Adam Wahed

604-315-9590
 

 

There has been so much talk in the last while about what’s to be done with Vancouver’s red-hot housing market.

 

The, then majority, Liberals thought they would bring in a new tax and cool off the demand. They wagered that the market was being driven in a large way by wealthy foreign investors and they wanted to do their part to protect would-be homebuyers from unfair competition.

 

And of course, it worked, for the short term, which lasted about three months. Once the market realized that there was still substantial demand and limited amounts of property for sale, prices started to return to the pre-tax levels and again began to climb even higher.

 

Not surprisingly, when Governments attempt to make corrections in a market with high demand and limited supply the results are not quite as advertised.

 

So now, with this now minority Government teetering on the brink of collapse, what can we expect to happen with the Vancouver real estate market.

 

The short answer is not much. So long as the demand remains high (which the numbers of people moving to Vancouver continue to bear out) and the mountains and ocean continue to stay right where they are, making our space beautiful and limited, Vancouver is going to be an expensive market. There is very little chance of Government interference having any real effect.

 

However, with the way our recent election finished and the end of the long-reigning BC Liberals a likely possibility, it’s important that we consider what ideas the other two parties put forward during the election and give some thought as to what meddling could be coming down the pipe.

 

Let’s start with the largest opposition, the BC NDP.

 

According to their election platform, the BC NDP hope to crack down on cheaters and speculators who they claim are unfairly driving up home prices in the lower mainland. Think Christy Clark’s foreign buyer's tax, but with more teeth. Of course, for all the reasons I’ve mentioned before, this is very likely to have the exact same effect as the Liberal’s version. The thing to pay attention to here is timing. If the NDP do manage to form a Government it might be worth watching to see when they hope to bring in their own foreign buyers' tax. It may provide you with another small window of real estate deals before the market forces kick back in again.

 

The NDP are also proposing to build a large number of social housing units to address a shortage of affordable housing as well as giving Universities greater ability to build their own student housing. This is worth paying attention to if you’re looking to purchase a rental property. However, with Vancouver’s vacancy rate among the lowest in the country this provision isn’t likely to have any real effect on folks looking to rent homes to mid to high-level income earners. In some small way, it may actually help to refine the tenant screening process, with fewer slightly applicants looking to find accommodation.

 

The one area where this could provide a little bit of concern is for investors who have bought several rental properties near one of the Universities. But again, with the number of students continually refreshing and in need of housing, it’s not likely to cause too much of an issue. It’s also not a market where the rents can soar too high, to begin with, so even if there are additional options provided by the university you are still likely to have a steady stream of applicants so long as there is a university. Of course, this is one area where you may find the screening requirements are escalated as the university is likely to get the first choice of the students looking for accommodation.

 

The last NDP promises that I think are worth us having a look at is their desire to provide a $400 rental rebate to tenants and attempt to shore up the rent control legislation.

 

Let’s start with rent control. It’s ultimately bad for business as a landlord to increase your rental rates every year quite substantially. It tends to cause a rapid turnover and could leave you stranded for long periods of time without a tenant in place. That said, for many people, the short-term gains have proved too hard to resist and the NDP would likely move pretty quickly to implement restrictions on landlords drastically raising the rent. For the most part, this is not going to eat into your opportunity to earn an income from your investment property. It will, however, force you to do a thorough scan of the market before advertising your rental. You don’t want to get locked in a price that is not meeting your financial needs. It also makes it important to put the utility costs directly in the tenant's hands. If there is any spike in rates, you don’t want to be stuck eating the difference.

      

With regard to the $400 subsidy, it’s not likely going to cause too much of a bother. In the short-term, it means a bit of relief for renters, but again, like most government interventions, it’s likely to simply move the rental prices up slightly as the market adjusts to the increased resource available.

 

All and all, we are likely looking at an increase in attempts to intervene from the BC NDP, and while you may have to ride out a few bumps, it’s not likely to affect things in any real way.

 

The BC Green Party

 

Looking at the BC Green party, the NDP’s new partner in the legislature, there are definitely a few things worth paying attention to. In fact, they seem to be quite a bit more willing to intervene in the markets if given the chance.

 

The first red flag is their desire to increase the foreign buyers' tax to 30% and expand it across the province. After watching what happened with the BC Liberals intervention, the Greens seem to think the problem was it just didn’t interfere enough.

 

Of course, they didn’t stop there. The BC Greens hope to tinker with the capital gains exemptions on the sale of your principal residence if the sale is within five years of the purchase date. And they hope to use a sliding scale to change how the Property Transfer Tax is applied. The tax on the first $200,000 would go from 1% to 0%, but they would increase the rate on amounts from $2MM - $3MM from 3% to 10%.

 

Right from the start, I’m happy that the BC Greens are going to be the junior partner in this collaboration.

