The Vancouver Sun

 

If you sold your home last year, this tax season you will be required to report some basic information on that sale on the newly updated Schedule 3 “Capital Gains (or Losses) in 2016” of your tax return to be able to claim the principal residence exemption and have the gain be completely (or partially) tax-free. Information you are required to provide includes: the date of acquisition, proceeds of disposition and the address of the home that was sold.

You’ll recall that this requirement came about in October 2016 and represented a change in the Canada Revenue Agency’s long-standing administration position that didn’t require you to report the sale of a principal residence if the entire gain was exempt from tax. But the CRA was concerned about, among other things, its ability to track frequent purchases and sales of homes by “flippers” and wanted a way to track and review principal residence exemption claims.

For an example of what the CRA can now more easily monitor, take the recent case, decided just last month, of a Toronto taxpayer who, in 2010, sold a one-bedroom, 560-square foot Yonge Street condo and didn’t report it in his 2010 income tax return. The taxpayer took the position that the condo unit was his principal residence and therefore there should be no tax on the gain. The CRA, however, disagreed, and reassessed the disposition as taxable business income saying that the taxpayer “never resided at the condo … did not ordinarily inhabit the condo in 2010 … (and) at no time was the condo the (taxpayer’s) principal residence.”

Under the Income Tax Act, for a dwelling to be a “principal residence,” one of the key conditions is that it must be “ordinarily inhabited in the year by the taxpayer, by the taxpayer’s spouse or … by a child of the taxpayer.” As the judge summarized, “(T)he key question is whether this was the (taxpayer’s) principal residence.”

To determine this, the judge reviewed the taxpayer’s past real estate transactions.

As it turns out, the taxpayer and his spouse bought and resold a number of properties from 2007 to 2011 at a profit. On one of the properties, the taxpayer reported rental income in 2011 and a taxable capital gain on his 2011 T1 return for its disposition.

The taxpayer entered into an agreement of purchase and sale for the Yonge Street condo on Feb. 16, 2007 prior to the completion of construction of the building. He took possession of the property on May 11, 2009 and became the owner on Oct. 30, 2009 at the time of closing. One and a half months later, on Dec. 16, 2009, the property was listed for sale, with the taxpayer’s wife, acting as the real estate agent. The property sold six days later on Dec. 22, 2009 and the closing date of that sale was Jan. 12, 2010.

The taxpayer testified that the family moved to the condo in June 2009 and left in early January 2010. During this brief period of time, the taxpayer explained that he was away for most of the time because he had to go overseas for the death of his father. His wife testified that she also had to travel back and forth overseas during this period because her mother became ill. The taxpayer’s wife testified that in late 2009, the family’s two older children had decided that “in order to be supportive … they should move back home. In order to do so, the family would need a larger condo unit” and thus the decision was to put the condo up for sale.

As a result, the family explained that it moved out of the condo in early January 2010 and went to live with some relatives until they moved into another condo, which was purchased in January 2010 and which they moved into in February 2010.

The judge did not believe the taxpayer’s testimony on the key point of whether or not the family actually moved to the condo for a variety of reasons. For one, it seemed that the “560 square feet one bedroom condo is pretty crowded for two parents and a university age son.”

Secondly, in responding to a CRA questionnaire, when the taxpayer was asked: “Did you reside in this property?” His answer was “no.” He was also asked for the names and ages of people who resided with him and left the answer to that question blank.

Thirdly, on the condo real estate listing, it read “Occup:”, which stands for occupancy, and next to it the word “Tenant.” As the judge said, “if there was a tenant the family could not be living there.”

Finally, there were inconsistencies with the electricity bills submitted into evidence that led the judge to conclude that “there is either no consumption of electricity after July 1, 2009 and before Dec. 31, 2009 or, for that period, someone else is paying for the electricity and that person is being billed. In either case it is incompatible with the (taxpayer’s) family living at the Yonge Street (condo).”

Since the taxpayer did not meet the requirement that he or his family “ordinarily resided at that property,” the judge denied him the use of the principal residence exemption and upheld the CRA’s reassessment.

Financial Post [email protected] Jamie Golombek, CA, CPA, CFP, CLU, TEP is the Managing Director, Tax & Estate Planning with CIBC Wealth Strategies Group in Toronto.

© 2017 Postmedia Network Inc.

Juwai
other

Despite a 15% foreign buyer tax, a new policy may now allow Chinese to continue buying Vancouver homes.

