Archive for February, 2019

B.C. launches condo pre-sale registry

Tuesday, February 26th, 2019

New provincial rules require buyers to report the identity and citizenship of assignment buyers

Rob Shaw
The Province

VICTORIA — B.C. has launched a first-of-its-kind registry to track pre-sale condo purchases, a move that may help combat tax evasion but is not expected to drive down condo prices.

The new pre-sale registry will collect data on pre-sale flipping of condo units during development and construction of a building, Finance Minister Carole James said Monday.

The names, ownership, sale and purchase prices will be shared with the Canada Revenue Agency to help make sure people aren’t taking advantage of loopholes for income tax, capital gains tax and property transfer tax, said James. It’s the first such registry in Canada.

“It will ensure people taking those assignments when condo assignments are flipped actually pay their fair share of taxes,” said James. “Right now we have no idea. There’s no registry, there’s no tracking of those kind of flips.”

The registry will require all developers currently building condos and other strata buildings to register every four months the status of their unit contracts, starting April 30. After construction is complete and a strata plan filed with government, the developer must report annually for the next six years.

“Most developers we believe will follow it,” said James. “They are required by law. There are also fines in place if they don’t.”

However, the registry will not be available for the public and researchers. “This will be private confidential information,” said James. B.C. is creating a public database of beneficial ownership, that will allow people to search the names of those involved in real estate developments, corporations and numbered companies, said James.

Flipping pre-sale contracts — known as contract assigning — has been a contentious practice in recent years during the hot housing market. Some critics have argued pre-sales also allow wealthy foreign investors to get early access to units rather than locals.

The previous Liberal government banned so-called “shadow flipping” of homes in 2016, which involved multiple quick sales without the original seller’s knowledge and with intermediaries like real estate agents and speculators accused of pocketing the profits.

Real estate experts said gathering the pre-sale assignment data is a welcome move, but cracking down on tax evaders will not actually reduce condo prices.

“I know sometimes a developer has been caught selling a unit twice, so I think having more transparency is good,” said Tom Davidoff, the director of the Centre for Urban Economics and Real Estate at the University of B.C.

“But there’s a second part of the argument which is when people buy and sell pre-sales that creates upwards pressure on prices, that I’m much more skeptical about.”

Davidoff said people who buy a pre-sale condo actually help finance years of development and construction as investors rather than homeowners. Were a bank or pension fund to do the same thing, there’d be no question it was acceptable behaviour, said Davidoff.

“They do make pre-sales more expensive when the market is hot that’s true,” said Davidoff.

“But I personally think buying a pre-sale is a fairly lousy way for a first-time buyer to get into the market. It’s like buying a Bruce Springsteen ticket from a scalper — that isn’t really a bad way to get a Bruce Springsteen ticket.”

Many of the buildings with pre-sold units during the hot housing market in recent years are only now complete.

“It’s not obvious that this behaviour makes Vancouver certainly in the long-run less affordable,” he said. “I don’t necessarily buy that. But that said I think people evading capital gains tax and maybe laundering money or who knows … I think the transparency part is good. But that this is the path to affordability for the province, I don’t really buy that argument.”

New data from the B.C. Real Estate Association released Monday forecast residential sales in B.C. to rise by 2.1 per cent in the 2019 fiscal year, after falling 24.5 per cent in 2018. Prices are expected to remain mostly flat, provincewide.

In Greater Vancouver sales are forecast to rise 6.5 per cent after falling 30.8 per cent last fiscal year, with the average price declining 2.7 per cent.

“I think if there’s going to be one data gap that needs to be addressed in the housing market it is the pre-sale assignment market because we simply don’t have good data on that,” said B.C. Real Estate Association chief economist Cameron Muir.

But addressing data and tax loopholes won’t impact prices, he added.

“I don’t see it as coercing or changing the market itself,” he said. “It’s not going to make housing more affordable.”

“Quite frankly these issues, the speculation tax, vacancy tax, foreign buyer tax and school tax none of these measures are going to make housing more affordable. They are certainly going to make revenue for government and if government uses that money to help those at the margins of housing affordability that may be a good thing from a policy perspective.”

Changes to federal mortgage stress test rules in 2018 are really what have driven the cooling in the market, said Muir.

Developers helped craft the registry with government, said Anne McMullin, CEO of the Urban Development Institute.

“It’s something we’ve encouraged and supported and are part of,” she said.

McMullin said pre-sale contract assignments are “a very small percentage” of overall sales and in addition being done for profit can be because of changing life circumstances during construction, such as marriage, separation or children.

