Foreign Buyers and a Market Update

Oh man, this is getting very telling what’s coming down the pipe. Scotia CEO banker sells mansion only 6 months after buying it, then sells mass amount of insider stock.

The REALLY Big Short: The $13.7 Billion Dollar Bet Against Canadian Banks Over Housing And Insider Sales

“BMO led the pack of five, with their executives selling $27,877,194 more shares than they purchased – this includes $500k worth of shares being sold by their CEO, and a whopping $9,242,320 being sold by their CFO Thomas Flynn in just the past year.

Scotiabank is by far the most interesting however, since the bank’s CEO Brian Porter has been the most vocal about housing prices. In addition to the bank making aggressive moves to reduce housing related risk, bank executives have sold $14 million more shares than they have purchased in the past year. Porter, who has said he’s “a little concerned about housing prices in the Greater Vancouver area and Toronto”, seems to be putting his money where his mouth is. He put up his mansion for sale just six months after purchasing it, and has let go of $11.9 million worth of shares. Making CFO Sean McGunckin’s $500k worth of sales seem tame in contrast.”

https://betterdwelling.com/the-really-big-short-the-13-7-billion-dollar-bet-against-canadian-banks-over-housing-and-insider-sales/

Active listings in Victoria at the lowest ever (for time of year) since data collection began in 1996.

Saw this on Twitter today:

https://twitter.com/mtthwbyd/status/760589837044813824

I’ve been getting that flyer at my house for a long time. I can’t believe people fall for that crap, but the majority do.

A buyer from out of town is not going to fly into town to ONLY take a look at a handful of listings realtor “Bob,” has listed. The out of town buyer will take a look at all that is available.

Saw this on Twitter today:

https://twitter.com/mtthwbyd/status/760589837044813824

For lower New Listings have to go back to 2010 and 2005.

Interesting anecdotes from the Vancouver jungle on how speculation can cause professionals with families as far out as the Fraser Valley to consider moving – which maybe BC gov’t is finally recognizing as a threat to the economy …

http://www.bnn.ca/a-chance-to-compete-how-vancouver-s-new-property-tax-will-affect-homebuyers-1.535122
Darren Joneson, doctor in residence:
“There has been a big shift in people buying up homes here, throughout the Fraser Valley, and that’s driven up the number of tenants and created a rental crisis here. A lot of homeowners are taking advantage by jacking up rents … When I start practicing medicine, I’m absolutely considering moving … We need to have a fundamental change in how we view housing. It’s viewed as an investment and almost played as a stock exchange right now. ”

Justin Fong, software developer:
“we have looked at living in Seattle … At least now, there’s an opportunity for us not to have to take on a crippling amount of debt … having that opportunity is very crucial if we want to keep young families in the city.”

The unit I bought at the Promontory was around $195ish. From day one I was renting it for $1,150 so it was cash flow positive (25% down just because my credit union didn’t do 20%).

The rent is now $1,300 (maybe I could squeeze out closer to $1,400) and my book cash flow is very high; however, given I could ditch it for $300,000 the return isn’t the great on the rent anymore.

I would ditch it if it wasn’t for capital gains. By the time I pay transaction costs and tax I am maybe pocketing $260-265ish. So really I look at it $1,300 on $265,000 (what I would have to re-invest in something else).

It’s a small rental return especially when buying high I agree but guess when have a large downpayment it must still be lucrative for a investor?

No. The larger your down payment the lower your ROI as with rental RE in a low interest HCOL market it is leverage that gives you the best returns for a number of reasons including low rent to value ratios, taxation and the impact of appreciation. Basically, do the math and you’ll see – there are calculators out there online.

If you have to put half down to make a rental property cash flow you are losing the truly passive returns you could get on that down payment elsewhere. Ie. 400k down on an 800k means you are losing $28,000 in returns on the down payment if invested elsewhere, particularly TFSA and tax preferenced investments .

My advice would be to invest in a market where you can put 20% down and make it carry itself if you are dead set on owning a rental, and that is not Victoria as far as I can tell. Your very best returns will be in a primary residence with a suite imo and that still works here if you want to take on the landlord role.

If you are buying a house to live in this is where you should go to the upper end of what you can afford if you are planning to sell later as the capital gains tax exemption is a huge benefit.

Looking back, if you were super wealthy you would have generally been better off to buy expensive waterfront to live in and wait for appreciation than buy a cheaper primary residence and a rental house because of the capital gains exemption primarily. Totally different in some markets in the US where prices are cheap and rents are high and places really do cash flow.

Just my two cents based on experience and a lot of spreadsheets – others may have a different view.

I’m not going to argue the numbers regarding foreign ownership in Vancouver because it is irrelevent to the stupidity that Canadians have indulged in over the last 7 -10 years.

I was born in Vancouver and have lived in B.C. for close to 60 years. It is one thing for our youth to be suckered into this mother of all gasbags, it is quite another to see my contempories dipping into unrealized equity to purchase investment homes here and more astoundingly the U.S.A., regardless of Garth’s recommendations to those who were financially capable, I presume.

I understand greed but every one of these boomers lived through previous crashes. I personally listed my home in 2002 and watched my equity disappear as I futilely followed the market down to try and save some shred of equity.

If this is indeed the turning point, we will be realizing the biggest recession this country has ever encountered. We may all be to blame for this bubble but the media, realtors and boomers collectively pushed our kids over that cliff…..and yes I do realize a minority of people have been responsible….just not enough.

These are headlines over the last several years. Wow.

Canadians, which had led international purchases since 2008, ranked second with US$11.2 billion in spending and a 14 per cent share of sales.

http://business.financialpost.com/personal-finance/mortgages-real-estate/move-over-canadians-chinese-buyers-now-leading-foreign-purchases-of-u-s-homes-for-first-time

Cash is king

Some of those multiple bids are actually coming from other Canadians. It’s still extremely difficult for all but the most credit-worthy Americans to get financing, so Canadians who can make all-cash offers – as most Canadian buyers do – still have a big advantage.

