Rural retreats beckon buyers as B.C. opens up

Frank O’Brien
Western Investor

Nearly 10 acres of island waterfront for less than $750,000; luxury lakefront residences at Whistler and Tofino on the spectacular west coast of Vancouver Island and Sunshine Coast; and Cariboo lakefront resorts are among the exclusive listings that Western Investor will feature in our special summer edition this August.

There has been a surge of interest from buyers for rural and even remote real estate property across Western Canada since the COVID-19 outbreak.

Freddie Marks is a specialist in B.C rural recreational property but his phones have lit up with calls from the big city since the pandemic brought on self-isolation and social distancing.

“Before COVID-10 we had an average of two to four inquires for rural property per day,” said Freddie Marks, an agent with 3A Group, Sutton Showplace Realty in Agassiz, who specializes in B.C. rural and recreational property. “Now we have 12 to 15 inquiries per day.”

Marks added that his office wrote deals on remote land listings even during the peak of the pandemic curve.

Among his active listings is Plato Island Resort on Quesnel Lake in B.C.’s Cariboo, which includes rental cabins, a café and a marina and recreational vehicle rentals, all for less than $2 million,

“For the price of a modest home in Vancouver, you can own a peaceful, relaxing place to live and earn an income that provides a breathtaking way of life,” Marks said.

The virus curve has begun to flatten, but the demand for rural properties continues to swell.

From Canmore in the Alberta Rockies to the Sunshine Coast and Gulf Islands near B.C.’s Lower Mainland, rural communities have been inundated with visitors since COVID-19 began. Now, as travel restrictions lift, many are considering a permanent move.

The search for rural retreats is not restricted to Western Canada. It has been experienced across North America.

In an interview with CNBC, Glen Kelvin, CEO of Redfin, a major U.S. real estate brokerage, said demand for homes has shifted to rural areas as people react to the coronavirus pandemic and look to move out of dense urban areas.

“We have seen that people are more interested in that house at the foot of the mountains, by the lake,” Kelman said. “Rural demand is much stronger right now than urban demand, and that’s a flip from where it’s been for the longest time, where everybody wanted to live in the city. We’ll see how it comes out, but there seems to be a profound, psychological change among consumers.” 

Escaping to backcountry waterfront need not be expensive, especially for someone accustomed to big-city real estate prices.

An example is a 9.8-acre oceanfront parcel with a contemporary house on Cortez Island, off the

coastline of Vancouver Island near Campbell River.

The property includes a 30-foot licensed dock with year-round protected moorage and easy access to the wonders of Desolation Sound. It is listed at $749,000 by LandQuest Realty of New Westminster.

 

 

© Copyright 2020 Western Investor

COVID-19 shakes rental market

Glen Korstrom
Western Investor

Cratering of travel and tourism action has persuaded many owners of short-term rentals to rent properties on long-term leases

Reverberations from COVID-19 are shaking up the Metro Vancouver’s rental-home market, where the tourism downturn has forced some landlords to stop renting homes via sites such as Airbnb and instead seek long-term tenants.

Job losses and reduced wages also play into the mix as many people will look for lower-priced accommodations.

“My general belief is that a long slowdown would be bad for rents and home prices,” said Tom Davidoff, director of the University of British Columbia’s Centre for Urban Economics and Real Estate. “When I say bad for the market, I mean the price goes down, not that it is bad from a social welfare perspective.”

He added that rental demand could rise in pockets of Metro Vancouver. Suburban homes may be more desirable to renters who plan to work from home and do not need to spend a premium to live near downtown Vancouver.

Davidoff agreed with Real Estate Investment Network senior adviser Don Campbell, who recently told Business in Vancouver that the pandemic could be a “psychological shock” to over-leveraged homeowners and investors, who may decide to scale back large mortgages and exposure to real estate investments.

Small-business owners hammered with forced business disruptions may also decide to sell their homes to provide capital for their businesses, Davidoff suggested.

Asking prices for Metro Vancouver rental units have already declined, as competition for tenants has increased and prospective renters, who have been hit with less stable employment, seek lower priced homes.

The average asking price for an unfurnished one-bedroom apartment in Metro Vancouver for July ticked up about 1 per cent to $1,657, after four consecutive months of declines, according to Liv.rent, which bases its data on rental-home listings on its website.

