REP

The Canadian Real Estate Association says it has cut its home sales forecast for next year due to the impact of tighter mortgage regulations taking effect in the new year, which will erode affordability.

The association representing real estate agents across the country also downgraded projections for 2017.

It now expects national sales activity this year to decline by four per cent to 513,900 units this year due to weak activity in Ontario, after the province in April announced measures to cool the market.

However, it says the national average price of a home is still expected to rise to $510,400, up 4.2 per cent compared to 2016.

CREA is now forecasting a 5.3 per cent drop in national sales to 486,600 units next year. That new estimate shaves about 8,500 sales from its previous 2018 forecast.

The national home price is expected to slip by 1.4 per cent in 2018 to $503,100.

Still, the November figures show the number of homes sold through its MLS system rose by 3.9 per cent compared with October, led by a 16 per cent sales spike in the Greater Toronto Area.

Copyright © 2017 Key Media Pty Ltd

Mortgage Guideline changes foster great Investment Opportunities

Canadian Real Estate Wealth

With some of the highest consumer debt levels in the world, Canada finds itself in a somewhat precarious situation. The trauma of the global financial crisis is still fresh in the minds of many Canadians and the country’s major lenders and policy holders are reluctant to allow a housing crisis similar to that seen in the U.S a few short years ago.

Although the most recent update to OFSI’s mortgage guidelines will help to prevent a credit crunch, they’re also preventing many Canadians from getting on the housing ladder. Investors are also going to be affected, as adding individual properties to their real estate portfolio will become increasingly difficult.

Already popular among a rapidly growing sector of investors, established rent-to-own programs are becoming a more attractive investment strategy for both new and seasoned Investors.

“These new mortgage rules will mean more high quality tenants will seek out rent-to-own programs more than ever before because they will be turned away by their bank for mortgage financing” says Terry Hepditch, Business Development Manager at HOS Financial.

“Clients who would normally be AAA clients for a bank no longer meet the stress test requirements and will no longer qualify for the mortgage they need to buy homes in appreciating markets. These consumers will represent higher quality credit profile tenants and higher quality investment opportunities for investors partnering with leading edge companies who have an established rent-to-own program and are positioned to accommodate the increase in consumer demand.”

There are some negative misconceptions that still surround rent-to-own programs, but Hepditch believes it’s time some of these myths were busted. The HOS Financial Home Owner Soon program has been providing investors with successful investment opportunities for the 15+ years, he says.

“Our program has a high success rate and as the profile of the consumer who enters a rent to own program going forward shifts, the quality of our investments will continue to climb. rent-to-own is an excellent investment strategy,” says Hepditch.

“The reality is, far more consumers are likely to purchase a property at the end of a rent to own program when they have initially invested a large sum of money, like 5% of house value, plus have been paying an extra 20% of their rent toward option credits. The option credits payments form a portion of the total down payment at the end of the program” Hepditch says.

Hepditch believes it can be difficult for the novice rent-to-own investor to see the forest through the trees. “Our Home Owner Soon rent-to-own program helps the investor navigate the forest,” he says. “The primary focus is on balance for both tenant and investor at the start and exit, which includes several defined strategies for a successful close. If the investor wants out or the tenant can’t exit, there are several options that we can offer.”

Copyright © 2017 Key Media Pty Ltd

Setting the stage at Pacific Heights

Mary Frances Hill
The Province

Pacific Heights 

Where: 16752 — 18 Ave., Surrey

What: 28 single-family homes close to Morgan Crossing

Project size: four or five bedrooms; starting at 3,082 square feet; priced from $1,479,900

Developer and builder: Foxridge Homes

Sales centre: 16752 — 18 Ave., Surrey

Hours: noon —  5 p.m., Sat — Thurs

Colour can enhance or create a mood, or change it altogether, while tones and shades can render new effects with natural light or a mirror’s reflection. Designer Shannon Haerdi recognizes the psychological power of colour in nearly every room at the display for Pacific Heights, Foxridge Homes’s collection of single-family homes in Surrey.

