Harvey Spector

The BC Real Estate Discussion Thread

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Hi everyone,

 

I have decided to start a NEW thread for BC Real Estate discussion.  The "other" real estate threads have reached their end of life cycle and so I would like to start with something new and fresh.

 

As a real estate professional I take my job very seriously.  I believe I have a fiduciary duty to do what's best for my clients, whether it be buying or selling their largest investment, which is their home.  I try to do the best I can with the current information that is available to me but unfortunately the market does not always co-operate.  There are ups and downs in this crazy real estate industry, and so I have to sometimes make judgement calls based on current and real time information in order to give the best advice I can to all my valued clients.

 

I have been a licensed real estate professional for 16 years.  I was first licensed in 1993 and worked for about 6 years before taking a "break" from real estate and going into the financial services industry for the next 7 years as a Financial Planner, working Downtown at one of the big banks and servicing high end clientele, lawyers, doctors, accountants and business professionals.  So I also learnt the mortgage and investment side of the financial industry.  My love for real estate never left me and so in 2006 I decided to go back to my first love and become a full time real estate professional again, and have never looked back.

 

As a result, I have seen all of the ups and downs of the real estate business for the past 23 years.  We have had alot of ups and we have had some pretty scary downs as well during that time.  The leaky condo crisis of the 1990's almost killed our City, the NDP government of the 1990's almost killed our economy.  The financial crisis of 2008 almost threatened our existence.  Throughout all of this turmoil our great city of Vancouver has prospered, becoming one of the top destinations for locals as well as foreigners in the entire world.

 

Over the last 7 years or so, our City has experienced tremendous growth.  There are new developments and new skyscrapers all over the City now as well as the suburban areas.  We have expanded into an international destination and we are lucky to live here.  Unfortunately, because of all of this growth and international attention, we have now become a City that is basically become unaffordable for the average local Vancouverite.  Not only is it expensive to buy the basics such as food and clothing, but our real estate prices have skyrocketed into the hemisphere over the last 7 years or so, with even a small single detached bungalow in an average part of East Vancouver now becoming unaffordable for most of the locals.

 

There are lots of people to blame for this and lots of reasons for this phenomenon.  Government of course has played a key role in allowing our real estate prices to skyrocket with little or no regulation to stop the insane increase of homes in the City.  Foreign ownership is also a big reason for the insanity of this market.  The CRA can also be blamed for not doing a better job at finding tax cheats and allowing the dirty money to flow into the City to scoop up our most valued pieces of real estate.  Basically it is a mess right now.  And it is hard to determine what is the best course of action to fix this mess.  

 

As we all know the BC government has stepped in to try and slow down the foreign buyer market, and their new 15% foreign buyer's tax implemented last month has certainly put the brakes on foreign buying.  It was a controversial tax and I will be the first one to admit that I was "pissed off" about how it was implemented and the fact that it hurt locals as well as innocent foreigners from the USA and Europe, people who were not the "intended" target of the BC government.  They were basically "collateral damage" to the new tax and so therefore there was alot of hatred and animosity, myself, included, against this tax as well as against Christy Clark and her government.

 

What is done is done however, and so here we are now.  In the last month sales have plummeted on the detached single family house side, and prices as well have come down from their high points and the median price has also dropped around 10% in the largest areas of Vancouver, where the foreign buyers were scooping up property.  Sales and prices for attached homes and condominiums still remain strong, with sales and prices still climbing in most areas, albeit not as much as they were a few months ago. It will be interesting to see what the future holds in terms of sales activity and prices moving forward.

 

I will be updating this thread as often as possible with real time market information to keep everyone in our CDC family on top of what is happening in the market.  i can provide real time stats in terms of sales and prices for pretty much all areas of the Lower Mainland.  I will also be posting articles that I find may be interesting to anyone, as well as any new real time data and charts that come out.  I also have contacts on the Commercial side of the business so I will from time to time post articles and information in regards to Commercial Real Estate.

 

I welcome all and everyone to post as they please and to make this as good of a real estate discussion as is possible.  I know that this is a very passionate topic for alot of people, especially now because of the affordability crisis that has taken shape in our beautiful City, so hopefully we have passion and share great information with each other but not go over the top with personal insults and I told you so's. That seemed to be happening quite a bit in the other threads because of how passionate we are in regards to real estate and the red hot button topic that is creates, so hopefully we can ALL be more civil in this thread, including me.

 

I also welcome all the other real estate professionals on this board to contribute as much as possible given their busy schedules.  I know we have at least one other Realtor on this board, Realtor Rod, who works outside of my areas so he can certainly contribute on his side of the border.  I believe we also have lawyers (Taxi), and some mortgage brokers and appraisers on this site if i'm not mistaken, so their input would be quite valuable.

 

Anyways, this is my first post of many on here, so I will try and post some new market info as soon as I can to share for everyone.

 

Thank you.

 

Harvey

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I take issue with saying, what's done is done, as I hope all the property owners will vote Clark's butt out of office in the next election. The problem is will there be a party that gives us a choice, as the NDP would also stick their fingers into the market, I'm hoping the Conservatives will run on a platform of no interference but who knows.

