Empty homes tax has clearer requirements

Steve Randall
The Vancouver Sun

Vancouver’s empty homes tax will have clearer requirements for property owners for three of its exemptions following a vote by the City Council.

The three approved changes, which will be effective for the 2019 tax year once the updated bylaw is enacted, are:

• The exemption for death of an owner could be used in the year of death and the year following; this aligns with the provincial Speculation and Vacancy Tax rules
• The exemption for property transfer will be tied to proof of payment of the property transfer tax; this also aligns with the provincial Speculation and Vacancy Tax rules
• The exemption for a rental property will require proof of an arm’s-length tenancy agreement under the Residential Tenancy Act, which will prevent situations where a property appears rented through a separate entity/corporation but is in fact vacant

The changes followed feedback from property owners.

In addition to the changes that have been approved, City staff will be exploring a potential change to help owners who are unintentionally impacted by the Empty Homes Tax.

They will also consider the results of the provincial government’s review of money laundering in real estate and how that could apply to the EHT.

And there will be a review of whether an incentive-based program, perhaps including property tax rebates, would encourage more rental properties.

Copyright © 2019 Key Media Pty Ltd

BoC keeps lending rate at 1.75%

other

The Bank of Canada (BoC) officially turned dovish in today’s scheduled rate announcement, keeping its trend-setting Overnight Lending Rate untouched at 1.75%, and explicitly stating lower interest rates will continue to be necessary in the current economic climate.

“Governing Council judges that the outlook continues to warrant a policy interest rate that is below its neutral range,” states the BoC’s release. “Given the mixed picture that the data present, it will take time to gauge the persistence of below-potential growth and the implications for the inflation outlook. With the increased uncertainty about the timing of future rate increases, Governing Council will be watching closely developments in household spending, oil markets, and general trade policy.”

Economic Growth is Lower Than Expected

The central bank says its stance was influenced by a surprising report issued by Statistics Canada last week, that revealed the economy grew by only 0.1% in the last quarter of 2018. This is despite already forecasting a temporary downturn due to challenges in the oil patch, softer housing market, and less household spending.

“However,” the BoC points out, “the slowdown in the fourth quarter was sharper and more broadly based.” This has led the Bank to predict economic growth will fall short of its previous forecast for the first half of 2019, following its pace of 1.8% over the course of last year. It expects inflation to remain below its 2% target as lower energy prices persist, and also points to global economic risks that have prompted other central banks to loosen monetary policy, including the U.S. Federal Reserve. International trade tensions, and particularly the unfolding U.S.-China trade war, remain top external concerns. The BoC’s next Monetary Policy Report forecast will be released along with its April 24th rate announcement.

A Slower Housing Market is Also a Factor

Another cause for concern is slowing activity in the housing market; the BoC has stated it will keep a close eye on how borrowers are impacted by the mortgage qualification rules introduced last year. So far, they’ve proven to take a bite out of demand in the nation’s biggest markets; February numbers from the Toronto and Vancouver local real estate boards reveal sales remain subdued moving into the year as a result of the stress test. It has been particularly painful for houses for sale in the west coast city, as detached prices have plunged 10% last month.

What’s to Come for Future Interest Rates?

That the BoC would take a softer stance on the economy in its March announcement was widely expected by analysts, especially following a speech made Governor Stephen Poloz in February that indicated his plan to hike rates this year had become “highly uncertain”. 

It’s a turnaround from the hawkish stance the BoC has taken over the last two years, when it hiked rates five times from 0.7% to the current 1.75% as part of efforts to reach a “neutral” interest rate (between 2.5 – 3.5%). Hitting such a range would indicate that the economy is performing at capacity and that rate stimulation is no longer needed – but the recent crop of flagging economic data have thrown that strategy into flux.  In fact, according to panels of economists recently polled by Bloomberg and Reuters, it’s expected the BoC will hold its rate all the way until December of this year, though the jury is still out on whether it will hike or cut it at that time. Previously, it was widely expected two rate hikes would occur in 2019.

What Does This Mean for Your Mortgage Rate?

Because the Bank of Canada’s Overnight Lending Rate directly influences the cost of variable consumer loans, those with variable-rate mortgages can rest easy knowing their rate is stable – for now.  However, having such forward-looking insight can be a benefit for those deciding whether or not to take out a variable mortgage, or those weighing their options at renewal time. As a rate hike can translate into a higher monthly mortgage payment, or more of your payment going toward interest and less toward your principal, it’s important to consider how this risk factor may affect your budget. Conversely, should variable rates be poised to be lowered over the medium term, that can result to more money saved on your mortgage. It’s a great idea to connect with a mortgage expert to discuss these options when the future of interest rates may be unclear.

