Responds David Hutniak, CEO of Landlord B.C.: ‘This is a down-zoning. Some of our members call it expropriation.’

Bill Cleverley
The Vancouver Sun

A sweeping zoning change under consideration by Victoria council to ensure purpose-built rental buildings remain rental is being met with dismay by landlords and developers.

“This is a non-starter,” said David Hutniak, CEO of Landlord B.C. “This is a down-zoning. Some of our members call it expropriation.”

Victoria councillors decided Thursday to begin consulting with building owners and the public on plans to apply residential rental tenure zoning to all 500 existing purpose-built rental buildings — containing about 16,000 apartment units — in the city.

If approved, the change would mean only residential rental units would be permitted on the properties — even if they were redeveloped.

It’s a move that’s needed in a city where 61 per cent of residents are renters, said Mayor Lisa Helps.

“We are going to need this amount of rental housing in the city in perpetuity without question. I don’t doubt that. So from that point of view alone, this is a sound direction to go,” Helps said.

But Hutniak said what is being proposed by Victoria is contrary to what the province intended when it gave municipalities authority to designate rental tenure zones last year. And, he said, it devalues the properties.

“These properties have been assessed by B.C. Assessment for many, many years on the basis of highest and best use. We’ve been paying property taxes on the basis of highest and best use. Do you know what highest and best use is for these properties? It’s condos. It’s not purpose-built rentals. So are we going to get a tax rebate for decades back?” Hutniak said.

Coun. Ben Isitt called for a “streamlined” approach to consultation.

“I think recognizing that we’re going to be far from, I think, unanimous support in the community for this approach. So ideally, not consuming too much staff resources, if possible, between now and [when] it comes to a more formal public hearing process would be my preference,” Isitt said.

Helps said Victoria is not alone in moving toward the zoning change, noting Burnaby, New Westminster and Squamish all have made or are planning similar changes.

City staff note that 96 per cent of the 500 rental properties in the city were built before 1980.

Most of the older properties are likely in need of significant improvements and thus could be candidates for redevelopment.

Hutniak said the “harsh reality” is that the vast majority of Victoria’s rental stock is old and “beyond its functional life.”

“So we need to look at progressive solutions here — work with the owners of these buildings, work with the developers of rental housing.

“What was contemplated here or discussed in the early stages of this report is a non-starter, frankly,” he said.

Jordan Milne, board chairman of the Urban Development Institute, said the city’s proposal could jeopardize property owners’ ability to get financing to maintain buildings.

He said building owners should be given the opportunity to opt into rental tenancy zoning and provided incentives to do so.

“It’s really difficult to make rental work. You can’t pay the same for land to build rental as you can to build condos.”

Consideration should also be given to using zoning to encourage rental development in areas where the city wants to see rentals built, he said.

“It takes a huge risk out of the process for a rental developer and it levels the playing field for a rental developer when considering buying a site versus a condo developer. (It provides) better certainty, shorter time frame, lower risk and for the city, it really encourages the kind of tenure they want to see,” Milne said.

Milne said the new zoning should “absolutely not” be imposed without the owners’ consent.

City staff have been directed to solicit public feedback through September and October and report to council in November. Rezoning proceedings could then begin if council chooses to go ahead.

Staff say rezoning of the 500 properties could be done in three batches, starting with the oldest properties.

© 2019 Postmedia Network Inc.

Future technology should always incorporate the personal element

Ephraim Vecina
Mortgage Broker News

While technology has proven to be a massive boon to the mortgage industry, Dominion Lending Centres accredited mortgage professional Eitan Pinsky recently noted that significant challenges remain.

In his piece published at DLC’s online portal, Pinsky noted that due to the very nature of mortgages, any current and future technology should always incorporate the personal element – a concept known in AI research and engineering as HITL (human in the loop).

“Because mortgages are complex, with timelines to follow and anxiety to manage, borrowers are continually requesting human interaction to answer their questions,” Pinsky explained.

