18 Oct

B.C. government moves ahead with speculation tax on vacant homes


Posted by: Kimberly Walker

B.C.’s finance minister has introduced legislation to move ahead with a controversial speculation tax on vacant or underutilized properties.

The bill ends months of speculation about how the province planned to use the new levy to help deal with runaway housing prices in some B.C. communities, outlining a range of tax rates from 0.5 to two per cent and a number of exemptions.

If the legislation is passed, the new tax will apply to all properties in designated regions of B.C. These include most parts of Metro Vancouver and the Capital Regional District (excluding the Gulf Islands), along with Abbotsford, Mission, Chilliwack, Kelowna, West Kelowna, Nanaimo and Lantzville.

Homeowners who live at their properties — or rent them out — will receive an exemption by filing an annual declaration form.

For the remaining properties, a tax rate of 0.5 per cent of the assessed value will apply for 2018.

In 2019 and subsequent years, B.C. residents with vacant or underutilized properties will continue to pay that rate, while Canadian citizens or permanent residents who are not B.C. residents will start paying one per cent.

Foreign homeowners will pay more

Foreign homeowners or “satellite families” who make 50 per cent of their income outside B.C. will pay two per cent on all properties, unless they rent them out.

The goal is to prevent housing speculation and help turn vacant properties into rentals, said Carole James, B.C.’s finance minister.

“As a government, we have a responsibility to act, to make sure that people can afford a home in the communities where they live and work,” she said. “The speculation and vacancy tax is a critical piece if we want to moderate our overheated housing market.”

Some opposed mayors in regions where the tax is set to apply had called on the finance minister to allow an opt-out clause, but James declined.

“When you face a major provincial crisis, it is the responsibility of the provincial government to act, not to let municipalities pick and choose about whether they want to address affordable housing,” James said.

‘NDP arrogance and hypocrisy’

However, the opposition Liberals say the tax punishes people in B.C. who want to have a retirement home and it will do little to improve housing affordability.

“This is the height of NDP arrogance and hypocrisy,” said Liberal leader Andrew Wilkinson.

“Our goal is to defeat this bill because it is a phony tax. It accomplishes nothing except to grab revenue for the NDP.”

Green Leader Andrew Weaver, who has been critical of the tax in the past, said he’s still reviewing the fine print to determine if his concerns have been addressed, and any changes that may be necessary.

“I still have concerns that Canadians are not being treated equally and that there is an insufficient role for local governments in determining what happens in their communities,” Weaver said in a statement.


The legislation also includes a number of exemptions for what the province calls special circumstances, including major home renovations and divorces.

Properties that are under development or renovation are also exempt — something that will keep the tax from discouraging more housing to come online, James said.

It’s estimated that more than 99 per cent of people in B.C. won’t pay the tax, James said.

17 Oct

MPC urges officials to protect the Canadian Dream


Posted by: Kimberly Walker

Mortgage industry representatives met with around 50 members of parliament and other government officials to urge them to reconsider some of the measures introduced to curb the housing market.

Mortgage Professionals Canada highlighted the continued negative impact of the stress test and discussed housing affordability.

“Fewer Canadian now are able to obtain the mortgage they need to acquire a home, and many sellers now find fewer buyers to sell their home too,” said Paul Taylor, President and CEO of Mortgage Professionals Canada. “As we first outlined at the time of the mortgage rule changes, it’s now clear that our concerns regarding the cumulative impact of said changes are decreasing competition and increasing costs for consumers.”

While acknowledging the intent behind the policy changes that have impacted the housing market, MPC says that the measures have made it harder for many Canadians to achieve their dream of homeownership, something previous generations have enjoyed.

“We ask that the government reconsider and recalibrate these policies to ensure the Canadian Dream is as achievable for this generation as it was for their parents and grandparents,” said Mark Kerzner, MPC Board Member. “We have outlined five clear asks that reflect the growing national evidence being felt by Canadians from coast to coast, which includes uncoupling the ‘stress test’ from the Bank of Canada 5-year benchmark rate and be set to 0.75% above the contract rate set by the lender, as well as changes to the B-20 ‘stress test’.”

15 Oct

Home price index flat but in line with historical average


Posted by: Kimberly Walker

A leading national measure of home prices was decidedly average in September.