© 2015-2017 Zoocasa Realty Inc.,

Chinese buyers looking at Halifax, Calgary, Montreal and Ottawa

Josh Sherman
other

Chinese homebuyers are showing increasing interest in Canadian real estate again — just not in the in the same places as they were before, a new report suggests.

Juwai.com, a real estate portal that connects residents of China with homes abroad, says Chinese enquiries into Canadian properties increased 8 percent last year compared to 2017, when demand was stagnating in the wake of the introduction of two separate foreign-homebuyer taxes in major urban centres within a span of 12 months.

In August 2016, the BC government imposed a 15-percent tax on non-residents purchasing residential real estate anywhere in Metro Vancouver. Ontario followed suit in April 2017, slapping its own 15-percent levy on the Greater Golden Horseshoe, which encompasses Toronto and surrounding municipalities. Starting February the following year, BC expanded and increased its tax to 20 percent, covering a larger geographic area.

The moves followed media reports and other speculation that foreign nationals were driving up home prices in Canada’s most expensive cities.

The subsequent measures are one reason Chinese buyers are turning away from Toronto and Vancouver to different Canadian markets, suggests Juwai CEO Carrie Law in a statement. “With steep foreign buyer taxes and high prices in Vancouver and Toronto, we have seen an increasing number of Chinese buyers shift to other cities in Canada,” explains Law, also director of the company.

Chinese buyer enquiries into Vancouver properties declined 2.8 percent on a year-over-year basis in 2018. Over the same period, they fell 10.3 percent in Toronto.

Meantime, enquiries were up 394 percent in Halifax, 234.4 percent in Calgary, 35.7 percent in Montreal and 32.5 percent in Ottawa.

Law puts the Halifax and Calgary gains in perspective by noting respective market sizes. “These growth rates appear startlingly high because Chinese buying in Calgary and Halifax during 2018 grew from such low numbers,” he explains. “Doubling a small number gives you 100% growth but leaves you with a product that is still small,” he adds.

Halifax and Calgary were only on the radar of a “relative handful” of those based in Mainland China — until 2017, at least. “And many fewer purchased property in them,” Law adds.

As well as the lack of foreign-homebuyer taxes in these markets, the comparative affordability they offer has sparked recent interest.

Local real estate industries have gotten better at selling the cities to an international audience. “They are successfully marketing local real estate in terms of affordability, lifestyle, and educational institutions,” says Law.

Juwai anticipates enquiries this year will grow at a similar rate to what was observed in 2018, barring political factors discouraging investment abroad or future Canadian policy moves that impact foreign-homebuyers.

© 2019 BuzzBuzzHome Corp

RBC report shows a very slow February

Josh Sherman
other

Higher interest rates, tougher mortgage rules, and special taxes against foreign homebuyers and speculators aren’t the only headwinds cooling some of Canada’s major housing markets this winter.

Toronto and Vancouver were slammed with snowy February’s, and that could explain — at least some of — the softness seen in these markets last month, according to a new RBC report.

“We would caution to jump to any conclusions too quickly in the middle of winter when the market is at its seasonal low point. Demand weakness can be easily exaggerated by blasts of bad weather. And February was particularly brutal across Canada this year,” reads the RBC report.

In February, home sales in Vancouver were down 32.8 percent compared to the same month a year earlier, according to the Real Estate Board of Vancouver. Within the first two weeks of February, the city had already been buried by three times the usual amount of snow for the entire month.

Meantime, Toronto sales were off 2.4 percent in February, by the Toronto Real Estate Board’s count. So much snow has fallen in Toronto recently that city workers are literally hauling it off the streets and putting it in storage in the biggest winter cleanup since 2010.

The 1,484 homes that changed hands in Metro Vancouver and the 5,025 homes that sold across the Greater Toronto Area represent 10-year lows in each market for the month of February.

In a client note about Toronto’s frosty market, RBC Senior Economist Robert Kavcic echoes RBC’s commentary on a possible seasonal effect. “Importantly, February was a nasty weather month in Toronto (great for winter surf, but very bad for house shopping), at a time when volumes were seasonally low anyways,” he explains.

“So, we’d probably brush this number off and wait for a better read in the March-through-May period,” Kavcic concludes.

