Real estate boards sign up for BC property info solution

Steve Randall
REP

Property research and analysis technology owned by the Land Title and Survey Authority of British Columbia has been adopted by another three real estate boards.

The Fraser Valley Real Estate Board, the BC Northern Real Estate Board and the Chilliwack and District Real Estate Board have all introduced AUTOPROP as a new service available to their members, following its adoption by the Real Estate Board of Greater Vancouver.

t means that more than 18,000 real estate agents across BC can currently access AUTOPROP to quickly gather relevant and detailed property information and provide it to their clients in a visually appealing format.

“AUTOPROP eliminates the need to search multiple sources for property information, which will be a big time-saver for our members and a benefit to their clients. We’re excited to be able to extend this technology to our members,” said Kyle Nason, President, Chilliwack and District Real Estate Board.

Further expansion The LTSA is working with the remaining real estate boards across the province with the aim of making the technology available to more real estate professionals.

“AUTOPROP enables Realtors to provide proper due diligence to their clients. Consumers will benefit from increased transparency and access to information, helping them make informed real estate decisions,” said Connie Fair, President and CEO, LTSA.

Copyright © 2019 Key Media Pty Ltd     

Development offers 8% returns on down payments

Neil Sharma
Canadian Real Estate Wealth

As Vancouver’s real estate market continues sputtering, developers are coming out with all kinds of incentives, one of which is an 8% annual return on a preconstruction down payment.

A condo called Soleil White Rock Living, located in the retirement community of White Rock about three-quarters of an hour from downtown Vancouver, is enticing buyers with the prospect of making an extra $23,275 to $77,275 in interest on their 20% down payments.

“White Rock is a funny market,” said Craig Anderson, director of marketing and sales at Magnum Projects. “It’s a downsizer market where people are sitting on houses they purchased 25 years ago and they’re equity rich. But the hurdle is that homes in the Lower Mainland have dropped 10-15% in the last six months, so your home that was once $1.5 million is now worth $1.35m”

That has made potential buyers reticent about taking out home equity lines of credit for deposits on new homes because they’re looking at a 4.45% rate.

“Their mortgages after 25 years are small, so if we pay an 8% return, we cover the 4.45% and then they continue earning interest on their money,” continued Anderson. “No incentives in Vancouver seem that customer-focused; they’re often full of realtor bonuses or they’re just discounts. What we’re saying is that there’s more interest to be earned the sooner you buy.”

Interest, of course, keeps accruing until the building completes.

“If the development is two months late, that’s up to $850 more in interest,” added Anderson. “It’s a fair incentive if the developer and buyer both have skin in the game.”

Mike Michelin, a mobile mortgage advisor with CIBC, says that in nearly three decades in the industry this incentive is a first for him. Moreover, it presents seniors the ideal retirement plan.

“I’ve never seen this kind of incentive before, and I’ve been in the industry for 26 years,” he said. “It’s good for seniors because if you’re in that demographic of getting ready to retire in the next four to five years, or already retired, a lot of seniors in their mid- to late-50s, early-60s, will generally have a home paid for, clear title, or have a small mortgage on it and they’re looking to buy a property.

“With an 8% return, 4.45% is your cost of borrowing, so you’re beating the spread on your line of credit. Usually, people don’t get anything on a pre-completion unit.”

Copyright © 2019 Key Media Pty Ltd

Selection of buyer’s bait increases as condo developers face crunch time

Frank O’Brien
Western Investor

Cash bonuses of up to $100,000 for realtors; free flights, skis and golf; free mortgage interest and property tax payments for the first year; no strata fees for life; eight per cent interest paid on deposits for presale buyers. All of these and more – including such headline-grabbing schemes as free avocado toast and a year’s worth of wine – are among the tempting incentives being dangled by Metro Vancouver condo developers.

But in some cases the buyer bait is not enough to turn the tide on what the Real Estate Board of Greater Vancouver says is the worst housing sales slump in 19 years. As of the end of May, there was an inventory of 766 newly completed and unsold condo apartments in Metro Vancouver, compared with 326 for all of 2017, according to Canada Mortgage and Housing Corp. (CMHC). Currently, 25,158 condo apartment units are under construction in the Metro region, representing 70 per cent of the total housing units underway.

