IN THIS WEEK’S FACTS BY EMAIL:
- LAND RUSH 2017 HIGHLIGHTS – PART 2
PHOENIX INVESTORS THRIVE UNDER TRUMP
CASH FLOW IN THE FRASER VALLEY
MAD, MAD VICTORIA BURNING HIGHER
- THE NUMBERS, THE NUMBERS – TORONTO, VANCOUVER, FV AND WHISTLER
- FOREIGN BUYER: ONTARIO STEPS I; AUSSIES GET ROUGH
- 30,000 ACRES IN METRO ALR “NOT FIT FOR FARMING”
- METRO VANCOUVER POISED FOR A SPRING BREAK TO THE UPSIDE
- POINT ROBERTS A LOW-COST DESTINATION FROM VANCOUVER
- OUR TAKEAWAYS FROM THE B.C. BUDGET 2017
Q: “Wasn’t the home office taxable before (on capital gains)? For several years now the rule was if a home owner claimed a mortgage payment deduction or capital cost allowance on the portion of the house used for office space then he lost the principal capital gains exemption for the portion of the house used for home office.
In view of this existing rule could the Finance Department simply be re-emphasizing this rule because home owners need to be reminded of this? Request clarification please.”
A: 1. I am not a tax advisor! It is vital that you do your reviews on this with your tax advisor.
2. What you meant was (I think): You cannot claim mortgage payment but you can claim mortgage interest as long as it does not create a business loss. Look at item 5. Currently you can claim, (some) expenses and still get no capital gains tax.
3. Attached another simplified version:
4. Here’s Canada Revenue Agency site for Work Space expenses:
5. For work space use of principal residence:
6. What I was reporting was that APPARENTLY (!) there is (will be) a change in interpretation, whereby the fact that you have an office from home is enough and the above rules may no longer work. No, it is not law (yet), the above still applies … but, we now must report the sale of the principal residence and we have the minister saying that our capital gains on principal residence has exceptions…and thus: caveat emptor!
Q: Do you think that the foreign buyer tax is coming to Victoria and Kelowna, Whistler?
A: I predicted it last August … see below.
Q: At Landrush you made a lot of astounding predictions. As a new subscriber, I am impressed. I did not understand your call on Greece however. I am Greek. Didn’t the Greek people vote to stay within the EU?
A: It is not up to them. Greece is between a very big rock and a very hard place. Unlike Iceland (who was able to depreciate its currency to get from under its stifling debt, Greece is in the euro and cannot save itself by devaluing. Debts have been piled upon debt … it will NEVER be repaid (we said it in 2012). Now 47% of Greek bank debt (47%!) is ‘not performing’ and it is untenable … and can never be kicked down the road again. It will leave the EU or be kicked out. Either way it has years of unhappiness ahead.
• Canada •
Foreign Buyers: Ontario Steps In, Aussies Get Rough
As we predicted last August after B.C. imposed its regressive 15% tax on foreign buyers, Ontario is now considering similar legislation to cool the hot Toronto housing market.
It is a reversal for Ontario housing minister Charles Sousa who said last year that Ontario would not follow B.C’s lead. Instead, it raised property taxes on homes sold above $2 million. But with GTA houses now up 28% since then and the average Toronto detached house north of $1.5 million, Ontario is feeling pressure to act and foreign buyers are a handy target.
Ontario will likely extend the tax to the Golden Horseshoe south of Toronto as far as Hamilton where home prices have also spiked. Expect to see some form of foreign tax in place within weeks.
Meanwhile, Australia is getting very tough enforcing its foreign buyer regulations. In the last few months, the Australian government has forced the sale of 61 homes with a combined value of about CAN$100 million. The most expensive divestment was a $6 million property near Melbourne, owned by an Indian national.
Sydney was named the second most unaffordable city in the world after Hong Kong in the latest Demographia report and many Aussies blame the higher house prices on foreign buyers.
The government has warned foreign buyers that they will now face jail terms and huge fines if caught. Under the new rules, foreigners who have bought properties illegally in Australia face fines of A$127,500 (US$97,830) and up to three years jail for individuals, and fines of more than A$637,500 (US$489,100) for companies. Plus, the forced sale of property.
Real estate agents who knowingly assist a foreigner to breach the rules can also be fined up to A$42,500 (US$32,611) for individuals, and $212,500 (US$163,051) for companies.
Under the Aussie rules, foreigners need to seek permission from Australia’s Foreign Investment Review Board (FIRB) before buying. They are not allowed to a buy resale homes They can buy an unoccupied new home, but only if the FIRB feels that the purchase will not add to the shortage of properties available to native Australians. (Which makes the process complicated and arbitrary.)
