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More than 12,000 new rental units under development would be at risk of cancellation if the oft-mooted “vacancy control” mechanism were to be implemented, according to a new Urban Development Institute (UDI) survey released November 21.

Photo Dan Toulgoet

Vacancy control is a form of rent control that is linked to a unit rather than a tenant – meaning that the landlord would be restricted in the amount they could raise the rent between tenancies. As of 2019, rent control has been capped at the inflation rate, set at 2.5 per cent, which means B.C. landlords can only raise rents by 2.5 per cent for sitting tenants.

However, currently landlords may raise the rent by however much they wish between rental leases, which has prompted calls for a vacancy control system tying rental increase caps to the unit. Tenants’ right advocates such as Vancouver’s COPE councllor Jean Swanson have argued that vacancy control is essential to prevent renovictions and stop landlords jacking up rents between tenancies. Such concerns are being heard by the B.C. Rental Housing Taskforce, which is set to release its next set of recommended changes to the Tenancy Act on November 30. The possibility of imminent changes prompted the UDI to survey its members on the outcome of a vacancy control.

The UDI found that thirty of B.C.’s major rental home builders were strongly against the introduction of “vacancy control” over fears that would make building new projects unviable, and therefore dramatically reduce supply. With respondents reporting 19,972 rental homes currently in development, the survey found that 12,631 of those would be at risk of delay or outright cancellation if vacancy control were implemented. This would reduce the already low vacancy rate, said the UDI, which is below one per cent in a number of communities across the province.

“British Columbians desperately need more rental homes,” said Anne McMullin, UDI Pacific Region president and CEO. “Rental home builders agreed that vacancy control would be the death knell for rental home construction. This is not the time for new restrictions that could result in the cancellation of important rental home projects in communities across British Columbia.”

In addition to making new projects financially unviable, a vacancy control that restricts rental price uplift between tenancies could result in units and buildings not being maintained properly, according to the UDI. McMullin added, “If strict limits are placed on rent, building owners simply won’t be able to afford upgraded elevators, new appliances or replaced carpets. Buildings will fall into disrepair and that’s not what British Columbians deserve.”

Rental housing needed in emerging areas

The survey release comes on opening day of the new 146-unit rental building FUSION in Surrey, which is Surrey’s first purpose-built rental building in more than 30 years. Janai York, sales and marketing director at developer WestStone Group, said that new purpose-built rental housing is needed now more than ever.

York told Glacier Media, “Particularly in emerging areas, like in Surrey’s technology district where FUSION is, there’s a lot of companies moving in and offering jobs, and a lot of people moving in from outside the area. They might not want to buy right away and you have to supply a rental option. At FUSION we have people who are moving from the Prairies and from back east who are RCMP officers and nurses taking local jobs.”

York said that new rental projects depend on being financially viable through the life of the building. “As a developer, we always look at the viability of a project to assess what type of project it will be, whether mixed-use, rental or market condos. When we start looking at the long-term impact of not being able to keep up with the costs of maintenance, suddenly the viability of doing rentals changes, because it’s much riskier. So then you have to decide perhaps not to do that, perhaps do a for-sale-to-market building instead. We have to take all of those things into consideration.”

The UDI survey also asked its members what other factors are inhibiting the building of new rental apartments. Responses included rapidly rising construction costs, increasing interest rates and taxes, and lengthy municipal approval processes.

Dr. Andrey Pavlov, finance professor at Simon Fraser University’s Beedie School of Business, said, “We need to remove the countless government barriers to increasing supply. Rent controls feel good for the moment, but hurt everyone, including renters, in the long-term.”

Source: Joannah Connolly

Canada’s once-lofty housing market is achieving a best-case soft landing for policy makers trying to cool things down without triggering a collapse.

The latest string of data indicates the market is experiencing only a modest adjustment in prices in the face of higher interest rates and tougher regulations brought in to tackle a boom that saw values more than double in Toronto and Vancouver since 2009.

It’s a Goldilocks scenario that reduces risk in what had become the economy’s main vulnerability -- an impressive achievement only a year after the country suffered a crisis of investor confidence because of debt and housing worries.

“It’s a pretty good spot to be in, avoiding boom but avoiding bust as well,” Eric Lascelles, chief economist at Royal Bank of Canada Global Asset Management in Toronto, said in a phone interview Thursday. “The rule changes that have been made have been effective in cooling these markets down.”

Canada’s housing boom appears to have come to an end in the middle of last year, following an eight-year ascent that saw national home prices rise by nearly 80 percent. Since then, they’ve been little changed even as market transactions have fallen sharply.

