The BC Real Estate Discussion Thread

[Realtor Rod]

53 minutes ago, Harvey Spector said:

If she eliminates the PTT which is her number one source of revenue her surplus would turn into a deficit and she would certainly lose the next election.  The day the government eliminates the PTT is the day we are six feet under, meaning we will never see it.

 

Income taxes and the PTT were only supposed to be SHORT term fixes.  Income taxes, introduced as a short term fix in 1917 as a temporary measure because of WWI, are now approaching their 100th year of operation.  The PTT (PPT), introduced in 1987 to avoid tax speculation and wealth on the "higher" end homes, is now approaching its 30th year of operation.

 

Why not increase the threshold on the PTT?  When it was introduced in 1987 the average price of a house was less than $150,000.  95% of homes at the time were below the $200,000 threshold, so only 5% of homes were getting taxed at the 2% mark. Now EVERY house is getting taxed at 2% since all homes are priced over $200,000.  So they should be RAISING the threshold of that first 1% to over $1 million at the very least.  Of course that will never happen as it would eat into all their profits.

 

 

Then she only cares about herself and not us. I know all about the PTT, I was part of a committee to help address 'future adjustments' for a political party. At the end, it was basically "this is so much money, we would be crazy to abolish this"

 

It should be a flat tax of $1000

[Harvey Spector]

Canadian homebuyers expected to bear costs of tighter mortgage insurance rules

Residential mortgage default insurance premiums are likely to increase for homes in hot real estate markets as a result of beefed-up capital requirements for Canada’s mortgage insurers coming into force next year.

And it is homebuyers who are expected to bear the added cost, rather than the financial institutions that lend the money for home purchases, according to Peter Routledge, an analyst at National Bank Financial

“We believe Canadian homebuyers will absorb the bulk of these higher costs directly or indirectly via higher mortgage interest rates,” Routledge said in a note to clients Monday.

“Said differently, we do not expect a material impact on bank or mortgage lender earnings strictly as a result of higher mortgage insurance premiums.”

The capital changes proposed last week by the Office of the Superintendent of Financial Institutions require added consideration of factors including the credit score, outstanding loan balance, and amount of time left to fully repay the mortgage for those who require default insurance. The new rules are to come into effect Jan. 1 following a consultation period, and are intended to account for risks in hot real estate pockets across the country including high price-to-income ratios.

Genworth MI Canada Inc., the parent company Canada’s largest private residential mortgage insurer, issued a statement Friday that said the company expects it will compliant with the new framework, “subject to business and market conditions.” The mortgage insurer estimates its pro forma minimum capital test ratio as of June 30 at between 153 per cent and 156 per cent, above OSFI’s target of 150 per cent.

Routledge said he expects two headwinds to hit the Canadian housing market if the OSFI mandated changes go ahead as proposed: higher mortgage rates and a higher probability that foreclosures will increase. The combined impact could contribute to a cooling of the market. 

“Mortgage insurance premium increases passed on to the homebuyer through higher mortgage interest rates will reduce affordability, potentially stunting sales activity and slowing house price appreciation,” the analyst wrote.

He said higher mortgage insurance premiums would hit the first-time homebuyers hard, as well as the mortgage broker channel that relies on this group. As a result, he believes, mono-line mortgage lenders that originate prime insured mortgages through the broker channel “are most at risk to a slowdown in sales activity directly related to higher mortgage insurance premiums.”

The analyst said the new rules could also serve to crimp the practice of extending the amortization period of a mortgage to reduce monthly payments when a borrower is in financial distress. This is because, under the new framework, more capital would have to be set aside against those mortgages.

“In our view, this weakens the incentive for mortgage insurance companies to forbear, potentially increasing the likelihood of foreclosure,” Routledge wrote. An increase in the number of properties in foreclosure proceedings, in turn, would weigh on home price appreciation, the analyst said.

He noted that increased mortgage insurance costs triggered by the new rules could also drive demand for uninsured mortgages.

[Harvey Spector]

B.C. economist says price of Metro Vancouver houses will keep climbing

VICTORIA — Metro Vancouver house prices will more than double over the next 25 years, as supply continues to be tight and more people move to the region, a senior B.C. economist predicts.

Helmut Pastrick, chief economist with Central 1 Credit Union, said Metro’s housing market has taken a hit with the recent 15-per-cent foreign buyers’ tax, but demand for property will likely rise in the long term because there is little room to expand in geographically constrained Metro and a million more people are expected to move here by 2041.