“Secondly, although digital applications promise speed and ease of use, all mortgage files still have to have ‘eyes’ on an application. We’re not there yet (nor will we be for the foreseeable future) where humans do not have to touch mortgage applications for final approval. This human requirement means that a mortgage file must wait in queue to be approved.”

More importantly, oversight will ensure that no mistakes are missed.

“If any file has the slightest hiccough and doesn’t conform to exactly what the computer systems need to see, an expert will have to be called in during the process to troubleshoot.”

Crucially, the industry should not forget that technology is, at the end of the day, just a tool. Pinsky argued that there will be no substitute for a broker’s learning, experience, and drive.

“The biggest issue with … relying too much on technology driven companies is that the Realtors who work there are most likely going to be sub-par,” he wrote. “If someone is working for half the commission, they are, by nature, not going to be as good or competent as someone who prides themselves on working for their due.”

Copyright © 2019 Key Media

Owner of $12.5-million Shaughnessy home goes to court to fight $128,000 vacancy tax bill

Keith Fraser
The Vancouver Sun

Sau Po Wong, a retired businessman, says that in February 2018, he completed and submitted to the city his property status declaration form for 2017.

He said that because he had lived at the property, a single-family home on Matthews Ave. that he purchased in October 2003, for more than six months, it was his principal residence for that year and he should be exempt from the empty home tax, which amounts to one per cent of the assessed value of the property.

In July 2018, the city delivered an audit notification asking him to provide information and evidence in support of his declaration.

Wong responded to the audit letter, but mistakenly uploaded copies of a utility bill, a notice of assessment and government correspondence relating to 2018, not 2017, the year for which he had made the declaration, according to his petition filed in B.C. Supreme Court.

“Consequently, through inadvertence the audit response provided the city with copies of relevant documents, but for the wrong calendar year,” reads Wong’s petition.

In early September 2018, Wong, who is a Canadian citizen, left Vancouver to travel overseas for several months and did not return until Dec. 18, 2018.

When he got back to Vancouver, he found that the city had delivered to him an audit determination dated Nov. 7, 2018 that found that despite his declaration, he was subject to the tax under the city’s bylaw.

He received a vacancy tax notice informing him that $128,310 was due and payable because the property had been vacant during 2017.

Wong was told that if he did not pay the tax by Dec. 12, 2018, a five-per-cent penalty would apply and the bill would be increased to $134,725.50.

He was advised that if he wanted to submit a notice of complaint, he would have to do so by the due date of Dec. 12, 2018.

Wong’s petition says that during his time overseas he did not receive any correspondence from the city with respect to his declaration and as a result did not become aware of either the audit determination or the vacancy tax notice until after the due date.

When his lawyers contacted city staff in March to seek an extension of time from the Tax Review Officer to file a notice of complaint, he was told that the city had concluded the audit.

“Based on the information and documents you submitted, we have determined that your client’s property status declaration is non-compliant and your client’s property is subject to the Vacancy Tax,” says the email from the city.

The stated reason for the non-compliance was “insufficient evidence” provided to the city.

“The city considers that the evidence provided was not sufficient to determine that this property was the principal residence of an occupier, and attempts by the city to request additional evidence were not responded to within the time frame provided.”

The city said that the property owner had been given “multiple” opportunities to comply by way of an audit letter, a follow-up phone call and email on Sept. 4, 2018.

Wong says in his petition that he did not receive the follow-up phone call or email referred to by the city.

The petitioner is seeking a court order quashing the decision to deny him an extension to submit a complaint.

No response has been filed to the petition. Wong’s case is the fourth lawsuit filed against the city in relation to the empty home tax. The city said in an email Thursday that it did not comment on specific cases.

The vacancy tax was brought in as a measure to return empty or under-used properties to use as long-term rental homes for people who live and work in the city.

© 2019 Postmedia Network Inc.

Fraser Valley home sales lowest since 2000

Steve Randall
Canadian Real Estate Wealth

Home sales in the Fraser Valley totaled 1,306 in June, the second lowest for the month since 2000.

