It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of light, it was the season of darkness, it was the spring of hope, it was the winter of despair.
— Charles Dickens: A Tale of Two Cities
Jay & Brenda News
The Two Cities are Vancouver and Toronto and the response described above includes the shocking US election results; the effect of the new mortgage rates on Canadian buyers; the effect of the City of Vancouver empty home tax plus its heritage home demolition bylaws on upscale neighbourhoods and over all the snuffing out of the high end market by the Foreign Buyer Tax. Vancouver is feeling the pain; Toronto is still riding high.
It’s becoming clear that the whole edifice was built on sand. All the regulation in the world cannot create supply where there is no willingness on the part of any level of government to require or rezone existing residential areas for high density street townhomes or low-rise multi-family units. Governments cannot go back and erase decisions that led to the unaffordability of real estate in Canada’s most popular cities.
There was gross malfeasance on the part of the Federal Government with the Immigrant Investor Program selling Canadian citizenship at bargain basement rates with no enforcement of the existing tax and residency rules required by law. This blatant money grab was not even well-executed. The payment for citizenship by Immigrant Investors turned out to be an interest free loan to the government by the applicant on the understanding it would be returned to them after a set period of time. This craziness was originated by the Liberal government of the day, continued and upgraded by the federal Tories until cancelled in 2014 only to be taken up the Liberal government of Quebec who takes the money and scares the Immigrant Investor with French language requirements so that they run to Vancouver and Toronto taking their tax avoiding ways with them.
An old pic of Jay and his friend Mike Andruff at the RE/MAX office in early 2000s
Thanks to the ongoing Globe and Mail newspaper exposure of fraud and abuse in the Vancouver real estate market by dishonest investors, builders and realtors the Provincial government has had to respond to numerous charges of avoiding responsibility for the fallout and lack of affordability in the Metro Vancouver market. In order for Premier Christy Clark and the Liberals to be re-elected and avoid a Trump-style pushback they have to appear to have the best interests of the voters (not the financial well-being of their contributors) in mind. Hence the ban of shadow-flipping; imposition of the foreign buyer tax and now cracking down on the abuses in the Agricultural Land Reserve where buyers are pretending to run a blueberry farm to claim the agricultural reduced tax benefits. Many buyers of farm properties are turning them into estates and boutique hotels using the ALR loopholes.
There is some too little/ too late investigations of suspicious real estate transactions in Vancouver and Toronto being undertaken by CRA for a total of $240 million to date. They have audited 13,400 Ontario residents and found mainly GST/HST and New Home Rebates illegally claimed to the tune of $210 million. More audits occur in Ontario but thanks to all the publicity CRA is setting its sights on investigating British Columbia real estate deals starting with 500 suspicious high dollar transactions. The federal revenue minister said the government is aiming to recoup more money in B.C.
"We are making a clear effort in British Columbia and our goal is to recover as much money [as in Ontario], if not more," Diane Lebouthillier told the Globe and Mail.
According to CRA, it is looking into five areas of concern, including:
- Questionable source of funds.
- Property flipping.
- Unreported GST/HST on the sale of a new or substantially renovated property or on the GST/HST new housing rebate.
- Unreported capital gains.
- Unreported worldwide income.
Julie, Brenda, Sondra, Mary at the cottage in November 2016
Last year an unlicenced criminal Immigration Consultant based in Richmond BC was tried for fraudulent activities including immigration applications where the Chinese immigrant lied by stating that he was resident in Canada while working in China. The consultant set up false addresses and accounts to make it appear his client was actually living in Canada as required by the Immigration Act. By investigating the client list the government has lined up a group of residents to be deported for lying on their application. All of them are complaining they were misled, the documents were in English and they only read Mandarin, their families live in Canada, they own high end real estate in Vancouver etc etc. The federal court appeal process usually takes one year. However, the government does not recognize "I was misled" as grounds for staying in Canada. When they are deported they cannot apply to come back for 5 years and have to disclose they were thrown out for illegal documentation when they do apply.
FYI: the immigration consultant got 7 years in jail and a $600,000 fine. His sentence was just upheld on appeal.
However, these few clients are the tip of the iceberg. For years realtors and the public have been reporting that many Chinese immigrants are "astronauts" who are working in China while their families live in Metro Vancouver using all public facilities including medical services and schools while reporting minimal incomes to CRA and paying less tax than many poor refugees. CRA has said in the past that it does not plan to check up on world wide income but it seems they will be forced to do so by public demand.
As a result of increased regulation and surveillance of real estate transactions the high-flying Vancouver market has been taking a breather. Anecdotally it appears that those buyers who are required to pay the 15% foreign buyer tax are taking it off the sale price of a property. A home listed at $4 million in April may be listed at $3.5 million today and sell for $3 million to account for the $450,000 Foreign Buyer Tax added to the existing Property Transfer Tax for a total of $500,000. Plus any applicable GST if it is a new home.
