THE LATEST ONE WAS UPLOADED JULY 19 – THIS OZBUZZ…
This month too many questions to answer. Never knew what “bombarded” meant. I know now.
We answered some of the questions at askanexpert.ca and feature most of OzBuzz Qs and As there as well.
On gold: This time there was a remarkable support for buying gold jewellery. Smartest thing ever – said one. Of course, I like that better, but either way, I AM NOT A GOLD ANALYST.
Note Ray Dalio (I recommended his book “Principles “a few month ago) is recommending gold … Frank Giustra on the Michael Campbell show (July 18) said: “If you have no gold you are a fool”. Read Dalio, listen to Giustra … But be warned … they both see a total collapse of our system.
The more worrying aspect of the Giustra interview was that he sees the US dollar collapse … eh, what? I am not buying that … but will read more about how he arrives at that view.
HOME EQUITY TAX ‘RESEARCH’ ORDERED BY CMHC
As you know, one of the most cherished things in Canada is NO CAPITAL GAINS TAX on your personal residence (PR). Canadian homeowners currently don’t pay tax when they sell their primary residence.
When the Liberals – out of the blue – brought in a ‘registration’ system in the tax year 2017, that was an eyebrow raiser. Now suddenly, we were required to report basic information (date of acquisition, proceeds of disposition and description of the property) on our income tax and benefit return when we sold our principal residence to claim the full principal residence exemption.
I mused then as to ‘why’ in my weekly ‘Facts by Email’. I speculated then that the government would come after the home offices (you make business in your home, right?) and thus would have to know when you sold (PR) and check what you claimed for home office expenses … Bang. You lose capital gain exemption on that portion the office represents in your PR home, I thought. We also discussed this possibility at length on the great Michal Campbell Money Talks show (CKNW 980). When the “Laneway craze” started a few years ago, I was at pains to write in my newsletter and again discuss with Michael the fact that building a laneway house for extra income, loses you that portion of the PR that is used to generate income (ergo Laneway house). I concluded that to put one on a 33 foot lot on a house you owned for 20 years (with a million in profit) and possibly lose 33 percent of your exemption may be foolish. Then 4 weeks ago Michael Campbell again raised the spectre of “Government will need taxes and real estate is in the crosshairs”. He and I discussed the possibility that government (now having a base of knowing when, what and how much for you sold) may plan to take away the capital gain exemption. The Conservatives were accused in the fall of 2019 for “misleading claims about a ‘secret’ Liberal housing tax” (by the liberals). This was supposed to be a staggered tax on the gain: First year 50%, 35% second year, etc., etc. The Liberals said then it does not exist. I took what was for me considerable flak for making the statement: “…if you want to be sure analyze a trust or sell and re-buy another house….” Lock in the gain. I mean if you have $500,000 or more in gain … keep it tax free if you can. Some (not subscribers to OzBuzz) called it ‘fearmongering’.
Well, on Friday the 17th July it was announced that (from a report in the Toronto SUN) CMHC was spending a quarter-million having UBC do “federal home equity tax research”.
That makes it clear, it is now in the open – they are analyzing it! They need UBC to tell them how best to implement it! Its funny (actually not!) that the economic forecast from the (CMHC) includes the ‘potential for falling real-estate prices’ and ‘increases in household debt.’ But yet they analyze taxing the gain!? Huh? In any case:
“The objective is to identify solutions that could level the playing field between renters and owners,” said CMHC spokesperson Audrey-Anne Coulombe. It’s being called the first CMHC-sponsored project via cabinet’s National Housing Strategy.
The UBC project Generation Squeeze: “…many Canadians bank on profits from home ownership to secure their financial future and gain wealth. This bound us to a catch-22: The more we made home ownership profitable, the more we made housing unaffordable. If we want a future where all Canadians can afford a good home, including our kids and grandkids, we must unravel this pre-existing catch-22. We need to make it so that no Canadian relies on gains in housing wealth to feel secure, and we need to rethink policies that by encouraging the financialization of housing push the cost to buy or rent a home even further out of reach.”