That average asking price for July rentals is down more than 7.1 per cent compared with December.

The shift toward more demand for rentals comes as longtime real estate publication and data source REW launches rental-home listings that visitors can search.

REW has long been known as B.C.’s largest platform for searching properties for sale, and that side of the business will remain, new REW president Simon Bray told BIV.

Its shift to include rental properties would likely have occurred even without the pandemic, Bray said, but with the COVID-19 downturn “absolutely” prompting more people to seek rental accommodation, the move made even more sense.

He pointed to data from a survey of REW subscribers that showed how much the pandemic is affecting purchasing power.

It revealed that 45 per cent of respondents had either lost their job or some income due to the pandemic. About 38 per cent of survey respondents said that the pandemic had negatively or significantly negatively affected their financial ability to buy a home.

That in itself, Bray said, is likely to keep many people renting instead of buying.

About 52 per cent of respondents to the REW survey said that in early 2020 they were planning to move into a new home this year. Only 44 per cent said that such a move is likely now.

For some, the ability to have short-term rentals made affording a new home possible, and that market has crashed.

“[Pre-pandemic] if you were a landlord, you could get more money renting out your property on a platform like Airbnb than you could having a long-term tenant,” Bray said.

“That took a lot of inventory out of the long-term rental market and was bad for the affordability of rentals, generally, because tenants would have to pay more to get into a diminishing pool of stock.”

The result now, he added, is that anybody with a short-term-rental property is likely seeking longer term tenants to add stability. •

 

© Copyright 2020 Western Investor

Buyers are looking for safe retreats since the outbreak of COVID-19

Frank O’Brien
Western Investor

Nearly 10 acres of island waterfront for less than $750,000; luxury lakefront residences at Whistler and Tofino on the spectacular west coast of Vancouver Island and Sunshine Coast; and Cariboo lakefront resorts are among the exclusive listings that Western Investor will feature in our special summer edition this August.

There has been a surge of interest from buyers for rural and even remote real estate property across Western Canada since the COVID-19 outbreak.

Freddie Marks is a specialist in B.C rural recreational property but his phones have lit up with calls from the big city since the pandemic brought on self-isolation and social distancing.

“Before COVID-10 we had an average of two to four inquires for rural property per day,” said Freddie Marks, an agent with 3A Group, Sutton Showplace Realty in Agassiz, who specializes in B.C. rural and recreational property. “Now we have 12 to 15 inquiries per day.”

Marks added that his office wrote deals on remote land listings even during the peak of the pandemic curve.

Among his active listings is Plato Island Resort on Quesnel Lake in B.C.’s Cariboo, which includes rental cabins, a café and a marina and recreational vehicle rentals, all for less than $2 million, “For the price of a modest home in Vancouver, you can own a peaceful, relaxing place to live and earn an income that provides a breathtaking way of life,” Marks said.

The virus curve has begun to flatten, but the demand for rural properties continues to swell.
From Canmore in the Alberta Rockies to the Sunshine Coast and Gulf Islands near B.C.’s Lower Mainland, rural communities have been inundated with visitors since COVID-19 began. Now, as travel restrictions lift, many are considering a permanent move.

The search for rural retreats is not restricted to Western Canada. It has been experienced across North America.

In an interview with CNBC, Glen Kelvin, CEO of Redfin, a major U.S. real estate brokerage, said demand for homes has shifted to rural areas as people react to the coronavirus pandemic and look to move out of dense urban areas.

“We have seen that people are more interested in that house at the foot of the mountains, by the lake,” Kelman said. “Rural demand is much stronger right now than urban demand, and that’s a flip from where it’s been for the longest time, where everybody wanted to live in the city. We’ll see how it comes out, but there seems to be a profound, psychological change among consumers.” 

Escaping to backcountry waterfront need not be expensive, especially for someone accustomed to big-city real estate prices.

An example is a 9.8-acre oceanfront parcel with a contemporary house on Cortez Island, off the
coastline of Vancouver Island near Campbell River.

The property includes a 30-foot licensed dock with year-round protected moorage and easy access to the wonders of Desolation Sound. It is listed at $749,000 by LandQuest Realty of New Westminster.