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12 minutes ago, aliboy said:

I take issue with saying, what's done is done, as I hope all the property owners will vote Clark's butt out of office in the next election. The problem is will there be a party that gives us a choice, as the NDP would also stick their fingers into the market, I'm hoping the Conservatives will run on a platform of no interference but who knows.

And why on earth would BC folk vote for a platform of no interference...?

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34 minutes ago, aliboy said:

I take issue with saying, what's done is done, as I hope all the property owners will vote Clark's butt out of office in the next election. The problem is will there be a party that gives us a choice, as the NDP would also stick their fingers into the market, I'm hoping the Conservatives will run on a platform of no interference but who knows.

I'm not sure what would be the distinction between BC Liberal party and the BC Conservative party. It's pretty vague.

 

According to Wikipedia, they are both Center-Right (See BC Liberal and BC Conservative). So, basically we have two options: BC NDP (Center-Left according to Wiki) or BC Liberal. Not that I am a supporter of BC NDP but I think it's time to change things up again.

 

The feeling that I get from the right wing parties in general is that they are usually greed driven. See for example, Republican party of USA. And the policies of Christy Clark's BC Liberal government have not changed this sentiment that I have. Look at the housing market. This is not normal. 

 

 

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I don't really buy this spiel about 'experts' developing this industry.

 

Basically it's a pinpoint on the globe that's so beautiful, no one could possibly f*ck it up(over a short time-frame).

 

The Missus & I had one of them condos(tarps going up on surrounding bldgs), back in the 90's..thankGawd we could get out quick, & retrieve our investment.

 

Anyways, take me back to the Lower Rainland in the 70's..t'was paradise.

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I just need to know, how much of this is about the tax

 

Which everyone said wouldn't have any effect because foreign buyers weren't the issue.

 

vs

 

How much of this is due to a lack of actual units on the market?

 

I still find it incredible that after 19 whole days of data this government could claim there was no issue with foreign ownership, then announcing this tax chave the industry that agreed now claim that it is costing money, jobs and sales across the board.

 

presale numbers are still through the roof and prices are in fact still climbing in areas of the GVRD this year.

 

Who do we believe?  And what is to stop these units bought in presale from being sold 2 or 3 times at inflated costs as is the norm in vancouver before they're finished?

 

http://www.msn.com/en-ca/money/homeandproperty/vancouver-presales-figures-breaking-records-despite-softening-in-real-estate/ar-AAiFDZ0?li=AAgh0dA

 

Presales of brand new condos in Vancouver have never been stronger, even as recent figures show a slump in real estate sales in the wake of B.C.’s new 15 per cent tax on foreign buyers.

Almost all of the presale units in projects under construction downtown are spoken for and sales so far this year have broken records, according to developers. Industry watchers say it’s too soon to tell when or how a slowdown in the resale market will catch up with presales.

At the end of the second quarter there were just 42 presale units for sale in downtown Vancouver, none of which were listed for less than $1 million, according to Fifth Avenue Real Estate Marketing’s second quarter report.
 

However, such figures are rarely represented in statistics describing the Vancouver real estate market.

Metro Vancouver real estate sales are usually measured by the sale of new and old detached homes plus resales of older condos, apartments and townhouses as listed in the realty industry’s multi-listing service (MLS). But, according to developers and the Canada Mortgage and Housing Corp., MLS doesn’t capture the sales of new condos, usually sold as presales before construction is complete or post-construction by the developer through its own on-site sales centre.

And those sales broke records in the first half of this year, according to Fifth Avenue, which analyzed every project under presale.

“This is all the stuff that hasn’t been owned before,” said Fifth Avenue developer Scott Brown. “Years ago, 50 or 60 per cent of the units would be sold at the opening of presales and the developer would sell the rest of the units over the months and after completion. 

“Now, more and more people are buying prior to completion.
 The demand for multi-family units is growing and the supply can’t keep up.”

Almost 13,000 units were presold across Metro Vancouver in the first half of this year alone, surpassing the total for each of the years between 2010 and 2014, Brown said.

From West Vancouver to Aldergrove, the number of presales for the first six months of the year in various multifamily buildings under construction or planning was 53 per cent higher than the same period in 2015.

Brown said presales are on track for more than 18,000 units this year and could even hit 20,000 for the first time. 
He said if there’s a downturn in the market for presales in coming years, it will likely be due to a lack of project launches than the effect of the foreigner tax.

In its report, Fifth Avenue listed several projects across Metro Vancouver, noting three sold out in downtown Vancouver in the second quarter, including Addition, at Hornby and Helmcken, The Jervis at Jervis and Davie, and Concord Pacific’s The ARC Sky Collection.

An “overwhelming number of these sales are not recorded in MLS data” and don’t make it into MLS sales activity figures, said Fifth Avenue.

Robyn Adamache, a senior analyst at CMHC, said the federal housing agency does not record presales, and only records purchases as sales once the building is complete and ready to move into.

She said in July there were only 296 recently completed units for sale across Metro Vancouver, compared with the five-year average of 1,617 available units, confirming Fifth Avenue data. “There’s a very strong demand” for just-built condos, she said.