MLA Advisory, a Vancouver research firm, estimates that about 5,000 concrete condo units in 17 separate projects had postponed sales launches as of April.

Last December, a Langley developer grabbed headlines with a buyer incentive that promised free mortgage payments for the first year. Now the 78-unit building has been converted to a rental project after sales fell short of the “magic” number.

“The magic number is 50 per cent,” explained Vince Taylor, president of Platinum Project Marketing, referring to the percentage of sales a condo developer must achieve before they can secure construction financing from increasingly nervous lenders.

In the current market, developers may set out a nine-month marketing window as they attempt to sell half the units in a project. Just two years ago, it was not uncommon for an entire condo project to sell out within days.

Today developers are turning to all forms of imaginative incentives to attract purchasers.

When RAR Development launched its Eliot condo project in East Vancouver last week, where two-bedroom condos start at approximately $700,000, it offered to cover the key expenses – mortgage interest, property taxes and strata fees – for the first year for the first four buyers.

Wesgroup is offering price discounts of from $10,000 to $20,000 on its Mode condo project in southeast Vancouver. Intergulf is allowing condo buyers to put down 15 per cent instead of the usual 20 per cent deposit at its Hunter at Lynn Creek project in North Vancouver. The 27North project in North Vancouver by Intergulf and Tatla offers buyers a 10 per cent deposit plus choice of ski pass and skis for all the family, free golf for a year, free mountain bikes for the family, or the cash equivalent. Platinum Marketing’s pitch for the News condo project in Abbotsford includes a choice of $3,000 worth of WestJet airline tickets or the same amount in a gift card to Abbotsford shops. Not to mention less-valuable but more media-hyped offerings such as a year’s worth of avocado toast or wine.

But the bait at the 26-storey Soleil White Rock condo tower may be the most lucrative for buyers.

Under this plan from developer RDG Management is an offer to pay buyers of the $484,900 to $1,609,900 condos a tidy eight per cent interest on their deposit during the three years the Soleil project is being built.

“With the building set to be completed in mid-2022, this means that buyers can receive an extra $23,275 to $77,275 in interest from their down payment of 20 per cent,” said John Rempel, president of RDG Management.

Craig Anderson, director of marketing and sales for Magnum Project Marketing, who came up with the idea, said that Soleil is attracting local downsizers who often take a line of credit loan on their existing house to cover the condo deposit.

“They are paying four per cent to five per cent on their line of credit, but they can earn eight per cent on their deposit at Soleil,” he said. The earned interest is deducted from the closing price of a Soleil condo.

So far, 40 per cent of the Soleil White Rock’s 178 units have sold, and Rempel said he is confident the project will start construction this fall.

“It will be built,” he said.

Anderson said some developers are offering cash incentives to real estate agents of $25,000 up to $100,000 for every new condo unit they sell, but he said direct incentives to buyers appear to be the most effective.

Taylor is marketing the Altus condo project in White Rock, which is offering its buyers free strata fees (average $400 per month) for life, plus a guarantee that the developer will buy the condo back if the buyer is not satisfied with the finished product, But, Taylor insisted, the real incentive for buyers today is tomorrow.

“I call it buying or crying,” he said, “If you don’t buy a new condo today you will be crying about it later. That is how good the deals are right now.”

© Copyright 2019 Western Investor

A real estate brokerage providing fixed-fee real estate services, coming to Canada

Mario Toneguzzi
REM

Purplebricks, a real estate brokerage providing fixed-fee real estate services, is poised to expand its presence in the Canadian market despite some challenges it has faced with the concept in Australia and the United States.

Lukas Lhotsky, COO and general manager for Purplebricks Canada, says the company has a growing network of about 100 Realtors across Canada operating in Ontario, Manitoba and Alberta. There are plans to enter the market in British Columbia in the future.

Purplebricks officially launched its operations in Canada in January. The company acquired the DuProprio/ComFree Network from Yellow Pages Digital & Media Solutions Limited in June of last year.