Copyright © Western Investor

Using a reverse mortgage as an exit strategy

Kasi Johnston
Mortgage Broker News

Qualifying for a mortgage in Canada is no easy feat. In fact, over half of Canadians see it as a barrier to homeownership. On July 1, the Canadian Mortgage and Housing Corporation (CMHC) rolled out their new underwriting guidelines with three changes, including an increase to the minimum credit score required for insured mortgage, from 600 to 680.

Some lenders also continue to tighten their restrictions and request additional financial information and documentation before approval. All these changes, spurred on by the coronavirus pandemic, have many Canadians turning to alternative mortgage lenders.

An important thing to consider is that alternative lenders usually offer rates between 7.99% to 13%, compared to traditional mortgage rates that sit around 3%. Alternative mortgage lenders also require you to renew every one to three years, carry additional fees and require requalification.

With many Canadians already suffering from cashflow issues, HomeEquity Bank vice president, referred sales, Sue Pimento questions how homeowners will be able to afford these interest payments without having to sell their assets. 

“Some private lenders work in the capitalization of the first year of payments, which unfortunately is a short-term fix and escalates equity erosion,” she added.

 

Using a reverse mortgage as an exit-strategy

Pimento suggests brokers offer using a reverse mortgage when building an exit strategy out of a high-interest alternative mortgage. Offering a lower interest, long-term strategy will not only benefit the homeowner, but adds an additional commission stream for the broker. Clients can use funds from a reverse mortgage to pay exit penalties from an alternative mortgage, and free themselves from a high-interest loan.

“Alternative loans usually have monthly payments while reverse mortgages don’t – your clients only pay what they owe once they sell their house or pass away. This means that they will also benefit from increased monthly cashflow to enjoy the retirement they’ve always planned,” added Pimento.

A reverse mortgage can also be used to help client’s out of a second mortgage, which usually has higher rates and fees than a primary mortgage.

“With a second mortgage, the borrower has to keep up with two sets of repayments, therefore, their monthly payments are considerably higher, leading to a risk of foreclosure or power of sale, depending on the province.”

Not only is a reverse mortgage a great way out of alternative loans, it also provides an alternative solution to these high-interest loans. Since a reverse mortgage is a lifetime loan with no renewal fees, or requalification fees, the loan can’t be called.  If your clients are looking for a mortgage exit strategy, they won’t have one with an alternative mortgage, but with a reverse mortgage, they won’t need one, since it is a lifetime deferral mortgage, purpose built for Canadians 55+.

 

Copyright © 2020 Key Media

UPDATE: Multi-family sites push $25 million an acre

Frank O’Brien
Western Investor

The value of residential development land in the Lower Mainland is increasing much faster than the price of the strata homes the land is being bought for, recent sales suggest.

The appetite for development sites has remained strong despite a pandemic that has stalled new strata projects, industry data shows.

 

During the first three months of this year, total land sales in the Lower Mainland increased 11.7 per cent from the same period a year earlier. The dollar value of land sales soared to $853 million, a 15.8 per cent increase from $737 million in the first quarter of last year, according to transactions registered with the Land Title and Survey Authority of British Columbia.

Many of the land sales are comprised of residential lots assembled for multi-family development, primarily condominiums and townhouses.

 

Yet, while land prices for potential condo projects are increasing by an average of nearly 16 per cent, the median price of a Metro Vancouver condominium has fallen 0.4 per cent in the past year to $633,241, according to a Re/Max Canada price survey released July 9.

Benchmark townhouse prices fell 0.8 per cent in June compared to a month earlier, but were up 3.6 per cent from June of last year, according to the Real Estate Board of Greater Vancouver.

Many new strata developments have been stopped or stalled due to COVID-19 uncertainty, according to a June survey of condo and townhouse projects by MLA Canada.

 

“Many projects have either extended or pushed back previews and are not committing to grand openings until the fall. Moreover, projects that were sales ready in February or March have re-strategized,” MLA Advisory stated. 

It can take years for a development site to mature into a new strata project, but it appears developers are willing to invest for the long term.

On April 30, the final piece of a North Vancouver residential land assembly on East 3rd Street closed at $17.5 million for a 0.66-acre site that currently contains two detached houses and two duplexes.

This represents a price per-square foot land price of $600, according to Klein Group of Companies, Vancouver, brokers on the deal.This translates into a land value of 

of $26.1 million per acre,

 

The property had been bought two years ago this month at $350 per square foot.