Since Canadian real estate prices have not collapsed the way they did in the U.S., home equity lines of credit are frequent sources of that cash.

http://www.cbc.ca/news/canada/canadian-buyers-face-more-competition-as-u-s-housing-recovers-1.1143312

Jerry Jarson, a 74-year-old retiree from Shanty Bay, Ont. said he was able to use the equity in his Canadian home to buy his condo. ‘‘We never had any money but the bank has lots,’’ he said about the line of credit on his Canadian home he was able to use to finance the purchase.

There’s no country that even comes close to Canada when it comes to buying, with No. 2 United Kingdom accounting for 7% of all international purchases.

Canada has been number one for seven straight years, cooling on Florida real estate after a 2011 peak but rebounding since.

http://business.financialpost.com/personal-finance/mortgages-real-estate/foreign-buyers-taking-over-this-time-its-canadians-in-florida

From the original post:
Look, either there’s a problem with foreign buyers or there isn’t.

From this weekend Globe and Mail:
“The tax could also produce a host of unintended and unwanted consequences. Top among them is that Vancouver’s problem could simply shift elsewhere as foreign buyers seek to avoid the tax. Cities such as Toronto and Victoria are already bracing for knock-on effects.”

As the tax taxes effect starting Tuesday, It will be interesting to hear this week if there in fact is a spillover effect, particularly during open houses. If you’ve taken a ferry in the last 2 weeks, the increase in Mandarin is unmistakable.

No one has bought an investment property in Victoria in 10 years who can say they had a reasonable expectation of return on investment through cash flow after factoring in the interest rate risk, opportunity cost of down payment, transactions costs and all the other costs. If they think they did they’re just bad at math. Prices can’t be too high when 100% of the returns are expected to come from prices going higher.

Buying and renting are only substitutes for a short period of time, when you’re young. Once you have a family, they are no longer substitutes. With investors buying everything they can get their hands on and not investing in other assets, first time buyers are forced into a less preferable housing consumption arrangement.

Portfolio investment in residential real estate shifts the ownership benefits of housing stock to work for the already rich ( investors) instead of those who aren’t (workers). The already rich investor class is much better positioned as a rule to take advantage of low interest rates / govt regulation changes etc when things change and always have a leg up on those who are less wealthy or less connected. Prices go up, workers hesitate hoping things will normalize because they can’t afford the risk of being wrong and investors keep buying only widening the gap further.

House hoarders and investors compete with first time buyers (renters) for properties. When the investor class wins the bidding war they prevent renters (potential first time buyers) from purchasing and they drive-up prices. Renters’ attempts to become homeowners are thwarted by investors and house hoarders.

When renters are prevented from purchasing a home, that decreases rental vacancy rates because thousands of ‘units’ are removed from the rental pool and converted to vacation rentals. If the investor leases the unit as a yearly rental, that action does not decrease rental vacancy rates but it still drives up house prices and thereby prevents renters from buying.

Is that simple enough for you Totoro and LeoS? You both are trying to alter my point to suit your argument, but my point is crystal clear, logical, and simple.

If you still don’t understand my simple point, then I suggest you google the news from New Zealand, Australia, UK, San Francisco, Shanghai, or a hundred other places where the governments have identified hoarders and investors as the root cause of the current global commoditization of real estate that they are targeting with new rules and new taxes.

Good try Totoro, more spin to deflect the issue.

My main point is neither the quality of the investment or nor what the investors do with their property investment.

The simple point that you are trying to deflect is that investors and house hoarders are the root cause of our current housing shortages and supply and cost. This problem is directly due to investors and house hoarders.

I was responding to the facts presented:

Continue this pattern for 12 years by adding a new ‘investor’ each year, with each investor buying another place each year, then after 12 years 90% of the houses are owned by 12 landlord/owners and the other 88 people are renters. Continue this cycle for another few years and you have three landlords and everyone else is a renter.

You know, the one where “landlords have access to unlimited funds”…

Not going to happen imo for the reasons I posted – and many others.

Now you are presenting a new theory. One where the houses are not bought foreigner and Canadian landlords and rented back to people long-term, but one where all the houses are being bought up for illegal Airbnb rentals.

Okay, here is what I’d say about the second. Every market has its limit and the laws can change or be enforced at any time as we’ve seen in places like Portland.

If a municipality or country wants to regulate vacation rentals it has the tools to do so and many do. Investing in a property at Victoria prices for this purpose knowing that the regulatory environment is a huge risk is pretty foolish imo.

I’d guess there are very few “investors” buying up houses specifically to do this, although maybe some of the people looking to buy are hoping to do this with a basement suite so they can afford their mortgage and improvements. Others on limited incomes are probably renting out rooms.

This also may be more common in strata buildings judging from the listings, but strata council can crack down on that pretty easily and impose daily fines. Not really a smart way to invest unless you can manage with long term rentals. With Victoria house prices I don’t think many can now so they have to be gambling on appreciation and have enough income to backstop negative cash flow – which is not the situation most people I know are in.

I have to disagree with Kathy Hogan of the UDI, it’s the community that is taking the risk. Once the developer has sold the units, made their profits and is long gone, the communtiy is left with the effects of hasty decision making for the next 100 years. Especially when the developer has pushed hard for smaller and smaller units that no longer meets the needs of family life but those of an AirBnB. AirBnBs that drive up house prices and remove month to month rentals from the community. The City has to keep focused on the future and not on the needs of developers. Do you want to live in a planned community or do you want to live in someone’s business plan.

LeoS- I know you’re an intelligent guy based on what you contribute to this blog, but I can’t understand your position on renters vs ownership vs runaway home prices.

These days are radically different; never before has any living generation had access to nearly unlimited amounts of nearly interest-free money. Plus, never before has there been a tsunami of wealthy foreigners wanting to buy a BILLION dollars of real estate per month in Vancouver. And never before have our living accommodations been turned into a commodity for investors.

Times are different these days.

