RSS

Turns out 2017 might be the year when B.C. home buyers will finally get a break. But don’t bother throwing a party, yet.

Price drop is due to a lack of supply 

The Canadian Real Estate Association (CREA) predicts prices will drop by about 7.8% in 2017 in B.C., primarily due to a lack of supply of higher-priced single family homes in the Lower Mainland and Vancouver areas.


CREA’s Chief Economist, Gregory Klump, likens this forecasted price decline as the equivalent of removing the basketball team from a Grade 8 class. “Throw in the basketball team and the average height shoots up. The same applies to markets with higher-end homes.” He continues by saying that, “The forecasted drop in B.C. home prices largely reflects an anticipated decline in single family home sales activity at the higher end of the market—particularly in the Lower Mainland,” says Klump.

New tax certainly helped

This trend of declining of home sales in B.C.’s Lower Mainland was confirmed by data collected by Zoocasa, a full-service national brokerage. According to Zoocasa Managing Editor, Penelope Graham, Vancouver “experienced a major deceleration in 2016.” While the decline started before the 15% tax for foreign buyers was quickly introduced by the B.C. government in early August 2016, the tax prompted homes sales activity to plunge 26% by September, according to the Real Estate Board of Greater Vancouver.


“Sales have been trending downward in Metro Vancouver for a few months. The new foreign buyer tax appears to have added to this trend by reducing foreign buyer activity and causing some uncertainty amongst local home buyers and sellers,” REBGV stated.


 By December 2016, sales had dipped by just over 20% year-over-year, according to the British Columbia Real Estate Association, with sales dollar volume down 25.2%.

These declines in both sales volume and house prices will continue into 2017.

Just don’t expect cheaper homes

“Home prices had gotten so out of whack with the growth in the underlying wages and salaries that there had to be a correction—and it’ll happen in 2017,” said Royal LePage CEO Phil Soper. But don’t expect home prices to get much cheaper, says Soper. The dramatic appreciation over the last few years means that a massive correction would have to take place in order to see some real devaluation in housing prices. For instance, even if homes were to fall in value by 10%, prices would still remain near March 2016 levels—or 20 times the average income of the region, Soper explained to Zoocasa.com.

B.C. buyers will get a temporary break

Price declines won’t be uniform across all markets and all price points. Then there’s the added pressure of the spring buyer rush. This year’s rush could be even more pronounced now that the B.C. government has announced a new Home Owner Mortgage and Equity Partnership (HOME) loan, which goes into effect starting this February 2017.


In case you missed it: The B.C government will offer a subsidized loan to any first-time home buyer that can match the interest-free loan (for the first five years), up to maximum of $37,500 or 5% of the home’s purchase price. To qualify for the program, buyers must have lived in B.C. for at least a year (and been a Canadian citizen or permanent resident for at least five years). The household income must be below $150,000 per year, plus each household must prove that they’ve filed their tax return and paid taxes for the last two years. The loan will be amortized over 25 years, with interest set at prime plus 0.5% after five years.


Right or wrong, this extra loan might just be the right incentive for first-time buyers to get into the B.C. real estate market in 2017 (for more, read my post on the Smart way to use the new HOME loan).


 

By Romana King

 

Referenced at: http://www.moneysense.ca/spend/real-estate/buying/bc-real-estate-market-forecast-for-2017/


Read

While real estate might be a product of local markets, probably the single biggest reason for the potential nation-wide real estate slowdown in 2017 are macroprudential measures introduced in late 2015 and throughout 2016 (and possibly stretching into this year, should banks be required to cover a portion of mortgage default losses). 

 

What are macroprudential measures?

Macroprudential is a term used to describe financial policies that are aimed at minimizing or eliminating risks to the financial system as a whole — think of it like a blanket, nation-wide policy that’s used to eliminate or reduce systemic risk within our country’s economy.

 

In Canada, these macroprudential measures included the increase to minimum down payments required for home purchases over $500,000 and the requirement of all high loan-to-value borrowers (and those who chose amortizations over 25 years) to qualify based on posted mortgage rates, rather than discounted mortgage rates.


In the U.S. these measures included stricter underwriting standards for mortgages (implemented after the 2007/2008 credit crunch and housing crash), and increased margin and capital requirements for banks and lenders.

 

Impact of these measures

The impact of these measures, both in Canada and in the U.S., has been significant.

 

According to analysis by Genworth Canada, the largest private mortgage insurance provider, over a third of home buyers would not have qualified for a mortgage on their current home had they applied after the new mortgage rules were introduced in 2016. Additional analysis suggests that another 8 per cent to 10 per cent of current homeowners would be unable to absorb even a $200 increase in monthly expenses — the equivalent of a 0.75 per cent increase above currently low rates. 