The April sale is the last section of the 1.36-acre assembly that sold for a total of $30.8 million.

A proposed project for the site, by Cascadia Green Development, has not yet been approved by City of North Vancouver council. Council will consider the developer’s application to amend the city’s official community plan and zoning bylaw to permit the construction of a mixed-use (commercial and residential) development at the site during a virtual town hall on Tuesday, July 14.

In late February, before COVID-19 was declared a global pandemic, a quarter-acre residential site in Vancouver’s Mount Pleasant neighbourhood sold for $6.6 million, or the equivalent of more than $25 million per acre.

 

The 11,094-square-foot lot in the 4600 block of Main Street has the potential to be developed into a six-storey residential building covering about 35,000 square foot. 

In this case, the land costs equate to roughly $188 per buildable square foot, according to Stanley Chiu, of Gammon International Real Estate Corp. which brokered the sale.

Fraser Valley residential land prices are also rising, but remain far below Metro Vancouver. 

In late February, an investor paid $4.26 million for a 28,100-square-foot (0.64-acre) site on 53 Avenue, Langley, or a land value of $150 per square foot. This represents a per-acre price of around $15 million.

The site is zoned at FSR 1.7, with the potential for 51 residential strata units. 

In July, a 6.3-acre site with the potential for high-density residential in central Surrey was listed by HQ Commercial of Vancouver. The asking price is $99 million, or about  $15.2  million per acre.

 

© Copyright 2020 Western Investor

Development sites still bought in the time of Covid

Frank O’Brien
Western Investor

The value of residential development land in the Lower Mainland is increasing much faster than the price of the strata homes the land is being bought for, recent sales suggest.

The appetite for development sites has remained strong despite a pandemic that has stalled new strata projects, industry data shows.

During the first three months of this year, total land sales in the Lower Mainland increased 11.7 per cent from the same period a year earlier. The dollar value of land sales soared to $853 million, a 15.8 per cent increase from $737 million in the first quarter of last year, according to transactions registered with the Land Title and Survey Authority of British Columbia.

Many of the land sales are comprised of residential lots assembled for multi-family development, primarily condominiums and townhouses.

Yet, while land prices for potential condo projects are increasing by an average of nearly 16 per cent, the median price of a Metro Vancouver condominium has fallen 0.4 per cent in the past year to $633,241, according to a Re/Max Canada price survey released July 9.

Benchmark townhouse prices fell 0.8 per cent in June compared to a month earlier, but were up 3.6 per cent from June of last year, according to the Real Estate Board of Greater Vancouver.

Many new strata developments have been stopped or stalled due to COVID-19 uncertainty, according to a June survey of condo and townhouse projects by MLA Canada.

“Many projects have either extended or pushed back previews and are not committing to grand openings until the fall. Moreover, projects that were sales ready in February or March have re-strategized,” MLA Advisory stated. 

It can take years for a development site to mature into a new strata project, but it appears developers are willing to invest for the long term.

On April 30, the final piece of a North Vancouver residential land assembly on East 3rd Street closed at $17.5 million for a 0.66-acre site that currently contains two detached houses and two duplexes.

This represents a price per-square foot land price of $600, according to Klein Group of Companies, Vancouver, brokers on the deal.This translates into a land value of 

of $26.1 million per acre,

The property had been bought two years ago this month at $350 per square foot.

The April sale is the last section of the 1.36-acre assembly that sold for a total of $30.8 million.

A proposed project for the site, by Cascadia Green Development, has not yet been approved by City of North Vancouver council. Council will consider the developer’s application to amend the city’s official community plan and zoning bylaw to permit the construction of a mixed-use (commercial and residential) development at the site during a virtual town hall on Tuesday, July 14.

In late February, before COVID-19 was declared a global pandemic, a quarter-acre residential site in Vancouver’s Mount Pleasant neighbourhood sold for $6.6 million, or the equivalent of more than $25 million per acre.

The 11,094-square-foot lot in the 4600 block of Main Street has the potential to be developed into a six-storey residential building covering about 35,000 square foot. 

In this case, the land costs equate to roughly $188 per buildable square foot, according to Stanley Chiu, of Gammon International Real Estate Corp. which brokered the sale.