Last August, British Columbia (BC) imposed a 15% property tax on foreign buyers¹, which saw Chinese buyers interest in red-hot Vancouver dampened as Chinese real estate buyers switched attention from red-hot Vancouver to other Canadian cities, such as Toronto and Calgary, as well towards nearby Seattle in the US.

Now, however Chinese real estate investors may soon be allowed to continue their love affair with Vancouver, thanks to a new policy from the BC government that waives the tax for foreign buyers with a work permit², thus opening up a huge opportunity for Chinese. 

Why Vancouver?

According to The Economist Intelligence Unit’s ‘Global Liveability Ranking 2016’, Vancouver is the world’s third most liveable city, behind Melbourne (#1) and Vienna (#2) but ahead of Toronto (#4).³

This speaks right to the hearts of Chinese, who are fast becoming more discerning in their lifestyle demands, and greatly boosts their interest to live in Canada, a longtime favourite immigration destination for rich Chinese.⁴

That’s why interest in achieving permanent residence in Canada is higher than ever – 22,114 Chinese received permanent residency in Canada between Q1 and Q3 2016, a 52% y-o-y increase that took total Chinese achieving permanent Canadian residency to 532,246 since 2000.⁵

Although the 15% real estate tax on foreign buyers had led to concerns for some Chinese who had their hearts set on buying Vancouver property to reside in, this new policy change has now opened yet another pathway for them through its current population of Chinese graduates and expatriates in Canada. 

How big is the Chinese student population in Canada?

By the end of 2015, Canada had 119,335 Chinese students enrolled at institutions across the country – a 200% from the 39,850 recorded in 2004.⁶

What’s more, British Columbia saw the biggest growth in Chinese students with a 253% increase, compared to 214% in Ontario and 209% in Nova Scotia⁶, and that firmly shows how popular British Columbia has become as an education destination for Chinese buyers, especially in Vancouver.

Vancouver ranks within the top 10 list in the QS Best Student Cities 2017, which was released recently by global higher education analysts QS Quacquarelli Symonds.⁷

With 35% of Chinese students choosing to study in British Columbia⁶, and the fact that more than half of Chinese students enrolled in Canadian colleges plan to apply for permanent residency (PR) upon graduating⁸, that makes for a huge pool of prospective Chinese buyers just waiting in the wings to purchase, should they be successful in securing a job permit in Canada.

Already, the recently-announced BC tax exemption for work permit holders had stirred up a storm of interest with Chinese students and buyers alike on WeChat, China’s most popular social media app.⁹

Given the the fact that newly-graduated foreign students in Canada are also entitled to post-graduation work permits (PGWPP) that last up to a maximum of three years¹⁰, we believe Chinese students in Vancouver and other parts of Canada will be seriously looking to leverage this opportunity to invest in Vancouver real estate. 

Canada calls out to Chinese professionals

Beyond the Chinese students’ desire to remain in Canada after graduation, it also helps that the Canadian government is getting ready to roll out the red carpet to attract more foreign expatriates to the country.

In fact, during Canadian Prime Minister Justin Trudeau’s visit to China, Canadian Immigration Minister John McCallum stressed Canada’s commitment to upping the number of emigrants¹¹ that it receives from China, and put plans in motion to build five new visa processing offices within China to help speed up application processes.

That’s because Canada is facing a tight labour market, and needs graduates in hi-tech disciplines to help boost its own businesses. For example, Canada’s economy will create at least 218,000 tech jobs between 2015 and 2020, but lacks the people to fill them, according to a report by Canada’s Information and Communications Technology Council (ICTC).¹²

With Chinese professionals seeking more overseas experience than before¹³, and the stiff competition faced by Chinese graduates in China itself, the prospect of broader job opportunities and an a better lifestyle in Canada is downright attractive.

96% of Chinese professionals said they were willing to head overseas for job postings for international experience and to relocate away from China, according to a recent survey by global HR services company Hays International.¹³

With that in mind, Vancouver is a perfect pick for them. After all, with great job prospects, high education standards, pristine natural environment, excellent healthcare, as well as its position as both the fastest-growing regional economy in Canada¹⁴ and its role as a bustling trade hub on the Pacific, Vancouver has much to offer for Chinese expatriates. 

Vancouver, get set for a Chinese buyer comeback

All these factors combined points to Vancouver looking to be a real winner with Chinese once more.

