Jen St. Denis
Van. Courier

Foreign buyers are driving price gains in Canada’s expensive home markets, a trend that picked up speed at the beginning of 2015 and is expected to continue to increase in the future, according to a Royal LePage survey released today.

The survey of 250 Royal LePage real estate advisors showed that 24 per cent of those surveyed believed that 25 per cent or more of luxury properties in their area were bought by foreign buyers. Royal LePage defines foreign buyers as buyers who live outside of Canada all or most of the time. In Vancouver, 83 per cent of agents surveyed said they had seen an increase of foreign buyers in 2015. Half of all the agents surveyed said China was main source of international interest in Canadian real estate.

Prices in Point Grey and West Vancouver, two high-end markets in Vancouver, have gone up 135 per cent over 10 years; the next highest increase was Toronto’s Lawrence West neighbourhood, up 76 per cent over 10 years.

“The luxury market has been driven purely on the demand from investors and the appeal is the perfect storm of geographical appeal,” Jason Soprovich, a real estate agent with Royal LePage Sussex who specializes in the West Vancouver market. “Low interest rates, very low active listing rates and pent up demand.”

Soprovich attributed the Vancouver percentage increase to demand from foreign buyers. He estimated that out of 100 homes in West Vancouver, buyers from Mainland China would represent between 65 and 70 per cent of sales, while in the Vancouver westside neighbourhoods of Point Grey and Shaughnessy, those buyers represent well over 50 per cent of home sales.

“[In West Vancouver] we’ve seen properties double in value over the past eight, nine months,” he said. “In the British Properties, some properties we saw listed eight months ago at $2.4 million are now selling at $4.5 million.”

In 2014, Canada effectively ended its investor immigrant program, but Soprovich said that change had not dampened demand from wealthy Mainland Chinese buyers. Many of those buyers have a 10-year, multiple-entry visitor visa to Canada, he said, and are attracted to Vancouver real estate for the investment potential, as a place to send their children to school, and an eventual retirement destination.

Earlier this week, B.C. Finance Minister Mike de Jong said he was “biased” in his belief that supply constraints, not foreign buyers, are the main factor behind Metro Vancouver’s extreme home price increases of the past 16 months; between April 2015 and April 2016 benchmark residential home prices across Greater Vancouver rose 30 per cent. De Jong said his government is reluctant to impose any extra tax targeting expensive properties or home owners who don’t make their income in Canada without more information on how that would affect the real estate market. 

He also warned that an extra tax targeting real estate could deter overall foreign investment in British Columbia.

“It’s naive to think there hasn’t been a lot of investors moving into this part of the country – there is and it has had a major affect,” Soprovich said, adding he thinks Vancouver should embrace real estate activity and the region’s attractions to wealthy people from all over the world as a main economic driver.

Soprovich said levying some sort of extra property tax could deter some real estate activity, but he believes it’s important in the fact of intense interest from from foreign buyers.

Vancouver-based academics have proposed several ways taxes could be designed to target either expensive properties or property owners who do not make income in Canada.

“If this large number of people are influxing into the city are coming to city and using

© 2016 Vancouver

Juwai
Other

This makes Chinese one of the most lucrative targets in the global economy – a fact recognised by governments across the world that are loosening visa policies, introducing extended visas, simplifying application processes, and cutting fees in order to compete for this highly lucrative market.

Established markets up their game

Travel and hotspots long favoured by Chinese tourists, such as the United States (US), Japan, Australia, the UK, Canada, South Korea, Singapore, and Europe, have all recently made sweeping changes to their visa policies to make them even more attractive and accessible.

While policies differ by location, the underlying changes can be broken down as follows:

• Longer visa validities: Visas with ten-year validity – like those offered by the US², Singapore³, Canada⁴, South Korea⁵, and Australia⁶ – have become much more common. Typically with a 3-6 month maximum stay per visit, these visas reduce the hassle of repeated applications for Chinese travellers and offer long-term access.  
• Simplified application processes: Online application processes and the removal of requirements for reams of supporting paperwork have made applying for visas much easier. Additionally, embassies from countries such as the UK⁷, Finland⁸ and Denmark⁹ are increasingly upping the ante by going to where the applicants are and opening up more visa centres across China to make ease and speed up visa applications for Chinese.  
• Reduced fees: Governments have made it cheaper than ever before to get a visa. The UK, for example, has cut the cost of a two-year tourist visa from £324 to £85 to entice more tourists, and other countries have also reduced their fees to cut the cost of application.  

More importantly, these policy changes appear to be paying off. A prime example is Japan, whose government relaxed requirements for three-year multiple-entry visas and started offering five-year multiple-entry visas for high-income groups during early 2015¹⁰ – China arrivals in Japan doubled to 5 million in 2015, compared to 2.1 million in 2014.

