Rob Shaw
The Province

The number of foreign purchases in Metro Vancouver’s housing market is twice as high as previously thought, according to new numbers released Tuesday by the government.

The figures released by Finance Minister Mike de Jong showed approximately 10 per cent of the total value of residences bought in Metro Vancouver was by foreign citizens in the five-week period between June 10 and July 14.

That’s almost double the number indicated in figures released earlier this month. But that first look at the newly collected data was for a much shorter period and did not include the end of June, which is a busy closing time for real estate transactions. 

In Metro Vancouver, foreign citizens bought $885 million out of a total $8.8 billion in housing purchases in those five weeks, representing 10 per cent of purchases.

The highest number in the region was Richmond, where 19.1 per cent of the value of all residential purchases were by foreign citizens. The comparable figure in the city of Vancouver was 10.4 per cent, in Surrey it was 8.4 per cent, and in Burnaby it was 15 per cent.

NDP housing critic David Eby said government was trying to justify its 15-per-cent foreign buyers tax by releasing the data the day after unveiling the legislation.

“I think now it becomes clear how we ended up here in a panic in a summer session,” he said. “The government had data that suggested very strongly that the issue was much worse than they initially suggested it was. The numbers we see today are in some cases almost double the original figures.

“It’s a huge amount of money and a bigger problem than they ever acknowledged it to be.”

Eby said the figures are “startling” because they only capture a small part of what’s happening in the real estate market. Previously, the NDP has called the government figures a lowball estimate, because the province tracks the citizenship of purchasers and not the origin of international money.

De Jong said it was “a slight tick upward from the first tranche of data we had, both in terms of overall percentage and value.”

The government will next release data up to Aug. 1, and then additional data after that to see how the market reacts to the new tax, which comes into effect on Aug. 2, said de Jong.

The new figures show foreign buyers purchased $1.024 billion in residences across B.C. during the five weeks, which represents 7.9 per cent of the $12.89 billion in purchases between June 10 and July 14.

Premier Christy Clark announced her 15-per-cent tax on foreign buyers Monday, as part of legislation that will also empower the City of Vancouver to create a vacancy tax and that also strips the real estate industry of the power to police itself.

The NDP said it will support the bill, but propose some amendments. “It’s better than nothing,” said Eby.

© 2016 Postmedia Network Inc.

Susan Lazaruk & Rob Shaw
The Province

B.C.’s new tax for foreign buyers could end up causing a “huge mess” that hurts Canadian property owners if the province doesn’t exempt soon-to-close contracts and condo “presale” agreements, real estate insiders say.

The tax, announced Monday by the B.C. government, imposes an additional 15 per cent property transfer tax on sales of residential property by foreign buyers that close and are registered after Aug. 2.

“I personally have two (Canadian) clients who have signed contracts and have had the subjects removed so these are firm and binding contracts but unfortunately they do not close until later in August,” said Dan Morrison, president of the Real Estate Board of Greater Vancouver.

He said because the tax is retroactive for contracts in the process of being finalized, it could hypothetically harm a Canadian seller if a foreign buyer who put $100,000 down on a deal were to renege on closing because of being billed an extra $300,000 because of the new tax.

Morrison said if the buyer walks away, it would leave the Canadian seller, who may have already contracted to build a house elsewhere, left trying to find a new buyer.

“They can sue the buyer but if they’re a foreign buyer, good luck trying to find them let alone trying to sue them,” he said.

“Because of the domino effect, it could end up affecting five different deals down the chain and you’ve got a huge mess,” he said. “These are not foreigners we’re hurting, they’re local Canadians.” 

“There could be hundreds and hundreds of these situations out there,” he said.

He and others in the B.C.’s real estate industry say the tax could also hurt so-called presales of condos, involving deals that were entered into with developers of condo projects months or years ago but that would close after Aug. 2.

“Presales are a big part of our business,” said Neil Chrystal, president and CEO of Polygon Homes. “The potential is there for chaos in the market.”

He said, “It would be so easy to grandfather all existing contracts. It’s just not fair to those people who may have bought (through a ‘presale’) two years ago.”

