Facts By Email

IN THIS WEEK’S FACTS BY EMAIL:

  • QUESTIONS, QUESTIONS
  • PROXY PAPER MAY COVER EMPTY HOME TAX
  • VICTORIA HAS AN AGENT FOR EVERY MLS LISTING
  • WINNIPEG APPEARS BEST HOPE FOR PRAIRIE LANDLORDS
  • VANCOUVER CHARACTER HOME PLAN COULD REDUCE HOUSING STOCK AND REDUCE HOUSING VALUES
  • DOWNTOWN CALGARY HAS 230 ACRES OF EMPTY OFFICES
  • “SQUEEZED” TRAILER PARK OWNERS EYE EXIT AS TAXES SOAR, RENTS CAPPED
  • POWELL RIVER POST AMONG HIGHEST SALES INCREASE IN B.C.

 

Questions, Questions

Eleven emails regarding the “inflation” question and answer. The gist of the emails is summed up in this one:

Comment: I took the time to revisit your outlook issue in which you talk about runaway inflation in hard assets and outright deflation in commodities at the same time (last few years). When I look around, that is actually the most logical explanation that I have seen yet. Forget what the banks, the economists, the experts tell you. Look around with an open mind and gosh, you know … Ozzie’s is the only answer.

A: Blush.

Q: I liked the JREI Questionnaire about your Facts by Email last week. Whatever you do, don’t stop talking!

A: Hmm, no chance of that. I love the sound of my own voice. (Please respond to the questionnaire – 2 minutes. It’ll help us do a better job for you. We adopted 9 suggestions from last year’s survey.)

Q: Who to vote for in BC on May 9?

A: Really?

Comments: The empty home tax generated a lot of comments … so we show you a possible solution – brought forward by Michael Geller. Psst!

 

• Canada •

Winnipeg Appears Best Hope For Prairie Landlords

If you are looking to become a landlord investor on the Prairies, you can likely forget doing very well in Alberta or Saskatchewan.  Edmonton, Calgary, Regina and Saskatoon are seeing near-record, double-digit rental vacancy rates and a rush of new rental construction. In fact, many Calgary condominium projects are being changed to rental buildings while they are still being built.

But Winnipeg maybe a different story.

Winnipeg’s rental vacancy rate was 2.8 per cent in 2016 – lowest on the Prairies – according to Canada Mortgage and Housing Corp. and is expected to rise only slightly this year. “Strong migration figures have put downward pressure on the vacancy rate,” the agency noted. In the second quarter of last year, immigration to the city increased by 27 per cent.

  • The province gained a net population of 8,455 people during the first half of 2016.
  • With capitalization rates in a healthy 5.5 per cent range and the average city apartment building selling for $93,200 per door, and rents averaging $1,100 per month, Manitoba’s capital offers the best landlord potential on the Prairies.
  • One developer is even planning Winnipeg’s first micro-suites, converted from an old office building, with 275 square-foot apartments renting from $950 a month.

Major Point: Values grow where people go…

 

Downtown Calgary Has 230 Acres Of Empty Office Space

Alberta is known for its wide-open spaces, but they used to be outside.

Now, according to reports from Calgary commercial real estate agencies, the city’s downtown alone has 10 million square feet of empty office space: that works out to a ranch-size 230 acres of carpet and concrete.

Cushman Wakefield estimates that 30% of the Calgary office towers are vacant, while other agencies estimate the vacancy is in the 26% range. And even more is being built: about 1.4 million square feet will come to the downtown market this summer. A further one million square feet floods into the downtown over the next 18 months, which includes more than 450,000 square feet of sublease space in the Bow Tower, as well as unclaimed space in the new Brookfield Place and the Telus Sky towers.

Major Point: If you need office space in Calgary, this is a good time to be looking. Recent tenant inducements include free rent for one or two months, free furniture and generous improvement allowances. The perks are common downtown, in the Beltline and in the suburban markets, leasing agents say.

 

• British Columbia •

Proxy Paper May Cover Vancouver’s Empty Home Tax

Gordon Clark of the PROVINCE writes: “Of the numerous offensive, vaguely totalitarian initiatives inflicted on Vancouverites by Mayor Gregor Robertson and the Visionistas, the Empty Homes Tax must be the worst.” Michael Geller says: “But ultimately, it will be administratively expensive and not make rental housing more affordable in 2017.”

We don’t usually share advice on how to (possibly) avoid taxes, but Vancouver’s blatantly unfair and unwise Empty Home Tax is an exception. The tax is 1% of the assessed value of the property. Ouch.

