Most people in Canada don’t care about the Vancouver housing market, but that doesn’t mean they would be unaffected by a bursting housing bubble here.
Canadian Business argues that what we need is a national regulator to deal with risks in the financial system:
In 2013, the International Monetary Fund called on Canada to create a federal entity with a clear mandate to monitor threats to the financial system. The IMF earlier this month scolded Ottawa for so far ignoring its advice.
The Vancouver house-price surge is exactly the sort of thing the independent agency should handle. It is a national issue: everyone knows who will be called on to clean up the mess if it bursts. The banks would feel it and likely would curb lending. CMHC would feel it because it has insured most of the mortgages Vancouverites have used to buy their inflated assets.
Unfortunately as a politician anything you could do about the housing market would most likely be political suicide. Owners are voters and nobody wants to see the value of their home drop. Read the full article here.
A while back NDP MLA David Eby held an ‘emergency meeting‘ on the Vancouver housing crisis. (Presumably called a ‘crisis’ because the 25-44 age group is leaving Vancouver faster than they are arriving.)
But you should not be under the impression that the BC Liberals are sitting back and doing nothing about the housing situation here.
Not only have they announced new real estate rules to address many of your concerns, the minister responsible for housing will be attending a Burnaby North Breakfast on Friday May 20th about housing affordability for young first time buyers.
Tickets are only $20 and all proceeds go to support the Burnaby North Riding Association. If you are unable to make it, there is a convenient link to make a direct donation on the bottom of that page and there’s nothing that says donations are limited to developers only.
Polozi Scheme posted this link to a post at Ross McKay real estate consultants with the theory that the Vancouver real estate is a ‘currency exchange ponzi scheme’.
A investor seeking to remove Chinese Yuan from China and have it converted into a foreign currency purchases a home in Vancouver. The investor once having the currency exchange authorized and completed for the purchase to take place then offers the same opportunity to another investor who is willing to offset any costs the original investor incurred through paying a high enough price for the same home that then allows the previous investor to “break-even”. This pattern is continued over and over again causing the selling price to raise higher and higher at no risk to the investor, while at the same time offering higher and higher amounts of currency to be exchanged on the rising home price being paid.
At no time is the price paid reflective of fundamental value of the real estate being traded but is being established for ulterior purposes that are not related to normal house price growth.
At some point in time the scheme ends as the last investor is converting so much currency that the benefits exceed even the need to “break even” and the home can be sold at a net loss. When that moment is reached the appearance of sustained house price growth ends and the scheme ends moving the scheme somewhere else.
Read the full posting here.
The BC government has announced new rules that require purchasers to reveal citizenship details:
The new requirements, aimed at answering whether foreign ownership is driving up housing prices, go beyond the data that are supposed to be collected for Canada’s anti-money-laundering agency whenever someone is involved in a real estate transaction. Records show there is significant non-compliance among Vancouver-area real estate firms, which are required to collect the information for the Financial Transactions and Reports Analysis Centre (FinTRAC).
B.C. Finance Minister Mike de Jong said he is confident provincial auditors will be more successful. “The objective here is to get beyond the theory, get beyond the conjecture and the speculation and actually have hard data,” he told reporters on Tuesday.
They also announced new requirements to deal with bare trusts:
The new disclosure rules will also create new data on the use of bare trusts, after an investigative report in The Globe showed how such trusts may be used to transfer property ownership without paying the property transfer tax. Mr. de Jong said the data, which must be provided on the new property transfer tax return form, will be shared with Revenue Canada.
Such data are supposed to be collected under Canadian law, but a federal audit of paperwork in Vancouver realty offices found many instances where required filings were significantly lacking.
And of course the dreaded ‘shadow flipping‘:
The new regulation – which applies only to licensed realtors – will not ban contract assignment but seeks to ensure that the seller consents to such an arrangement and is the one who profits if the property is resold before the deal is closed.
So presumably the best way to continue shadow flipping is to avoid being a licensed realtor. Read the full article over at the Globe and Mail.
A recent report out of SFUs school of public policy is generating headlines that are rather extreme:
Foreign buyers crushing Vancouver home dreams as governments do little.
“People recognize what’s going on, and they’re willing to call a spade a spade,” he said, stressing that such views are based on reality, not racism.
His report compiles a number of other studies, including data on home-buying trends, population density, the cancelled immigrant investor program, and American research on the same issue.
Gordon said his report blames Vancouver’s housing crisis on foreign buyers, particularly from China, because “this is where the evidence points, not because of some anti-Chinese animus.”
Chinese investors have also spiked home prices in the Toronto region, but Vancouver has seen the highest rise in real estate due to the influx of foreign money reaching an unprecedented level in the last year, he said.
Gordon noted that other countries, including Australia and Singapore, have created policies for foreign homebuyers to protect their own citizens but that hasn’t happened in Canada.