It meant that sales lagged the 10-year average for June by 29.3% and were down 13.9% month-over-month and down 10.1% year-over-year according to a new report from the Fraser Valley Real Estate Board.

But it wasn’t just buyers that remained cautious as new listings were down 20.7% from May and down 10.5% from June 2018 to a total 2,810. That’s 9.6% below the 10-year average for June listings.

Inventory was up 19.3% year-over-year and up 0,1% from May to a total 8,516 active listings.

“The Fraser Valley market is still adjusting to the federal government’s new mortgage requirements and to the provincial government’s speculation and vacancy taxes,” said Darin Germyn, the board’s president. “We’re seeing historically low levels for home purchases in our region, and yet at the same time we’re seeing some prospective sellers holding back on listing their homes; waiting to see what the market will do.”

The number of active listings and a reduction in prices of a typical home of around 6-10% year-over-year creates an opportunity for buyers, Germyn added, especially with interest rates on hold.

HPI® Benchmark Price Activity

• Single Family Detached: At $960,100, the Benchmark price for a single-family detached home in the Fraser Valley decreased 0.4% compared to May 2019 and decreased 6.1% compared to June 2018.
• Townhomes: At $525,200, the Benchmark price for a townhome in the Fraser Valley in the Fraser Valley increased 0.5% compared to May 2019 and decreased 5.9% compared to June 2018.
• Apartments: At $409,800, the Benchmark price for apartments/condos in the Fraser Valley decreased 1.7% compared to May 2019 and decreased 9.6% compared to June 2018.

Copyright © 2019 Key Media Pty Ltd

June sales lower the May in Greater Victoria

Ephraim Vecina
Canadian Real Estate Wealth

Despite stronger sales on an annual basis, Victoria’s real estate market performance last month remained muted in the greater scheme of things.

Overall sales volume in June was 4.5% higher year-over-year, but was 12.7% below May 2019 levels.

“June has trended lower than May for the past few years and tends to signal the end of the active spring market,” Victoria Real Estate Board president Cheryl Woolley explained. “The summer months of July and August generally see less activity than the spring, as people’s attention shifts to vacation and away from real estate. This year, we have seen slightly more sales compared to June of last year.

“We have also seen one hundred fewer new listings enter the market this year, which continues to make a challenging market for buyers who are hoping for more options.”

Single-family homes sold the most in BC’s capital city in June, with transactions increasing by 10.4% annually. On the other hand, the condo sub-sector had a 6.1% decline during the same period.

The benchmark price of single-family properties in Victoria’s core fell by 4.3% year-over-year, ending up at $859,600. Condos’ benchmark value edged up by 2.97% to settle at $524,100.

“It is possible that some buyers are waiting for the federal government’s new first-time home buyer incentive to roll out this September,” Woolley explained.

“It’s hard to estimate how many local buyers may take advantage of the incentive, but because of the low threshold for maximum purchase price, the program may only help those in our area who seek to buy condos. This could mean a slight uplift in lower priced properties in the fall, if more buyers are enabled to enter the market.”

Copyright © 2019 Key Media Pty Ltd

FIBREE slow to be embraced for real estate

Steve Randall
REP

Blockchain is being hailed as the future of everything from legal services to healthcare but while some industries are already embracing the technology, real estate is taking things slowly.

This is the key finding of a new report from the non-profit FIBREE – the Foundation for International Blockchain Real Estate Expertise – which was founded in 2018 and is growing into a worldwide network of more than 5,000 real estate professionals, blockchain specialists, legal experts and researchers from around the world to exchange their expertise and best practices.

The study shows that blockchain use in real estate is evident in many countries but the US leads with the most initiatives. At city level, London is the current leader.

But there are still many markets where blockchain for real estate is still relatively unknown.

“We see this as a milestone for FIBREE to contribute to the market with a realistic perspective on the impact of blockchain for real estate, says Achim Jedelsky, President of FIBREE. “Never before such a global survey has been done.”

