surrey

Mortgage stress test could become election issue

The Conservative Party of Canada plans to make the mortgage stress test a hot button issue in time for next year’s election, but explaining such a convoluted issue to Canadians could pose a challenge.

The party’s Deputy Shadow Minister for Finance tabled two motions this year to study the impact of the stress test, known as B-20, but they were both rejected by the Liberals. Nevertheless, MP Tom Kmiec has vowed to put the mortgage stress test on the agenda in time for the Oct. 2019 federal election.

“It will be an election issue, absolutely,” said Kmiec. “I’m willing to use procedural tools to get this study done. I’m not necessarily saying to get rid of B-20 completely; I’m saying take a look at the data and then make a decision on it. I’m asking the Liberals to provide any internal documents they have showing why the mortgage rules were introduced in the first place.”

Kmiec has started a website to pressure the Liberals into studying B-20’s effects. He claims that he was initially told B-20 wouldn’t be examined in the absence of more data, however, much has since come to light about Canadians being shut out of the housing market.

Kmiec is dogged, to be sure. He participated in the electoral reform committee’s filibuster.

“If it comes down to it, I’m happy to use up every two-hour time limit on every single committee until we agree to do a mortgage study,” said Kmiec. “I’m not asking for the moon, either. All I want are a few meetings in Ottawa where we can invite people with data who can then tell us what’s happening with the market.”

But communicating the message will doubtless be challenging for the Conservatives. Ron Butler of Butler Mortgage can attest to how difficult buying homes has become this year, but too few Canadians have born that brunt for the impact to truly be understood.

However, given that mortgage renewals are subject to the same stringent B-20 qualification rules, Butler believes it is still possible to make Canadians understand how detrimental the stress test is.

“It won’t be hot button, but if it’s messaged right, it could be,” he said. “If it’s presented properly as a group of themes about the incompetence, in terms of the ability to handle the file—why has Mexico settled NAFTA already and Canada hasn’t? Why did we buy a pipeline that got shut down? It’s a good thing to add to the general list of incompetence. On its own, it isn’t a hot button issue, but if you want to weave it into a tapestry of every day, practical fiscal management, it could work.”

 

by Neil Sharma01 Oct 2018, www.canadianrealestatemagazine.ca

International online retailer selling Canadian houses like shoes

Chinese real estate portal Juwai—which collects staggering quantities of data on Canadian housing—has struck a deal with online retailer JD.com to start selling homes like shoes.

Juwai markets overseas properties to buyers in China’s Mainland and, according to a JD.com statement buyers can view houses listed for sale “like milk, shoes and other household goods.”

In addition to Canadian real estate, home listings from Australia, the U.K. and U.S. will also be advertised on JD.com—all popular markets for Chinese investors.

JD.com, which is often referred to the Chinese equivalent of Amazon, made a special request for Canadian real estate because of how popular of a commodity it’s become among Chinese consumers.

China forbids capital outflow exceeding USD$50,000, but it’s in the midst of loosening such restrictions and retailers like JD.com—China’s second-largest retailer after Alibaba—are champing at the bit.

However, news about the deal between Juwai and JD.com is bound to inflame tensions between domestic and foreign buyers, whom believe responsible for rising unaffordability.

Countries like New Zealand, Britain, Australia, Switzerland and Singapore, to name a few, have taken measures to protect their housing markets from foreign speculators, while Canada has steep foreign buyer taxes in its two most expensive real estate markets.

by Neil Sharma03 Apr 2018 | .www.canadianrealestatemagazine.ca

B.C. commercial real estate investment up 83% year-over-year

Real estate sales over $5 million hit a new dollar volume high in 2017, led by institutional buyer demand

 

B.C.’s commercial investment value set a new record-high of $7.5 billion in 2017 – up nearly 83 per cent over 2016’s $4.1-billion value. 

A new year-end investment review from Avison Young Commercial Real Estate notes commercial real estate deals and dollar volumes have continued to rise astronomically since 2015. Avison Young cites a number of reasons behind this acceleration – primarily a divergence of market opinion between vendors and purchasers that has led to more assets for sale by owners and more demand for purchase among investors. 