© 2019 BuzzBuzzHome Corp

Conversations on Cannabis ‘ Strata Properties

BCREA

The legalization of cannabis opens up new risks for homeowners and new opportunities for REALTORS® to add value as trusted advisors as consumers make the biggest financial decision of their lives. That’s why BCREA has launched a series of videos called Conversations on Cannabis. Click here to view the second episode. It features Victoria REALTOR® and CFAX radio host Tony Joe interviewing housing lawyer Grant Haddock on cannabis as it relates to strata properties, the risks of growing cannabis inside a strata unit and how to identify whether the strata bylaws align with your client’s purchasing needs. The aim of the series is to create an accessible tool that builds REALTORS®’ reputations as partners to consumers when it comes to understanding and navigating risks around real estate transactions. This is a different approach with different targeted outcomes than the Real Estate Council of BC’s announced Professional Matters webinars for licensees on cannabis. In early spring, BCREA will be following up with the final video with other industry experts, as well as social media campaigns around all the videos targeting consumers, REALTORS® and other real estate professionals.  Please feel free to take advantage of this resource, whether by sharing the link with your network on Facebook, Twitter or LinkedIn or on your professional website.

For more information:  April van Ert Communications Manager [email protected]  604.742.2797 BCREA is the professional association for about 23,000 REALTORS® in BC, focusing on provincial issues that impact real estate. Working with the province’s 11 real estate boards, BCREA provides continuing professional education, advocacy, economic research and standard forms to help REALTORS® provide value for their clients. To demonstrate the profession’s commitment to improving Quality of Life in BC communities, BCREA supports policies that help ensure economic vitality, provide housing opportunities, preserve the environment, protect property owners and build better communities with good schools and safe neighbourhoods.

Conference Board of Canada’s study predicted economy slowdown

Ephraim Vecina
Canadian Real Estate Wealth

British Columbia’s moderating housing market will have a domino effect of overall weakness in the provincial economy, the Conference Board of Canada predicted in its study released last week.

Some ongoing energy megaprojects might help alleviate some of the pain, according to the analysis. Among the most promising of these is a $40-billion project based in Kitimat, B.C. by LNG Canada and five investment partners.

“With the housing market slowing, investor approval of LNG Canada’s liquefied natural gas terminal and pipeline in late 2018 came at an opportune time for the province. The first phase of the development will provide a substantial boost to the province’s real GDP between now and the middle of the next decade,” the Board stated in its report, as quoted by Business in Vancouver.

Nevertheless, the market should still brace for considerable real GDP growth slowdown, with housing likely to drag down the economy well into next year.

The Board warned that the province’s economy will shrink from 2.6% in 2018 to 2.5% this year, and then down to 2.4% in 2020. These would be noticeably lower than the 2014-17 period, which enjoyed an average of 3.2% growth.

Said slowdown will make itself especially felt in the largest cities, which endured the brunt of weaker housing activity. Data from the Real Estate Board of Greater Vancouver showed that the region’s sales numbers suffered an annual decline of 39.3% in January, down to 1,103 completed deals.

Much of the blame has been cast upon B-20, which introduced a severely tightened mortgage lending stress test at the beginning of last year.

Copyright © 2019 Key Media Pty Ltd

Vancouver becoming a buyer’s market

Steve Randall
REP

As the spring buying season approaches, Metro Vancouver’s housing market continues to exhibit weakness with buyers firmly in control.

February’s data from the Real Estate Board of Greater Vancouver shows a 32.8% drop in sales year-over-year to 1,484, more than 42% below the 10-year average for the month. Sales were up 34.5% compared to January.

Detached home sales were down 27.9% year-over-year to 448, apartment sales fell 35.9% to 759, and attached home sales were down 30.9% to 277.

“For much of the past four years, we’ve been in a sellers’ market. Conditions have shifted over the last 12 months to favour buyers, particularly in the detached home market,” Phil Moore, REBGV president said. “This means that home buyers face less competition today, have more selection to choose from and more time to make their decisions.”

Although new listings eased– by 7.8% year-over-year and by 19.7% month-over-month (3,892) – inventory remained elevated with 11,590 homes on the MLS, 48.2% above February 2018 and 7.2% higher than in January 2019.

Prices eased

Home prices in Metro Vancouver were down in February with the benchmark MLS price at $1,016,600, down 6.1% year-over-year and down 0.3% from January.

For detached homes, the benchmark was $1,443,100, down 9.7% year-over-year; for apartments it was $660,300, down 4%; and for attached homes it was $789,300, down 3.3%.

“Homes priced well for today’s market are attracting interest, however, buyers are choosing to take a wait-and-see approach for the time being,” Moore said. “Realtors continue to experience more traffic at open houses. We’ll see if this trend leads to increased sales activity during the spring market.”