 

Then there’s the impact tighter mortgage regulations had on lending institutions in 2016. Higher capital requirements — this is the money banks and lenders must keep within their coffers in order to cover worst-case scenario losses — and the threat of having to shoulder the responsibility of defaulted loans has meant small, incremental increases in both fixed and variable mortgage rates. Not enough to establish rising rates, but just enough to knock out those buyers struggling the most to get into the real estate market.

 

And now rates are poised to rise in 2017.

 

Don’t discount Trumpflation

But attempts to keep our nation’s economy strong and stable aren’t the only factors that will impact Canada’s varied real estate markets in 2017. This year must also contend with the very real possibility of inflationary economic policy under the newly elected President Donald Trump.

 

Trump campaigned on a plan to stimulate the slowly-but-steadily-growing U.S. economy by spending big on infrastructure. This deficit-style spending still worries global financial markets (albeit with a lot less impact than when his presidency was first announced). Still any movement towards massive infrastructure spending and tax cuts will lead to inflationary pressures on the U.S. economy and this could mean additional rate increases by Federal Reserve Chair, Janet Yellen. 

 

While Federal Finance Minister Bill Morneau and the Bank of Canada have stood their ground — committing to the 2 per cent inflation target, as opposed to following the U.S. Federal Reserve’s lead — it’s only a matter of time before the Canadian economy is forced to respond to U.S. economic pressures.

 

As a result, we could see additional increases in both fixed and variable rate mortgages in 2017 — and any rate hike will impact demand side of the real estate equation, and translate into further market slowdowns and eventual price cuts.

 

Then there are the foreign buyers

Finally, there’s the elephant in the room: Foreign buyers.

 

While the impact of foreign buyers is not uniform across the country, the hottest markets — Vancouver, Victoria, Toronto and Montreal — certainly benefitted from non-resident foreign money.

 

One of the biggest influencers, particularly on the west coast, has been the influx of Chinese money. In an effort to capture their new-found wealth, many Chinese home buyers sought out foreign jurisdictions to park their coin. The result was increased demand on residential and commercial real estate in sought after cities, such as Sydney, Australia and Vancouver, Canada.  

 

A few national and provincial governments, including Canada, responded to this influx of foreign cash. In October 2016, the federal Liberals opted to close a loophole that helped foreign buyers, as well as real estate speculators. Starting in 2017, the sale of all real property must be reported on each person’s annual income tax returns. (This means any property sold in 2016 must be reported on the T1 General tax form for 2016, which is due in April 2017.) While the rules can get complex, the general gist is that anyone who has purchased and sold a property must report it; if the property doesn’t qualify for the principal residence exemption, the seller must pay capital gains tax. Now, in order to qualify for the principal residence tax exemption, the homeowner or the spouse of the homeowner must “ordinarily reside” in the property. Now, no one is foolish enough to assume that this will eliminate all the foreign buyers from the Canadian market, but those who want to avoid paying tax on the sale of the property that they do not live in, may end up looking elsewhere to park their money.

 

Then there was the B.C. foreign buyers’ tax — a 15 per cent surtax introduced in August 2016. “This tax only exacerbated a market slowdown that had just begun after six months of robust activity,” explains Adil Dinani, real estate agent with Royal LePage.

 

Yet, while it can’t be denied that B.C.’s new tax had a big part to play in slowing down sales activity in B.C.’s Lower Mainland markets, credit must also be given to the Chinese government.

 

Due to increasing pressure on the renminbi (China’s currency) Beijing took steps to stop money flowing out of the country. As a result, by mid-2016 Chinese banks started to apply stricter rules on international money transfers and one Chinese bank want as far as obtaining a B.C. court order to freeze the assets of a businessman that they accused of “fleeing China and buying ‘luxury’ Lower Mainland homes [using] a defaulted $10 million loan.” To put this in perspective, the court order was issued in June 2016 — the same month sales dramatically slowed in B.C.’s Lower Mainland.

 

Right now, many buyers, sellers and those who work in real estate are watching and waiting to see how the spring selling market unfolds. If there are no other regulation changes and if supply continues to be constrained, there will be little movement in prices in the hotter Canadian property markets. However, unless there are dramatic changes, most Canadian markets can expect a shift towards a more balanced real estate market — and this will mean a slight drop in prices for most markets.