Seeing as Vancouver still remained as the second most popular city in Canada for Chinese homebuyers on Juwai.com in 2016¹⁵ – even with the 15% BC foreign buyer tax imposed – we believe Vancouver is all set for a resurgence in demand with Chinese, who see it as a safe and stable choice on par with London and New York.

That said, would this propel Chinese property investment in Vancouver to surpass the estimated $12.7 billion spent in 2015?¹⁶ We’ll find out in time.

2017 © Juwai.

Canadian Real Estate Wealth

Home sales across Metro Vancouver were down dramatically last month compared with last year’s record-breaking pace, while prices across the region remained more stable.

The Greater Vancouver Real Estate Board says a limited supply of listings and an unusually snowy start to the year affected the market.

It says residential sales totalled 2,425 in February, an almost 42-per-cent plunge from February 2016.

But sales in February were up about 59 per cent from January.

The board says the number of properties that changed hands was 7.7 per cent below the 10-year sales average for February.

The board says the benchmark price for detached properties was about $1.47 million, down 6.5 per cent over the previous six months.

Prices for condos and townhomes climbed marginally over January, reflecting limited supply.

“While home sales are not happening at the pace we experienced last year, home seller supply is still struggling to keep up with today’s demand,” board president Dan Morrison said in a statement. “This is why we’ve seen little downward pressure on home prices, particularly in the condominium and townhome markets.”

Copyright © 2017 Key Media Pty Ltd

Vancouver looks to increase number of townhomes, row houses, duplexes

Mike Howell
Vancouver Courier

Mayor Gregor Robertson announced Wednesday that changes will be coming to single-family home neighbourhoods in Vancouver to accommodate more affordable forms of housing such as townhomes and duplexes.

In a speech to a crowd of about 300 developers and business people at the Pinnacle Hotel downtown, Robertson said the “time is right to advance a conversation” about how the city can create more affordable housing while still preserving the essence of single-family home neighbourhoods.

“We want to make sure we do this very carefully,” the mayor said in a 45-minute speech to guests and members of the B.C. chapter of the Urban Land Institute. “But at this point, we need to see change, we need to see new homes, new supply in our single-family home neighbourhoods.”

Robertson didn’t provide specifics but city council has heard previously from city staff about the so-called “missing middle” in Vancouver, where there is a shortage of affordable townhomes, row houses and duplexes.

An analysis by city staff, he said, showed that 70 per cent of all current development proposals are for condos, 16 per cent are for rental apartments and less than 10 per cent are for subsidized housing.

He said city staff will provide more details in the weeks to come on changes to single-family neighbourhoods and four other strategies to increase affordable housing options, including freeing up more city land for development, a push for more housing around transit stations, adding homes along arterial streets and allowing more density to the “hundreds of blocks of aging apartment buildings that desperately need reinvestment at a time when our vacancy rate is near zero.”

“Why aren’t we adding a fourth floor to the three-storey walk-ups that are all over the city?” the mayor said.

Robertson said he believes there are ways of adding more affordable housing options into single-family neighbourhoods without land assemblies, where residents on a block get together and sell their homes to one developer to maximize their profits.

“The choice isn’t between change and no change because the single-family home neighbourhoods are changing right now,” the mayor said. “We’re seeing character homes being razed and replaced with much larger single-family homes. So the essence of the neighbourhoods is already in great flux.”

He noted the most recent census data shows neighbourhoods on the west side of the city are losing residents. Kerrisdale has 800 fewer residents than in 2011, Arbutus Ridge has lost 700 and Dunbar dropped by 300 people.

“Prices are going higher, less people live there and whatever change is taking place is not creating more opportunities for people to move into the neighbourhood,” he said. “A neighbourhood that’s made up of perfect character or heritage $5 million homes is not healthy, frankly, if there’s no kids there.”

© 2017 Vancouver Courier

Westbank?s Horseshoe Bay community of condominiums attracts locals, downsizers

Mary Frances Hill
The Province

Horseshoe Bay

Address: Horseshoe Bay, West Vancouver

What: 158 condos and townhomes in six buildings on the waterfront at Horsehowe Bay, including amenities such as a boathouse

Residence sizes and prices: One- to three-bedroom-and-den homes, ranging from 1.084 to 6, 405 square feet, including up to 2, 844 square feet of outdoor space; from $950,000

Developer and builder: Westbank

Sales centre: 1502 Marine Dr., West Vancouver

Centre hours: noon — 5 p.m., Sat — Thurs.