You need to look beyond today. You can’t contemplate long term consequences on society based on your short term vision of what has happened up to today. The long term consequences matter today when our housing-stock is rapidly becoming an investment commodity.

Here’s a hypothetical simple scenario to make my point: let’s say that Victoria has just 100 houses and 100 families; and each family owns one house. If person #1 buys person #100’s house then rents it back to person #100 we now have 99 owners, one renter and one landlord. Next year person #2 buys person #99’s house and person #1 buys another rental property from person #98. Now we have two landlords, two renters, and 98 home owners. Continue this pattern for 12 years by adding a new ‘investor’ each year, with each investor buying another place each year, then after 12 years 90% of the houses are owned by 12 landlord/owners and the other 88 people are renters. Continue this cycle for another few years and you have three landlords and everyone else is a renter. Now bring in a foreign investor with buckets of cash who out-bids on every place and before long we are all tenants to a foreign landlord.

In this scenario it’s not just first time buyers who are unable to buy, everyone becomes a lifelong renter in a short time when investors have access to unlimited funds. Sounds just the the game of Monopoly; in the end there is just one winner.

Of course it will never get that bad because the youth and renters would revolt and revolutions are nasty on landlords.

We also have to look at the reason why so many Germans rent – it’s because of proactive government policies dating back to WWII, which created high quality rental housing for families. There was more partnership between government and private entities than any other country, and their housing market is more stable because of stricter rental rules & home-owner deposit & lending rules – then people don’t have to worry about price volatility & having to move. Good article here: http://qz.com/167887/germany-has-one-of-the-worlds-lowest-homeownership-rates/

In any case, it seems that Canada’s housing market is riskier than places like Germany – for both renters & home owners – because of the greater market volatility & lower supply of family-friendly rentals. That’s why people (families in particular) like the security of home ownership – it protects them from having to move unexpectedly and out of their control.

Not saying home ownership is the best goal for everybody, but there are good reasons why it’s more popular. Many home owners rent out their basement suites on yearly leases that don’t have to be renewed (so they can increase the rent, or not have “too many” kids in the suite). Great for the owner, but stressful for the renters.

Buying wasn’t considered a “luxury” back when speculators weren’t playing the market as much. It’s unfortunate that because of the excess speculation it’s being considered a luxury to own. Our limited population growth doesn’t account for the increase in demand.

124 St Charles sold for $790k (48×60 lot)

The current housing situation has long been in the making. People need to remind themselves:
1/ the # of houses in the core has stayed flat for years
2/ their are more people living here
3/ people are living longer, seniors are staying in their homes much longer than previous generations for lifestyle reasons
4/ younger people want to live in the core and close to all amenities
5/ and yes demand from investors/foreigners/ with access to cheap and plentiful credit

This problem will not go away anytime soon; but the reality is that millenials/Gen Xers do have choices and there is affordable housing available for purchasing, but just not in the core.

I believe that Grainte place sold for $716. Still some hyped up market out there. I wondered how much the 124 Charles st duplex conversion went for didn’t last too long…foreign investment/vrbo property or tear down build new?

LeoS said: “I think the lack of vacancy in the rental market is a much bigger problem than house prices.”

I completely disagree with you LeoS; I think the lack of affordable housing, based on average wages of semi-PROFESSIONAL 30 year olds, is a much bigger problem than a lack of rentals.

Thirty year old people want to buy but they are forced to remain renters because investors, home hoarders, and foreigners are driving up the prices of starter homes.

Marko – you’re right that some 30-something people mismanage their finances with $50k SUVs and other toys, but those are not the one’s I’m talking about…they are deservedly lifer-renters.

“a young couple who probably took today off their government job to stretch it into a 4-day weekend so they can go up to Whistler in their $50,000 SUV”

I know some people are addicted to debt, but I don’t think everyone is like this – there are a lot of families who are struggling to make ends meet, don’t take fancy vacations, don’t buy toys.

Have to say, I feel the same way as LeoM, why put my money into extra SFHs or condos when they were originally built for families or singles to buy, not for me to rent out. We need more apartment buildings purposefully built for renting – and if a group of investors wants to buy into that, great. At least leave the SFHs for owner occupiers.

but I refuse to compete with and out-bid young people who are trying to buy their first home and thereby contribute to the commoditization of homes. I don’t mean this in a self-righteous way, but it’s simply not right that those of us with the means prevent the younger generation from buying their first home.

So you are refusing to out-bid a young couple who probably took today off their government job to stretch it into a 4-day weekend so they can go up to Whistler in their $50,000 SUV?

I come across a lot of younger generation buyers buying their first home and you would be surprised by how some of them live.

Ahhhh yes, the HST…..every time I have to do accounting I need to remind myself of that idiotic decision to revoke.

Marko, the 1%ers I refer to are any of us who invest in homes as a commodity, when those homes might otherwise be available to first time buyers at a reasonable price. Any of us 1%ers who have the financial means and who treat homes as an investment commodity are the people I refer to. Developers like your father and hundreds of other builders who provide a valuable service by rejuvenating and rebuilding homes do not usually hoard houses and condos, but a few probably do.

I likely have the financial means to bid on several condos in Victoria today with 20% downpayments, but I refuse to compete with and out-bid young people who are trying to buy their first home and thereby contribute to the commoditization of homes. I don’t mean this in a self-righteous way, but it’s simply not right that those of us with the means prevent the younger generation from buying their first home. A home is our castle and every young Canadian who works hard, is frugal, and saves should not have to compete with us 1%er investors for their first home. Increasing the supply to meet the runaway demand is not the answer because that will just increase the commoditization of housing.

Land tenure, related property rights, and housing accessibility have spawned many revolutions with ruling governments overthrown for this very reason.

There is a difference between unconditional offers and unconditional contracts. An unconditional contract was more than likely a conditional offer to start.

It would be like a young family buying a new home in the Westhills for $600,000+GST (5%) and during the course of construction for the government to introduce an 15% additional tax, payable on completion, irrelevant of when the contract was entered into?