LATE NEWS: The Victoria Mayor came out and said that she is “Watching the Ontario decision closely”. Spell: We will do it too! (I forecast this last summer!)
Major Point: As we have seen from Emerson, Manitoba to the YVR arrivals terminal, people from around the world are desperate to share in the safety, stability and economic hope of Canada. The overwhelming majority of foreign homebuyers are immigrants or permanent residents looking for a home, not speculators. We don’t think Canada will start throwing people in jail for buying a home. In fact, as seen in B.C., which recently eased the rules on foreign buyer taxation (foreigners with a work permit are waived, and pre-sales of new homes are already exempt), we expect the taxes to remain an irritant rather than a blockade to foreign buyers.
Imagine … you are in power and can make a MAJOR TAX GRAB … and blame foreigners! Too tempting, no matter what you call it.
• British Columbia •
30,000 Acres In Metro Vancouver ALR “Not Fit For Farming”
If governments in B.C. really wanted to do something about high housing costs in Metro Vancouver, they should look at increasing the supply of housing and a good place to start would be in freeing up thousands of acres of non-arable land that is locked in the Agricultural Land Reserve, which covers 150,000 acres in Metro Vancouver and the Fraser Valley.
A recent study done by left-leaning groups that was meant to promote sustainable farming exposed the fact that 29,144 acres of ALR land is not farmed and has “no potential for farming.” Another 37,453 acres could be farmed, but aren’t.
The study ‘Cost pressure and price of farmland in Metro Vancouver’ was funded by Vancity and conducted by the Sustainable Food Systems at Kwantlen University and the BC Food Systems Network.
The study found that only 50% of ALR land is actually farmed. Another 20% has no potential for farming due to natural limitations or because it is parkland, protected areas, or is underwater or roadways. A further 25% has potential for agriculture but is not farmed: 40% of this (about 15,000 acres) is in small parcels of under 10 acres.
The study also found that ALR land is the most expensive farmland in Canada, if not the world. Five acres of farmland in Metro Vancouver sells for $150,000 to $350,000 per acre, and for up to $100,000 per acre in the Fraser Valley. A 20-acre parcel costs from $80,000 to $120,000 per acre and 40-60-acre parcel averages $60,000 per acre. This is expensive for farmland but it is cheap for residential development.
Major Point: At even the lowest RM zoning, ALR dry land that is not suitable for farming or has never been farmed would cover at least 20,000 acres, or enough space at current RM zoning to create more than one million homes across Metro Vancouver and the Fraser Valley. It is an idea, anyway.
The Numbers, The Numbers – Toronto – Vancouver – Whistler
Toronto is BOOMING! The average price is up 28%! The average detached price in the 905-area code is up 35! Who could have predicted that! Foreign tax will be a done deal. If you are a foreign buyer, close your deal now!
|VANCOUVER||Feb. 2017||Feb. 2016||%||Apr/May/July 2016||%|
|Total Det. Sales||754||2,016||-57%||1,971||-73%|
|Total Condo Sales||1,283||1,788||-28%||2,113||-40%|
|All SF Avg. Prices||1,757,400||1,814,000||-03%||1,811,900||-04%|
|All Condo Avg. Prices||603,400||530,700||+14%||570,100 (May)||+04%|
Vancouver: Total numbers tell the story… Sales down 41%, detached sales down 57%. Detached prices a tad lower, condo prices higher! (See below.)
|FRASER VALLEY||Feb. 2017||Feb. 2016||%|
|Total Det. Sales||489||1,243||-61%|
|Total Condo Sales||391||388||+01%|
|All SF Avg. Prices||912,400||897,000||+02%|
|All Condo Avg. Prices||286,000||252,000||+13%|
|Langley Condo Prices||298,200||244,800||+21%|
|North Surrey Condo||283,400||232,200||+22%|
Fraser Valley: Sales down 42%, detached sales down by 61%, condo prices higher and condo prices MUCH higher in Surrey and Langley (up 22%!).
Whistler: Sales way up, listings way down, prices up. Forecast: Prices much higher.
Metro Vancouver Poised For A Spring Break To The Upside
There are increasing signals that a spring thaw is coming to the Metro Vancouver detached housing market that has been in a deep freeze since last summer. Do not expect housing prices to take off, but detached sales are slowly increasing as listings are flooding back onto the market. This is the time to start hunting for duplexes and houses with secondary suite potential because the rental market remains very tight. There are potentially some good investor deals out there right now.