The report tracks B.C. office, industrial, retail and multi-family property transactions greater than $5 million. Two hundred and thirty property sales were recording in 2017, versus 147 in 2016.

 2017 property sales continued to be led by redevelopment potential, regardless of asset class. 

"Ongoing price appreciation in all asset classes is being driven almost exclusively by land value and redevelopment potential," says Bob Levine, principal for Avison Young. "The acquisition of retail assets has morphed in many cases into land deals with lesser consideration or interest for the income in place or the retail asset itself.” 

Private investors accounted for 87 per cent of transactions in 2017 but only 46 per cent of dollar volume. Institutional buyers accounted for the other 47 per cent of dollar volume recorded in 2017. Institutional buyers were involved in most high-profile transactions of the year, including Cadillac Fairview’s downtown Vancouver office portfolio, Pacific Centre shopping mall, Oakridge Centre and Solo District office sales in Burnaby. 

Retail sales in B.C. claimed the largest portion of sales dollar volume, claiming 48 per cent or $3.6 billion of 2017’s 7.5 billion investment total. 

The year’s single biggest transaction was the $1.9-billion sale of Pacific Centre and surrounding office towers. It was B.C.’s second commercial real estate deal to surpass $1 billion, following the $1.05-billion sale of Bentall Centre in 2016. 

Avison Young do not anticipate a billion-dollar transaction in 2018 and believes institutional buyer demand will slow, leading to an annual dollar volume decrease. 
 

Tanya Commisso Western InvestorMarch 22, 2018

Major impact to B.C. real estate market expected from proposed taxes

New tax policies put pressure on Canadians to sell their secondary properties within the province

Albertans anticipated to look within their own province and to the United States for secondary properties

TORONTO, March 29, 2018 /CNW/ - According to a Royal LePage advisor survey, which consolidated the views of 535 real estate professionals in British Columbia and Alberta, the implementation of new housing taxes outlined in British Columbia's 2018 budget have the potential to significantly impact the province's residential real estate market. While previous provincial measures have targeted foreign homebuyers, the implications of the new tax policies will be much more widespread, primarily affecting domestic homeowners located in B.C., Alberta and other parts of Canada who have made the tourist-focused region their second home.

British Columbia's tax policies within its 2018 budget include the introduction of a speculation tax on qualifying secondary homes, an increase to the foreign buyer tax as well as an expanded list of affected regions and an increase to the property-related school taxes and land transfer taxes on homes worth over $3 million.  

When asked, 85.0 per cent of advisors operating in British Columbia said that the new tax policies have hurt consumer confidence in residential real estate across the province. A further 78.0 per cent of respondents believe that home sales will decrease within the first three months of the announcement of the new policies, while the majority (57.3 per cent) stated that prices will also decrease during the same period of time.

"The expected impact of the proposed housing taxes announced in British Columbia should not be taken lightly," said Phil Soper, President and CEO, Royal LePage. "Homeowners across the province will feel the effects as major policy changes like this are also amplified by a drop in consumer confidence. We saw this happen in 2016 when the previous government launched a tax on foreign investors. A small number of international purchasers withdrew from the market – along with a huge cohort of domestic homebuyers.

"Canadian homebuyers from coast-to-coast were already struggling with new federal restrictions on access to mortgage financing," continued Soper. "We expect the impact of the new government's housing tax policies to be even more pronounced as they will force Canadians, Americans and potential buyers from elsewhere in the world out of the market."

While 77.0 per cent of advisors stated that the provincial regulations will cause interest from international purchasers to decrease, this demographic was ranked last when respondents identified the group that was most impacted by the new policies. When asked, 44.8 per cent of advisors stated that the new housing policies most impacted residents of British Columbia, followed by 43.5 per cent who believed it was Canadians who own or are looking to buy property in British Columbia, but predominantly live in other provinces. Only 11.3 per cent of real estate professionals forecast that the policies would impact international purchasers the most.

"We expect that the new taxes will materially impact communities that rely on recreational property markets for the health of their local economy," said Soper. "There will be some Canadians in British Columbia and across the country that will choose to sell their properties in the province as the new taxes add to the cost of homeownership.