At the end of July, 99 per cent of completed condo units had been sold — compared with a 76-per-cent average over the previous five years — while 89 per cent of brand new townhouses had been sold, compared with the five-year average of 67 per cent, Adamache said.

At the same time, according to Fifth Avenue Real Estate Marketing’s second quarter report, there were no brand new units available in completed buildings in downtown Vancouver — from the West End to Chinatown — except for the penthouse at the Private Residences at the Hotel Georgia, coming in at $18 million.

The sales activity is driving up the per-square-foot price at the high end for downtown Vancouver properties to an “unheard-of” $1,700 per square foot, according to Urban Development Institute president Anne McMullin. That translates to $1.2 million for a 700-square-foot suite.

McMullin said the new 24-storey Cardero high rise in Coal Harbour, at Cardero and Georgia streets, sold out in two weeks in July at that price per square foot, well above the average of $1,500-$1,600.

She said MLS shows the market has “softened” since May, before news of the foreigner tax, but added that presales aren’t included in those numbers because they don’t fit the criteria of a sale.

“We tried to put the numbers together but because they’re presales and they haven’t closed, it’s apples and oranges,” she said.

The UDI is waiting to see post-tax sales figures to see what effect, if any, the tax will have.

“The softening had started already so it will be hard to say if (a further drop) is because of the tax,” McMullin said.

Brown said the quick presales and low remaining inventory shows considerable demand for new multi-family homes is still present.

He estimated that only one per cent of buyers of presales are foreign investors, and said he’s optimistic the “hangover” from the shock of the foreigner tax will start to lighten by the middle of this month.

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1 hour ago, aliboy said:

I take issue with saying, what's done is done, as I hope all the property owners will vote Clark's butt out of office in the next election. The problem is will there be a party that gives us a choice, as the NDP would also stick their fingers into the market, I'm hoping the Conservatives will run on a platform of no interference but who knows.

The vast majority of BC residents support the tax. With 9/10 in Vancouver supporting it:

 

http://www.cbc.ca/news/canada/british-columbia/vancouverites-support-tax-poll-1.3700421

 

Yes, a small portion of people were making astronomical amounts of money from their real estate. However, even many of them were fed up and realized the negative impact it was having on everyone. Seeing their children unable to live and work in Vancouver or provide them with grandchildren, communities ceasing to exist, schools closing, etc...

 

If Clark gets voted out, it'll be because she didn't act soon enough. Not due to the tax.

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51 minutes ago, Nuxfanabroad said:

I don't really buy this spiel about 'experts' developing this industry.

 

Basically it's a pinpoint on the globe that's so beautiful, no one could possibly f*ck it up(over a short time-frame).

 

The Missus & I had one of them condos(tarps going up on surrounding bldgs), back in the 90's..thankGawd we could get out quick, & retrieve our investment.

 

Anyways, take me back to the Lower Rainland in the 70's..t'was paradise.

Exactly this. If anything many realtors and developers have managed to harm a surefire thing through their own shady practices. The quality of many buildings here is atrocious. The government has had to make many reforms to the real estate industry. If buy develop the industry, you mean put a for sale sign up and watched foreign millionaires fall over themselves to launder money, then yes they "developed" the industry.

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Tax shows no sign of slowing luxury condo market as Bosa's Cardero project sets new high price

Bosa Properties' Cardero project in Coal Harbour has pre-sold more than 100 of its 116 units, with prices in the $1,750-per-square-foot range.

Bosa Properties' Cardero project in Coal Harbour has pre-sold more than 100 of its 116 units, with prices in the $1,750-per-square-foot range. PNG

 

Vancouver’s real-estate transfer tax for foreign buyers doesn’t appear to have slowed the market for high-end, high-rise properties. 

In May, the Holborn Group said it had hit a new high price for a project in Canada when it sold all 214 luxury condos at its Trump International Hotel and Tower Vancouver at an average of $1,615 per square foot — but now Bosa Properties has claimed the record, with more than 100 of the 116 units at its Cardero development in Coal Harbour pre-selling in the $1,750-per-square-foot range.

It comes just weeks after the B.C. government brought in a new 15-per-cent property transfer tax for non-Canadian buyers of residential real estate in Metro Vancouver in a bid to dampen the hot market.

There appeared to be little concern over the tax at the first pre-sale of new condo units since the levy was introduced. Bosa began marketing its luxury Cardero project, which is slated for completion in late 2019, on Aug. 20.

The launch coincided with heated debate about what the immediate and long-term impact of the foreign buyer tax might be on blistering home prices. There have been some initial signs of a significant slow down in the percentage of sales in some Metro areas compared to last year, along with examples of price cutting.

And yet, less than two weeks after the Cardero launch, Bosa had pre-sold all of its one-bedroom (443 sq. ft., $600,000-$700,000) one-bedroom plus den (682 sq. ft., $730,000-$840,000) and 718 sq. ft. two-bedroom units. Just the larger two-bedroom and three-bedroom units remain, measuring between 1,389 sq. ft. and 1,545 sq. ft. in size, with starting prices for the largest of these hitting $2.9 million, or $1,880 per square foot.