To be sure, risks remain. Young home buyers have never faced anything other than historically low mortgage rates and many will have to refinance over the next few years, while policy makers remain concerned about a cluster of highly indebted borrowers.

Growing signs of a sustainable housing market allow the Bank of Canada to keep moving ahead with modest interest-rate increases in an economy that’s otherwise at full capacity. Government officials can also hold back on new interventions that could spook households.

“It looks like we’re settling into this environment in Canada where price growth is going to be flat in real terms,” something that hasn’t happened outside of a recession since the 1990s, Bank of Montreal Senior Economist Robert Kavcic said by phone from Toronto.

Prices and sales showed modest gains or losses for October in reports Thursday from the Canadian Real Estate Association and from the Teranet land registry. That’s a switch from most of the last year where they swung in response to tougher mortgage qualification rules and the first interest-rate hiking cycle from the central bank in almost a decade.

‘Medicine Is Working’

Home sales held close to their 10-year average after falling for a second month in October, the realtor group said. Benchmark prices rose 2.3 per cent from a year earlier, and gains in Vancouver and Toronto were close to the national average.

Canada would stand out if it comes through its housing boom without a crash like those seen in the U.S., the U.K. or Spain. “Overall, yes the medicine is working,” Benjamin Tal, deputy chief economist at the Canadian Imperial Bank of Commerce, said in a phone interview.

“We are reaching some sort of landing, how soft it will be I don’t know, but we aren’t in a free-fall by any stretch of the imagination,” Tal said.

Even with the latest figures showing stability, it could take years to unwind the imbalances that have built up. The rise of the million-dollar home in some of Canada’s biggest cities has also created affordability challenges for buyers as builders struggle to offer new supply.

“Its absolutely fair to say the Canadian housing market is off the boil,” Lascelles said, adding a note of caution: “There is no pre-ordained conclusion here.”

Source: Greg Quinn; bloomberg News--With assistance from Erik Hertzberg.

Three emerging factors are set to disrupt and transform the real estate market in the near future, according to a new report by Montréal-based real estate website Shupilov.com.

Remote working and self-employment, disruptive technology such as autonomous vehicles and virtual reality, and lack of affordable housing are the three key trends that will affect the real estate market next year and into the future, said the report.

Across Canada, builders are seeing more demand for loft spaces that easily convert from home to work space, according to a report by Shupilov.com

Home as office, business or service

The blurring of live-work boundaries and changing social needs are affecting the kinds of homes buyers want, especially as more and more people work remotely or are self-employed, according to the report.. This creates a need for work spaces in the home, whether that’s home office space or a live-work unit. Added to that need is an increased desire for homes – or spaces within homes – that can be rented out as short-term rentals on websites such as Airbnb.

“Builders are seeing more demand from the self-employed – who prioritize loft-like spaces that easily convert into home offices and workspaces – and Airbnb hosts – who prioritize ‘socially-focused’ architectural design such as open-concept living spaces and common areas, as well as smart security technology,” wrote the report authors. “‘Experience-based’ architecture is what provides leverage to real-estate-as-service companies such as WeWork and Airbnb, where design is carefully curated in response to particular demographic lifestyles.” (Check out the ‘Smart Thinking’ article on page 24 of the latest edition of West Coast Condo for more on home technology.)

Remote working also means that there is less of a need to live close to downtown cores, and buyers may choose to gain more space in homes further away from urban hubs.

Disruptive technologies

The trend of moving further out of city centres could be reinforced by another of the disruptive technologies affecting real estate – the emergence of autonomous vehicles.

The report said, “As self-driven cars reduce ease commuting time and the burden of gridlock, will suburban living become more popular among the younger generation? Better connectivity in urban transportation may, in coming years, shift buyer desirability in favour of larger spaces, further away from the city core.” (More on the potential impact of autonomous vehicles on real estate here.)

Another major technology affecting real estate is virtual reality. Already being used to allow buyers to remotely view properties for sale or as-yet-unbuilt new homes, the use of VR could be expanded in future to let owners redesign their homes to suit their needs, said Shupilov.com. “In the future, the same technology could conceivably be used as an interactive way of allowing consumers to participate in the design of their living spaces, providing highly tailored end products at a residential or retail level.” The report also predicted that 3D printing could play a role in this home design and product tailoring, with the ability to create one-off products in a cost-effective way.

The affordability factor

The final major factor that will hugely affect real estate in 2019 and beyond is already here, and that’s affordability, or lack thereof. With the cost of housing in major Canadian urban centres having soared in recent years, and even with some market correction unlikely to return to its former values, the market is forced to respond and adapt.