Broader horizons see Chinese tourists growing more adventurous

However, the growing populace of Chinese tourists is an increasingly varied bunch with a widening range of locations filling up their bucket lists.

As such, even countries not usually considered as standard tourist hotspots, such as Iran¹² and Israel¹³, are also making their plays to catch a share of China’s outbound tourism market.

Africa is also a case in point. Currently the fastest-growing port of arrival for Chinese tourists, Africa is seeing 80.9% annual growth in 2014, totalling an estimated 10.2 million trips.¹⁴ In fact, African nations, such as South Africa¹⁵, Egypt¹⁶, and Zimbabwe¹⁷, have all recently been falling over themselves to follow the lead of Mauritius’¹⁸ to offer visa-free entry.

Asia – the most popular destination for outbound Chinese travellers, who numbered an estimated 98 million trips to the region in 2015¹⁹ – just got even more accessible too. South Korea⁵, Malaysia²⁰, New Zealand²¹, and Nepal²² have all announced new visa policies to boost their tourist industries.

In the case of South Korea, this market is highly significant as six million tourists from China spent $22 billion last year, accounting for 1.6% of its GDP in 2015.⁵

South America is making a play for China too. The 16,000-km trip from China just got a little easier to handle too – following Mexico, Peru, and Costa Rica who introduced similar visa policies in 2014, Ecuador²³, Chile²⁴, and Colombia²⁵ have all introduced visa-free entry policies for Chinese tourists as well.

Eyes on the prize: tourist spending and property investment

Make no mistake, these policies are not just with tourism spending in mind. Investment from China’s increasingly outward-looking business sectors – which grew 51% y-o-y to 115 deals in Q1 2016 to be worth a total of $82.6 billion²⁶ – and property investors figure prominently in the calculus behind looser visa policies.

To an extent, countries around the world are taking their cue from Spain, Portugal, and other ‘Golden Visa‘ countries who went further than offering visa-free entries by loosening their visa policies in 2013 to offer residency in exchange for property and business investments.

The results have been highly lucrative for agents in Spain and Portugal:

• Portugal: 3,165 golden visas had been issued up to March 2016, with Chinese nationals accounting for about 80% – bringing in €1.92 billion of investment, of which €1.73 billion has been in the form of property investment.²⁷  
• Spain: Chinese investors made 363 transactions worth a total of €268.4 million euros in 2014 and 2015.²⁸

Rapid impact of visa policy changes

With such wide-ranging visa changes and increasing openness to business from China, governments are laying the foundations for what looks like continued growth in the coming years.

Recent data from the US showed a 68% y-o-y increase in visas issued to Chinese tourists in Dec 2015 and January 2016 following the introduction of a 10-year visa shows that markets are already picking up. This is on top of the 68% surge that happened last year in Dec 2014 and January 2015.

And looking across a wider range of countries, a clear pattern emerges – easier visa policies coincide with an increase in visitors. South Africa and Egypt have seen visitor numbers double at the start of 2016, and hotspots such as the UK and Singapore have seen 20%+ annual growth in tourist arrivals from China following their visa overhauls.

Clearly, despite grand projections about the prospects and potential for outbound investment from China, such data compellingly shows that this market is growing and is already having a transformative effect on markets across the world.

Beyond that, what’s also clear from our survey of recent government policy changes is that countries are increasingly looking to compete with each other for a share of this lucrative market.

And if governments see the opportunity and are taking it seriously, then this clearly indicates that businesses – especially real estate – should too.

2016 © Juwai. All Rights Reserved

BCREA
Other

Consumer awareness took a step forward with the announcement of new requirements for real estate contracts.

Following on a promise made by Premier Clark in March, as of May 16, 2016 the government will require contracts prepared by real estate licensees to include clauses stating that the contract cannot be assigned without the written consent of the seller, and that any profit from an assignment goes to the initial seller. Clients can instruct licensees to omit or change the clauses.

“Real estate consumers now have a tool to help them decide whether they want their contracts to be assignable,” says BC Real Estate Association (BCREA) President Deanna Horn. “Like many other provisions in the contract, buyers and sellers have the option of keeping the new paragraph, changing it or striking it out completely—but at least the conversation is more likely to happen now.”

BCREA supports the new requirements. To help consumers and REALTORS® with the transition, the Association is adding the following paragraph to the residential and commercial Contracts of Purchase and Sale:

The Seller and the Buyer agree that this Contract: (a) must not be assigned without the written consent of the Seller; and (b) the Seller is entitled to any profit resulting from an assignment of the Contract by the Buyer or any subsequent assignee.

“Assignment” is the practice of someone assigning their rights in a contract to someone else before the transaction completes. In simple terms, someone can buy the right to step into the original buyer’s shoes to complete the contract. Assigning one’s right to a contract is a legitimate practice, allowed by common law and also by section 36 of the Law and Equity Act.