This demand will likely worsen affordability and force more young people to rent for longer, he added, as incomes won’t rise at the same pace. Metro Vancouver home prices have ballooned in recent years: Just recently, a “student” flipped a Point Grey property for a $1.6-million profit within a year.

“We just have a shortage of land,” Pastrick told delegates at the annual Union of B.C. Municipalities convention Tuesday. “As long as we have ongoing growth, we will see increased demand for housing. I think it will be a national and global development as well.”

Pastrick maintains such cycles aren’t new, noting there have been constant rises and dips in B.C.’s housing market, with a series of recessions since 1957 in which prices dropped between 10 per cent and 35 per cent.

Pastrick said he couldn’t predict when the next recession will strike, but wouldn’t be surprised if, in the meantime, the provincial government considers other measures to cool the market. This could include requiring higher down payments for first-time homebuyers or a gradual increase in interest and mortgage rates.

“This cycle will come to an end, but affordability will worsen,” he said. “Someone once said ‘they don’t make land anymore.’ We will see more renters than we do today, largely because of the unaffordability.”

High house prices are crushing the young demographic’s dreams in this province

Paul Kershaw, associate professor at UBC’s School of Population and Public Health, said interest rates should be increased. They are helping to fuel the sluggish economy, he said, but the availability of cheap cash is driving up housing prices across B.C.

He and UBC’s Thomas Davidoff have a more controversial suggestion to cool the market: increase taxes for older homeowners — most likely seniors — who have paid off their homes and accumulated wealth in those properties.

The idea concerns North Saanich Mayor Alice Finall, who said many of her residents are already “house poor” and “a higher tax may make it impossible for them to stay in their home.”

Kershaw acknowledged such a tax may be unpopular, but said people over 55 can defer taxes until they sell.

Meanwhile, it would take the average young person in Metro Vancouver 15 years to save enough for a down payment, and that would likely only be enough for a condo.

“High house prices are crushing the young demographic’s dreams in this province,” he said.

He also suggested the province should cut income taxes, provide more rental accommodation and reduce the cost of child care, parental leave and transit so that young families aren’t having to take out a second mortgage to care for their children.

Davidoff, meanwhile, said the province should go beyond Vancouver’s vacancy tax and insist that all B.C. homes that are not used as a primary residence face a higher tax. Politicians also have to get tougher with zoning practices, he added noting that they hold public hearings for one-off rezonings and end up bowing to residents who want to keep luxury single-family homes in places like Vancouver’s west side, which results in renovictions in other places where there is weaker opposition, such as Vancouver’s east side.

Davidoff added the province should also dictate to municipalities how many apartments, townhouses and single-family houses they need, so municipalities can set “targets” for themselves, as well as tell developers what to build.

“Over time, this challenge isn’t going to go away, it’s going to be exacerbated.”

[Harvey Spector]

'World-class' tower proposal adding 200-plus rental suites to West End

The developers behind a new apartment tower in Vancouver’s West End plan to add more than 200 market rental units to the neighbourhood that’s facing one of the worst vacancy rates in the city.

Residents of the 66 rental apartments at Brockton House at 1640-1650 Alberni St. have been informed the 47-year-old, 14-storey apartment building owned by Hollyburn Properties will eventually be emptied for redevelopment.

A 385-foot-tall, 42-storey rental apartment tower will take its place.

“We’re finalizing our plans and we’re currently at 275 rental units, so that’s an increase of more than 200 rental units,” said David Sander, the director of Hollyburn Properties. “We’ll come in at a little under 40-per-cent family-oriented, which means two-bedroom and three-bedroom suites,” he said in an interview last week.

He called the project, designed by Francl Architecture, “a world-class apartment building with great amenities for residents.”

The building would include a gym, two common lounges, urban agriculture, an outdoor and indoor kids play area, as well as a rooftop lounge on the 42nd floor.

“The intention is that everyone in the building will be able to enjoy the best space in the building.”

Sander said they have completed pre-application work and the next step is to submit their rezoning application to the city, after which there will be a city-led public information meeting. “We’re a minimum of two years away from breaking ground,” he said.

 

The project comes amid a swirling debate over housing in Metro Vancouver, with startlingly low vacancy rates posing major challenges for families and singles. On Sept. 20, Vancouver city council heard from staff about how a proposed home vacancy tax could be levied and enforced on homeowners who refuse to let out their empty homes.