The Teranet-National Bank National Composite Home Price Index was flat at 226.23 (up 0.05% from August), but in line with the historical average for September since 2010.

Of the 11 metros included in the survey, five gained – Winnipeg (1.1%), Montreal (0.5%), Victoria (0.5%), Hamilton (0.2%) and Ottawa-Gatineau (0.1%) – the weakest diffusion in 6 months.

Vancouver and Edmonton indexes were flat month-over-month while there were declines for Toronto (−0.1%), Calgary (−0.1%), Halifax (−0.2%) and Quebec City (−0.6%).

Taking out seasonal effects, the index edged up in September, recovering some of the ground lost in previous months, especially in Toronto.

But for Vancouver and Calgary the seasonally adjusted indices extended a string of declines, consistent with the weakness in home sales reported by the respective real estate boards of these two metropolitan areas.

Annual rise greater than in August

On a year-over-year basis, the national index gained 2.1%, a larger gain than in August as the index began declining in September 2017.

The largest gains were in Vancouver (6.2%), Victoria (5.5%) and Halifax (4.8%) thanks to gains earlier in the year while recent advances resulted in relatively large 12-month gains in Ottawa-Gatineau (5.1%) and Montréal (4.8%).

Winnipeg (2.8%), Hamilton (1.4%) and Quebec City (0.7%) also gained but there were year-over-year declines for Edmonton (−0.5%), Toronto (−0.8%) and Calgary (−1.3%).

The indexes reflect percentage gain/decrease from a base value of 100 in June 2005

10 Oct

Survey: This is the number 1 concern for real estate pros


Posted by: Kimberly Walker

Several challenges continue to concern real estate professionals but there is still optimism for the sector in the year ahead.

A new report from PwC Canada and the Urban Land Institute shows that the industry’s concerns include tariffs and interest rates which could further weaken affordability.

For those developers, investors, lenders and other leading experts involved in the residential real estate sector, land supply is the top concern heading into 2019.

“Dealing with the affordability issue is a shared responsibility between government and developers. While government addressed demand by introducing measures like tighter mortgage rules and foreign taxes, they neglected the supply side,” says Frank Magliocco, National Real Estate Leader, PwC Canada. “Reducing regulation and making more land available for development in a timely manner will help address the affordability issue.”

With the proportion of household income needed to service the costs of a single-family home rising to 53.5% in the first quarter of 2018 (and as much as 119.3% in Vancouver), the impact of rising interest rates and tariffs on steel are also large concerns.

Commercial sector
For the commercial real estate sector, multi-family remains strong along with industrial, which should benefit from demand for growing facilities for Canada’s burgeoning cannabis sector.

The struggles for retail continue as the sector faces more competition from ecommerce. This sector is being forced to reinvent itself.

Coworking space is driving demand in the office sector and is projected to make up 30% of corporate real estate portfolios by 2030.

There is also growth expected in the seniors sector with the aging population driving demand for this housing type.

Technology continues growth
Despite growth in the PropTech sector, including new lending platforms and digital real estate brokerages, just 10% of executives said they were concerned about the speed of technological change.

According to the report, PropTech is forecasted to add US$5.2 billion in new investment globally across 454 equity deals in 2018, after reaching a record US$3.4 billion in 2017 across 367 deals.

Drones are considered the top tech disruptor for the real estate sector, the poll found, followed by autonomous vehicles, cybersecurity and construction technology.

20 Aug

“Little risk that prices will accelerate much further”


Posted by: Kimberly Walker

Home resales in Canada were driven by the Greater Toronto Area in July with a 7.7% gain compared to 1.9% nationally.

The GTA also saw a flattening of price growth which has been declining in recent months. RBC’s senior economist Robert Hogue says that the national benchmark price appreciated at a faster rate (2.1% y/y) for the first time in 15 months.

In a monthly housing report, Hogue says that, with a few exceptions, price acceleration is unlikely to be a major factor in the Canadian housing market in the coming months.

“We see little risk that prices will accelerate much further in the near term. Except in a few areas (including Ottawa and Montreal where sellers have a slight upper hand), demand-supply conditions are balanced in the majority of markets in Canada, which does not support rapid price growth. Vancouver prices are in fact decelerating at present,” he writes in his report.