This largely looks like a continued dominance of the condo market, with many buyers priced out of the single-family and even townhome market, according to the report. But even within the condo market, which is itself much more expensive than a few years ago, innovative solutions will be needed to make or keep homes affordable.

“The condominium market speaks to the affordability crunch, and has topped sales statistics in most Canadian cities this year. In 2019, condominium developers will need provide unique products in response to competition, and find innovative technologies that will help reduce cost at the construction and administrative level.”

Source: Joannah Connolly: Glacier Media Real Estate

It was the year the Beatles released Hey Jude, Pierre Trudeau was elected prime minister, and Rev. Martin Luther King was assassinated.

It was 1968 — the year that Metro Vancouver got its first condominium complex.

A great deal has changed in the ensuing 50 years. Now roughly one out of three residents of the region live in a condominium. Metro Vancouver has about 600,000 condo units, with the city of Vancouver having 130,000 of those. The province in total has about 900,000 units, according to the Condominium Homeowners Assoc. of B.C.

Metro Vancouver could be the poster city illustrating the results of the legal changes half a century ago that made condominiums possible. A strong case has been made that the “condofication” of Metro Vancouver has done more than anything else to define this West Coast city. It’s come with some benefits, including for many owners, but the deeper structural effects have not all been pretty.

The condo metamorphosis has led to increased density, higher land prices, more vacant dwellings, more vertical neighbourhoods, fewer purpose-build rental units, more investor owners (domestic and offshore) and discord between different kinds of condo owners and users.

The condo boom has arguably provided many people who could not afford a detached property the chance to own a less-costly dwelling through a strata title, without directly owning a private chunk of land.

And it’s clear the property laws that made condominiums possible increased the density and shape of the city and its neighbourhoods — bringing far more tower clusters and making land in general more expensive. The vast majority of Metro’s more than 1,300 highrise residential towers are condominium buildings.

But the expansion of condominiums has also, many say, discouraged the construction of purpose-built rental buildings. Developers generally prefer constructing condo complexes, since they can sell the units right away, or in advance, and realize their profits quickly. They don’t have to patiently wait years to collect their profits in rents.

One of the most intriguing pieces ever written about the condofication of Metro Vancouver, and other parts of North America, is by Douglas Harris, a specialist in legal history and property law at the University of B.C. His article is titled Condominium and the City: The Rise of Property in Vancouver.

One of the many points Harris makes is that the laws that made condominiums possible in Metro Vancouver contributed to the high-end gentrification of the city, and to some extent the squeezing out of low-income residents.

The condo phenomenon ignited in the late 1980s after the Social Credit government shocked many by selling the Expo 86 lands to one of Asia’s most wealthy real-estate developers. (Photo: Cabinet minister Grace McCarthy, who spearheaded the sale.) COLIN PRICE /PNG

“Much of the explanation for the higher prices in the last two decades lies in the influx of overseas capital and migrants,” Harris writes. “Enormous economic expansion in East Asia coupled with moments of political uncertainty and instability brought people and capital to North America and its west coast in particular.”

The condo phenomenon especially ignited in the late 1980s, Harris says, after the Social Credit government shocked many British Columbians by selling Vancouver’s former Expo 86 lands to one of Asia’s most wealthy businessmen, real-estate developer Li Ka-shing of Hong Kong.

People from Hong Kong, Taiwan and China became particularly active in the skyrocketing condominium market in Metro Vancouver. “Since the 1990s, Vancouver has had the highest residential housing prices in the country,” with condominium law providing the mechanism that “expanded the market for land, embedded the city in international flows of people and capital, and, by doing so, contributed to the rising prices.”

While the mushrooming of condominium units has made it possible for many residents to buy into housing options other than single-family dwellings, it’s also led to conflicts between those who own them, live in them, rent them and leave them empty.

It’s hard to obtain hard province-wide figures on the number of investor-owned apartments. But one reliable report to Vancouver City council, based on B.C. Assessment data, found 35 per cent of condo units in the city were owned by investors.

Source: Douglas Todd: Vancouver Sun

Real estate brokerage Royal LePage said house prices in Canada is forecasted to climb in the next three months as the USMCA trade deal boosts confidence in the job market and consumers consider larger purchases.

Royal LePage expects the aggregate price of a home in the country to rise by 1.5 per cent in the fourth quarter from the previous year. The average price of a home in Canada rose 2.2 per cent in the third quarter to $625.499.

"Positive economic fundamentals, supported by a new agreement on trade, should bolster consumer confidence across Canada and stoke demand in the nation's real estate market," said Phil Soper, president and CEO of Royal LePage in a statement on Tuesday.