Fraser Valley residential land prices are also rising, but remain far below Metro Vancouver. 

In late February, an investor paid $4.26 million for a 28,100-square-foot (0.64-acre) site on 53 Avenue, Langley, or a land value of $150 per square foot. This represents a per-acre price of around $15 million.

The site is zoned at FSR 1.7, with the potential for 51 residential strata units. 

In July, a 6.3-acre site with the potential for high-density residential in central Surrey was listed by HQ Commercial of Vancouver. The asking price is $99 million, or about  $15.2  million per acre.

Copyright © Western Investor

CRA’s tax audit of U.S. real estate transactions

David Rotfleisch
REM

On June 25, Canada Revenue Agency (CRA) announced that it would carry out a tax review of six years of U.S. real estate transactions in order to find any tax non-compliance from Canadian taxpayers. CRA is looking for “real estate and property data in bulk form, in order to identify current and historical records, mortgage transactions, property taxes, real property records and deeds.”

To accomplish this, CRA will carry out a tax audit of “records on Canadian property transactions in the U.S., including municipal addresses, names of owners, square footage, sales histories and property tax assessments.”

A Canadian taxpayer who is reassessed through this audit can face substantial tax penalties on top of interest, not to mention the professional and legal fees required to respond and object to the audit. There is also a possibility of prosecution for tax fraud or tax evasion. This article will break down the typical issues that could come up in a tax audit of undeclared real estate property or unreported real estate transactions.

 

Unreported foreign property

The first issue that CRA could be looking for is the T1135 Reporting Requirement for a foreign property with a value of over $100,000 Cdn. This is a reporting requirement a Canadian taxpayer must comply with, regardless of whether the taxpayer is generating income from his or her foreign property.

A Canadian taxpayer who held U.S. real estate directly or through a trust is subject to this T1135 requirement depending on the fair market value of the U.S. property over time. The penalties for failure to comply with the requirement could be steep. If a taxpayer only failed to file the required form in the past 24 months, then the penalty is calculated as $25 per day for a maximum amount of $2,500.

However, if a taxpayer has not filed the T1135 form for more than 24 months when the taxpayer is required by law to do so, the penalty could be five per cent of the cost of foreign property. The calculation of this penalty could be different if the property has been transferred or loaned to a trust, or the property is in the form of shares or bonds from a foreign corporate affiliate.

Note that Canadian taxpayers with personal-use properties located outside of Canada are not required to file T1135 forms if their properties are not generating income. For more information please see our article about T1135 reporting requirements.

Unreported rental income

As a general rule, Canadian tax residents must declare and report their worldwide income. The Income Tax Act uses the Foreign Tax Credit mechanism to ensure income generated from another jurisdiction is not double taxed. However, if a Canadian taxpayer failed to report his or her U.S. rental income, the taxpayer can be subject to reassessments and tax penalties from the CRA, even when taxes had been paid to the U.S. government.

This upcoming CRA tax audit will probably involve auditors looking for unreported U.S. rental incomes from Canadian taxpayers. This could take several forms. CRA could reassess a Canadian taxpayer for failing to disclose any rental income when CRA believes U.S. rental income had been generated.

However, even when a Canadian taxpayer had been reporting their U.S. rental income, CRA could take issue with either the total revenue generated by a rental property or with the expenses claimed by the taxpayer in relation to the rental property. A tax audit over deductions can be particularly frustrating, given that CRA tax auditors have the power to make a wide range of assumptions when it comes to expenses, while the taxpayer can have difficulty producing the required documentation regarding claimed expenses in the past.

 

Unreported real estate sales

 

Finally, CRA will be looking into U.S. real estate sales of properties owned by Canadian taxpayers, and specifically unreported sales of U.S. residential homes owned by Canadian taxpayers. When the sales of these homes do not qualify for the principal residence exemption, the proceeds will be fully taxable as either income or capital gains. CRA’s power to tax U.S.-based income is subject to the U.S.-Canada Tax Treaty.

While unreported sales of non-principal residence homes will certainly be on CRA’s radar, another crucial issue that could affect many Canadian taxpayers is the failure to report the sales of a principal residence located outside Canada after 2016.