“It’s a pretty big blunder,” said Royal LePage agent Adil Dinani. “What’s the fallout out going to look like? Changes in tax policies have never been retroactive before.”

Figures released by Finance Minister Mike de Jong on Tuesday showed 10 per cent of the total value of residences bought in Metro Vancouver were by non-Canadians in the five-week period between June 10 and July 14.

In Metro Vancouver, foreign citizens bought $885 million out of a total of $8.8 billion in housing purchases in those five weeks.

That’s almost double the figures that government released earlier this month based on just 19 days and which didn’t include the end of June, which is a busy closing time for real estate transactions.

NDP Leader John Horgan said the new tax, a “hamfisted” attempt to curb speculation, has a huge loophole that would allow foreign buyers to buy a condo through a “pre-sale” and then flip it for a profit before closing, thereby dodging the property transfer tax.

“It’s not capturing the speculator,” he said.

An anti-speculation tax should apply to each of those reassignments and not just on closing because that would harm eventual homebuyers, such as an American university professor who buys a house when he moves to Vancouver for a temporary contract and contributes to the economy, said Horgan.

“How do you ferret out speculative buyers who are laundering money or just out to create capital but not penalize contributing members of society, ” he said.

If I’m an international investor looking to avoid that tax, added NDP MLA David Eby, “I’m going to buy a ‘presale’ condo, hold it until the building is near completion and then sell it just before completion and not have to pay the tax. The ultimate buyer is the one who registers at the land title office.”

De Jong confirmed on Tuesday that any transaction registered at the land title office after Aug. 2 will be taxed and said existing contracts or “presales” won’t be exempt.

He also admitted people recruited to work in B.C. on a work visa or student visa would pay the foreign buyer tax, but said the government chose the best method it could for defining who is eligible. 

“There will be impacts,” he said of potential problems for recruiting foreign workers. “There will be reputational impacts that relate to how people view us. I think that is true of other jurisdictions and has occurred in other jurisdictions where a foreign purchase tax has been applied.”

Vancouver lawyer Peter Anderson said governments are free to impose a transfer tax for foreigners but, “when significant land transfer tax policy changes have occurred in the past, there has been a recognition that transactions already in the pipeline, i.e., where a contract has already been signed, should be given special treatment.” 

Buyers who have already signed contracts “will be stuck having to pay the tax without the ability renegotiate the purchase price to reflect the higher cost,” he said in an email. “Some purchasers will refuse or be unable to complete as a result. This could then trigger further failures,” if sellers were relying on sales proceeds to complete purchases of their own.

“The solution would be to grandfather existing contracts,” he said.

© 2016 Postmedia Network Inc.

Steve Randall
Mortgage Broker News

It’s unlikely to happen, but some of Canada’s largest mortgage lenders have been told to prepare for some seriously scary drops in home prices.

The Office of the Superintendent of Financial Institutions has told Canada’s banks that they should stress test for a 50 per cent decline in home prices in Vancouver and a 40 per cent drop in Toronto.

While many analysts have suggested a slide in prices in Canada’s hottest markets, the high figures OSFI is talking about are extremes, designed to ensure that banks are able to withstand a correction and then some.

For the markets to face a plummet in prices to those degrees would mean some significant economic issues in play which are unlikely, as BMO Capital Markets’ senior economist Benjamin Reitzes told BNN:

“Getting prices to fall to that extent would either take a massive jump in interest rates, which I don’t think anybody sees, or a very significant recession – which, again is not in our forecast or anybody else’s.”

Copyright © 2016 Key Media Pty Ltd

Chinese tycoon allegedly at the centre of $0.5B in B.C property deals

Ephraim Vecina
Mortgage Broker News

 

A Chinese property tycoon who supposedly left the mainland in connection with a banking scandal (involving allegedly irregular loans discovered via a nationwide audit) is said to be at the centre of more than half a billion dollars in property deals across British Columbia, according to various testimonies.

As reported by Sam Cooper for The Province, Sun Commercial Real Estate founder Kevin Sun has purchased and sold over $500 million in B.C. properties, as well as raised in excess of $200 million from investors.