"More confident that their jobs are secure, the new USMCA agreement has removed a widespread veil of uncertainty that was acting as a drag on large purchase decisions."

After months of intense negotiations, the federal government reached an agreement with the U.S. and Mexico on a new trilateral trade pact earlier this month that is expected to be ratified by the end of this year.

Even though the trade deal paves the way for the Bank of Canada to raise interest rates, Soper said the agreement is a positive development for housing industries on both sides of the border.

“Job growth is strong, Canada is attracting more of the best and brightest from around the world and the large millennial cohort is putting increasing pressure on our limited new housing stock,” Soper said. “It is imperative that all levels of government address looming supply shortages, particularly in affordable housing."

The jump in house prices across Canada in the last three months were driven by gains in the greater Montreal and Vancouver areas, while Toronto reported year-over-year declines.

Source: Rajeshni Naidu-Ghelani: BNN Bloomberg News

More supply and less demand seen across Metro Vancouver housing market

The supply of homes for sale continued to increase across the Metro Vancouver* housing market in September while home buyer demand remained below typical levels for this time of year.

The Real Estate Board of Greater Vancouver (REBGV) reports that residential property sales in the region totalled 1,595 in September 2018, a 43.5 per cent decrease from the 2,821 sales recorded in September 2017, and a 17.3 per cent decrease compared to August 2018 when 1,929 homes sold.

Last month’s sales were 36.1 per cent below the 10-year September sales average.

“Fewer home sales are allowing listings to accumulate and prices to ease across the Metro Vancouver housing market,” Ashley Smith, REBGV president-elect said. “There’s more selection for home buyers to choose from today. Since spring, home listing totals have risen to levels we haven’t seen in our market in four years.”

There were 5,279 detached, attached and apartment properties newly listed for sale on the Multiple Listing Service® (MLS®) in Metro Vancouver in September 2018. This represents a 1.8 per cent decrease compared to the 5,375 homes listed in September 2017 and a 36 per cent increase compared to August 2018 when 3,881 homes were listed.

The total number of properties currently listed for sale on the MLS® system in Metro Vancouver is 13,084, a 38.2 per cent increase compared to September 2017 (9,466) and a 10.7 per cent increase compared to August 2018 (11,824).

For all property types, the sales-to-active listings ratio for September 2018 is 12.2 per cent. By property type, the ratio is 7.8 per cent for detached homes, 14 per cent for townhomes, and 17.6 per cent for condominiums.

Generally, analysts say that downward pressure on home prices occurs when the ratio dips below the 12 per cent mark for a sustained period, while home prices often experience upward pressure when it surpasses 20 per cent over several months.

“Metro Vancouver’s housing market has changed pace compared to the last few years. Our townhome and apartment markets are sitting in balanced market territory and our detached home market remains in a clear buyers’ market,” Smith said. “It’s important for both home buyers and sellers to work with their Realtor to understand what these trends means to them.”

The MLS® Home Price Index composite benchmark price for all residential properties in Metro Vancouver is currently $1,070,600. This represents a 2.2 per cent increase over September 2017 and a 3.1 per cent decrease over the last three months.

Sales of detached properties in September 2018 reached 508, a 40.4 per cent decrease from the 852 detached sales recorded in September 2017. The benchmark price for detached properties is $1,540,900. This represents a 4.5 per cent decrease from September 2017 and a 3.4 per cent decrease over the last three months.

Sales of apartment properties reached 812 in September 2018, a 44 per cent decrease compared to the 1,451 sales in September 2017. The benchmark price of an apartment property is $687,300. This represents a 7.4 per cent increase from September 2017 and a 3.1 per cent decrease over the last three months.

Attached property sales in September 2018 totalled 275, a 46.9 per cent decrease compared to the 518 sales in September 2017. The benchmark price of an attached unit is $837,600. This represents a 6.4 per cent increase from September 2017 and a two per cent decrease over the last three months.

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As most of us know, the real estate market in Canada has changed over the last few years with the arrival of more buyers and investors from outside of Canada.

Some of these buyers may split their time between living in Canada and another country or have family living in both Canada and another country, which can result in them being deemed as a non-resident for tax purposes. This status makes them subject to different taxation rules than residents.

If you’re a resident of Canada, you have to pay tax in Canada on your worldwide income — meaning any income earned either inside or outside Canada. Non-residents of Canada, however, are required to pay tax in Canada only on income that is earned from a Canadian source. Employment income, income earned from a business carried out in Canada and capital gains earned on Canadian real estate must be reported on a Canadian tax return and are subject to the payment of tax to the Canadian government.

