Kath with her version of Palm Springs in Toronto:
BBQ and patio heater in freezing weather!ife is really simple, but we insist on making it complicated."
Jay & Brenda News
Well, it has been March Madness all month. Between real estate activity, family birthdays including mine, Spring Break, Easter, the Federal Budget, the US Presidential Primaries the month was pretty well-packed with action. Every time I sat down to write the updates something changed. So here we are at the end of March with all that's happened in the interim.
To start with the larger picture: prices are still rising with multiple offers because there is no incentive for homeowners to put their property on the market. Even if you get a stupendous price you have to find somewhere to live. So unless you are planning to leave the city you have to buy another home. The stasis in listings is really a result of demand. Buyers and Sellers are all dressed up with nowhere to go.
Questions about affordability and rising prices have been asked but not answered over the past few years. It's a long arc dating from the late 1980s. Governments have been reluctant to address the queries both at the Federal and Provincial levels. Research has shown that the problem started with the wildly popular mainly unregulated Immigrant Investor program whereby rich offshore applicants could loan $800k (raised from $400k in 2010) to the government (fully refundable) for 5 years and be allowed into the country. Many applicants were looking to acquire a Canadian passport of convenience and not to settle and contribute to the economy or even to pay taxes.
Alec and Constantin at working lunch in Zylinder
Unlike other countries there was no registry of the successful applicants, no exit record of them flying out of the country throughout their required residency period for citizenship or list of residential real estate that was acquired during this time. Fraudulent applications came to light at the time of the 2006 war in Lebanon where Canada airlifted out Canadian "citizens" who had never been in Canada and with the immigration fraud exposed in a Richmond court case in 2015. Canada is known among investors as a safe haven for dirty money, easily laundered, tax free.
In Canada the money laundering is usually through residential real estate investment. Right now China is being accused of money laundering on a commercial scale through China's major banks. They are accused by the FBI and European governments of providing money laundering services to cyber fraudsters and criminal networks throughout the world. Spain has arrested 6 executives from the Industrial and Commercial Bank of China's office located in Madrid for providing services to Spanish and Chinese criminal syndicates in China and Europe.
The Immigrant Investor program was terminated on June 24, 2014 with a backlog of 60,000 applicants who tried to sue the government in a class action suit against the closure. The program has since been reborn as the Immigrant Investor Venture Capital Pilot Program requiring a personal net worth of $10 million, a 15 year non-guaranteed investment of $2 million, Canadian post secondary education of at least one year or recognized international degrees and tested competency in English or French including reading, writing, speaking and listening. It is only allowing a few applicants and may not survive the new Liberal government's changes to immigration rules.
Constantin is walking already
Quebec runs a parallel immigration program to Ottawa's and continues to allow more Investor Immigrants into the country with the required $800k guaranteed investment being loaned to the provincial government with the agreement of the investor to move to BC or Ontario. The Conservative government was concerned that the investors in the federal Immigrant Investor program were taking advantage of public services at the expense of the BC and Ontario taxpayers and the gouge is continuing with the Quebec program.
The influx of offshore money and residencies of convenience started in BC after Expo 86 when thousands of Hong Kong residents moved to Vancouver out of fear of the upcoming 1997 handover of Hong Kong to the People's Republic of China by the British government . This was the inception of the astronaut lifestyle whereby the husband worked in China and the wife and children lived in Canada on a low declared income. He was absent except for occasional visits during the 5 year required residency period but turned up for the citizenship ceremony. This is the time that rules should have been put in place to regulate offshore investment but at the time the BC economy was fragile and everyone was grateful for the influx of money. Beware the Law of Unintended Consequences.
When the handover went smoothly and China agreed to maintain Hong Kong rule of law and financial institutions for 50 years many Vancouver residents returned to Hong Kong. This reverse migration crashed the Vancouver real estate market for several years in the late 90s due to the large number of homes suddenly listed for sale. The next wave of immigrants from Taiwan and then Mainland China took up the slack in real estate sales. With new immigrants and the awarding of the 2010 Winter Olympic Games in 2002 the market started to rise again and has mainly continued to do so.
One of the concerns of the federal government today is that China will suddenly turn off the individual investor tap and the market will take a downturn that will affect the Canadian economy and mortgages all up and down the spectrum. China's stated goals for foreign investments is to return a positive cash flow to the country.