"There are further unintended consequences from these kinds of policy changes," Soper concluded. "If property values decline, property tax revenues decline. Local municipalities will have to deal with this added burden."

When asked, 81.5 per cent of advisors said the new tax policies within British Columbia's 2018 budget have already caused interest from Canadians living outside of the province to decrease, with 73.8 per cent believing that the move will lead the group to sell their property. This is predominantly led by the impending speculation tax, which 90.8 per cent of respondents believe will impact sales in the province from prospective homeowners located in other areas of Canada, like Alberta.

These sentiments were verified by advisors in Alberta, with 80.7 per cent believing that Alberta-based interest in B.C. recreational properties will decrease, and a further 75.6 per cent stating that Albertans who currently own recreational property in British Columbia would likely sell their secondary homes. Instead, it is believed that Albertans will now increasingly look within their own province (72.6 per cent) or south of the border (46.7 per cent) for secondary properties.

Survey Methodology

Royal LePage's advisor survey was conducted online between March 14, 2018 and March 20, 2018, polling a total of 400 Royal LePage real estate advisors from British Columbia and a further 135 from Alberta. Responses were anonymously recorded and analyzed independently.

On March 26th, 2018, British Columbia announced amendments to its speculation tax. These amendments do not change the opinion of Royal LePage and its network of real estate professionals. While the size of the new taxes has been reduced modestly in one of the categories, the entire scope of the new tax regime remains in place. The results of the Royal LePage advisor survey are reflective of current expert opinion on real estate in the region.

 

NEWS PROVIDED BY

Royal LePage

06:00 ET

British Columbia's economy is forecast to remain strong through 2020

VANCOUVER — British Columbia is predicted to have solid economic growth through 2020 by a trade association of credit unions.

Central 1 Credit Union says 2017 was a year of “stellar growth” and the positive momentum will continue in B.C. for the next 24 months, despite a slower housing market.

The new forecast calls for a three per cent growth in the province’s real gross domestic product, which is the inflation-adjusted value of all goods and services produced in B.C.

Growth is expected to slow to just over two per cent next year, but Central 1 economists are calling for a rebound to 3.3 per cent by 2020, marking what they say has been “more than a decade of uninterrupted annual growth.”

Federal lending restrictions, provincial government policies and stepped up home construction will combine to keep a lid on B.C.’s housing market, but Central 1 does not foresee a price correction.

 

Bryan Yu, deputy chief economist at Central 1, says warning flags include trade disruptions due to trade wars or disputes over renewal of the North American Free Trade Agreement, but he says B.C.’s exports are spread across the province, limiting some of the risk.

Yu also forecasts faster wage growth for B.C. workers, as average unemployment moves toward four per cent over the next two years.

“Employers will face increasing challenges in finding workers to support operations as employment is constrained by growth in the labour force due to an aging population,” he says in a news release.

Overall, Yu predicts a surge in investment by the end of the decade as major private and public works projects get underway.

“B.C.’s economy remains in a strong position with consumer demand underpinned by high employment and income growth, rising exports and government spending,” he says.

 

THE CANADIAN PRESS

Published on: March 27, 2018 | Last Updated: March 27, 2018 10:12 AM PDT

BC commercial market set new record in 2017

The commercial real estate market in British Columbia surpassed previous highs for activity and dollar volume in 2017.

Dispositions of 230 office, industrial and retail properties achieved a total of $7.5 billion according to a new report from Avison Young. That almost doubled the previous record set a year earlier ($4.1bn).

Large pools of investor capital helped achieve the record year but that was not the only reason for the strong market.

The low interest environment, mindset of market participants, and a shortage of available development land, all played their part.

Interestingly, while many property owners decided to sell in the belief that significant peaks had been achieved, buyers were happy to pay higher prices believing that the peak is still to come.

"Ongoing price appreciation in all asset classes is being driven almost exclusively by land value and redevelopment potential," comments Avison Young Principal Bob Levine. "The acquisition of retail assets has morphed in many cases into land deals with lesser consideration or interest for the income in place or the retail asset itself. This approach has spread to office and even industrial properties as investors seek to secure land in hopes of redevelopment."