“We’re incredibly pleased with the response thus far to our offering, and please to welcome well over 100 new homeowners to the Bosa Properties family,” said Daryl Simpson, vice-president of marketing at Bosa Properties in an email.

There have only been a few new condo launches this year in the downtown core and outside of it, “there are a handful of units available on Cambie and at UBC, but if you look at the number of units in East Vancouver, there are also just a few left and they are the sub-penthouse ones in the $1.2-million range,” said Jon Bennest, co-owner of Urban Analytics, which analyzes real estate data and compiled the report information for the Urban Development Institute. 

The affordability of new concrete condominiums in the City of Vancouver has fallen noticeably in the last few quarters, according to UDI, which represents developers and this week released its second quarter report. 

By comparison, the UDI’s affordability index for new concrete condos in the suburban areas is more stable.

Bennest said at one recent pre-sale of a development on Main Street, there were some “500 to 600 real purchasers” for about 100 units. Developers understand that some “400 buyers might not be as keen” on buying if they moved the price higher.

“People with more equity are (the ones) getting to buy when there is not as much choice,” he said.

The development industry is generally known for believing the antidote to high prices is adding more supply. But increasing density in the West End and downtown won’t bring down prices, Bennest said — particularly bearing in mind the designs for some proposed high-rises in the area.

This week, Bosa Properties and Kingswood Properties filed an official rezoning application for another luxury condo building across from Cardero. They are planning a 43-storey tower with 217 condo units in a design that involves several sets of cantilevered floors and looks like a giant stack of Jenga blocks. Bosa paid $120.5 million for the land in 2014, according to vancouvermarket.com.

“I don’t feel adding towers in the West End will increase affordability,” said Bennest. The land prices being paid by developers are one thing. There are also “the design guidelines,” he said.

“When you go to 50 storeys, the construction costs are much higher. Developers and the City of Vancouver want buildings they can be proud of aesthetically and in an architectural way.”

Bennest cited the twisting shape of Westbank’s Vancouver House as an example. “Every single floor plate is different because they (need to) sit 3/4 of an inch (off from the floorplate below)” in order to achieve the building’s shape.”

“It’s going to be very expensive,” he said.

jlee-young@postmedia.co

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CRA hunting for tax evaders

article image

Tax evasion in the real estate sector is increasing, according to the Canada Revenue Agency (CRA).

To persuade BC property buyers and investors to comply with the Income Tax Act, CRA hired 50 additional income tax auditors, 20 GST auditors, and 15 workload development officers to actively monitor and audit suspected tax cheaters.

CRA is using risk assessment tools, analytics, leads, and third-party data to detect and address non-compliance. They’ve identified five areas of concern:

1. Questionable source of funds: if a property buyer reports no or low-income yet has a large downpayment or buys properties that are expensive to maintain, they can expect to be audited by the CRA.

 

2. Property flipping: anyone, including real estate representatives, who buys and resells homes in a short period for a profit is considered a property flipper. CRA is focusing on:

  • professional contractors or renovators who frequently buy and sell real estate at a profit;
  • speculators or middle investors who buy a property and then, for a profit, assign the right-to-sell clause to another speculator or the final buyer in a transaction; and
  • individual renovators who buy real estate, renovate it, live in it for a short time, and sell it so they can claim the principal residence exemption several times in their lifetimes.

Profits from flipping transactions are fully taxable as business income. CRA will investigate whether a flipped property is accurately reported as business income or as a capital gain.

 

3. Unreported GST/HST on the sale of a new or substantially renovated home

The builder of a new or substantially renovated home must charge and collect GST/HST when the home is sold and then report the tax to the CRA.

If a builder leases a new or substantially renovated home, the builder is deemed to have sold the home to themselves. The GST/HST is payable and collectible on the fair market value of the home, including the land value, and the builder must report that tax to the CRA.

There are GST/HST implications for flipping transactions, if a property is new or has been substantially renovated.

 

New housing rebate: to claim this rebate the purchaser must buy or build the house for their own use, or their relation’s, primary place of residence.

  • Anyone buying or building a new house in Canada who has a primary place of residence outside Canada, doesn’t qualify for the new housing rebate.
  • If the house is built or renovated to flip, the owner doesn’t qualify for the new housing rebate.

4. Unreported capital gains on a property sale: A property sale for an amount greater than it cost leads to a capital gain, which is taxable and must be reported to the CRA. There's a principal residence exemption. Non-residents must pay tax on gains from the sale of the property and are ineligible for the principal residence exemption.

There are rules about the disposition or acquisition of certain Canadian properties that require non-residents who sell Canadian property to notify the CRA and to pay an amount covering their estimated Canadian tax liability.

 

5. Unreported worldwide income: residency status is important in establishing Canadian tax liability and the tax treatment of worldwide income.

  • Canadian residents must report worldwide income to the CRA.
  • Non-residents must only report Canadian-source incomes. Residency status determines what income must be reported.

For information, visit Income Tax Folio S5-F1-C1, Determining an Individual’s Residence Status.

 

What happens to tax evaders?