“As home builders we have supported this. It doesn’t really have anything to do with affordability, or the velocity of pre-sales its just a mechanism to ensure government can collect taxes where taxes are due.”

© 2019 Postmedia Network Inc.

Further cooling policies still needed – B.C. Finance Minister

Monday, February 25th, 2019

Greater affordability – housing slowdown

Ephraim Vecina
Canadian Real Estate Wealth

Policies that cultivate further housing slowdown are still needed to ensure greater affordability in B.C., Finance Minister Carole James said last week.

The statement came amid official reports of considerable slowdown in the province’s home price growth and sales activity, after several changes were introduced last year.

Among the most notable of these regulatory revisions were levies aimed at speculators and hiking the taxes on foreign buyers, which is part of the B.C. government’s aim to diversify the economy and “not simply relying, for example, on a speculative real estate market which doesn’t help grow a sustainable economy,” James said, as quoted by Bloomberg.

“I think there’s more to go. I don’t think anyone in the Metro Vancouver-area would classify housing as affordable at this stage.”

B.C. is not looking at possible housing risks as a major long-term threat, considering that it is projecting new borrowings to grow to $7.5 billion in the coming fiscal year, up from $6.3 billion in the current year.

The province’s fiscal plan, as presented in documents last week, is estimating economic growth to hit 2.4% this year, outstripping the 2.2% in 2018.

James noted that contrary to doomsayers’ fears of long-term lethargy, this trend of housing slowdown leading to more affordability is exactly what the government intended.

“I’m cautiously optimistic when I take a look at the moderation we’re seeing in all segments of the market. That’s exactly the kind of approach that we’ve been looking for,” James stated.

Copyright © 2019 Key Media Pty Ltd

Vancouver considers changes to city’s empty homes tax

Monday, February 25th, 2019

City staff want to increase the empty homes tax or charge a different rate for foreign owners

Dan Fumano
The Province

Vancouver city staff want to look at changing the city’s empty homes tax, the first of its kind in North America, and that could mean increasing the tax or charging a different rate for foreign owners.

In a report before council this week, city staff seek council’s approval on immediate bylaw amendments to “improve the effectiveness of the empty homes tax,” and to move ahead with further review and consultation on additional changes, including changes to the tax rate.

The tax, a levy of an extra one per cent of the property’s assessed value for the year, targets homes that are empty or only used part-time. With Vancouver’s rental vacancy rate remaining close to zero for several years now, the primary purpose of the policy, the city said, was to encourage increase the number of units available for rent.

The first year of the empty home tax is expected to generate $38 million in gross revenue, most of which the city has already collected. But, the staff report says, “While this money will be spent on affordable housing initiatives, the desired outcome of the EHT was conversion to rental use, not revenue generation. Given the number of property owners that chose to pay the tax instead of renting their property, it is possible that the current tax rate is not enough of an incentive to rent.”

The city recommends “a number of different options for increasing the rate be analyzed and considered,” including different rates for Canadian residents and foreign owners, different rates for different categories of residential properties, and rate increases based on the number of years a property is left vacant.

The staff report also asks council to approve bylaw amendments to improve the tax. One recommended change seeks to prevent owners of empty homes from evading the tax through a method the city’s auditors discovered.

The report says the city’s empty-home tax audit process “identified the potential for situations where an owner might attempt to avoid paying the tax on an un-occupied second home by entering into a rental agreement with a corporation (which they might own) or a family member or friend, without the property actually being occupied as a long-term rental property.”

“This is a potential unintended opportunity for property owners to avoid paying the tax that Staff recommend closing for the 2019 tax year,” the report notes, although it does not indicate how many, if any, property owners previously exploited this “unintended opportunity.” The report recommends bylaw amendments to ensure the “permitted occupier” actually uses the property as their principal residence for at least half the year.

No one from the City of Vancouver was available for an interview Sunday.

If council approves the recommendations in the report, staff will report back to council on the review of the empty homes tax rates in fall 2019, including recommendations for public consultation on the proposed options.

© 2019 Postmedia Network Inc.

Near-record housing starts expected to fall

Sunday, February 24th, 2019

Predicted 30-per-cent drop sets off debate on whether too many, or too few, condos are being built

Joanne Lee-Young
The Province

The NDP budget forecast a drop in housing starts by as much as 30 per cent across B.C. over the next three years, sparking debate about whether there are too many, or too few, condos being built in Vancouver’s expensive market.

Economists at major banks recently joined geographers in comparing Vancouver and Toronto when it comes to the ratio of condo units to number of households.