Vancouver’s rental vacancy rate is 0.6 per cent, according to the city. The vacancy rate in the West End is at 0.5 per cent.

Sander said the site is subject to the city’s zero rate of change policy, which requires the replacement of any rental housing that is demolished in the redevelopment.

He said the current residents at Brockton House will eventually have to relocate when it’s time to vacate the building. Residents have been told about the redevelopment, including door-knocking visits, printed notices and a resident meeting, he said. “We’re committed to keeping our residents informed throughout the process.”

Hollyburn is offering residents a relocation package that includes money for rent and moving expenses. Both amounts depend on the resident’s tenure, Sander said. “We understand it’s not nice to live in a building when this type of process is going on,” he said. “We’ll give residents a minimum, and I really want to stress, a minimum of two months’ notice when we’re going to need to empty the building.”

He said Hollyburn will provide three similarly priced options to the residents for alternative rental homes, two of which will be located in the West End. “We’ll provide assistance in finding alternative accommodation,” he said. “We are displacing our residents and we want to make sure they’re landing in a place that’s suitable to them and isn’t just a short-term fix.”

All residents will also have the first right of refusal to move back into the new building at a 20-per-cent discount, he said. “We do anticipate that quite a few will do that, from our early discussions.”

The City of Vancouver wants at least 5,000 new rental units constructed by 2021.

Since 2009, 1,352 rental homes have been added to the city’s stock, said Kathleen Llewellyn-Thomas, the City of Vancouver’s GM for community services. Another 2,363 units are under construction at roughly 30 sites, and another 2,031 units have been approved — a total of 5,746, according to numbers provided by Llewellyn-Thomas.

“The city is using all the tools we have available to address this need, including encouraging owners of empty homes to rent them out, incentivizing new rental housing through density bonus zoning, and partnering with senior levels of government to create affordable housing,” she said.

More developers are considering building purpose-built rental towers amid record-high lease rates, said Mark Goodman, principal of HQ Commercial and author of the Goodman Report.

“A lot of the development sites that are coming on the market are for rental. It would be great to see Hollyburn’s project become a reality,” said Goodman, who specializes in apartment buildings. “I think it’s great for the city and it’s great for the community. And hopefully we’ll see a lot more of those towers going up in the city.”

Meanwhile, the apartment building sales market has remained strong, but winds of change seem to be blowing, he said. The firm listed for sale a 10-suite apartment building last week in Kitsilano, and within two days 21 groups had signed up to tour the property, Goodman said.

But they’re also getting an “unprecedented” number of owners considering selling their buildings, he said. “A lot of our clients who would traditionally never consider selling are now entertaining it or putting their property on the market.”

Goodman said some who have been holding buildings for decades may now feel that prices have plateaued or are worried about more product coming to market.

Last week, Goodman assessed all apartment building sales in Greater Vancouver during the first eight months of the year. The number of transactions increased by 44 per cent over that period compared to the same period last year.

“Dollar volume was just over $1.3 billion in the first eight months — a staggering 93-per-cent increase over the same period last year,” he said. “While demand is still there, I wouldn’t be surprised if there was a levelling-off or perhaps a decline in certain pockets in Vancouver.”

Edited September 28, 2016 by Harvey Spector

[Harvey Spector]

Vancouver tops list of ‘bubble’ cities on global real estate risk ranking

Canada’s priciest city to buy residential real estate also has the biggest risk of being in a bubble, according to a new international study of real estate markets.

The UBS Global Real Estate Bubble Index 2016 listed 18 cities around the globe and their risk and found Vancouver with the greatest probability of a bubble.

“Real house prices have increased by more than 25 per cent since 2014 in the wake of a weak Canadian dollar which apparently stimulated Asian demand even further,” the bank said, in its 22-page report released Tuesday. “Moreover, loose credit conditions have offset the economic slowdown due to weak commodity prices. Mortgage growth rates have been accelerating lately. In response, to still-high foreign demand, the local government has introduced an additional property tax for non-resident investors. The risk of substantial price correction appears very elevated.”

Vancouver prices have already started falling based on average prices, though the Real Estate Board of Greater Vancouver said in August its Multiple Home Prices Index composite benchmark price for all residential properties in the metro area was $933,100, up 31.4 per cent from a year earlier. The British Columbia Real Estate Association said the average price of a home sold in Greater Vancouver last month was $833,065, down 7.5 per cent from a year ago.

