BCREA
Other

Minister of Finance Mike de Jong has made it clear that there’s no room in the provincial budget for new spending. In fact, that’s been the message of his office for several years, and BCREA respects this fiscally-prudent approach.

But fiscal prudence isn’t just about saying no; sometimes, a strategic yes is in order.

BCREA consistently and regularly recommends that the provincial government minimize the negative impact of the Property Transfer Tax (PTT). The PTT places an unfair burden on homebuyers, and is by far the highest provincial property transfer tax in the country. While BCREA understands the government’s objective to balance the budget, adjusting the PTT could stimulate additional activity in the real estate market, encourage spending related to property transactions and would certainly demonstrate an understanding of the important role of real estate and property owners in the provincial economy.

Since it was introduced in 1987 as a luxury tax, the PTT has always been applied in the following way: 1% on the first $200,000 of the fair market value of a property, and 2% on the remainder. This static structure is entirely at odds with BC’s dynamic real estate market.

As an initial measure to improve the fairness of the PTT today and in the future, BCREA strongly recommends the provincial government index the 1% threshold of $200,000, and then make adjustments annually.

The impact on provincial revenue would be minor, and the goodwill from homebuyers and real estate sector stakeholders significant. This is a strategic yes.

More information about the budget consultation: www.leg.bc.ca/cmt/finance/budget-consultations.asp.

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Greater Vancouver sales increase 17.7 per cent year over year and single-family home benchmark price nears $1 million in hottest September ever

Joannah Connolly
The Vancouver Sun

Greater Vancouver’s real estate market showed no signs of cooling in its hottest September yet, as sales increased 17.7 per cent year over year, according to Real Estate Board of Vancouver figures released October 2.

Benchmark sales prices hit record highs at $633,500 for all housing types, and just shy of $1 million for single-family homes across Greater Vancouver.

Ray Harris, REBGV president, said, “September was an active period for our housing market when we compare it against typical activity for the month.�

Sales and Listings

Since July 2013, Greater Vancouver MLS home sales have closely tracked the 10-year average. But in September 2014 the region’s 2,922 sales beat the average by 16.1 per cent.

Of the properties for sale, 1,270 were detached houses, 464 were attached (townhouses or duplexes) and 1,188 were apartments.

 

New listings climbed in September as the fall season picked up, after having dropped for four months in a row – they rose 33.5 per cent to 5,259 compared with 3,940 in August. They currently stand at 0.4 per cent below the 10-year average for September new listings.

The sales-to-active listings ratio moved closer to the 20 per cent mark that would put Greater Vancouver into a seller’s market, rising one percentage point compared with August to 19.7 per cent.

Benchmark Price (MLS® Home Price Index)

The composite benchmark price for the REBGV region continue its determined upward trend, now standing at $633,500, up 17.7 per cent over five years, 5.3 per cent over one year and 0.3 per cent compared with August 2014.

The MLS benchmark price is a calculation of the value of a typical home of its type for the neighbourhood. Because it’s tied to housing type and area, it varies widely for the Greater Vancouver region. A good idea of home prices in a specific location is contained in the detailed MLS Home Price Index that the REBGV publishes.

September composite benchmark prices by housing type are as follows:

 

© 2014 Real Estate Weekly

Residents worried about lack of consultation by city on temporary housing

Mike Howell
Van. Courier

Parents at a downtown housing co-op are questioning the city’s decision to move up to 40 homeless people from the Oppenheimer Park tent city into a former restaurant and dozens more into a neighbourhood hotel set to close at the end of the month.

Five parents from Pacific Heights Housing Co-operative sent a letter Wednesday to Mayor Gregor Robertson and council outlining concerns about the clientele moving into the shelter at the former Kettle of Fish restaurant at 900 Pacific St. and the 157-unit Quality Inn at 1335 Howe St. that will serve as temporary housing.

“While we are both sympathetic and empathetic to the issues at stake here, the idea of displacing so many people with so many issues into a largely residential and family neighbourhood without any consultation with the residents impacted seems absolutely ludicrous,” the parents wrote in their letter, which they shared with the Courier. “We are not NIMBY [not in my backyard], we realize these people deserve a home somewhere, but we worry about just how well planned this idea is.”

