Housing starts eased in July

Steve Randall
Canadian Real Estate Wealth

Housing starts eased in July as the multi-family sector pulled back from near-record highs in the previous month.

CMHC data reveals a trend of 219,988 starts in July, down from 221,738 in June, based on a 6-month moving trend of seasonally adjusted annual rates.

“The national trend in housing starts decreased in July, reflecting a decline in the SAAR of multi-unit dwellings in urban centres from the near-historical high registered in June,” said Bob Dugan, CMHC’s chief economist. “Despite decreasing in July, the trend remains well-above historical averages, reflecting elevated levels of multi-unit starts in most major markets that has more-than-offset declining single starts.”

Around the markets There was little change in the Toronto CMA, with single-family starts lower but offset by higher multi-family units. The only time there were more multi-family starts in a July was in 2005.

Both main housing sectors saw fewer starts in the Vancouver CMA. The market has seen an elevated rate of new home construction this year though.

The Quebec CMA saw a 10% decline in starts year-over-year although the rental market including seniors housing surged 48%.

Victoria saw a higher rate of starts across the CMA with fewer multi-family units but a rise in single-family starts compared to a year earlier.

Monthly stats The standalone monthly SAAR of housing starts for all areas in Canada was 206,314 units in July, down from 246,200 units in June. The SAAR of urban starts decreased by 16.2% in July to 190,093 units. Multiple urban starts decreased by 20.3% to 136,231 units in July while single-detached urban starts decreased by 3.6% to 53,862 units.

Copyright © 2018 Key Media Pty Ltd

In the coming years 1.4 million boomers are expected to sell and buy real estate between now and 2023

Steve Randall
REP

Baby boomers are set to play a key role in Canada’s housing market as they plan to buy but consider their current markets unaffordable.

Royal le Page says that 1.4 million boomers plan to buy over the next five years but 56% believe their local housing market is unaffordable for retirement.

“Don’t count them out yet – baby boomers will impact Canada’s housing market in a big way in the coming years, as another 1.4 million of this large demographic are expected to sell and buy real estate between now and 2023,” said Phil Soper, president and CEO, Royal LePage. “While the wave of older consumers will increase competition for condominium property in particular, there is no single type of home that boomers will be investing in.”

The study conducted by Leger found that 59% of retirees plan to renovate their current home rather than buy.

Where the boomers live, plan to live Over three quarters of respondents own a home, 19% rent, while 1% live with family. Most boomers (61%) nationwide live in a detached home, 21% in condos and 12% in semi-detached/town homes.

Among those planning to purchase a home in the next five years, 45% are most likely to purchase a detached home, 32% prefer a condominium, and 10% noted strongest interest in a semi-detached/town home. Just 5% would opt for a recreational property. Most (51%) boomers are not planning on downsizing.

A minority (10%) plan to buy a secondary property, while 15% plan to sell their primary residence and move into their currently owned secondary property full-time. Nearing or during retirement, nearly one quarter of boomers nationally plan to live in another city (24%) or country (23%) for at least three months of the year.

If they were to make a property purchase, 54% would have a budget of under $450,000, while 25% have a budget of $450,000 or higher.

Helping their kids Almost half of baby boomers said that they would help fund their children’s home purchases with 41% saying they would contribute less than a quarter of the home’s total value.

“Baby boomers are the most affluent generation in Canadian history, yet the journey has not been without challenge and adversity. Through several difficult economic recessions, the equity in their homes has proven to be wealth bedrock. This is a generation that deeply values home ownership and very much wants their children to have the same opportunity,” concluded Soper.

Copyright © 2018 Key Media Pty Ltd

Construction starts dip

Canadian Real Estate Wealth

Canada Mortgage and Housing Corp. says there was a slowdown in housing construction starts in July, following a near-record high in the previous month.

The federal Crown corporation says the seasonally adjusted rate of housing starts dropped to 206,314 units in July, from 346,200 in June.

Urban multiple-unit projects such as condos and apartments declined by 20.3 per cent from June to 136,231 units in July, while single-detached urban starts decreased by 3.6 per cent month-over-month to 53,862 units.

Rural starts were estimated at a seasonally adjusted annual rate of 16,221 units in July.

CMHC notes that the six-month trend for housing starts remained well above historical averages due to elevated levels of multi-unit housing starts in most major markets.

In a separate report, Statistics Canada says its national index of new housing prices edged up 0.1 per cent in June, mainly due to higher construction costs. 

