IN THIS WEEK’S FACTS BY EMAIL:
- EXPERTS DISCUSS THE NEW TAX AT UDI
- LANDLORDS RUSH TO UNLOAD APARTMENT BUILDINGS BEFORE RECORD PER-DOOR PRICES START TO CLOSE
- HOT PROPERTY: 4 PLEX $299,000
- IT’S COMMERCIAL, STUPID
- UH. OH. GOVERNMENTS VOW TO HELP HOUSING MARKET
- B.C. ECONOMY: HOMES WORTH MORE THAN FORESTS, MINES, LNG COMBINED; LOAFERS TRUMP WORK BOOTS IN THE OUTBACK
“Hi Ozzie, I thought I would pass this on to you as I found it interesting. X and I were walking down the street in Amsterdam yesterday and overheard a woman from the UK say ‘I just heard that Vancouver has instituted a new tax on foreign buyers.'” Unintended consequences?
Also … lots of comments about “not being in a bubble”, lots of comments on this week’s Hotline and my report on the UDI luncheon (still up).
Experts Discuss The New Tax At The Fall UDI Luncheon
A fine panel discussion among BC industry experts on the implications of our new tax. The panel was moderated by Neil Chrystal – president of Polygon and consisted of:
- Tom Davidoff and
- Tsur Somerville of UBC (professors at UBC Center of Urban Economics and Real Estate)
- Helmut Pastrick – Chief Economist – Central Credit Union
- and Arnon Dachner – Partner of Denton Canada
IN A NUTSHELL
- The retro-activity of the tax was considered by most speakers both morally – and ethically wrong
(Premier said in May that she had “no intention of interfering in the market” and then the bombshell)
- Re. the upcoming election: If there was a soft landing – it would guarantee a liberal re-election, if it was a hard landing (3rd of a chance) it would not.
- Pastrick felt the 15% tax was simply too high and no new taxes really benefited in the long run. He particularity disliked the policy shock to the system but thought that after a 3 – 6-month period of slow sales and falling prices we would stabilize. We would get back into our normal cycle … but also predicted a recession would follow eventually and there could be a sharp reversal.
- Somerville defended the government (the only one) saying that it could have been introduced better but something had to be done.
- September to be slow, 35% in sales and 10% in prices
- Tax is a mistake for other reasons – we are a province that needs capital investment from foreigners in mining, agriculture, LNG etc. The foreign investor will look at other provinces. He will ask himself: “…if they can bring in a retro tax in housing they may also bring it in in my business?”
- Realtors and developers note: Lawyer Dachner pointed out that the ‘avoidance rules’ have been written very tightly putting the ‘foreign buyer into a box’. Note: Any transaction registered at the land title office after Aug. 2 will be taxed and said existing contracts or “pre-sales” won’t be exempt. Yes, the buyer has the right to assign the contract of presale – but not if he does it to avoid the tax. Any steps he takes to avoid the tax (assigning to a Canadian family member etc.) attracts the avoidance rules which offer stiff penalties and/or jail! Further if you as a realtor or developer willfully help there would be a fine and/or imprisonment for you also! He allowed that he has ‘a lawyer standing by’ for a test case – just supply a foreign buyer!
Major Point: As I said in July, in my opinion, we are a guinea pig for Toronto … the tax will be brought in there as well – and soon. Eventually it will be brought in everywhere. Tax hungry and indebted governments must chomp at the opportunity under the ‘umbrella of creating affordability’ (an outright lie) to lay their hands on BC-like tax coffers. As we said last week the PPT was supposed to only apply to the top 5% and then temporary – in 1987!
Landlords Rush To Sell Before Record Per-door Prices Start To Close
For months now our mantra regarding Metro Vancouver’s aging apartment market has been the same: sell, sell, sell.
It has been our position that peak prices, minute cap rates and rabid demand offered a once-in-a-lifetime opportunity for old time landlords to cash out.
Well, landlords are now trying to do just that, but it may be a bit late for some. The challenge today for vendors is both the 15% tax on foreign buyers – which applies to rental apartment buildings because they are residential – which has reduced the number of buyers and a sudden glut of buildings on the market.
In the first six months of this year, 43 B.C. apartment buildings sold for more than $5 million each. The dollar volume of $472 million does not give a real idea of the prices paid in Metro Vancouver, where the average rental apartment is 45 years old.
A Kitisilano 64-year-old rental building (rents averaged $1,600 per month) sold for $750,000 per door; buyers bid old walk-ups in Burnaby’s Metrotown to $500,000 per suite. The capper is an old eight-suiter on Granville Street, with a strip of lower floor retail that sold in June with multiple bids for $1.2 million per suite.
