Estimating the Impacts of the Speculation and Vacancy Tax

BCREA

Summary Findings:

• While all BC markets experienced sharp declines since 2018, the Speculation and Vacancy tax(SVT)is estimated to have reduced home sales in taxable regions in BC byan additional15per cent compared to non-taxable regions. Growth in home prices since 2018 is estimated to be5 per cent lower in taxable regions in BC compared with non-taxable regions due to the SVT.
• However, these impacts effectively disappear if Metro Vancouver markets are excluded from the analysis, suggesting the impact of the SVT has been limited to Metro Vancouver.
• A recovery of home sales is underway around the province, and without addressing significant supply issues, any progress made toward improved affordability looks to be short-
• The SVT’s impact on the rental market also appears to be more material inMetro Vancouver, where there was a record increase in rental supply, yet it is not possible to disentangle this from impacts of the Empty Homes Tax and short-term rental regulationsthat were implemented around the same time.

Introduction

Since 2018, several housing policies designed to dampen demand and household indebtedness have been implemented by federal, provincial and municipal governments. These include the federal government’s revised Guideline B-20, generally referred to as the mortgage stress test, the increase and expansion of the province’s Foreign Buyer Tax (FBT), and the new Speculation and Vacancy Tax (SVT). This period also coincided with interest rates gradually rising from very low levels.

Given the concurrent implementation of these measures, it is difficult to isolate each policy’s impact on the housing market. While this report focuses on the impact of the SVT, the provincial government also increased the FBT rate from 15 to 20 per cent and expanded the geographic scope of the taxable regions. While foreign transactions have declined, that downtrend occurred well before Budget 2018 and was likely prompted by external factors such as tighter capital controls by the Chinese government in 2017(Figure 1).Given there is considerable overlap between the SVT and FBT regions, our estimated impacts could be viewed as capturing the combined impacts of the province’s Budget 2018 policy measures.

Read the full report HERE

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Home sellers once again getting the upper hand as demand exceeds supply, especially among condos and townhomes

Western Investor

February saw steady demand from home buyers in Metro Vancouver, while the inventory of listed properties “struggled to keep pace,” according to a March 3 report by the Real Estate Board of Greater Vancouver (REBGV).

There were 2,150 transactions on the residential resale market in February 2020, a 44.9 per cent rise over February 2019, and 36.9 per cent higher than the 1,571 homes sold in January 2020.

Even though February’s total sales was 15.9 per cent below the 10-year average for the month, the supply of available homes for sale was unable to meet demand.

“Home buyer demand again saw strong year-over-year increases in February while the total inventory of homes for sale struggled to keep pace,” said Ashley Smith, REBGV president. “This was most pronounced in the condominium market.”

This lack of competition increased the pressure on home prices, with the benchmark composite price of a Metro Vancouver home rising slightly again last month. The benchmark price for all residential properties combined, across the region, now stands at $1,020,600, which is a 0.3 per cent increase over February 2019 and a 2.7 per cent increase over the past six months.

Although new listings in February were 3.4 per cent higher than in January, the total number of homes for sale as of the end of February was 20.7 per cent lower than the same month last year, at 9,195 units.

The sales-to-active listings ratio in February 2020 was 23.4 per cent. It is deemed to be a seller’s market if the measure is more than 20 per cent for several consecutive months. By property type, the ratio is 17.3 per cent for detached homes (a balanced market), 26.9 per cent for townhomes, and 28.4 per cent for apartments (both now seller’s markets).

Smith added, “Our Realtors are reporting increased traffic at open houses and multiple offer scenarios in certain pockets of the market. If you’re considering listing your home for sale, now is a good time to act with increased demand, reduced competition from other sellers, and some upward pressure on prices.”

Sales and prices by property type and area

Although detached homes in Metro Vancouver saw the lowest sales-to-listings ratio, it was the submarket to see the most rapid sales growth in February. There were 685 single-family home sales across the region last month, which is a jump of 52.9 per cent year over year.

The benchmark price for a detached Metro Vancouver house has not recovered its recent losses yet, but it is recovering. The benchmark price for a detached home in the region is now $1,433,900. This is 0.7 per cent lower than in February 2019 but a 1.9 per cent increase compared with the low point seen around six months ago.

Whistler and Squamish were again the markets to see the biggest annual jump in typical detached home values, up 15.7 per cent and 10.1 per cent respectively. The steepest price loss in the REBGV’s jurisdiction was seen in Bowen Island, where typical detached prices are down 8.4 per cent year over year, followed by the Sunshine Coast, down 7.8 per cent.

Sales of attached Metro Vancouver homes such as townhouses and duplexes totalled 404 in February, a 45.8 per cent increase compared with the 277 sales in February 2019.

A typical attached home in the region now sells for $785,000, according to the board. This is 0.6 per cent higher than in February 2019 and a 1.7 per cent increase over the past six months.

As with detached homes, Whistler and Squamish townhome prices have seen the biggest increases in the region, up 7.5 and 7.2 per cent respectively. Once again, resale townhome prices in Ladner (down 5.0 per cent) and Tsawwassen (down 4.5 per cent) dropped the most year over year, although those declines are not as steep as they have been recently.

Some 1,061 Metro Vancouver condos traded on the MLS last month, which is a 39.8 per cent increase over the 759 sales in February 2019.

With the demand for condos highest of all the property types, and supply not keeping up, the price of a typical Metro Vancouver condo has recovered the most so far. The benchmark price of an apartment property now stands at $677,200, which is 0.9 per cent higher than in February 2019 and a 3.6 per cent increase over the past six months.

