IN THIS WEEK’S FACTS BY EMAIL:
- TRUMP EXODUS EFFECT: AMERICANS MAY NOT BE BLUFFING ABOUT MOVING TO CANADA
- CALGARY’S CAUTIOUS COMEBACK
- CHINESE CAPITAL OUTFLOW RESTRICTIONS BITE
- PRE-SALE CONDOS AND ASSIGNMENTS INVISIBLE UNDER FOREIGN BUYER REGULATIONS
- BOOMER BUYER MYTHS: SIZE MATTERS, PRICE NOT SO MUCH
- VANCOUVER: FALSE CREEK FLATS ARE THE FUTURE
- CONDO INVESTING: GTA VS GVA
• International •
Chinese Buyers? Coming Or Not? Which Is It?
It is the number 1 question, following last week’s story that there are still buyers coming and will continue to come.
Yes, there are a number of reports warning about China’s escalating crackdown on capital outflows. You heard it here first last December (Our story “HO Hum”). Now, this week, Bloomberg released a story that in London, Chinese citizens (who clamored to purchase flats at the city’s tallest apartment tower three months ago,) are now struggling to transfer their down payments! The report goes on to say that in Silicon Valley, Keller Williams Realty says inquiries from China have slumped since the start of the year. And in Sydney, developers are facing “big problems” as Chinese buyers pull back, according to the consultancy firm Basis Point.
Bloomberg: “Less than a month after China announced fresh curbs on overseas payments, anecdotal reports from realtors, homeowners and developers suggest the restrictions are already weighing on the world’s biggest real estate buying spree. While no one expects Chinese demand to disappear anytime soon, the clampdown is deterring first-time buyers who lack offshore assets and the expertise to skirt tighter capital controls.”
As we reported last December, the change spooking prospective buyers was outlined by the State Administration of Foreign Exchange (SAFE) on Dec. 31. NOTE: SAFE said all buyers of foreign exchange must now sign a pledge that they won’t use their $50,000 quotas for offshore property investment. Violators will be added to a government watch list, denied access to foreign currency for three years and subjected to money-laundering investigations! China clamped down further on corporate outflows late Thursday, asking firms with outbound investment plans to clarify the source of their funding for purchases and give additional details on their spending.
Major Point: So, it is a fact, that there will be fewer speculators. However, it is also a fact that we have a 400,000 people Asian population, 200,000 Chinese in Hong Kong with a Canadian passport and large foreign inward migration. Thus, not all the purchases will cease suddenly. But the speculative ones will. Money is harder to get out, even the loophole “Bitcoin” (which had soared to over $1,000 per, because of the transfer of money facilitation out of China) has now been closed.
• Canada •
Condo Investing: GTA Vs GVA
Toronto is edging out Vancouver as the place to make money as a condo investor. The average condo apartment price in Greater Vancouver is $588,922, while it is $440,669 in Greater Toronto. A new concrete condo in Toronto averages $503,255 compared to $725,302 in Vancouver, but since the Toronto condos are smaller, the cost-per-square foot is $623, fairly close to Vancouver’s average of $682. But, we see Vancouver condo prices leveling off this year while they surge in Toronto. Also, both cities have a 0.7% rental vacancy rate for condos but Ontario’s biggest city has a rental pool that is four times larger than Vancouver. Rental prices, while lower than Vancouver, are rising faster in Toronto. Further, Toronto has no foreign-buyer tax (yet) and has the highest immigration levels in Canada.
If you are looking for Toronto condos, here are three city neighbourhoods to consider (these are featured in the annual Jurock Real Estate Outlook publication, released last month and part of your existing subscription or available for purchase to non-subscribers).
Average condo price: $564,077
1-bedroom condos for investors: $275,000-$375,000
Known for its gay history – it is ground zero for the annual Pride Parade. This super-up trending downtown zone attracts a wide variety of residents and a startling amount of new condo construction. Rental demand is among the best in the city, drawing student tenants from Ryerson University as well as local professionals and soft-collar workers. The neighbourhood is ideal for short-term Airbnb-type income as well as month-to-month rentals. You can find some good deals on the many older condo buildings in the area.
Average condo price: $484,700
1-bedroom condos for investors: $280,000-$305,000
Corktown has seen a proliferation of trendy new retail outlet and conversions of brickwork buildings into live-work suites and lofts. It has fairly relaxed zoning that have inspired some creative condo spaces that in turn have drawn a lot of young professionals. New condos have been sprouting up in the past four years and the 2013 opening of an 18-acre park in the West Don Lands has helped revitalize the neighbourhood. It borders Queen Street East and King Street East and Jarvis, so there is plenty of modern entertainment and retail action in this historical area.