Copyright © 2019 Key Media Pty Ltd

Belcarra cabins charged speculation tax

JOHN LEHMANN
The Globe and Mail

Seniors who own rustic cabins that are in no shape to be on the rental market say they face thousands of dollars in speculation taxes because their properties fall within the Vancouver-area boundary where the levy applies.

Neil Belenkie, mayor of the remote village of Belcarra, and the property owners were at British Columbia’s legislature Tuesday demanding relief from the tax, which applies to vacant homes in Metro Vancouver, the Fraser Valley, Kelowna, southern Vancouver Island and Nanaimo.

Retired music teacher Charline Robson said she lives in a basement suite in Burnaby but now faces a $6,000 speculation tax bill this year because the cabin she inherited is empty much of the year and not up for rent.

Robson, who said she already pays annual property taxes for the cabin of about $12,000, says the property is not insulated and does not have running water, sewer or street service.

“You can’t rent this,” she said. “You have to go through private property to get there. There’s no parking. There’s no proper water and certainly not any sewers.”

She said the land value is assessed at about $1.3 million, but the cabin is valued at $15,000.

“This was passed on to me by my auntie about three years ago,” said Robson. “She bought it in the early 1950s. During the last couple years, she said to me, ‘I’m not sure I can hold onto it. I don’t have the money.’ ”

Robson, who has children and grandchildren, said the family uses the cabin as a summer vacation getaway.

“We can’t afford to go away,” she said.

The New Democrat government introduced the speculation and vacancy tax to reduce the number of empty homes in most B.C. urban areas in an effort to ease the province’s housing crisis. The tax rate varies depending on the citizenship and residency status of the owners.

The tax rate for 2018 is 0.5 per cent of a property’s assessed value for all properties subject to the tax. Next year it changes to two per cent for foreign owners and satellite families, but remains 0.5 per cent for Canadian citizens or permanent residents who are not members of a satellite family.

Opposition Liberal Leader Andrew Wilkinson said the Belcarra seniors are not property speculators, but still face the tax because their roughly finished cabins are considered second homes and are not on the rental market.

“These people are seniors who have cabins that cannot be rented out and the NDP have classified them as speculators,” he said.

Belcarra Mayor Neil Belenkie said efforts to exempt his community from the tax have been rejected by Finance Minister Carole James.

“These cabins don’t have potable water,” he said. “They don’t have parking. They don’t have services you’d require and never had the insulation and the heating for regular day to day living. They are not designed to be able to have someone live full time.”

Retired engineer Walter Mechler, 93, said he built a cabin on a rock outcrop in Belcarra for family use. He said he pays about $4,000 in property taxes and now faces a speculation tax bill of about $3,000.

James said there tax credits available to B.C. property owners subject to the speculation tax. She said B.C. owners are eligible for a tax credit of up to $2,000 on a secondary property, which means a property assessed up to $400,000 will be exempt from the tax, she said.

© Copyright 2019 The Globe and Mail Inc.

Aragon Developments build first then sell

Neil Sharma
Canadian Real Estate Wealth

Arguably the greatest risk to preconstruction condo purchases is show suites often don’t conceal the true state of delivered units. But a Vancouver developer has found a way around that.

Aragon Developments builds its condomniums before opening sales to the public—a virtually unheard of way to market condos in a major Canadian market. Developers usually have to surpass 80% sales before they can secure financing to start building.

“It also allows buyers to go in and see the amount of work we put into the finished quality,” said Luke Ramsay, development coordinator at Aragon. “They see what we do acoustically or to the finishes. They see where they’re going to live instead of a show suite that may or may not reflect the finished product three or four years down the line.”

Perhaps Aragon’s most unique offering can be found at two of its condominium developments that go on sale this summer. Amber, a 31-unit building with three accompanying townhomes, and Shift, a 43-unit tower, are designed by the firm’s in-house interior design team and promise idiosyncratic design elements. But most importantly, they will be family-friendly.

“The suites appeal more to young families who are looking for more bedrooms but don’t have the ability financially to afford a big house or apartment,” said Ramsay. “Most companies start by going through an architect and telling them what they’re looking for, then letting them come up with a design concept, but at Aragon we get our interior designers involved early on in-suite planning. We have more play in our floor plans to make them livable and we make a product well-suited towards a certain demographic.”

Buyers with a flair for modern, even eccentric, design are the target, added Ramsay. The units feature 16-20-foot wide folding glass doors and cantilever balconies.

