Facts By Email – May 30- June 6, 2015 #20

The Numbers, The Numbers (early As Of June 29)

These are early unofficial numbers, but they show a strong May – up 23% in sales, pries sharply higher and listings down.

Major Point:
Vancouver is moving forward at a record pace. The previous high May price of May 2011 of $834,000 is now 8% higher and sales are also surpassing previous
records for the month. I think when Richmond numbers will be released they will show a 20% increase in single family prices. (Of course we recommended you
buy there!) A strong June awaits.

Immigration To BC Plunges To Negative Numbers – But Don’t Panic

Net immigration to British Columbia fell to a 10-year low of minus 3,100 people in the fourth quarter of 2014, compared to an average net increase of
13,000 in the three previous quarters. But don’t panic, there is apparently no indication that wealthy foreigners – especially from China – have suddenly
turned their back on B.C. or its real estate.

The negative numbers – the first in a decade – mostly relate to changes in the Temporary Foreign Workers (TFW), and a seasonable trend. The four-year term
for thousands of TFWs began to expire and many are forced to leave Canada. Many are from the Philippines. In all, nearly 7,000 of these “non-permanent
residents” left B.C. in the last three months of last year and a similar number will leave in the first quarter of this year, explains ace Vancouver
immigration lawyer Richard Kurland.

The Conservative government set April 1, 2015 as the deadline for temporary foreign workers in low-skilled jobs to leave the country after changing the
rules in 2011, and the fourth quarter of last year saw the outflow begin. It used to be TFWs just had to re-apply, but new rules require them to leave the
country for at least four years before re-applying.

The last quarter of the year is traditionally a slow time for immigration to B.C., Kurland explained, which added to the negative numbers.

However, expect overall B.C. immigration numbers to be lower through most of this year after averaging 34,000 net arrivals a year for a decade. On March
31, the BC government implemented a 90-day pause on new applications under its Provincial Nominee Program and, combined with the tightening on TFW
applications, less worker-class immigrants will be arriving.

But Kurland said any loss of immigrants to B.C. is taken up with the “trampolining” of rich immigrants from Quebec. As Kurland explains, it is easier for
immigrant investors to qualify for Canadian citizenship through Quebec than most other provinces. The Quebec immigrants then move to B.C. Kurland’s office
paid for a study that tracked Quebec immigrant investors two years after they had arrived: 95% of them had a B.C. address and most were in Vancouver. “That
is up to 2,000 investor immigrants a year moving to B.C. -150 a month – that is not counted in B.C. immigration numbers”, Kurland said.

NOTE:
It is this inflow of foreign wealth that really cooks Vancouver’s white-hot housing market.

Vancouverites still struggle to grasp the scale of this influx. From 2005-2012, about 45,000 millionaire migrants arrived in Vancouver
under just two wealth-determined schemes, the now-defunct Immigrant Investor Programme and the

Quebec Immigrant Investor Programme
. Let’s put that in perspective. The entire United States only accepted 9,450 wealth migration applications in the same period under its EB-5 scheme,
likely representing fewer than 30,000 individuals.

So, Vancouver has recently received more wealth-determined migration than any other city in the world, by a long stretch – and this to a moderately sized
city with some of the lowest incomes in Canada.

B.C. is also seeing an increase in people moving west from other provinces. In the fourth quarter of 2014, for instance, 2,566 more people moved into B.C.
than left for other provinces, including 209 from Quebec and 548 from Alberta.

Major Point: Vancouver will remain a preferred destination for Asians and we expect housing sales and prices in Vancouver to reflect this. While we
may be losing temporary foreign workers, the city is a magnet for high-rolling investors. But the latest immigration numbers give a warning of what would
happen to the B.C. housing market if immigration continued to post negative numbers. Governments considering restrictions on foreign buyers should remember
that immigrant investors have many countries to choose from.

Analysts Crazy Bullish On BC Housing Sales And Starts – But They Said The Same Thing About Alberta

From an Urban Development Institute luncheon to the latest federal forecasts, the outlook is extremely bullish for B.C.’s housing market.

Speaking to the UDI last week, top condo salesman Bob Rennie noted that, with 34,000 people arriving in B.C. every year for the last and
future 15 years, prices for housing in the land-scarce city would continue to rise. Rennie also pointed out however that of the last 2,000 condos sold in
four major projects, about 60% of the buyers came within 10 kilometres of the site and Asian-based buyers accounted for just 2.2% of sales, which gives an
indication of the market’s depth.

Meanwhile, Canada Mortgage and Housing Corp. is forecasting that B.C. housing starts, sales and prices will all increase this year and
into 2016, the only province with that winning trifecta.

B.C.’s resale market will be boosted by job and population growth and low mortgage interest rates, CMHC says. Re-sales could be as high as 93,100 homes in
2015 and 91,800 in 2016. The MLS average price is forecast to be between $573,700 and $627,500 in 2015, edging higher to $577,000 to $652,000 in 2016. And
that is province wide!