Also today, Minister of Finance Mike de Jong announced that, starting in June 2016, the provincial government will begin collecting citizenship data of real estate owners through the Property Transfer Tax form.

“BCREA is pleased that the government will collect this information, in which there is obviously a lot of public interest,” says Association CEO Robert Laing. “Strong policy is based on solid information, and we look forward to learning more about this aspect of the real estate market.”

New Provincial Requirements for Contract Assignments Announced

The provincial government announced today that beginning May 16, 2016, new rules relating to the assignment of real estate contracts will come into effect. All licensees providing trading services need to be aware of these new rules and understand how to comply with the requirements.

The new provincial rules are intended to help real estate consumers make informed decisions about contract assignments before accepting an offer on their property. They will apply in transactions where a licensee is acting for a seller and/or a prospective buyer.

As part of the new requirements, licensees preparing an offer must include the following terms, unless otherwise instructed by their client:

• this contract must not be assigned without the written consent of the seller; and
• the seller is entitled to any profit resulting from an assignment of the contract by the buyer or any subsequent assignee.

The new rules also include steps that licensees must take if they are involved in a potential real estate transaction where an offer does not include these terms. More information on these steps is available on the Council’s website.

The Real Estate Council of BC is undertaking a number of initiatives to ensure consumers are well informed about the changes, and that real estate licensees act in compliance with the new requirements:

• We will be providing educational tools to prepare managing brokers and licensees to begin implementing the new requirements on May 16.
• We are developing a comprehensive enforcement and compliance plan to ensure that effective monitoring of the new regulations is in place.
• We are preparing a consumer education campaign to give prospective buyers and sellers the information they need about the new assignment regulations, because informed consumers are protected consumers.

Look for further announcements from the Council about educational materials for licensees and consumers beginning next week.         

More Information

Further information about the changes announced today is available at:

• http://www.recbc.ca/licensee/contract-assignment-faq.html

Further Consumer Protection Measures Expected

The new rules announced today are intended to strengthen the requirement under the Real Estate Services Act that licensees act only in the best interests of their clients. The BC government took action to regulate contract assignments in March 2016, following reports in the media that some real estate licensees were not acting in their clients’ best interests in relation to assignments. The Council has also taken action, by initiating an Independent Advisory Group to develop wide-ranging recommendations on measures to strengthen the enforcement of conduct requirements for real estate licensees and increase consumer protection. We look forward to receiving the final recommendations from that group in early June.

BC government announces new contract assignment regulations

On May 10, the provincial government announced new rules regulating contract assignments.

The new rules will require real estate contracts to include two terms: one requiring seller’s consent to assign the contract, and one requiring that any profit from an assignment goes to the initial seller.

Clients can instruct REALTORS® to omit or change these clauses.

These regulations will apply to all offers starting May 16, 2016.

The buyer’s Realtor will also be required to inform the seller if one, or both, of these clauses are removed from their offer. The seller’s Realtor must also disclose if the proposed contract is assignable or not – including any conditions that would be applicable to the assignment.

This is done through the new “Notice to Seller Regarding Assignment Terms” created by The Real Estate Council. This notice must be presented at the same time as the contract to either the seller’s Realtor, or directly to the seller.

These regulations apply to both residential and commercial transactions, with the exception of development units as defined by section 1 of the Real Estate Development Marketing Act.

BCREA will update WEBForms® with both the new Notice to Seller Regarding Assignment Terms form and revised Contracts of Purchase and Sale on May 16. Updates to PDP courses and an applicable webinar will be coming shortly.

Copyright ©2016 BCREA

Other

Josh Wingrove
Other

Optimism for housing prices in Canada has reached a two-year high as consumer confidence continues its upward march.

The share of Canadians expecting home prices to increase in their neighborhoods over the next six months rose to 43.3 percent last week, the highest level since October 2014, polling for the Bloomberg Nanos Consumer Confidence Index shows. At the start of this year, just 30.6 percent believed home prices would increase.

Nationally, the broad consumer confidence score reached a 2016 high of 57.7, driven by record levels in British Columbia and a rebound in the energy-rich prairies, where optimism rose to a 2016 high of 48.9 despite the commodities price crunch and a wildfire near Alberta’s oil sands that has sapped production levels.

Despite the upward trend, the sub-indexes show uncertainty looming. While the expectations index — measuring optimism for real estate and the broader economy — rose to 57.0 from 55.0, the pocketbook index that measures personal finances slipped to 58.4 from 58.9.

“The latest economic data releases hint at upcoming issues for the economy and the labor force,” Bloomberg economist Robert Lawrie said. Manufacturing shipments, imports and exports have all declined as of late,“highlighting Canada’s dependency on global economic trends and the impact of the commodities glut,” he said.