While population growth in Vancouver has been lagging that in Toronto, there are more newly completed but unoccupied condo units in Vancouver, according to Stephen Brown, a senior Canada economist at London-based Capital Economics. He found that at the end of last year, there were some 2,000 such units, compared to 1,500 at the beginning of 2018.

“By contrast, in Toronto, the number of (newly completed and unoccupied) units is just 500, despite the population being 2.5 times larger. … The supply situation will probably get much worse. There are currently 42,000 units under construction in Vancouver, compared to 71,000 in Toronto. Vancouver is therefore building 1.2 units for every person that arrived in Vancouver in the past year, compared to just 0.5 units in Toronto.”

In Toronto, Benjamin Tal, an economist at CIBC Capital Markets, agreed that population growth in Vancouver has lagged while “supply, mainly in the high-rise segment, has risen sharply. The number of completed and unabsorbed units in Vancouver is on the rise. In the third quarter (of 2018), the ratio of units under construction to household formation in Vancouver was elevated … while Toronto was still in line with long-term averages.”

At Vancouver-based Urban Analytics, managing principal Michael Ferreira, who tracks data about new multi-family projects, pegged the number of “completed and unsold units” in Vancouver at just 223 at the end of 2018, “which is nowhere close to being an oversupply situation.” Across Metro Vancouver, said Ferreira, “there are fewer than 1,000 unsold condominium units either under construction or completed and move-in ready.”

Other critics argue that estimates of oversupply don’t necessarily take into account the demolition of older units, which reduces the total supply.

As well, census numbers used in some studies do not count the number of temporary foreign workers and students moving into cities, said Anne McMullin, CEO and president of the Urban Development Institute (UDI), which represents developers. She also noted that investors rent out units that form an important secondary rental market.

“We also have to look at building for population growth for the next 10 years, not just now,” said SFU professor of real estate finance Andrey Pavlov.

Pavlov said the number of homes stuck in the permit approval process in the Lower Mainland was estimated to be 108,000 in 2017. He has been unable to get updated information from municipalities, but said clearing this backlog would greatly increase supply and potentially bring down prices.

The provincial Ministry of Finance said housing starts are at near-record highs, and noted the previous Liberal government projected 27,521 housing starts across the province in 2018, but the actual number was 48 per cent higher, totalling 40,857. The historical average is closer to 30,000 units, which is what the NDP budget is forecasting by 2021.

Andy Yan, director of SFU’s City Program, looked at all housing starts in Metro Vancouver, including co-ops, condos, rentals and homes, going back more than a decade, and found that after a plunge in 2009 (following the credit crisis), the number of housing starts steadily rose from around 15,000 to 20,000 between 2010 to 2015. The number spiked to almost 28,000 in 2016 and then started to fall to 26,200 in 2017 and again to 23,400 in 2018.

It is the opposite of what had been happening ahead of the peak, when several factors came together, said Yan. Now, “we are in an era of declining assessments. Interest rates are going up. Credit is harder to obtain, as is global capital.”

© 2019 Postmedia Network Inc.

Sydney 545 Sydney Avenue Coquitlam 160 homes in a 25 storey tower by Ledingham McAllister

Saturday, February 23rd, 2019

Ledingham McAllister’s Sydney tower will have a striking look, inside and out

Kathleen Freimond
The Vancouver Sun

An artist?s rendering of Sydney, a project from Ledingham McAllister in Coquitlam. PNG

Sydney?s lobby, as shown in an artist?s rendering, is expected to have the feel of a boutique hotel

Floor-to-ceiling windows will make for expansive outlooks at Ledingham McAllister?s tower to be built at 545 Sydney Ave., near the Lougheed SkyTrain station.

The rooftop space will have an outdoor terrace, lawn, children?s play area and cabanas, plus there will be other impressive amenity offerings inside the building

Sydney?s amenity space includes a large kitchen and dining area where residents can gather

Plenty of kitchen storage will be available in the cupboards that stretch to the ceiling.

A games room with ping-pong and pool tables is planned

An artist?s rendering of Sydney?s splashy entrance

Ledingham McAllister?s Manuela Mirecki says the large kitchen is attractive to neighbourhood residents who are looking to downsize

Appliances include a five-burner gas range by KitchenAid


Project address: 545 Sydney Avenue

Project City: Coquitlam

Developer: Ledingham McAllister

Architect: IBI Group Architects

Interior designer: The Mill

Project size: 25 storeys; 160 market units

Bedrooms: one-and-den, two- and three-bedroom units

Unit size: 611 to 966 square feet

Price: TBD

Construction: June 2019

Sales centre: #408 – 552 Clarke Road, Burquitlam Plaza

Sales centre hours: noon — 5 p.m., Sat — Thurs

Phone: 778-948-0333


The architecture and relaxed lifestyle of Palm Springs, with its mid-century modern influence, inspired the design of Sydney, Ledingham McAllister’s new 25-storey residential tower to be built in Coquitlam.