Court documents filed as part of the Vancouver Park Board’s application to get an injunction to dismantle the tent city at Oppenheimer reveal a camp population of people suffering from drug and mental health issues, or both.

Police have answered calls for fights, drug activity, concerns about known sex offenders, sex trade workers, a man threatening to cut his head off or kill people, gang members and what appears to be a stolen bike ring.

It’s those incidents that worry co-op parent Kirsten Holkestad, a part-time teacher who lives with her husband Ted and two young children in the complex across the intersection from the shelter. The hotel is a few blocks east of the shelter, which operates seven days per week from 8 p.m. to 10 a.m.

“The safety of our children is absolutely paramount and there is no way to guarantee that safety with an influx of people with a history of crime, drugs and violence from the Oppenheimer camp within a block of us,” Holkestad and the other parents said in their letter.

Neighbourhood consultation

Holkestad said by telephone that she nor any of the tenants in the 300-person co-op that she spoke to received notification from the city about the opening of the shelter or plans for the hotel. She pointed out co-op residents have received letters from the city regarding the closure of the Burrard Bridge for a marathon. She argued opening facilities for the homeless would constitute a more important reason to leaflet the neighbourhood.

“You have to put the homeless somewhere — they need to be housed,” Holkestad said. “But you need to do it with consultation with the neighbourhood and you need to have supports in place for [the homeless].”

An example, she said, of support services for homeless people not being in place was recently reported in a Courier story that revealed the Marguerite Ford Apartments social housing project adjacent to the former Olympic Village saw police answer 729 calls in the building’s first 16 months.

Business problems

Wim Vander Zalm, owner of the Art Knapp store on Hornby Street adjacent to the shelter, is equally concerned about his new neighbours. His concerns are related to loitering and the negative effect the shelter will have on customers wanting to frequent his business, which has been there for more than 30 years.

Still reeling from the city’s decision several years ago to turn Hornby Street into a one-way to accommodate a separated bike lane, Vander Zalm said the shelter “may be the nail in the coffin” of his Vancouver location of stores.

“It will be a huge impact, we’re certain of it,” said Vander Zalm, whose business also had to contend with public disorder issues when the former Kettle of Fish restaurant was used as a youth drop-in centre. “I’m really not even prepared to fight anymore because I see what fighting did last time which was absolutely nothing.”

He said his sales are down and noted his other stores in the Lower Mainland have had financial growth.

Vander Zalm said the city should use industrial land to set up shelters and temporary housing. Putting people suffering from mental illness and addictions in residential neighbourhoods puts strain on residents, he said.

He pointed out the same neighbourhood will soon be home to the much celebrated Vancouver House residential tower designed by Danish architect Bjarke Ingels.

“And the city’s going to say, ‘Oh, by the way, there’s going to be homeless shelters next to it.’ The logic and the intelligence is dramatically lacking. If the city doesn’t have any foresight to see that this doesn’t make any sense whatsoever in developing a grand city, then that is a sad statement of our bureaucrats and politicians in Vancouver.”

Shelters and street crime

According to the city’s communications branch, close to 1,400 letters explaining the opening of the shelter were sent to area residents and at least 10 businesses were visited by city staff. Security guards at the shelter continue to hand out information sheets on the shelter to pedestrians.

Vision Vancouver Coun. Geoff Meggs said he will check why co-op residents weren’t notified. He said he understands why residents and business owners are concerned about the shelter and the temporary housing at the hotel. The city, he added, will provide information or meetings for people who want more details about the two facilities.

Meggs noted the majority of business owners and staff he spoke to during his visit to the neighbourhood did not complain about the facilities or identify any problems related to the previous youth drop-in centre set up in the former Kettle of Fish restaurant.

“One person was very frustrated by it,” Meggs said. “There are some anxieties about it, absolutely.”

Added Meggs: “But we know from experience that winter shelters and transition housing are crucial to reducing street crime and disorder. It’s far better to have people housed and with supervision and support than it is to have them on the street.”

Injunction hearing Monday

A city notice circulated in the neighbourhood said over the past six years approximately 500 people who were previously homeless moved from shelters to temporary housing. The city will manage the shelter on Pacific for two months before turning it over to a non-profit agency for the winter months. It will close no later than April 30, 2015.

