Mortgage rates trend

Money Laundering, Showdow Flipping, Empty Houses To Blame. Really?

By Dustan Woodhouse

Recently I threw the word ‘xenophobia’ into a conversation with a client about the general sentiment shown by the Brexit voters, the Trump supporters, and to some extents the media surrounding Vancouver Real Estate.  I suggest that these challenges we face are far more complex that assigning the bulk of the blame to one specific group of people. Such a dumbing down of complicated problems into finger pointing at an easily identifiable group seems a slippery and often regrettable slope to be setting foot on. “Well, what else could it be” I was asked. I asked for a list of their key points to address one by one with a simple alternative explanation:

High Vancouver home prices are driven by:

  1. Money laundering
    OK – you mean like the three billion dollar per year BC bud industry run largely by rural white guys?
    A crackdown (or simply legalization) would be great. I agree. Next…
  2. Shadow flipping
    Not exactly a foreign investor created issue, although certainly an issue that has cost foreign investors millions. It seems more of a crooked CDN citizen (some, not all, of them Realtors) issue. But maybe these shadow flippers are the modern day Robin Hoods in this problem you think has a single cause. After all the people flipping the paper in the article were CDN locals. Spending the millions, they fleeced from foreign investors here in our city.

In any event the new contract assignment rules have essentially stopped this practice – and created a problem for many first time buyers who realize too late that only one of their names should have been on the contract as they are now both losing their first time home buyer status. So a crackdown that ensures foreign investors get fleeced a bit less often, and local first timers get caught in an $8,000 contractual error. Next.

  1. Empty houses

Empty homes (should) mean no homeowners grant, so thus we collect higher property taxes.  And really half of the homes on my own street might as well be empty as we never see a soul coming or going from them. Either working class people up and gone early to work, or retired people early to bed. 90% of the suburban block I live on is Caucasian for the record. Besides how exactly is an empty house really negatively affecting your personal life. If anything it means less crowded schools, lighter traffic, and a shorter wait at the hospital. Next.

  1. The general buyer profile pays no capital gains, income taxes, property purchase tax etc.

What profile is this?

Capital gains tax - Foreign buyers pay capital gains on a sale, locals do not.

Incomes taxes – I know an awful lot of locally born and raised millionaires, on paper that pay no income tax – in particular every single retired person over the age of 65. Most of whom will live for 30yrs income tax free drawing down far more in cash and social services than they ever put into the system. Due to the combination of inflation and increased life expectancy. This is not their ‘fault’ but when you look at the economics of the demographic, these are an expensive bunch these retirees.

Property purchase tax – 100% of buyers pay this – unless they are a CDN resident, have been in BC for 365 days, and are buying under $475,000. That $475,000.00 exemption limit was brought in 30 yrs. ago by Vander Zalm and was sold politically at the time as a ‘luxury tax’. Always be careful about voting in taxes on the ‘rich’. One day you too might be considered ‘rich’.

Annual property taxes – Foreign investors pay the highest rate – whereas locals over the age of 55 can defer taxes until their death or the sale of the home effectively paying nothing into the system for decades.

SO, was the ‘general buyer profile’ you referred to retired people?

Bottom line:  

The list goes on, and so could I. This craziness in the market is driven by more than one thing, and it is driven by more than one group of people. Indeed, BC had more migrants from across Canada flow through its borders than immigrants from outside Canada in the past 12 months. In any event there are just shy of 100,000 new bodies in BC expected in the 24-month period we are in the middle of, and they all want a roof over their head. Thus far the supply has not been there to meet the demand.

Dustan Woodhouse is an Ace Mortgage Broker – you can reach him at www.dustanwoodhouse.ca

Mortgage Rates

TERMBroker RatesPosted Rates
One Year2.19%3.00%
Two Year2.14%3.05%
Three Year2.29%3.45%
Four Year2.49%4.09%
Five Year2.44%4.64%
Seven Year3.44%6.35%
Ten Year3.84%6.75%
June 28, 2016

Mortgage rates trend and News courtesy of Jurock's Facts by Email, factsbyemail.com