The building’s double-height lobby, with its custom water feature, zigzag wall of glass panels and natural stone elements, is expected to be reminiscent of boutique hotels in the southern California city, which is famous for its distinctive mid-20th century buildings.

n the tower’s 160 market units, the interior design’s clean lines and interesting use of materials will create a setting that enables homeowners to customize their space to reflect their own style preferences.

In the show suite at the sales centre at 552 Clarke Road, Burquitlam Plaza, an over-sized floral print wallpaper provides a sophisticated contrast to the white countertops and glossy cabinetry in the kitchen.

Made in Vancouver, the attention-grabbing Bouquet of Peonies wallpaper mural by Anewall is one of only a few fixed styling additions to the show suite.

“Our display [units] are 100-per-cent attainable,” says Manuela Mirecki, Ledingham McAllister’s senior vice-president of marketing and design. “For example, sometimes one can walk into a show suite and see so much millwork and so many extras, but none of it is included. We also always provide a shopping list so that people can see where [furnishings and paint colours] come from – we may pick one luxury piece, but we’re not afraid to include items from stores like Ikea.”

Located a short walk from the Lougheed Town Centre SkyTrain station, Sydney, designed by IBI Group Architects, will be built on a 35,386-square-foot lot in a residential community.

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The Sydney development will also benefit from the green landscape of the nearby 176-acre Vancouver Golf Club with its 18-hole championship course, Mirecki says.

“Those beautiful lush green grounds bring an element of prestige to that part of Coquitlam,” she says, adding views from the tower will include the area’s skyline or vistas across the course that hosted its first round of golf in 1911.

The building, at 545 Sydney Avenue, will be stepped according to the natural slope of the land.

“This will gently lead the eye up, creating a transition between the building and the surrounding residential community,” Mirecki notes.

The amenities are also an important part of Sydney’s appeal.

“It’s large enough to offer 14,000-square-feet of amenities, but small enough to feel intimate,” she says.

Many of the amenities are on the fifth floor, including four cabanas. Inside, the fireside lounge, kitchen and dining room, games room with a ping-pong and pool tables, fitness centre, yoga room, two meeting rooms, and two guest suites for out-of-town visitors are complemented by an outdoor terrace, lawn, dining area and children’s play area. Sydney will be a pet-friendly building with an outdoor dog run planned for the second level.

Buyers of the air-conditioned homes can choose from two colour palettes, both named for famous Palm Springs hotels: Parker (as seen in the show suite) with its white cabinetry and chrome hardware enhanced by light floors in the living areas; and Riviera, featuring soft greys, black matte hardware and darker laminate floors. Both palettes include carpeting in the bedrooms and marble-look porcelain tiles in the bathrooms.

In the two-bedroom, two-bathroom 761-square-feet show suite, the three-by-five-foot kitchen island has the same white quartz countertop as the perimeter cabinets. Full-sized appliances – a five-burner gas range by KitchenAid and refrigerator with bottom-mount freezer by Fisher & Paykel – add to the ceiling-high pantry cupboards to create a functional space for meal preparation and relaxed entertaining.

The honed, marble-look porcelain tile backsplash in the kitchen adds texture and contrasts against the white countertop and glossy white cabinet doors.

“The honed finish adds warmth to the space,” Mirecki adds. “It could look sterile without a tactile surface.”

She says the large kitchen is attractive to residents in the neighbourhood who are looking to downsize.

“There’s interest from some people living in the large single-family homes to the east – built from the late 1950s and through to the 1970s – who want a smaller home, but don’t want to sacrifice kitchen size,” she adds.

Contemporary Kohler faucets in the kitchen (Purist) and in the bathrooms (Honesty) provide a sense of design continuity through the home. In the ensuite bathroom, the shower’s seamless glass enclosure gives the room a spacious ambience while the 12-by-24-inch porcelain marble-look wall tiles introduce a European sensibility. Look for the soaker tub in the main bathroom.

The home also includes a separate in-suite laundry with a full-sized Whirlpool washer and dryer.