This non-resident status becomes relevant to the purchaser of a resale home when the seller of the property is a non-resident who fails to pay the capital gains tax owed on sale of their Canadian property. When the Canadian government is unable to collect tax on the capital gains from a non-resident — perhaps because they have left the country — there is a special part of the legislation that allows the government to look to the purchaser to pay the capital gains tax that is owed.

While most buyers are likely not even aware of this rule, they need to learn about it because of the potentially significant financial impact it could make on their purchase.

The impact of this is only starting to become known as more non-residents of Canada start to sell properties they have purchased in Canada.

So how can a purchaser protect themselves and find out if the seller’s permanent residence is not in Canada? One red flag would be if on the agreement of purchase and sale, the contact address of the seller is outside of Canada or if there is any other indication on other documentation or even in conversation that this could be the case.

But the best advice is to ensure that you work with a qualified real estate lawyer when it comes time to do the paperwork on the purchase of your home.

The lawyer should ensure that the seller provides a declaration made under oath confirming they are not a non-resident. Or if the seller is a non-resident, your lawyer needs to obtain a clearance certificate from the seller, which clearly indicates that the Canada Revenue Agency and the non-resident have made appropriate arrangements to pay the tax on the capital gains made on the sale of the property.

Canada Revenue Agency puts the onus on the purchaser to take prudent measures to confirm the seller’s residence status. You and your lawyer should investigate any hint or question of residency prior to closing a real estate transaction. A partial holdback of payment by your lawyer on closing is one way to protect yourself if you have valid concerns.

Source: Sue Wastell;Postmedia Press

Canada’s luxury-home market has a split personality: East versus West.

Sales for $1 million or more in the Toronto region bounced back after a slowdown earlier this year, climbing 19 per cent in July and August from the same period in 2017, Sotheby’s International Realty Canada said Wednesday. The increase was even greater -- 34 per cent -- for a subset of transactions priced above $4 million.

Deals went the opposite way in Vancouver, a pricier market that’s still adjusting to new regulations, including a provincial foreign buyers tax and speculation tax, on top of the rising interest rates that affect the whole country. Sales for $1 million or more dropped 24 per cent, while in the $4 million-plus range, the decline was 33 per cent.

Toronto’s top-tier market will “run at full throttle” this fall after holding its own in the face of rapid policy changes, higher borrowing costs and stricter lending guidelines, according to Brad Henderson, the brokerage’s president and chief executive officer. By contrast, buyers will hold the upper hand in Vancouver, with high-end sales and prices softening.

Vancouver’s slowdown is “a reflection of the concern that people have about the current and continued government intervention in the marketplace,” Henderson said by phone. “That’s probably the primary difference” between the cities.

Luxury sales in both cities plunged in the first half of the year largely in response to the federal government’s tighter mortgage rules, put in place on Jan. 1 to tame speculative purchases across Canada. Condos in Vancouver, however, were bucking the trend, with sales rising as buyers shifted away from the city’s costlier detached homes.

That growth was short-lived. British Columbia’s taxes, combined with buyer speculation that additional restrictions might come into play, helped drive Vancouver’s $1 million-plus condo sales down 21 per cent in July and August from a year earlier, Sotheby’s said. In the Toronto region, meanwhile, luxury-condo purchases had their strongest gains of the year, jumping 28 per cent.

In Montreal, where July and August’s $1 million-plus sales jumped 19 per cent, sustained demand will continue to fuel growth this fall, according to Sotheby’s. Luxury sales in Calgary climbed 9 per cent, but the city’s rising unemployment rate is a headwind, the brokerage said.

Source: Natalie Wong: Bloomberg News

TORONTO - The Toronto Real Estate Board says it is still reviewing a handful of issues associated with releasing Greater Toronto Area sales data, but it will make a password-protected feed with the numbers available to realtors by Tuesday.

In an email to members obtained by The Canadian Press, the board says the feed can only be used to engage with residential real estate brokerage services and any other uses are not permitted under TREB agreements.

The email says the board is reviewing how to handle historical sold price information where consents were given before websites were in existence and looking at how long listing photos should remain active on a broker's website after the sale of a property has been completed.

The board encountered the issues following the Supreme Court of Canada's August decision not to hear an appeal from TREB that was trying to prevent realtors from being able to post the information on password-protected sites because of privacy and copyright concerns.

When the Supreme Court decided not to hear the case after TREB fought it at three judicial bodies over seven years, it forced the board to allow the data's publication.

However, companies who made the information public prior to the board permitting it say they have received cease-and-desist letters from TREB asking for the source of the data and threatening to take away access to such numbers, revoke their TREB membership or bring legal action.

Source: The Canadian Press