If you look at all apartment building sales over the past eight months in Metro Vancouver – including those under $5 million – there were 145 transactions and the dollar volume soared 95% to $1.3 billion.
There is a big change taking place in Metro Vancouver’s multi-family market and the first things you have to realize is that some agents did not tell the whole truth. Shocking, we know. Some agents, and even some leading analysts at the BC Real Estate Association and Avison Young, have all been claiming that foreign buyers are not a big factor in the apartment market. The second pants-on-fire statement is that the high prices are a result of low inventory, not rampant speculation.
We suggest that foreign buyers dominate the Metro apartment market and the only rationale for the prices being paid was and is land speculation. Every major apartment building sale in Metro Vancouver in the first half of this year was to a private buyer and the majority of these were locals or permanent residents using offshore money.
The 15% foreign buyer tax brought that to a halt. Now, everyone wants out.
Since the foreign tax kicked in, listings of apartment buildings have skyrocketed. Mark Goodman of HQ Commercial – perhaps the leading multifamily agent in Vancouver – said that since August 1 he has been fielding non-stop calls from vendors trying to sell. “Something is shifting. In my 15 years, we’ve never had this many proposals (to sell) on the go. Twice a day, every day for three weeks we have been getting calls for apartment owners, land owners. There is a rush to get apartments on the market,” he said.
Hate to say we told you so, but we at JREI told you so.
Major Point: If you are a Vancouver apartment building owner, sell. Prices are not going to go higher but there is a still a hefty lift to be had if you have owned for three years or more. If you are an investor, look at your options: For the price of an aging 12-unit apartment block in Vancouver (around $4 million) you could buy seven new two-bedroom condominium apartments in Coquitlam or South Surrey, areas that, due to SkyTrain and demographics offer excellent long-term rental income and appreciation, plus much more flexibility to get cash out when you need it.
It’s Commercial, Stupid
The residential real estate market has been a blast for investors over the past few years. Nationally, the composite home price has risen about $45,000 in the last year and in B.C. and Ontario, the typical detached house made more money, by far, than the average two-income family.
But with governments now rushing to “help” the housing market, it is commercial real estate that offers the best and safest potential for investors over the next 12 months.
A couple of reasons: first governments will not bring a foreign buyer tax in on commercial real estate because they are no votes to be had there and because commercial real estate is so fundamental to global trade and investment,
Second, values for industrial real estate, shopping malls, office buildings and land for development – even for residential – are ripe for speculation and profits. Yet another reason is financing: unlike the political pressure restricting residential financing, commercial loans can be easier and cheaper.
Consider Abbotsford, B.C.
Five years ago, the best guess was that there was around 1,700 acres of industrial land that could be developed. Today – after major upgrades to bridge and highway access – there is less than 100 acres left and the local government is trying to crowbar about 700 acres out of the Agricultural Land Reserve (good luck with that). Prices have soared. Last month a 12,000-square-foot industrial building in Abbotsford sold for $2.62 million and five acres of raw industrial land sold for more than $700,000 per acre, reflecting the 30% surge in industrial prices since 2014.
In Vancouver, industrial sites are now selling for nearly $600 per square foot and the industrial vacancy rate is a Canada-wide low of 1.5%. Instead of fancy condo apartments, investors may want to look at bare-bones strata industrial.
In the second quarter of this year, commercial real estate sales in Metro Vancouver set an all-time record of $3.75 billion in sales, up 34% from the first quarter and unit sales hit 600 for the first time. Remember this is in a three-month period and it capped five straight quarters of higher sales and prices.
We believe commercial sales in Metro Vancouver will rocket from here, both in unit sales and dollar volume.
A key reason? Offshore investors can buy land for residential development without the foreign buyer tax and who had already been shifting to commercial real estate. Another reason is real estate investment trusts who are hungry for yields and competing for products.
So what should a smaller investor buy?
As we have recommended in the past, strata industrial and offices are a good bet. On a per-month basis, industrial space can be leased for about $1 per square foot and office space for around $2 per square foot, lower than residential but this trades off in longer-term tenants, less maintenance and less government regulations. The downside is that commercial strata prices are becoming expensive in major urban centers.
Look at suburban and smaller town strip malls.
They are cheaper to buy than neighbouring rental apartment buildings and, with the right mix of tenants, can generate positive cash flow with downstream appreciation potential.