Under the Income Tax Act and the Excise Tax Act, tax evaders can face fines ranging from 50 per cent to 200 per cent of the taxes evaded and up to two years imprisonment. If convicted of fraud under Section 380 of the Criminal Code of Canada, an individual can face up to 14 years in jail.

 

Result of audit activities related to real estate in British Columbia from April 2015 to June 2016

  Tax Program

  Number of files completed

  Audit recoveries

  Income tax

  145

  $6.6 million

  GST/HST

  280

  $13.6 million

  GST/HST New Housing and
  New Residential Rental Property Rebates

  1,462

  $5.0 million

  Total

  1,887

  $25.2 million

SOURCE:  Canada Revenue Agency

From April 1, 2015, to March 31, 2016, the CRA applied 447 penalties, totalling about $9,720,256. The highest penalty was almost $2.5 million.

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Just tell me if prices will drop so I can know whether to save up for a down payment or just accept saving up for rental payments.

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Yes!! Please let me know if you know if the Victoria market might come down soon!  My soon to be wife and I are looking at the market but man its tough out there.  We would love a townhouse but finding a decent one in or around 300K is a challenge.  The highest we would be willing to pay is in the high 300's.  

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1 hour ago, ajhockey said:

Just tell me if prices will drop so I can know whether to save up for a down payment or just accept saving up for rental payments.

Do both...

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2 hours ago, ajhockey said:

Just tell me if prices will drop so I can know whether to save up for a down payment or just accept saving up for rental payments.

Your rental payments should be at or lower than a mortgage payment. So just save up any extra money you have. There's more to buying a home than just the downpayment. Banks are tightening up their lending policies so you also need to have a clean credit bureau and also a stable job and income. 

 

In terms of the market, single family detached homes are in freefall right now, however condo and townhome prices are still going up.  Also, most pre-sale developments I have seen are selling out quickly, so there is still a large demand for the lower priced and more affordable sector of the market.  So it all depends what you're looking to buy and what your budget is. If you want a house in East Vancouver I would say the prices will keep dropping in the short term so you should wait it out. If you're looking to buy a condo or a house in the suburbs then it's a different story and demand is still high. So it's up to you as to how long you want to wait before you jump into the market. 

 

It's pretty much impossible to time the market. If you could you'd be a multi millionaire and wouldn't need any advice. No one knows for sure what's gonna happen these next few months. But it does look like a lot of buyers are in waiting mode right now as they are looking to wait it out a few more months or more to see if they can jump into the market at a much bigger discount than today's prices. 

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2 hours ago, Rush17 said:

Yes!! Please let me know if you know if the Victoria market might come down soon!  My soon to be wife and I are looking at the market but man its tough out there.  We would love a townhouse but finding a decent one in or around 300K is a challenge.  The highest we would be willing to pay is in the high 300's.  

Victoria is booming right now. They are not affected by the new 15% foreign buyer tax as Victoria is not a part of Metro Vancouver. So I have heard there are lot of foreigners either already buying or looking to buy in Victoria and in other parts of Vancouver Island. 

 

You might want to hook up with a good Realtor out there and seriously look for something you like, as the prices out there might not be coming down anytime soon. However, if there is a downturn in the economy due to the Vancouver market it could affect Victoria as well. So there is always the possibility prices could drop at some point in Victoria as well in the coming year. But then by that time prices might have gone up another 10-20%, so it is always a gamble if you wait it out as well. 

Edited by Harvey Spector

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1 hour ago, Harvey Spector said:

Your rental payments should be at or lower than a mortgage payment. So just save up any extra money you have. There's more to buying a home than just the downpayment. Banks are tightening up their lending policies so you also need to have a clean credit bureau and also a stable job and income. 

 

In terms of the market, single family detached homes are in freefall right now, however condo and townhome prices are still going up.  Also, most pre-sale developments I have seen are selling out quickly, so there is still a large demand for the lower priced and more affordable sector of the market.  So it all depends what you're looking to buy and what your budget is. If you want a house in East Vancouver I would say the prices will keep dropping in the short term so you should wait it out. If you're looking to buy a condo or a house in the suburbs then it's a different story and demand is still high. So it's up to you as to how long you want to wait before you jump into the market. 

 

It's pretty much impossible to time the market. If you could you'd be a multi millionaire and wouldn't need any advice. No one knows for sure what's gonna happen these next few months. But it does look like a lot of buyers are in waiting mode right now as they are looking to wait it out a few more months or more to see if they can jump into the market at a much bigger discount than today's prices. 

I'm definitely looking to live more eastward, in the Fraser Valley. The furthest west I'd live would probably be west Langley around 200th street. If I was buying a home, it would be a small and cheap one for sure, since I'm just about to graduate university. I will likely have a stable accounting job, but I won't be moving out for a year or so; however, if buying is a possibility, I may stay at home for an extra year to save up the necessary capital for such an investment.

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Chinese cases target property in B.C., say lawyers

Lawyers in Vancouver say they are seeing a substantial increase in B.C. court cases filed by Chinese companies seeking to seize real estate assets from Chinese immigrants in B.C.

