters are treated with respect by their landlords. Today, with the rampant home price increases and with the very little rental supply that’s out there, landlords have a lot of power and they’ve been evicting tenants in the name of trying to find someone who’s willing to pay higher rent. Those are things that should not happen. Talking about people getting into the housing market and buying, we want to see family-friendly homes that are realistic and affordable for people. Ultimately, we need to have solutions around foreign money distorting our markets and we need to deal with having the right type of supply coming on line so it remains a livable city and that young families have that opportunity to grow up in the city if they choose.

Do you have specific measures you’d like to see implemented?

The first step is to really deal with the foreign money. This is what has been driving everything else. It’s driven a lot of speculation, both foreign and local speculators in terms of our housing market. Our homes are being treated like piggy banks by a lot of foreign investors It’s madness that we’re doing that.

Are you not satisfied by a vacant home tax or a foreign buyers tax?

I’m concerned about their efficacy and whether they are targeting the right things.

A 15 per cent foreign buyers tax simply is an increased barrier to entry, but it’s a one-time tax. What we’d like to see, and one of the things we’ve been pushing very hard for, is the B.C. Housing Affordability Fund proposal put forward by Tom Davidoff where we would actually have a means check against a home that you own. So, a property tax surcharge that would be offset by income tax paid in Canada. That really speaks to what HALT is all about — housing action for local taxpayers. It’s to say we want equal ground. We want fairness in terms of trying to get into the housing market.

Will HALT endorse a political party for the next provincial election?

I’m not sure yet. If we got to a point where we felt that one of the parties is going to make the right decision, we may at some point. Our view is to make sure that all parties listen to our concerns and that they’re willing to address them. We are angry and resentful about a lot of the inaction that’s happened, but we have also seen that, perhaps through some of our advocacy, action is starting to be taken. This is turning into probably the number one election issue heading into May 2017. It really is about governments responding and doing the right thing.

© 2016 Vancouver Courier

other

The British Columbia Real Estate Association (BCREA) reports that 8,945 residential unit sales were recorded by the Multiple Listing Service® (MLS®) in August, up 1.5 per cent from the same month last year. Total sales dollar volume was $5.1 billion in August, down 6.7 per cent compared to the previous year. The average MLS® residential price in the province was $569,393, a decline of 8.1 per cent compared to the same month last year.

“Strong housing demand across most regions of the province offset slowing home sales in Vancouver last month,” said Cameron Muir, BCREA Chief Economist. “The newly introduced 15 per cent foreign buyer tax combined with the 3 per cent property transfer tax on homes over $2 million brought in earlier this year, slowed demand at the top end of the market in Vancouver last month.”

“The decline in the average home price was due to a change in the composition and location of homes sold in the province,” added Muir. “Fewer sales of high priced detached homes relative to all other homes sales in Vancouver as well as fewer Vancouver home sales relative to the rest of the province has caused the average price statistic to decline.”

Year-to-date, BC residential sales dollar volume increased 39.1 per cent to $61.6 billion, when compared with the same period in 2015. Residential unit sales climbed by 22.1 per cent to 86,206 units, while the average MLS® residential price was up 13.9 per cent to $714.400.

© 2016 BCREA

Buckle up, brokers, you may not agree with this hot take

Justin da Rosa
Mortgage Broker News

One of the country’s most infamous housing bears tackles the housing markets in Vancouver and Toronto, and investigates whether supply is truly an issue.

“The most egregious bubble in housing in Canada, perhaps in the world, is in the Greater Vancouver area. And a lack of supply there often gets the blame for unaffordable house prices, along with the foreign investor demand,” Hilliard MacBeth, portfolio manager with Richardson GMP and author of When the Bubble Bursts: Surviving the Canadian Real Estate Crash, wrote in his latest housing analysis. “One theme that keeps getting repeated is that there’s no room to build new housing. But the numbers don’t fit that story.”

To support his argument, MacBeth cites CMHC’s latest housing start report.

From January until August of this year, Vancouver’s market has seen 19,006 housing starts. That’s up 39% from 2015’s total for that time period of 13,717.

“Vancouver housing starts are at record high level … to put (the number of starts) in perspective, if those starts are high-rise apartments at 200 units per tower (8 units per floor and 25 floors), the current pace of construction would result in 95 new buildings in Vancouver,” MacBeth wrote.

And Toronto’s market is performing at an even more aggressive clip.

From January to August, Toronto has seen 26,526 starts – which has kept pace with 2015’s total.

