Category Archives: hype

Before buying real estate, create a bare trust

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!

Is Alberta now a buying opportunity?

The oil market has had an effect on house prices in Alberta.  Now with prices lower than they were a year ago does Alberta pose a good buying opportunity for real estate investors?

Don Pittis over at CBC says maybe not yet.

According to long time investment adviser and real estate guru Hilliard MacBeth, the bargain hunting in Alberta has already started.

“I’ve heard of lots of people who say, ‘The prices are down. I’m going to jump in,'” said MacBeth, Edmonton-based author of When the Bubble Bursts.

In fact, some of the people he advises have already identified a buying opportunity and jumped into the market, at least on behalf of their kids, who they are helping out in the role of bank of mom and dad.

“I would have counselled them against it,” said MacBeth by phone as he put on his ski boots in the Lake Louise parking lot. “I would have said, ‘Wait,’ because we’re early days yet.”

It’s more exciting to buy when prices are rising, so maybe try the Fraser Valley instead, where prices are up 27% over a year ago and they don’t have high paying oil jobs to lose.

“One of the things that was supporting Alberta home prices was the fact that our incomes were 40 to 50 per cent higher than the rest of Canada, and that’s changing very rapidly,” said MacBeth.

But property owners and prospective buyers elsewhere would be wise to watch and see if, indeed, the plunge is nipped in the bud by bargain hunters or whether prices continue to fall for a while yet.

Read the full article here.

Replica cities lack something

The economic miracle in China has led to the creation of many ‘fake’ replica cities; Paris, London, Jackson Hole, etc.  Despite features like a 1/3 replica of the Eiffel Tower, a modified Tower Bridge and Route 66 these ‘duplitecture’ cities are missing something according to this piece over at ABC Nightline.

Is it Joie de vivre? Culture? or simply population? Apparently if you build it, they won’t necessarily come right away.

Tianducheng, or “Sky Capital City,” is a real estate development modeled after the city of lights, right down to a version of the Eiffel Tower that is one-third the height of the real one.

“I think [it’s] a little strange,” Rachel Ni, who moved to Tianducheng six years ago, told ABC News’ “Nightline.” “I don’t like it here.”

Unlike the real Paris, laundry hangs in full view everywhere in Tianducheng, even on trees, and the fountains are dry. Many apartments are empty, and few stores are even open for business.

“I live here because it’s cheap. In Hangzhou, this is very, very cheap,” said Ni. “The environment is good, especially for the baby.”

Is it jealously that made ABC find a negative angle on this? Replica theme park cities sound great, think of the savings on travel budget!  Just imagine if we could have a replica Interlaken in Stanley park, a tiny NYC on the east side or Honolulu in Poco…  Read the full article and view the video here.

It’s a tough job to bust AirBnB listings in Vancouver

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.

Update on David Eby emergency housing meeting

Did you go to the emergency town hall meeting on housing in Vancouver last night? David Eby hosted with seating for 650, with the CBC reporting attendance of over 700.

“These are serious issues, this is a major crisis, and we want the provincial government to take it seriously,” said NDP MLA David Eby,  who organized it.

The event started with Eby citing a long list of media stories highlighting questionable real estate practices and how housing practices have caused residents to leave the region.

Eby said the region’s real estate is governed by “runaway speculation” that is “unpoliced, unregulated and rampant.”

The CBC article has a live blog from the event if you missed it and are curious. Will events like this have any effect on Vancouver house prices or will non-owners eventually move away leaving the city as a home owners paradise?

Housing bubble pushes out young tech workers

According to this article in the Financial Post Millennials are ‘fleeing Vancouver‘ and moving to cities where they can afford housing.

As housing costs have risen, so have the number of people in their twenties and thirties leaving the city. The net number of people age 18 to 24 added to Vancouver’s population was the lowest ever last year, at 884, and the number of 25-to-44-year-olds decreased by about 1,300, the biggest decline since 2007, according to Statistics Canada.

The tech industry is currently one of the key drivers of economic growth in the area, but they’re noticing the shift:

That driver of growth may evaporate as talent exits Vancouver, said Christine Duhaime, founder and executive director of the Digital Finance Institute, which supports Canada’s financial-technology industry. She’s having a tough time filling a 2,000-square-foot (186-square-meter) open-concept office for startups in Vancouver’s historic Gastown neighborhood she opened this year because potential tenants say they’re leaving the city for Victoria, Kelowna and as far away as London and Singapore.

“We’re banging our heads on the wall,” she said. “Why aren’t they staying? Because it’s too expensive. Vancouver is going to lose its tech edge.”

The nearest towns that seem to be benefiting from the exodus of young tech workers are Victoria and Kelowna. Read the full article over at the Financial Post.

CMHC looks to define foreign money

How would you go about trying to determine how much foreign money is going into Canadian real estate? The CMHC is now trying to figure that out.

A core team of analysts at CMHC held several meetings to discuss how best to tackle the data gap. Researchers had initial meetings with agencies including the Canada Revenue Agency and Fintrac, CMHC confirmed. The Financial Transactions and Reports Analysis Centre of Canada monitors money laundering and out-of-country transactions of at least $10,000. The documents show CMHC also planned or had meetings with the Bank of Canada, British Columbia’s housing and property assessment agencies, and the department of finance to start a data working group.

So why are we missing that information and how much real estate is owned by people outside the country?