Three major use cases have been identified worldwide, resulting in a global picture that includes solutions for real estate transactions, real estate tokenization and building decentralized infrastructure.

However, with some exceptions many of the solutions are early-stage and funding is often an issue, resulting in 1 in 3 products in the space apparently having ceased operation within 2 years of launch.

This could be addressed by collaboration says Jedelsky.

“When developing an infrastructure in a consortium, the costs for individuals will be lower and the benefits will be higher,” he says.

Copyright © 2019 Key Media Pty Ltd

BMO Senior Economist compares trends in the two markets, primarily focusing on prices

Josh Sherman
Livabl

The housing markets in Toronto and Vancouver are on very different paths, new commentary from an economist with one of Canada’s biggest banks highlights.

In a note to clients this week, BMO Senior Economist Robert Kavcic compares trends in the two markets, primarily focusing on prices.

First up was Toronto. Kavcic notes sales in June were up 10.4 percent annually, while the benchmark price climbed 3.6 percent. “Month- over-month, condo prices looked very strong, and remain the much tighter subset of the market,” writes Kavcic.

“All told, this is playing out largely as expected, with the market firming up after absorbing past policy changes, and with the help of meaningfully lower 5-year fixed mortgage rates,” he says.

It’s been a year and a half since policymakers introduced stress tests for uninsured mortgages that require borrowers to qualify for loans at a rate 2 percentage points higher than the lender is offering on contract.

Over this time, homebuyers are adjusting to new constraints from the test and opting for more affordable condo apartments, one expert recently suggested. And increased sales activity has removed excess supply from the market restoring balance. Meantime, five-year fixed mortgage rates have fallen to multi-year lows.

While Toronto looks like it’s benefitting from these developments, it’s a different story in Vancouver, where Kavcic notes June sales plunged 14.4 percent on a year-over-year basis, and the benchmark home price nosedived by 9.6 percent compared to 12 months ago.

“That is now approaching declines seen at the depth of the financial crisis (13.3% at its worst),” says Kavcic, referring to the 2007–2008 global economic collapse.

“And, with the market balance still very soggy, that looks to continue for some time yet. In fact, condo price declines only look like they got worse, not better, in June,” he adds.

© 2019 BuzzBuzzHome Corp.

Q2 apartment rental listings up

Steve Randall
REP

The strength of the economy and labour market in the Greater Toronto Area is boosting rental activity.

Toronto Real Estate Board reports a 14.9% year-over-year increase in condo apartment rental transaction in the second quarter of 2019 to a total of 9,749.

Supply eased with a 28.8% increase in condo apartments that were listed for rental at some point in Q2 2019.

“The GTA population continues to trend upward, as the region attracts people from around the world, both on a permanent and temporary basis, to take advantage of a diversity of employment opportunities. Many of these newcomers and existing GTA households choose to rent. With this in mind it makes sense that we continue to see strong year-over-year increases in the number of condominium apartments rented,” said TREB president Michael Collins.

Pace of rent rises slows

Rents increased but the pace of growth slowed with the average Q2 2019 one-bedroom condominium apartment rent for the GTA as a whole at $2,192, up 6.7% compared to Q2 2018. Over the same period, the average two-bedroom condominium apartment rent increased by 4.3% to $2,873.

“While the rental market remains tight, renters do appear to be benefitting from more supply in the marketplace. The pace of year-over-year average rent growth has slowed over the past year. That being said, average condo rents continued to increase well-above the rate of inflation in the second quarter. This suggests that new rental supply, in terms of both purpose-built rental units and investor-owned condominium apartments, is still required in the GTA to keep up with population growth and new household formation,” said Jason Mercer, TREB’s Chief Market Analyst.

Copyright © 2019 Key Media Pty Ltd

Mansion owner claims he missed $128K empty homes tax bill because he was out of the country

Jason Proctor
CBC Radio

The owner of a multi-million dollar Vancouver mansion claims he missed a deadline to fight a $128,310 empty homes tax bill because he was out of the country when the city tried to contact him.

