Lift on 15% Foreign Investors Tax to come?

One of the most major things that we’ve all been talking about regarding real estate last year was the 15% Foreign Investors Tax. Did it slow down the market? Did it do what it was meant to do? What will we do with all that extra tax income? Although the answers to some of these questions will still remain unclear, Christy Clarke believes that the tax has done its duty to help correct the prices in single detached homes. Therefore, if there is a foreign investor planning on working in BC, and will be paying taxes, they can be exempt from the tax.

We are still unsure on when this exemption will start taking place, as well as any details that go along with it, but be sure to check in again soon!

Read more about this here.

Did the foreign investor’s tax really hurt our market?

Ever since the 15% tax on foreign investors, we have been hearing constantly about how the average price of a home in Greater Vancouver continues to drop. This is, in fact, true, we have seen a significant drop in the average price of homes, particularly on the West Side, and in surrounding cities that are further out. But, was the 15% tax really the cause of this drop? To be fair, the tax probably helped accelerate the rate of prices dropping, but we were already seeing some adjustments before the tax.

When the market is in such a frenzy, it grows at exponential rates. People start to get desperate after losing out on offers so the next one they see, they will bid for it and with a non-subject offer. But at the same time, prices will eventually get to a point where more and more people will feel that it just is not worth it anymore. The market for single detached homes definitely reached that point, and we were able to see a slowdown in the market. Right afterwards, the 15% foreign investor tax came out, which most likely accelerated this decline in demand.

Nowadays, we see the pricing adjusting to a more ‘acceptable’ pricing, but keep in mind, prices are still higher than what it was just 5 years ago. We still see condo prices continue to grow, though, and with some highly desirable units or lower priced units, there are still multiple offers and the units would sell for over list price. In the end, the single detached homes are still listed for millions of dollars. Townhouses are all close to $1M and up, and with an average salary, condos are still the way to go for most people. For foreign investors, 15% on $750,000 for a 2 bedroom condo downtown is a big difference compared to a $4,000,000 home, so it just directs their attention elsewhere. If we are still seeing a steady growth in the condo market, did the 15% foreign investors tax really help adjust our market?

It’s always good to consider both sides of the argument, so read more about that here.

Real estate developers donor list for BC Liberal party

The Liberal party has released their donor list as a statement of transparency, and not surprisingly, the top donors are real estate developers. Last year, $400,000 has been donated to the Liberal party by the developers of the popular building Wall Centre in Vancouver. Another large donation includes $260,000 from a developer that just finished a new building in Kitsilano just a couple of years ago.

Over the past while, the media and public have been blaming foreign investors for the unaffordability of homes in Vancouver. They claim that these investors are swiping up every home possible and causing the prices to spike to unrealistic levels. Even the Liberal Government came forward with a 15% tax on foreign investors when purchasing a home. Despite what most people thought, foreign investors only take up a small percentage of the population that purchases homes in Vancouver. So what else can be driving our pricing to such soaring heights? Many new presale projects pop up constantly all over Vancouver and surrounding areas. Developers price their condos on a predicted pricing of when the building would be sold. Currently, new projects along the Cambie Corridor are listing 2 bedroom condos at mid $900,000s and higher. In a typical market, nearby buildings will see this pricing and think to sell their own place for a similar price, and so the cycle continues. Developers purchase land years before they start building because they need to go through planning and permits from the City. So land purchased in 2010, will have sales around 2015, with projected pricing around 2020.

Why are there no discussions on how the developers drive our market?

Read more about this here.

New Year, New Market?

After the tumultuous year we’ve had in 2016, what will 2017 bring us? In December, the average price for a home in Vancouver was $948,246. This is a 3.4% drop from December of 2015. But is this a good determination of the next months to come in the new year? It’s hard to say, as demand for a home in Vancouver is still immensely strong. The Vancouver market has always been ‘ahead’ in a sense that many locals feel their pay is not enough to keep up with the rising prices. Along with this, December ’16 has seen a 34.5% drop in the number of listings compared to ’15.

So what will this mean? Prices of homes are falling, the supply is also falling, but demand is still strong. To put it simply, these are the basic building blocks of a market that will continue to soar. However, this simply cannot be, right? It’s already been so hectic over the last year, we need some time to adjust! What we have been noticing is that people are starting to feel tired of the high prices, and the clamoring of people whenever something cheaper is listed. If demand slows down, we may see the market adjust some more.

For now, we’ll have to see what the spring time brings us.

Read more about this here.

What will happen to the Vancouver real estate market?

It seems that so much has been happening in such a short time in regards to the real estate market here in Vancouver. From soaring prices, increased foreign investment and speculation, to new policies, new taxes, and now a new loan for first time home buyers, it goes to show that real estate in Vancouver is a hot topic for a reason.

But what will happen to our market now? Surely, the market has not seen so many different changes all at once, will this tank our market? The market has definitely slowed down compared to this time last year, but it is hard to say what 2017 will bring to Vancouver.