Representatives of Sun Commercial maintained that Kevin Sun—who has also gone by the aliases Hong Sun, Hong Wei Sun, Kevin Lin, and Sun Hongwei—was not connected to the massive scandal involving the Industrial and Commercial Bank of China.

“As far as my client knows, there are no ‘Chinese police warrants’ in China for Kevin Sun (under that or any other name) nor are there any RCMP files in relation to same,” Sun Commercial lawyer James Carpick wrote in an email.

“Mr. Sun is not a director, officer, employee or shareholder of my client,” Carpick added.

Despite having founded Sun Commercial, Kevin Sun remained an elusive personality, having never consented interviews and appearing in only one public picture (dates September 2015) ever since he set foot in B.C. The picture was removed from Sun Commercial vice president Julia Lau’s social media accounts when regulators initiated a review of the company in connection with a January 2016 investigative report.

“Kevin Sun has been here for a while,” a Chinese community leader said. “He is pretty good at staying out of the spotlight.”

Sun arrived in Vancouver at around 2001 or 2002, according to anonymous sources closely associated with the man. Subsequently, Kevin Sun and his spouse Ling Lin were sued by HSBC Bank Canada on grounds of allegedly defaulting on a $3.2-million mortgage for Sun’s $9.5-million gated mansion in Richmond.

No records exist of Sun transferring enormous sums from the mainland to Canada. Existing Chinese regulations cap the amount that nationals can transfer abroad per year to $50,000.

Copyright © 2016 Key Media Pty Ltd

Wayne Moriarty
The Province

The way things are going, it wouldn’t surprise me if “Bob, who owns a double lot on 14th and Crown” makes the 2017 Forbes list of the world’s wealthiest people. Just don’t tell Bob the good news. One unlikely consequence of skyrocketing real estate in this city has been the unease in which some homeowners discuss their astonishing good fortune.

A friend of mine bought a condo in Chinatown a few years back. It wasn’t anything more than an architectural drawing at the time. Today, she still hasn’t moved in, yet the value of her place has doubled.

She seems modestly pleased by all this. I would be on my knees weeping with joy.

As someone who moved to Vancouver a dozen years ago and has rented for every minute of those 4,380 days, I am tired of homeowners saying things like “it’s just mine on paper.” Wrong. It’s yours on lots and lots of paper — each ply with its own serial number and a picture of the queen.

Many homeowners in this city have been so gobsmacked by their rapid ascent into the league of the nouveau riche, they find themselves uttering ridiculous laments like, “The bank owns it,” or “The only way it’s worth anything is if we move.”

Their property value has doubled in the past couple of years, yet somehow they make the situation sound almost burdensome — like renting would be a preferred option.

There may be a problem to having greater equity than the Sultan of Brunei, but I’m sorry, I just don’t see it.

Barring some unforeseen development like a lottery win or a coup, I am part of a population in this city that will never own the place where I sleep. The lottery win isn’t likely; the coup I’m thinking about. Seriously, what if all us renters got together and did something about being left, financially, so far behind the homeowners of our province?

I needed to speak with a Communist about this.

Kimball Cariou is the organizer of the Vancouver East Club of the Communist Party of Canada. I asked him if there was a Vancouver West Club. He told me “not at the moment.” I wasn’t surprised.

Our conversation was genuine and delightful.

“Philosophically, the CPC doesn’t have any objection to home ownership. People should have the right to own their own homes, but there is a bigger social issue here and that is we believe society has the obligation to make certain that everyone has a decent place to live and enough to eat.”

To meet that end, Cariou and other like-minded activists spent a good part of this month occupying a Burnaby apartment building scheduled for demolition.

I asked Cariou what advice he would give renters in a market as volatile as this one.

“There are two things renters can do,” he said. “One of them is political. Renters have to start voting for candidates and politicians who will seriously put the interests of tenants and renters first … The other thing renters have to do is get together with neighbours and friends and say ‘no’ when facing eviction. That takes a lot of courage.”