Sau Po Wong is suing the city and its vacancy tax review officer in a bid for an extension so that he can file the documents he claims will prove he was living in the home on Matthews Avenue in 2017.

According to a notice of civil claim filed in B.C. Supreme Court, the retiree accidentally filed utility bills and an insurance policy from the wrong year in support of his declaration that his five-bedroom house wasn’t empty.

“Although he has various documents to support the declaration … owing to his difficulties understanding English, he provided documentation relevant to a different vacancy reference period,” Wong’s lawyer wrote in an email to the city.

“[He] then was unfortunately out of the country and did not receive any further correspondence from the city with respect to the audit (whether by email, phone, or mail) until he returned home.”

Whoops! Wrong year

The City of Vancouver introduced the empty homes tax in 2016 in a bid to relieve pressure on Vancouver’s rental market by targeting empty or under-utilized properties.

It’s on the same street as the house where Huawei chief financial officer Meng Wanzhou is living under house arrest as she awaits an extradition hearing.

Wong’s two-storey house is currently for sale for $16.9 million. The 2019 assessed value of the home was $12.6 million.

According to his statement of claim, Wong is a retired businessman and a Canadian citizen. He filled in the initial empty homes tax declaration before the deadline in February 2018.

“Because he had lived at the property for more than six months during 2017, in the declaration Mr. Wong indicated that the property was his principal residence in 2017,” the notice of claim reads.

“It is the residential address he used on documentation related to his governmental identification and it is where he received bills, including utility bills relating to the property and other mail, such as taxation and insurance documents.”

Wong was subsequently given an audit notification. He doesn’t speak, read or write English.

“Unfortunately, when Mr. Wong submitted his audit response, he mistakenly uploaded copies of a utility bill, a notice of assessment, and government correspondence relating to 2018 — not 2017,” the notice of claim says.

‘Multiple opportunities to comply’

After submitting the files for the audit, Wong headed out of town in early September 2018 for several months.

When he got home on Dec. 18, 2018, he found an audit determination sent the previous month in the mail — and a vacancy tax bill for $128,310.

He was told that a late fee would apply after Dec. 12 — six days earlier. It was the same deadline to file a notice of complaint.

Watch the video for 1138 Matthews

According to the notice of claim, Wong’s lawyers started corresponding with the city in March 2019.

They were told Wong “had been given multiple opportunities to comply with the Vacancy Tax Bylaw by ways of an audit notification letter, a follow up phone call (no answer) and email.”

But Wong claims he didn’t receive the follow-up call or the emails. He asked the city for an extension, but was advised that “management” had turned him down.

“The vacancy tax is a significant sum and directly affects Mr. Wong’s property interests,” the lawsuit says.

“The city owed Mr. Wong a high degree of procedural fairness.”

The city has not yet responded to the claim.

©2019 CBC/Radio-Canada

Vancouver’s housing market has been on ‘on a bender,’ professor says, ‘and after that bender will come a hangover.’

Dan Fumano
The Vancouver Sun

With the first half of 2019 in the books, local realtor Barry Magee reviewed sales data from the Real Estate Boards of Greater Vancouver and the Fraser Valley. He said he expected to see a slowdown given the market recently. But the extent of that plummet, Magee said, was striking.

In Greater Vancouver and the Fraser Valley, the combined value of properties sold in the first half of 2019 was $15.6 billion, less than half the total of $38.1 billion recorded over the same period in 2016, at the market’s high point.

The total transaction value is a result of lower prices and fewer sales. Sales have dropped most significantly, but prices have been dropping as well, particularly in certain segments of the market. This week, the Real Estate Board of Greater Vancouver’s monthly report showed its benchmark price for homes in Metro Vancouver fell below $1 million for the first time in two years, and reported the lowest June sales numbers in almost 20 years.