While the master bedroom in the show suite includes a walk-in closet, the doors have been removed from the closet in the second bedroom, showing the space set up with a desk and presented as a small office. The accent wall in this bedroom – in Benjamin Moore’s Tucson Teal – is another idea for potential buyers to consider when it’s time to decorate their own unit.

All homes at Sydney will be assigned a parking stall – there will be a limited number of additional parking stalls for purchase – and a bicycle storage locker. The development will also include stalls with a 240V outlet to charge electric-powered vehicles.

© 2019 Postmedia Network Inc.

B.C. real estate audits reveal widespread tax evasion

Friday, February 22nd, 2019

Taxman recovered over $140 million in nine months last year from B.C. real estate audits; new speculation tax expected to curb tax avoidance

Graeme Wood
Western Investor

After reporting a record number of B.C. real estate audit assessments in 2018 – amounting to $140.7 million – the Canada Revenue Agency is expected to receive a treasure trove of data from the B.C. government tying home ownership to income declarations.

The province is estimating it will collect $642 million over the next four years from the newly implemented BC speculation and vacancy tax, aimed at satellite families and those who leave their secondary urban homes empty for most of the year.

Whether these 2019 budget estimates hold water will partly depend on what the government deems to now be the “most advanced auditing processes in the country,” thanks in part to a suite of new efforts to collect information on home ownership.

Complex audits are bound to follow the submission of speculation tax declaration forms, policy and tax experts suggest.

The annual 2% tax against a satellite family’s assessed home value is designed to bridge a policy gap that has led to tax avoidance attributable to trends in global migration and the internationalization of B.C. real estate.

In essence, satellite family breadwinners earn income abroad while having their families live in B.C. The household thus pays little income tax in Canada but utilizes social services, the bulk of which is paid for by such taxes.

B.C. real estate audits lucrative for the taxman

In 2015 the CRA augmented its compliance program for B.C. and Ontario real estate audits. Last month the agency issued a report claiming it had collected $140.7 million from 1,417 real estate audits in B.C. alone, from April, 2018, to December, 2018.  That’s $99,294 per audit, well above the three-year average of $45,182 per B.C. audit, and miles ahead of Ontario’s average of $17,241 per audit.

Tax collectors are getting more efficient, it appears, as 1,470 B.C. real estate audits from April 2015 to March 2016 generated only $18.5 million in evaded taxes.

In B.C., $173.4 million of the $310.4 million recovered in taxes – from 6,861 audits since April 2015 – is income tax related (lifestyle audits of owners of expensive homes and capital gains assessments on home sales). The other portion relates to unreported GST on sales and house flipping. Ontario’s 31,749 real estate audits since April 2015 brought in $547.4 million. Overall, the CRA also applied $70.9 million in penalties for knowingly making false statements.

The $642 million estimated new tax revenue is payment of the speculation tax only. The B.C. government says it has not assessed the amount of tax from unreported worldwide income or capital gains could be recovered from the data it collects for the speculation tax. After Ministry of Finance experts declined an interview request from Glacier Media, the government said it does expect the speculation tax auditing process to help identify overseas tax evasion and thus the ministry is expected to flag audit leads for the CRA.

Out migration and expensive homes

B.C. technically defines a satellite family as one in which reported worldwide household income is greater than local income.

Satellite family arrangements can be observed by looking at investor-class immigrant “out-migration.”

A government study of the now defunct federal investor immigrant program (foreigners paying an $800,000 loan for permanent residency), favoured by Chinese nationals, showed “out-migration” rates of investor immigrants after 10 years was 26.2 %, well above any other immigrant stream.

As an example, from 2006 to 2010, Canada admitted 13,151 investor immigrants and 34,544 of their spouses and dependents. According to the 2016 census, there remained only 7,590 of those investor immigrants and 27,370 spouses and dependents, showing a disproportionate number of breadwinners left the country within five years.

The average assessed value of homes owned by investor class immigrants in Metro Vancouver, in 2018, was $1.78 million for those admitted by the federal government and $2.2 million for those entering via Quebec, according to a recent Statistics Canada study. Furthermore, recent investor immigrants (since 2009) own single detached houses with average values of either $3.11 million for federal investors or $3.30 million for Quebec investors. 

Of 121,650 investor immigrants admitted since 1986 and still declaring residency in Canada, 52% are now located in British Columbia, per census data.

Tax tries to close “bad tax setup”

Satellite family arrangement have given rise to wealthy people – often foreign nationals or recent immigrants – with access to foreign sources of money having a greater advantage in owning homes in Metro Vancouver than local income earners, said Josh Gordon, assistant professor at Simon Fraser University’s School of Public Policy.