“Colour is so filled with emotion, and certain colours are more welcoming and embracing than others. Lighter colour tones and off-whites are very pleasing to the eye, so we tried to keep our colour palette soft and delicate,” says Haerdi, principal of First Impression Design.
In the show home’s great room, Haerdi set light greys, whites and light blues against darker accents like charcoal as complements to the Carrera marble tiles in the dining room and kitchen of the open-concept space.
That great room has huge mirrors on either side of the fireplace that emphasize the home’s spaciousness and create a centrepiece in the way a great piece of art would. Elsewhere, furnishings and shades are soft.

“Those two mirrors were most definitely our statement piece in the room. The soft tones on the walls and in the art really balance with the bold mirrors allowing the space to bask in comfort and elegance.”

Haerdi mimicked the vertical lines of the kitchen cabinetry and the hood fan with the pendant lighting. The effect enhances a softness she desired, a feature the designer says is becoming more popular among homebuyers. That style finds a more dramatic edge when it’s coupled with dark or metallic accents.
“We are also working with a lot of soft creams combined with mushroom-coloured undertones and pairing them with warm chocolate tones, with a touch of gold accents.”

Haerdi’s own love of contrasts and rich texture is illustrated in the flex room, where First Impression has added a panelled wall with dark charcoal detail and silver leaf accents.

 “The custom built-in desk carefully placed in the corner with the delicate silver and charcoal velvet chair finishes off the space perfectly.”

All these sophisticated details — the soft muted tones and contrasts — only enhance the practicalities that homebuyers are looking for in Surrey, says Haerdi.

Foxridge Homes is seeing buyers who are downsizing from much larger homes, but still looking for the space they’ve grown accustomed to, while many other buyers are younger couples who need the space for their growing families.
“They are looking for more functional square footage, with lots of practical usable space,” she says.

© 2017 Postmedia Network Inc.

Steve Randall
Canadian Real Estate Wealth

Canada’s strong economy is set to continue into 2018 but it – and the housing market – are set to moderate.

In its latest Economic Outlook, RBC says that although Canada’s economic growth will lead the G7 nations, it will fall from 2017’s predicted 2.9% GDP growth to 1.9% in 2018, followed by 1.6% in 2019.

“Canada’s robust growth in 2017 is likely to moderate somewhat in 2018 as key economic drivers shift, but we still anticipate the economy will continue to outperform its potential,” said Craig Wright, Senior Vice-President and Chief Economist at RBC.

The housing market was one of the key drivers of Canada’s economy in 2017 but for next year there will be a shift to business investment and government infrastructure spending.

The cooling of the housing market which has already begun in recent months will continue with mortgage underwriting rules tightening, and interest rates rising to 1.75% by the end of 2018 RBC forecasts.

All provinces are forecast to grow their economies in 2018 but generally at a slower pace than in 2017. However, RBC expects Saskatchewan and Newfoundland and Labrador to buck this trend with growth exceeding that of 2017.

Copyright © 2017 Key Media Pty Ltd

Historic Fraser Mills industrial site could be lost in Coquitlam as developers retool for condos

Frank O’Brien
Western Investor

The developer of an 89-acre historic industrial site in Coquitlam is attempting to jettison warehouses and workspace in favour of 1,000 more condos, though an industrial shortage is driving prices to record highs.

Coquitlam’s industrial vacancy rate is 1.6 per cent, which is up from a record low of 0.5 per cent a year ago, according to commercial agency Avison Young.

Industrial lease rates have shot up to an average of $11.07 per square foot, third-highest in Metro Vancouver. Scarce industrial sites are topping $1.2 million per acre.

Industrial tenants had looked to the development of 800,000 square feet at the former Fraser Mills sawmill, which would represent 10% of the city’s total industrial inventory.

But developer Beedie Development has submitted a revised proposal to Coquitlam council that cuts 30 per cent of industrial on the waterfront site.

The company’s plans, which have yet to receive all of the required council approvals, are substantially different from 2008 when it first gained approval for the redevelopment.

The developer wants to add 1,000 more residential units to the 3,400 to 3,700 units currently approved, which would mean increasing the number of towers from 10 to 15.

At least one would be 41 storeys, compared with a maximum of 12 floors under the original plan. Beedie also apparently plans to speed development by cutting the construction phases from 16 to nine.

Fraser Mills industrial space would be reduced by 252,000 square feet.

If approved next year, it would be built out over the next decade, according to Beedie.