Average condo price: $588,000
1-bedroom condos for investors: $400,000-$485,000
Beaconsfield Village has a rich Portuguese and Italian heritage and is characterized by streets of beautiful Victorian-era houses and row homes. It has become very popular with upscale artists, young professionals and families and, more recently, condo developers. It borders the vast Trinity Bellwoods Park and hosts a lively art and design district. Rents are on the higher end, averaging $2.60 per square foot for one-bedrooms, but there appears no lack of tenant demand. It is a 10-minute drive from downtown and has good transit access.
Major Point: I have lived in Toronto and while we in the West like to raze the “TO”, the above are fine areas for your money to grow wings…as in going higher.
Trump Exodus Effect: Americans May Not Be Bluffing About Moving To Canada
We originally dismissed as rhetoric projections that many Americans would move to Canada if Donald Trump became president, but evidence is mounting that it may not be a bluff. The first sign was the crash of the Canadian Immigration website on the night of the U.S. election. A second is a report from Royal LePage that said visits to its website were up more than four times the normal daily volume the day after Trump’s win on November 8th. That doesn’t appear to have been a blip, either, as interest from U.S. buyers during the October-to-December period came in a full 40% higher than the same period a year ago. This week, both Breitbart News Network and Bloomberg reports Silicon Valley, California tech workers are moving to or planning to move north to Vancouver, due to increased U.S. enforcement of immigration and labor laws.
Up to 75% of Silicon Valley tech workers are foreign-born, because many tech companies hire foreign labor contractors to provide workers with science, technology, engineering and mathematics skills at favorable wage rates through the H-1B temporary visa program. But there is increasing concern in Silicon Valley that such programs may be reduced in the future. (White House press secretary Sean Spicer confirmed on January 31 that a federal effort to overhaul the H-1B visa is on the horizon.) A number of Silicon Valley tech entrepreneurs have formed a company called Truth North as a vehicle “to make it easier for U.S. companies to create subsidiaries in Canada and to move their U.S.-based employees to a new, Vancouver-based office.” The group is offering $6,000 packages that include airfare for one person to fly to Vancouver, two nights of accommodations, and a day with and immigration consultant, True North cofounder Scott Rafer said they “aren’t saying to move on spec, but to have a ripcord.
Major Point: We welcome any and all American home buyers and remind them that, if working in Vancouver, they now won’t be subject to the foreign-buyer tax.
Calgary’s Cautious Comeback
Calgary’s housing market is slowly crawling back from crash that followed the 2014 plunge in oil prices. In January, for the fourth consecutive month, housing inventory levels recorded year-over-year declines. At 4,112 total unit listed, January’s inventory was 18% below last year’s levels. Sales are still slow, though. Only 947 homes sold in January. This was up 24% from January 2016 – which was a near record low – and 21% below 10-year averages.
The detached house market is doing best, with 584 sales in January, and the inventory falling to 3.2-month supply, compared to more than five months last year. Calgary region benchmark combined prices are $437,400, 2.82% lower than last year’s levels. From the peak in early 2014, prices have declined 4.9% in the detached sector and 11.5% for condominium apartments reports the Calgary Real Estate Board.
Major Point: At the World Outlook Conference last Saturday, we met a lot of Albertans who shared tales of woe as rental property owners. Said one Edmontonian: “I have a lot of vacancies…some as long as a year” Ouch!
• British Columbia •
The Numbers, The Numbers
GREATER VANCOUVER: Sales totaled 1,523 in January 2017, a 40 per cent decrease from the 2,519 sales recorded in January 2016 and an 11 per cent decrease compared to December 2016. Also, sales were 10.3 per cent below the 10-year January sales average.
Active listings stood at 7,238, a 9 per cent increase compared to January 2016 (6,635) and a 14 per cent increase compared to December 2016 (6,345).
The sales-to-active listings ratio for January 2017 is 21 per cent. This is the lowest the ratio has been in the region since January 2015. The Real Estate Board stated that: “Conditions within the market vary depending on property type. The townhome and condominium markets are more active than the detached market. Thus, detached home prices declined about 7 per cent since peaking in July.”