The Canadian Press

Copyright © 2018 Key Media Pty Ltd

At Luxia at Yorkson, high-quality finishes elevate decor

Mary Frances Hill
The Province

Luxia at Yorkson

What: 138 three-bedroom townhouses

Where: 7947 209th Street, Langley

Developer and builder: Isle of Mann and Pollyco Group

Residence sizes and prices: Three-bedrooms from 1,443 to 1,897 sq. ft. from $639,900

Sales centre: 180 — 20780 Willoughby Town Centre Drive, Langley

Sales centre hours: noon — 5 p.m., Sat — Thurs

At Luxia at Yorkson, Natalia Kwasnicki harnesses the best of interior design by using natural and man-made materials that give the interiors of the community’s three-bedroom homes a resilience without sacrificing their sophistication and aesthetic appeal.

In the display space for the Langley community, which will offer 138 townhomes near Willoughby Town Centre area, Kwasnicki shows how a generous use of wood against stone counters can reflect the materials that the architects used in the building’s west coast modern exteriors (think wood, soffits and colourful panels).

These materials “always create a great dichotomy of texture and reflectiveness. Sort of a nature versus manmade thing,” says Kwasnicki, an interior designer at Portico Design Group, who worked with the developers Isle of Mann and Pollyco Group, on the project.

It’s clear at Luxia that Kwasnicki appreciates what high-quality finishes can do to elevate a home, particularly the areas homeowners use most frequently. Case in point: the laminate flooring throughout the kitchen, dining and living areas will still be attractive while it withstands years of wear and tear, thanks to the innovative advances in flooring manufacturing. “Laminate floors are very durable and will stand the test of time, and the visuals on them are fantastic nowadays. We’re lucky that technology has come as far as it has that we are able to [use] products that look fantastic and perform really well.”

In the ensuite bathroom at the presentation centre, visitors will see a floating vanity with double sinks in a white quartz countertop; all plans include a powder room on the ground floor with quartz countertops and floor tiles laid out in a herringbone pattern, an effect that provides “a modern twist on the appealing subway tile,” she says.

Luxia offers two schemes to buyers—the “Elm” and the “Urban.” Both appeal to the tastes and needs of the young families that marketers are seeing at the presentation centre, though the Urban scheme offers lighter finishes and can be viewed at the presentation centre. The Elm scheme takes a bolder route, says Kwasnicki.

“The Elm scheme takes a few more risks with a wood laminate cabinet that has a bit more character to it, as well as a grey backsplash tile, as opposed to a more typical white,” she adds.They both also include wood features that manage to be sophisticated and modest at the same time.

“The elegance and beauty [of wood] is reflected in how you use it to create beautiful pieces — it’s in its construction and finishing. Wood is an alive, breathable, warm product so it’s always going to bring that life into a space.”

© 2018 Postmedia Network Inc.

Will Vancouver condo buyers maintain their edge in 2018

Kerrisa Wilson
other

As Vancouver condo inventory increased in July in the face of plummeting sales, one Vancouver realtor says the market is favouring buyers and will continue to trend in this direction for the rest of the year.

Last month, a total of 427 condos changed hands in the city, down 22 per cent from a year ago, according to the Real Estate Board of Greater Vancouver (REBGV).

July’s sales were also 20 per cent below the 10-year sales average for the month.

“We’re entering into a slower period from a seasonality perspective so I think that you’ll probably continue to see the market trend towards favouring buyers. I think inventories are going to keep building up here and I don’t expect sales to get stronger in the back half of this year. I think for buyers it’s definitely encouraging,” Vancouver-based realtor Steve Saretsky tells Livabl.

In a blog post, Saretsky writes that, so far, condo sales have declined each month this year and dropped to their lowest total for July in six years.

Saretsky attributes the fall in sales to a combination of factors, including government intervention and higher interest rates.

With condo sales dropping and more supply hitting the market, inventory is on the rise in the condo segment.

In July, Vancouver’s condo inventory hit a three-year high for the month, increasing 32 per cent compared to a year ago.

Saretsky says supply still remains low on a historical level but is starting to grow — an uncommon trend in the city.

“Over the last couple of years, the trend has been lower inventory and more sales and now it’s fewer sales and higher inventory. So, buyers and sellers alike have to adjust to that,” says Saretsky.

While the city is experiencing a slower sales pace, Saretsky says prices are still holding up relatively well.

He adds that condo prices peaked in the beginning of 2018 and have been declining ever since.

“Condo prices have definitely topped out and I would say they topped out in Vancouver probably about four or five months ago. And, since then, it’s been a steady decline lower. I would say typical condo prices are off about 5 per cent from their peak,” says Saretsky.

Last month, the average sales price of a condo dropped two per cent compared to a year ago.

© 2018 BuzzBuzzHome Corp

School catchment areas important in sales

Neil Sharma
REP

Chief among all requests James Mabey receives from clients is finding a home near a reputable school.

As of last week, Realtor.ca started offering users information on school catchment areas, beginning the roll out in major centres before it services the entire country next month.