Using MacBeth’s chosen averages, that would result in 130 total buildings in the Big Smoke.

“It doesn’t look likely that supply is the problem (in Toronto either),” MacBeth wrote. “Most of the new construction is in multi-family, which includes purpose-built rentals and condos for sale.”

According to MacBeth, one way to determine whether the level of starts is appropriate is to compare it to starts in the United States.

“If we adjust for the population difference between Canada and U.S. we would adjust the U.S. starts to a ratio 36 million/320 million or 0.11. This gives a Canadian target range of 264,000 to 45,000 to match U.S. building activity,” MacBeth wrote. “So Canada’s construction pace of between 180,000 and 200,000 for several years is at the high end of the range, if it is comparable to the U.S. In fact it is possible that Canada has been overbuilding housing.”

Finally, MacBeth compares supply to residential investment as a percent of GDP of the Canadian economy. It’s here that he raises the spectre of a housing correction.

“Compared to Canada’s past the pace of investment has never been this high,” he wrote. “Canada has consistently invested a bit more than the U.S. but the last ten years the spread is unusually large.

“When investment levels have been this high in Canada and the U.S. in the past, in the periods of 1976-79 and 1988-90 in Canada, shortly after the peak there’s been a significant drop in investment, bottoming around 4 percent of GDP in Canada and 2.5 percent in the U.S.”

Click here to read the full report

Copyright © 2016 Key Media Pty Ltd

Canadian Real Estate Wealth

 

National Revenue Minister Diane Lebouthillier has asked the Canada Revenue Agency to look into the actions of real estate speculators in B.C. following a newspaper investigation.

The Globe and Mail reported on the weekend that some foreign investors allegedly profit in buying homes in B.C. while evading taxes.
The federal minister says she is concerned by the allegations and has asked the CRA to look into them.

The request by Lebouthillier follows comments by B.C. Finance Minister Mike de Jong, who said the CRA must be diligent in enforcing the law in order to maintain the confidence of taxpayers.

De Jong says the 15 per cent tax on foreign homebuyers introduced in Vancouver last month was intended to address some of the issues raised in the Globe and Mail story, but did not specify whether the government would be taking any new actions.

Copyright © 2016 Key Media Pty Ltd

Real estate speculators pay little on no tax flipping houses

Ryan Smith
Mortgage Broker News

The Canada Revenue Agency must be diligent in cracking down on real estate tax cheats, the BC finance minister says.

In a statement released over the weekend, Mike de Jong responded to a news investigation relating to real estate speculators who pay little or no tax despite being very active in buying and flipping homes valued at many millions of dollars.

“Canada’s finance ministers discussed concerns about tax auditing and potential money laundering in real estate at their June meeting in Vancouver,” Mr de Jong’s statement noted.

He added that British Columbia’s real estate and financial regulators are also interested in the allegations raised in the news story, and that he understands that the CRA is taking steps to pursue those who are not paying the correct tax for real estate transactions.

“Like all taxpayers, I am concerned about allegations that some are not paying their share of taxes. For Canadians to have confidence in the tax system, the CRA must diligently enforce the law. I have and will continue to communicate this expectation to Finance Minister Morneau and the federal government,” Mr de Jong concluded.

Copyright © 2016 Key Media Pty Ltd

New dawn on Sunset

MICHAEL BERNARD
The Vancouver Sun

Project: 1151 Sunset Drive

Project location:  1151 Sunset Drive, Kelowna

Project size/scope: 117 condominium homes in a 21-storey concrete building and seven street-level townhomes. Located in the heart of Kelowna, a few blocks walk to the Lake Okanagan beach, restaurants, cafés and bars.

Prices: One bedroom from 624 sq. ft., $309,900 to $347,900; One bedroom and den 596 sq. ft. to 851 sq. ft., $289,900 to $489,900; Two bedroom/two bedroom and den, 820 sq. ft. to 1093 sq. ft. $399,900 to $717,900; townhomes 1,567 to 1,569 sq. ft., $739,900 to 899,900; sub-penthouses 2,026 to 2,157 sq. ft., from $1,399,900

Developer: Kerkhoff Construction Ltd., Chilliwack

Architect:  Meiklejohn Architects Inc., Kelowna

Interior designer: Giraffe Design, Vancouver

Sales centre: 1001 Manhattan Drive

Sales phone: 250-980-7637

Hours: Mon — Wed 11 a.m. —  5 p.m.; Thurs — Fri 11 a.m. —  7 p.m. Sat 11 a.m. — 4 p.m.