Foreign money inflows into real estate by various means have decoupled housing prices from local income earners, Gordon contended, pointing to widely available data of the Vancouver real estate phenomenon where relatively low incomes are reported in some of the most expensive neighbourhoods in Canada.

Gordon said the purpose of the speculation tax is to close the gap on a “huge subsidy” due to a “bad tax setup.”

“It’s a tax avoidance problem, not purely tax evasion. This arrangement is perfectly legal and that’s the problem,” he argued.

“Over time much of the expensive property will come to be owned by people outside the labour market,” said Gordon.

Gordon said presumably higher consumption based taxes paid by satellite families are an inadequate substitute for any unreported or even reported worldwide income.

“Those families will be using the education and health care system for much of their life. The purchase of a couple luxury vehicles does not capture the services they will consume,” said Gordon, adding that even if worldwide income is diligently declared and paid (minus the home country’s tax assessment), Canada’s social systems are still disadvantaged.

Richmond’s Andersen Tax LLP international tax accountant Steven Flynn said at first glance the speculation tax should be able to capture those families whose breadwinner is not filing Canadian taxes. Should a satellite family try to file a speculation tax exemption, the federal and provincial governments should be able to cross reference low income to high property value, via the auditing system, said Flynn.

For satellite families, “in general terms, by filing for an exemption under the B.C. speculation and vacancy yax, you’re admitting to a government agency that you’re a Canadian resident for income tax purposes. The expectation is the individual is subject to Canadian income tax of their worldwide income,” said Flynn.

Some audits of overseas spouses could be tricky, said David Duff, professor and director of the LL.M. in Taxation program at University of British Columbia’s Peter A. Allard School of Law.

Duff said people make arrangements to ensure that they are not residents in Canada for tax purposes. So one could remain a non-resident for tax purposes even if their de facto Canadian household pays the speculation tax.

“The key is that they’re not residents for Canadian tax purposes. Residence for tax purposes is not the same thing as citizenship or permanent residence status,” he explained.

Opaque, if not non-existent, spousal status; children (students) put on the title of homes; income transferred by the non-resident spouse from offshore corporations; and cash “gifts” to the family makes for a difficult gambit for Canadian auditors, should initial red flags, such as low income declarations from expensive homes, arise, Duff said.

“Perhaps the [speculation] tax will trigger real or fictitious separations for tax purposes,” he said.

Flynn said under the federal tax act, overseas cash gifts do not count as worldwide income.

And so, said Duff, “since the CRA has no way to audit this income directly, it will have to rely on whatever information it is able to obtain from the jurisdiction in which the spouse is a resident.”

For instance, according to the Canada-China Income Tax Agreement a person shall be deemed a resident for tax purposes first and foremost if “he has a permanent home available to him.”

If the person has homes in both countries the tiebreaker is where most personal and economic relations lie. If this cannot be determined then nationality determines tax liability.

The agreement eliminates double taxation in the event a person is deemed a resident for tax purposes in both countries (and presumably files tax returns in both countries as mandated to do so).

Polling indicates the BC NDP’s new speculation tax is supported by four in five British Columbians, but the opposition BC Liberals and special interest groups have panned its implementation, citing objections such as allegedly unclear and unfair exemptions and privacy concerns about providing one’s social insurance number.

“I think its revealing that someone would be more concerned about connecting income tax data to property ownership than about widespread tax avoidance,” countered Gordon, who seems confident the tax will do what it is intended to do.

Flynn said collection of a SIN should not be a concern and would appear necessary to make the tax effective.

Bryan Short, director of the BC Freedom of Information and Privacy Association, said his group is “monitoring” the tax. 

“If the B.C. government can demonstrate that the collection of SINs is absolutely necessary to the facilitation of the speculation tax, then they are not overstepping boundaries,” said Short, via email.

Copyright © Western Investor

Metro Vancouver home values to drop this year, but recover in 2021: poll

Friday, February 22nd, 2019

Overall real estate market downturn will be relatively short-lived, according to Reuters poll of market analysts, while other experts predict no improvement in affordability

Joannah Connolly
Western Investor

The housing market downturn in Metro Vancouver will persist this year, and stay flat in 2010, but will recover in 2021 – that’s the consensus from a Reuters poll of 20 market analysts nationwide.

Home prices in the region will be “likely down 1.0 per cent this year, then up 0.2 per cent next year and 3.0 per cent in 2021,” Reuters reported February 22.

Across Canada as a whole, the chances of a nationwide price correction are being pegged at around 20 per cent, the survey found.  