“This is the number one request for enhancements we’ve had for Realtor.ca,” said the broker-owner of Century 21 Masters in Edmonton. “It’s important for realtors to bring this information to the marketplace because people don’t just pick a house. Being in the right catchment areas for schools that people would want their children to go to is quite a high priority. We’re really happy we were able to respond to consumers’ desire for this feature.”

Homebuyers typically research schools by their boards and then provide sales agents with MLS numbers and addresses, hoping they line up with the right catchments.

“There was no single source of information for this kind of thing,” said Mabey. “Providing that, and integrating it with the actual listing data, is what they actually need and want on a house-by-house basis. As a realtor, you’re researching that for them, which is, of course, part of the job, but this makes it so much more integrated and seamless with their natural way of searching the MLS that I think they’re going to love the ability to see it on the listing data.”

According to Marc Lafrance, director of product management and member services at the Canadian Real Estate Association, which owns Realtor.ca, consumers have long pined for school catchment information.

“This is something consumers have been asking for the longest time and we can finally roll it out, and hopefully it draws more leads to realtors because that’s what Realtor.ca is all about,” he said. “I know that the realtors I’ve spoken to so far think it’s a great thing because it helps them with daily interactions with customers.”

The Canadian Real Estate Association recently launched a neighbourhood feature on Realtor.ca that lets consumers search lifestyle amenities to paint a fuller picture of what living in a home entails. According to Lafrance, it has proven to be reliable lead generation tool for sales agents, and he expects the school catchment feature to go even further.

“Ever since we introduced the neighbourhood information, leads to realtors have gone up, and now with the catchment areas it’s interesting to see the number of leads that are going to our realtors,” said Lafrance.

Copyright © 2018 Key Media Pty Ltd

Delinquency rate in Vancouver near historical low as Ottawa tightens mortgage access

Frank O’Brien
Western Investor

The federal government’s mortgage stress test was expanded in January in a bid to protect homeowners from becoming overextended, particularly in Vancouver, which has the highest average home prices in Canada.

Yet the latest data on mortgage defaults shows that Vancouver homeowners have the lowest delinquency rate in the country at 0.08 per cent, one of the tiniest ever recorded.

When the stress test was revised this year, the Office of the Superintendent of Financial Institutions (OFSI) said it was a prudent move to keep mortgage holders from running into financial trouble. The test requires all those applying for a new mortgage to qualify at a lending rate 2 per cent higher than what is generally available in the market.

“We clearly see the potential risks caused by high household indebtedness across Canada and by high real estate prices in some markets,” OFSI superintendent Jeremy Rudin said at the time. “We are not waiting to see those risks crystallize in rising arrears and defaults.”

As of the first quarter of this year, though, the delinquency rate for existing mortgages fell to 0.08 per cent, down from a peak of 0.6 per cent in the third quarter of 2014, despite the average monthly mortgage payment rising to $1,800, up 6.3 per cent from the first quarter of 2017, according to Canada Mortgage and Housing Corp. (CMHC). A mortgage is considered delinquent if three consecutive mortgage payments are in arrears.

CMHC found the low default rate in Vancouver was the same regardless of the mortgage amount.

As a comparison, the default rate on Vancouver credit card holders is about 1.5 per cent and for auto loans is above 2.2 per cent, CMHC noted in its Mortgage and Consumer Credit Trends Report Q1 2018, released July 26.

As well, the credit risk score among Vancouver mortgage holders increased from an average of 776 in 2017 to 780 in the first quarter of 2018, according to credit reporting agency Equifax Canada. Equifax ranks a credit score of 700 as “good”, an 800 score as “excellent.”

“The main finding is the share of delinquent mortgages has declined over the last few quarters, ” said Eric Bond, CMHC’s principal market analyst for Vancouver. “What’s behind that is a strengthening job market and rising home values, and a high level of liquidity in the housing market as well, which has given people a lot more financial flexibility.”

Copyright © 2018 Western Investor

Vancouver?s industrial & logistics leasing rates increased 29.1% this year

Steve Randall
REP

Owners of industrial real estate in Vancouver are enjoying a surging market right now and the sector has posted the largest rent rises in the world!

A report from real estate firm CBRE shows that Vancouver’s industrial & logistics leasing rates increased 29.1% this year as the vacancy rate fell to 2.4%, the lowest in North America.

The average year-over-year rise for industrial & logistics globally is 3.2%, increasing from 2.2% in the previous 12 months.

“These price increases are a result of continued dwindling industrial supply, doubling occupier demand and continued growth of Vancouver’s population,” said Jason Kiselbach, Vice President and Sales Manager at CBRE Vancouver. “This is a testament to Vancouver’s growing economy and strong retail consumer spending. Industrial users understand the value of having port access and proximity to a growing population that is increasingly demanding expedient delivery of products and services.”