Surprisingly, given the rise in detached and townhome prices in the area, Squamish condos saw the region’s biggest annual condo price drops, down 6.8 per cent. Port Moody and Coquitlam were the areas with the biggest benchmark condo price rises, up four and three per cent year over year respectively.

Copyright © Western Investor

In Metro Vancouver two and three bedroom rentals are at 1%

Kimberly Greene
Mortgage Broker News

As affordability continues to plague homebuyers in some of Canada’s hottest housing markets, a growing number of families are wondering whether homeownership is the best fit for their families after all. In fact, the latest CHMC data suggests that demand for apartments with family size floor plans in both the GTA and the GVA is outstripping supply by a wide margin.

In Metro Vancouver and the GTA, the vacancy rate for two-and-three-bedroom apartments is between 1% and 1.4%. Over the past five years in Metro Vancouver, rental rates for three-bedroom units have risen by 7.4 per cent and six per cent for two-bedroom formats.

Demand is such that construction of family-focused rental housing is expected to surge in many Canadian cities. Developers have had to drill down on what families want, and how it different from more typical renters of studio and one-bedroom units.

“Families who are renting in urban areas are renting in places that are amenity rich, but also there’s amenities for the whole family,” said Wendy Waters, Vice President of Research Services and Strategy at GWL Realty Advisors (GWLRA). “What we’re trying to provide is some of these conveniences that you might have if you had a detached house or a semi-detached.”

GWL Realty Advisors (GWLRA) has six residential projects underway with components catering to families in the GTA, Metro Vancouver, Edmonton and Montreal and two more projects in Calgary and Ottawa are expected to be approved this year. These components include outdoor and indoor dedicated play spaces for children, recreation rooms and multipurpose rooms appropriate for all age groups, as well as outdoor spaces for family gatherings. Rental buildings are increasingly providing all of these amenities that previously may have only been available if you could afford a single family house or a high-end condo, now they’re available in rental buildings.

Waters said that when they’re building, it’s for the long term, so these trends are very much on their radar. Developers have to be thinking ahead of what’s changing in the urban dynamic and the fact that people are also staying in rentals for longer periods of time. Apart from affordability, people are also looking to rid themselves of commuting headaches and being in easily-accessible areas is a growing priority.

Despite the greater demand for rental housing, however, Waters doesn’t think it will do anything for the residential housing market. These new buildings are a response to demands that are already there, she said.

“What we do believe is that if we’re providing some of these higher quality amenities, what we may see is families who rent with us [living] there longer because they look at what they have to give up if they were to then go buy an older home or condo that doesn’t have these amenities,” she said. “There’s such a shortage of rental housing . . . I don’t see it as being something that’s going to affect demand for townhouses or affordable rowhouses; I don’t see it as affecting that market as much. I think it just provides another option, and I think our big dynamic urban cities in Canada and across the world, North America need to provide families with more options at all the price points.”

Right now, this also means focusing on urban suburban areas, which give families the best of both worlds in terms of amenities and space. Again, Waters said, it’s all about choice. Some families are going to prefer to do whatever they can to purchase homes in that “missing middle” tier, while others are going to go for purpose-built rental.

Another advantage to rental, Waters said, is security of tenure. When renting a condo or other property type, people are out of luck when the owner decides to sell or reclaim possession of the units, and that can be incredibly disruptive for a family. And at the end of the day, everyone’s looking out for number one.

“Purpose-built rental is made for renters, so you are the customer, as opposed to in a condo building,” Waters said. “You don’t have quite the same privileges that you would have in purpose built rental. So we’re offering that, and security of tenure is a big issue, particularly in Vancouver and Toronto.”

Copyright © 2020 Key Media

Trust in Real Estate Service Act (TRESA) passed by Ontario

Steve Randall
Canadian Real Estate Wealth

The news that Ontario has passed the Trust in Real Estate Service Act (TRESA) has been welcomed by one of the province’s largest industry bodies.

Toronto Regional Real Estate Board (TRREB) says that it will help enhance professional standards, create a more fair and efficient business environment, and better protect consumers dealing with those who trade in real estate in Ontario, including Realtors.

“The real estate sector continues to be one of the most important parts of Ontario’s economy, and real estate transactions represent the single biggest economic transactions that most people make in their life. It’s important that we make sure the real estate sector is regulated in an efficient and modern way that allows Realtors and their clients; and the general public, namely home buyers and sellers, renters and business clients, to continue contributing to the growth of our economy and communities,” said Michael Collins, TRREB President.

The board has been calling for reforms for many years and has been consulting with the current and previous governments.

The proposed act includes:

• regulatory changes to enhance consumer choice in the real estate transaction process
• enhancements to ethical requirements for real estate professionals
• updates to the Real Estate Council of Ontario’s regulatory and enforcement powers and changes to factors for eligibility for registration
• changes to treat real estate professionals fairly and allow them to operate more efficiently by incorporating

“We always made sure that preserving consumer choice and consent, along with enhanced industry professionalism, remained central when proposing and discussing legislative improvements with the government. Furthermore, we are pleased to see business fairness being addressed by allowing all Realtors to run their businesses more efficiently by forming personal real estate corporations, if they so choose—a tool that’s available to Realtors in six other provinces and many industries in Ontario,” said John DiMichele, TRREB Chief Executive Officer.  

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