MoneySense

Referenced at: http://www.moneysense.ca/spend/real-estate/real-estate-market-slowing-down-2017/

Read

Strict new government scrutiny on Chinese people who want to convert their money into other currencies threatens to slow the rush of foreign property buying that has stoked sky-high home prices in Canada and around the world.

 

For months, China has sought to dam the flood of money pouring out of its borders, which has rapidly diminished its stockpile of foreign reserves.

 

It has raised new barriers to companies buying abroad and moving money out of the country.

 

Now, authorities in China are taking new steps to bar individuals from putting their cash into overseas markets to buy homes and other investments, a change with important implications for cities such as Vancouver and Toronto where Chinese buyers had contributed to frenzied property trading.

 

Under the new regime, the number of buyers will “drop sharply,” said Andy Xie, a China economist formerly with Morgan Stanley.

 

Those selling homes to Chinese buyers should brace for their “business to shrink dramatically,” he warned.

The Vancouver region’s real estate market has already been cooling off for months, after sales volume and prices peaked last spring.

 

In February, the B.C. government slapped a tax on the portion of a property sale above $2-million and then implemented a 15-per-cent tax on foreign home buyers in Metro Vancouver in August.

 

In the seven weeks leading up to the tax’s implementation in the Vancouver area, foreign purchasers (including those from China) accounted for 13.2 per cent of the region’s total.

 

Since then, the influx of foreign buyers has slowed to a relative trickle, according to the B.C. government.

In October, Ottawa tightened mortgage rules in general and closed tax loopholes used by some purchasers who are not Canadian citizens or permanent residents.

 

Real estate industry officials said Wednesday it will take many months for the impact of various government measures in Canada and restrictions in China to play out. “There are so many factors in the housing market,” said Dan Morrison, president of the Real Estate Board of Greater Vancouver. “Vancouver is not a homogeneous market. Some people want to point to one easy problem or one easy solution, and there is no such thing.”

 

People in China, who can normally only convert $50,000 (U.S.) a year in foreign currency, have long been technically barred from buying property overseas, but those rules have not been rigorously enforced.

At the outset of 2017, however, China imposed a series of new documentation requirements on currency transactions and punishments for using money in ways the rules don’t allow.

 

Before, changing yuan into loonies could be done with the tap of a smartphone screen. Now, banks have begun requiring paperwork that entails submitting for approval the reason a person wants to obtain foreign currency and when it will be used. A new rule then holds people liable for what they do with that money – and could bar them from exchanging money for up to three years if they are found to have used it improperly, such as for the purchase of a home.

 

The rich, with corporate assets and access to sophisticated market tools for stealthily routing money around the world, are unlikely to feel much difference from the change.

 

But for the middle class, which has become an important force in property markets in places such as Canada, the United States and Australia, “it will have a big impact,” Mr. Xie said.

 

Families that once bundled together converted currency to buy condominiums and modest houses abroad will face new inspection of their currency conversions and new risks to falling afoul of the rules.

 

Mr. Xie expects many to simply abandon the idea, particularly since the rules also give banks much more latitude to simply deny transactions. He expects authorities to give banks quotas, in a bid to keep the country’s foreign reserves from dipping below $3-trillion, a line Beijing does not want to cross, he said. In November, China’s foreign reserves stood just $50-billion from that mark.

 

“China is trying to defend the line,” he said, a shift that has created anger among Chinese citizens, which spilled out on social media.

 

“Why can companies use vast amounts of foreign currency to buy mines or contracts for soccer stars, but citizens can’t buy houses abroad?” one person complained.

 

Another posted a mock bank application, saying the reason for needing foreign currency was that “I have lung disease and need to breathe fresh air in Canada,” and, “if I don’t go to a country with a better environment, I will have to use this money to buy a tomb in Beijing.”

 

Those in the property industry, however, say they aren’t worried Chinese buying will stop. In the first few days under the new policy, clients have asked questions, but, “I haven’t seen any anecdotal reasons to believe that there will be a drop in inquiry levels from a year earlier,” Charles Pittar, chief executive officer of Juwai.com, the top international property website for Chinese buyers, said in an e-mailed statement.

 

Rather than dry up, he expects Chinese home acquisitions to grow alongside rising domestic wealth and an appetite for overseas property.

 

“There is no doubt that Chinese buyers will set new records for international property purchase in the years to come,” Mr. Pittar said.

 

Indeed, crackdowns inside China often have the opposite effect. Many cities have rolled out policies to tame real estate markets in recent years only to find the announcement of the new rules “turned out to be a starting gun for even more house buying,” said Li Zhanjun, director of the Shanghai Yiju Real Estate Research Institute.