They have hit on a new method. They are allowing the Anbang Insurance Company of Beijing to buy Class A commercial structures and hotels. First the Waldorf Astoria, recently the Bentall Centre in Vancouver and now one of the most prestigious hotel chains in the world for US$6.5 billion: Strategic Hotels and Resorts which includes Four Seasons resorts in Scottsdale AZ and Jackson Hole WY, Hotel del Coronado in San Diego CA, JW Marriott Essex House in NYC, NY. Anbang made a surprise offer of US$14 billion for Starwood Hotels that was already in negotiation with Marriott. The offer was eventually withdrawn when Marriott raised its US$12.2 billion bid to US$13.6 billion to compete. Starwood includes Sheraton, Westin, Four Points by Sheraton, W Hotels, St. Regis, The Luxury Collection, Le Méridien , element , Aloft and Tribute Portfolio Hotels. It is the largest hotel chain in the world. China wants to take advantage of its well to do middle class now travelling abroad by providing recognized branded accommodation everywhere with the cash flow coming home.
Constantin prefers a stand-up desk. Visiting Alec in his office
The BC government is now starting to recognize how negatively their bleats about fixing affordability are being received, especially since the Budget. The Property Transfer Tax funds the government coffers to the tune of a billion dollars per year. They are making no moves to do anything except providing some window dressing. Premier Clark announced they would disallow "shadow flipping" as though that affected affordability. It deals with statistically few (less than 3% according to reports) homes in the high end of the Vancouver property market. The reading of that statement is that the government wants to collect Property Transfer Tax through each assignment. We have recently seen that those real estate companies who permitted or encouraged the practice of "shadow flipping" are no longer allowing their agents to offer homes for sale before the closing of the original transaction.
There is no need to regulate it. The Real Estate Board has just raised by member vote the top fine for infractions to $30k from $10k. The Real Estate Council which deals with licensing realtors and with public complaints is waiting for the Superintendent of Insurance's report to be allowed by the provincial government to update the rules and penalties. This will have to be done by amending the Real Estate Services Act.
Assignments of the Contracts are allowed under BC law and are sometimes necessary if the circumstances of the Buyer have changed. It is common in new home and condo sales where there is a long period of time between pre-sale and closing. In those cases a fee must be paid to the original developer in order to assign the contract to a new buyer.
We have become addicted to rising prices and growing home equity. Many Baby Boomers who bought early, didn't divorce, are looking at a luxurious retirement thanks to the Vancouver real estate market. It's hard to take political posturing seriously when respected public figures gamble with good insider guesses as to rising property values.
Mike Harcourt, current adviser to Mayor Gregor Robertson, former mayor of Vancouver and NDP premier has just offered his Point Grey duplex for sale. According to the Province newspaper the building lot in the 2800 block of West 1st at the corner of Point Grey Road was purchased in 2011 for $2.8 million jointly with his son. In 2012 they tore down the house. After Point Grey Road was closed in 2013 to 10,000 cars a day to become a bike lane the Harcourts divided the lot and built a duplex. They are selling both homes together. It is now advertised for sale at $8.38 million as a waterfront property. Harcourt wrote a letter to the Vancouver Sun extolling the greenway without disclosing his ownership of a house that had quadrupled in value as a result.
There is a strong resistance among home owners to supporting actions that will devalue their investment. The Council in Vancouver announced their Heritage Conservation area zoning for First Shaughnessy (Oak to Arbutus between 16th Avenue and King Edward) with great fanfare last year. They used the Parks Canada gold standard of heritage preservation. What they didn't factor in was the fact that the buyers for $7 million+ properties don't want to add laneway houses and suites to their homes which was the compensation in return for maintaining the original home. They want privacy. The city is in a class action lawsuit brought by property owners claiming that the designation has devalued their properties and they should be compensated. The city is now watering down the regulations. Unnecessarily so according to legal opinions but there is no political will to take on the voter.
Again the Law of Unintended Consequences in effect. Nobody tracked the buyers, Metro municipal councils did not protect the housing stock with building bylaws and architectural requirements early on. Once it was a free for all it was impossible to rein it in as everyone had a vested interest in getting the most money for their property. Beautiful homes were destroyed to build square stucco boxes in the 1990s. These are now coming down for even larger homes. Nobody wants density in their neighbourhood but single family homes are an impossible dream for most local buyers.