The B.C. government’s new 15 per cent additional property transfer tax on foreign-owned or backed purchases was announced July 25 and went into effect Aug. 2. Realtors have reported some consumers, including foreign buyers, are walking away from deals and some expect an even larger fallout when September housing results are released next week.

The UBS study does not just single out Vancouver. It notes that with a third of all government bonds offering negative yields, investing in tangible assets remains popular.

“It is hardly any wonder that housing markets are again overheating, just a few years after the last major wave of a global correction,” the report states, adding there is significant overvaluation of housing in key financial centres.

UBS says the cities with overheating have a key common characteristic, excessively low interest rates that don’t match the strong performance of the real economy. The eurozone, Australia, the United Kingdom and Canada are all listed for keeping rates too low.

“When combined with rigid supply, as well as sustained demand from China, this has produced an ideal setting for excesses in house prices,” write Claudio Saputelli and Matthias Holzhey, of UBS, in their report.

After Vancouver, the next four bubble cities in order were London, Stockholm, Sydney, and Munich.

[Harvey Spector]

Student who flipped Point Grey property for $1.16 million profit prompts new call for stricter oversight for real estate

Researchers for NDP housing critic David Eby have turned up property documents that show a homebuyer, listed as a student, bought a Point Grey property and within a year flipped it for a $1.16 million profit.

In other cases, Eby said, buyers listed as students secured mortgages on $40 million worth of real estate purchases in the expensive west-side neighbourhood with no indication of whether they reported income to support those loans.

In conjunction with an investigation by the Globe and Mail published Wednesday that uncovered internal documents showing where banks allowed foreign clients to take out mortgages without having to verify income, Eby said the information raises questions about how offshore buyers are influencing metro Vancouver real estate markets.

“Is Canadian banking policy enabling foreign students to flip houses in Point Grey?,” Eby said.

“I think this issue of bank lending is a huge part of the problem in terms of rapidly inflating house prices.”

Eby, who is also the MLA for Vancouver-Point Grey released the documents Wednesday at a news conference where he called on the province to step up its oversight of real estate transactions when it comes to buyers proving the sources of funds for property purchases.

Eby said the research on property titles was an extension of work the NDP caucus had done last fall in conjunction with urban planner Andy Yan, which showed that in a snapshot of purchases made in 2015, 38 per cent listed the buyers as being homemakers, house wives or students.

And checking those titles again in 2016, Eby said, revealed nine buyers listed as students who bought properties worth a total of $57 million, including one student purchaser who flipped a house on West 8th Avenue in Point Grey for a substantial profit.

There is no indication that the buyer, listed in property documents as Xuan Kai Huang, used a mortgage in that transaction, he added, but documents show that Huang bought the property for $7.19 million in April, 2015 and sold it last May for $8.35 million.

“It certainly does raise a serious question about whether the title ‘student’ is appropriate for somebody who’s flipping real estate and doing it on the west side of Vancouver,” Eby said.

Postmedia attempted to reach Huang Wednesday but there was no answer at a telephone number under that name, which also had a voicemail message box that was full.

As well, no one answered the door at the address of a home on Angus Drive in Kerrisdale that the phone number is listed to, and an address where Huang was once named as a joint tenant in ownership.

Of the other nine purchasers, documents in four of the transactions totalling $40 million, show that the buyers obtained mortgages for at least part of the amounts.

That, Eby said, suggests a broader investigation is warranted into whether Canadian banks are enabling speculation elsewhere in Metro Vancouver if banks are allowing foreign clients to make purchases with just a down payment and without verifying income.

“The provincial government has to immediately review land transactions over the last two years in Metro Vancouver to identify how widespread the issue is of banks issuing mortgages to people with no apparent source of income,” Eby said.

That, he said, is important to maintain its obligations to prevent money laundering and make sure speculators aren’t abusing the capital-gains-tax exemption on principal residences to avoid taxes.

However, Ministry of Finance spokesman Jamie Edwardson said that kind of data matching between the ministry and the Canada Revenue Agency already takes place and CRA does conduct “lifestyle audits” to flag cases where individuals make large purchases while reporting low incomes.

A spokeswoman for Scotiabank, one of two banks named in the Globe and Mail investigation, on Wednesday, said “it is entirely inaccurate to suggest there is preferential treatment” for foreign buyers.

Diane Flanagan said the bank regularly makes exceptions on verification where clients don’t have standard documentation, such as Canadian tax returns or pay stubs, which certain borrowers — including non-residents, new Canadians or the self employed, typically don’t have.