Read the full article over at the CBC.
Those of you who complain about the local real estate market should calm down and take a moment to reflect on the benefits of the current situation.
Without financial support from real estate developers how would the provincial government be able to provide necessities like salary top-ups for the premiere?
Without fundraising by condo marketers it would be you the taxpayer that would have to pay for that extra $300k given to the premiere since 2011.
And if you’re concerned about conflicts of interest, don’t be! The premiere herself has addressed this issue:
‘The issue for us is to make sure we always separate our public duties from any sources of funding for political parties, and I think that’s the most important thing for all of us to remember,” Clark has reportedly said in defense of the stipend. ”I always keep that utmost in my mind when we’re making decisions.”
If you want to read David Ebys concerns about the current situation, you can find them over at the Tyee but just remember, he’s likely motivated by sour grapes or jealousy. After all, Eby has been stuck with the MLA responsibilities for Vancouver Point Grey for the last few years while Clark gets to enjoy Kelowna.
You know what the difference between you and the wealthy is?
The wealthy have lots of money.
And they tend to keep hold of it by using perfectly legal techniques such as buying and selling real estate within a bare trust to avoid taxes. One recent example prevented more than $2 million from from being vacuumed up into government coffers.
Green Party MLA Andrew Weaver has been concerned about the bare trust for the last two years, highlighting the need to fix the loophole.
He says people who are very wealthy or investing from abroad would be recommended by astute accountants to purchase their house using the loophole.
“Every time most people buy and sell a house, they’re paying property transfer tax. It’s only the wealthy and the wise who would actually buy in bare trust,” said Weaver.
“As a society, if every single person created a bare trust and bought every property in a bare trust there would be no more property transfer tax collected in British Columbia… there’s no reason not to change it.”
Just think of the efficiencies and tax dollars saved if every real estate transaction in BC happened through a bare trust. Less money spent in taxes means more money flowing into a supporting a healthy local economy. Bare trusts for all!
Over at MoneySense they have a list of 4 casualties of the Vancouver real estate market.
The first one isn’t really a negative though, it’s just people jumping into the market without any conditions or clauses and taking on the risks that entails. That only affects willing participants in the market.
The other 3 points affect everyone – Empty zombie neighborhoods, high rental prices and fewer options for local food.
…land prices in the rich and productive soils of the Fraser River delta have risen and now sell in the range of $80,000 to $110,000 per acre. While prices can drop for parcels of land greater than five acres, these price increases are setting off alarm bells, especially when paired with statistics from agricultural lender Farm Credit Canada that show that any land priced above $80,000 per acre makes farming unsustainable.
Read the full article here.
Did you know that the Vancouver School Board owns the land under Kingsgate Mall?
Well now you do.
The VSB is seeking ideas on what to do with this asset due to current budget shortfalls.
Surprisingly, the modest little mall has also been generating big money for the Vancouver School Board — upwards of $750,000 per year, The VSB has owned the East Broadway and Kingsway lot on which the mall sits since 1892 when the long-gone False Creek School first opened on the site.
But 124 years later and facing a $24 million budget shortfall, the VSB is now contemplating its future with Kingsgate, and asking for public input.
“One of the questions we’re asking is what do you think the school board should do with it,” said VSB chairman Mike Lombardi.
According to Lombardi, the VSB could see revenue from the property increase to $2 million annually — money which flows directly into the operations budget, offsetting the deficit. The lease with mall operator, Beedie Development Group is set to be renegotiated next year.
Selling the land is also a possibility, although money raised from a sale won’t help the budget shortfall because it would be restricted to capital projects like new school construction and building upgrades.
Read the full article over at the CBC.
Short term AirBnB style property rentals are not permitted in Vancouver and the city can levy fines up to $10,000, but apparently there are still some of these short term rentals available.
“The difficult and complex thing comes when we move forward with prosecution,” Toma said, explaining that the city needs to connect the property owner to an online short-term rental listing without the help of a specific address.
Toma said a few cases against short-term renters are pending. Fines in those and other cases are up to the prosecutor, but staff recommend they recoup investigation expenses at minimum.
City staff are contemplating new tools to deal with the nuisance aspect of short-term rentals at the same time as assessing the industry’s impact, Toma said.
“We do have such a tight rental market,” Toma said, adding that she hoped staff could craft a smart and enforceable regulation that would also “find that sort of a sweet spot” for those sharing their home to meet their mortgage payments.
Of course there is one kind of short term rental that is currently allowed in Vancouver, but it comes with a few catches:
Bed and breakfasts are allowed in Vancouver, but under certain conditions. Homeowners need to live in the residence and they can host a maximum of four guests in two bedrooms, among other regulations. They also have to pay a one-time development and building permit fee, get a business licence and pass a safety inspection.
Read the full article over at the province.