It’s estimated a national home sales tax would raise at least $6 billion a year for the federal treasury (Toronto Sun). I would very much like to know – how they arrive at that figure. But dear Reader, the real burning question is – will this include some retroactivity of some sort. Retroactivity you say? No government ever would be so dastardly as to nilly willy change the rules backward?
Well, then of course BC brought in the foreign buyer’s tax (no problem from me here) but brought it in retroactively. No, I do not believe anything they state, analyze, research, promise or report. In a 2019 report, UBC researchers called homeowners lottery winners with an unfair tax advantage. I believe that the same researchers advised to bring in the foreign buyer tax retroactively.
Major Point: What to do? Well, it is not law yet, it may even never be law (not likely), they may not bring it in retroactively, they may exempt some people. In any case… LOOK at your situation. In the last 7 years we have seen a lot of gains. If you are sitting on $500,000, a million or two – think about how long it would take you to earn this tax free?
They may also like to capture ALL capital gain but let you carry it forward (Harper had that on his platform) – but then you must continue to buy stuff … eventually you lose a good portion to tax anyway.
So, look at your options:
Do nothing and hope for the best and trust they won’t do it… hahahahahahaha!
Analyze a possible sale to a trust (but be darn sure its works).
Sell your house, trigger the gain tax free and buy another house in the same area, or build one and have the gain start on it. You would actually be a true participant in Canada’s economy … you are creating employment for scores of lawyers, realtors, bankers and if building … carpenters, furniture makers etc. well, you get the point.
We discussed this before – headlines only – look at link below for details.
Prohibition of referral fee: Licenced insurance agent only!
Information Certificates must include insurance coverage information
Changes to strata insurance requirements:Remove the requirement to obtain and maintain insurance on developer fixtures. Also, strata corporation’s property insurance does not need to be on the basis of full replacement value.
Notification requirements: Strata corporations will be required to inform owners and tenants on insurance.
Strata Property Actallows an expenditure to be made out of the operating fund or contingency reserve fund.
Limiting owner’s liability
Changes to depreciation report requirements
Also there is some added power to make regulations.
Announced: Framework for residential tenants who have fallen behind in their rent, along with a couple of other announcements about residential tenancies. Key points on the repayment plan:
The residential eviction ban will be lifted before September 1 (full rent will be due in September).
Late payments during the emergency period are not considered cause for eviction and a tenant cannot be evicted for unpaid rent during the emergency unless they have defaulted on their repayment plan. Tenants who have fallen behind in their rent will have until July 2021 to pay it back, as long as they make monthly installments (landlords can’t charge late fees). The first installment will be due 30 days from when the landlord presents the repayment plan – probably October 1 for most tenants: and landlords and tenants can still negotiate additional terms, as needed.
So, a renter owing 4 months of $2,000 ($8,000) in unpaid rent will receive a repayment framework that sets out:
The total amount of rent still owed ($8,000).
The amount the renter is expected to pay each month, with the total owing split into instalments (e.g., $800 each month from October 2020 to July 2021).
The date of the first payment is due (Oct. 1, 2020).
The news release includes several additional announcements: I.e. no rent increases can take effect until December 1, 2020, etc..
Marv Steier, long term highly qualified tenant and landlord specialist says: “Many tenants took deferred rent to mean, FREE rent. Landlords and Property Managers can’t evict for non-payment of rent, yet.” However, he does point out that landlords can report rent payments to www.landlordcreditbureau.ca who then reports rent payments to Equifax for addition to consumer’s trade line, LCB networks landlords and property managers across Canada to identify good and bad renters. Tenants are sent ‘Welcome emails’ advising them of benefits for paying rent on time and consequences for not paying rent and damaging rental property that results in a debt. Look it up … it’s a pro-active way to deal with your possible ownership issues.
There were 175 deaths due to illicit drugs in June in BC, up from previous high of 171 in May. What? 731 deaths since January. What? Total BC Covid death? 189! Huh?
The fine Fraser institute reports that on an average income of $75,000 we in BC pay 28% in tax, Ontario 29%, Manitoba 38%. Washington, Nevada, Texas, and Florida? 22%
Real Estate sales strong in lower tax states. Definite trend of people rushing out of high tax areas (California, New York) and resettling in Arizona, Texas…etc.
