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Victoria Real Estate Market Review of April

"Last year, the months of May and June were the busiest," said Victoria Real Estate Board President Kyle Kerr. "So, we may see this pattern again but on a slightly smaller scale than last year, since our sales for the year thus far are down about 18 per cent when compared to 2017."

A total of 2,002 active listings for sale on the Victoria Real Estate Board Multiple Listing Service® at the end of April 2018. A total of 774 properties sold in the Victoria Real Estate Board region through April which is a 12.5 per cent increase from the month previous.

There isn't a lot of homes on the market to meet demand, and good homes in desirable locations still see multiple bids. There is a strong pressure on lower-priced properties. The reduced buying power of consumers due to the new mortgage rules is creating more competition for lower-priced properties. That's what is pushing prices up.

The Multiple Listing Service® Home Price Index benchmark value for a single-family home in the Victoria Core in April 2018 was $866,700, an increase of 8.3 per cent increase over last April at $800,100. The MLS® HPI benchmark value for a condominium in the Victoria Core area in April was $495,100, an increase of 18.4 per cent over last April at $418,200.

 

Creating More Rental Spaces in Victoria


The NDP introduced amendments to legislation which will provide municipal governments stronger zoning tools to protect and improve the supply of rental properties. It will allow them to ensure existing rental properties cannot be redeveloped for other uses. Undeveloped land zoned for rental will be used for rental homes.

That's welcome news for Victoria Mayor Lisa Helps. She points out there are 10,000 rental buildings from the 1960s in Victoria that require some form of updating, including seismic work. She and the Victoria council are interested in seeing this work progress as a measure to alleviate a vacancy rate well below one percent.

“We're definitely looking at incentives for developers,'' she said.

Victoria council has been working to increase rental stock in the city. In March, they passed a bylaw to allow condos, duplexes, townhouses, secondary suites, and garden suites to offer short-term rentals of up to 2 bedrooms in their principle residences. Even renters can engage in short-term rentals, as long as they have their landlord’s permission.

Offering rental space in your home is an excellent mortgage helper. Talk to me about purchasing a property with short-term rental potential and I’ll make sure you’re fully informed about what you need to know before you buy your home.

 

BC Government Legislating Measures Designed to Control Home Prices and Increase Rental Vacancy


Recent legislation introduced by the BC Government will require builders to collect and report their buyer's information on the purchase and sale of condos before they are built. The NDP are putting this practice into place because they are concerned speculators are making purchases, riding out the equity increases while the property is being built, then selling them at a profit without ever living in them or reporting any of the capital gains.

“This is a key step to stopping people from using presale condos as a quick, lucrative investment,'' says Carol James. ``It's also to stop them from driving prices up for British Columbians trying to get into the housing market.''

This legislation would force the reporting of the condo flips and allow the government to collect the tax.

The NDP also introduced amending legislation to give municipal governments stronger zoning tools to protect and improve the supply of rental properties. It will allow them to ensure existing rental properties cannot be redeveloped for other uses. Undeveloped land zoned for rental will be used for rental homes.

Other steps the provincial government recently took include the introduction of a speculation tax on vacant homes to encourage rentals, increased foreign buyers tax on property sales and the creation of a housing hub program to link non-profit and faith groups with property to developers to build affordable housing.

 

More Homes Selling as Spring Arrives

The number of homes sold in March is up from February in over half of all local housing markets, led by Ottawa and Montreal. Monthly sales gains were offset by declines in B.C.'s Lower Mainland, the Okanagan Region, Chilliwack, Calgary and Edmonton. 

While a national snapshot is interesting as a backdrop for our local market, and you can read more through the link. Here in Victoria, the number of homes sold over last month rose 26.2 per cent as 688 properties sold in the Victoria Real Estate Board region.

It's certainly fewer than last year - 25.9 per cent down from the 929 homes sold last March. That's likely due to the federal government's new mortgage qualification rules combined with rising interest rates.

While there are outside pressures on the market and demand has lessened somewhat, supply is still tight, and spring is an excellent time to sell your home.

 

March 2018 Greater Victoria real Estate Market Review


Home buyers are looking at increasing interest rates combined with the mortgage stress test. And while these factors have constrained the market somewhat, Greater Victoria’s continuing historical low inventory levels means demand is still outpacing supply.

The Multiple Listing Service® Home Price Index benchmark value for a single-family home in the Victoria Core is now $840,300, up 9 per cent from last year, February 2017, when it was 771,100. The MLS® HPI benchmark value for condominiums in the Victoria Core area is now $472,500, up 19.85 per cent from last year, February 2017.

