Opinion: Housing is a struggle and governments about to make it worse

Frank O’Brien
Western Investor

Four new rules – including one now in effect in B.C. – will be costly, complicated and do nothing to alleviate the low supply or high price of housing in Canada

| Dominion Lending Centre

Despite headwinds, rental investments appear solid into 2023, due, ironically, to the high cost of homeownership that will keep more tenants renting. This, combined with a spike in immigration and low supply of rental apartments, means that rents will likely keep increasing and the value of multi-family rental property will also rise.

But a residential market that is already reeling from a series of seven interest rate hikes since the spring, is about to experience a new round of government “assistance” that will make the process of buying a home in Canada even more complicated and costly, especially in British Columbia.

The Land Owner Transparency Registry (LOTR) came into force in B.C. on November 30, 2022. The first of its kind, it was dreamed up four years ago when governments suspected real estate was being used to launder money. Now, it appears, everyone is considered guilty unless they prove they are not. Under LOTR, every residential land transfer application must declare everyone “considered to have some meaningful relationship with the land or an indirect ownership interest in it.”  Failure to provide the transparency report can result in meaningful fine of up to $50,000 for the homebuyer.

Vancouver lawyers say LORT has been a time-consuming and complicated registry to complete.

On January 1, 2023, the federal government will bring in a home sale flipping tax for two years, which was recently extended to include assignment sales of new homes.

The tax kicks in when home or assignment is bought and sold within one year, unless disqualified by divorce or death. Any profit on the flip would be taxed as business income and would not qualify for the 50 per cent capital gains exemption.

With home prices falling across Canada since the spring and the outlook for little recovery next year, short-term flipping has already vanished, but the regulations remain in place.

On New Year’s Day 2023, Ottawa will bring in a two-year ban on foreign home buyers, just as it tries to increase immigration to the highest levels the country has ever seen. The Prohibition on the Purchase of Residential Property by Non-Canadians Act will stop would-immigrants from purchasing a home before their families arrive in Canada, further complicating their efforts to become productive citizens.

B.C. and Ontario, the major destinations for immigrants, already have 20 per cent of value tax on foreign homebuyers.

Also on January 1 the B.C. government will bring a new rule that requires that consenting adults who agree to consummate a home sale must wait three days before the sale is legal.  All this rule will do is delay possession dates and mess with the mortgage financing.

Advice to provincial and federal governments: please save us from any more government help with home buying. It is adding expense and delays to the process of simply owning a home.

 

© 2022 Western Investor

6.5-acre land assembly in Central Surrey sells for $170 million

Western Investor Staff
Western Investor

The development site of older rental buildings is destined for approximately 2,000 homes in five new condominium towers, some as high as 44 storeys.

Sutton Group West Coast Realty, Vancouver, for Western Investor

 

Property type: Development land assembly

Location: 13315 104th Avenue, Surrey B.C.

Size of land: 6.5 acres

Sale price: $170 million

Date of sale: July 2022

Buyer: Bosa Properties

Brokerage: Sutton West Group Realty, Vancouver.

Broker: Goran Bucan

 

 

© 2022 Western Investor

Brick-and-mortar retail holds the course as consumers cut spending

Peter Mitham
Western Investor

Space constraints ensure Metro Vancouver mall resilience

Shoppers have returned to Metro Vancouver’s malls, but inflation means they’re set to spend less.Rob Kruyt/Business in Vancouver

Consumers are back in force at malls, but many are spending less as cost-of-living pressures bite.

Close to 90 per cent of Canadians will visit shopping malls in December, according to surveys by JLL Canada, up from 85 per cent last year. Approximately 43 per cent will shop for 30 to 90 minutes, an improvement over 37 per cent a year ago.

“People are going back to the malls feeling more comfortable and safe shopping in person compared to last year,” said Madeleine Byblow, a senior associate specializing in retail with JLL Canada in Vancouver.

The arrival of the omicron variant just in time for Christmas put a damper on mall traffic last year, but the risk of respiratory viruses this season seems to emphasizing more focused trips rather than keeping people away.

But the survey, based on a sample of 982 shoppers contacted between late October and mid-November, indicates that spending will average $412 per person. This is 13 per cent lower than last year, and effectively offsets the effect of inflation on prices.

“Canadians plan to spend almost the same amount on gifts that they spent in 2020; however, prices are not the same as two years ago,” JLL reported. “Overall consumer prices have increased on average 12 per cent since the 2020 holiday season, mostly over the past year.”

While spending last year was driven by pent-up demand for in-person experiences, a spirit of restraint is in play this year even though demand remains high.

“Most consumers report that their cost of living − food, utilities, and gas − has risen since the beginning of the pandemic, reducing their discretionary budgets,” JLL reported.

Byblow said the cost of living has always been higher in Vancouver than elsewhere in Canada, and the current environment will drive a greater percentage of consumers to brand-name discounters like Homesense, Marshalls and Nordstrom Rack both during the Christmas season and in the year ahead.