Reuters said of the national outlook, “House prices are forecast to rise just 1.1 per cent this year on an average basis, followed by 1.9 per cent in 2020 and then 3 per cent in 2021.” However, this forecast was “based on a smaller sample of contributors willing to look that far into the future.”

The news agency said that one reason for the relatively subdued national market activity, compared with recent years, was a slowing in demand and a shift towards rental over homeownership.

The survey report quoted Sebastien Lavoie, chief economist at Laurentian Bank Securities, as saying, “The stars are aligned for further strengthening in activity in the rental market: demand coming from atypical jobs and immigration, higher rates restraining some households to buy a home, the preference of millennials to delay the purchase of a home later in their life cycle.”

In B.C., however, the provincial government is taking credit for the downturn in local home prices, following its wide-ranging housing taxation policies tabled in the 2018 B.C. Budget. These include the B.C. Speculation and Vacancy Tax and the so-called School Tax on homes valued above $3 million.

However, the 2019 Budget, presented February 19, showed the government is also expecting the market downturn to be of short duration. The budget documents forecast home sales this year across the province would rise three per cent, with revenues from residential taxes expected to increase over the next few years.

Do real estate taxes work?

Speaking February 22 at an Urban Development Institute panel event on the B.C. Budget, SFU Beedie School of Business professor Andrey Pavlov said that using taxes on housing to bring down real estate values does not necessarily help with affordability.

The professor of real estate finance argued that affordability isn’t improved by reducing home prices, if a lower mortgage total is offset by higher interest rates (resulting in higher monthly payments), caused by lender caution in a declining market, as well as lower incomes, caused by declining economy. Pavlov asserted that reducing prices by increasing supply, on the other hand, does help with affordability, because development occurs in a growing economy, which helps improve incomes and tends to be in a lower-interest-rate environment.

Pavlov’s co-panellist, Ken Peacock, chief economist of Business Council of B.C., referred to the real estate industry as “the oil of the B.C. economy.” He observed that the downturn in the real estate market was having wider-reaching effects on the provincial economy, including a reduction in retail sales in sectors such as home improvement and furniture. 

Peacock added that he found it “a bit alarming” for a provincial government to be celebrating falling real estate values and taking credit for this outcome.

Predicted interest rate hikes may be a while in arriving. Bank of Canada governor Stephen Poloz said February 21 that although interest rates needed to move up into a neutral range at some point, the way forward was “highly uncertain.” Pundits are now widely predicting there will be no further interest rate increases until at least the end of the year.

Copyright © Western Investor

NDP proposals on 30-year loans welcomed by MPC

Friday, February 22nd, 2019

CMHC backed 30 year term mortgages

Steve Randall
Canadian Real Estate Wealth

The leader of the NDP has set out proposals to make homeownership more achievable for young Canadians, including the reintroduction of 20-year amortizations for insured mortgages.

Jagmeet Singh also said this week that his party plans to build 500,000 affordable homes over the next decade.

Mortgage Professionals Canada has responded to the leader’s proposal to reintroduce 30-year CMHC-backed loans saying that it’s top recommendation to policymakers is “that qualified first-time homebuyers be provided access to mortgage amortization periods of up to 30 years for insured mortgages.”

In a statement, MPC president and CEO Paul Taylor said:

“We support a simple increase from the current 25 year maximum to 30 years because it helps aspiring homeowners in three key ways:

  • It helps renters become owners, helping many younger Canadians nationwide move into housing more suitable for young families;
  • It gives them flexibility to get the same size mortgage but with lower payments, allowing them greater capacity for saving, spending, and investing;
  • It specifically targets assistance to first time buyers, allowing them to better compete financially against investor purchasers.

Aspiring Millennial and Generation Y homebuyers have been telling policymakers and our members that they are frustrated, and that they want Housing Affordability brought front and center.

We have some technical concerns about the structure of Mr. Singh’s pledge today, but we are very encouraged to see 30-year amortizations as a component of the NDP support plan for would-be first-time buyers.”

The issue of Housing Affordability is important, and it is multi-partisan. We are continuing our discussions with all parties and look forward to the March 19 Federal Budget and any support measures the sitting government will also recognize to help aspiring young middle-class Canadians.

Copyright © 2019 Key Media Pty Ltd

Expect a slow year for the housing market says RBC economist

Thursday, February 21st, 2019

CREA report shows market to be slow

Steve Randall

The latest home resales data from CREA showed an improvement in January with a 3.6% rise following declines across the fourth quarter of 2018 (cumulatively 4.3%).