By asset class:

  • Office investment sales activity achieved record levels in 2017 with 46 transactions valued at $2.7 billion, representing 36% of overall record dollar volume of $7.5 billion.
  • Retail assets achieved blockbuster heights in 2017 with 96 transactions valued at $3.63 billion – surpassing the previous record of 59 retail details worth $1.22 billion set in 2015.
  • Robust demand for industrial assets pushed deal and dollar to record levels in 2017 with 88 deals valued at more than $1.2 billion, capturing just 16% of total 2017 investment proceeds of $7.5 billion but claiming 38% of the total number of deals.
  • Multi-family investment activity surpassed the billion-dollar mark for only the second time in BC history after registering more than $1.275 billion in 89 sale transactions in 2017.

Private purchasers remained the most dominant buyer group in 2017, accounting for 87% of transactions but just 46% of dollar value.


by Steve Randall | 22 Mar 2018 | canadianrealestatemagazine.ca  

Investing in strata windups, How to profit from strata assembly: selling off entire buildings for development can be a windfall

Changes to BC’s Strata Property Act allow for strata owners to dissolve their strata corporation on an 80 per cent vote for voluntary wind-up, which has spurred developer interest in older strata properties for redevelopment purposes.

Prior to the July 29, 2016 change in the statute, the requirement was unanimous approval, which was difficult to meet – one holdout vote was all it took to defeat the wishes of a significant majority.

The new provisions bring B.C. into line with most other provincial condominium statutes.

In anticipation of the new changes, developers have been busy identifying feasible sites and likely candidate strata corporation owners willing to consider wind-up and sale for redevelopment. And strata councils/owner groups have been consulting with their advisors to sort out the navigation processes required for such wind-ups and sales.

Some sites, decades old, are worth more in redevelopment value than non wind-up, as-is value. Some buildings are not built to full allowable or potentially allowable density, or are close to newer rapid transit lines. Other buildings have such high deferred maintenance and repair costs that sale to a developer could yield owners greater returns, while also relieving them from having to pay for significant repair costs to the building, and from the mess and stress of carrying out the repairs.

 

Complex process

However, the termination and sale process, for both developer buyers and owner sellers, can be complex and lengthy. There are requirements for the winding-up, mandatory where five or more strata lots are on the strata plan, including court order approval, procedural rules for obtaining approval, and notice requirements.

The court approval requirement gives those opposed to termination and sale the opportunity to try to convince the court there is significant unfairness to one or more owners or holders of charges, or significant confusion and uncertainty in the affairs of the strata corporation or of the owners.

This is new law for B.C. and as such, time will tell what parameters the BC Supreme Court will establish to determine the best interests of the owners as a whole, and what factors it would consider in its determination of whether or not there has been significant unfairness or confusion to deny approval.

Fairness

A good approach, for both the developer and the majority owners who wish to sell to a developer, is to ensure there are terms benefitting the sellers which show fairness to all owners. As an example, provision for a long turnover possession date where the sellers can live rent free for 12 to 18 months after closing would show the sellers are being given time post closing to find alternate housing.

Some developers have considered entering into contracts with sufficient numbers of owners to enable the developers to effect the 80 per cent vote for wind-up only after it completes the purchase with those owners. In such instances the obtaining of a court order approving the voluntary wind-up and sale by all owners would not be a condition of its purchase. Buyers should understand there could be considerable delays and holding costs to factor in if they opt to go this route, as getting court approval is not guaranteed. Also, if a court does not order a wind-up on an application, a developer buyer may be left, for the short to mid-term, with an 80 per cent or more ownership of a property requiring costly repairs.

Working with legal advisors in advance and during this new process is suggested, for developers and owner sellers alike.

Carol Lee Western Investor
June 22, 2017
www.westerninvestor.com

Keeping up with the condos in the city of Surrey

The City of Surrey is hoping its low municipal tax rate for businesses will continue to attract companies to keep pace with its residential real estate boom.