However, Flanagan said the bank still verifies the source of money being used to fund a purchase and the borrower’s capability to pay a mortgage.

With files from Brian Morton, Postmedia News and The Canadian Press

[King_Canuckian]

So are there any legal experts who have suggestions to sue real estate agents for colluding to drive up prices?  I'm not affected, but I know people that are.  There should be something available to the average working class to sue agents who have deliberately found loopholes and exercised fraudulent strategies to drive up prices for their own personal gain.

 

And can we sue the clients who have benefited from this practice as well?  People are over-extending themselves, and gotten themselves into awful purchases out of necessity.  And real estate agents and people halfway around the world are laughing to the bank at our expense (and when I say our, I mean legitimate Vancouverites).

[Harvey Spector]

Waitress's purchase of $2.3M Vancouver home prompts questions 

CTV Vancouver

 

The B.C. NDP is calling for more auditing of real estate purchases after discovering a number of eyebrow-raising transactions, including a $2.3 million home on Vancouver's west side that was bought by a waitress.

Housing critic David Eby said the party investigated sales activity in the MacKenzie Heights neighbourhood and found dozens of high-priced homes owned by people with little or no income.

Data obtained by the NDP revealed 26 self-proclaimed homemakers and five students own properties in the area valued at more than $107 million combined.

"I can't suggest that anything has actually been done wrong by anybody," Eby said at a news conference Tuesday. "I'm simply saying that we need to have additional resources dedicated to investigate where this money that's coming into our real estate market is coming from."

The multimillion-dollar home that was purchased by a waitress in 2012 is three storeys, custom built, with hardwood flooring, a sub-zero fridge and stainless steel appliances, according to a description obtained by Eby.

"The taxes alone on this property in 2014 were $10,000 a year," he said. "So a very successful waitress."

In another transaction, a student bought a property from a homemaker for $2.06 million, then renovated it and sold it for $4.33 million to a self-identified businessperson.

Eby argued it's possible some of the homes were purchased on behalf of a wealthy individual who wanted to avoid paying capital gains tax on the investment.

The provincial government has already committed to hiring dedicated auditors to investigate tax evasion in real estate, but the housing critic said the eight-person team promised is still woefully inadequate.

Asked about Eby's comments Tuesday, MLA Andrew Wilkinson, the BC Liberal representative for Vancouver-Quilchena, dismissed the concerns as a "bit of a witch hunt."

"He's throwing out wild allegations with no real information to back them up," Wilkinson said.

But real estate lawyer T.J. Dhillon disagreed, insisting there are many buyers using loopholes to avoid capital gains tax.

"I do a number of deals where the buyers are either homemakers or students and I think it is clearly an attempt to circumvent the information on who's the real owner," Dhillon said.

[tbone909]

4 hours ago, Harvey Spector said:

Waitress's purchase of $2.3M Vancouver home prompts questions 

CTV Vancouver

 

The B.C. NDP is calling for more auditing of real estate purchases after discovering a number of eyebrow-raising transactions, including a $2.3 million home on Vancouver's west side that was bought by a waitress.

Housing critic David Eby said the party investigated sales activity in the MacKenzie Heights neighbourhood and found dozens of high-priced homes owned by people with little or no income.

Data obtained by the NDP revealed 26 self-proclaimed homemakers and five students own properties in the area valued at more than $107 million combined.

"I can't suggest that anything has actually been done wrong by anybody," Eby said at a news conference Tuesday. "I'm simply saying that we need to have additional resources dedicated to investigate where this money that's coming into our real estate market is coming from."

The multimillion-dollar home that was purchased by a waitress in 2012 is three storeys, custom built, with hardwood flooring, a sub-zero fridge and stainless steel appliances, according to a description obtained by Eby.

"The taxes alone on this property in 2014 were $10,000 a year," he said. "So a very successful waitress."

In another transaction, a student bought a property from a homemaker for $2.06 million, then renovated it and sold it for $4.33 million to a self-identified businessperson.

Eby argued it's possible some of the homes were purchased on behalf of a wealthy individual who wanted to avoid paying capital gains tax on the investment.

The provincial government has already committed to hiring dedicated auditors to investigate tax evasion in real estate, but the housing critic said the eight-person team promised is still woefully inadequate.

Asked about Eby's comments Tuesday, MLA Andrew Wilkinson, the BC Liberal representative for Vancouver-Quilchena, dismissed the concerns as a "bit of a witch hunt."

