Vacancy tax is pointless, say Vancouver sales agents

Empty abodes in Vancouver will be slapped with a vacancy tax, that one sales agent says amounts to little more than a slap on the wrist.

While the hope is that the tax could free up as many as 25,000 empty units for rent in a city suffering from a rental supply shortage, the 1% vacancy tax likely won’t dissuade owners willing to forgo rental revenue, says Marilou J. Appleby of Dexter Associates Realty.

Homeowners must declare their property’s status annually, however, properties for which no declaration is filed by February 2 will be considered vacant and, in addition to being subjected to the tax, will be fined $250.
An amount Appleby believes is palty.

Moreover, she says it’s affecting Vancouverites who spend part of the year away and don’t want to rent their homes out to strangers.

“Owners are not thrilled about it,” said Appleby. “A lot of people in Vancouver spend winters down south and they have to have their places rented. In my opinion, it’s not going to solve any problems. Really, who it will hurt again are Vancouverites who are living a very normal life, who want to have the opportunity to spend winter in a warmer climate.

“I live in downtown Vancouver and people talk about dark buildings, but I don’t see that. There’s a very vibrant downtown community.”

She also said that if a homeowner can afford to leave the place vacant, taxing them 1% practically amounts to asking them for their pocket change.

“One percent could be substantial to some people, but if you’re allowing your place to stay vacant then you’re losing revenue anyway, so what’s 1%?” she said. “That’s why it’s a useless tax.”

Mahmoud Ahmed, managing broker of Nu Stream Realty, agrees with Appleby.

“The vacancy tax won’t do anything,” he said. “There’s a lot of money in the city, so 1% won’t make a lot of difference. If they don’t need the rent, that’s why it’s sitting empty anyway. It’s not going to be the solution for affordable housing.

“Most homes that are vacant are not entry-level homes, they’re mansions. It won’t make an impact on the rental market because most people don’t have $10,000 a month to spend on rent.”

As for how the tax will affect the market, Ahmed says it’s far too early to tell. But he says the 15% foreign buyer tax only managed to cool down the market temporarily, therefore, a 1% tax probably won’t even make a dent.

“Fifteen percent is a big hit, but 1% won’t do damage,” he said.

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Building equity for multiple properties

by Haripal Pannu, real estate broker and investor

One real estate agent looks at pre-build investments for the first-time investor.

It’s always challenging to buy the first investment property because there is a lot that must be learned. There is a little bit of difference when it comes to buying real estate as your primary residence compared to buying it as your investment property.

If you are buying real estate as your primary residence you can get financing even with 5% down
(as long as you qualify) but for investment properties you typically need 20% down in some cases even 25% or more.

Some “A“ lenders (big banks) don’t finance an investment property after a certain number of properties; for investment properties there are other costs associated too if you are also buying a primary residence you get certain rebates and you can even buy under first-time home buyers plan while in case of investment property it is not possible. If you are buying a brand new investment it is very likely you are going to pay HST on top of purchase price (if you fulfil the conditions the HST you pay you will get it back one condition is that you cannot sell the property before one year period).

Let us look at where and what kind of investment property one should buy so that equity can build up fast and that equity can be used in future to buy more properties.

One thing which matters most in real estate is the location; excellent location makes all the difference where your property is located location is always the key. Do not buy a property in an area where you do not want to live. Good location must have public transit system accessible to everyone, good walk score and should be close to all amenities.

Check the vacancy rate in the area. A low vacancy rate in the area is an indicator that your property will be rented out quickly and more chances are that rent will increase in the near future.

Check employment rates in that area. Property prices are increasing at a very fast rate not only in the GTA but all over in Central and Southern Ontario and, as a result, more and more people are being forced to rent instead of owning.

Let us look at an example of a $400,000 pre-build condo property. We’ll assume it will be ready in 2-three years. By the time you take ownership of the condo you will see that property already has already appreciated by 3-4 % or approximately $50,000. If it is in a desirable location you will have no problem renting it out and in another 2-3 years you should have paid already approximately $15-20k of your mortgage and also at the same time your property is further appreciated by another approx. $30 – 40K. Now it is time to talk to your bank or your lender so that you can take money out and on your way to buy another property and in another 2-3 years next property and so on.