“We’re pretty excited about what’s happening. I think that we’ve been growing very significantly since January,” says Lhotsky. “We moved into a much bigger new space (of about 10,000 square feet) in Hamilton, Ont. We’re growing in all of the markets we’re in. So, it’s exciting to see.

“We’re still a small part of what real estate represents. I think we’re modest enough to know we’re never going to be all of real estate. There’s always going to be room for a variety of different models but we think there’s a lot of opportunity to continue to grow and to continue to offer the service that a lot of Canadians are asking for in the markets where we operate. Our goal is just to continue to be more present, more signs on the ground.”

Lhotsky describes Purplebricks as a duly registered real estate brokerage that helps people buy and sell their home for a single fixed fee, offering the same expertise consumers would expect from traditional real estate.

The fixed fee varies a little bit by market but is generally about $799 – the cost of the core listing fee. If consumers want help with showings and negotiations, they can purchase those add-ons for a fixed fee as well.

The people who work with Purplebricks are licenced Realtors, who list the properties on the Purplebricks online network.

“They all work for us. They’re all Purplebricks Realtors,” says Lhotsky.

“We’ve had a lot of success so far and we think we can continue to make inroads. A lot of people – especially once they use the service – they say afterwards, ‘How come I didn’t always do this? It works’. That’s what gets us excited and where we think there’s more opportunity.”

Part of the company’s recent marketing effort has been a television advertising campaign to spread the word about what it does.

“It’s being seen in a lot of places. We’ve got a pretty significant media buy that covers sporting events. We were in some of the NHL playoffs. We were in a variety of other TV shows. We did a lot of buying of daytime television as well as some of the top shows in almost all markets,” says Lhotsky.

“The main message is incredibly simple. There are different ways that you can sell your home and you can sell your home for a fixed fee and save on commission. That’s the core message we’re trying to get across. You don’t have to compromise on getting access to real estate expertise and getting a very high level of service and you can still get that without necessarily paying the full commission that you might in a traditional brokerage context.”

Does the Purplebricks concept appeal more in a buyers’ or sellers’ market? Lhotsky says it’s an interesting question and he really doesn’t know. But he said the company has seen that it has been quite vibrant in both types of markets.

“Because we’ve got an offer and negotiation service, people feel really comfortable using us in very hot markets. They know we’ve got a very dedicated team that does nothing else but offers and negotiations. An individual on that team will literally do hundreds of those in a year,” he says.

“They literally do more in one year than most Realtors will do in a lifetime. So, in a hot market like Ottawa is right now, we’ve done very, very well. And in challenging markets… there are people that see the value because they are value conscious. There’s a lot of really smart people out there that are doing their homework and when they start to add it up they start to realize,  ‘Okay, what am I really compromising? I know the market’s difficult but I’m going to get the same visibility. I’m going to get access to the same Realtor’s level of service if not more. And I can use that money right now’.”

Purplebricks’ parent company is based in London, England. It first expanded to North America in September 2017, operating in Los Angeles.

Internationally, the company has faced some recent challenges. Its founder and chief executive Michael Bruce left the company. It also reported that it was pulling out of Australia and placing its U.S. business under review.

In early May, the company posted a report on its website that said this about the Canadian, Australian and American markets:

“The Group’s Canadian business continues to perform well and trading is in line with management’s expectations. The Board has a strong belief in the future opportunities in this market.

“During the two and a half years that Purplebricks has been operating in Australia, market conditions have become increasingly challenging. This, combined with some execution errors, has resulted in the business not delivering the progress the Board expected. The Board has therefore concluded that the prospective returns from Australia are not sufficient to justify continued investment. Accordingly, the Group has chosen to exit the Australian market and the business there has been put into an orderly run down with immediate effect, pending closure. The business remains committed to our current customers.

“Whilst good progress has been made in launching our brand across the U.S., the Board has materially cut investment in marketing and other overheads to reduce expenditure to sustainable levels and begun a strategic review. As part of this review, management proposes to examine the options for delivering the next phase of growth in a more effective and cost-efficient way including more closely considering the opportunities and risks associated with a materially scaled-back U.S. business. A further announcement on this strategic review will be made in due course.”