Sales of detached properties in January 2017 reached 444, a decrease of 58 per cent from the 1,047 detached sales recorded in January 2016.
Sales of apartment properties reached 825 in January 2017, a decrease of 25 per cent compared to the 1,096 sales in January 2016.The benchmark price of an apartment property is $512,300. This represents a 0.3 per cent increase over the last six months and a 0.4 per cent increase compared to December 2016.
Attached property sales in January 2017 totaled 254, a decrease of 32 per cent compared to the 376 sales in January 2016.
FRASER VALLEY: In contrast sales in the Fraser Valley clocked in above the 10-year average while down some 27% over last year compared to the 1,338 sales in January of last year. Of the 976 sales processed last month, 212 were townhouses and 276 were apartments, representing exactly half of the month’s market activity.
Active listings stood at 4,40, a decrease of 8.1 per cent year-over-year and the lowest level seen for a January in ten years. However, active inventory increased by 12 per cent month-over-month compared to December’s 3,930 active listings. For the Fraser Valley region, the average number of days to sell a single family detached home in January 2017 was 49 days, compared to 33 days in January 2016.
|VANCOUVER||Jan. 2017||Jan. 2016||%||Apr. 2016||%|
|Total Avg Price||885,700||1,098,900||-19%||1,092,200||-20%|
|Total Det. Sales||454||1,049||-57%||1,971||-77%|
|Total Condo Sales||831||1,095||-24%||2,113||-61%|
|All SF Avg Prices||1,520,200||1,817,500||-17%||1,812,000||-16%|
|All Condo Prices||582,000||500,300||+13%||573,600||+02%|
|FRASER VALLEY||Jan. 2017||Jan. 2016||%|
Major Point: We feature again the highs of sales and prices as measured against January 2016 but also against April or May – the all-time highs. We forecast last fall that for Vancouver we saw a 20% decline in the average price and we got there and fast! Both January over January (-19%) and January 2017 over April 2016 (-20%). Whopping sales declines in the single-family home sector right across the Lower Mainland … however condominium sales in Vancouver only declined by 27% (57% down in detached homes). In the Fraser Valley condo sales actually soared by 42%!! That shows that we have turned to a more local market. Affordability for both first time buyers and investors have driven them into Surrey, Langley and Abbotsford. We forecast this and urged you to buy for investment there. Price increases in the condo sector in most markets are substantial, particularly in North Surrey.
Pre-sale Condo And Assignment Invisible Under Foreign Buyer Regulations
Even as the B.C. government moves to exclude some from the foreign-buyer tax on Metro Vancouver homes, foreign nationals can buy and sell undetected in the province’s hottest housing sector: new concrete condo assignments.
Here is how a foreign national could avoid paying both the 15% foreign buyer tax that came last August, and not fall under the regulations under B.C.’s real estate assignment regulations that came into force on May 16, 2016.
Under the assignment rules, the B.C. government now requires contracts prepared by real estate licensees to include clauses stating that the contract can’t be assigned without the written consent of the seller and that any profit from an assignment goes to the initial seller.
But the legislation exempts new developments, including pre-sale condos, even if a licensed realtor sells the assignment, according to the Real Estate Council of BC and the Ministry of Finance.
Section 8.2(2) of the new regulations states: “This section does not apply in relation to a contract for the sale of a development unit by a developer, as those terms are defined in section 1 of the Real Estate Development Marketing Act.”
Finance Ministry communication director James Edwardson said the regulations contain an exemption for developers “because they generally do not need the same kinds of protections as consumers, especially since developments are often pre-sold and some form of assignment term is standard.”
Many condo developers allow assignments – which are perfectly legal – while some charge a small assignment fee, usually 1% to 2%, or restrict advertising of assignments until the building completes. Developers have told us it is only fair to allow assignments because it often takes three years for a high-rise project to complete and, for various reasons, the buyer may not be able to complete the sale.
However, with the sudden increase in land and housing prices, concrete condos that were pre-sold two or three years ago, are now worth much more money, hence a recent spike in assignment sales. Craigslist now has an average of 50 condo assignment ads daily, from both Realtors and owners, some offering multiple units, including in luxury Metro towers by brand name developers. (We did notice that assignment ads on Craigslist dropped slightly this week from last.)
Assignment sales are also shielded from the foreign buyer tax. In fact, if a foreign national buys a pre-sale condo and then flips the assignment, the province has no record of the purchase or the sale.