But this is okay because it is foreigners? Still horrible business practice that doesn’t instill confidence in doing business in B.C.

Also goes against some of the things the government has done earlier this year in various bills. For example, I ordered a Tesla and during the order period the government took away the $5,000 EV rebate, but they still honoured it when the car was eventually delivered based on the date of the order (as long as it was ordered before the announcement).

I think it made sense as the reason I ordered new versus buying used was only two reasons and one of them was the $5,000 rebate (only on new).

Once again, no issue with the 15% tax just the fact it is being applied to buyers who made decisions not knowing at all that it was coming and they can’t get out of their unconditional contract.

The net rental income is $24,156/year or $2,013/month. They are not taxed on the gross of $55,200, only the net. After tax this adds about $15k to their net (albeit in home equity not cash) on the balance sheet.

This net rental income already accounts for the deduction of mortgage interest paid from the mortgage payments of $7241 (about 2.5-3k/month perhaps). I think you may be double counting here by taxing them on the gross and then deducting the whole mortgage payment from the net?

I think applying the tax to unconditional contracts is really dumb. Can’t really do business like that.

There was a way around the last minute buying….ONLY unconditional contracts the day of the announcement are exempt. All others with conditional contracts feel free to collapse.

Make announcement around 5 pm so people wouldn’t have enough time to scramble to unconditional.

deryk houston said he objects to how the tax was implemented.
I say, Tough!!!

The tax was done properly; any other way would have encouraged massive last minute buying by foreigners. The Liberals did the right thing at the right time. The only improvement to the implementation would have been an immediate implementation on the date of announcement and a 25% tax.

I have no sympathy for foreigners or Canadians who are greedy profiteers who are commoditizing homes for their personal gains. However I have great respect for people or developers who buy old delapidated properties and rejuvenate them, or demolish and build new places. “Amateur Investors”, as Marko calls them, who buy up places and hope to profit just from appreciation caused by their ilk and foreigners can all go bankrupt with no sympathy from me. Basic housing needs should never be allowed to become just another commodity to be exploited by the 1%ers.

Their net is $7900/month from working income alone, so that is after tax and before living expenses.

In addition, their gross from rental income is $55,200 and their net is $24,000 or so. I don’t know how they get to net as they have rental income from two properties, one used as a primary residence.

Their mortgage payments total $7,241.48 if 30 year at 2.4%.

This means that the amount of mortgage payments not covered by rental income is $31,371.36 or $2,614.28/month. They can afford this and they are not cash flow negative.

I agree the numbers are unclear and the way of accounting makes it hard to determine what the bottom line is.

That article is off. I ran the numbers on their properties combined with their equity and debt and rental income and get a negative cash flow of $5437 / month @2.5% over 25 years. At 4% interest it’s $6929! their take home pay is $7,900 leaving them 2,463/ month for everything else. Their monthly expenses are $3288 taking savings out. They are screwed now, just wait until rates go up and they have added more to their debt load….

Looking at some numbers in Oak Bay and wow.

Median Single Family Deatached

May 2014 May 2016
$789,000 $1,260,000

If we isolate for Uplands even more insane

May 2014 May 2016
$1,355,834 $2,723,500

I personally would never buy next to a park or school. Listening to a basketball ball all day long would drive me crazy. House looks nice though.

How much would the price of that house increase… say if you have a good PokeStop or PokeGym near by? Tnx.

I think 29/32 is still the right time to take on calculated risk. If they go bankrupt by 35 they still have enough time to recover by 65.

I am all for risk but $1,800,000 in mortgages on less than $100,000 yearly income is really ballsy.

4029 Providence Pl in Gordon Head purchase in 2013 for $868,000.

Listed today for $1,680,000.

So many negative nellies on this board, it should be called househuntgarthturner.ca.

Hasn’t anyone looked at their PCS lately? I have one for all of greater Victoria in all price ranges and I literally just see a wall of “pending” with only a few new/recycled listings.

I’ve never seen anything like it. I think y’all will be in for a shock come end of July and early August.

I’m not making up fantasy stuff like Just Jack does everyday, desperately trying to talk the market into a crash, I’m talking actually what I see in my PCS.

I bet we get well under 2000 available homes by Sept.

“Frankly, I wouldn’t mind seeing some economic cleansing of the real estate market. ”

This cleansing has been long over due. Anyone who thinks this was sustainable had a biased and most likely highly leveraged interest and will be learning some painful lessons.

Parabolic charts always tank in spades. This cleansing will include a detox and an enema.

Jeff Lee ‏@SunCivicLee 2 hours ago
I’m hearing multiple cases of local buyers rescinding offers because they think the market will soften. #vanRE

Steve Saretsky
‏@SteveSaretsky
@SunCivicLee @VancouverSun I can confirm hearing similar things

I think the tax is being implemented exactly as it should be. Otherwise it would just cause panic buying. As it stands its a solid firing across the bow. It has gotten out of hand in Van for way too long. It’s not like it’s a ban, or the transparency that JJ seeks, Or raising the down payments to 25% or increasing renters rights or a general change to the tax rules on the gains received with housing etc. This is supposed to affect a small part of the market remember. A part that is not Canadian, not a resident, not an immigrant. Just some rich person somewhere else trying to convert their money into dirt in a politically safe country…. They can still do that, they just need to provide an over the table kickback of 15%. That’s not too bad.

http://business.financialpost.com/personal-finance/family-finance/couple-has-gone-all-in-on-b-c-real-estate-but-a-secure-retirement-will-mean-getting-out-at-the-right-time

Couple has 1.8m in BC mortgages. What are people thinking. Wonder if they are sleeping after this week.

Understood – that’s why I pointed out that the Australia and NZ banks implemented their new rules almost overnight. To be honest, I think BC is trying to send some signal to foreign buyers that this isn’t the place to put your money if Australia and NZ aren’t easy hideouts anymore. Also, maybe there really would have been panic buying and new tax evasion schemes created if there was too much notice.

