Make the best use of what is in your power, and take the rest as it happens.
Jay & Brenda News
KABOOM! And so went our plans to enjoy lying around in the lazy hazy days of August. The sudden introduction of the 15% Foreign Buyers Tax on July 25 surprised most observers who were expecting some action to lower house prices and stabilize the market but expected it to happen later in the year.
One client who guessed right works for an organization that closely monitors government thinking and direction. They could see this coming ahead of time. They recognized that Premier Christy Clark has highly honed political instincts and there was an election on the horizon. She would have to do something to satisfy the angst in the populace, cement her position as the leader of the most prosperous province and do it early enough that the inevitable fallout would be well behind her in the rear view mirror before Election Day May 9 2017. These clients listed and sold in the Spring.
The tax is generally popular. Just the idea that something is being done to address the fallout from globalization and the overwhelming changes to Vancouver of old did make many people feel hopeful. However no one remedy can do everything and for every action there is an opposite and equal reaction. As Adam Goldin of Moody's Analytics stated: "The indefatigable law of unintended consequences has travelled to Vancouver."
The plan of the Finance Ministry and the Premier agreed was that everyone should be covered by the tax on the same day. Their worry was there would be a Gold Rush for properties if they announced the tax to take effect in the future. They were right and wrong at the same time. By not grandfathering contracts that were already negotiated and accepted they left many of their prize voters in the lurch.
The Real Estate Boards of Vancouver and the Fraser Valley are protesting the unfairness to buyers and sellers who negotiated in good faith and are left stranded. All the information is anecdotal to date. We will have to wait for real time stats which will be available at the end of August and beyond. It may take 3 months or more to find out if foreign buyers really did walk away from their contracts, forfeiting the deposit rather than pay 15% tax on top of their purchase price and the required Property Transfer Tax. We are watching for a domino effect when a seller can't close on their next purchase because the foreign buyer didn't close on their house. The provincial government has stated they won't make any adjustments for this anomaly but the unintended consequence for their valued voters may move them to action.
The Brexit vote caused the same confusion in the property market in London. Prices in the high end dropped and people couldn't close on condo units bought much earlier from plans. Gerald Grosvenor 6th Duke of Westminster died suddenly on August 9th 2016. His obit in the Guardian mentioned all the property the Grosvenor family owns in Mayfair and Belgravia and how his fortune had diminished as a result of the Brexit vote and the drop in property values. The next day an updated obit was published. Sorry we made a mistake in the first one---the Duke's London properties are now worth more than they were before the Brexit vote!
There was an interesting article in the Globe and Mail recently which addressed the path of international money. There is a river of cash flowing through the most desirable cities in the world looking for a haven in real estate where there is an actual asset that will increase in value. It's estimated at $8 trillion. Not all of it is being invested in residential real estate. In Canada huge commercial buildings, shopping centres, infrastructure projects are sought by international investors from China and the EU. Quantitative easing by many countries created more currency; low interest rates; zero interest on US Government Bonds; the potential for growth has spiked the international investors interest in bricks and mortar. San Francisco, Sydney, Melbourne, Vancouver, London are all unaffordable to their local population. A city undergoing a surge in house prices is Auckland NZ. There is international money rushing in. The NZ government is looking at ways to control the growth. One thing they are doing is registering the citizenship and place of residence of all buyers.
Many methods as suggested in Vancouver have been tried in different places. Vancouver's new Foreign Buyers Tax is being heavily watched for results. It appears that no methods short of onerous property taxes, speculation taxes if homes are sold within a certain time frame and now the Foreign Buyers Tax here have any impact.
The one thing left on the table with the new FBT is lack of supply of homes to buy. Even if by the remotest chance prices were slightly lowered they cannot be maintained at that level. The demand far surpasses the availability of detached properties now and in the future as there is no land on which to build. Vancouver would have to rezone for higher density all through the city to begin to provide more housing. Single detached homes would be prizes that only the fabled 1% could afford.