"He's throwing out wild allegations with no real information to back them up," Wilkinson said.

But real estate lawyer T.J. Dhillon disagreed, insisting there are many buyers using loopholes to avoid capital gains tax.

"I do a number of deals where the buyers are either homemakers or students and I think it is clearly an attempt to circumvent the information on who's the real owner," Dhillon said.

Someone must be tipping her well.

[Harvey Spector]

22 hours ago, King_Canuckian said:

So are there any legal experts who have suggestions to sue real estate agents for colluding to drive up prices?  I'm not affected, but I know people that are.  There should be something available to the average working class to sue agents who have deliberately found loopholes and exercised fraudulent strategies to drive up prices for their own personal gain.

 

And can we sue the clients who have benefited from this practice as well?  People are over-extending themselves, and gotten themselves into awful purchases out of necessity.  And real estate agents and people halfway around the world are laughing to the bank at our expense (and when I say our, I mean legitimate Vancouverites).

 

That would be a very difficult case to prove, collusion. At the end of the day it is the buyer's who are purchasing. Having said that there are a few unscrupulous Realtors out there who will do whatever's it takes to close a deal. But to actually sue them for driving up prices would be almost impossible to prove. 

 

What shoukd have happened is the government should have put stricter regulation on the real estate industry to weed out the bad apples. There are bad apples everywhere. A Notary Public in Vancouver just got 6 years prison sentence today for orchestrating a $110 million Ponzi Scheme. So you can't even trust Notaries. And how about all the bad lawyers, doctors, dentists and teachers out there. Same thing. Bad apples everywhere. 

 

The government is responsible for this mess. Blaming Realtors won't fix the problem. 

[taxi]

On 9/29/2016 at 10:38 AM, Harvey Spector said:

 

That would be a very difficult case to prove, collusion. At the end of the day it is the buyer's who are purchasing. Having said that there are a few unscrupulous Realtors out there who will do whatever's it takes to close a deal. But to actually sue them for driving up prices would be almost impossible to prove. 

 

What shoukd have happened is the government should have put stricter regulation on the real estate industry to weed out the bad apples. There are bad apples everywhere. A Notary Public in Vancouver just got 6 years prison sentence today for orchestrating a $110 million Ponzi Scheme. So you can't even trust Notaries. And how about all the bad lawyers, doctors, dentists and teachers out there. Same thing. Bad apples everywhere. 

 

The government is responsible for this mess. Blaming Realtors won't fix the problem. 

 

I think he might have been talking about individual cases of shadow flipping? 

 

In which case, assuming you had proof of the transactions, there would be plenty of lawyers willing to take on such a case. A real estate agent has a fiduciary duty to their clients. Not getting each client top dollar is a breach of that. Breaking up a single transaction into multiple transactions for the purpose of getting multiple commissions is clearly in violation of a fiduciary duty.

[Harvey Spector]

Trudeau government to close foreign-buyers loophole

SHAWN MCCARTHY AND KATHY TOMLINSON

OTTAWA AND VANCOUVER

 

Finance Minister Bill Morneau will unveil Monday new measures aimed at slowing the flood of foreign money pouring into overheated housing markets like Vancouver and Toronto, a significant federal intervention in the sector.

Ottawa will close a tax loophole that allows non-residents to buy homes and later claim a tax exemption on the sales, a government source said Sunday. The government plans to make sure the principal-residence exemption is only available to individuals who reside in Canada in the year the home is purchased.

Housing prices have soared dramatically the last few years in the Vancouver and Toronto markets, triggering a vigorous debate about the role of foreign money. British Columbia has responded by imposing a 15-per-cent foreign buyers tax on homes and collecting data on who is buying property in the province. Ottawa has also been preoccupied with the issue, with Mr. Morneau creating a working group to conduct a “deep dive” into the state of the housing market and make recommendations on possible policy actions.

Mr. Morneau will announce new measures to combat offshore speculation, including closing the loophole, in a speech in Toronto on Monday. The moves follow a Globe and Mail investigation that revealed a network of speculators flipping homes for profit and avoiding taxes by classifying them as principal residences.

Under the Canadian tax code, homeowners do not have to report the sale of any property that they designate their principal residence, and do not pay tax on the increased value – or capital gains – of that home. In order to make that designation, a homeowner, their current or former spouse or any of their children must have lived in it at some time during the year for which the designation is claimed.