 

“Don’t imagine that once the government announces something, it will always reach its intended outcome.”

The new currency rules could even motivate more Chinese buying by making “people more worried about the security of their assets and more eager to move them overseas,” said Anne Stevenson-Yang, co-founder of investment advisory J Capital Research.

 

Chinese investors tend to be nimble in finding ways around new rules, too. “It takes about a month before people find the next channel,” Ms. Stevenson-Yang said.

 

Still, the Chinese determination to choke cash outflows appears to be serious, and could have implications that extend far beyond property and into other sectors whose payrolls and future plans are increasingly dependent on Chinese money, such as universities and tourism operators.

 

What China is doing with capital controls is similar to its successful management of the Internet. Access to censored websites “is not impossible from China, but it’s just a big hassle, and because it’s a hassle, very few people manage to do it on a regular basis,” said Victor Shih, who specializes in Chinese fiscal policy at the University of California, San Diego.

 

The goal with currency conversion restrictions “is exactly the same – to create enough friction to deter the vast majority of people from converting sizable amounts of money,” he said.

 

China could do much more, Dr. Shih said. Every month, Chinese people spend between $15-billion and $20-billion abroad on services such as tourism and education. It’s a huge cash drain, and one that China could pare back by restricting the number of people who can travel and study abroad.

 

“I really think this is where it’s all heading – dialling back the clock to the early eighties, when all flows, including visits, were tightly regulated by the government,” Dr. Shih said.

 

“The leadership would like a certain combination of outcomes – stable growth, and also currency stability, and also no financial risk,” he said. “In order to accomplish that, you just have to control more and more stuff.”

 

 

Read

The Metro Vancouver* housing market had its third highest selling year on record in 2016, behind only 2015 and 2005.


Sales of detached, attached and apartment properties in the region reached 39,943 in 2016, a 5.6 per cent decrease from the 42,326 sales recorded in 2015, and a 20.6 per cent increase over the 33,116 residential sales in 2014.


“It was an eventful year for real estate in Metro Vancouver. Escalating prices caused by low supply and strong home buyer demand brought more attention to the market than ever before,” Dan Morrison, Real Estate Board of Greater Vancouver (REBGV) president said.


“As prices rose in the first half of the year, public debate waged about what was fuelling demand and what should be done to stop it. This led to multiple government interventions into the market. The long-term effects of these actions won’t be fully understood for some time.” Residential properties listed for sale on the Multiple Listing Service® (MLS®) in Metro Vancouver reached 57,596 in 2016. This is an increase of 0.6 per cent compared to the 57,249 properties listed in 2015 and a 2.6 per cent increase compared to the 56,066 properties listed in 2014.


“The supply of homes for sale couldn't keep up with home buyer demand for much of 2016. This allowed home sellers to raise their asking price. It wasn’t until the last half of the year that prices began to show modest declines.”


The MLS® Home Price Index (HPI) composite benchmark price for all residential properties in Metro Vancouver ends the year at $897,600. This represents a 2.2 per cent decrease over the past six months and a 17.8 per cent increase compared to December 2015.


December summary:
Residential property sales in the region totalled 1,714 in December 2016, a decrease of 39.4 per cent from the 2,827 sales recorded in December 2015 and a decrease of 22.6 per cent compared to November 2016 when 2,214 homes sold.


Last month’s sales were 8.1 per cent below the 10-year sales average for the month. New listings for detached, attached and apartment properties in Metro Vancouver totalled 1,312 in December 2016. This represents a decrease of 35.1 per cent compared to the 2,021 units listed in December 2015 and a 58.3 per cent decrease compared to November 2016 when 3,147 properties were listed.


The total number of properties currently listed for sale on the MLS® in Metro Vancouver is 6,345, a 5.3 per cent increase compared to December 2015 (6,024) and a 24.3 per cent decrease compared to November 2016 (8,385).


Sales of detached properties in December 2016 reached 541, a decrease of 52.4 per cent from the 1,136 detached sales recorded in December 2015. The benchmark price for detached properties is $1,483,500. This represents an 18.6 per cent increase compared to December 2015 and a 1.8 per cent decrease compared to November 2016.


Sales of apartment properties reached 915 in December 2016, a decrease of 25.3 per cent compared to the 1,225 sales in December 2015.The benchmark price of an apartment property is $510,300. This represents a 17.3 per cent increase compared to December 2015 and a 0.3 per cent decrease compared to November 2016.