Some buyers cannot afford or are unwilling to pay the Foreign buyer tax on pre-sold condos as they are being completed and are ready for registration at Land Titles with all taxes due and payable. There is no grandfathering of an earlier transaction and the buyer must be a Canadian citizen or an immigrant with Permanent Resident status in Canada as of the date of purchase to be excused from the tax. We are seeing collapsed sales being reported on the MLS by the Real Estate Board of Greater Vancouver.
Constantin also learned to brush his teeth. He's not quite as accomplished as he looks in this picture but he's a keen student.
Areas of Vancouver that fall under RS-5,3 and 3-A zoning are also hard hit as the City has denied demolition permits for pre-1940 homes. This includes Kerrisdale and Shaughnessy. Most foreign buyers, either investors or residents, are looking to build a new home suited to their needs. A lovely old Vancouver home, even when renovated is seldom configured the way they prefer. There is a premium being paid for newer homes that were built before the bylaw changes.
The Vancouver Sun had a spread on a home at 5387 Cypress Street that has been bought and sold 6 times in the last 13 years, last sold in Fall 2015 for $4.55 million. It is currently listed for sale at $5.28 million. However, it is impacted by the new bylaw. A realtor was making a comparison with this property and one across the street and down the block at 5468 Cypress Street. That property as an older home sold in February 2011 for $2.998 million. It was razed and replaced selling at $8.074 million in April 2012. In June 2016 (before the Foreign Buyer Tax applied) the 6,500 s.f. home sold for $12.26 million. Built before the new bylaw with its size restrictions and heritage requirements changed the market for older homes as candidates for redevelopment.
Needless to say, those owners who did not take advantage of the wild west marketplace before it was shut down are disgruntled by what many of them think is the capricious application of zoning bylaws and the Foreign Buyer Tax. Many think it should have been applied to more areas in BC than Metro Vancouver to more effectively spread the restrictions throughout the province. It does not apply to Squamish, Whistler, Victoria or Kelowna which are busy real estate markets.
I will report on the impact of the new mortgage rules next month plus the tragic rental market. We are still awaiting the announcement of Trump’s trade policies. In the meantime let’s celebrate the Season in gratitude for our many blessings.
Family News
Jay is busy with clients and calendars. There is action in the real estate market with the right product and price point. He has lots of interest in his listings. Buyers have to go through more hoops today to get a mortgage and there must be many applications in the system because it is taking the banks much longer to appraise and approve properties. In the meantime there are joyful seasonal visits to be paid to past clients and news to be caught up on. He always has an attitude of gratitude.
The hunters come out in force on the weekends from end of September until after Christmas. Lucia and Constantin with Thor in a hunting jacket.
Effi is recovering from a sudden onset urinary tract infection diagnosed at an after hours trip to the emergency vet. We found Burrard Animal Hospital & Emergency (open 24 hours) to be outstanding in facilities and staff. They are equipped to do lab tests, X-rays and surgery on the spot. Fortunately after tests the treatment turned out to be antibiotics for canines and she is all better now.
Since Jay’s 2016 birthday gift of a big screen HD/4G TV his movie going has been a bit curtailed. He says it’s mainly because there aren’t that many great movies that need the large cinema screen to enjoy. He likes the Fifth Avenue Cinema for its civilized presentation and lobby cafe where you can get an expresso to take into the flick.
That's Thor there in the middle who's scented either a bear or another dog. Late October colours in Slovak mountains.
After the election I lost all interest in TV news. I still read the Washington Post, NY Times, Globe and Guardian online to keep up with our wildly spinning world. I do better without graphic visuals that you can’t get out of your head.
When I was in Toronto Julie reminded me that she and I had experienced the great 2016 anti-globalization election outcomes together. We were in the Eastern Townships at Manoir Hovey in June when we heard the EU shaking Brexit results in the middle of the night and then on November 9 when Trump unexpectedly won the Electoral College even though Hillary was well ahead in the popular vote. It was like remembering the Kennedy assassination for our generation. Ontario was dry and warm for the week I was there. Mary, her mother Sondra, Julie and I had a great time at the cottage. It’s always fun to walk through the woods and crispy leaves with the dogs. The Royal Winter Fair was another highlight. Held at the Canadian National Exhibition grounds we enjoyed the crafts and vendors and dressage and driving and jumping competitions. All held in Victorian era buildings with high ceilings and much molding. It was wonderful to spend time with family and dear friends.
Royal Winter Fair Jumping Competition
Even with a rocketing real estate market that kept the JKT busy, Julie’s birthday was celebrated regularly throughout the month so she and Mary have been enjoying an active social life. Mary hosted Julie at a popular restaurant in Toronto owned by Julie’s clients. Guests were Julie’s friends including many from school and camp days. Mary is enhancing her retirement with advanced culinary courses at George Brown College. Right now Central Italy is on the menu.