Households continue to be impacted by job losses in manufacturing and gains in the service sector — a sign of Canada’s transition “away from basic materials and toward higher value-added enterprises,” Lawrie said.

Economic Outlook

Statistics Canada data last week showed a slender net loss of 2,100 positions in April, however the economy added almost 50,000 jobs in consumer-related sectors. Consumer spending also tempered a 0.1 percent contraction in gross domestic product in February.

According to the Nanos data, the share of those expecting the Canadian economy to gain strength in the next six months rose to 27.6 percent, the highest level since November.

The share of those who say their personal finances have improved over the past year rose to 14.8 percent from 14.5, while the share of those whose finances worsened declined to 28.9 from 29.3 — leaving the net difference between the two measures at its lowest level since January. The share of those who say their employment is either somewhat or not at all secure, however, rose to 14.5 percent from 13.4 percent a week earlier.

The data is based on a rolling four-week average of telephone polling totaling 1,000 respondents. It’s considered accurate within 3.1 percentage points, 19 times out of 20, with larger margins of error in regional data. The latest polling concluded on May 6.

Copyright © 2016 Key Media Pty Ltd

Matt Maurer
Other

An Ontario Superior Court Judge has expressed his hope that legislative changes will be made to stop unscrupulous tenants from “gaming the system”.

The facts of the case are straightforward and rather appalling.

The tenant entered into an agreement to lease a condominium in downtown Toronto starting in September 2015. The rent for the first month cleared but the rent for October bounced. The tenant has not paid another cent since that time, although he continued to reside in the unit.

The landlord served a “Notice to End Tenancy Early for Non-Payment of Rent” on Oct. 16, 2015. On Nov. 19, 2015, the landlord filed an application with the Landlord and Tenant Board seeking an order to terminate the tenancy, payment of rental arrears and to evict the tenant from the unit.

The landlord’s application was heard on Jan. 4, 2016 (at which time the tenant was now four months in arrears of rent). The tenant consented to an order terminating the tenancy, requiring him to pay the rental arrears along with per diem compensation to the date of move out and costs. The order also provided that if the tenant had not moved out by Jan. 31, 2016 that the landlord could have the Sheriff evict the tenant.

The tenant did not pay any of the amounts ordered, nor did he move out of the unit. On Jan. 29, 2016, the last business day before the landlord could file the eviction papers with the Sheriff, the tenant initiated an appeal with the Ontario Divisional Court, which had the effect of staying any potential eviction proceedings.

The landlord was proactive and brought a motion to quash the appeal on a variety of grounds before it was heard on its merits. Even still, the landlord had to wait until April 14 for his hearing. The tenant did not file any responding materials nor did he attend the hearing, despite being explicitly directed to do so by the presiding judge.

The judge quashed the appeal, lifted the stay permitting the immediate eviction of the tenant and ordered the tenant to pay the landlord’s substantial indemnity costs.

Inclusive of costs, the tenant, who signed a lease for $1,700 a month, owes the landlord $16,786.82.

What makes the tenant’s disgraceful conduct even more reprehensible is that he pulled a nearly identical stunt with his previous landlord. In that case, the tenant had rung up over $15,000 in rental arrears.

The tenant was found, in both cases, to be “gaming the system”. In the more recent case the presiding judge urged legislative changes to be made, and in particular urged the government to consider modifying the existing legislation to remove the automatic right to appeal decisions of the Landlord and Tenant Board and instead require that leave (permission) be granted before an appeal can be initiated.

© 2016 REM Real Estate Magazine

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Justin da Rosa
Other

Despite a glut of inventory, prices in this one western market refuse to drop, which is good news for investors.

Residential home prices remained relatively unchanged in April, with an average price of $377,283 in April – down less than 1% month-over-month and up less than 1% year-over-year.

“Prices in Edmonton and area market remain stable. This is good news for sellers who have been concerned about selling in a ‘buyer’s market’,” Steve Sedgwick, Realtors Association of Edmonton chair said. “Buyers continue to have a great selection of properties to choose from and sellers need to be competitive with their listings.

“Continued lack of significant movement in the average house price is a good signal that Edmonton’s economy is strong.”

The average single-family home price increased slightly to $439,982 – up from $439,815 in March. Listings and sales volume fell for single-family detached homes year-over-year.

Condo prices, meanwhile, fell less than 1% year-over-year and sold for an average of $250,869 in April.

A total of 1,498 homes were sold in Edmonton last month – up 10% month-over-month but down 6% year-over-year.

The average days on market was 40, which was seven days shorter than in April 2015.

“New listings were slightly down in April, but inventory remains high,” Sedgwick said. “We expect to see sales continue to rise through the early summer months. It will be interesting to see whether there are many new listings added to the existing inventory in the coming months.”

Copyright © 2016 Key Media Pty Ltd