Anyone who’s marvelled at the natural beauty of Horseshoe Bay might understand that when the village’s residents find themselves in the market for a new home, they’re not likely to look too far past the community’s borders. So it’s a special occasion when home hunters who have lived in and loved the village are given new opportunities for luxury living locally — particularly when their architecture and interior design that evokes the stunning surroundings.

With its planned Horseshoe Bay community of condominiums, Westbank wants to appeal to those who are already familiar with the bucolic waterfront village — and it’s eyeing young families, marine lovers and downsizers alike.

“[Horseshoe Bay attracts] local residents who already love the area and are looking to downsize from their larger homes. They need the space to be inviting and still feel like home,” says Melissa Peatch, an interior designer with Merrick Architecture, whose architects designed the Horseshoe Bay community of six buildings and 158 homes.

The suites’ interior design are characterized by a distinct West Coast modernist touch, says Peatch—minimalist, clean, and spare. “We are always taking inspiration from the West Coast modernist influences seen throughout the project and take into consideration the surrounding environment and amazing views.”

The views are the magnet for the visitors to the display space, and the building is oriented to take advantage of every angle, allowing homeowners to soak in the natural setting of the water and mountains.

We work closely with the entire [Merrick Architecture] team to ensure a unity throughout the project and allow the West Coast modernist influences to be present in all aspects,” says Peatch, referring to the architectural style characterized by roof overhangs (as a response to rainfall); big windows for muted sunshine, views of nature, wood exteriors, floor plans with high ceilings, open sight lines and flat roofs.

Peatch says the minimalism inside is meant to calm, while it keeps the visitor’s attention on the views.
“It is best to stick to a clean and simple esthetic to prevent from distracting from the view beyond,” she says.  She advises homeowners to “treat the view as a piece of art and take inspiration from the changing colour palette and textures to accentuate the existing beauty.”

That’s not to say Horseshoe Bay’s interior finishes don’t command attention on their own. Though none of the luxurious materials, such as Travertine tile (surrounding a fireplace), wide-planked flooring and teak cabinetry were chosen merely for the sake of their own beauty. Peatch refers back to the continuity and the communication between the natural surroundings, architecture, and interior design.

“They are practical and timeless materials that will always have a tactile warmth, creating an inviting West Coast contemporary space.”

© 2017 Postmedia Network Inc.

Rosewood Hotel Georgia to be sold for $145 million

Joanne Lee-Young
The Province

A deal has been struck to sell one of the city’s oldest hotels.

The Rosewood Hotel Georgia in downtown Vancouver has been around since 1927. For years, it was known for playing host to the likes of Elvis, Frank Sinatra and Jayne Mansfield.

In 2011, the historic landmark completed a four-year, $120-million restoration that preserved the heritage facade and expanded the rooms inside. It was brought under new management.

This week, a deal was made for it to be sold to a joint-venture of Hong Kongbased firms owned by two brothers for $145 million.

Able Shine Enterprises and Magnificent Hotel Investments will together buy the hotel from Vancouver-based Delta Land Development Ltd., but it will continue to be managed by Rosewood Hotels & Resorts, a Dallas-based group.

Magnificent Hotel is listed on the Hong Kong Stock Exchange and owns five Best Western and other hotels in Hong Kong, plus one in Shanghai. Last year, it made some headlines when its subsidiary swooped in, post-Brexit in June, to buy the 408-room Travelodge London Kings Cross Royal Scot Hotel for about 70 million pounds. Magnificent’s chairman, William Cheng Kai-man, commented at the time that a significant drop in the British currency helped to seal the deal.

A post earlier this week on Magnificent’s website describes the recent acquisition in Vancouver as “an excellent opportunity to enter the vibrant (local) real estate and hotel market at a nearly construction-replacement cost, for a new and most prestigious building on the most prominent address of the city centre with initial yield of four per cent.”

Able Shine is a private company that was incorporated in October 2016.

According to filings with the HKSE, Able Shine is owned by Jonathan Cheng, William Cheng’s brother.

© 2017 Postmedia Network Inc.

DREW HASSELBACK
The Vancouver Sun

The Bank of Canada is holding its benchmark overnight interest rate at 0.5 per cent as it says Canada faces “persistent economic slack.”

The decision to hold rates was hardly a surprise. Ahead of Wednesday’s decision, 20 economists and analysts surveyed by Bloomberg News unanimously predicted Canada’s central bank would not change its trendsetting interest rate.