In Penticton, for instance, a popular strip mall with a large parking lot and five long-term tenants in place sold last month for $2.35 million. A few blocks away a 20-unit rental apartment building sold for $5.1 million, or about $250,000 per door. (You can find similar comparisons in the Fraser Valley, the Okanagan and southern Vancouver Island.) The commercial landlord, however, does not have to deal with the Residential Tenancy Act or rent controls and the tenants take care of all fittings and finishings and, will even cover all the taxes and utilities if you do the lease agreement right.
Major Point: In much of B.C., multifamily real estate prices have peaked and cap rates for landlords have flatlined. For the next year, commercial real estate will offer better returns and greater stability.
Uh. Oh. Governments Vow To Help Housing Market
There is no greater threat to the prosperity of residential investors than government help. And right now it is getting very scary as all three levels of government have vowed to fast track plans to help us out of the housing “crisis”.
So far, this help has driven housing sales in Metro Vancouver down about 70% in a matter of weeks, will cause Vancouver condo investors to flee rather than risk massive fines for failing to rent their unit out; and has made it much harder for all buyers to finance a simple home.
This week, Jean Yves Duclos, Canada’s super housing minister who is to formulate a national housing strategy said that bringing the residential market “under control” is now a “priority.”
By under ‘control’, we read (into it) a further
- tightening of mortgage credit for home buyers;
- more restrictions on landlords;
- higher taxes on residential sales;
and a government rush to build more social housing units that will not only compete with existing landlords but also cost taxpayers a bundle. (It costs nearly twice as much to build a subsidized apartment than a condo).
Major Point: Of course, in the real world, only Toronto and Vancouver have anything approaching a housing crisis and the default rate for homeowners makes mortgage holders the lowest risk consumers in the country. But reality has little place in the politics of housing, so brace yourself, investors because more help is on the way(?!)
B.C. Economy: Homes Worth More Than Forests, Mines, LNG Combined; Loafers Trump Work Boots In The Outback
Ahh, the British Columbia economy. Built on the blood, sweat and tears of lumberjacks, fishermen, miners and roustabouts, it is now largely reliant on government wages and social net cheques and the sale of homes in Metro Vancouver. The latter was made official this week as the province conceded that housing sales in B.C. – most of it in the Lower Mainland – accounted for more provincial tax revenue than the entire resource industry combined.
But the hard cash numbers are even more telling. This year, building homes in B.C. will be worth $20 billion in goods and services and, across the province, housing resales were worth $65.3 billion in 2015: that is more than all of B.C. exports for the year.
A survey by the Chartered Professional Accountants of B.C. shows that, nearly without exception, more income and employment is generated by health care and social services than by resources in every economic region of the province. Public sector jobs and social assistance cheques are much more important that private industry in nearly every small town in the province.
Major Point: When investing in smaller B.C. centres, the size of the hospital, the city hall, the police station and the schools are much more important than whatever resource the town was originally built around. It is sad to say, but a regional hospital is better indicator of employment growth than a sawmill, a pulp mill, a mine or gas rig drills.
Plots Of The Week
Phoenix 4 Plex, 299,000 USD. It’s a deal because it will cash flow $10,000 USD per year based on a 65 percent LTV mortgage. Completely refreshed 4plex in beautiful condition, including updated plumbing and electrical, always rented. (2 duplexes on 1 parcel) Great location in historic district. Solid newer block construction, all 4 water heaters new. Roof and AC units are in great condition and regularly serviced, ceramic tile everywhere, desert landscaping, new paint. Fully rented with a waiting list. 7.5 Cap.
WE RESERVE THE RIGHT to accept or not to accept a specific deal. What makes it a deal? We look for: Low down payments, special discount, and owner carries mortgage, etc. Also note…we do not vet any deal, we just think it may be of interest. You MUST do your own due diligence. Please get contact info from your password-protected website or e-mail Max at firstname.lastname@example.org …and read the disclaimer!
DO NOT MISS JUROCK’S OUTLOOK 2017 CONFERENCE
The 2017 theme is “New Opportunities”
In today’s mad world there is so much conflicting advice: “New foreigner tax, new opportunities, buy real estate, sell real estate, buy gold, sell gold, are we in a deflation, depression, runaway inflation?”
On September 24th, September we will lift the cobwebs of confusion and replace them with a well-reasoned and researched outlook of the future. We’ll answer YOUR questions and help get your mind into clarity.
For 24 years, had you attended this conference and acted on the advice of the speakers … you would have been rich beyond your wildest dreams!
This year’s multi speaker, all day conference addresses a number of special areas:
- Will Vancouver recover from the tax intro?
- What sleeper areas should investors buy in British Columbia?
- What does Brexit mean for us?
- Where to invest in the U.S.?