 

Similarly to the NDP, the Greens have pledged more money for social housing, are looking to deal with rental vacancies, and have pledged to create a tax credit for renters. It will be interesting to see just how much emphasis the Greens and the NDP put on these initiatives if they manage to take power for the Liberals.

 

Now, of course, I recognize that these are all campaign pledges I’ve been discussing and that if this coalition of parties is able to form a government there is going to be a period of reflection and negotiation as to how they plan to govern and nothing is likely to shift too quickly. However, my real concern is that both parties have expressed a real desire to double down on government intervention. The silver lining to this, if there is one, is that some additional short-term real estate opportunities may be about to happen, so keep your eyes open.


Looking to buy or sell real estate soon? Contact me today to find out how I can help.


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For the past few years, there has been so much written about the meteoric rise in the Vancouver housing market. Most everyone has their own pet theory about how long it will last and what the best strategies are for navigating it. It’s been called a bubble that’s destined to burst on the one hand and a natural market reaction to supply and demand economics on the other.


And, as is so often the case, when there is a hot or cold market, governments feel the need to get themselves involved and start trying to swing it one way or the other. Of course, these interventions always tend come with unintended consequences.

The 15% Foreign Buyers Tax

In the case of BC’s Liberal Government and their 15% foreign buyers tax, the outcome looks almost comically obvious in hindsight.


When the Liberals added the 15% fee they created concern in the market. Naturally, everyone with any interest in real estate in the Lower Mainland took a “wait and see” approach. Owners wanted to know if their investment was going to drop in value and folks wanting to get into the market were hoping to see if they could wait out a better deal. In short, most everyone stopped buying and a slight cooling of the market took effect.


For the astute investor, this was the sweet spot, and I’ll explain why.


First, people still want to come here.


Vancouver is one of the most desirable locations in all of Canada. You have stunning natural beauty surrounding a culturally vibrant urban centre. Ringed by breathtaking mountains and bordered by the Pacific Ocean, means that you will always have an incredibly limited supply. So while Toronto is surrounded by a seemingly unlimited sprawl of suburbs, Vancouver has some pretty serious natural checks to its horizontal growth. Despite these limitations, Vancouver continues to add nearly 50,000 new residents every year, mostly consisting of people from other cities in Canada.


All of this domestic migration has meant great opportunities for vertical growth. More than any other city in the country, Vancouver is seeing a growth market for people who invested in condominium apartments. And there is still so much opportunity to grow up. Of course, none of this will be impacted by a foreign buyer's tax, no matter what percentage you set it at. The only real factor with the potential to cut into this market slightly is a significant rise in the mortgage lending rates, which the Bank of Canada has so far been quite unwilling to consider.  


Second, the American dollar remains strong.


Whatever your opinions on the politics of our neighbours to the south, the American market has continued to remain bullish. This means the American dollar is sitting very comfortably above our Canadian currency, and will likely continue to do so for the foreseeable future. And while the 15% foreign buyers tax will eat into the purchasing power of American’s looking to invest in Canada, it likely won’t be enough of a bite to deter the serious investor.


With that in mind, you also have to consider that much of the trade done internationally by serious investors is also conducted in US dollars. Meaning, most international investors will be in the same spot as American buyers. Noticing the population increase, growth in the condo market and Vancouver’s very real land mass limitations will continue to make Vancouver incredibly attractive to any serious international investor.


But, of course,  the most important thing to remember is that by comparison foreign investors are well outnumbered by Canadians looking to move West.

    

When you consider all of these factors it becomes easy to see why the sweet spot for investing in slightly discounted Vancouver property was relatively short. People figured this out quick.


Once the realization set in that the 15% foreign buyer’s tax was going to have no real impact on the people actually wanting to buy in Vancouver, people scrambled to jump on the opportunity. It’s been dubbed a ‘rebound’ and a ‘whiplash,’ but for anyone who bought in that brief moment of uncertainty, they will likely refer to it as money well invested.


All of this said the more important takeaway is that while the sweet spot has passed and the discount has ended, it’s still a great time to get into the Vancouver market and realize investment growth. Now that the consumer has realized that the lion’s share of growth in Vancouver real estate is being predominantly driven by domestic demand and a real lack of supply, all of those “wait and see” people are now rushing back in droves to take advantage.


If you're ready to take the jump and sell your property, get in touch with the Adam Wahed team today.