Look at East Vancouver’s example. More than 540 new listings for detached listings came onto the market so far, this year, but there were only 142 detached sales since January 1. Two houses sold for less than $1 million and 10 sold for less than $1.2 million (benchmark) in February. The East Vancouver detached average price has crashed by 20% from $1.8 million last April. Most of the listings are clustered, unsold, north of $1.8 million. It now takes an average of 40 days for an East Vancouver detached house to sell, so buyers have a sharp edge in negotiations.
Surrey also has a lot more detached listings than buyers. There were 357 active listings in Central Surrey last month but only 95 sales. South Surrey-White Rock has 478 active listings but only 73 sales in February, up from just 44 in January. Again, buyers have an advantage right now. We suspect many sellers are looking for an exit, especially investors holding multiple properties who were counting on rapid appreciation.
Major Point: Foreign buyers are coming back into the market, representing about 3% of recent Metro housing sales, and taxes have eased for foreigners with work permits. Look to suburban markets – Coquitlam, Surrey, Burnaby and Richmond – for a spring sales surge starting in April. The time to lock down a detached house in these areas may be sooner than you think. Inventories are high and vendors that need to sell are flexible on price. (See below.)
Point Roberts A Low-cost Destination From Vancouver
How would you like a brand-new ocean view detached house an hour from Vancouver for around $500,000? How about a luxury house even closer to beachfront for around $1 million? Well, you can find that – and many more priced much lower – across the border in unique Point Roberts, Washington.
The water problem in Point Roberts has been solved. It appears there was much more capacity than thought from the Metro Vancouver system so the water is flowing freely. All homes are still on septic, however. (The great Point Roberts golf course has drawn in new investors [it had been for sale] and will shut down for the start of the spring season to get fixed up and may be closed until July.)
A search this week through a local agency (http://www.discoverpointroberts.com) turned up TLC cottages for under US$200,000 and vacant lots for under US$60,000 but also some nice houses for less than US$300,000. Try finding any of that north of the border in White Rock or Delta!
We like Seabright Farm Cottages, which has been trying for years to get an ocean view development going and finally got their permits last August. Aimed squarely at Metro Vancouver buyers, Seabright Farm Cottages have oceanview lots with custom cottages from $US500,000 to north of US$1million, according to Anders Kraus, VP finance for Seabright Farm Cottages.
Major Point: Kraus said Point Roberts has not seen a Trump affect and does not think the election of the new president will deter Canadians from buying there. He noted that Canadian snowbirds have had a two-month extension added for U.S. residency, so Trump could actually help attract more Canadian buyers south.
Kraus said they are seeing more interest from Seattle buyers because Point Roberts is less expensive than in the San Juan Islands, and buyers don’t have to take a ferry to get to their vacation home in Point Roberts. The same could be said for those living in Metro Vancouver.
Our Takeaways From The B.C. Budget 2017
The B.C. government tabled its 2017-18 Budget last month and, with a provincial election looming, we share the key takeaways from the BC Liberal Budget as it will affect real estate:
- An increase in the threshold in the first-time homebuyer’s program to $500,000, which the government estimates will save up to $8,000 in property transfer tax for people buying their first home.
- A forecast surplus of $295 million, a fifth consecutive balanced budget with projections to remain in the black for the next two years, with a $223 million surplus in 2019-20.
- Provincial sales tax on electricity for business will be eliminated over the next two years, saving $164 million by 2019-20.
- The small business corporate income tax rate will be reduced to 2% from 2.5%.
MORE FROM LAND RUSH:
• PHOENIX OFFERS POSITIVE INCOME AND POTENTAL APPRECIATION
Phoenix is facing the biggest housing shortage in history because of a decade-long slowdown in housing starts and rapid in-migration to one of the fastest-growing cities in America. Last year saw the highest Phoenix housing sales since the 2008 bust, ace Phoenix realtor Todd Smith told the Land Rush audience. Per a national survey, Phoenix is second only to San Francisco in high-technology job growth.
The current unemployment rate is 5.8% and more than 250,000 new jobs have been created since 2011. In the past year alone, the number of detached houses for rent has fallen 50% to 2,226 and rental rates have increased 20% to an average of $1,680 per month. Listings of houses for sale have fallen to 19,900 today, down from more than 29,000 a year ago,
“There is tremendous rental demand and a severe shortage of houses for rent,” Smith said. Yet, average house prices are still 21% below the historical peak in 2006 and resale houses average $100,000 less than the price of a new house because of new development fees and higher prices for land.
Add it all up, Smith, of AZ Performance Realty, said, and there is a terrific opportunity for Canadian investors to buy resale cash-flow houses in Phoenix with a strong upside appreciation potential.