- How will oil prices change?
- Will the Canadian Dollar rebound?
- Will the Chinese and other foreign money stop coming to Vancouver?
Guest speakers include
- Ozzie Jurock (Donald Trump says he received the best real estate advice from Ozzie) – detailed forecasts for Vancouver Island, Kootenays and the Okanagan as well as the Lower Mainland.
- Ozzie Jurock will also discuss the new tax fallout and consequences
- Charan Sethi – Investing in Transit Oriented Developments and a special focus on the Fraser Valley
- Rick Hoogendoorn – Ace developer and Realtor in Victoria
- Todd Smith – Top Phoenix Realtor talking about why Phoenix is STILL hot!
- Kyle Green – Getting the best mortgage in today’s tough market
- Ralph Case – Creating clarity and confidence in your real estate investments
- Eric Lynch and Ryan Kohl – Getting financing in the USA made easy
- Kevin Wheeler – Focus on New Mexico
- Ray Levesque – Innovation Village – Community of care
PLEASE SEE ATTACHED THE CURRENT SPEAKERS AS WELL AS CURRENT SPONSORS (MYSTERY SPEAKER TO FOLLOW)
Plus, a sterling lineup of expert speakers (no money down expert too!) advise on investing, mortgages and making money in real estate across North America. Further, all attendees receive 100 deals under $100,000 in B.C!
Most subscribers have tickets included in their subscriptions, others pay a minimal amount to attend. Everyone can invite their guests (must be preregistered) for only $30 a ticket (regularly priced $97)
If you are unsure how many tickets you are entitled too, please e-mail Max at email@example.com.
Don’t miss Outlook 2017.
To register your subscriber tickets (depending on your package) or purchase them at your discounted subscriber price, please visit here. (Scroll down past the most recent Facts by E-mail issue).
If your package includes a ticket you MUST be registered to attend as seating is limited and we are expecting another sell out!
Friendly regards and we hope to see you all there,
Jurock Real Estate Insider
Topic: Real Estate Outlook 2017
Ozzie Jurock is known as one of Canada’s leading business motivators and his investor outlook conferences attract audiences of over 500 attendees every time. There is only one reason: Ozzie Jurock delivers more than he promises.
Topic: Creating clarity and confidence in your real estate investments
Ralph doesn’t just talk the talk; he practices what he teaches! In the last 10 years he has bought and sold over 2500 residential units either individually or with his joint venture partners. Clearly he is a man of ACTION! His specialty is “Action Plans” and he meets monthly with Real Estate Action Group members to perfect their plans and reach their goals.
Topic: Phoenix is still hot!
Todd Smith and his wife Shannon Cunningham lead The AZ Performance Realty Team of Keller Williams Professional Partners. They are a team of eight full-time licensed real estate agents supported by five full-time licensed Administrative Staff Members that serve the entire Phoenix, AZ Real Estate Market.
Topic: Why interest rates will stay low Plus: Getting creative to finance your investments
Kyle Green has been working as a mortgage broker since 2006, and has carved out a niche as an investment property specialist since 2008. His years of experience working with the Real Estate Action Group and many other investors and investment groups has made him one of the go-to resources for financing investment properties in Canada.
Eric Lynch & Ryan Kohl
Topic: How to get United States financing quickly
We provide specialty financing for foreign national mortgage buyers purchasing property in the USA. This is our focus. In this changing market we are dedicated to finding the right products to fit your investment needs.
Topic: Why invest in Transit Oriented Developments plus a special focus on the Fraser Valley
Charan is president of the Tien Sher Group of Companies, developer/ builders of community sensitive and Transit Oriented Developments. A licensed machinist in England, Charan continued his trade upon immigrating Canada in 1978. He began an award-winning career as a Realtor consistently ranking amongst the top one per cent in the Greater Vancouver Real Estate Board.
Topic: New Mexico opportunities!
Kevin Wheeler is the VP Investor Relations and a Partner at Clear Sky Capital Inc. Mr. Wheeler manages the distribution and negotiation of Clear Sky Capital retail and institutional offerings across Canada. With over 14 years of experience and background as a consultant, investment advisor and wholesaler within the financial services industry, Mr. Wheeler provides our partnering forms with a high level of expertise.
Topic: Real estate opportunities from a Victoria perspective
Rick Hoogendoorn is commonly referred to as “Rictoria” at Ozzie’s Real Estate Action Group meetings. Rick and his wife Cheri began investing in real estate in 1997 and built up a substantial portfolio of properties in Western Canada, primarily through joint venture partnerships with family and friends.