The tax appears to be aiming to punish hard working people, mostly Canadians, who can afford to have a pied-à-terre in Vancouver than to actually increase the number of rentals in the city. Even a cursory look at the estimated 10,000 empty homes in the city, we believe, would find that, as in any major city, they are not speculative plays but temporary second homes owned by locals who spend part of their lives somewhere warmer and drier. Some examples reported recently include a retired Vancouver doctor who lives in California half the year and has no desire to rent his fully-furnished and antique-filled West End condo when he is not using it. He will be on the hook for a $12,000 tax bite.

Another Vancouverite, who spends most of the year in Florida, and has tried but can’t find anyone to rent his $3 million Vancouver luxury condo, will have to pay $60,000 to the City of Vancouver in 2018 if it is still not rented by July 1! The answer from some quarters: he should rent it for $1,500! He should store his furniture. It is beyond comprehension!!!

Major Point: So how does one get around this tax? The idea could be a paper tenant, according to architect and civic gadfly Michael Geller, who floated the idea by law firms. The concept, Geller said, is that the owner sets up a proxy tenant who signs a six-month lease agreement but agrees to never live in the place. “The city may have a hard time prosecuting either the owner or tenant, provided there was a lease in place,” Geller suggested.

 

Victoria Has An Agent For Every MLS Listing

Victoria has such a shortage of home listings that there is now nearly one real estate agent for every MLS home for sale, according to the Victoria Real Estate Board.

At the end of March, there were 1,556 active listings and 1,353 licensed agents. Victoria is in the midst of a sellers’ market where prices are climbing and listings numbers are shrinking. A decade ago, there were 3,079 listings in March, nearly double what we see today. Real estate agent numbers fluctuate but were close to today’s figure, at 1,310 in 2007.

Other numbers have changed. Last month, the benchmark price, which tracks the price of a typical home, for a single-family home in the core was $790,100. A decade ago, it was $542,504.

There were 929 properties sold through the VREB last month, a drop of 17% from 1,121 sales in the same month last year, but most agents say that is only because there is nothing to buy.

Victoria may be seeing a trend that ReMax recently reported on: people afraid to sell their home because they fear they won’t be able to afford another one.

Major Point: The RE/MAX study found that many don’t want to get caught up in a market with bidding wars and other stress, and are confident that their home me value will continue to increase in any case.

“A lot of people whose children are grown and have moved out, who in the past, may have chosen to downsize to a smaller house are deciding to stay put.”

 

Leases With An Expiry Date – Now A Target In Victoria?

Ace realtor Rick Hoogendoorn (Royal Lepage, Coast Capital Realty) reports that the crazy market also affect tenants and may government to create new legislation. Hoogendoorn: “Just wanted to touch base and let you know how INSANE the market is overall in Victoria. I have people who are panicked that they will be homeless because they are in bidding war after bidding war and keep coming up short.

“I had a seller who ended up in a Super 8 motel because she sold and couldn’t find a rental. I had 190 people through the show suite at our newest rental apartment building (over 4 days / 12 hours total) and I was fully tenanted (with increased rents on all suites) almost a month before opening.

“The danger here is that when tenants get this desperate, they start to lie on their rental application forms.

“Further, when the situation becomes this dire, government starts to stick their noses into rules and regulations and punish landlords when landlords are NOT the problem. The NDP is currently looking to scrap leases that indicate vacant possession at the end. These have been abused by some landlords who use them to coerce tenants into accepting higher rents than the mandatory maximum allows. Certainly, this can be addressed simply by preventing landlords from re-renting to the same tenant at a higher than maximum allowed rent increase.

“Scrapping vacant tenancy leases creates other problems for landlords. As an example. We’re buying a property from a seller and his tenant gave notice early. He wants to re-rent for the short term but needs to make sure we have vacant possession at the end. A lease with vacant tenancy allows for this to happen.

“Meanwhile, you get goofy Oak Bay that is kicking people onto the street, or trying to. They won’t even allow a person to have their own parents in their house with their own kitchen (true in-law suite).“

Major Point: Hoogendoorn – “This is a market in crisis.” Indeed!

 

Vancouver Character Plan Could Reduce The Amount Of Housing And Drop Values By 10%

Vancouver has floated a Character Home Rezoning Review, which is to “encourage the retention of pre-1940 character homes in single-family neighbourhoods; and look at options for geographic areas, zoning tools, and the trade-offs and implications for new home development.”

But critics are pointing out that the proposal will actually reduce the amount of housing. A missive from Abundant Housing Vancouver, which lobbies for more rental housing to be built, points out that the Character Home rezoning plan goes in the reverse direction.