Smith then presented a portfolio of resale houses, priced under or slightly above US$200,000 in the Surprise, Buckeye and other areas of the West Valley of Phoenix that, he said, can deliver positive cash flow.
With a 15% increase the West Valley population forecast for the next seven years, the opportunity to invest is right now, he said. (For contact information to fine US joint ventures or outright purchases send me an email at firstname.lastname@example.org)
• CASH FLOW IN SURREY AND THE FRASER VALLEY
Two experts at Land Rush proved that you do not have to go far from Vancouver to find affordable rental property that can deliver positive rental income and impressive returns on investment.
Kelly Fry of the Kelly Fry Team (www.kellyfryteam.ca) and Brent Roberts of Royal LePage Brent Roberts Realty (www.brentroberts.com) outlined opportunities from Surrey to Chilliwack.
Fry is an expert in both rent-to-own purchases and in acquiring Valley investment homes. Roberts provided examples of Valley homes that could be bought with less than $50,000 down payment that deliver positive rental income.
Here is one example: A corner unit condominium on 138 Street in Surrey listed for $179,800. Bought with a 25% down payment ($44,900) it produced gross rent of $1,000 per month. Cash flow is a positive $375 per month, after expenses.
After mortgage paydown, rental income and 5% appreciation, this unit would deliver a total return on investment after five years estimated at 26.9%, Roberts explained.
Both Fry and Roberts have plenty of other examples. Investors can contact them directly for the latest opportunities.
• CENTRAL SURREY IS CONDO INVESTING 101
Condominium investors in Metro Vancouver need to look at four top issues: proximity to transit, potential rental demand, the age of the building, and the selling price. Many areas can tick off two or three boxes but only one ticks all three with ease: Central Surrey.
Surrey, with 517,000 people, is now the second-largest city in B.C. and is poised to overtake Vancouver within 13 years, according to Canada Census.
But it is the type and scale of development in Central Surrey that really sets it apart. We are talking modern job generation – and tenant and condo buying demand – on a grand scale.
“The plan is to create a Stanford University-type of centre,” said Charan Sethi, founder of Tien Sher, which has built a number of condominium projects in Central Surrey.
Innovation Boulevard, a joint venture between the City of Surrey, Simon Fraser University, Kwantlen Polytechnic University and private developers, is being built as a large medical research hub at Central Surrey. It is all part of a $1.1 billion initiative that is now in its second phase. Already 300 companies are in place, many of them start-ups in the medical research field.
A state-of-the-art retirement residence and medical research facility is also underway. And there is more.
Last week the province announced a $25 million upgrade to the Central Surrey SkyTrain station with work to start in April. At the event, the City of Surrey reminded officials that Central Surrey is also the terminus for a planned light rail system that will radiate to other parts of the municipality.
On February 27, Walmart opened a 147,000-square-foot store at the Central City Shopping Centre.
Yet this is still a ground floor investor opportunity for condominium investors.
You can buy brand new condominiums for less than $300,000 (the Venue by Tien Sher) within a
- five-minute walk of SkyTrain and then 35 minutes to downtown Vancouver;
- as for tenants, about 1,000 people a month are moving into the municipality every month;
- the expanded SFU campus is within walking distance;
- Surrey City Hall, an award-winning new civic library and the headquarters of a major credit union;
- Surrey has one of the highest proportions of Gen-X workers (read renters) in the Lower Mainland.
As well, with an average resale condominium price of $225,400 in February, North Surrey resale condo prices are up 22% from a year ago, Central Surrey up 15%, 4% higher than a month earlier – and are still $200,000 less than the average condo price across the Lower Mainland and $30,000 less than the Fraser Valley average.
Full disclosure: Jurock Insider has arranged an exclusive deal on pre-sale condominiums in Central Surrey, because we think it represents one of the best buys, short and long-term, for our investors in Metro Vancouver.
Full disclosure: Ozzie Jurock and Ralph Case own a fully licensed real estate brokerage firm called Worldwide Referrals Inc. That company arranged an exclusive buy on pre- sale condominiums in Surrey (for Tien Sher last April) and currently represents a number of pre-sale opportunities throughout the Lower Mainland. Why? Because we think it represents one of the best deals for our investors in Metro Vancouver.
• RECORD HIGHS AND LOWS IN VICTORIA
Ace Realtor and developer Rick Hoogendoorn had no shortage of news (or PowerPoint slides- 435!)) when he gave his Landrush presentation. He noted that Victoria is now the 3rd most expensive rental market in Canada, and real estate sales smashed a 25-year-old record in 2016. However, they also have record low inventory to go with the extremely high demand for properties, and that has been driving property prices up all over Greater Victoria, especially in the CORE. In fact, most neighbourhoods have only a few listings for sale, and some are without a single home on the market.