The larger real estate market with its assorted components of home sales, construction, mortgages, legal and financial services, sales of furnishings and appliances is the major driver of the BC economy. Real estate is 20% of the Canadian economy. The downside is that it has overtaken more traditional drivers such as the manufacturing, resource and oil industries. According to the Globe and Mail economist Brian DePratto of the TD Bank reports that the real estate sector's share of GDP has grown by 0.4% in the last two years while every other sector has shrunk. Real estate's contribution to GDP has increased by 35% since 2006. In our haste to turn back the clock we have to be careful we don't destroy everything we are trying to preserve.
Now is the time for optimism:
"I didn't lose the Gold.
I won the Silver."
— Michelle Kwan
More of Julie and Brenda's Great Adventure in Quebec:
Crossing from Ontario into Quebec along the St Lawrence River is the most amazing experience. You drive along the 401 when suddenly the signs are properly set up to give you lots of notice in French as to where you are going. The roads are smooth and when you move onto secondary highways they are all paved with curves, trees and very high speed limits.
A little historical background:
After the British conquest of Quebec in 1759 and the Treaty of Paris in 1763 which divided the spoils of the Seven Years War (called the French and Indian War in North America) considered to be the first world wide war as it was fought on several continents with Britain and France being the principal antagonists Britain retained the colony of New France and all its territory including the Ohio Valley. The main economic driver in New France was the fur trade and British merchants jumped right into it. Montreal became the English business centre. At this time the 13 North American Colonies which later became the United States were just starting to rebel. As Sir Guy Carleton the Governor of Quebec thought no one would want to live in Quebec in the snow except Indians and fur traders he persuaded the London government to pass the Quebec Act of 1774 to prevent Quebec from joining the American Revolution. This gave the French population and the Catholic Church more autonomy and political independence than any place in the British Empire until the Catholic Emancipation Act passed in Parliament in 1829. The Quebec Act with its tolerance of French institutions and language plus freedom of religion for Catholicism enraged the Protestants in the 13 North American colonies and triggered the 1775 invasion.
Quebec played a role in the revolution. Mainly by surprising Benedict Arnold when he came to persuade them to join it and they refused. In 1775 American troops fought and occupied Montreal and Quebec for the winter until driven out by arriving British forces. The French-Canadian habitants were neutral and merchants and landowners supported the British as did the Roman Catholic clergy.
After the Treaty of Paris in 1783 ended the Revolutionary War 80,000 Loyalists left the United States and migrated to Quebec and Nova Scotia. With their qualities of loyalty and integrity they set the tone for Canada and made it the society it is today.
Resume the trip:
As Julie and I drove around Montreal into the Eastern Townships we touched the shore of the St Lawrence and marvelled at how close we were to New York state. Just one bridge away. No more than 3 km on many signs. In the small towns of the Eastern Townships and in the surrounding farms there is a strong history of English settlers. The cider house we visited is built on a farm settled by Loyalists in the late 1700s. The area is filled with apple orchards, maple sugar shacks and now vineyards. The towns have English names even though everyone speaks French. Towns are called Knowlton, North Hatley, Magog, Sutton. Julie's and my favourite author Louise Penny lives in Knowlton and incorporates many of the local highlights into her Chief-Inspector Gamache of the Surete du Quebec mystery novels. She models her village Three Pines on Knowlton and the other villages around it. Montreal was the power centre of Canada before 1976 when the separatist Parti Quebecois was elected and Anglos and CEOs voted with moving vans going west to Toronto. Before that time North Hatley was the summer resort for the wealthy English and it has many beautiful homes today. One of the largest which also features in Louise Penny's books as a private residence is now a Relais & Chateaux boutique hotel called Manoir Hovey. It originally belonged to an Anglo captain of industry and is now a beautiful resort with miles of lakeside shoreline and a highly rated restaurant Le Hatley with a Wine Spectator awarded wine list. We loved our stay there. So luxurious. Julie, biked, swam, hiked while I sat on the terrace and read.