Despite the sharp rise for Vancouver’s leasing rates the city still represents a relatively affordable location, only ranking at 25th most expensive markets in the sector.

Hong Kong (USD $30.99), London (USD $22.35) and Greater Tokyo (USD $19.96) are the top three most expensive markets.

Tenants should lock in rates now The rising leasing rates in Vancouver are in tandem with other increasing costs for industrial and logistics tenants in the market and Kiselbach has some advice for businesses.

“This should however serve as a wake-up call for the smaller, family-owned, industrial businesses that have seen, not only an increase in rental rates, but in a number of other costs as well, including property taxes, wages and transportation. These businesses need to consider locking in rates now with early, long-term renewals to hedge against further cost increases,” he advises.

Copyright © 2018 Key Media Pty Ltd

There are certain legal and accounting issues that arise when a non resident of Canada acquires or sells property in Canada

The Spagnuolo Group
other

Non-Resident Sellers

The Income Tax Act of Canada provides that whenever a non-resident disposes of property, the non-resident is required to pay the appropriate amount of taxes on any gain.  In order to satisfy the Buyer that the appropriate amount of taxes are paid, the Seller must provide to the purchaser, on or before closing, a clearance certificate from Revenue Canada.  This certificate is issued by the federal government and certifies that a certain amount of money is payable for the taxes.  The amount owing is deducted from the sale proceeds and sent directly to the federal government by the Seller’s lawyer.

The clearance certificate is issued pursuant to section 116 of the Income Tax Act and is usually required on the closing date.  The application for the certificate may be made prior to closing by the Seller, but not until there has been a subject free contract of purchase and sale.  The wait for the clearance certificate is usually around 3 months, so in a perfect world, there would be a 3-month lead-time between subject removal and the completion date.

Complications can arise if the certificate is not obtained prior to the closing date.  In such a case, the Buyer is required to hold back from the sale proceeds a percentage of the selling price.  This percentage is between 25% and 50%, depending on whether the property is non-depreciable property (a residence of the Seller), depreciable property (the property has been rented), or inventory (Seller is a builder).  The transaction closes with the money remaining in a lawyer’s trust account until the certificate is obtained.  Once the certificate is obtained, the taxes are paid from the holdback and the Seller receives any amount left over.

Note that the holdback is based on the selling price, not the equity in the property.  If there is financing on the property, the Seller may need to pay this financing from other sources. 

Non-Resident Purchases

There are no income tax issues that arise from a non-resident purchase of the property.  There are no restrictions for a non-resident purchase, nor are there income tax implications.  A non-resident may purchase as many properties as they wish.

Income tax issues may arise on the holding of property by non-residents.  Non-residents of Canada are subject to tax on various kinds of income paid to them, including rental income.  If you are a non-resident and are renting property in Canada, a tax return must be filed each year.

Although there are no income tax issues, there is the Foreign Buyers Property Transfer Tax. This is a tax of 20% of the Purchase Price, and must be paid by anyone who is not a Canadian citizen or a Permanent Resident, or registered under the Provincial Nominee Program. This applies to any property within:

• Greater Vancouver Regional District
• Capital Regional District
• Fraser Valley Regional District
• Regional District of Central Okanagan
• Regional District of Nanaimo

For further information on the Foreign Buyers Tax, please visit the B.C. government page at:

http://www2.gov.bc.ca/gov/content/taxes/property-taxes/property-transfer-tax/understand/additional-property-transfer-tax 

Who is a Non-Resident?

For the FBPTT it is clear that the tax applies to a person who is not a Canadian citizen, Permanent Resident or registered under the Provincial Nominee Program.

A different definition applies for income tax, as the term “resident” is not defined in the Income Tax Act. The courts have held “residence” to be a “matter of the degree to which a person in mind and fact settles into or maintains or centralizes his ordinary mode of living with its accessories in social relations, interests and conveniences at or in the place in question.” The courts have held that an individual is “ordinarily resident” in Canada for tax purposes if Canada is the place where the individual, in the settled routine of his or her life, regularly, normally or customarily lives. In making a determination of residence status, all of the relevant facts in each case must be considered, including residential ties with Canada and length of time, object, intention and continuity with respect to stays in Canada and abroad.

Please remember that the Income Tax Act frequently changes, and there are often new cases dealing with the issues set out above. While we try to keep our website as current as possible, please do not rely on the above without talking to one of our lawyers. 

The information you obtain at this site is not, nor is it intended to be, legal advice.  You should consult a lawyer for individual advice regarding your own situation. 

Copyright © 2018 by The Spagnuolo Group of Real Estate Law Firms.