Ray Levesque & David Siebenga
Topic: WestStone’s Innovation Village. A 5.1-acre state of the art senior’s village located in the heart of Surrey immediately adjacent to the fastest growing hospital in B.C.
Ray Levesque, MA – Ray is an experienced sales and marketing manager, instructional designer and technical writer having completed projects for Boeing, Microsoft, Panasonic and Cisco and recently HSBC.
AZ Performance Realty Team
Since starting AZ Performance Realty in 2006, they have been among the top 1% of real estate agents in the State of Arizona.
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Business in Vancouver
Business in Vancouver is an award-winning weekly newspaper serving Greater Vancouver since 1989. Targeted at business decision-makers, it provides local business news and information every Tuesday and reaches the Lower Mainland’s business leaders every week.
British Columbia Real Estate Directory. Add your site now, for free.
Brent Roberts – Royal LePage Brent Roberts Realty
Your #1 Choice for Surrey, Delta, Langley or White Rock Real Estate. Brent has consistently been the Top Realtor in the area and one of the Top 2 Realtors in the whole Fraser Valley during his career.
CanadAmerican Tax Services
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Clear Sky Capital
Clear Sky Capital is a 19-year-old investment firm that have been focused on acquisition, value add and sale of multi-family residential complexes to date. They have zero losses and a very successful audited track record of returns back to investors and are presently managing about $250 million in AUM.
Express Capital Mortgage
Express Capital Mortgage provides specialty financing for foreign national mortgage buyers purchasing property in the USA. This is our focus. In this changing market we are dedicated to finding the right products to fit your investment needs.
Green Mortgage Team – Mortgage Alliance Meridian Mortgage Services Inc.
The Green Mortgage Team provides top notch service to our clients in the Lower Mainland and Vancouver BC. Whether you’re a first time home buyer or a seasoned real estate veteran, we’re here to help.
The Kelly Fry Team
Kelly Fry offers real estate investors a unique advantage when negotiating. Not only is she a top realtor, she is also a real estate mentor, professional trainer of creative financing and a chartered accountant. Having invested in rental properties for the last 12 years across Western Canada, she knows what investors need.
Jurock’s Real Estate Insider- Facts by Email
The Facts by Email service provides international (as the US goes so goes Canada – eventually) national and regional news comments, (as far as they might affect real estate values), general and specific real estate information all evaluated by Ozzie Jurock. As past president of several of Canada’s and the United States largest real estate companies, Ozzie Jurock has a unique insight into the exciting world of real estate investing.
Marc Jurock Sci-Fi Real Estate Guy
Marc has worked with one of the biggest private Real Estate focused websites in Western Canada since 1997 and has worked with thousands of individual Real Estate investors since 2001 as well as organizing two of the biggest Western Canadian Real Estate Conferences yearly in the same time period.
The Real Estate Action Group is an exclusive group lead by Ozzie Jurock and Ralph Case. The focus is Real Estate Investing. Membership includes monthly meetings, high profile guest speakers, mentoring, market forecasts, and much more!
Pinnacle Wealth Brokers
Briefly, Pinnacle Wealth Brokers happens to be one of the largest Private Market Dealerships in Canada, with Registered Securities Advisors from coast to coast, representing some of the top private investment firms in numerous industries, with a large focus on Real Estate and Fixed-Income products. Pinnacle has looked at over 300 Private Equity Firms in the last 36 months or so, conducting extensive due diligence on each, before approving a small handful of these firms on to our shelf that are institutionally structured in nature, offering the most security for our clients and that can offer them the best risk-adjusted returns on their investments.
Rick Hoogendoorn, Victoria REALTOR, Royal LePage Coast Capital Realty
Rick and his spouse, Cheri Crause, used to be financial planners. However, they read Rich Dad, Poor Dad and started buying investment real estate. Eventually, it got to the point where they couldn’t, in good conscience, continue to advise their clients to buy mutual funds, while they were buying nothing but rental condos and houses. Both became residential REALTORS with Royal LePage Coast Capital Realty in Victoria, BC, where they have been President’s Gold, Diamond, and Award of Excellence winners.
The Vancouver Sun
Tri View Capital Ltd.
Tri View Capital Ltd provides investors with an alternative strategy to the volatility of the public markets and have developed over $200 million on the private markets over the past 4 years.
WONDERING ABOUT THE HOTLINE?
Hotline Text Alert System and Hotline Code Changed
To get on the Hotline Text Alert System and receive a text update when the Hotline is ready, please text ‘Jurock‘ to the number ‘393939‘ and you will be added to the system. You will receive no more then one text a week.
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