Adam Wahed

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So you’re ready to jump into the housing market for the first time! Or at the very least, you’re doing your homework to see if it’s a good idea for you. That’s great. You’ve come to the right place. It’s never a good idea to jump into an investment, especially one as important as your home, without doing some serious investigation.


Below is my 4-step guide for First-time Home buyers, to assist you in thinking it through and help you know what angles to explore.


Know Your Budget

It’s important that before you start looking around at houses that you know how much capital you have access to. This is going to hone your search and more importantly, it’s going to prevent you from finding your dream-home, only to be disappointed that it’s beyond what you can afford.


The very first thing to consider when determining your budget is how much actual cash you have in the bank. And it goes without saying that the more money you have saved to start with the easier it’s going to be. You will want to consider taking advantage of the Canadian Government’s Home Buyers' Plan (http://www.cra-arc.gc.ca/hbp/). This program allows you, as a first-time homebuyer, to take out up to $25,000 from a registered retirement savings plan on qualified homes. It also allows for someone else to do this on your behalf.


After that, you will want to investigate the various incentives the BC government has established for first-time buyers. For example the B.C. Home Owner Mortgage and Equity Partnership (BC HOME Partnership) program is a three-year initiative that contributes to the amount a first-time home buyer has for a mortgage down payment. Up to $37,500, or up to 5% of the purchase price, could be provided to qualified first-time buyers through a 25-year mortgage loan that is interest-free and payment-free for the first five years.


The next thing to do is to get yourself pre-approved for an actual mortgage. Using either a bank or mortgage broker, you want to find out how much money they would be prepared to lend you. This is going to require you to provide as much information as possible about your current debts, income, expenditures, and cash flow. Be sure to be as accurate as you can with this, you don’t want to find out later they can’t lend you as much as you thought.


Know How Much House You can Buy and Where

You probably have a good idea of the home you want to own. However, often the home you want, in the area you want, for the price you want is not going to line up. One of the best ways to get started is to search online. You can begin at VIEWVANCOUVERHOUSES.COM and plugin some of the neighbourhoods you might be interested in living. This will give you an initial sense of the market and what you might hope to afford working with your budget.


The next thing to do is go have a walk around some of the neighbourhoods that make your list. Before getting caught up in the emotion of buying your first home, make sure the neighbourhoods you plan to look in are going to meet your needs and be a place you want to spend a lot of your time.


Get Yourself a Real Estate Agent

You know how much you have to spend. You know a little bit about the neighbourhoods you like and what sorts of prices they have. Now is the time to get someone on your side to intensify the search.


The trouble is, how do you know who to choose? Well, first off you want someone who really knows the neighbourhood you're interested in, but I think that goes without saying. Beyond that, you want someone who takes your business seriously. It sounds basic, but having an agent who spends the time to educate you about the process, and doesn’t just rush to get you sold, is important. A great way to see how an agent conducts business is to drop in at an open house they're hosting. Often you’ll know pretty quickly if it’s a realtor you can work with. One of the best ways to find a good real-estate agenet is through referrals from friends and family and if you're still not sure about who to pick, it's not unreasonable to interview a few of them to see if any of them will be a good fit for your needs. 


As a first time buyer, it’s important to remember that most of the time you don’t pay your agent directly. They're usually paid a finders fee by the agent representing the owners of the property you buy. In British Columbia, it is the responsibility of your agent to disclose to you, in writing, how much they are being paid and by whom.


Take Advantage of Your Agent’s Experience

Now that you’ve hired your real estate agent, you have to work as a team. The agent is going to bring all their expertise to bear on helping you find a home. It’s important that you are up front with all your questions and concerns. If you chose the right agent they will walk you through everything so that you feel completely comfortable relying on their know-how.


Your agent should also be able to help walk you through how you can save up to $7,500 when purchasing a home ranging up to $500,000 through the First Time Home Buyers Program (which exempts you from paying the property transfer tax). Or how you can access the Newly Built Homes Exemption, which can help you save up to $13,000 in property transfer tax when purchasing a newly constructed or subdivided home worth up to $750,000.


Once you’ve found a property you’re intent on buying, the agent will draft an offer, in writing, for the seller, but also provide a written disclosure, for you the buyer, as to what exactly is transpiring.


Over the course of this offer and any subsequent offerings, your agent is going to assist you in understanding everything that’s going on. What is the expiry date of your offer? What are the subject clauses that need be included? Will you need a home inspection before your offer is final, or are you still waiting for approved financing that your offer is contingent upon? Make sure your agent takes the time to walk you through all the back and forth that could happen before you’re in the thick of closing a sale. By that time there is often too much emotion happening to think as clearly as you’d like.  


Bonus Step: Stay Calm and Don’t Get Attached Too Soon

It is still a great time to get involved with real estate in Vancouver, but with so much happening, from new government regulation to a rapidly growing market, the most important thing is to keep your cool. Buying a home, especially for a first-time buyer, can be an emotionally charged endeavour. It’s important to try and think of it as just a potential investment until the deal is done. After the closing, you can go ahead and get attached and contemplate where you’re going put the kids’ the treehouse.



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


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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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