“Another reason this tax was not grandfathered is to reduce the possible spillover effect. ”

Great point Fustercluck, could you imagine the panic buying that would have ensued if they gave it a one or two month warning ? The prices would be popping another 10 or 20% and that would defeat the whole purpose of the tax.

Look what happened when Justin changed the down payment rules and gave a couple months warning. Prices popped. It should have been done within a week or two like this new law.

You take chances doing any major deal in a foreign country, tough shit I say.

It’s not investing, it’s buying up. Investing would be putting money in to grow something that benefits Canada and our economy.

Does anyone honestly take someone named “Fustercluck”seriously?
Canada is viewed as a safe place to invest because we have laws that meet international standards. What “Fustercluck” and his type will never fathom is how the implementation of this new tax law will erode that confidence and damage our reputation as a safe place to invest around the world.

Another reason this tax was not grandfathered is to reduce the possible spillover effect. The government has shown their authority as a reminder that they’re not obligated to give anyone the benefit of the doubt. They can and will change the playing field at any time. So those expecting auto price surges in Victoria underestimate the foreign buyer hesitancy this may cause for all regions in BC.

Suppose the tax does work with a high capture rate.
Is 15% enough to either deter purchases in Vancouver and/or cancel out of existing deals prior to completion.

I would argue that Victoria is somewhere between 2.5x to 3.5x comparible properties. It’s just a vague assumption and none of us here will agree on exactly what compares to what. Point Grey vs Uplands? Burnaby vs Quadra? Kitsilano vs Oak Bay ? You get the idea…

Buying a $4M house in Van and paying $600k out of pocket for a ludicrous tax or paying $1.5M in Victoria. That comparible (sans argument) effectively just became a 3.5x from a 2.5x.

This, of course, if this is not implemented province, or better yet, country wide. And again, strip the Quebec investor program out.

This message is to “OlympicBound”.
What part of changing tax rules “retroactively” do you not understand????
Anyone Buying or Selling a house in Victoria could easily be caught in the same mess if the government decides that they want to change the rules at any time during your contract.
Real estate is very often a chain of people at all stages trying to complete their deal. As a result this will not only hurt foreign buyers but Canadian sellers who thought they had just sold their house and now find the buyer can’t complete their part of the bargain because they have a huge tax expense that they hadn’t expected. Everyone get’s hurt.

This small tax is same or less then most other similar places around the world, think Sydney/New Zealand, etc.

It will put a small 1% damper on the growth. But as we all know the majority of this boom is just a cycle. Has anyone seen the building boom everywhere? It’s just getting warmed up, these usually last 4-5 years and we are 1.5 years in.

The fact that Victoria just became ANOTHER 15% cheaper and is reported in all papers as a place people will go, will have a fairly large bump to our prices.

I’m seeing nothing but pending on my PCS, with almost no new listings!!! I think the lul around Canada day is ramping up already.

Even if the new tax makes 20 worldwide buyers think and buy in Victoria, that is enough to push prices up 15% easily! Think it through.

The price jump will be very fast. If I was looking, I would buy as fast as possible to get in before law changes.

Excellent point Hawk!!
Hawk said: “The foreigners were supposed to be having zero effect on the price rise and now it’s going to destroy market confidence and bring down the whole construction industry.”

Time to take off the party hats perma-pumpers, it’s SHTF time. From a non-fictional Van agent:

Steve Saretsky ‏@SteveSaretsky 11 minutes ago
My talks with many realtors lately- everyone is scared shitless for what might happen to market. #VanRE

Marko

Any insite on how this is playing out in Victoria?

Whole Vancouver industry created this mess. Now than can deal with the shit. Gov did the right thing since these people can not regulate themselves.

Also from the G&M article that jumped out at me:

“He also reminded the Premier of his company’s support, saying, “ITC has been a big supporter of you and the B.C. Liberals” through subsidiary companies.”

You can read a lot into that…..

This is hilarious. The foreigners were supposed to be having zero effect on the price rise and now it’s going to destroy market confidence and bring down the whole construction industry.

This is what a bubble popping looks like when the first catalyst hits as I have mentioned too many times on here.

Next comes the credit freeze up as the books are opened up on all the bloated lending deals as the foreigners and locals rush to the exits. Look out below.

B.C. realtors voice unease over new foreign-buyer tax

“In a letter on Wednesday to Premier Christy Clark, Cressey Development Group president Scott Cressey warned that it expects to see buyers – half local, half foreign – rescind on $20-million worth of sales contracts by Friday.

“The resident buyers who are rescinding are concerned that this new taxation might destroy the confidence in the real estate market,” Mr. Cressey said in the letter, a copy of which was obtained by The Globe and Mail.

And he warned that banks will likely want to do audits of all projects under construction in the Lower Mainland to determine whether financing – which depends in part on presales of units – can continue.

In a separate letter to Ms. Clark, also obtained by The Globe, a construction company spokesman warned that the new tax could cast a pall over the construction sector – one of the province’s biggest employers.

“The imposition of this foreign buyers tax is a real threat to the state of development in the Greater Vancouver Area and thus a threat to employment within the construction industry,” said Doug MacFarlane, president of ITC Construction Group.”

http://www.theglobeandmail.com/news/british-columbia/bc-realtors-voice-unease-over-new-foreign-buyer-tax/article31145792/

JD, agents are regulated and are not permitted to work without a written contract to purchase. The agents have to have the new May 16 legislation regarding assignment in the contract to purchase.

It is extremely rare to have a verbal contract to purchase real estate and it is not advisable to do so.

Land interests have to be in writing.

It is based on the Statute of Frauds.