It's interesting to note that fights for ownership and property values can occur at every level. Concord Pacific who inherited the Expo Lands from Li Ka-shing the Hong Kong billionaire who bought them for a song from the provincial government and built the Yaletown area is in a big legal tussle with CMPC owned by Singapore developer Oei over ownership of the Plaza of Nations. The last open land in downtown Vancouver. CMPC bought the land for $40 million from Li Ka-shing in 1990 and Concord Pacific claims that Oei agreed to sell them to Concord Pacific in 2015. Oei denies this and the litigation continues. The lands are now valued at $500 million.
It's an active Spring market and Jay is busy with buyers and sellers. It takes all his years of skill and experience to make things happen. Lots of crazy energy out there. Every transaction is a multiple offer with the successful buyer paying a premium price.
Kath with her version of Palm Springs in Toronto:
BBQ and patio heater in freezing weather!
Fortunately the Woofer Walkers keep Effi entertained when Jay and I are too busy for long off leash walks.
I promised myself after the 2012 US election when I was addicted to the news that I would not be immersed in politics again. Especially when I can't even vote! However, who could have foreseen the meltdown of the Republican Party with Donald Trump and Ted Cruz as candidates and the wildly socialist Bernie Sanders against smart Hillary for the Democrats. Bernie is even left of the Liberal Budget goodies. Some journalist wrote that they wondered that young college women would prefer an old male geezer over a well-qualified and compassionate woman candidate. Shows how successful our generation has been in opening doors for women. Younger ones don't even notice the gap anymore.
Brenda and the Laughing Men Statues at English Bay
Kath with her version of Palm Springs in Toronto: BBQ and patio heater in freezing weather!
Alec and Lucia are busy at home and work in Kittsee and Bratislava. Constantin is a big boy about to celebrate his first birthday. They spent Easter with Lucia's family in Riecka.They are planning a trip to Canada in July. We are excited about seeing them.
Kath and Stef are hunkered down with work and looking after their canine family in the cold and stormy weather in Ontario. Palm Springs seems like a long way behind them in the rear view mirror.
Julie and Mary celebrated a friend's 50th birthday with a group party in Barbados. Loved the weather and the beaches. Julie was amazed at how many visitors come every year to the same place. One woman said that it was her 48th year of holidaying there. Sandy Lane Hotel there is fabulous. Julie is busy with the Spring real estate market in Toronto. Mary is looking forward to her upcoming early retirement.
FYI: We find that working with clients at every stage of life: buying first condo homes, moving up to family size townhomes or detached, then downsizing from the large family home to a condo again keeps us busy. We hope that Life is good for you too.
Real Estate News
For those interested in the tax rates of the Metro Vancouver municipalities Jay has compiled them and posted them on our website.
The complete February 2016 Stats Package from the Real Estate Board of Greater Vancouver is also posted.
Darcy McLeod, retiring President of the Real Estate Board of Greater Vancouver states: "We're in a competitive, fast moving market cycle that favours home sellers. Sustained home buyer competition is keeping upward pressure on home prices across the region".
"We're beginning to see home listings increase as we head toward the spring market," McLeod said. "however, additional supply is still needed to meet today's demand."
According to the Real Estate Board of Greater Vancouver MLS residential property sales of detached, attached and apartments reached 4,172 in February 2016, a.36.9% increase compared to 3,061 sales in February 2015.
With the sales-to-active-listings ratio at 38 per cent for January 2016, it remained a seller's market which typically occurs when this ratio exceeds 20 percent for a sustained period of time.
The REBGV Home Price Index includes Benchmark Prices for consistent comparisons. Benchmarks represent a typical property within each market. The benchmark property descriptions have been updated to reflect current buying trends.
|Home Price Index / Benchmark Prices|
|Detached||February 2016||1 year change||5 year change|
|Townhouse||February 2016||1 year change||5 year change|
The following schedule shows the change in sales volume from February 2015 to 2016:
|Detached Home Sales|
|February 2016||February 2015|
|February 2016||February 2015|
Change is in the air. We’re still advising clients to take advantage of the continuing low interest rates available now whether you are moving up or down in the market. You will be glad that you did so at this time!
We thank you for your referrals and look forward to assisting you or any of your friends and family with future real estate needs.
All good wishes for a bright and happy Spring,
Jay Banks & Brenda Kinnear