© 2019 REM Real Estate Magazine

Almost half of Vancouver condo units are not occupied by owners

Ephraim Vecina
Canadian Real Estate Wealth

Vancouver’s condominium market has been a hotbed of activity and price growth over the past few years, but Simon Fraser University academic Andy Yan has just confirmed many hopeful home buyers’ worst fears: Almost half of the city’s condo units are not occupied by their owners.

These condos tend to be rented out, used as secondary properties by their owners, or left vacant, unable to be counted as additional supply in the incredibly tight market.

“The big take on this [data] is the role of units that are not owner-occupied — a.k.a. investments,” Yan said, as quoted by the Vancouver Courier.

In his analysis of fresh data from the Canadian Housing Statistics Program, Yan stated that 46% of the city’s condominiums are not-owner occupied. The phenomenon was especially apparent in Electoral Area A, where 49% of condo units are not-owner occupied.

These ratios were markedly higher than the 35% market share seen in 2009.

“So things became progressively worse, and we knew [about it] 10 years ago,” Yan noted.

“It illustrates the types of demands that are in Vancouver housing and really goes into the question of what’s the priority in demand that our housing system needs to meet — investments versus, say, someone who’s trying to set their roots in the city, not to mention the importance of actually having an affordable purpose-built rental stock as opposed to one that’s dependant on this kind of fragmented, precarious condominium-as-rental system.”

Yan concluded that any federal or provincial-level strategy that will aim to ensure market stability should seriously regulate short-term rentals.

Copyright © 2019 Key Media Pty Ltd

Yi Ju He claims that her home on Belmont Avenue should be exempt from the city’s vacancy tax because she is rebuilding it

Keith Fraser
The Vancouver Sun

In a petition filed in B.C. Supreme Court, Yi Ju He, the owner of the home at 4749 Belmont Ave., says she bought it in October 2015 and in February 2018 filed a property status declaration for the year 2017 claiming an exemption from the city’s vacancy tax.

The homeowner said she was getting the aging home rebuilt and therefore qualified for the exemption that applies to residential property unoccupied for more than six months for development purposes.

The applicable bylaw says that exemptions can be allowed for developments for which permits have been issued by the city and which in the opinion of the city’s chief building official are being carried out diligently and without unnecessary delay.

In the petition, the homeowner says that she or others on her behalf applied for development permits for the property in April 2017 and the city issued them in 2019.

“The fact that the city did not issue building permits until 2019 when the petitioner or others on her behalf applied for them in 2017 was not because of any action or inaction by the petitioner or others acting on her behalf,” says her petition. “At no time has the chief building official expressed the view that the property’s redevelopment was carried out other than diligently and without unnecessary delay.”

In the court documents, the homeowner says that on March 8, 2018, the city denied her claim for the redevelopment exemption and issued the vacancy tax notice. Her lawsuit argues the property qualifies for the exemption and its denial was unreasonable and should be overturned.

The tax bill for the home, which had a taxable value at the time of $24.9 million, came to $249,000.

The Belmont Avenue home is now assessed at $26.7 million, with the buildings valued at just $10,000 of that and the land accounting for the rest of the value. The 1½ storey home was built in 1937, has six bedrooms and five bathrooms and sits on a 1.1 acre lot.

In January 2017, the homeowner got an environmental analysis done on the home which declared that it was uninhabitable due to potential asbestos concerns, her lawsuit states

She filed a complaint when her exemption was first denied by a vacancy tax review officer, who found that there was “inappropriate evidence” provided for her claim.

“The city determines that the reason the property was unoccupied for more than 180 days was not because it was undergoing redevelopment … with permits issued by the city,” said the review officer.

An appeal was then filed to the vacancy tax review panel. But the owner says she was not given a chance to make  oral arguments before the panel. In April, 2018, the panel informed her that it had concluded its review and found that the evidence did not bring her submission within the bylaw requirements.

“The determination of the vacancy tax review panel is final and no appeal is available,” says a letter from that panel included in the lawsuit.