Though the shelter opened Sept. 22 with 40 spaces, only 23 people registered and 16 stayed Tuesday night. The Quality Inn is scheduled to open as temporary housing in mid-November. The Vancouver Park Board goes to court Oct. 6 to seek its injunction to dismantle the three-month old tent city.

© Vancouver Courier

Proposal to levy a tax on non-resident owners of luxury properties in New York City is a fascinating template for similar markets, such as Vancouver. But is it really a good idea?

Joannah Connolly
Other

If you think the idea of taxing owners of vacant homes is a hot topic here in Vancouver, just take a look at New York City, where the real estate industry can currently think of nothing else. 

Like our own, NYC’s high-end real estate market is characterized by overseas (or out-of-town) buyers snapping up luxury properties as investments or pieds-a-terre. And, like Vancouver, this has long been causing anguish among residents priced out of both the buying and renting markets.

Manhattan in particular, especially Midtown around Central Park, is seeing the construction of multiple massive luxury condominium towers, such as the 90-storey One57, much of which are being pre-sold to uber-rich out-of-towners. The City’s Independent Budget Office says that in some of these developments, the share of non-resident owners “could approach 50 per cent.” Sound familiar?

So this past week – again, just like in Vancouver – a new tax is being considered by New York mayor Bill de Blasio, aiming to squeeze more cash out of those overseas buyers and placate frustrated New Yorkers.

The idea, pitched by the city’s Fiscal Policy Institute (FPI), is to apply an additional annual property tax on owners of homes worth more than $5 million, but with an exemption for primary residences.

The “pied-a-terre tax,” as it is becoming known, would start at 0.5 per cent of the home’s value for homes over US$5 million, increasing in increments to a maximum of four per cent for homes over $25 million.

According to the Wall Street Journal, a six-bedroom penthouse currently being sold for $95 million at 432 Park Avenue, a skyscraper being built near 57th Street, would face a surtax of $3.1 million a year on top of $260,000 in regular annual property taxes. 

The FPI says: “With the tax starting at 0.5 per cent for the first $1 million in value over $5 million, and rising such that the four per cent rate applies for the value over $25 million, an estimated $665 million could be generated [annually].”

An attractive proposition for mayor, no doubt, and for the city’s residents – and voters – who would likely support it (and a mayor who introduced it) as they would reap the public benefits of additional city income without having to contribute a cent.

But the local real estate and development industry is in uproar over the idea. According to US real estate website The Real Deal, Steven Spinola, president of the Real Estate Board of New York, said that even proposing such a tax could have an immediate impact on non-resident buyer sentiment and ultimately damage the real estate market.

“The problem is that when you propose this kind of economic hit on any segment of the market, you’re putting a significant chill into the market,” said Spinola. “What’s going to happen while there’s this uncertainty about whether or not this tax is going to be adopted?”

It certainly seems likely that non-resident buyers would seek lower prices for luxury homes to offset the additional tax burden – potentially leading to a softening of prices or even, as some in the industry are warning – a high-end market collapse.

The WSJ reports that Gary Barnett, president of Extell Development Co., the developer of two other towers on West 57th Street, said the taxes could put an end to such buildings.

“There is no way in the world that any luxury buildings like these are going to get built again,” he told the WSJ. “There is the problem of killing the golden goose.” And does the mayor of New York really want to destroy City Hall’s relationship with developers and the wider real estate industry?

Not only that, the problem of additional bureaucracy, particularly in terms of policing what exactly qualifies as primary and non-primary residents, is another fly in the ointment (just as it is with Vancouver mayoral candidate Meena Wong’s vacant home tax proposal). For example: would the New York tax apply to snowbirds who live in their Manhattan property 50 per cent of the time? What about someone who lives there 40 per cent of the time and divides the rest of their life between multiple other properties, therefore making the New York base a kind of primary residence? Should there be degrees of taxation for proportions of time being spent at the property? How will city officials check whether someone who claims to be a resident of their property is really living there? How many ways of defrauding the city to dodge the tax will be adopted?

All these questions and doubts just prove that any new property tax, whether in New York City or here in Vancouver, needs to be fully thought through to assess its long-term implications for the real estate market and for the city and its people.

Let’s hope that Bill de Basio and Vancouver’s mayoral candidates all take that lesson to heart.

© 2014 Real Estate Weekly

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