After meetings with realtors, lawyers and condo developers in Vancouver, CMHC market analysts pointed to the lack of transparency in the market. Realtors often don’t see residency status or identification such as a passport, and that information isn’t stored electronically at the brokerage. Lawyers and bankers who run the transaction aren’t obligated to pass on residency information and buyers don’t regularly check a citizenship box when paying land-transfer tax.

“Conveyance is done through the lawyers and bankers,” minutes from a meeting show. “Money transfers should get passed onto Fintrac. Whether this is taking place or not is an issue.”

Previously, CMHC has tried to glean the scope of foreign investment with a survey of property managers that found less than 6 per cent of condos were bought by people who reside outside the country.

Read the full article over at the Financial Post.

More propaganda from the pro-renting cabal

The highly secretive pro-renting cabal that runs the local media have another article out comparing renting to owning with an obvious preference given to renting:

Not only did renting give her more options for places, put an extra $700 a month in her pocket and get her off the hook for repairs, maintenance, property taxes and the day-to-day responsibilities of ownership, it also gave her more options to live her life.

“If I had purchased in Vancouver, my future for the next many years is set (in stone),” said Yee, who is now happily living in a 685-square-foot, two-bedroom laneway house with her partner in her dream neighbourhood of Mount Pleasant for $1,650 a month.

“With renting, I can do whatever I want. It’s so freeing and valuable to me.”

They also paint ownership in a negative light:

Putting all your eggs in one very expensive and non-liquid item over the expense of other assets doesn’t make financial sense, say some experts.

Hannah says unprepared homeowners can end up more stressed and in debt than renters. Studies have also shown homeowners aren’t happier than renters. They have less leisure time and derive more pain than joy from their homes.

Will the media stop at nothing in their portrayal of renting as a superior life choice?

Read the full article here. Thanks to southseacompany for the link. Krystal Yee runs a personal finance blog that can be found at givemebackmyfivebucks.com.

The 140 sq ft apartment

‘Microlofts’ aren’t a new thing, but they seem to be getting smaller.

Enter the ‘Nanosuite’.

UBC has announced they will will be building 140 square foot apartments for student housing.

That’s still bigger than living in a van, but not everyone seems enchanted with the idea.

Reaction was mixed.

“I think they’re pretty cool,” said international economics student Raj Singh, 19.

“They have many things that you might not get in campus residences, for example a private washroom. But I’m like a really messy person, so if I were to move in there, it would be a disaster.”

“They’re very small,” said economics student Chun Lok Tse, 18.

“It’s kind of strange to not have a table and a bed at the same time. I’ve seen the prices online, $675 a month. For not a lot more you can get a better room, which shares a kitchen with three other people. I’d much prefer those to these.”

His friend Kennedee Fung agreed.

“Where I’m from in Asia, houses are famous for being small,” she said.

“And this is even smaller than the ones we usually live in. So it’s kind of ridiculous.

“I really don’t like the idea that you have to pull down your bed every time you want to work or sleep, I think that is quite a hassle. Also there isn’t much storage space.

“Although you have a kitchen and a bathroom, as an international student, you have suitcases, and you wouldn’t know where to put them.”

Read the full article over at the Vancouver Sun.

Q&A with Globe and Mail RE Reporter

Kathy Tomlinson is the reporter who wrote a recent article detailing the flipping of property in Vancouver which seems to have gotten some government attention.

Many Franks pointed out that she did an AMA over on reddit today.

There’s a comment from a Real Estate lawyer that points out this practice is not necessarily a driver of a hot market, but more a symptom of a hot market and it can go both ways:

First, without a clause disallowing it, any contract can be assigned. You can assign your cell phone contract to someone else. There’s nothing sneaky about this.

Second, the final purchase price is listed on the transfer document (Form A Transfer) and easily found through the Land Title registry. Just need the PID number, pay the search fee and it’s under s.2(b) of the transfer. Property transfer tax is paid on this amount since it’s a tax on the transfer. There’s no tax avoidance here.

Third, the seller. The seller signed off on the transfer agreeing to the sale price. If they thought they could sell for more, there’s no one forcing them to sell at the price they signed off on. I fail to see how the sellers in the article were taken advantage of.

Fourth, the middleman. Okay so a few things, if the middleman isn’t paying taxes on the lift (the difference between the original purchase price and the final sale price), then that’s tax evasion, and attracts criminal liabilities. And a stupid way of going about it too. Sure, it’s a private contract but if the CRA/police come inquiring there’s a massive paper trail.

Further, if the middleman signed the contract without having the intention to complete but just to flip, then they’re taking on the risk of not finding a final buyer. And if they don’t complete, then they’re liable to lose the deposit and get sued for damages if the seller can’t find a buyer at the same price.

I was around in 2008 during the housing crash when it went the other way, when buyers assigned their contract at a loss because their financing fell through when property values plummeted.

Garth is right basically, this is a symptom, not a driver of insane housing prices. Want to watch prices drop? Increase the interest rate. Have the rate go to 6-7%. I might have to go into foreclosure work.

Read the full AMA thread over at reddit for this and other viewpoints.

It’s interesting that this topic has blown up so much and spurred responses from government. There’s nothing inherently shady about purchasing something and reselling it for a higher price and if the government feels like getting some of their hands on this money all they have to do is tax each assignment transfer.