This follows a years-long boom that made Vancouver one of the world’s least affordable housing markets. For a story last week in the Financial Times, the England-based newspaper’s global property correspondent visited Vancouver to compare the local situation with that in far larger cities like New York and London.

TAX TURNS

The B.C. NDP government has implemented measures, including new taxes, intended to dampen the market. But, real estate industry figures say, that slowdown also means reduced tax revenue and other economic impacts in a province with an economy largely dependent on real estate and construction.

“I do think it’s a good thing, in my personal opinion. I’m firmly on the side that lower prices are better for society in general,” said Magee, a realtor with 2 Percent Realty West Coast. “It’s really just coming back down to reality.”

Josh Gordon, an assistant professor at Simon Fraser University’s school of public policy, said Vancouver’s real estate market was hit by a surge in demand in the years leading up to the high point in 2016.

“What’s really interesting is that there was this surge in demand, and that doesn’t really coincide with any fundamental changes in the local economy, or the local situation. We didn’t have a big population surge, it’s not as if incomes all of a sudden took off,” Gordon said. “That kind of a dramatic escalation in demand simply has to be connected to factors like outside money and speculative demand.”

Last month, Gordon published a new working paper showing a strong correlation between the price-to-income ratios for detached houses across different Metro municipalities and the proportion of that housing stock owned by non-residents. The more unaffordable the municipality, Gordon reported, the higher proportion of homes were owned, at least partly, by people who do not live or pay taxes in Canada. These findings, Gordon says, further establish the long-debated link between foreign property ownership and unaffordability in Vancouver.

In the weeks since Gordon’s working paper was published, he’s had some pushback, he said Thursday, which he expected. But he’s also heard from other academics validating his findings. A University of B.C. geography professor, David Ley, told the Vancouver correspondent of the Hong Kong-based South China Morning Post last month that Gordon’s findings were “unimpeachable.”

Magee agrees that Vancouver’s boom in recent years was largely driven by external demand. 

 ‘THE DEBATE IS OVER’

“It is incredibly clear that money earned outside of our economy was driving the unprecedented real estate market from 2015 to 2017,” Magee said. “Anyone who argues against this, after seeing $22.5 billion disappear from the market, must be financially, and emotionally, motivated by selling misinformation. The debate is over.”

Some slowdown was to be expected following the record-setting sales pace and price increases of previous years, said Ashley Smith, president of the Real Estate Board of Greater Vancouver.

“There’s always going to be cycles in real estate. We’ve just seen a bit of a dramatic one,” Smith said. “So when the market’s moving incredibly fast, I think a lot of folks might benefit from that, and a lot of folks might feel disenfranchised.”

“There’s obviously, some could argue, a negative economic impact. When we look at significantly reduced revenue from property transfer tax to the government, that’s huge,” Smith said. “So we’re not seeing that kind of money go into services such as health care and education.”

The provincial government has anticipated the real estate slowdown in its fiscal planning. This year’s B.C. budget, released in February, forecast for $1.91 billion in property transfer tax revenue over the following fiscal year, a reduction of more than $340 million from the forecast for the previous budget. Updated forecasts are expected in the government’s next quarterly financial report in the fall.

Gordon predicted that the revenue generated by the B.C. NDP’s new taxes — including a surtax on high-value homes and the speculation and vacancy tax — is unlikely to make up for the reduced property transfer tax revenues. But, he said, “Unless the province was supposed to persist on a frenzied housing market year after year after year, then something was going to have to change in the economic situation, and that includes the fiscal situation.”

Several factors are influencing local real estate, including federal government changes and global forces, Gordon said. But in his view, “there’s no doubt” the massive property transfer tax revenues of previous years were part of the reason the previous B.C. Liberal hesitated to dampen the red-hot market.

“The B.C. Liberals took us on a bender, and after that bender will come a hangover,” Gordon said. “And suggesting that we should have a couple more to put off the hangover is probably not a strategy that your doctor would recommend.”

© 2019 Postmedia Network Inc.