Attached property sales in December 2016 totalled 258, a decrease of 44.6 per cent compared to the 466 sales in December 2015. The benchmark price of an attached unit is $661,800. This represents a 20.4 per cent increase compared to December 2015 and a 0.8 per cent decrease compared to November 2016.


The Real Estate Board of Greater Vancouver is an association representing more than 13,000 REALTORS® and their companies. The Board provides a variety of member services, including the Multiple Listing Service®. For more information on real estate, statistics, and buying or selling a home, contact a local REALTOR® or visit

www.rebgv.org.

Read

Home values in the Vancouver region skyrocketed in the latest BC Assessment data, with the snapshot from mid-2016 capturing the housing market before it cooled off.


Assessments for single-family detached houses jumped 30 per cent to 50 per cent in value from July 1, 2015, to July 1, 2016. For example, a typical detached home on a lot with a width of 33 feet (10 metres) on Vancouver’s west side soared 41 per cent in value, BC Assessment said Tuesday.


The provincial Crown corporation estimates values on behalf of B.C. municipalities, which use the data to determine how much homeowners will pay in property taxes.


Condo and townhouse values in the Vancouver region rose 15 per cent to 30 per cent during the latest assessment year, said Jason Grant, the corporation’s acting vice-president of assessment.


He emphasizes that the valuation date is important because the housing market in the Vancouver area has slowed down since mid-2016. The amount that homeowners pay in property taxes will hinge on how their increase in value compares with the average in their taxing jurisdiction.


“Dramatic increases in property assessments do not translate into a corresponding increase in property taxes. It’s going to depend on how your property performed relative to the average change in your community,” Mr. Grant said in an interview.


The valuations reflect the state of the real estate sector weeks before the B.C. government implemented a 15-per-cent tax on foreign home buyers in Metro Vancouver on Aug. 2.


“We’re historically used to the assessment being lower than what the home’s market value is, and now you have this reversal,” said Vancouver real estate agent Steve Saretsky, who specializes in condos. He estimates typical condo prices downtown have slipped 5 per cent since June.


Sales volume peaked last March, while the average price for detached homes sold in the area called Greater Vancouver hit record highs that surpassed $1.8-million during the first quarter of 2016, according to real estate board data. The price for Greater Vancouver detached homes averaged $1.61-million in November, down 8.6 per cent from $1.76-million in July.


One group of owners facing higher property tax bills are those having homes with assessed values above $1.2-million. For assessments above $1.314-million, a provincial grant worth up to $570 will be eliminated.


Assessed values in the City of Vancouver have risen 30.6 per cent on average for all types of housing.


The price for detached homes sold within Vancouver’s city limits recently averaged more than $2.6-million.


Lululemon Athletica Inc. founder Chip Wilson’s Vancouver waterfront mansion topped the list of the most expensive residential properties in British Columbia on July 1, 2016 – the fourth consecutive time that his home has been No. 1 in the province for an assessment year.


Mr. Wilson, who owns the property through 3085 Point Grey Road Holdings Ltd., saw his home’s assessed value jump to $75.8-million, up 18.7 per cent from $63.9-million on July 1, 2015, BC Assessment said.


A property at 4707 Belmont Ave. in Vancouver placed second on the provincial most-expensive residential list. That home, owned by Pisonii (PTC) Ltd., increased 21.3 per cent in value to $69.2-million.


In the Victoria suburb of Oak Bay, assessed values climbed 29.1 per cent on average for all types of housing.


Values in rural British Columbia, however, have decreased in several resource-based communities. They fell 4.2 per cent in Kitimat in the northwest, where proposals have stalled for constructing terminals to export liquefied natural gas. Values slipped 4.1 per cent in Fort St. John in the northeast, where natural gas drilling has diminished, while coal-dependent Sparwood in the southeast saw a 9.8-per-cent decline during the latest assessment year.


Reference at:

http://www.theglobeandmail.com/real-estate/vancouver/home-values-skyrocket-in-vancouver-region/article33473392/


Brent Jang

Globe & Mail

Read
Reciprocity Logo The data relating to real estate on this website comes in part from the MLS® Reciprocity program of either the Greater Vancouver REALTORS® (GVR), the Fraser Valley Real Estate Board (FVREB) or the Chilliwack and District Real Estate Board (CADREB). Real estate listings held by participating real estate firms are marked with the MLS® logo and detailed information about the listing includes the name of the listing agent. This representation is based in whole or part on data generated by either the GVR, the FVREB or the CADREB which assumes no responsibility for its accuracy. The materials contained on this page may not be reproduced without the express written consent of either the GVR, the FVREB or the CADREB.