China’s capital controls seem to be having some effect on the US real estate market:

http://www.bloomberg.com/news/articles/2016-07-26/end-of-an-era-as-china-s-love-affair-with-u-s-real-estate-fades
“The residential-property market here, especially for those priced between $2.5 million to $3 million, has been affected by China’s measures to control capital flight …”
“Meanwhile, illegal foreign-exchange transactions from underground banking were brought to regulators’ attention, as China busted the nation’s biggest underground bank, which handled $62 billion … Chinese buyers’ 26.7 percent share of international purchases surpassed the total share of the next four biggest countries of origin, Canada, India, Mexico and the U.K.”

Yeah, you can’t buy with a verbal agreement at the LTO.

Buying requires a completed freehold transfer form in writing from the seller which is witnessed by an officer and sets out the names of the parties, the purchase price, the property description. Plus the PTT and discharge of mortgage etc. All the stuff required for a written RE contract and you need it witnessed by an officer.

A buyer can’t just come in and say they have a verbal agreement and get a transfer. Even if both parties come in they’ll be directed to fill in the forms required in order for the purchase to complete. Either party can still back out at this point if there is no written contract for purchase and sale.

The reason this arose is that you stated that it would be up to the seller to prove loss if the buyer assigned without seller consent, as assigning without written consent would “not void the contract”. You just mixed up the law of contract damages with the statutory requirement for contracts in writing for land transactions in BC.

In any event, I see that the LTO form actually requires the witnessed consent of the seller to transfer to the specific purchaser. Seems like an assignment can’t be done without the purchaser knowing and consenting.

This is getting ridiculous. We are talking about land contracts.

Oral contracts are not enforceable when it comes to real estate contracts because of the Law and Equity Act which says they have to be in writing to be enforceable.

This is an EXCEPTION ( ie. not most instances) to the fact that oral contracts are generally enforceable, although they can be easily disputed, which is why written contracts are advisable in most cases.

Maybe get some professional advice on land contracts before posting what you believe to be the law. FWIW Leo was correct in what he was trying to explain to you.

Totoro, are you now saying that you can not purchase property with a verbal agreement?

Because you would be wrong again. You can still buy property with a hand shake.

Here is a quote from what you last googled.

“The simplest way to do so is by putting the contract in writing. Failing to do so may result in a contract that is not enforceable.”

Did you read the word “may” or the word “will” in the above? Do you know the difference?

Sorry Totoro, but in any of what I wrote did I say an “unauthorized assignment” or circumvent the law?

Really, you’re grasping at straws now.

The question was would an assignment void the contract to purchase? You said it would and I say it depends.

Vicbot, I think the issue is that the person is counseling someone on tax evasion. He is instructing someone on how to break the law. That would be considered unprofessional conduct by a licensed real estate agent.

But maybe we should have Totoro google it?

Isn’t a key question whether the assignment is “authorized” or not? If the seller agrees to the assignment, to complete the deal, then the purchase would move ahead. (Of course, if it was deemed tax evasion through an audit, then it wouldn’t work! 🙂 )

Perhaps one of the things RECBC objected to was this sentence in that realtor’s email:
“For those of you who do not have that option, we may be able to sell the presale to a third party at a profit to you.”

By offering to give the profit to the buyer instead of the seller, that is the polar opposite of the new rules that the BC gov’t introduced in May.

Totoro, nothing you googled shows that the contract to purchase would be null and void.

There may be a breach of contract but that would be dealt with after the contract to purchase has been completed. It would not necessary stop the sale of the property unless the contract said expressly “null and void” which common boiler plate does not.

Again you show great skill in googling but not in understanding.

This may be a breach of contract but the burden is on the non assigning party to prove damages. Unless the contract expressly states the contract would be “null and void” which common boiler plate clauses do not.

Jibberish again.

Sellers and buyers must be committed to resolving each condition of the sale.

Jibberish. Where assignment is not permitted as set out on the standard contract it is not a condition of the sale.

You see Totoro, that’s the problem when all you know is how to google and not how to think.

That in itself will not void the contract to purchase. Sellers and buyers must be committed to resolving each condition of the sale. This may be a breach of contract but the burden is on the non assigning party to prove damages. Unless the contract expressly states the contract would be “null and void” which common boiler plate clauses do not.

Victoria shows green overall. Calgary is red also.

Sorry Leo misread your comment

Here is the email:

BC’s New 15% Tax on Foreign Buyers in Vancouver
& A Solution For Our Clients
Hi Chris,

Hope you’re well.

We received some unfortunate news yesterday that may have a big impact on some of our clients who have purchased properties in Greater Vancouver that ARE NOT Canadian Citizen’s or Permanent residents.

What is it?

The Province of British Columbia will be levying a 15% tax on all purchases by people who ARE NOT Canadian Citizens or Permanent Residents.

When does it come into effect?

This will come into effect on August 2nd, 2016 and will be applicable to all completions (ie money exchanged for title to a property) that occur after August 2nd.

I would suggest consulting with your Canadian accountant for more information on this new tax.

For more details on this new 15% Tax on Foreign Purchasers please Read the full story…

A Solution to This Issue

For our clients and others who have bought presales we do offer a solution.

Most of the presales bought in the last 24-36 months have seen significant increases in value.

It is possible in many cases to assign the presale purchase contract to a family member or friend who is a Canadian Citizen or Resident.

For those of you who do not have that option, we may be able to sell the presale to a third part at a profit to you.

For more information, please respond to this email.

For help with our solution, Please respond with “I’m interested” and your phone number.

This speaks for itself.

http://vancouversun.com/business/real-estate/top-vancouver-realtor-rapped-for-trying-to-avoid-new-15-property-transfer-tax

So what happens if your contract prohibits the assignment but you do it anyway at the same price or less?

Your conveyance will most likely not complete.

Pokemon Go crashed the real estate market?

I was speaking with one of my neighbors and she was saying that her intersection is one of the points where she gets a lot of Pokemon Go millennials. She has had to yell at some of them to look up as they walk through the road intersection. Maybe that’s why Vancouver sales have slowed, the prospective buyers are in VGH.

Section 36 of the Law and Equity Act provides that the seller’s consent to the assignment is not required, provided that notice in writing of the assignment is given to the seller.