“The proposed change would effectively allow less floor space in new homes (0.5 Floor Space Ratio (FSR), down from 0.7 FSR in most cases), and a little bit more in homes built before 1940 (0.75 FSR, up from 0.7 in most cases).” The comment adds that many Vancouver houses built in 1920s to 1940 are well above 0.5 FSR.

Major Point: The Character Rezoning proposal has another deep flaw. A city report states: “We commissioned a study by independent consultants to look at the possible effect on property values. The study found that land values may decrease by 5% to 10%, but it’s unlikely that values would drop below 2015 values.”

 

“Squeezed”  Trailer Park Owners Eye Exit As Taxes Soar, Rents Capped

Have you noticed more modular home parks are being listed for sale?

It could be because owners, at least in B.C., feel threatened by higher taxes tied to soaring assessment values.

Al Kemp executive director of the Manufactured Home Park Owners’ Alliance of BC (MHPO) explains that park owners are under annual rental restrictions while assessed values, and subsequent property taxes, are increasing.

“Owners are being squeezed”, Kemp said. Assessment values on some manufactured home parks have shot up 20% to 30% in the past year, but park owners can increase pad rents by only 3.7% under B.C.’s Residential Tenancy Act

One owner of a Vancouver Island park appealed to Kemp for help after receiving their 2016 assessment. “We will be out of business soon as our low rent-controlled increases never allow us to catch up,” the owner wrote.

Kemp explained that BC Assessmentdoesn’t have a clue” how to value manufactured home parks. The land-valued sale of one park, for example, will raise the assessed value of neighbouring parks that may not have the same development potential, he noted. (The same is true of Vancouver apartment buildings.)

“There is a park in Nanaimo where [the assessed value] went up by $1.2 million because of the sale price of another park in the area,” Kemp said.

Major Point: Some park owners, including long-time owners, are selling their parks for redevelopment. Such is the case in View Royal near Victoria where the assessed value of the 18-unit Thetis Lake Campground and Trailer Park jumped by more than $400,000 in the past year, to $2.98 million. The owner of the park is now selling to a developer who wants to build 45 single-family homes and 14 townhouses on the 12.5-acre property.

 

Powell River Posts Among Highest Sales Increase

While the BC Real Estate Association says the provincial housing market is “normalizing”, Powell River is posting some startling sales numbers.

While B.C. housing sales fell 25.5% in the first quarter compared to Q1 2016, they increased 23.3% in Powell River, a former logging town turned recreational coastal paradise about 70 miles north of Vancouver.

In March, housing sales in Powell River were up 26.9% from a year earlier and the dollar volume soared nearly 54%, compared to a decline of 30% across the rest of the province.

The other hot spot was the Northern Lights board (anchored by Dawson Creek) were Q1 sales increased 120%, but average prices dropped nearly 7%.

The average house price in Powell River gives a clue to the demand: in March it was $263,531, the lowest price west of the Kootenays and south of Dawson Creek, but up 17% from a year ago.

  • Here is an example of a rental investment property in Powell River: MLS 12970. An older rented house on a freehold half-acre ocean view lot. Price $199,900. Retiring?
  • MLS 12835 an “immaculate” 6-bedroom waterfront house right in town on a landscaped 130,000 square foot lot. Price: $899,000.

Major Point: As we reported 2 weeks ago, the big Q1 declines in B.C. were in Greater Vancouver, with housing sales down 37% and the Fraser Valley, down 32.6%. The average Greater Vancouver price is down 11.4% to just over $1 million, while the Fraser Valley average composite price is down 9.6% to $699,028 (BCREA).

 

HOT PROPERTY

1. 150 Mile House, 12-acre lot with nature pond, on a paved road with power, phone and natural gas, no buildings. Price: $89,000;

2. 100 Mile House, one acre building lot, in an established subdivision. Price: $55,000;

3. Commercial Building Lot in the Center of the City of Wells, the home of Barkerville. Price: $20,000. 

(As we have stated many times, you are welcome to send in your ‘best deal’. There are no fees from us, nor any guarantees that your deal will be featured here or even is a good deal. It is up to you to study, evaluate and negotiate. Look up our disclaimer under the Hot Property section on your website. Interested parties – go to your website and get in contact directly with the owners/realtors or write to max@jurock.com)

 

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To subscribe to Jurock’s Facts by Email call 1-800-691-1183 or 604-683-1111 or fax 604-683-1707. While the above information is compiled from sources believed to be reliable, its accuracy cannot be guaranteed. Any type of investing carries inherent risks; as such, JREI cannot assume responsibility for any subscriber’s actions.