Mary with her new pasta machine
We are excited to be spending Christmas with them in Vancouver. Lots of festivities planned. They will have a day at Whistler with Julie’s college roommate Tracey who now lives in Vancouver as well as a trip to Victoria to see Mary’s longtime friends who live there. I pointed out the possibility of being stranded by weather related ferry cancellations but Julie just told me to have a more positive attitude. So no rain or wind in December by decree. The Bellinger family is gathering at Jane and Rory’s home for a traditional Christmas dinner.
Julie’s birthday party with longtime school and camp friends. Front from Left: Jen Palacios; Sarah; Back from Left: Kate; Julie; Stephanie; Heidi.
Alec and Lucia are wearing themselves out with work and renos. Alec sent us a funny story with pics about their busy lives and Constanin’s antics. They are fortunate to have such great support from Lucia’s parents who took care of Constantin and Thor while Alec and Lucia recovered from late Fall colds. They also agreed to keep Thor while the work was going at home and there were builders in the yard. Thor has to wear his orange vest to be safe from hunters both at home in Kittsee and in the mountains around Lucia’s family’s village. All grandparents think their descendants are brilliant so Constantin is no exception. It’s amazing how the modern child has taken to technology. It seems to appear in their DNA today.
Here is Constantin aged 19 months. Alec took the pics in the train and thought they made a set that demonstrated his personality quirks.
Kath and Stef are planning Christmas celebrations at Crooked Creek while Mary and Julie are on the West Coast. They are hosting Stef’s family and recently bereaved friends plus many dogs. They are looking forward to a trip to Palm Springs in the New Year. They took me for dinner at the Keg Mansion in Toronto which was Julie’s Mansion in the 1970s/80s when I lived there. It’s a big heritage house so looks just the same 30+ years later. However, the guests are not as glamorous and well-dressed as in the old days. In Toronto as in Vancouver tall condo buildings are being tucked into every vacant piece of property so it is getting harder and harder to see the Toronto of old.
A delightful smile - just like Daddy’s
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 is very satisfying. 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 October 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 "Changing market conditions compounded by a series of government interventions this year have put home buyers and sellers in a holding pattern. Potential buyers and sellers are taking a wait-and-see approach to try and better understand what these changes mean for them."
"While sales are down across the different property types, it’s the detached market that’s seen the largest reduction in home buyer demand in recent months. It’s important to work with your local REALTOR to help you navigate today’s changing trends." Morrison said.
According to the Real Estate Board of Greater Vancouver MLS residential property sales of detached, attached and apartments reached 2,223 in October 2016, a 38.8% decrease compared to 3,646 sales in October 2015.
October sales were 15% below the 10- year sales average for the month.
In October 2016 the number of residential properties listed for sale on the MLS in Greater Vancouver was 9,143. This is a decrease of 4.5% from October 2015 (9,569).
With the sales-to-active-listings ratio at 24.4% in October 2016, it remained a seller’s market which typically occurs when this ratio exceeds 20 percent for a sustained period of time.
Benchmark
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 | October 2016 | 1 year change | 5 year change |
| North Vancouver | $1,658,400 | 34.7% | 78.9% |
| Richmond | $1,673,300 | 34.8% | 65.8% |
| Vancouver East | $1,516,900 | 29.1% | 83.7% |
| Vancouver West | $3,569,700 | 28.7% | 59.7% |
| West Vancouver | $3,210,100 | 29.6% | 79.3% |
| Townhouse | October 2016 | 1 year change | 5 year change |
| North Vancouver | $842,300 | 25.7% | 43.0% |
| Richmond | $714,500 | 24.5% | 39.0% |
| Vancouver East | $771,000 | 27.9% | 50.3% |
| Vancouver West | $1,123,800 | 35.4% | 66.6% |
The following schedule shows the change in sales volume from October 2015 to 2016:
| Detached Home Sales | ||
| October 2016 | October 2015 | |
| North Van | 61 | 130 |
| Richmond | 61 | 194 |
| Van East | 65 | 149 |
| Van West | 78 | 163 |
| West Van | 22 | 116 |
| Townhouse Sales | ||
| October 2016 | October 2015 | |
| North Van | 32 | 36 |
| Richmond | 68 | 132 |
| Van East | 28 | 52 |
| Van West | 30 | 78 |
Change has already begun with new mortgage rules. 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.
As we express our gratitude, we must never forget that the highest appreciation is not to utter words, but to live by them.
John F. Kennedy
Sending warmest regards and all good wishes for a Blessed Holiday Season.
Jay Banks & Brenda Kinnear
JB00DT