The homeowner is the wife of Jian Jiang Zheng, a wealthy businessman.

A spokeswoman for the city of Vancouver, which is named as a respondent to the petition, said they don’t typically comment on specific cases.

The tax, also known as the vacancy tax, was brought in as a measure to return empty or underused properties to use as long-term rental homes for people who live and work in the city.

© 2019 Postmedia Network Inc.

There are concerns FTHBI criteria are too restrictive to really help average first-time buyers

Penelope Graham
other

The First-Time Home Buyer Incentive (FTHBI), the federal government’s new mortgage equity sharing program, has been somewhat controversial from the get-go; there was little clarity on the nuts and bolts of the program when it was first announced in March, and there are concerns its criteria are too restrictive to really help average first-time buyers.

However, new information released this week addresses some of those questions, as the Canada Mortgage and Housing Corporation (CMHC) delved into further detail on borrower eligibility, as well as how equity sharing will work in a fluctuating market. It also announced the FTHBI will officially go into effect in September of this year.

Who Is Eligible for the FTHBI?

The FTHBI provides an interest-free loan of 5% toward the purchase of a resale home and either 5% or 10% toward the purchase of a brand-new build. To be eligible, home buyers must qualify for a high-ratio mortgage and have the minimum down payment saved (5% down for homes priced up to $500,000). They must have a combined household income of no more than $120,000, and the mortgage they are taking on cannot exceed more than four times their income at a cap of $480,000, including the portion that is provided by the CMHC. This means the maximum purchase price for a resale home is limited to $505,000 for a buyer making a minimum down payment of 5% (rounded).

How Does the FTHBI Work?

The FTHBI is designed to improve affordability by reducing the size of the overall mortgage, and thereby the monthly payments, alleviating the financial strain on home buyers and improving their overall debt servicing ability. For example, a buyer receiving the maximum 10% loan on a newly-built home could save as much as $286 per month, resulting in $3,430 in savings per year, according to the CMHC.

The money the CMHC kicks in takes the form of a second mortgage on the home, which is interest-free, and only needs to be paid back once the 25-year mortgage matures or the home is sold, though borrowers have the option to pay it back any time as a lump sum without financial penalty. 

Loan Size Increases with the Value of the Home

However, rather than a traditional cash-value loan, the money provided is in exchange for a share of equity in the property; it’s this percentage that must be paid back, meaning homeowners may need to shell out more when the loan matures.

For example, let’s say the CMHC provides a 5% loan of $25,000 for a home purchase of $500,000. The homeowner sells the home several years later, and its value has increased to $550,000. The homeowner would then need to pay the CMHC back $27,500 to reflect 5% of the increased value of the home. However, if the home loses value over that time period, only the original amount of $25,000 would be due to the CMHC upon its sale.

Could the FTHBI Be Used in a Market Like Toronto?

A main criticism for the FTHBI is its purchase price cap of $505,000 for resale homes purchased with a minimum down payment, which won’t go far in Canada’s biggest urban housing markets where buyers would arguably need the most help. For this reason, analysts believe the FTHBI will be useful only in markets with overall lower prices, such as in the Prairie or eastern Canadian markets. 

For example, buyers are hard pressed to find a resale home within the eligible price range in the City of Toronto, where the average home price came to a whopping $937,804 in May.

FTHBI Would Only Be Available to Toronto Condo Buyers

In fact, according to recent data compiled by Zoocasa, there are only 13 out of the city’s 35 MLS district neighbourhoods where such homes are available – and options are limited to condos located away from the city core, including North York condos and Etobicoke condos.

Those on the hunt for average priced houses for sale in Toronto (including both detached and semi-detached options) have zero ability to utilize the program, as the average property comes with a price tag of $1,299,061. 

The study assumes a home buyer qualifies for the FTHBI based on a household income of $120,000, has saved the requisite minimum down payment to qualify for an insured mortgage, and is purchasing a resale home priced at or below the maximum of $505,000. Home prices for each MLS district neighourhood were sourced from the May 2019 report from the Toronto Real Estate Board. The prices used for houses are a weighted average of both detached and semi-detached homes.