The general market remains stronger than expected…There was 33% mortgage renewal applications, highest average price mortgaged in US. Lowest 30-year mortgage (30 years no term!) under 3%!
Q: I found your view on Chapter 11 most interesting. Why did I not know this? I got concerned about your solvency crisis. More please. A: Well, we have a total disconnect of the stock market and the economy, guided by government selling bonds to itself and then spending the money. We also have a ‘non-payment of credit card crisis’ and a ‘nonpayment of rent crisis’ and a ‘major, major insolvency crisis’ in brand name companies. So, we have an insolvency crisis that has to be worked out … So far major companies that filed for Chapter 11 bankruptcy in 2020 are featured at Wikipedia… 65 pages are in this category. Look it up here: https://en.wikipedia.org/wiki/Category:Companies_that_filed_for_Chapter_11_bankruptcy_in_2020
Q: I can’t believe that gold did not do anything for 27 years. Where can I look that up? A: I said that gold was $800 in 1980 and did not raise above that until 2007. That does not mean that after it crashed in 1990 you could have not bought it at $300 or so in between and then rode it up to $800 in 2007.
Q: What is a VPN and why do I need it? A: Typically, when you go to a website on your internet service provider, they redirect you to any websites through your ISP server. This means that they (and easily others) can see and log everything you do online. Everything! Even your ‘private webpage’. They may even hand your browsing history over to advertisers, government agencies, and other third parties. A ‘VPN’ redirects your internet traffic through a specially configured remote server. This way, the VPN hides your IP address and encrypts all the data you send or receive. The encrypted data looks like gibberish to anyone who intercepts it — it is impossible to read. Today most of the world’s best VPN providers offer you total privacy for about $5 – $9 dollars a month. I pay about $8 and that covers 2 iPhones, 2 computers and my smart TVs. Google the info on VPNs, read up on it … I think the future looks grim for privacy … do all you can to protect yourself. It’ll get a lot worse!
Q: With all that goes on, what worries you most?
A: Galbraith: People don’t know, and some people don’t know they don’t know. That’s me and most everyone else. Very worrisome. Federal Reserve in the US is worried about banks. They are at odds. One governor said it wasn’t enough to (create billions) Another said it’s irresponsible. Fed in US and Canada is very worried. That’s’ why goofy comments about stop people buying houses…They also don’t know what they don’t know. Seems to me, that policy makers say something in public yet admit to be very worried privately.
In essence though we have to have – if grudgingly – some admiration for government action in a difficult new environment. Easy for us to criticize. But what exactly is/was and will be the right decision we can bemoan but they are in the crosshairs…hopefully doing the best they can…
That means to me, we muddled thru in the past (1,100 banks close in USA in 89/90) and we will muddle through this time…Look at my “age cash “position, stay attentive and jump on the deal of the lifetime when it comes.
HOUSE PRICES IN MANILA UP 22%
We recommended you buy in Manila (albeit carefully) last May (2019) when we were in Manila for 3 weeks. Now it is up 22% and Budapest is up 16%. Frank Knight of London tracked 150 cities (by the latest Global Residential Cities Index) and the average increase is 4.6% … well over the stated government inflation rates. The top 20 cities all show over 10% increases. The monied elite is pounding into real estate from Athens to London, from Manila to Toronto (Toronto reported the highest price EVER achieved in a month of June.)
Major Point: If it were not for the massive economic disruptions, huge solvency issues etc … we would see massive double digit increases everywhere … and when and yes ‘if’ we get thru this … we will. In the meantime, money is pounding into stocks, gold, and real estate … everywhere.
Q: Can I still get a passport when I buy real estate in Portugal and Spain? A: You can get one there and in 20 other nations. Read carefully the requirements – they vary by country. I was last in the Algarve (Portugal) in 2018 and it was possible to buy real estate there for as little as $120,000 euros. However, you need $350,000 euros in Portugal to qualify for residency. So, the amounts vary, Ireland is $500,000 euros etc. However, if you can show an income as low as $1,500 a month you can reside in Dubai and in Portugal (1,200) and most other countries.