Canada experienced a surprising jump in inflation in January, but the Bank of Canada attributes this to the short-term impact of new carbon pricing measures in Ontario and Alberta. Take that temporary blip out of the mix, and the central bank said it continues to see “material excess capacity in the economy.”

The bank’s last interest rate decision, released Jan. 18, made note of global uncertainty, and Bank of Canada governor Stephen Poloz told reporters at the time that enough potential downside risks were present in the economy for a future rate cut to be “on the table.”

Some Canadian economic data has improved since then, but the brief statement for Wednesday’s decision is unlikely to spark any expectation the bank will hike rates soon.

“Today’s statement provides further confirmation of our view that the Bank of Canada will not be taking its foot off the accelerator,” said Brian DePratto, senior economist with TD Economics. “Over the near term, given the still significant economic uncertainties, particularly beyond Canada’s borders, we continue to see the risks to monetary policy as tilted toward further easing.”

Benjamin Reitzes, senior economist with BMO Capital Markets, described the statement as nothing but a placeholder until the bank releases its next Monetary Policy Report on April 12.

© 2017 Postmedia Network Inc.

Super-sized Richmond farmhouses have ‘gotten out of hand’

Kent Spencer
The Vancouver Sun

Perfectly legal farmhouses as large as 22,000 square feet are cropping up on Richmond farmland, among the largest homes allowed in Metro Vancouver.

But on Thursday the city begins a process to decide whether the mega-mansions are taking up too much space on land in the agricultural reserve and whether sizes should be capped the same as many other Lower Mainland cities.

“This has gotten out of hand. We’re got to do something to address it,” said Coun. Bill McNulty. “The horse is out of the barn. We’re trying to close the barn.”

An open house from 5 to 8 p.m. at city hall will set out the problem: Richmond is alone among Metro Vancouver municipalities in permitting 60 per cent lot coverage, meaning a farmhouse is allowed to cover 60 per cent of the size of the property. On a three-acre spread, that amounts to a pretty big house, said Coun. Carol Day.

Sizes are often capped elsewhere: According to Richmond staff, Delta’s limit is 5,000 square feet on eight hectares or more; Port Coquitlam’s maximum is 5,282 square feet and Maple Ridge’s is 3,000 square feet; Surrey does not specify a maximum house size. Ministry of Agriculture guidelines allow two houses of 3,339 and 4,305 square feet, the latter for seasonal farm labour.

Day said farmhouses have “quadrupled” in size in the last dozen years, growing from 5,000 square feet, to 7,500, 10,000, 12,000 and 22,000.

here are six-car garages, 10 or 12 bedrooms and multimillion-dollar prices that no ordinary farmer could afford, she said; bedrooms have supplanted veggie beds.

One application for a 41,000-square-foot mansion featured 23 bathrooms and bedrooms; staff turned it down on the grounds it was a hotel, not a house.

“The application was unreasonable,” said McNulty. “Farmland has got to be farmed. The trouble is, you can build a structure all over and not have any farmland left.”

Day said the city has to come up with a “better number.”

“These people are realtors first and farmers second,” she said. “They buy properties, claim they’re going into farming, then subdivide so they can build more houses and put them on the market. Does a family really need more than 7,500 square feet? … I’m very passionate about getting this fixed.”

Staff don’t know the number of huge farmhouses in the city, but say there are 1,400 pieces of agricultural property where homes can be built. 

Home owners protest when proposals are made to restrict house sizes; they say farming is a tough business and it works best when large families can be housed together and the benefits of in-house labour can be reaped. 

Farmer Gary Berar told council his family moved to Richmond a couple of decades ago because South Asian culture favours living together and working the land.

“My brothers, parents and our children lived under one roof inside a home of 11,000 square feet.  People like big estate homes. It is comfortable for them. We are people who actually work the farms and we don’t want to be limited in size,” he said.

Opposition to mega-mansions is rife. Resident Deirdre Whalen called the houses “monstrosities” that are an “embarrassment” to the city.

“The best farmland in Canada has been covered up in concrete. They are removing agricultural land, one mega-house at a time,” she told council.

Richmond’s politicians are not entertaining specific proposals at the moment, but publicly gauging public feeling before a bylaw is drafted.

McNulty said council should act quickly because more than a dozen requests for huge homes have been made since council’s interest was raised.

“People are trying to come in before we do anything,” he said.

© 2017 Postmedia Network Inc.