The more properties you own, the more cash flow you will generate. In times of inflation real estate creates hedge against inflation. One can reap the rewards of equity build up, not to forget many tax advantages of owning real estate and advantages of appreciation real estate enjoys.

Word of caution before you buy a rental property: it is very important you do your due diligence.
Make sure numbers work out for you and seek help from a real estate expert. Owning your real estate is owning your own business and you are your own boss.

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Trends in three major markets

As real estate market data trickles in ahead of CREA’s official release, we have a good sense of how three major markets have performed.

Toronto
The country’s largest city continues to be its hottest one in terms of real estate.

Sales increased 16.5% year-over-year in November, according to the Toronto Real Estate Board.

This despite inventory challenges.

“Home buying activity remained strong across all market segments in November. However, many would-be home buyers continued to be frustrated by the lack of listings, as annual sales growth once again outstripped growth in new listings,” Toronto Real Estate Board President Larry Cerqua said. “Seller’s market conditions translated into robust rates of price growth.”

Edmonton
Prices increased in the Big E by an average of 3.95% for single-family homes and 6.39% for duplexes and rowhouses.

“There is continued strength and price stability in Edmonton’s real estate market. Most average selling prices increased this month, partially due to sales of the several high-priced listings,” Steve Sedgwick, chair of the Realtors Association of Edmonton, said. “The all residential median selling price is down 2% and condominiums median selling prices was down over 8%.”

Calgary
Following a solid October, Calgary’s market returned to previously weak performance.

Year-over-year sales fell 3% and were 17% below long-term averages.

“November was the first full month with CMHC’s new lending rules in effect,” said CREB® chief economist Ann-Marie Lurie. “As suspected, the gains in last month’s sales were temporary. Stringent conditions for borrowers are converging with the current economic climate and weighing on demand.”

Are you looking to invest in property? If you like, we can get one of our mortgage experts to tell you exactly how much you can afford to borrow, which is the best mortgage for you or how much they could save you right now if you have an existing mortgage. Click here to get help choosing the best mortgage rate

Investment Hot Spots:
Fox River, Beaver Dam, Ladysmith, Point La Haye, Lower New Cornwall

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Agent questions impact of foreign mortgages on Canadian debt levels

Worries around national average debt numbers are overblown, according to one real estate veteran who argues the stats could be inflated by mortgages held by foreigners.

“The national debt carried by Canadian consumers and the fact that Canada allows foreigners to borrow money for homes and that’s put into our debt [could have a major impact on debt levels],” Derek Austin, an agent with Century 21, told Canadian Real Estate Wealth. “Even 10 foreign borrowers taking out $10 million in mortgages each would throw the numbers out of whack.”

It’s an interesting take on the foreign investment trend and increased debt levels, which have both increasingly made headlines over the past year.

The average national household debt increased 5.1% in April, according to Statistics Canada. Mortgage debt showed the largest growth — up 6.2%.

And that trend is expected to continue, according to Doug Porter, chief economist for BMO Capital Markets.

“It’s tough to see anything turning this canoe around, as home prices continue to soar in Toronto and Vancouver, while there’s little prospect of a big bounce in personal incomes,” he told the Financial Post.

The impact foreign-owned mortgages have on national debt stats is unknown. Many may argue it has little effect, noting that many foreign buyers pay cash.

However, Austin isn’t so sure.

“The Royal Bank of Canada took away its limits on foreign mortgages,” he said. “Why would they do that if foreigners weren’t taking out mortgages?”

RBC announced in late 2015 that it will no longer limit mortgage size for immigrant buyers in Vancouver.

“We’re seeing a lot of affluent newcomers looking to buy high-purchase price homes,” Christine Shisler, RBC’s director of multicultural markets, told Reuters at the time. “Now we can actually service any mortgage amount.”