However, there has been widespread abuse of the exemption by foreign buyers who claim residency either for themselves or their spouses or children simply in order to avoid paying taxes on real estate speculation. Non-resident investors must pay capital gains tax at the time of a sale.

Multiple sources have told The Globe of the widespread abuse of the primary-residency exemptions in the Greater Vancouver area. The Globe has seen hundreds of cases in which homemakers or students were listed as registered owners on multimillion-dollar residential properties.

The new measure would make the exemptions available only to home buyers who are residents at the time of purchase.

The Globe’s investigation discovered these cases usually involve a wealthy breadwinner who earns their living in another country, while parking money in Canada, through buying residential properties. Some of the homes are used by family members; others are simply left vacant.

Several expert sources told The Globe there are two ways to exploit the system – to sell those properties and pay no taxes. In the first scenario, the breadwinner claims to be a non-resident of Canada and pays no taxes here, while their spouse and children buy and sell homes registered in their names. The homes are purchased with money received as a “gift” from the breadwinner. The homes can then be sold tax-free, because the family members claim to be residents of Canada, classify the properties as their principal residences, and therefore pay no tax when they sell.

There is more widespread abuse in a second scenario, according to experts. That is when the breadwinner claims to be a resident of Canada but then doesn’t report their worldwide income to the Canada Revenue Agency, as required by law. Because they claim to be residents, they can sell Canadian properties in their name, tax-free, even if they spend little or no time in Canada.

If these homeowners make their living in China, experts said it’s difficult for anyone to determine what they actually earn, because it’s next to impossible to get tax records from that country, even though China and Canada have a long-standing tax treaty. As a result, experts say, these wealthy people get away with claiming little or no income on their Canadian tax returns, while selling homes tax-free.

Tax accountants and lawyers who handle these cases told The Globe this can be done with multiple properties, primarily because the CRA doesn’t require any resident to report any sale of a principal residence. Taxpayers simply have to fill out a form, but keep it for their own records, instead of submitting that information with their taxes.

Experts have urged Ottawa to require taxpayers to report the sale of all homes, even if they are claiming the principal-residence exemption.

“Everybody’s biggest lifetime gain is from principal residence and [Canada Revenue Agency] is saying if you are a resident it is tax free and if you are a resident we don’t worry,” one Vancouver real estate accountant said Sunday. He spoke on the condition he not be identified out of fear of repercussions.

“So the CRA pushes them into residency claims. A wife and kid are allowed to stay in Canada as a resident and as such they are entitled to tax-free principal residence and as such they don’t have to report it.”

Mr. Morneau announced in June that the government was studying developments in the housing sector, with his department working with Canada Mortgage and Housing Corp. and the Office of the Superintendent of Financial Institutions while consulting with provincial and municipal officials.

In a bid to cool its hot housing market, British Columbia introduced a foreign-buyers tax this summer which applies to the sale of all residential properties within 22 communities of metro Vancouver.

The levy applies to buyers who are not Canadian citizens or permanent residents, and corporations that are either not registered in Canada or are controlled by foreigners, and adds $300,000 to the purchase of a $2-million home.

The CRA says it completed nearly 2,500 audits related to real estate in B.C. and Ontario between April, 2015, and June, 2016, and that the agency plans to do as many or more next year.

[Harvey Spector]

15 hours ago, taxi said:

 

I think he might have been talking about individual cases of shadow flipping? 

 

In which case, assuming you had proof of the transactions, there would be plenty of lawyers willing to take on such a case. A real estate agent has a fiduciary duty to their clients. Not getting each client top dollar is a breach of that. Breaking up a single transaction into multiple transactions for the purpose of getting multiple commissions is clearly in violation of a fiduciary duty.

 

Shadow flipping itself isn't illegal. The government closed the loophole on it but it was never actually illegal. I've never heard of a Realtor being sued for fiduciary duty before. And all discipline cases are made public to the Realtor members through our internal MLS website. 

 

Having said that I'm sure now would be the time to challenge that as the class action lawsuit against the government for the foreign buyers tax is currently before the courts for consideration. 

[taxi]

24 minutes ago, Harvey Spector said:

 

Shadow flipping itself isn't illegal. The government closed the loophole on it but it was never actually illegal. I've never heard of a Realtor being sued for fiduciary duty before. And all discipline cases are made public to the Realtor members through our internal MLS website. 

 

Having said that I'm sure now would be the time to challenge that as the class action lawsuit against the government for the foreign buyers tax is currently before the courts for consideration. 