There was a total of 1,545 active listings for sale on the Victoria Real Estate Board Multiple Listing Service® at the end of February 2018. Of that, there were 455 active listings for single-family homes which resulted in 226 sales. In comparison, we saw 243 active listings for condominiums which resulted in 174 sales.

Over the past year, more families and professionals have turned to condominiums as the more affordable and accessible real estate option. Another population segment are seniors who are downsizing from larger homes to simplify their lifestyles and their living space.

 

Examining the BC NDP Budget Impacts on the Housing Market


The NDP budget includes a 30-point housing plan that is designed to stabilize the housing market. This plan outlines a new speculation tax on people who own empty homes but pay no income taxes in B.C., expands the current transfer tax and foreign buyers' tax, and cuts a loan program for first-time buyers.

Finance Minister Carole James said she hopes this and other changes will cool real estate costs, but would not predict how much, or what will happen if they take a bigger bite out of housing values than intended. "We are treading on new ground," she says.

Speculation Tax

Part of the plan includes a new levy, or "speculation tax," which will be applied to more than 15,000 residential properties in Metro Vancouver, the Fraser Valley, the regions of Victoria and Nanaimo on Vancouver Island, and Kelowna. The tax rate, charged on a property's assessed value, will be 0.5 per cent in 2018, and then 2 per cent in the following years. This means if an overseas owner who is not a Canadian citizen owns a $1,000,000 home in Victoria, they will pay $5,000 this year, then $20,000 in following years. "This will penalize people parking their capital in our housing market simply to speculate, driving up prices and removing rental stock," Ms. James said.

There are some unintended consequences of this tax. Albertans who own vacation properties in BC are feeling the sting and they are not happy about it. The proposed tax has already been dubbed a “punishment tax” on chat sites frequented by Albertans with vacation homes in B.C. Many feel it is discriminatory and suspect the motivation behind it is the ongoing oil pipeline fight between the two provinces. Under the plan, a $500,000 condo in Kelowna owned by an Albertan could face an additional $10,000 tax bill annually.

In a recent interview with MacLean’s Ms. James said, “It doesn’t matter if you’re from Toronto, Montreal, Calgary or overseas, the speculator tax will impact those who choose to speculate or take housing stock off the market.”

Out of province homeowners with vacant properties in BC will not know until the fall legislation whether the provincial tax will apply to their properties, and if so, whether they will qualify for any exemption that will provide an income tax rebate the next year.

Property Transfer Tax

The Property Transfer Tax has been increased for residential properties on the portion of the Fair Market Value exceeding $3,000,000. The Property Transfer Tax rate is now on per cent on the first $200,000, two per cent on the portion of the fair market value greater than $200,000 and up to and including $2,000,000, three per cent on the portion of the fair market value greater than $2,000,000, and finally, five per cent on the portion of the fair market value greater than $3,000,000.

Additional Property Transfer Tax (Foreign Buyer Tax)

The current tax on the purchase of a home by a foreign buyer rose to 20 per cent and was expanded to communities outside Metro Vancouver, including the Fraser Valley, Nanaimo, the Central Okanagan and the Capital Regional District. "We think that foreign buyers should contribute more for the high quality of life they enjoy in our province," said Ms. James.

Grandfathering provisions will exempt transactions from the Additional Property Transfer Tax in the above areas if registration occurs before or on May 18, 2018 and the property transfer is subject to a written agreement dated on or before February 20, 2018 (a definition of written agreement has not been provided).

First Time Home Buyers Program

The NDP axed the former BC Liberal government's program that provided interest-free loans to first-time homebuyers. The program offered a second mortgage to qualified buyers and did not require any interest payments or payments on the principal for the first five years. While helpful, many critics felt this program encouraged first-time home buyers to take on too much debt.

Conclusion

The NDP budget represents a strong shift toward wealth redistribution. The additional tax revenue they raise will be approximately $2-billion towards their efforts to tackle B.C.'s affordability issues.


 

BC Budget 2018

I hope you will find this Legal Update by Mullin DeMeo Barristers and Solicitors interesting and helpful.