Toronto Neighbourhoods Where the FTHBI Could Be Used to Buy a Condo

 

• E10: West Hill, Centennial Scarborough

Average Home Price: $352,389

• E11: Malvern, Rouge

Average Home Price: $362,037

• W05: Black Creek, York University Heights

Average Home Price: $373,932

• W09: Willowridge, Martingrove-Richview

Average Home Price: $374,050

• W10: Rexdale-Kipling, West Humber-Clairville

Average Home Price: $388,935

• E04: Dorset Park, Kennedy Park

Average Home Price: $397,600

• E07: Milliken, Agincourt North

Average Home Price: $423,726

• E08: Scarborough Village, Guildwood

Average Home Price: $430,104

• E05: Steeles, L’Amoreaux, Tam O’Shanter-Sullivan

Average Home Price: $437,213

• E09: Morningside, Woburn, Bendale

Average Home Price: $438,615

• E03: East York, Danforth Village

Average Home Price: $449,750

• W04: Yorkdale, Glen Park, Weston

Average Home Price: $454,470

• C06: Bathurst Manor, Clanton Park

Average Home Price: $497,967

METHODOLOGY

Condos: Average condo apartment prices for each MLS district neighbourhood was sourced from the Toronto Real Estate Board for May 2019.

Houses: Average house prices are a weighted average of detached house prices and semi-detached house prices. Average house prices for each neighbourhood and property type were sourced from the Toronto Real Estate Board for May 2019.

It is assumed the home buyer has the maximum eligible household income of $120,000 and has saved the minimum down payment of 5.05%, which would qualify them for an insured mortgage on a $505,000 resale home.

© 2015-2017 Zoocasa Realty Inc.,

Chair of Expert Panel on Money Laundering in Real Estate tells SFU audience that the panel was unable to “estimate the inestimable”

Joannah Connolly
Western Investor

Media headlines proclaimed recent findings of an estimated $7.4 billion in dirty money laundered in B.C. in 2018, with approximately $5.3 billion of that going through real estate, as reported by the province-commissioned Expert Panel on Money Laundering in Real Estate. But in reality, these figures are looser even than an estimate – they could be anywhere from approximately correct to totally off the mark, report author Professor Maureen Maloney confirmed June 20.

In a refreshing display of transparency, Maloney told an audience at SFU’s Public Square discussion forum on money laundering that her panel’s estimated figures on the amount of money being laundered were only an approximation, and that definitive data was impossible to come by.

Maloney’s expert panel came up with a “conservative” estimate that $47 billion was laundered through various methods in Canada last year, based on an international standard model called the Gravity Model (click here for a fuller explanation of Maloney’s methodology in coming up with these numbers). However, because of the data gaps in using this model, that national dirty-money figure could be above $100 billion, according to Maloney’s slide presentation.

Using the “low-end, conservative” $47 billion national figure as the basis, Maloney’s team calculated that B.C.’s share of laundered money, using any laundering method, was approximately $7.4 billion. Of this, the team reported that the amount being cleaned through B.C. real estate was anywhere from $800 million to $5.3 billion. This amount, Maloney told the SFU audience, would lead to about a five per cent increase in home prices across B.C. – which could be very different in urban areas, compared with rural regions.

Maloney told the audience, “For the real estate figures, that’s even less definitive data that we have, because we had to use different methodology.”

When asked to clarify how the team came up with the B.C. figure of $7.4 billion, and whether it could be wildly off base, Maloney replied, “We used the same Gravity Model for our provincial figures as we did for the national figure, but the model is [designed as] a country model not a provincial one. This meant that the data we got for each province, including B.C., was all the same. The two biggest issues were, what was the rate of crime in that province, as well as what was the GDP. So [the data] was much less sophisticated than [the methodology used] for the entire country. So that’s absolutely correct.”

The SFU professor told the audience, “I do believe that we have probably the best estimates available, but they are only estimates. We couldn’t send out a survey to organized criminals asking them how much money they laundered and where they put the money – so we don’t have definitive data. If anybody else out there has better figures, that’s great, let’s have a conversation.”

Copyright © Western Investor