There's a difference between something being illegal and being the subject of a civil law suit.

 

 

I've filed lawsuits on behalf of clients against realtors for breach of fiduciary duty. It's definitely a thing. A realtor as agent must act in the best interest of their client and put the client's interests before their own.

[Harvey Spector]

23 minutes ago, taxi said:

There's a difference between something being illegal and being the subject of a civil law suit.

 

 

I've filed lawsuits on behalf of clients against realtors for breach of fiduciary duty. It's definitely a thing. A realtor as agent must act in the best interest of their client and put the client's interests before their own.

 

Yes I know the meaning of it, I've just never heard of anyone being disciplined over it.  Mind you if it goes through the civil courts it wouldn't be posted on our website, but I am sure if it was a large case it would be all over the media.  Also, alot of lawsuits against Realtors and discipline procedures get settled before any action is taken, so that could be another reason this has never been exposed before.  The parties (the buyer or seller and the Realtor) around 80-90% of the time usually settle before it gets to a discipline hearing, the reason why is the Realtor would rather just pay off the client versus getting disciplined by the Board and get their name tarnished throughout the industry as well as having to pay fines and getting suspended.  Although things may change now that there is a neutral Superintendent in charge now.  He may change the way Reatlors are disciplined and how it is dealt with in the public eye.

[Hugor Hill]

On September 29, 2016 at 9:00 AM, Harvey Spector said:

Waitress's purchase of $2.3M Vancouver home prompts questions 

CTV Vancouver

 

The B.C. NDP is calling for more auditing of real estate purchases after discovering a number of eyebrow-raising transactions, including a $2.3 million home on Vancouver's west side that was bought by a waitress.

Housing critic David Eby said the party investigated sales activity in the MacKenzie Heights neighbourhood and found dozens of high-priced homes owned by people with little or no income.

Data obtained by the NDP revealed 26 self-proclaimed homemakers and five students own properties in the area valued at more than $107 million combined.

"I can't suggest that anything has actually been done wrong by anybody," Eby said at a news conference Tuesday. "I'm simply saying that we need to have additional resources dedicated to investigate where this money that's coming into our real estate market is coming from."

The multimillion-dollar home that was purchased by a waitress in 2012 is three storeys, custom built, with hardwood flooring, a sub-zero fridge and stainless steel appliances, according to a description obtained by Eby.

"The taxes alone on this property in 2014 were $10,000 a year," he said. "So a very successful waitress."

In another transaction, a student bought a property from a homemaker for $2.06 million, then renovated it and sold it for $4.33 million to a self-identified businessperson.

Eby argued it's possible some of the homes were purchased on behalf of a wealthy individual who wanted to avoid paying capital gains tax on the investment.

The provincial government has already committed to hiring dedicated auditors to investigate tax evasion in real estate, but the housing critic said the eight-person team promised is still woefully inadequate.

Asked about Eby's comments Tuesday, MLA Andrew Wilkinson, the BC Liberal representative for Vancouver-Quilchena, dismissed the concerns as a "bit of a witch hunt."

"He's throwing out wild allegations with no real information to back them up," Wilkinson said.

But real estate lawyer T.J. Dhillon disagreed, insisting there are many buyers using loopholes to avoid capital gains tax.

"I do a number of deals where the buyers are either homemakers or students and I think it is clearly an attempt to circumvent the information on who's the real owner," Dhillon said.

Hey man, don't know about Vancouver but here in Laughsland bottle service girls make hundreds of dollars of tips a night.

 

And these girls can probably get a $40K accounts manager job at Mad Men during the day.

 

And you have to work on Sundays......

[DonLever]

How is closing the loophole for principal residency going to work anyway?  All you need is to live in the house a few months and you can sell.  Unless you get rid the capital exemption for principal residence for everyone,  foreigners will still flip houses without paying capital gain tax.

[Harvey Spector]

2 hours ago, Hugor Hill said:

Hey man, don't know about Vancouver but here in Laughsland bottle service girls make hundreds of dollars of tips a night.

 

And these girls can probably get a $40K accounts manager job at Mad Men during the day.

 

And you have to work on Sundays......

 

Haha, where the heck do you live Hugor??

[Hugor Hill]

Just now, Harvey Spector said:

 

Haha, where the heck do you live Hugor??

Toronto

[Harvey Spector]

3 minutes ago, Hugor Hill said:

Toronto

 

We need those bottle service girls here in Vancouver!!