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I have listed a new property at 302 6388 MARLBOROUGH AVE in Burnaby.
LOCATION. LOCATION. Minutes away from Metrotown, Skytrain, T&T, Bonsor, Parks and much more. This spacious and updated unit offer a great layout with a massive patio facing west for all your entertainment needs. 9 ft ceilings with insuitelaundry and low maint. fee which includes heat and hot water. Well maintained building. Units rarely come up for sale in this building. BEST VALUE IN THE AREA FOR UNDER $275,000. Open house Sat April 27, 2-4pm.
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Please visit our Open House at 302 6388 MARLBOROUGH AVE in Burnaby.
Open House on Saturday, April 27, 2013 2:00 pm - 4:00 pm
LOCATION. LOCATION. Minutes away from Metrotown, Skytrain, T&T, Bonsor, Parks and much more. This spacious and updated unit offer a great layout with a massive patio facing west for all your entertainment needs. 9 ft ceilings with insuitelaundry and low maint. fee which includes heat and hot water. Well maintained building. Units rarely come up for sale in this building. BEST VALUE IN THE AREA FOR UNDER $275,000. Open house Sat April 27, 2-4pm.
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Recently I listed a house that was an estate sale which had not been granted probate yet. I had lots of buyers asking what is probate and the process. Below is a link to a great article on probate and the process. Hope this helps.

 

http://www.dummies.com/how-to/content/probing-probate-what-you-should-know.html

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I listed a property in East Vancouver last week. It was an old house that needed updating but solid all around. We have had close to 100 groups go through since listed last Monday. We received 11 offers on the property on Sunday after the Saturday open house. There is a buyer for every property and tons of buyers for well priced property. We have accepted an offer substantially higher than asking price. The market will always tell us within the first week or two if we're price right. Regardless of being over priced or under priced.

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H.S.T. TRANSITIONAL RULES
 

February 17, 2012

H.S.T. will be eliminated April 1, 2013 (yes, April Fool’s Day). To help purchasers of new homes, the provincial government has announced transitional rules.

Effective April 1, 2012, buyers may be eligible for a provincial enhanced New Housing Rebate if they buy, as their primary residence, a home (as currently defined) priced up to $850,000. The current threshold is $525,000.

In addition, buyers may also be eligible for a provincial New Housing Rebate if they buy a secondary vacation or recreational home outside the Greater Vancouver and Capital Regional Districts priced up to $850,000.

Buyers of new homes will be eligible for a rebate of 71.43% of the provincial portion of the HST paid on the new home up to a maximum rebate of $42,500. Homes priced at more than $850,000 will be eligible for a flat rebate of $42,500.

Below are the typical scenarios.

If a buyer enters into an agreement dated on or before April 1, 2012 and they take ownership or possession on or before April 1, 2012, nothing changes. The buyer will pay the 12% HST and be eligible for a rebate of up to $26,250 on homes priced to a maximum of $525,000. Homes priced at more than $525,000 are eligible for a flat rebate of $26,250.

If buyers have entered into an agreement dated on or before April 1, 2012 and they take ownership or possession on or before April 1, 2013, they will pay the 12% HST and be eligible for a rebate of up to $42,500 on homes priced to a maximum of $850,000. Homes priced at more than $850,000 are eligible for a flat rebate of $42,500.

If a buyer purchases a presale residential property and they have an agreement dated on or before April 1, 2012 and they take ownership or possession on or after April 1, 2013, they will not pay the 7% provincial portion of the HST. Instead, buyers will pay a temporary transitional provincial tax of 2% on the full house price. This 2% reflects an embedded PST builders pay on materials.

If a buyer purchases a presale residential property and they have an agreement dated on or after April 1, 2012 and before April 1, 2013, and they take ownership and possession before April 1, 2013, they will pay the 12% HST and be eligible for a rebate of up to $42,500 on homes priced to a maximum of $850,000. Homes priced more than $850,000 are eligible for a flat rebate of $42,500.

If a buyer purchases a residential property and they have an agreement dated on or after April 1, 2012 but the construction of the home commenced before April 1, 2013, and they take ownership and possession after April 1, 2013, they will not pay the 7% provincial portion of the HST. Instead, buyers will pay a temporary transitional provincial tax of 2% on the full house price. This 2% reflects an embedded PST builders pay on materials.

If the Contract of Purchase and Sale is signed on or after April 1, 2013, with possession after April 1, 2013, only GST is applicable. The HST will generally cease to apply to sales of real property (including residential real property) if ownership and possession of the property transfer on or after April 1, 2013. This will be the case for sales of new housing, irrespective of whether the agreement of purchase and sale was entered into before April 1, 2013 or whether construction of the new housing began before April 1, 2013.

If a Contract of Purchase and Sale is signed on or before November 18, 2009, or construction began before July 1, 2010, with possession on or after April 1, 2013 special transitional rules apply. In this situation a Buyer will pay a 2% transition tax.

If a Contract of Purchase and Sale is signed after November 18, 2009, or construction began before July 1, 2010, with possession on or after April 1, 2013 the buyer will pay a 2% transition tax. However the 2% tax will not apply where construction has been substantially completed before July 1, 2010 and the PST Transitional New Housing Rebate has not been claimed as of February 17, 2012.

All the same rules apply to recreational property that apply to other residential property.

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