Your specific contract may or may not expressly prohibit the assignment.

So what happens if your contract prohibits the assignment but you do it anyway at the same price or less?

The assignment of a contract being prohibited ‘absent the express consent of the seller’ won’t slow things down much. From my limited understanding the two markets that foreign owners prefer are the high-end luxury SFH and condo pre-sales. These are traded like equities and I don’t think either seller would have issue as to the source of the money. My cynical nature would suggest that this would, if anything, shift foreign buying to condos, where the developer/real estate team work closely together to market and sell the properties. The contract assignment would just be another step in the purchase. This will potentially (and ironically) hit average people in Vancouver even more than now, because (last I checked) most people worried about putting a roof over their heads aren’t looking at Point Grey mansions.

I don’t think this will slow purchases down. I don’t think this will impact Victoria, unless the condo thing as described above really accelerates and drives more locals out of market. We aren’t the international market (yet). I can imagine that a Chinese buyer (or anyone else rich from overseas) has a list that would include properties in Vancouver, Sydney, London, etc – this isn’t a regional demand thing. This is an international equity market.

Having said that, my hope is that the combination of several measures does slow the market. Our region will be far more dynamic and robust with affordable options for young people. While I’m one of those with a significant paper gain on my modest property, I don’t have ready access to that gain as I don’t plan on moving anytime soon – in fact, the market is a hindrance if I want to move up, or buy additional property for my kids to inherit. Like others I do stand to inherit my folks’ place, but equally I don’t count on one penny from them in case (as we’ve seen happen) they need all of it to address future care needs.

This next year will be interesting for sure.

Months of inventory for houses in the core is rising very slowly this month as sales activity slows and new listings slightly out pace sales.

There are about 270 houses for sale in the core districts today starting at a low of $365,000 to a high of $15,000,000. The median asking price is near $870,000.

Sales are down this month with 170 house sales in the core so far this July which is about the same as last July at 175. 111 stated a Victoria address compared to last year when it was 117. The big difference was last year the fear was that the blue eyed sheiks from Alberta were taking over Victoria and that has now been replaced with Asians from Vancouver.

It seems we always need someone else to blame for our high prices. I guess it is easier to blame someone else than to look at yourself as the cause. Maybe what we really needed was a 15% tax on non primary residence homes.

Totoro,

Wouldn’t assignment only be prohibited with shadow flipping, which harms the initial seller? If they have a relative or friend who is a PR or citizen, why would consent to buy on behalf be an issue?

Michael

Well that would be a good way to loose a ton of money if the relationship falls apart. Also interesting to see if the legislation has something in there to deal with this now or in the future if there was a transfer.

Got to admit. People wanted action. Liberals have acted and are going to have a ton of cash to help with affordability before the election. They could have exempted contracts not closed yet but this is yet another signal that they can do this elsewhere if foreign money turns its attention to the island or other BC places. Christy finally showed she has balls. Been coasting before this.

FEAR: False Evidence Appearing Real.

New 15% Tax
1/ google stamp tax Hong Kong/Singapore, if they can track it/enforce it; this will be a powerful tool for Metro Vancouver. RE prices will trend over 5 years downwards IMHO no more than 10%.

Victoria RE
1/ Asians will not buy in Victoria. They will go to Toronto first. Two reasons, large Asian diaspora, and perceived notion of friendlier, not to mention no direct flights to Asia!
2/ Prices will increase but because of migration from Vancouver + QE, not immigration

Millennials
1/ Marko has got it right. They want the best “experiences” life can offer and wonder why they cannot or will not afford accommodations after enjoying their resources/funds else where
2/ The notion of “entitlement” is really alive now; especially when is rich vs poor
3/ The us vs them mentality is really alive and it is easy to look for a scape goat

Personal Anecdote
Just spent 2 weeks in enjoying Victoria and finishing off our new house that we worked 30 years for; saving and sacrificing. We ran into a Chinese family we knew, who is also building a home in the same area and have been in the neighbourhood for 40 years and ran a business there for even longer. Very insightful conversation that in 2016 because of how they “look”, they are perceived by a small percentage of people who walk by their house, that they are causing the housing crisis.

Kindly informed them this is not racism, this is jealousy, but more pronounced by factors beyond their control. Caveat is that the snarky remarks come from younger people and not the older ones. I sincerely hope that this is not representative of the Victoria I grew up in and so dearly cherish.

BTW, did you know there are over 1 million people of dutch descent in Canada? Funny that when they came, they only stuck to themselves and spoke their own language and now 2 generations later; you would never say, oh those goofy waffle heads 🙂

Liberals have put themselves into a corner, and their timing could not be worse for next May election.

If housing collapses, employment soars, then they’ll be to blame for both (a) not doing enough sooner and (b) making drastic changes that lead to said collapse, should one happen.

If housing continues to rise…

These Liberals are a shadow of Gordon Campbell’s brand. Time for a wholesale change.

“I have always thought that most of our foreign residential purchases were being made through local residents as proxy buyers or a relative attending university.”

It’s true that in those cases, the gov’t isn’t tracking it, so the numbers could be much larger than official stats. eg., shadow flipping where realtors or their companies are putting their names down as owners, flipping the property multiple times, and getting multiple commissions.

As in the G&M – at least 11% of deals in West Van & 14% in Richmond might be like that
http://www.theglobeandmail.com/news/investigations/the-real-estate-technique-fuelling-vancouvers-housing-market/article28634868/
(would be interesting to add those to the stats)

Also, relatives buying houses was cited here – with guesstimates from the realtors:
http://www.vancourier.com/news/government-s-foreign-buyer-numbers-way-off-according-to-asian-real-estate-conference-1.2298899
“I would say 50 per cent of house buyers, maybe 60 per cent [are foreigners],” said Eve Chuang of Macdonald Realty. Chuang and other agents at the AREAA conference said it is not the nationality of the buyer but the source of the capital that is important. Money from China, the real estate agents said, can be transferred to a relative with an address in Vancouver, who then acts as the buyer.”