Ryan Beedie, president of Beedie Living, said the changes will make the development “more economically viable.”

Currently, new highrise condominiums in Coquitlam are selling for north of $750 per square foot.

Beedie Living itself has experienced Coquitlam’s white-hot industrial demand.

It has two speculative industrial buildings underway for lease at Fraser Mills and a third being custom-built for AG Hair, a Burnaby cosmetic maker that ships product around the world.

There has been a “ton of interest” for leasing the remaining 120,000 square feet, said leasing agent Greg Lane of Colliers International.

Beedie is considering only tenant applications that match a specific profile.

“We are taking our time,” Lane said. “We want to have job creation, such as clean manufacturing.”

The limited industrial space in Coquitlam has also spurred strata speculation. Teck Construction LLP sold out all 27 units of its spec play at Coquitlam’s Nicola Avenue Business Park this year before the shovels even hit the ground. The 68,700-square-foot complex opens this spring.

Strata industrial space in Coquitlam sells for around $280 per square foot.

Fraser Mills was once was a large, heavy-industrial site but residential will mostly swallow it up.

That’s worrisome, said Michael Hind, CEO of the Tri-Cities Chamber of Commerce. “We’ve exhausted all industrial land in Coquitlam.”

Hind said other than a 120-acre parcel of land in Port Coquitlam being developed by the Kwikwetlem First Nation there’s not much industrial land to be had anywhere in the Tri-Cities, which includes Coquitlam.

David Munro, Coquitlam’s economic development officer, agreed there’s a lack of industrial but he said the city is also creating opportunities for businesses fleeing even higher rental rates or property prices closer to Vancouver.

“Yes, we are losing businesses, but there’s other businesses that are coming in and taking up those spaces,” Munro said.

The Fraser Mills changes require adjustments to Coquitlam’s official community plan and zoning bylaws and public consultation, which would likely not finish until at least mid-year 2018, said James McIntyre, the city’s general manager for planning and development. 

Copyright © 2017 Western Investor

When your cab driver starts talking about Bitcoin, it?s time to sell

Jonathan Ratner
The Vancouver Sun

Whether it’s the shoeshine boy of decades past, or the taxi driver of more recent times, an old investing adage suggests that when somebody you wouldn’t expect is talking stocks or giving you portfolio advice, it’s time to sell.

And these days, it’s hard to find someone who isn’t talking about Bitcoin.

From high school students discussing how to purchase fractions of the digital currency over lunch at McDonald’s to YouTube celebrities giving advice on how to make a quick buck, or thousand, the mania around the cryptocurrency has been mounting for weeks.

On Sunday night, it grew even stronger, as Cboe Global Markets Inc. launched the trading of Bitcoin futures contracts, leading to another price surge and the imposition of trading halts to quell the frenzied activity.

On Monday, the rise continued, as prices for the contract expiring on Jan. 17 — the vast majority of CBOE Bitcoin futures traded so far have been of the one-month variety — leapt more than US$3,100 to US$18,600 by late afternoon.

The price of Bitcoin itself, as report by Coindesk.com, also surged Monday, climbing nearly 13 cent to surpass US$17,000 for the first time.

“We’re obviously dealing with a global phenomenon that everyone can potentially partake in — both the creation of Bitcoin, but also investing in it,” said Douglas Porter, chief economist at BMO Capital Markets. “There is a place for it, and certainly the blockchain technology does have a very important future. Having said that, every great mania or bubble starts off with a very compelling story.”

The most popular of many unregulated digital currencies with blockchain as the underpinning technology, Bitcoin began 2017 just below US$1,000, and is up more than 275 per cent in the past three months alone.

“It has — to some extent — gotten a stamp of legitimacy from the fact that the CBOE has welcomed it, and the fact that so many central bank officials globally are now looking at it,” Porter said, noting speculation that the U.S. Federal Reserve may eventually issue its own cryptocurrency, and ensure Americans use it.

“We’re definitely hearing modern-day versions of the shoeshine boy story, which is usually a pretty good signal that we’re getting close to the top. Although, history has show that manias can go on a lot longer than many people believe is possible,” he added.