Cariou has me so fired up, I may apply for that vacancy with the Vancouver West Club of the Communist Party of Canada. All I need is an office. I wonder if Bob on 14th and Crown has a basement suite I can rent?

© 2016 Postmedia Network Inc.

Justin da Rosa
Canadian Real Estate Wealth

The Crown Corporation reports an increase in worrying conditions in Canada’s housing market, and rings the warning bell for overvaluation in many cities.

“For Canada overall, we now detect strong evidence of overvaluation. As a result, our overall assessment has moved from weak to moderate since the last report,” Bob Dugan, CMHC’s chief economist, said. “Moreover, the greater range of evidence of problematic conditions in Vancouver has led us to conclude that there is now strong evidence of problematic conditions in our overall assessment of the Vancouver housing market.”

CMHC now believes overbuilding currently plagues seven markets, including; Calgary, Saskatoon, Regina, Winnipeg, Ottawa, Moncton, and St. John’s.

It has also identified overvaluation in nine markets. Those include; Edmonton, Calgary, Regina, Montreal (which CMHC argues there is moderate evidence of overvaluation) and Vancouver, Saskatoon, Hamilton, Toronto, and Quebec (where there is strong evidence).

“Right now we’re seeing moderate evidence of overheating and price acceleration in Vancouver because supply is not keeping pace with demand,” Robyn Adamache, principal market analyst, Vancouver with CMHC, said. “We’re also continuing to see strong evidence of overvaluation mainly because single detached home prices are higher than those supported by economic fundamentals.”

In Canada, overall, CMHC now believes there is strong evidence of overvaluation – up from moderate evidence in last quarter’s report.

However, its overall assessment for the country is that there is moderate evidence of problematic conditions.

“Driving the increased level of evidence has been increasing growth in housing prices that have pushed house prices to levels that exceed the fundamentals supporting the housing market. These fundamental factors include changes in income and population,” CMHC said in its report. “Prices have increased relative to fundamentals in Toronto and Vancouver, and are increasing rapidly in some other parts of Ontario and British Columbia. This pattern is not reflected in many other provinces, however.”

To read the full report, click here.

Copyright © 2016 Key Media Pty Ltd

additional Property Transfer Tax on Residential Property Transfers to Foreign Entities in the Greater Vancouver Regional district

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Premier unveils foreign buyers tax on Metro Vancouver real estate

? ROB SHAW
The Vancouver Sun

A foreign buyers tax introduced in a surprise move by the B.C. Liberal government on Monday may cool the high end of Metro Vancouver’s red hot real estate market, even if it contains several potential loopholes and unintended consequences, experts say.

The new 15 per cent foreign buyer tax will apply to residential real estate deals in Metro Vancouver — from Bowen Island to Maple Ridge and Langley township — starting Aug. 2, according to legislation.

It could add hundreds of thousands of dollars in additional taxes for buyers who aren’t Canadian citizens or permanent residents, and potentially generate hundreds of millions in revenue the government plans to reinvest into affordable housing projects. A $2-million home in the Lower Mainland would see an extra $300,000 in property transfer tax if purchased by a foreign citizen. That would rise to $1.5 million on a $10-million home.

The tax isn’t perfect, but it’s a good move that could discourage foreign buyers who are pushing up the region’s real estate prices, said Tom Davidoff, an associate professor at the University of B.C.’s Sauder School of Business.

“I think there are going to be foreign buyers turned off by this. Fifteen per cent is a very big number,” he said. “I just can’t believe anybody is going to pay $750,000 (in foreign buyer tax) on a $5- million home. I guess somebody might, but that’s a hell of a tax to pay.”

The latest government data shows foreign buyers — mainly from China — purchased more than $1 billion worth of B.C. property between June 10 and July 14, and 86 per cent of that was in the Lower Mainland. Countries that have tried taxing foreign investment report that it slows rising prices, UBC geography professor David Ley said.

“Other cities that have employed a tax at this kind of scale have indeed cooled the market at the top end,” he said. “It does have an effect.”