Or go to a tax-free/VISA FREE year in Barbados… The government of Barbados says: Come here, not just for a holiday, but for up to a year. Bring your laptop. Soak up the sun, the sea, the sand — and forget about the coronavirus. Prime Minister Mia Mottley told Today’s Worldview in an interview. “The sunshine is powerful. The seawater is powerful. They’re both therapeutic in ways that are hard to explain. And we felt that, why not share it?”
Dubbed the “Barbados Welcome Stamp” and launching this week, the program will allow visitors to stay on the Caribbean island visa-free for up to one year. Hmm, worthwhile considering?
If in Canada, sell your house, lock in capital gain, buy another house.
Buy gold for goodness sake and leave me alone. But, if you buy gold go with silver too … in any major up reversal silver outperformed the yellow metal. I understand your reasons.
I will send out a survey, please take a minute when you get it … we will give away 20 books to the first 20 surveys returned.
BOOK OF THE WEEK
Michael Campbell talked about the well known environmentalistMichael Shellenberger and his total about turn. A committed environmentalist owns up to: “Why Environmental Alarmism hurts us all.” A fascinating read. An environmental expert unleashes a scientific, fact-based broadside against eco-alarmism and the excesses of the left, arguing that climate change and other environmental problems are real but not apocalyptic and require practical, not radical, solutions.
Stranger Things – Great series of murder and Sci-Fi
Misaeng – Ok, ok, hooked on this Korean – Go playing boy survives in a quirky but real Korean co.
THE NUMBERS THE NUMBERS VANCOUVER
Buyers in June said: CMHC be darned! They came out and clocked in far better than June last year and very, very much better than May. Before we get too excited, maybe some buyers wanted to lock in the CMHC mortgage before the new terms came in on July 1… But overall, the LM exceeded expectations. Central Okanagan until June 23 also reported an INCREASE in sales as did Victoria.
Major Point 1: Needless to say, when you look at averages in the Fraser Valley you look from Surrey to Langley White Rock to Cloverdale. Always drill into the numbers of the area YOU want to be in. Take Surrey for instance:
Major Point 2: Surrey’s single-family home is up 9% (!) best compared to June than all 4 years.
Major Point 3: A dramatic turnaround. Sales in Vancouver are up y-o-y overall 17%. The price was not only higher by 6% across the board, but better than 2019 and 2,017. Active listings are lower than 2019, and 2018.
On the SF home side … sales are higher, and prices are higher and listings lower than 2019.
Condo prices clocked in better than 2019, 2018, 2017! And condo sales? Higher than 2019 and 2018.
“We said last month that sales in May were higher (1,499) over April (1,122). SF sales are higher (544) versus April (393). Condo sales were higher (766) versus April (656). Prices are higher – year over year by 4% overall, etc. We noted sharp declines last month, but we mused: “Will it continue? June will tell the story.”
Well, June told the story… We also said in March that we thought the virus would peak in BC in April and then taper off into the summer. (At the youtube.com/jurockvideo I said July)
Your OzBuzz has been right on target on all fronts… Please study the last 4 years – 3 out of the last 4 years the average price is higher, and 2018’s average was only 18,000 higher, steady as she goes. Of course, now people talking second wave.
LIVE LIFE LARGE
You can have everything you want… But look around you’ Do you want everything your have?
I am grateful for what I have I am grateful for my friends I am thankful for abqandunce I will share what I don’t need I will grow into my future best self LIVE LIFE LARGE
Go to www.realestatetalks.com – Some 2,500 members (47,009 posts) talk real estate. Ozzie created this bulletin board in 1998!
If you are in a real estate related industry of any sort (realtor, appraiser, lawyer, home inspector, etc.) list yourself in Ozzie’s free British Columbia real estate directory at www.bcred.ca.
Ozzie is on air with Michael Campbell on the fabulous MONEYTALKS every Saturday sometime between 8:30AM – 10 AM. The radio station is CKNW and the best way to listen to it is WHEREEVER YOU ARE IN THE WORLD, just visit www.cknw.com at 8:30 am every Saturday (PST), click on live and you’re good to go. The Hot Property that we discuss there, is available by subscribing to the Oz Buzz Dispatch at Jurock.com
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