CBOE is using pricing data from Gemini, the cryptocurrency exchange founded by Cameron and Tyler Winklevoss. The twin brothers sued Facebook co-founder and chief executive Mark Zuckerberg over the idea behind the popular social network, and used part of the US$65 million settlement to invest at US$120 per Bitcoin in 2013.

The Winklevoss twins’ Bitcoin holdings are now estimated to be worth approximately US$1 billion, and that’s just the sort of story that has the mainstream public so interested in this complex digital entity that was launched with the intention to circumvent government currency controls, and make online transactions easier by eliminating the need for third parties.

The heavy interest forced the temporary shutdown of Cboe’s website, but the bitcoin wave still may only be in its early stages, as CME Group is set to launch its own trading later this month, and Nasdaq will likely follow in 2018. There are still strategists, currency traders and other experts on both Bay Street and Wall Street that have no opinion on Bitcoin — at least officially. But that’s changing quickly.

Matt Barasch, Canadian equity strategist at RBC Capital Markets, noted that institutional investors are now willing to entertain the idea that what’s happening with Bitcoin relates to the gold market.

“The argument has been that gold is a substitute for fiat currencies, and perhaps Bitcoin is simply starting to fill in part of that niche,” Barasch said.

In the era of Donald Trump, North Korea, and various other events and issues that have been thrown at investors in the past 12 months, many investors are wondering why gold hasn’t done better. That prompted Barasch to do some number crunching, based on the assumption that all the money that went into bitcoin during the past 12 months, went to gold instead. Gold is currently trading near US$1,250 per ounce, but would be at about US$1,325 in this scenario.

“From my lens, you can’t simply dismiss the question, and say this has nothing to do with gold,” Barasch said. “This is really the first year bitcoin has really mattered because the size of it has caused it to matter.

For now, however, investors will have a tough time putting bitcoin anywhere other than in the highly speculative portion of their portfolios. It’s possible that cryptocurrencies don’t even exist in a couple of years, and the market simply doesn’t have enough information to work with yet.

While bitcoin’s equity value shouldn’t be measured like a business because it doesn’t have profits or even operations, that hasn’t stopped people from doing so, and the figure is staggering.

“At the rate it’s going, it’s going to have a larger market cap than the Canadian stock market pretty soon,” Barasch said.

According to Coinmarketcap.com, bitcoin’s market cap is about US$280 billion … for those keeping track.

© 2018 Financial Post

The proposal, approved by the city council, would make it harder for foreign buyers to invest in the Canadian city

Fang Block
other

Vancouver’s luxury markets may further cool in 2018 if the city’s proposed measures to quell its housing affordability crisis take effect.

A group of curbing measures, as part of a new “Housing Vancouver” strategy and three-year action plan, were approved by Vancouver’s City Council at the end of last month.

Among the measures in the new strategy are:

• Increasing the tax rate on luxury homes
• Imposing a speculation and flipping tax
• Closing capital gains tax loopholes
• Restricting foreign buyers and investors

“Housing Vancouver builds on measures the city is already taking that are the first of their kind in Canada—the empty homes tax, temporary modular housing for our most vulnerable residents, and regulating short-term rentals,” Mayor Gregor Robertson said in a news release Nov. 29.

The proposed actions, most of which will need approval from either provincial or federal governments to turn into law, could mean more bad news for the luxury segment in one of the world’s hottest markets, especially in light of the impact of previous curbing measures, experts say.

“We’re concerned about the drive to increase the ‘luxury tax,’ or Property Transfer Tax, on top of the ‘luxury tax’ imposed by the previous provincial government,” Anne McMullin, president and chief executive of Urban Development Institute, a nonprofit association comprising members of the development industry, told Mansion Global in an email.

In February 2016, British Columbia introduced a 3% luxury tax for homes sold for at least C$2 million (US$1.55 million) on top of the 1% already taxed on the first C$200,000 (US$155,000) and the 2% taxed on the portion between C$200,000 and C$2 million.

In the three decades prior to the so-called “luxury tax,” all homes sold above C$200,000 had been taxed at a 2% rate.

The luxury tax applies to more than 40% of all detached homes in Vancouver, according to estimates by the country’s leading brokerage firms.

Real estate fees and taxes contribute 25% of the provincial gross domestic product, according to Ms. McMullin. She cautioned that the government should be more discerning about the new housing taxes.