“People are way more conscious of what they’re spending,” she said. “You’ll probably see those discount banners do well this season.”

The debut of Specsavers Optical Group, a UK retailer JLL is working with to secure locations in Metro Vancouver, underscores the trend.

“It’s going to be very timely for them to enter the market given that people are going to be looking for more affordable solutions for eye care,” Byblow said.

The impact for retail landlords is minimal, however.

While consumer spending might be down, tenants aren’t necessarily leaving malls because storefront exposure is an integral part of the new omnichannel marketing environment.

While more shoppers are researching purchases online, and fewer than half are completing purchases in-store, approximately 18 per cent will use brick-and-mortar stores as pick-up points for purchases.

The in-person activity co-exists alongside online shopping, with close to 60 per cent of shoppers buying online and having products home-delivered.

The shift in consumer habits has increased the importance of mall activities.

“The big one that’s come back this year is photos with Santa,” Byblow said. “That’s obviously a reason to get families into the mall and have them stay.”

But even with lower traffic, Metro Vancouver malls will likely be more resilient than those in other markets given geographic constraints that ensure retail space doesn’t track with population growth.

“Vancouver malls always fare better because we’re geographically constrained in terms of how much retail space we can even have,” Byblow said.

 

© 2022 Western Investor

Burnaby Metrotown 1.8-acre land assembly sells for $145 million

Western Investor Staff
Western Investor

The 80,000-square-foot, two-lot assembly eyed for high-density mixed-use development

Sutton Group West Coast Realty, Vancouver, for Western Investor

 

Property type: Development land assembly

Location: 4444 and 4488 Kingsway Avenue, Burnaby, B.C.

Number of sites: 2

Land size: 80,000 square feet (total)

Land size in acres: 1.8 acres

Potential: High-density, mixed-use residential development FSR (floor-space-ratio) 14.3

Date of sale: November 30, 2022

Brokerage: Sutton Group West Coast Realty, Vancouver

Broker: Goran Bucan

 

© 2022 Western Investor

Vancouver home buyers settle into the driver’s seat

Frank O’Brien
Western Investor

 

November sale and price data remains dismal, but Metro Vancouver housing market could be ripe for buyers right now, analysts say

Buyers should take advantage of “stuck” Metro market, some say. | Chung Chow

November housing sales and price data continued a downward spiral seen over the past seven months, with total transactions down 52.9 per cent from a year earlier and homes shredding more than 10 per cent of value since the spring price peak, according to the Real Estate Board of Greater Vancouver (REBGV).

Greater Vancouver sales in November were the lowest since 1967 and nearly 37 per cent below the 10-year average, while another increase in interest rate hike is expected December 7, the seventh from the Bank of Canada this year.

Yet, some claim to have seen the bottom of the Metro Vancouver housing market and that buyers should be taking advantage of today’s market because low supply and increased demand from population growth could soon push prices and sales higher.

“In our view, sales are likely at or near bottom with some downside risk if interest rates move higher than expected,” said Brian Yu, chief economist with Central 1 Credit Union, following the release of October sale data, which was nearly mirrored in November.

“Higher mortgage rates continue to price a large swath of buyers out of the market, but lower pre-approved rates, steady fixed rates and lower prices may be drawing some buyers back in. A strong provincial labour market and robust population growth are also supporting confidence,” Yu stated.

Kevin Skipworth, managing broker and partner at Dexter Realty, Vancouver, noted that some markets, including Vancouver’s Westside, North Vancouver and Richmond – where the sales-to-new-listing ratio hit 68 per cent in November – are seeing steady or rising sales despite a shortage of listings.

“This is more of a stuck market than a down market,” Skipworth said.” Buyers waiting for further price declines and sellers waiting for the next rise. In reality, at the rate we are going, flat will be the new up and down. So, if you are trying to plan your move around it being the right time based on market dynamics, don’t wait.”

“There is life creeping back into the real estate market,” he added. “Just don’t tell the Bank of Canada.”

The condominium market, which accounted for half of all the November sales, is also stronger than most suspect, according to Ben Smith, president of Toronto-based Avesdo, a software firm that tracks real estate data. He noted in a recent column in Storeys that price comparisons between pre-pandemic 2019 and today shows Metro Vancouver condos proved a solid investment, with price gains of up to 150 per cent for new units in the past three years.

“When reviewing recent data from the REBGV  it’s not difficult to be swept away by the descriptions of decreased year-over-year sales or lowered month-over-month prices. But industry insiders know that real estate – and new home development in particular – is a long game, and comparisons between astronomical mid-COVID-19 activity and today’s more typical market  simply can’t lead to reality-rooted conclusions,” Smith said.

“If you’re waiting for big price drops, they are unlikely to materialize, and you may just find yourself perpetually on the sidelines as the cost of housing continues to inflate … just like everything else.”

Still, it may take steely nerves for buyers to ignore the recent data.