Are you looking to invest in property? If you like, we can get one of our mortgage experts to tell you exactly how much you can afford to borrow, which is the best mortgage for you or how much they could save you right now if you have an existing mortgage. Click here to get help choosing the best mortgage rate

Investment Hot Spots:
Port Saxon, Murray Corner, Suffolk, Upper Vaughan, Chartierville

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Sounding the alarm for certain landlords

Last year was a tough one for the real estate market in Alberta, and uncertain will prevail – at least for the time being – meaning investors may want to hold off on making any major purchases.

“We really are just starting to see the effects and have no idea how long this is going to last,” Duane Ritter, an agent with RE/MAX, told CREW. “We are just starting to see the ramifications of the oil change and layoffs, I believe in next couple months will be a better indicator of where we are and how long we (will be in this situation).”

Alberta home sales fell 21.3% year-over-year, according to CREA’s most recently released statistics. Of the 10 major markets tracked by the association, nine posted sales declines; all except Lethbridge, which posted a 4.5% increase.

And while price declines weren’t as drastic, many are already forecasting further drops in 2016.

Overall, average home prices fell 1.9% year-to-date in December; those declines were led by Fort McMurray, which posted a 6.2% average price decline.

Dollar volume was also down.

Overall, volume was down 22.8%. Again, that drop was led by Fort Mac, which posted a 47% volume decrease.

As for how 2016 will fare, it’s anybody’s guess at this point.

According to CREB, Alberta’s economy will remain weak in 2016 with oil prices expected to remain below $45 U.S. per barrel.

It also forecasts housing demand will be weak; sales activity is expected to fall by 2.2% below 2015 levels to 18,416 units.

The average price is expected to decline by 3.44% to $438,652.

“It’s going to be interesting and not pretty,” Ritter said.

Are you looking to invest in property? If you like, we can get one of our mortgage experts to tell you exactly how much you can afford to borrow, which is the best mortgage for you or how much they could save you right now if you have an existing mortgage. Click here to get help choosing the best mortgage rate

Investment Hot Spots:
Victoria Harbour, La Malbaie, Girardville, Port Severn, Dundas

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Investors not as hard-hit as previously thought?

The final stats are in for one hard-hit market, and they show more optimism than some agents may have expected.

Sales stats for Edmonton — which were compiled by industry veteran Duane Ritter, an agent with RE/MAX, and shared with MortgageBrokerNews.ca – and they show two seemingly contradictory trends.

Sales were down, which should come as no surprise to agents, but prices were up year-over-year.
The average price for a single-family home in Edmonton was $437,569, a 1% year-over-year increase. The average price for a condo, meanwhile, was $252,511 – a 0.4% year-over-year increase.

Overall, the average price for all residential properties increased 1.5% year-over-year to $371,511.
“2015 was a steady year for real estate in Edmonton. Edmonton and the surrounding areas experienced a decline in sales due to economic uncertainty, but we saw a slight increase in price that demonstrated that the market remained relatively stable,” Geneva Tetreault, Edmonton chair for the Realtors Association, said. “This began to cool in the fall months as inventory remained higher than normal.”

According to Tetreault, buyers continue to take advantage of low interest rates.

The market also evolved over the course of the year.

“An influx of listing at the beginning of the year meant that buyers had a larger selection of homes and were able to take more time selecting properties than in previous years,” Tetreault said. “We continue to see a tight market in the popular $400,000 price range for single-family homes.”

Still, it was a tough year for Edmonton – especially considering the boom its enjoyed on the back of the oil industry.

For his part, Ritter has been in the industry for 32 years and has seen it all. He remains bullish on Edmonton’s future.

“I’ve seen three or four of the corrections and this one has a very different,” Ritter told REP. “There isn’t as much panic and there has been no push to lower prices.”

Are you looking to invest in property? If you like, we can get one of our mortgage experts to tell you exactly how much you can afford to borrow, which is the best mortgage for you or how much they could save you right now if you have an existing mortgage. Click here to get help choosing the best mortgage rate

Investment Hot Spots:
Laurier-Station, Centre Rawdon, Tiverton, Barss Corner, Saint-Lazare

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