He added that he and his colleagues believe that the market is adapting to the impact of the mortgage stress test and while some sellers may still be reluctant to list their homes, RBC Economics forecasts a recovery of the resales market across most areas through the second half of 2018.

Supply boost for GTA, constraint nationally
The GTA saw more homes on the market in July but new listings were down 1.2% nationally.

There was a notable drop in new listings in Vancouver, Calgary and Edmonton, and to a lesser extent in Ottawa and Montreal.

23 Jul

CMHC wants more robust income verification


Posted by: Kimberly Walker

The CMHC wants the Canadian Revenue Agency to provide more robust verification of incomes stated on mortgage applications.

The call comes following an investigation by the CMHC into the correlation between incomes stated on mortgage applications and those reported to the CRA.

It now wants the tax agency to take a “more direct and formal role” in verifying incomes according to documents obtained by Reuters.

Some other countries including the US and UK have systems where the tax agency does provide lenders with verification of mortgage applicants’ incomes and the CMHC believes this would cut potential incidents of mortgage fraud, which can have a serious impact on the economy, especially if there is another financial crisis.

The CRA told Reuters that it is looking into ways that it can respond to CMHC’s concerns and provide lenders with income verification.

While the majority of Canadians are honest on their applications, a recent study by Equifax found that 13% think it’s ok to lie on a mortgage application and 16% believe mortgage fraud to be a “victimless crime”.

The study of mortgages originated between 2013 and 2016 found a 52% spike in suspicious mortgages, mostly in the highest priced housing markets.

6 Jul

Detached homes entering buyers’ market in Vancouver


Posted by: Kimberly Walker

Buyers looking for detached homes in Metro Vancouver have more choice as sales weakened again in June.

Detached home sales fell 42% to 766 and the Real Estate Board of Greater Vancouver says that the sector is leading the move towards a buyers’ market.

“Buyers are less active today. This is allowing the supply of homes for sale to accumulate to levels we haven’t seen in the last few years,” Phil Moore, REBGV president said. “Rising interest rates, high prices and more restrictive mortgage requirements are among the factors dampening home buyer activity today.”

Although new listings were down 7.7% across all residential property types year-over-year and down 17.2% from May 2018, total active inventory was 8,515, 40.3% higher than a year earlier.

While detached sales recorded the largest decline year-over-year, apartment sales were also down sharply (by 34.9% to 1,240) along with attached homes (down 37.3% to 419).

Price growth is slowing
The increased supply and weakened demand means that, although prices continue to rise, the acceleration of prices is slowing.

The benchmark price for a detached home is $1,598,200, up 0.7% from a year earlier but down 0.6% compared to May 2018.

For apartments the benchmark is $704,200, up 17.2% y-o-y and up 0.4% m-o-m; for attached homes the benchmark price of $859,800 is up 15.3% y-o-y but virtually unchanged month-over-month.

“With reduced demand, detached homes are entering a buyers’ market and price growth in our townhome and apartment markets is showing signs of decelerating,” noted Moore.

12 Jun

Housing starts decline as urban multi-family spike ends


Posted by: Kimberly Walker

Canadian housing starts declined in May as overall multi-family construction in urban areas weakened.

CMHC’s 6-month moving average shows 216,362 starts in May compared to 225,481 in April.

“In May, the national trend in housing starts declined following several months of stability,” said Bob Dugan, CMHC’s chief economist. “This reflects a decline in multi-unit urban starts in May that leaves them close to their 10-year average following several months of historically elevated levels.”

The figures show a divergence in construction trends in the two hottest markets.

Vancouver saw continued growth in multi-family, which led overall gains. Multifamily starts increased 9% in the past year.

Toronto, by contrast, saw fewer overall starts and this was notable in the multifamily sector. CMHC says that the CMA’s stronger supply of existing units and higher mortgage costs are key factors.

Langford saw strong gains for condo starts in Metro Victoria and the metro as a whole has seen increased building activity especially in rental units.

Multifamily has also led to a rise in overall starts for Saskatoon while it was single-family homes that increased most in Brantford due to more affordable home prices than nearby Hamilton.

Although multiple units led construction in some markets, nationally they declined 16.4% in the standalone monthly figure (seasonally adjusted annual rate) to 119,811 units while single-family units increased 2% to 58,390. Overall, the monthly figure was down 11.1% to 178,201.