The tax also applies to corporations that purchase residential real estate — but not commercial properties — and government can examine the citizenship status of directors and the beneficiaries of corporate profits in deciding whether to add taxes.

The foreign buyers tax was a surprise move by Premier Christy Clark’s government, which recalled the legislature for what it said was mainly policy-making to give the City of Vancouver the power to implement a vacancy tax.

Instead, Clark executed an abrupt about-face on her government’s long-held reluctance to intervene in the housing market or discourage foreign investment in B.C.’s economy.

It also marked an end to a promise Clark made in 2015 that “we really want to start knocking down the property transfer tax because it is a drag on our economy.” Clark had told the Surrey Board of Trade that reducing the property transfer tax would increase housing affordability.

On Monday, the premier said increasing the property transfer tax on foreigners is about “making sure that British Columbians get first crack and best crack at buying new homes and existing homes when they come on the market.”

“There is evidence now that suggests that very wealthy foreign buyers have raised the price, the overall price of housing for people in British Columbia,” she said.

“If we are going to put British Columbians first — and that is what we’re intending to do — we need to make sure that we do everything that we can to try and keep houses affordable and to try and make sure that those very wealthy foreign buyers find it a little bit harder to buy a house in the Greater Vancouver area.”

Up until recently, the government had denied wealthy foreign investors were a contributing factor in skyrocketing Lower Mainland housing prices.

Clark and Finance Minister Mike de Jong would not speculate how much revenue the 15 per cent tax increase could generate, but a recent probe by the province into foreign home ownership offers a rough idea.

Earlier this month, de Jong said foreign nationals accounted for 6.5 per cent of the value of real estate transactions in Metro Vancouver between June 10 and 29. Were foreign buyers behind 6.5 per cent of all residential sales in Metro Vancouver in 2015 (a total value of nearly $55.07 billion, according to real estate data provided by Landcor Data Corporation), and were they taxed 15 per cent on those purchases, the government would have raised about $537 million.

Any revenue would go into a special housing fund to be spent on housing affordability projects to be announced in coming weeks and months, de Jong said.

Davidoff and Ley said the money could help increase the supply of housing by encouraging municipalities to approve higher-density housing projects, and targeting development along new transit lines.

However, the tax could have unintended consequences and loopholes. It relies on buyers self-reporting their nationality and providing a social insurance number, backed up by new auditing procedures and penalties.

“You hire yourself a tax lawyer, you hire yourself an accountant and you can get by that pretty quickly,” NDP Leader John Horgan said. “I think sophisticated investors, those who are laundering money in our real estate market, will be able to get by that very quickly.”

NDP critic David Eby said Canadian-owned companies that solicit foreign capital to buy property may also be able to get around the tax. Other experts floated the scenario of a person with citizenship buying property as a proxy for nonresident family members.

The tax may also hurt recruitment by B.C. companies because international employees could face the foreign buyers tax while resettling in the province before they obtain resident status, Davidoff said.

It may also cause foreign speculation to spike in Greater Victoria, Kelowna and other parts of the province, the NDP argued.

The proposed law allows cabinet to later alter the foreign tax rate to between 10 to 20 per cent and expand it to outside the Lower Mainland.

The Liberal government’s housing legislation also included the enabling power for Vancouver’s vacancy tax, as well as an end to self-regulation of the real estate industry.

Vancouver Mayor Gregor Robertson told reporters Monday that he was pleased, but the city also needs homeowner data from the province to help with administering the tax and putting it in place as early as next year.

“It’s too early to judge whether or not (the tax) will have a significant impact, but it’s good to see,” he said.

Surrey Coun. Judy Villeneuve, who is also president of the Surrey Homelessness and Housing Society, said she would like to know how the tax revenue would support housing. Villeneuve said very little affordable rental housing has been built in the past 20 years and what remains desperately needs to be upgraded or replaced with more rentals.

“I’d be very happy if they would transfer it to municipalities. I’d prefer that because we know what our needs are,” Villeneuve said. “But I’m being realistic that they probably won’t.”

© 2016 Postmedia Network Inc.