In a particularly striking section of his talk, Rick showed how there are 1,330 realtors licensed in Victoria, and a paltry 669 home listings between them. There are a mere 23 houses with suites, available in the Core and priced under $1,000,000 … and many of those already have accepted conditional offers in place.
The average price in Greater Victoria (at the end of February) was $852,111, but there is still a huge difference between home prices in the CORE and areas like Victoria’s Westshore region. Nonetheless, Rick outlined the sometimes-ridiculous discrepancies between prices in Vancouver and the Capital Region, where a modest home on Vancouver Westside costs as much as FOUR waterfront properties in Victoria. In terms of investment condos, there is only ONE rentable 2 bdrm condo in downtown Victoria priced under $400,000. Rick made a classic Arnold Schwarzenegger and you can hear him do that, buy real estate or become a joint venture partner with him here: email@example.com
• THE MAD, MAD VICTORIA:
Rick reports on March 8: “There is a NEW PROBLEM in the Victoria market now, and it has to do with the now-common practice of delayed offers. This is where you list a house and the seller refuses to look at offers for 4-7 days. It has resulted in a dramatic increase in the number of multiple offers, but has conversely taken some of the frenzy out of the buying process. So, what’s the problem?
Almost all the delayed offers are being set to be reviewed on Mondays. So, if you have buyers who like more than one house with offers being reviewed on Monday, they now have to choose only one to offer on! Nuts! Bananas! Irksome.
There is still so little inventory here that this conundrum is actually becoming commonplace. As if the having no inventory isn’t bad enough! Krikey. So, I’m working with a buyer who needs a 5-bedroom house in the Victoria CORE.
There are 14 current listings. Oh wait. Four already have accepted offers in place. There are ten. One is far outside the CORE and two are on busy streets which are tough for resale. There are 7. Of the seven, FIVE are looking at offers on Monday! So, he can only offer on ONE of those FIVE! As if it wasn’t bananas enough-there are three listings to choose from for him”.
• THE EXTRAORDINARY 2017 LAND RUSH CONFERENCE WAS PACKED
No threat of sleet, hail or bad weather kept attendees away last Saturday…and that was – for the whole day – there was standing room only. (Actually, the sun came out to help as well.) If you were not able to make it, please note that the full cd set will be available shortly to the general public for $88.88. However, subscribers will be granted the ‘attendee bonus ‘for this week.
NOTE: For subscribers, the full conference (on cds) is available for a short time at a steep discount price of only $48.88 (plus GST and shipping). Just go to www.jurock.com/products and click on Landrush CD sets and use coupon code LRCD2017 … or phone MAX at 604-683-1111 or write him at firstname.lastname@example.org.
(Please note, that at Landrush conferences we have this disclaimer similar to the one on our subscriber only website: Landrush 2017 conference neither guarantees claims made for a product or service, nor an endorsement of a manufacturer, distributor or promoter of a product or service. Neither Landrush 2017 nor Jurock Publishing Ltd. or its subsidiary companies shall be liable for any damages, claims, liabilities, costs or obligations arising from the use or misuse of the information that appear, whether such obligations arise in contract, negligence, equity or statute law. No guarantee or warranty is made as to the quality, accuracy, completeness, timeliness, appropriateness or suitability of the advertising or sponsorship material or any information provided. No advertising material is intended to be a substitute for the advice of a real estate, accounting or legal professional, and attendees are advised always to consult their personal professionals for a review of products and services offered.)
At our great Landrush conference, we handed out 100 MLS listings in BC and 10 in Phoenix, that were priced under $100,000. Just email a request to email@example.com and he will be pleased to send you the listings.
(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 firstname.lastname@example.org)
WONDERING ABOUT THE HOTLINE?
Hotline Text Alert System and Hotline Code Changed
To get on the Hotline Text Alert System and receive a text update when the Hotline is ready, please text ‘Jurock‘ to the number ‘393939‘ and you will be added to the system. You will receive no more then one text a week.
The Hotline Code has also been changed. Our new Hotline access code is 8080. The Hotline phone number is still 778-328-8887.
To subscribe to Jurock’s Facts by Email call 1-800-691-1183 or 604-683-1111 or fax 604-683-1707. While the above information is compiled from sources believed to be reliable, its accuracy cannot be guaranteed. Any type of investing carries inherent risks; as such, JREI cannot assume responsibility for any subscriber’s actions.