Finance Ministry communications director James Edwardson confirmed that under B.C.’s foreign-buyer tax rule, the buyer of a property must list his or her citizenship. However, the requirement is only on transfer of title. In the case of a condominium, that would be when the building completes. Therefore, an investor could purchase a pre-sale condo, flip it as an assignment during construction and not appear either as a buyer or a property owner on any provincial government documentation. (Though the assignment seller’s profit could be subject to federal capital gains taxation.)
We don’t know nor does anyone else exactly how many foreign nationals are familiar with or using this tax-avoidance strategy (in fact some developers we talked to didn’t know about it). But is not a huge stretch to imagine that foreign nationals, now being taxed heavily in the resale housing market, may be accounting for more than the 3%-5% of new condo sales suggested in a recent Canada Mortgage and Housing Corp. report.
And some breaking news: Last week, the BC government said it will soon allow international citizens working and paying taxes in the province to bypass the 15 per-cent foreign home buyer’s tax. “We’re going to lift the foreign-owners’ tax on people who have work permits, who are paying taxes and living in British Columbia, as a way to encourage more people to come,” said Premier Christy Clark. The change, overdue, is expected to become law shortly.
Major Point: The bottom line is that many foreign nationals, from the U.S. as a recent example, will continue to buy Metro Vancouver homes, regardless of the petty obstacles the government puts in their way. The rules of supply and demand will trump government regulations every time.
Boomer Buyer Myths: Size Matters, Price Not So Much
The senior population in Metro Vancouver will increase by 91% within the next 19 years but don’t expect to see the skyline wrapped in old folks’ homes, says Simon Fraser University’s Andy Yan. Instead, Yan said in a recent report, that many Metro Vancouver senior homeowners will cash out and move to suburban or rural centres that have concentrated on transit, health services and affordable housing. His pick is Nelson, a small but lively Kootenay town that combines affordable housing with “adequate services” to attract and retain older citizens.
(We tend to lean towards Okanagan centres like Peachland and Osoyoos and parts of Vancouver Island, such as Sidney and Qualicum Beach.)
Surveys show that 29% boomers (now nearing or past retirement age) are looking to move to the suburbs, while 26% want to live downtown and 16% would move to a rural area. The rest would not move at all.
Boomers are also not really downsizing, according to the Resonance survey released last week. The average minimum size required is 1,195 square feet and boomers also want at least two bedrooms, extra storage space and garage, since most plan to keep on driving a car. Boomers are also less concerned with price than Millennials or Gen-X buyers, Resonance found, and overwhelmingly want to buy a detached house or ground-oriented attached home, rather than a condo apartment.
Vancouver: False Creek Flats Are The Future
The future of Vancouver is being forged on its eastern edge of downtown at the False Creek Flats, according to both the City of Vancouver and panel of experts at a recent Urban Development Institute real estate outlook conference in Vancouver.
The Flats cover 450 acres bounded by Prior Street, Clark Drive, Great Northern Way and Main Street. It is already home to more than 600 businesses ranging from manufacturing, transportation, textiles, food and beverage production, to art galleries.
It is here where the new St. Paul’s Hospital (2,000 employees) and the new Emily Carr University (1,800 students) will be built. We believe it will also see a radical mix of residential into the commercial and industrial development planned for the site, though the city has not gone that route yet.
At a January 25, public hearing, the City put an emphasis on job creation in the Flats, estimating 30,000 people could be working there within 30 years.
But the UDI panel argued that higher-density residential should be included, and pointing to a recent mixed-use industrial/residential complex on East Hastings as a template. The City will eventually awake to the need for more housing in the Flats, likely in the form of zoning changes.
In any event, long-hold investors would be wise to scout opportunities now in neighbouring Grandview-Woodlands and Strathcona because the False Creek Flat is going to be a Vancouver real estate driver for the next 20 years or so.
1. Nanaimo – Brand new 4-bedroom listing in desirable North Nanaimo. This is the only single family home under $400,000 in all of North Nanaimo. $379,900;
2. Port Hardy – Full Duplex with 3 beds and 3 baths on each side as well as a self-contained cottage. Rental income of $1800/month. $247,000.
As we have stated many times, you are welcome to send in your ‘best deal’. There are no fees from us, nor any guarantees that your deal will be featured here or even is a good deal. It is up to you to study, evaluate and negotiate. Look up our disclaimer under the Hot Property section on your website. Interested parties – go to your website and get in contact directly with the owners/realtors or write to email@example.com
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