“These may appeal to some voters but will not address affordability, given the housing supply shortage has yet to be tackled,” she said.

The Vancouver city council didn’t specify how much they want to raise the luxury tax.

More: Penthouse at Bjarke Ingels-Designed Tower in Vancouver Listed for C$11.9M

Foreign buyers’ 15% tax has slowed down luxury market

Last year, British Columbia imposed a 15% foreign buyers’ tax to those who are not Canadian citizens or permanent residents, to appease public outcry over ever-growing foreign investment in the area—particularly from Asian buyers.

Additionally, the City of Vancouver began to implement a 1% empty-home tax to entice absentee landlords, many of them foreign, to rent out their homes rather than keep them vacant. Robertson has touted the empty-homes tax as the first of its kind in Canada.

These cooling measures, together with other political and economic factors, such as the Chinese government’s curbing of capital outflow, have resulted in a softening luxury market, though the impact on the overall Vancouver market has been negligible, insiders say.

“These measures no doubt are aimed very heavily at Asian buyers, who often buy luxury detached homes,” said Wayne Ryan, managing broker at RE/MAX Crest Realty.

Since the foreign buyers’ tax was imposed, detached home prices have dropped almost 20%, while prices for condos—mainly driven by local buyers—surged 15% during the same period, according to Mr. Ryan.

In terms of luxury properties, during the first seven months of 2017, sales of C$1 million-plus (US$780,000-plus) homes declined 22.5% in Vancouver year-over-year, according to a RE/MAX report in September.

For homes over C$3 million (US$2.33 million), the number of sales from January to July dropped 40% compared to the same period last year, the firm’s latest data show.

More: Sales of Vancouver Luxury Homes Decline As a Result of Foreign Buyer Tax

The expensive detached market has softened disproportionately to the overall market so far this year, according to Steve Saretsky, an agent of Sutton West Coast who runs a blog that covers the Vancouver residential market called Vancity Condo Guide.

Total transaction volumes in single-family detached homes, favored by wealthy, foreign buyers, dropped 28% year-to-date in 2017, after experiencing 25% growth in 2014 and 30% growth in 2015, Mr. Saretsky said.

Largely due to the slowdown in the detached market, the total volume of closed sales in Vancouver fell 12.4% year-over-year, to C$12.8 billion (US$10 billion) in November, according to Mr. Saretsky, citing data from The Greater Vancouver Real Estate Board.

Detached market likely to continue softening in 2018

“Detached properties will have further downward pressure in 2018, while the condo market will continue to heat up,” Mr. Ryan predicted.

It’ll be the result of existing cooling measures and the psychological effects of new proposals to restrict foreign buyers, who are concentrated in the detached market.

“Vancouver, like Manhattan, will likely see continued softening in the luxury market for another two or three years,” said Tina Mak, an agent with Coldwell Banker Westburn Realty and founding president of the Asian Real Estate Association of America, Vancouver Chapter.

She attributed the luxury softening mainly to the 15% foreign buyers’ tax and a lessening of foreign funds in Vancouver market. The Chinese government’s control over economic outflow, for one, has deterred some purchases, she said.

But most of her Chinese clients still find Vancouver an attractive market, Ms. Mak said, thanks to a weak Canadian dollar, higher rankings of colleges in and around Vancouver, as well as the city’s beautiful scenery and close proximity to the Asia-Pacific region.

“Once the Chinese government loosens control over money flight, Chinese buyers will return to the Vancouver market,” Ms. Mak said.

More: For Foreign Buyers, Times Are Getting Tougher

Vancouver could restrict foreign buyers from purchases

The city council is considering “restricting property ownership by non-permanent residents,” possibly following Australia and New Zealand’s lead and “limiting new home sale and resale to local buyers,” according to Housing Vancouver’s action plan.

In October, newly elected Prime Minister Jacinda Ardern announced that New Zealand will ban foreigners, excluding Australians, from buying existing housing stock beginning in 2018.

And Australia has already banned foreign buyers from buying existing housing stock. And any residential purchases in the country by foreign non-residents have to be approved by Foreign Investment Review Board beforehand.