“The glass doors open up and the balcony becomes an extension of your living room, so we’re marrying the outdoor space with the indoor space and it’s a different feature that you won’t generally see in an apartment building,” he said. “Essentially, it’s for people looking to live in a place with an artistic statement and are looking for a type of space that’s more unique than cookie-cutter. Our mantra is to always be different.”

Indeed, the buildings’ exteriors are different, too. Using timber reinforced with steel, the building materials are eco-friendly and earthquake-resistant.

“There are rods in the concrete deck that pull the building into the ground and that make it heavier, giving it more lateral resistance to an earthquake,” said Ramsay. “Timber construction has come a long way. It insulates buildings well with good thermal properties and it will help turn Vancouver into one of the greenest cities in the world.”

Copyright © 2019 Key Media Pty Ltd

Mobile home parks remain the most affordable residential investment in British Columbia

Frank O’Brien
Western Investor

Perry Peace, a multi-family apartment landlord in Regina, placed a simple ad in Western Investor last month: “Private investor wanting to purchase mobile home park in B.C. or Alberta,” the ad read.

Percy is representative of what has always been a major profile in the manufactured home park buyer base. 

“I want to retire and I don’t want to be too far north,” Peace said, noting that it was minus 35 degrees in Regina as he spoke in early February. 

The fact he is advertising to find listings reveals another trend: a shortage of manufactured home parks in B.C. after many have been sold as redevelopment plays. 

Peace has about $2 million to invest in a park, and a scout through the Western Investor found a number of listings that would likely fit the bill.

These include a 12-site park near Salmon Arm in the Okanagan, fully occupied and priced at $549,000 and returning 6.5 per cent annually, representing an annual net income of about $36,000; and a 12-unit mobile home park with six rental cottages in the South Okanagan, priced at $1.62 million, both listed by veteran park dealer Vadim Kobasew of Re/Max Commercial in Penticton.

Kobasew noted the Salmon Arm property has recently sold “for very close to the asking price.” 

Eugen Klein of the Klein Group has a 15-pad park in Rock Creek in the South Okanagan listed at $549,000, with a 9.1 per cent capitalization rate. “An ideal retirement home,” Klein suggested.

Kobasew said demographics are coming into play on both sides of transactions.

On one hand, longtime owners are selling parks and retiring with their capital, while buyers are often mature investors who see the manufactured home parks as a future retirement investment. For instance, it is possible for a rental investor to buy a 12- to-15-pad manufactured home park in rural B.C. for around $600,000, which is the average cost of a Vancouver condominium apartment. 

Manufactured home pads rent to tenants for between $350 to $500 per month in B.C.’s Interior and northern Vancouver Island. Rents are allowed to increase 2.5 per cent this year under B.C.’s Residential Tenancy Act.

Many manufactured park owners are remote investors who hire a manager and might visit the site only once or twice a year, Kobasew said.

Like B.C.’s overall residential market, action in manufactured parks has “adjusted” recently, he added.

Klein noted that B.C. park sales in 2018 reached 22, down

from 27 a year earlier, but the sales volume dropped from $90.6 million in 2017 to $32.7 million last year. This reflects more sales of lower-priced properties.

“Demand for cash flow propertied outside of the Lower Mainland continues to increase since the implementation of speculative and foreign [home buyer] taxes in B.C.,” Klein noted.

 “Buyers are taking longer to make decisions; it is not like it was two or three years ago when we had competing offers and sales over list price,” Kobasew said. Financing can be a challenge for nascent investors, he added.

“The minimum down payment is 25 per cent,” Kobasew said, and ideally should be higher if the buyer does not have a track record in the industry. He recommends dealing with local credit unions, which are more tuned into the real estate market in their community, he said.

Deep-pocket investors, including pension funds and real estate investment trusts, are also in the market, but are looking for large parks close to major centres, or multi-park portfolios. 

An example is Canadian Apartment Properties Real Estate Investment Trust, which now owns a manufactured home park on B.C.’s Sunshine Coast and seven other parks across Western Canada. 

Investor advice

For those considering a first investment in a manufactured home park, this is what you should consider, according to Kobasew, who has sold nearly 50 parks in Western Canada.

• Location: Parks close to urban centres cost more but may have redevelopment potential, while lower-priced rural parks will deliver a higher capitalization rate.
• Local market stability: Look for centres that have a diversified economy.
• Tenant mix: Ideal tenants are mature workers or retirees; not seasonal or project workers who often are more transitory. 
• Infrastructure: Check the type and age of infrastructure, especially sewer and water services, if the park is not tied to municipal services.

© Copyright 2019 Western Investor