But despite some positives, the outlook for 2019 overall is for the Canadian market to remain subdued due to the factors that weakened sales in 2018 continuing.

That’s the message from RBC Economics senior economist Josh Nye whose housing market report points out that the challenges that buyers faced last year, especially the mortgage stress test, higher interest rates, and local policy measures, are all still in place, so things are unlikely to see significant improvement.

January’s data did however halt the decline for month-over-month sales figures for Vancouver, while prices continued lower; Nye says it’s too early to say if the market has found its footing.

Toronto seems to have stabilized and Nye says they are “more balanced than we’ve seen in years.”

Ottawa and Montreal are the “new hotspots” while the energy sector issues continue to dampen sales in Alberta and prices here are still falling.

Overall, Nye says the stats are a positive start to the year but notes the inequality across markets. Nationally, RBC Economics forecasts sales to rise less than 2% from 2018’s five-year low and prices are expected to see only a slight increase.

Copyright © 2019 Key Media Pty Ltd

Best bid no guarantee of the best result

Thursday, February 21st, 2019

Multiple bids alone will not assure success or best value

Tony Gioventu
The Province

Dear Tony:

 Our strata owners recently approved $1.8 million from our contingency fund on elevator upgrades, deck and balcony repairs and the replacement of our boilers. At our general meeting, an owner questioned the council on how the funds would be spent and how the council would ensure we obtained the best prices for the best values and not leave our strata corporation in a disaster over failed contracts.

The council responded that it would be seeking several bids from contractors and awarding the contract to the best price, but it would not explain how this process would unfold.

While the owners did approve the expenses, there remain several concerns over past council practices of just awarding contracts without any due diligence. Do any standards or conditions exist that strata councils must follow when administering projects over a certain value, such as $100,000?

Emma Walters, Vancouver 

Dear Emma:

Many strata council and property managers often assure their owners and clients that several bids on a project will be sought and the best bid will be accepted. However, multiple bids alone will not assure success or best value.

A bidding process is only credible if everyone is bidding on exactly the same details and specifications. To achieve this standard, an independent consultant or technician is hired who details the scope of work and contractual details, and every bidder is required to comply with the specifications of the project and contract conditions to qualify.  

General bids on a project will help your strata in planning and understanding the scope of the project and estimate pricing, but it does not replace competitive tendering.

In my experience, a well detailed scope of work and a qualified list of contractors who meet the conditions of the contract will provide your strata corporation with a comfortable level of confidence on the pricing, the contractor’s ability to perform the work and legal options if the project becomes embroiled in conflict. No one wants contractors who constantly delay completion, fail to meet their quoted prices, take shortcuts on promised schedules of work or use substandard materials on their project.

While a tendering process is not always possible for every contract, a reliable preferred contractor should still expect to enter into a written agreement that details the scope of work and the terms and conditions of a contract. 

A qualified consultant will provide you with a detailed scope of work and monitor the progress and completion of the project to confirm the contractor has met their promised obligations. Your lawyer reviews the scope of work and provides advice on contract terms, conditions and helps negotiate.

A bid is only reliable for your owners if the project is completed within the time frame promised, on budget and with quality materials and service. 

The CHOA offices receive monthly complaints regarding contractors who undertake projects and fail to meet building code requirements, obtain building permits or are in violation of WorkSafe regulations. These failures overwhelming burden condo owners with costs and delays that could have been easily avoided.

Neither strata councils nor property managers are procurement experts. The whole point of buying in a strata corporation is the collective ability to manage and negotiate purchasing. Your common fees ensure your strata council has access to hire the necessary professionals.

There are no laws or regulations that regulate how strata corporations administer the purchasing of products or services; however, that does not prevent the owners of strata corporations from making decisions by majority vote that direct or restrict strata councils in the action of their duties, or strata corporations adopting bylaws that regulate purchasing practices and procedures.

If your owners insist on an independent consultant and a supervised bidding process, you are permitted by majority vote at a general meeting to direct council to retain the professionals necessary to protect your interests.

A majority vote to approve money from your contingency fund for repairs or major maintenance cycles as recommended by a depreciation report may also include consulting and legal services as part of that project.

Don’t be deceived by values. A $25,000 deck repair can easily spiral out of control into a $100,000  nightmare. Get the right consultants on the job and do it only once. A common warning alarm from a contractor is: “If you are going to seek competitive bids on this project, I am not interested because it will the make the project too expensive.” What they are really saying is: “If you want me to compete on a level playing field with everyone else, I won’t play.”

These are the common funds of your owners. How do you think they should be best spent? 

© 2019 Postmedia Network Inc.