Vancouver’s proposal seems to be focusing on new developments, though. According to the Housing Plan, the city will work with developers to prioritize buyers who work and live in Vancouver. These measures will include requiring developers to market pre-sale units to Vancouver residents before they are marketed and sold nationally and internationally, as well as to limit “bulk sales” and potential flippings.

But not everyone thinks these plans are realistic.

“They are talking about banning foreign ownership, levying more property taxes on mansions. I don’t foresee anything happening,” Mr. Saretsky said.

Faith Wilson, founder of an eponymous West Vancouver-based agency agreed. “The foreign buyer ban is not likely to proceed,” she said, “But [we] expect to see higher taxes for luxury home buyers and owners.”

To Ms. McMullin at Urban Development Institute, blaming foreign buyers for Vancouver’s housing crisis “is not productive,”  as they account for less than 5% of total residential real estate purchases in British Columbia.

“Telling them they are banned from buying a home and can only rent in a city that has had a chronic less-than-1% vacancy rate for some years seems discriminatory,” she added.

Copyright © 2017 Mansion Global

Steve Randall
REP

In a week’s time we’ll have a better idea of the impact of foreign ownership of homes in Canada’s hottest markets.

Statistics Canada will release data on foreign investment in residential real estate on Dec. 19 following a 5-year study. It’s hoped that it will give a clearer picture of the extent to which foreign ownership is driving prices.

There is no consensus currently. While some place the blame for escalating prices firmly at the door of wealthy investors from outside Canada, others question the impact compared to the constraints on new supply.

The foreign buyers’ tax implemented in Vancouver a year ago, and in Toronto this year, initially appeared to curb foreign buyers but they are returning.

David Madani, chief economist at Capital Economics told Reuters that the new wave of data beginning next week is welcome but said it should have been available years ago.

“Government policy has been reactive, whether they had evidence or not to base a reaction on,” he said.

Copyright © 2017 Key Media Pty Ltd

Rental rule changes provide a break for tenants

Linda Givetash
The Vancouver Sun

Renters in British Columbia no longer need to worry about their landlords hiking up rates to match high rents in hot neighbourhoods.

The NDP government announced it’s closing another loophole in residential tenancy and manufactured home park tenancy regulations by eliminating a clause that permitted landlords to raise rates above the allowable rental increase limit to match rents within a geographic area.

Spencer Chandra Herbert, a New Democrat member of the B.C. legislature, said the change is part of an effort to provide the 1.5 million renters in the province with more security.

“Renters have been threatened with huge rent hikes under the existing rules — that’s a scary situation for any renter,” he said in a news release.

The current allowable rent increase is set at four per cent but the clause allowed landlords to raise rents at significantly higher rates to match neighbouring prices.

Andrew Sakamoto, executive director of the Tenant Resource and Advisory Centre, said some landlords took advantage of the clause to “bully” tenants into agreeing to rent increases.

“A landlord will go to a senior and say, ‘You know what, the law allows me to apply for this 50 per cent geographic increase but I’m a nice guy, I’ll let you sign for a 30 per cent rent increase and we won’t have to go through the whole process. I’ll give you a break,”‘ he said. “These often disadvantaged tenants won’t know any better and they’ll sign the agreement and accept or consent to a 30 per cent increase.”

Sakamoto said the move to eliminate the clause compliments changes announced earlier this year to slow skyrocketing rental rates.

The government said in October that it would eliminate vacate clauses and restrict rent increases between fixed-term tenancy agreements. Landlords could previously abuse the clauses to force out tenants at the end of a lease and hike up rents for new agreements.

Sakamoto said the changes will have a significant impact for renters in competitive markets like Vancouver where the vacancy rate hovers near zero.

He adds more changes are needed to improve housing security and affordability for renters. The centre is advocating for greater penalties against landlords who evict tenants for renovations and fail to follow through on the work.

Sakamoto said the burden for reporting that the reason for the eviction was honoured should no longer be on the tenant who is seeking compensation if they were wrongfully evicted.

“It’s often challenging, right. You don’t live in the unit any more, it’s hard to gather evidence of what’s going on in there. So we’d like to flip that burden and see the landlords have to prove to an arbitrator that they did follow through,” he said.

The elimination of the vacate and geographic clauses and limitation on rent increases take effect Monday.

© 2018 National Pos