Website: 1151Sunset.com

Occupancy: Fall 2018

The wave of retiring baby boomers and the growing number of young professionals who have been shut out of the Vancouver residential market is giving new life to a 21-storey concrete highrise in Kelowna, say its developers.

Construction of the tower, called 1151 Sunset Drive after its address, started in 2008, but stalled during the financial meltdown that year. The site, with just the largely above-grade parkade built, sat idle until earlier this year when Chilliwack-based Kerkhoff Construction stepped in to restart the project.

“We had a number of opportunities we were looking at in West Kelowna, downtown and other areas,” said Leonard Kerkhoff, company vice-president and general manager. “This one really appealed to us, being downtown Kelowna near the water in a prestigious area.”

Kerkhoff, a third-generation member of a family that started building homes in 1966, says there is a constellation of indicators that point to 1151 Sunset Drive being a success.

“Our target market is firstly move-down buyers, both local and from Vancouver and Calgary, people moving to a smaller home with less maintenance, snowboard-type people who want to live in Kelowna and go south for the winter.”

Also fuelling the need for new homes are first-time buyers and young professionals who are considering working in Kelowna at one of the new job generators, which include the Interior Health building and the high-tech Innovation Centre, together accounting for an anticipated 1,200 positions, he said.

Sunset Drive is one of several projects in the downtown district where clearing commenced in the mid-2000s only to lie fallow until the last two years. Helping to stimulate the strong interest in the downtown core are the redevelopment of the nearby lakefront and Bernard Avenue.

 “It is just a five-minute walk to the Kelowna Yacht Club, and the whole walkway has been improved over the last few years,” Kerkoff said. “There are a lot of changes coming to downtown Kelowna.”

 To accommodate this new-found interest from a diverse market, he said, “we’ve got 117 condos in the building and seven townhomes at street level. We have a range of one-bedroom to four-bedroom units available, each appealing to a different market.”

 “This is a really nice neighbourhood and we compare it to a Yaletown feel. It has high-end restaurants right across the street. We wouldn’t be doing this right now if we didn’t feel absolutely 100-per- cent positive about the market, and it’s great right now.”

The building was approved under a 2006 building permit, but has undergone modernization, says architect Jim Meiklejohn, whose firm took over design work from the original architect.

“We’re trying to connect the building to the neighbourhood at the ground plane with the landscaping and townhouse units that surround the tower and quite a large reflective water feature and a smaller pool area for the residents’ use,” said Meiklejohn. His firm has also modernized the exterior.

 Inside, the suites are being updated with contemporary countertops, modern appliances and hardwood flooring, while a few more suites have been added to the original design.

 Notes Kerkhoff of the Okanagan city: “I have heard Kelowna being referred to as Silicon Valley. It is getting expensive to live in Vancouver. It makes perfect sense to build the buildings where the cost of living is cheaper for young people.”

 Meiklejohn agrees.

 “There is a whole new vibe to the downtown,” the architect said. “It’s urban, it’s pedestrian, it’s relatively green and it’s pretty sophisticated. And I think that young professionals are bailing out of the Vancouver market because they can’t get in, and Kelowna is becoming a viable option.”

 From the computer-generated views available on 1151 Sunset Drive’s website, buyers will get a sense of the impressive views of Okanagan Lake and the surrounding mountains on offer. 

 Inside the homes, large floor-to-ceiling windows will take advantage of those views, as do generously sized balconies. The homes have nine-foot-high ceilings. Flooring is plank engineered hardwood through the living areas and bedrooms with tile flooring in the bathrooms. All homes come with window blinds, pot lights in select locations, and three panel interior doors.

 Kitchens feature shaker cabinets with full-height upper units, quartz and marble countertops, two-basin undermount stainless steel sinks, and stainless steel appliance packages that include a 30-inch slide-in gas range with built-in range hood fan, a 17-cubic-foot Energy Star bottom-mounted freezer and a high-temperature dishwasher, and a microwave.

 The bathrooms feature vanity cabinets that match the kitchen cabinetry, a shower in the master bathroom and tub-shower combinations in other bathrooms.

 Amenities include a multi-purpose room with kitchen and lounge area, outdoor private terrace space with a plunge pool and a barbecue facility, fitness room and business meeting work space.

 Two presentation suites are being finished now and are expected to be open for viewing this month.

© 2016 Postmedia Network Inc.