What we can point out is that foreign investment is slowing down compared to before, albeit we are still unable to determine the full effect this will have on the market. Along with this, new credit policies are also a strong factor to consider. First time home buyers are finding it more and more difficult to provide a 20% down payment for their mortgage, causing them to be tested at a higher rate around 4.5%. Along with this stress-test, we are also expecting to see interest rates rise as well.

Financial factors aside, in regards to basic supply and demand, there is still not enough supply of homes available for the population of Vancouver. Many Vancouverites that do own homes are hesitant to sell because they are afraid they cannot afford anything else. Vacancy rates are also still at an all-time low, and more and more people are finding it difficult to find a place to live in.

So… Who else is ready for the new year?

Read more about this here.

 

Home Owner Mortgage and Equity Partnership Program

The province of British Columbia has just introduced a new loan program that is aimed to help first time home buyers. Despite the sudden slow-down in our market, prices of homes are still significantly higher than it was just a few years ago.  An average price of a condo in Vancouver is over $500,000. For a mortgage, a 20% down payment would be a hefty $100,000. Many first time home buyers are finding it difficult to save up that much money, so to help combat this, they can now apply for an interest-free loan up to $37,500.

Although many people are criticizing this program, suggesting the debt-risk is too high, the province will be running this program for 3 years. There is an estimated over 40,000 people will apply for this loan.

Click here for more details.

Despite cooling market, property values expected to rise

The Greater Vancouver real estate market is constantly surprising people with its drastic changes. From prices rising exponentially, to scandals, to new taxes and policies being introduced, it seems there is never a dull moment when it comes to this market. The newest change that people will expect to see next year, other than the falling average price for a single family home, is a large increase in property values. BC Assessment has stated that property values for a single family home can jump up from anywhere between 30% to 50%. Areas, where we will see this happening, includes Vancouver, Burnaby, North Shore, Richmond, Surrey, and even the Tri-Cities as well as Squamish.

Of course, seeing the value of your home go up is exciting, however that does also mean that your property taxes will also be higher. Almost 100,000 warning letters have been sent to the homeowners of these areas so that they may prepare for their property tax value for next year. One thing to always keep in mind when looking at your property value is that these values do not necessarily reflect the current market value. For example, a home located in the Cambie area is listed at $2,498,000 but the property value is assessed at only $1,831,200.

Will you be affected by these new property assessments?

Read more about this here.

New prediction for Metro Vancouver’s real estate

BCREA had come out with a prediction for an average home sale in Greater Vancouver next year to be a whopping $1,030,000. Now, since the market has continued to slow down (specifically for detached homes), the prediction has been corrected to $940,000.

When housing prices fall, it could cause people to default on their mortgages. Some experts are concerned that with the rising prices Vancouver had been seeing before, people are stretched too thin with their purchases. With the steady decline in housing prices, there is a chance that there will be a higher number of people defaulting on their mortgages next year.

A decline in real estate can also lead to a decline in construction of new homes, marketing for new homes, etc. Although the market is still higher than where it was a few years ago, this slow down does seem daunting after what we have been seeing before. We will have to continue to keep an eye on the market to see how things go.

Read more about this article here.

More taxes to come for Vancouver?

The City of Vancouver has released their 2017 operating budget with a whopping $55 million increase from last year’s budget. So, where is all this new money going to be coming from? The city has suggested a possible 3.4% increase in property taxes. Although this number seems exceptionally high, the city claims that they have the lowest property tax increase compared to the rest of the Lower Mainland.

This possible property tax increase comes after a seemingly long line of other policies that have been introduced. We started off with the foreign investors 15% tax, a new stress test for mortgages, and also a vacant housing tax. Will all these policies help the real estate market in Greater Vancouver to reach equilibrium after the spike we have been seeing the past couple of years? Or will it give our market a turn for the worse?

Read more about this here.

City of Vancouver introduces new Vacant Housing Tax

Gregor Robertson, the Mayor of Vancouver, and his council has approved a Vacant Housing tax, the first one the country has ever seen.

Despite the arguments and backlash over this tax, they are hoping that this tax will help combat the housing crisis in Vancouver. In the spring of 2015, CMHC released statistics showing that the vacancy rate for private structures with 3 or more apartments is 1.8%, a drastic 0.6% drop from 2014. Many citizens of Vancouver have complained about the low vacancy rates along with the steadily increasing monthly rent.

What does this new vacancy rate entail?

  • Homeowners will start paying this tax in 2018
  • Homeowners must self-report how their homes were used in 2017
  • The tax is 1% of the ASSESSED value, not market value
  • Staff will audit 3000 homes a year

There are also a few exemptions for some homeowners, such as

  1. Homeowners are not required to pay if the home is their primary residence (listed on their drivers license, tax forms, etc.) even if the home has been vacant for long periods in the year.
  2. For secondary residences, homeowners can be exempt from the tax if they can prove that they have rented it out or has family members living there for more than 6 months.
  3. Homeowners will also be exempt from the tax if they have already purchased a strata property where bylaws are in place restricting their ability to rent out the home.

Read more about this here.