The average company is paying $21,995 annually in Surrey, the second-lowest rate in the Lower Mainland behind Langley City. The average business tax rate across Greater Vancouver sits at $42,902, and Coquitlam has the highest rate ($65,963). According to Fraser Valley Real Estate Board (FVREB) 2017 data, the region sold $15.7 billion worth of real estate, the second-highest year since the area started keeping statistics.

 

One of the companies Surrey recently lured east to set up an office is international law firm Fasken, which has 10 offices on four continents and one in Vancouver.

William Westeringh, managing partner for Fasken’s B.C. region, said the firm picked Surrey because the economic viability of establishing a business in the city is increasing with its population.

“We’re a business law firm, so if it were just the population that was growing, and not the business sector then that would be of less appeal, just to the individual people living there,” said Westeringh. “What we’re seeing is growth in business in Surrey and in the Fraser Valley and the sophistication of services those companies are offering.”

According to City of Surrey statistics, the municipality issued more than 2,600 new business licences in 2017. The value of building permits exceeded $1.5 billion, the majority of which were in the industrial and institutional building categories. South Surrey had the largest share of the industrial growth in 2017. It accounted for 56% of the building permit values and 66% of the additional floor space in that category.

Slightly more than five million square feet of industrial space is under construction in Metro Vancouver, and more than 1.2 million of that is in Surrey. As of 2015, only 2,261 hectares of Metro Vancouver’s industrial land is vacant; 38% of that is in Surrey.

Aside from Fasken, several other companies have set up offices, headquarters or buildings in Surrey, including:

Loblaws, which recently opened a 422,000-square-foot refrigerated food distribution centre in Campbell Heights;

Starline Windows, the country’s largest window manufacturer, which has four facilities in the city totalling 450,000 square feet;

G-PAK, which makes compostable Keurig-compatible single-serve coffee pods and recently received $2.5 million from Western Economic Diversification Canada to secure a 9,000-square-foot contract for a manufacturing facility in Campbell Heights; and

DSV Solutions Inc., the world’s sixth-largest third-party logistics provider, which recently acquired a 214,000-square-foot property in South Surrey.

City of Surrey Coun. Bruce Hayne acknowledged the municipality’s building boom is being driven primarily by low residential prices compared with other Lower Mainland cities.

The benchmark price for an apartment in the Fraser Valley as of the end of December was $388,600, according to the FVREB. Within the Real Estate Board of Greater Vancouver’s catchment, the benchmark price for an apartment is $655,400.

Hayne noted the city has several bylaws to help promote sustainable development, including the Development Cost Charge Bylaw (which allocates portions of development monies for municipal use such as sewage, highway facilities and parkland) and its Neighbourhood Concept Plan which guides the development of new Surrey neighbourhoods. He said it is still a struggle to keep the various forms of development in lockstep across the city.

“As you can imagine it’s difficult to keep the job growth at the same pace as our residential growth. Some of the advantages, though that Surrey has is that we have the majority of the undeveloped industrial land left in the region, and we’re very protective of those industrial lands.”

Hayne added that the city has also instituted moratoriums on residential developments in some areas of the city while the school board plays catch-up. He said the November 2016 Supreme Court of Canada decision that reinstated class size limits across the province that were removed in 2002 has put added pressure on the local government to accelerate new school construction. Starting in the 2017-18 school year, the limits for primary classes were 20 students for kindergarten and 22 students for grades 1 to 3.

“We’ve had to put moratoriums on certain areas for developments, particularly in South Surrey,” he said, “as we wait for the school board to catch up and purchase land for schools or make announcements to build.”

According to B.C.’s Ministry of Education, there are two schools under construction in the municipality and 14 are in the design or planning phase.

Surrey Board of Trade CEO Anita Huberman noted that one of its major projects is trying to build a convention centre space in the city. She said various agencies are working together to target the Guildford mall space formerly occupied by Sears.

“We’re going to be the largest city in British Columbia, and we really need to have a convention centre,” she said. “And we’re behind the times in terms of what we can do to bring in those types of events and jobs and economic dollars.”

By Patrick Blennerhassett | February 7, 2018, 8:00am | Business In Vancouver |BIV.com