Major Point: When all the bulls are running loose, it is often time to step back and reflect on what follows bulls. We recall that this time last year, Calgary was
being picked by TD Bank, Re/Max, CMHC and others as the top housing market in Canada for 2015, with both
Saskatoon and Regina also in the pack. Then oil prices fell. Now Alberta and Saskatchewan housing starts, sales and prices are all tracking down. Calgary
was forecast to see a 4% rise in sales and a 5% increase in prices this year: that is now off the table. In B.C., the first giant LNG plant will likely be
announced next month and the rest of the economy appears to be doing well, so we don’t expect a Black Swan, but then no one ever does.

What It Costs To Build A Vancouver High Rise Condo

While every government talks about delivering affordable multi-family housing to Vancouver, it is the cost of land and the subsequent city fees that add a
lot to the price of a typical condo in the city. It could be argued that a key reason land prices are so high is the Agriculture Land Reserve has frozen
thousands of acres of land for development. It could also be noted that Provincial property transfer fees add to the end cost of nearly all housing.

But in Vancouver, taxes and fees bring the role of government into housing costs to a whole new level. The Urban Development Institute
crunched the numbers on a hypothetical high-quality high-rise condominium with 115 units, assuming a two-year construction period starting in 2014.The land
cost – and this is based on 2014 numbers – for such a building equate to $160,893 per 800-square-foot condo. But, since the land price is calculated after
rezoning to higher density, the City of Vancouver takes community amenity contributions (CAC) fees on 75% of the “land lift” value (or profit) a developer
would make for the higher density. For this hypothetical high-rise, the CAC amounts to $48,295 per unit. Other fees such as development cost levies and
demolition fees in Vancouver would add a further $14,427 per unit, Vancouver also requires all new developments subject to rezoning to meet LEED Gold, a
sustainability standard that adds $11,718 to each unit in this sample building, UDI says. Vancouver also has higher levies to collect money for district
energy, car share programs, electric vehicle charging stations and public art, which add an estimated

Break it all down and the typical high-rise condo building in Vancouver carries city fees and taxes of $76,154 per condo unit. According to calculations by Altus Group, construction costs for a concrete condominium in Vancouver is around $280 per square foot. This would mean that our
theoretical high-rise condo would cost $224,000 per suite to build. Add in land costs and city of Vancouver fees and taxes, and the total

concrete condo cost rings in at nearly $461,000 per suite, before any finishing, appliances, amenities, marketing and promotion costs or developer
profit are factored in.

Little wonder that condo prices in Vancouver are so high.

115-UNIT CONCRETE HIGH RISE CONDO PER SUITE PRICE

LAND COSTS $160,893 per unit

CONSTRUCTION COST $224,000 per unit

VANCOUVER CAC FEES $48,295 per unit

CITY DEVELOPMENT FEES $14,427 per unit

LEED Gold costs $11,728 per unit

MISC City levies $1,704 per unit

(Total Vancouver city fees, taxes $76,154 per unit)

Source: Urban Development Institute, Vancouver; Altus Group

Hot Market Sector: Check Into Hotels

Vancouver is now the hottest hotel market in Canada, posting higher revenues than any other major city and attracting eyebrow raising prices “per key” for
the record number of hotels selling this year.

Last year, B.C. claimed a 24% share as national hotel transactions hit $1.4 billion, stretching an eight-year string of property sales of more than $1
billion, according to Colliers Canada‘s 2015 Canadian Hotels Investment Report.

January’s $168 million sale of the Delta Hotels and Resorts portfolio by the British Columbia Investment Management Corp.
to Marriott International and the sale a month later of the Fairmont Hotel Vancouver to West Vancouver-based Larco Hospitality for $180 million indicate another blockbuster year is emerging.

In the first quarter of this year, downtown Vancouver hotels posted an average occupancy rate of 69.5%, highest among all major cities. More telling, the
average revenue-per-available room (REVPAR), a key industry metric, surged 17% to $111.13, the sharpest increase in the country. As a comparison, REVPAR
fell 11.5% in Calgary and dropped 4.5% in Toronto compared to a year earlier.

It now costs an average of $160 for a downtown Vancouver hotel room, up 9% from a year ago, according to industry analysts PFK Consulting Ltd.

Landmark sales in B.C. last year included the Fairmont Empress Hotel in Victoria, sold to Vancouver developer Nat Bosa
for $48 million, and the purchase by Innvest Real Estate Investment Trust of Vancouver’s Hyatt Regency Hotel for $140
million.

In the first quarter of this year, nearly $600 million in hotel deals closed across Canada and some big deals are looming. One of the largest is the
portfolio of 23 hotels that Fortis Inc. is selling, including a Holiday Inn conference hotel in Kelowna and 10 properties
in Alberta.

It’s not always about rate