The Chinese plaintiffs are asking B.C. judges to enforce monetary judgments awarded in Chinese courts. These Chinese rulings typically involve people found in China to have defrauded Chinese banks or business partners and then fled to Canada with the money and invested in real estate here.

The rapid rise in the numbers of Chinese cases in Canada and the U.S. — two preferred destinations, according to the Chinese government, for financial fugitives — has also been recognized by Dan Harris, a Seattle lawyer who advises international law firms on strategies for recovering assets from Chinese defendants.

Such cases have been trickling into B.C. courts for several years, including a 2015 B.C. Supreme Court award of $670 million to the Bank of China against money allegedly laundered through buying multiple homes and setting up bank accounts in Richmond.

But, according to Vancouver lawyer Christine Duhaime, a precedent-setting case in June appears to have opened the flood gates.

Duhaime says that after her client, China Citic Bank, won a so-called Mareva injunction from B.C. Supreme Court, prohibiting the sale of four Vancouver-area homes worth $7.2 million, calls from China poured in. The homes belong to a couple who were alleged to have “fled China” with an unpaid $10-million loan.

Duhaime says she understands this is the first case of a Mareva injunction, also called a freezing order, being won by a Chinese bank in North American courts. Such injunctions prevent assets from being sold before a court can rule on whether they should be used to repay a court award.

Based on the case, Duhaime says she has obtained information from China alleging that “billions of dollars” of bank fraud proceeds are invested in B.C. real estate. She said she could not share the documents for reasons of client privilege.

“The (Citic) Mareva case absolutely increased the interest in China, and caused a number of banks in China to reach out to us and say ‘We have all these cases. Can we do something in B.C., too?'” Duhaime said. “There is lots of cases coming down the pipe, and there is lots of appetite in China from the government, down to the banks, to come to B.C. to enforce judgments.”

In the Citic case, the defendant, Shibiao Yan, a citizen of China, is now seeking to overturn the Mareva injunction. Yan argues Mareva is a “harsh and exceptional remedy that should only be available in the clearest of cases,” according to B.C. legal filings. Yan’s lawyers did not respond to a request for comment on the case.

Duhaime says as the Citic case continues, her law firm is already working on new cases.

“One of our next projects is a Toronto house we are looking at, worth $100 million,” Duhaime said. “A guy went to a bank in China, defrauded them, got a loan and all the money in one day, and moved to Canada and got a mansion. And no one asked any questions, even though he never worked a day in Canada. It’s all the same type of story, where a foreign national doesn’t have a job, but is living in homes in Canada and owes money to a bank in China.”

 
Vancouver lawyer Ross McGowan recently filed a case for the Chinese industrial giant, Lonking. The heavy equipment manufacturer is seeking to collect on a $6-million judgment awarded by a Chinese court against a Chinese couple living in West Vancouver. The B.C. lawsuit, against Xing Fu Zhao and his wife Ren Tao Li, says they are living in a $3.38-million West Vancouver home.

 

The defendants have responded, alleging that Lonking obtained their judgment through “fraud” in the Chinese court, and that as a major company in China, “Lonking has enormous power and influence,” so that the Chinese court was “biased against the defendants.”

In an interview, McGowan said that he could not speak specifically about the case. But he told Postmedia that he anticipates a growing wave of legal actions from Chinese citizens seeking to recover debts by targeting B.C. properties.

 

“What I can say generally is that I’ve seen and I’m anticipating seeing a lot more claims like this,” McGowan said in an interview. “The amount of inflow litigation from China is substantial. I think the Chinese are starting to appreciate there is an opportunity to make recovery on their losses in China … against people who have immigrated to Canada.”

Harris, the Seattle lawyer, said he agrees with the Vancouver lawyers “100 per cent” that cases from China are rapidly increasing.

“There is an influx of these cases because they are in some ways so easy to bring in the U.S. and in Canada,” Harris said. “And, more importantly, they are so easy to collect on, unlike in China, where winning a case is one thing but collecting on the judgment is another.”

Harris said his firm is often approached by Canadian and U.S. lawyers seeking to recover assets from companies and people in China. He advises these lawyers to avoid Chinese courts and instead find international assets owned by the litigation targets and take action “in other countries with more effective legal systems.”

Legal experts and precedent cases say that as global trade increases, North American judges are increasingly willing to enforce commercial case judgments from China, even though Canada and the U.S. do not have treaties with China for reciprocal enforcement of judgments.

While the legal process without such a treaty is more challenging, if Chinese plaintiffs can establish that their court judgments were awarded in China following fair and due process, experts say that B.C. judges will enforce monetary awards. But Chinese defendants can avoid enforcement of Chinese monetary judgments in B.C. courts if they can show fraud or denial of natural justice in the Chinese court process.

The civil claim from plaintiff Lonking Machinery was filed in B.C. Supreme Court on June 23. It says that defendants Xingfu Zhao and Rentao Li, also known as Xing Fu Zhao and Ren Tao Li, are a married couple that “reside or have property within the jurisdiction of this honourable court.”

he plaintiff’s claim states that in October of 2013, Lonking sued defendants including Zhao and Li, and Liaoning Mechanical, a company controlled by Zhao, in the People’s Court of Longyan. The Supreme Court claim indicates that Zhao and Li were not in China at that time, and the couple “did not appear for or participate” in the court case.