The REBGV reports that residential home sales in the region totalled 1,614 in November 2022, a 52.9 per cent decrease from the 3,428 sales recorded in November 2021, and a 15.2 per cent decrease from October 2022.

“With the most recent core inflation metrics showing a stubborn reluctance to respond significantly to the furious pace of rate increases, the Bank of Canada may choose to act more forcefully to bring inflation back toward target levels,” said Andrew Lis, REBGV’s director, economics and data analytics. “While it’s always difficult to predict what the bank will do with certainty, this persistent inflationary backdrop sets up the December 7 rate announcement to be yet another increase.”

But Lis added that the extremely low supply –  new listings in November were down 24 per cent from a month earlier and 21 per cent lower than November 2021 – and the recent increase in immigration means “our market remains one demand surge away from renewed price escalation, despite the inflationary environment and elevated mortgage rates.”

Prices, meanwhile, are tracking lower but at a slow decline considering the dramatic year-over-year drop in housing sales.

The benchmark price for a detached house in Greater Vancouver is $1,856,800, down 1.7 per cent decrease from November 2021 and a 1.9 per cent decrease compared to October 2022.

The benchmark price of an apartment property is $720,500, a 3.5 per cent increase from November 2021 but down just 0.9 per cent  compared to October 2022.

Townhouse sales in November  totalled 281, a 54.2 per cent decrease compared to the 613 sales in November 2021. The benchmark price of townhouse is $1,027,900. This is a 2.7 per cent increase from a year ago and a 1.5 per cent decrease compared to October 2022. 

 

© 2022 Western Investor

Port Moody 14.8-acre land assembly closes at $157.2 million

Western Investor Staff
Western Investor

Assembly sale composes 56 detached-house lots in Coronation Park neighbourhood proposed for high-density mixed-used development

London Pacific Property Agents, Vancouver, for Western Investor

 

Property type: Development land assembly

Location: Coronation Park neighbourhood, Port Moody, B.C. 

Number of units: 56 (detached houses)

Land size: 14.8 acres

Sale price: $157.2 million (includes 3 lot sales that closed separately)

Date of sale closing: September 30, 2022

Buyer: Wesgroup Properties, Vancouver

Brokerage: London Pacific Property Agents Inc., Vancouver

Brokers: Grant Gardner and Thomas Trowbridge, assisted by Dean Andag and Jerry H. Lee.

 

© 2022 Western Investor

Keltic closes on multimillion-dollar Burnaby land deal

Frank O’Brien
Western Investor

The site: A 1.8-acre land assembly in Burnaby’s Metrotown sold November 30 for more than $100 million. | Google Earth

Vancouver real estate agent Goran Bucan brokered two of the biggest real estate deals in Metro Vancouver this year, including the sale of an entire city block in Burnaby’s Metrotown that closed November 30.

The 1.8-acre site was purchased for “in excess of $100 million” under a share-sale agreement, according to Rachel Li Lei, CEO of Keltic Canada Development, the buyer.

The transaction of 4444 and 4488 Kingsway, Burnaby, includes an Esso gas station and a smaller adjacent lot, both of which had previously been purchased by Bosa Properties. Bosa acquired the Esso gas station from 7-Eleven Canada in 2018 for $24 million.

The entire 80,000-square-foot site is planned for a one-million-square foot residential and commercial development, which will now proceed under the new owner, Keltic Canada Development of Vancouver.

Bucan said the deal is linked to the earlier sale of Bristol Estates in Central Surrey, a 6.5-acre parcel purchased by Bosa Properties in July for $170 million and approved for approximately two million square feet of residential and commercial construction in five towers. Bucan facilitated the off-market deal during a five-hour meeting between Bosa and the vendor, Landmark Premiere Properties Ltd., which had spent four years getting the site rezoning and permits in place, the agent said.

In return, Bosa provided Bucan with the opportunity to sell its 1.8-acre Burnaby site, which Bosa had spent seven years on land assembly and planning.

“Bosa gave me 30 days to sell it, with an unconditional offer,” Bucan recalled.

He immediately pitched the site to Keltic Canada Development and two out-of-province developers. Less than a week later, Keltic accepted the offer and the multimillion-dollar unconditional sale closed at midnight on November 30.

Bosa’s plan for the property, at the corner of Kingsway Avenue and Willingdon Street in the Metrotown area of Burnaby, included two towers, with one potentially as high as 70 storeys, covering approximately one million square feet with 553 condos, 385 rental housing units, a 160-room hotel and commercial square footage. The maximum allowable density is 14.3 floor-space ratio (FAR).

According to Lei, Keltic may change the configuration to replace the hotel with more office and other commercial space, including a small grocery outlet and upscale restaurants.

Bucan, of Sutton Group Vancouver, also brokered the single largest commercial transaction in Metro Vancouver in 2021. That transaction involved the sale of a 27-acre property in Richmond to Keltic Canada Development for $300 million.

 

© 2022 Western Investor