… then you have all the new condos that are first owned by developers or overseas buyers, and flipped again.

Just out of curiosity Totoro what would you be suing the Canadian national for?

Specific performance if the market drops or the subsequent offer is lower. Any losses are the buyer’s loss, not the seller’s. If you can resell at the same price there is no loss. I’m not sure that is still the case in Vancouver with these changes.

Of course it’s not safer in Victoria and could change on short notice. That’s been stated many times here in the last 24 hours. I was using a developers/ salesmen’s viewpoint who would choose to flog their condos over ethics.

I’ve been thinking the same Jack about the proxies buyers being from most of the Vancouver crowd buying here this last few months.

Just out of curiosity Totoro what would you be suing the Canadian national for?

Would it not be simpler just to keep the deposit and put the home back up on the market? After all what damages have you incurred?

I have always thought that most of our foreign residential purchases were being made through local residents as proxy buyers or a relative attending university. Foreign buyers would then not be subject to this tax.

None of these transactions would have Canadian mortgages because then this would be mortgage fraud. However, if it is a cash deal then it’s fine with the BC government.

As for Japan welcoming Chinese foreign ownership. LOL

Totoro

Interesting to see if any deals fall through.

It’s not racist, it’s richist….

So many jurisdictions favour local buyers/owners over international or non-resident buyers that it is laughable to call BC’s measure racist. Many countries or states/provinces restrict or prohibit foreign purchases and many more have tax regimes that favour local purchasers/owners. Just in Canada all three prairie provinces restrict foreign farmland purchases and PEI restricts all out of province folks (even Canadians) from larger lots and waterfronts. Mexico restricts foreign ownership within 30 miles of the coast (though easily circumvented via a trust). Several EU countries are very difficult to purchase in unless you are a citizen of an EU state. Likewise Switzerland. In Iceland you need the Minister’s permission 😉 BC and Canada remain one of the easiest countries in the world for foreigners to buy in.

Also of note today OSFI announced new stress tests required for Canadian banks:
http://www.cbc.ca/news/business/osfi-stress-test-1.3695691
“Canada’s banks must stress test their ability to withstand a 50 per cent drop in housing prices in the Greater Vancouver area and a 40 per cent drop in Greater Toronto, the country’s banking regulator said Tuesday. The OSFI also said the country’s banks must all test for a 30 per cent downturn in valuations for all other areas of the country … this year, OSFI said the test must also take into account a scenario where a bank’s authorized leverage ratio may be breached.”

Jeez, a few months ago there wasn’t a problem and now the cat’s out of the bag it’s worse than thought. Wait til the next laws come in for investigating those buying houses for relatives in their names without the income to support it.

Just the tip of the iceberg and will scare off all foreign nationals from BC period. Why go to a place that they will be asking too many questions. They don’t like questions about their personal financials.

New data on foreign investment in real estate

The provincial government has released more data on foreign investment in real estate and it seems the issue may be a bigger problem than the first set revealed. Of the transactions between June 10th and July 14th in Metro Vancouver, 9.7 per cent involved foreign nationals. By community, Vancouver is at 10.9 per cent, Richmond is at 18.2 per cent, and Burnaby is at 17.7 per cent.

International trade treaties often contain reciprocity clauses. If one country applies a new tax on specific groups, then the other country automatically imposes a similar tax.

Really Totoro, is your hatred for me that much that you would defend racial profiling?

How many of us will be looking through the crowd for proof of foreign buyers because there are visible minorities present?

Um, no reasonable person? There is no way to tell if someone is a permanent resident or foreign national by their ethnicity.

And how many will exploit that fear for their own greed.

What? Please let us in on this fear/greed opportunity for exploitation by nefarious Victorians.

It will be interesting to see what effect the new property transfer tax has once the affected market overcomes any shock and adjusts (or doesn’t adjust) to it. I’ve seen a few people raise the Quebec Immigrant Investor program, and how the foreign money issue won’t be seriously affected unless that avenue is mitigated. I think that’s a valid point, but really don’t know what degree of impact it has or that vis-à-vis China’s apparent clampdown on capital flight.

So far the federal government seems to have no appetite to make any related policy moves to the program, which would also seem to provide the means for BC to provide inaccurate data – ie the buyers coming in that way are not “foreign nationals” by provincial standards, but the deleterious effect of offshore money is virtually the same.

Once I’ve finished my coffee I might be less cynical.

Interview with Christine Duhaime who stated:

“If I had liberty of telling you how much money has been scammed from Chinese banks & parked in Canadian real estate, Canadians would riot.”

http://www.am730.ca/syn/112/207812/steele-and-drex-how-big-of-a-problem-is-money-laundering-in-the-b-c-real-estate-market#

I challenge the simple assessment that the immediate effect will be a run up in nearby centres (Vic, Nanaimo):

(1) If I’m a non-foreign Vancouver refugee, I probably pump the breaks on that idea of moving to the island with a more in-reach market now anticipated. Considering this demographic has been considered to be the lions share of the Vic market run up – maybe this has a huge negative impact.

(2) If I’m a foreign buyer – why BC at all now? Given the local government’s new propensity to dramatically and quickly alter the playing field – maybe I look elsewhere altogether. Ontario doesn’t have an election for quite some time…

(3) Vancouver is not Nanaimo. Why is there a continued belief that this newly impacted buyer would select a new zone based on proximity vs city type. I.e Perhaps London England is the second choice.

Let me guess, this is that pathetic happy point for all the realtors, specuvestors, and recent FOMO buyers that troll this joint to justify their hope that the Vic market further unhinges from a healthy level. Greed, greed, greed – consequences be damned – overriding the market conditions needed for the economic stability of their own community.

Well wouldn’t it be interesting if this overly simplified auto-spillover effect didn’t materialize. Shining a bright light on the impact of ignorant speculation and casting doubt on the validity of the recent run up. Yep, that would definitely be a concern for the over-leveraged.