 

In July 2014 the Chinese court, in Fujian province, awarded a judgment against Liaoning Mechanical, Zhao and Li for 30.5 million yuan (about $6 million), Lonking’s B.C. Supreme Court claim says.

Lonking says that the defendants have not appealed the Chinese judgment and that, in B.C., the Chinese verdict is “a valid and enforceable judgment and stands as a debt owing by the personal defendants to the plaintiff.”

The lawyer for Zhao and Li, Kathleen MacDonald, said her clients did not want to comment. She referred Postmedia to their legal response, filed on Sept. 1.

The response says the couple are permanent residents who arrived in Canada in 2011 as landed immigrants.

Title documents say that in 2011, “Ren Tao Li, housewife” purchased the West Vancouver residence named in Lonking’s Supreme Court claim.

Zhao and Li say Liaoning Mechanical was an exclusive wholesaler for Lonking machinery, and after a distribution deal went sour in 2012, Liaoning signed a new deal with Lonking to pay outstanding debts, and has continued to pay back Lonking. The defendants say they were not properly notified of Lonking’s action against them and did not have a fair chance to defend themselves.

Furthermore, the defendants claim they could not have a fair hearing in China, as “Lonking has enormous power and influence,” in Fujian, and in China as a whole, and the company’s president is a member of the elite National People’s Congress, and other political bodies linked to the Chinese state.

“Canadian courts will not enforce a foreign judgment,” that is contrary to Canadian notions of fundamental justice, the defendants stated, and “has been obtained through fraud (and) where the judgment is granted by a foreign court that is biased against the defendants.”

While Lonking’s B.C. claim only names one West Vancouver property, the claim cites various versions of the defendants’ names which are found in connection to a number of B.C. properties or loans, valued at about $11 million.

Xing Fu Zhao and Ren Tao Li are owners of a $2.2-million 100-block Wollny Court home in Anmore, documents show. Xingfu Zhao and Rentao Li are shown as owners of a $639,000 Metrotown condo. On July 12, 2016, Xing Fu Zhao, “retired” and Ren Tao Li “homemaker” of 2790 Chelsea Close in West Vancouver, paid $1.36 million for a home in Maple Ridge, title transfer documents show. The property was assessed at $817,400 in 2016.

Land title and mortgage documents show that Rentao Li, “business person” and Xingfu Zhao, “business person” of 5065 Whiskey Cove Lane in Belcarra, lent $3.6 million in a mortgage to a business person named “Didi Zhao” of 5065 Whiskey Cove Lane.

The mortgage document says the principal amount is $3.6 million, and it does not list any interest rates or payment dates, and says the balance is to be paid at 5065 Whiskey Cove Lane, “on demand.”

In another case, filed in July in B.C. Supreme Court, Beijing Jinxinrun Investment Co. and business person Huimin Li, are seeking enforcement of a 67-million yuan, or about $12.9-million, judgment awarded in a Beijing court in 2015 for defaulted loans. The defendants, Hebei Zhongli Industrial and Trading Group and business persons Ying Min Li and Dong Yan, have not paid the award in China legal filings say, but they are believed to have assets in B.C., according to the plaintiff’s Vancouver lawyer, Junzhong Cao. The plaintiff’s claim indicates no known Canadian addresses for Li and Yan. The defendants have not filed a response to the July 13 claim, and could not be located for comment in China or B.C.

Edited by Harvey Spector

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Data suggest Vancouver housing supply isn’t the issue, affordability is...

New data show that simply throwing more supply at Vancouver’s affordability problem will not solve the housing crisis. Instead, we need supply that is directly targeting the needs of residents – and not wealthy buyers who aren’t earning incomes locally.

Too often, the argument for supply focuses on a shortage of housing units as a response to increased demand. But if we are to look at the number of housing units being created and the net population growth that is occurring in the region, supply in itself is not the issue. There is an average of 35,842 newcomers into Metro Vancouver every year and 16,332 housing starts.

That means for every unit of housing started each year – purpose-built rentals included – there is an average of 2.4 people arriving in Metro Vancouver. That’s a lower ratio than Toronto (2.9) or Calgary (2.6).

And that average ratio for Metro Vancouver spans the past 25 years, according to data supplied by planner Andy Yan, acting director of Simon Fraser University’s City Program. Mr. Yan was in Ottawa this week to take part in a round-table discussion on real estate data as part of the federal government’s Let’s Talk Housing conference, which is doing the early groundwork for a new national housing strategy. Mr. Yan’s data are also part of an upcoming book to be released by the University of British Columbia’s School of Community and Regional Planning.

“The supply argument would be that population is outstripping housing development,” Mr. Yan says. “What we are saying here is that no, it hasn’t. Housing development has reached a certain production level that’s been pretty consistent over the last 10 years, with the exception of 2009.”

The problem then is not a question of production, but the type of housing that is being supplied – and the wealthy demographic that is being targeted. Mr. Yan uses a car analogy.