CRA’s position is that it is entirely possible for a Canadian tax resident to claim principal residence exemption on a home located outside Canada. This can often be the case for Canadian taxpayers who work in the U.S. for up to several months a year. They could own homes in the U.S. and still be considered a Canadian tax resident under the U.S.-Canada Tax Treaty.

A taxpayer in such a situation might have been assured that he or she did not need to report the sales of their U.S. principal residence to the CRA. Such advice, if given for real estate transactions after Oct. 3, 2016, would be wrong. Canadian taxpayers are required to report the sales of their principal residence to the CRA. Failure to report can incur a maximum penalty of $8,000.

Furthermore, a taxpayer with unreported principal residence transactions might also have to defend the position that it indeed the sale of a principal residence. This could involve a costly and time-consuming tax audit response and objection process any taxpayer would want to avoid.

CRA’s intention to conduct a tax audit was announced through a tender notice titled Bulk United States (U.S.) Real Property Data (re: Canadian residents). As of the date of this article, the tender is still active, which could mean CRA has yet to find a U.S. vendor to provide CRA with its desired U.S. real estate data.

If CRA has no existing knowledge of the tax owing by a Canadian taxpayer, this taxpayer may qualify for the Voluntary Disclosure program if other criteria are also met. Refer to our article about the Voluntary Disclosure Program for more information. A timely voluntary disclosure application could result in substantial savings in penalties and interest and would avoid prosecution for tax fraud or tax evasion.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

 

© 1989-2020 REM Real Estate Magazine

RE/MAX: COVID-19 can?t slow demand in Toronto real estate market

Ephraim Vecina
Mortgage Broker News

COVID-19 has not significantly deterred buyers in Toronto due to the market-friendly monetary and fiscal conditions driven by the federal government and the Bank of Canada, according to a RE/MAX analysis.

While employment levels have fluctuated and businesses have placed themselves on hold over the last few months, “at the same time, there has been sustained activity in the number of buyers compared to available listings,” RE/MAX said. “This is one of the chief factors in supporting price growth relative to last year’s pace, despite shifting market conditions.”

Data from the Toronto Regional Real Estate Board showed that in May, the market’s average home price grew by 3% annually to reach $863,599.

Federal measures played a large part in keeping the number of prospective buyers stable, RE/MAX said.

“Canada Mortgage and Housing Corporation has supported lenders to cover the cost of mortgage deferrals,” RE/MAX said. “In a broader policy tool, the government implemented a wage subsidy program to help employers keep staff on payroll, helping millions continue to collect pay cheques and cover their bills.”

RE/MAX also pointed at the current BoC benchmark rate of 0.25% as especially advantageous to Canadians who were fortunate to have kept their jobs during the crisis.

“This is allowing buyers to borrow greater amounts of money at a lower cost over time,” RE/MAX said. “The institution has also pumped billions of liquidity into the financial system, making lenders more confident in issuing loans.”

Copyright © 2020 Key Media

(Some) B.C. tenants can now be evicted

WI Staff
Western Investor

The B.C. government has partially lifted a ban on residential rental evictions but is maintaining the moratorium on rent increases and evictions for non-payment of rent.

B.C. has also extended a rental relief program that provides $300 to $500 per month in rental supplements, paid directly to landlords, until the end of August. 

The province says that between April 9 and June 15, BC Housing received more than 90,000 applications for the temporary rent supplement, with nearly 82,500 eligible applications confirmed.

According to surveys by Goodman Commercial Inc. and CBRE, about 97 per cent of residential tenants paid the rent in April, May and June.

The following tenancy laws came into effect July 2.

A landlord can now issue a Notice to End Tenancy for any reason (other than unpaid or late payment rent).

Landlords with existing orders for eviction can now take them to the courts for enforcement and can enforce a writ order effective immediately.

Landlords can enter a rental suite with 24-hour notice and do not need the tenant’s consent. They are expected to follow health guidelines like physical distancing, cleaning and wearing masks when appropriate.

The change also allows for personal service of documents to resume, rather than via email.

Landlords’ ability to restrict access to common spaces for COVID-19 related health reasons remains.

“A tenant who has not paid rent could face eviction once the state of emergency is over,” the government statement cautions.

 

© Copyright 2020 Western Investor

REW.ca shakes up the real estate market by adding rental properties?to B.C.?s most-used home platform

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