Premier?s announcement of foreign-buyers tax about-face from previous position on the issue

Michael Smyth
The Province

In a hyper-inflated housing market fuelled partly by quick-buck property flippers, the biggest flip of all came Monday from Premier Christy Clark.

A big flip-flop, that is, after the Clark government brought in a surprise 15-per-cent tax on foreign home buyers in Metro Vancouver after rejecting and even mocking the idea for more than a year.

“British Columbians first,” Clark said in wheeling out a new slogan she’ll repeat continuously from now until election day next May.

“There is evidence now that suggests very wealthy foreign buyers have raised the price of overall housing. If we can make it a little bit harder for those wealthy foreign buyers, we are going to make it a whole lot easier for those middle-class British Columbians we want to put first.”

This is a stunning about-face for Clark and her governing Liberals, who spent the last year scolding critics for suggesting offshore capital was distorting the housing market.

“Industry experts estimate that most of the real-estate speculation taking place in the region is being done by local investors,” Clark said last year, while suggesting it was “fiction” foreign buyers were fuelling stratospheric price hikes.

Prices across the Metro region have soared to well over $1 million for a detached house — much higher in many neighbourhoods — with townhouses and condo prices going bonkers, too. But the government fiddled while the market burned.

Finance Minister Mike de Jong said repeatedly that offshore investment in the housing market was actually a good thing.

“We’re actually proud of the fact that we have a jurisdiction in British Columbia that people want to come to, that they feel they can succeed in, that they want to invest in,” de Jong said in May.

That comment came during a typically raucous question period, where the Liberals delighted in taunting the NDP Opposition with shouts of “Show us your tax!” as the New Democrats demanded action.

And now the action is here in the form of a 15-per-cent tax that will cost a foreign buyer an additional $300,000 when purchasing a $2 million home in Metro Vancouver.

The new tax, which kicks in Aug. 2, also applies to foreign-controlled corporations and the government said it could increase the tax or expand the area where it’s applied.

I’ll predict right now the government will impose the new tax in Victoria, too.

And do you think the premier is going to let this issue trip her up in her home riding? I doubt it, which is why you shouldn’t be surprised to see the tax expanded to Kelowna as well.

Critics demanding a crackdown on foreign capital flooding these markets had a universal two-word response to the government’s announcement: About time.

“It’s flip-flop season here in B.C.,” NDP Leader John Horgan said in the legislature, where it was his turn to mock the government.

“First, you deny there’s a problem. Then you claim that the Opposition is fearmongering. And then you say: ‘I’ve discovered the problem and I’m going to correct it.’ Well, I think the public is going to see right past that.”

Whether the public remembers the flip-flop at election time may depend on whether the new tax is effective in staunching the inflow of foreign money.

But critics, including University of B.C. professor Tom Davidoff, were quick to point out loopholes in the government’s scheme.

“The question is whether that foreign money is going to find its way into the Vancouver housing market anyway through related parties,” Davidoff said. “If your cousin is a permanent resident or citizen, you just buy through them.”

San Souci Executive Realty president Alex Majdpour, who does a lot of business with Chinese clients, said offshore buyers could continue purchasing property through kids attending school here.

“They go around the tax implication,” he said.

Despite flaws in the plan, Clark will now portray herself as a champion of local homebuyers and an opponent of foreign speculators.

“I want to keep home ownership in the grasp of the middle class,” she said.

The government on Monday also cleared the path for an empty homes tax in Vancouver, committed $75 million to a new housing fund and promised long-overdue help for first-time homebuyers.

“It will make a very big difference for all those British Columbians who want to make sure, particularly in the Lower Mainland, that they can still afford to live in their own city,” Clark said.

What she didn’t mention is that two-thirds of voters thought she was doing a lousy a job on the issue, according to recent polls.

With an election looming, she had to do something.

The NDP will remind voters that Clark had to be dragged kicking and screaming to do it and that her governing Liberals pocketed more than $12 million in campaign donations from profit-drunk real-estate companies before they finally realized they had a political problem on their hands.

© 2016 Postmedia Network Inc.