We went sight-seeing from Manoir Hovey. There is lots of activity in all the little towns as it is really an all year round resort area. A highlight was our trip to the Benedictine L'Abbaye Saint-Benoit-du-Lac. Beautiful, spiritual, inspirational and practical. They have a huge business making and selling cheese which they ship around the world. Julie bought a selection of cheeses that we then transported in coolers, ice boxes, cold packs where we had a fridge to freeze them. It was an exercise in determination for Julie and no complaints from the cheap seats were allowed.
In the little town of Magog I bought a hat from a French shopkeeper who said she was born there and never wanted to go anywhere else. I heard that a lot. Julie says it's because anyone who is fluently bilingual can leave Quebec and live elsewhere. Those who aren't (most of the population) stays and loves it.
Bishops University is located on a beautiful campus in the Eastern Townships. The winding road and gorgeous scenery are part of the ambience that makes this area seem so old and settled. After this foray we motored through the real Quebec into the Charlevoix region. More next month.
While Julie and I were away Mary took advantage of her early retirement to stay at the cottage and golf and generally have a relaxing time. A new first for her after all the years of structured hours. She and Julie are back to their busy entertaining schedule. Julie has been working in July and most of August plus attending the KW conference in Austin TX.
Kath and Stef combine summer work schedules with a round of downtime visits with their canine companions including little feisty blind Q-Tip to friends farms and cottages. All the dogs recognize the road to Crooked Creek, their favourite destination.
Jay is in Toronto seeing friends and family. He and his friend Dave went to the MoCool Wine Festival in Ann Arbor, MI last weekend and this one he is up at Crooked Creek with the gang. He spent some time with Bunny and seeing family. He has been hanging out with Kath and both of them along with Mary and the JKT entertained Julie's special clients and kids at a picnic and games party in High Park. He can never get away from real estate. Good thing he loves all the interaction.
Alec and Lucia and Constantin are busy at home and work after taking so much time for their Canadian visit.
Effi and I have had a lovely ladies time together. Gardening, walking, guarding the property. She looks after things while I go out with clients. A highlight for me was attending my great-nephew Ronan Moore's Christening. A lovely occasion with a fun reception afterwards in Grandma Jane and Grandpa Rory's garden. Ronan looked just like Prince George in a gorgeous long Victorian Christening gown made by his mother Layne.
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.
Gone Too Soon
Lance Taylor Charmaine and Lance Taylor Our dear friend Lance Taylor, formerly of Richmond, passed peacefully in Vancouver on August 4, 2016
Real Estate News
The complete July 2016 Stats Package from the Real Estate Board of Greater Vancouver is also posted.
Dan Morrison, President of the Real Estate Board of Greater Vancouver states "After several months of record-breaking sales activity, home buyer demand returned to more historically normal levels in July."
"Home sale activity showed some moderating signs in late June and this carried into July,." Morrison said. "We'll wait and watch over the next few months to see if this marks the return of more normal market trends."
According to the Real Estate Board of Greater Vancouver MLS residential property sales of detached, attached and apartments reached 3,226 in July 2016, a.18.9% decrease compared to 3,978 sales in July 2015.
July sales were 6.5% above the 10- year sales average for the month.
In July 2016 the number of residential properties listed for sale on the MLS in Greater Vancouver was 8,351.This is a decrease of 27.4% from July 2015 (11,505).
With the sales-to-active-listings ratio at 38.6% in July 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||July 2016||1 year change||5 year change|
|Townhouse||July 2016||1 year change||5 year change|
The following schedule shows the change in sales volume from July 2015 to 2016:
|Detached Home Sales|
|July 2016||July 2015|
|July 2016||July 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.
Love the place you are in and celebrate the end of Summer!
Jay Banks & Brenda Kinnear