“I enter a car dealership and there are 10 Ferraris, and I have a Honda budget. We aren’t producing enough Hondas.”

The West End of Vancouver, for example, has long been considered a worldwide success in terms of being a walkable, highly livable neighbourhood, rich in affordable rental and condo stock. However, demand from wealthy buyers threatens to change that status because the supply that is coming onto the market is out of reach for the average-income resident. Redevelopment is pushing the Honda budgets out to make way for the Ferrari buyers. Existing low-income housing stock is also under pressure because demand has made the land so much more expensive.

“The presale is definitely not geared towards locals,” says realtor Ian Watt, who specializes in downtown condo sales. “It’s geared towards people bringing money in from offshore.”

Trump Tower developer Holborn Group set a precedent in the spring, when it averaged sales of $1,615 a square foot. Bosa Properties’ luxury Cardero project in Coal Harbour sold more than 100 units in a month for an average of $1,700 per square foot. That means a three-bedroom unit sells for close to $3-million. And supply can’t keep up with the demand for luxury downtown condo units.

“Pretty much everything that comes on the market sells,” says Jon Bennest, analyst at Urban Analytics, which works on behalf of the development community.

Mr. Bennest says developers are forced to ask the high prices because the land costs are so high.

“In order to make any money based on what people are asking for in terms of the land price you’d have to pay for the site, you’d need to have prices like that to purchase today, based on expectations of land owners.”

The only way to address affordability, then, is by looking at the demand that is driving those prices. But the focus from governments and the development industry is too often squarely on boosting supply, without addressing demand.

“Something else is happening,” Mr. Yan says. “That’s why we need to talk about global capital, the professionalization of Airbnb and condo units being used as holding investments.

“We need to ask, ‘What kind of demand is being met by the supply?’ The problem is when housing becomes investment stock, as opposed to full-time homes.”

Josh Gordon, assistant professor at Simon Fraser University’s School of Public Policy, says he’s never seen convincing evidence to suggest there isn’t enough development. And the argument for more supply as a panacea has been around for several years, to no avail.

Supply is necessary because it lowers prices, he says, as long as it’s in line with demographic demand and growth. In order to curtail outside demand, he and several other academics have proposed a property surtax that could be deductible against income taxes paid, while broadly exempting seniors. Foreign owners that own expensive houses left empty as investments, declaring little or no income, would be hardest hit. The 15-per-cent foreign-buyers tax is also addressing demand.

“We have already been building at a healthy or rapid rate relative to population growth, as Andy Yan’s data show, so the idea that supply alone can solve this is implausible,” he says. “That doesn’t mean that we don’t need to keep on building and, in some cases, rezone some areas.

“The point is simply that the main cause of the affordability crisis, the decoupling of incomes and housing prices that we’ve seen, is foreign capital.

“Bob Rennie sort of recognized this back in a 2010 [Globe and Mail] article you wrote, where he agreed that an emerging wave of foreign money would cause affordability issues. His solution then, as now, was to increase supply. But as we’ve seen, even sharply increasing supply hasn’t been sufficient to counteract the affordability effects of foreign capital. So it makes little sense to think that it will now after having failed for five years or more. That’s why we need to address the demand side, as the recent foreign-buyer tax does.”

He argues that municipalities need to address the foreign money piece before attempting to rezone entire communities. He believes city officials might be finally getting the message.

“I will say the city has been very open to rapid redevelopment and rezoning, and yet prices have gone up,” Mr. Gordon says. “For a long, long time, that was the strategy: Let’s build as much as we can and this will address affordability. And that never really paid off, which seems to have prompted a rethink on the part of municipal government. For a long time, they did think that the path to affordability was rapid supply expansion and that would solve the problem, but I think they are now seeing that in absence of tackling foreign demand, you might not get that.

“That’s where policy levers come into play, like the progressive surtax, because then you are making sure the demand is local. You are reattaching, or recoupling, the housing market to the local labour market. Developers … are going to build to what the clientele is, and if that makes more money than other projects, that’s what they will tailor their projects to. So if you shift the demand in a sense by taxing foreign demand and elite demand, you better create the buildings that are going to house the local population, for more affordable prices.”

UBC associate professor and economist Tom Davidoff believes Vancouver is vastly lacking in supply, but he agrees the data show the need for more answers.

“I actually think there is a significant role for supply, but to deny the demand side is crazy,” he says.

Mr. Davidoff wonders if Mr. Yan’s findings indicate a lower population growth because of a lack of housing.

Mr. Yan used Canada Mortgage and Housing Corp. data. He says the data have their limitations, but he believes they offer an accurate snapshot of the housing landscape.

As for the 15-per-cent foreign-buyers tax chasing away demand, Mr. Davidoff has a few reservations, but over all says it’s a good idea.

“Moving the tax system around so that if you are working here means you do better – and if you are buying a house here just as [an] investment means you do worse – is unquestionably good policy. It’s not the exact step I would have taken, but I have not heard any economist say, ‘This sucks.’”

Edited by Harvey Spector
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Information as to how low the supply was in the area, and still is, to those who do not want to believe in supply and demand. 

 

Edited by Realtor Rod
Apparently personal promotion info

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