The British Columbia government made several announcements regarding housing as part of the NDP 2018 Budget. Among those announcements are the following:
1.     Additional Property Transfer Tax (Foreign Buyer Tax):
a.     Increase of the Additional Property Transfer Tax on Foreign Entities from 15% to 20%.
b.     Expanded regions of the Province where the Additional Property Transfer will apply, to include the Capital Regional District, the Fraser Valley, the Central Okanagan, and the Nanaimo Regional District.
i.     Grandfathering provisions will exempt transactions from the Additional Property Transfer Tax in the above areas if registration occurs before or on May 18, 2018 and the property transfer is subject to a written agreement dated on or before February 20, 2018 (a definition of written agreement has not been provided).
c.      Further information on the Additional Property Transfer Tax and other exemptions to the Additional Property Transfer Tax can be found in the following link: https://www2.gov.bc.ca/gov/content/taxes/property-taxes/property-transfer-tax/understand/additional-property-transfer-tax

2.     Property Transfer Tax:
a.     The Property Transfer Tax has been increased for residential properties on the portion of the Fair Market Value of the property in excess of $3,000,000.
b.     The Property Transfer Tax rate now is:
i.     1% on the first $200,000,
ii.     2% on the portion of the fair market value greater than $200,000 and up to and including $2,000,000,
iii.     3% on the portion of the fair market value greater than $2,000,000, and
iv.     if the property is residential, 5% on the portion of the fair market value greater than $3,000,000.
c.      This is effective February 21, 2018 and there is no exemption for contracts of purchase and sale entered into prior to February 21, 2018 closing on or after February 21, 2018.
d.     Further information on the Property Transfer Tax can be found in the following link: https://www2.gov.bc.ca/gov/content/taxes/property-taxes/property-transfer-tax/understand#FairMarket

3.     Speculation Tax:
a.     Beginning fall 2018, the Province has announced that it will introduce a new speculation tax on residential property targeting foreign and domestic owners who own real estate in BC but do not pay taxes in BC.
b.     While full details of this tax have not been released, the Province has announced:
i.     The new tax will apply to the Metro Vancouver, Fraser Valley, Capital Regional District, Nanaimo Regional District and the municipalities of Kelowna and West Kelowna.
ii.     Exemptions will be available for most principal residences, qualifying long term rental properties and special cases.
iii.     The tax rate will be 0.5% of the taxable assessed value of the property for 2018 and 2% for 2019.
c.      Further information on this proposed speculation tax can be found on page 10 in THIS LINK.

4.     General Anti-Avoidance Rules
a.     The Property Transfer Tax Act is subject to general anti-avoidance rules and applicable penalties.
Professional advisors (including Realtors) advising someone to avoid, evade or attempt to avoid or evade tax liability under the Property Transfer Tax Act may result in significant penalties including double the tax, tax plus interest, a fine of $200,000 for corporations or $100,000 for individuals and/or up to two years in prison.
b.     Further information on this can be found in the following link: https://www2.gov.bc.ca/gov/content/taxes/property-taxes/property-transfer-tax/file
This is only a brief discussion of some aspects of certain announcements related to housing in the 2018 Budget. The following is a link to further information on the NDP housing announcements: http://bcbudget.gov.bc.ca/2018/homesbc/2018_Homes_For_BC.pdf. If you have any questions on the above or any other real estate related matter, please do not hesitate to contact our office at any time.

Contributed by Mullin DeMeo

 

Builders are Flat Out Busy!

According to a report released by Canada Mortgage and Housing Corporation (CMHC) on February 8th, the number of January starts – 100 units – is down from 175 starts last January.

CMHC Stats

However, 2017 was a near-record year with close to 4000 units started. That’s nearly double what the Capital Regional District normally sees – on average 2000 – 2200. Builders in the Greater Victoria region started 2,966 multi-family units and 896 single-family homes last year for a total of 3862 new homes. This number beats every other year except 1976 when the region saw 4439 starts.

 

Lack of Inventory Driving Home Prices

Real estate prices have risen a good deal in the last year, driven by the lack of inventory which was at a record low in January.

There was a total of 1,491 active listings for sale on the Victoria Real Estate Board Multiple Listing Service® at the end of January 2018, 1.6 percent fewer than the 1,516 active listings for sale at the end of January 2017.

The lack of inventory in our market is maintaining pressure on pricing, especially as high demand continues in many areas of Victoria.

The Multiple Listing Service® Home Price Index benchmark value for a single-family home in the Victoria Core in January 2018 was $831,900, a 9.3 percent increase from January 2017.


HPI benchmark value for a condominium in the Victoria area in January 2018 was $450,600, a 20.1 percent increase from January 2017.

 

Welcome News for the Burnside Area

An 88-unit development geared to moderate-income families is in the works for the grounds of the former Burnside Elementary School, thanks to the collaboration of the Greater Victoria school district, the City of Victoria, and the Pacifica Housing Society.

Victoria Mayor Lisa Helps said the plan for Burnside is among the most exciting projects to come up during her time in office.


“It’s the beginning of a village centre, it’s new childcare spaces which are desperately needed, community space,” she said. “It doesn’t get much better than this. “It’s one of those projects everyone should be jumping for joy about, and I certainly am.” Read the full article.