IN THIS WEEK’S FACTS BY EMAIL:
- QUESTIONS, QUESTIONS
- THE NUMBERS – EDMONTON, CALGARY, TORONTO, MONTREAL – THE WINNER IS…?
- KELOWNA: ZONING CHANGE BOOSTS DETACHED VALUES
Hundreds of detached lots can add strata units under new zoning
- ONTARIO’S NEW RENTAL RULES TOUGH ON LANDLORDS
- WHISTLER CRACKS DOWN ON AIRBNB-TYPE RENTALS
Licensing system is effectively a $1,000-per-day fine
- HERE ARE THE REAL NUMBERS ON B.C. HOUSING MARKET
- NUTS…EYEBROW RAISER
- PRICE OF A POINT GREY HOUSE RISING BY $168K A MONTH
- MORTGAGE RATES HEADED HIGHER?
Questions, Questions, Comments
I had a lot of fine comments on my musings in and about Europe. Thank you.
Q: I heard you on the Michael Campbell show every week from Europe. (How much holiday time do you get anyway?) How hard was it to get to do the show from Europe … and how much?
A: If you go to your computer, type in cknw.com, click on “listen live” … anywhere in the world, you can listen to the show live. Dialing from any hotel is easy, dialing when on board a ship is not.
Q: Toronto sales are off, but don’t you think it’s the same as Vancouver? Down first after the intro of a new tax and then – business as usual?
A: Nope, I don’t think so. Ontario’s new tax is one of 15 new tough measures. The fact that SF listings instantly soared the way they did at the intro of the new measures, means Toronto owners – unlike Vancouver’s – want out! As they all try and squeeze thru the door at the same time, there will be pain. Vancouver product stayed low, listings did NOT surge.
Q: What so you think about the ‘mobility pricing system’ studied by the city of Vancouver?
A: It’s a CYA way to bring in a new tax. Their ‘study’ always means they already have decided. They studied the ‘bicycle lanes’ and brought them in on a trial basis. Hah! It was a done deal on the day they announced the ‘trial’.
Q: Your questioning Ms. May ‘need’ to call an election and warning her with a comparison to Joe Clarke’s early election call (and losing it) was borne out!
A: Yes, she had till 2020. Hard to understand why she chose an election. Political greed! Now she is much weaker. Also the Labour Party promising a ‘forgiving of student loans’ … worked on the youth. Labour almost won – even while they appointed a 40-year communist party member to your election team! Communist!
• Canada •
Ontario’s New Rental Rules Tough On Landlords
Last week we discussed residential investment opportunities in Ontario (and there are lots of them) but this week we look at the new Rental Fairness Act (Bill 124) that the Ontario government brought into effect May 17.
This legislation amends key parts of the Residential Tenancies Act, nearly all in favour of tenants.
Here is a look at the highlights:
- It expands rent control to ALL private rental units, including those that were previously exempt under the ‘post 1991’ rule. (The current annual rent increase allowed is 2.7 %.)
- Notices of rent increases sent before April 20, 2017 even with a later effective date will be allowed to proceed – the legislation requires the rent control guideline to apply to all notices and increases given on or after April 20, 2017.
Changes to Above Guideline Increases (AGI)
- Remove the ability to apply an AGI for all utilities.
- Prohibit AGIs in buildings with outstanding elevator work orders.
- Create the ability to add additional circumstances where otherwise eligible capital expenditures are ineligible for AGI applications.
Requiring a Standard Lease
- Government will develop a standard lease that will be required to be used by ALL landlords.
- If the landlord does NOT provide the standard lease within 21 days of a tenant’s written request, the tenant can withhold one month’s rent, until the landlord provides the lease;
- If a landlord does not provide the standard lease within 30 days after the tenant has withheld the rent, the tenant would no longer be liable to repay the withheld rent;
- Changes to Landlord’s Own Use Eviction Provisions – Onerous!
Corporations will no longer be able to use “own use” eviction provisions, only landlords who are individuals will be able to use this as a ground for eviction.
- Require the landlord or the landlord’s family to reside in the unit for at least one year and provide this intention in writing to the tenant.
- Require the landlord to compensate the tenant one month’s rent or offer the tenant another acceptable rental unit.
- If the landlord advertises or re-rents the unit for a higher rent within one year, the LTB could order additional compensation be paid to the tenant.
Major Point: Maybe it should be called the “unfair to landlords act”. For example, hydro rates are soaring in Ontario and have increased much higher than the rate of inflation, but the new Rental Fairness Act “will no longer allow applications based on an extraordinary increase in the cost for utilities.” Why are hydro rates soaring? Because of a 400 million failed ‘windmill’ energy debacle, that doubled the cost of hydro and will continue to rise for 10 years! Now the government is shifting some of the enormous increase to the children of Ontarians – borrowing 25% of that increase from the future. Who votes for these people? Oh and today they voted in 8% increase to all government employment unions. Of course, they need it!? But isn’t the official inflation rate 2%?
The Numbers, The Numbers – Edmonton
Unit sales for May 2017 are up 25% over April 2017, and down 3% compared to May 2016. Average prices for single family home are up a tad to $440,907. However, inventory continued to increase for May and is up 10% over April 2017, also increasing a bit by 4% relative to May 2016. New listings increased by15% compared to May 2016.
Average days on market remained stable, decreasing slightly for most categories in May. The average for single family homes was down marginally compared to 51 average days in May 2016. Condominiums increased to 62 days on market from 60 days in April 2017 and May 2016. Average days on market for duplexes and increased compared to 59 days in May 2016.
Major Point: Edmonton looks in balance. New listings are rising, but the inventory in total is only up 10%. Edmonton is steady as she goes.
The Numbers, The Numbers – Calgary
Calgary home prices trended up for the fourth consecutive month, but remain below 2014 highs.
NOTE: For the first time since June 2015, prices in the detached sector did not decline on a year-over-year basis. Unadjusted detached benchmark prices reached $509,000 in May, one per cent higher than last month and May 2016 levels.
“We can really see a slow but sure recovery in the housing market,” said CREB president David P. Brown. “Demand for detached product is driving a new sense of optimism for consumers as we move further into spring.”
But, against this backdrop, the number of new listings rose to 3,866 units in May, which is 17 per cent higher than last year’s total for the month. Yet, active listings stayed even with last year.
Major Point: Calgary surprises: Sales higher, prices (SF) higher and active listings (SF) lower. But the condo sector is not faring as well, with active listings higher and prices 5% lower.
The Numbers, The Numbers – Toronto – Follow-up…
Further to our notes from last week, sales down by 20 per cent compared to 12,790 sales reported in May 2016. Sales of detached homes were down by 26 per cent. Sales of condominium apartments were down by 7 per cent.
Active listings for SF homes were up by 43 per cent compared to May 2016. The number increased considerably for low-rise home types including detached and semi-detached houses and townhouses. The average selling price for all home types combined for the TREB Market Area as a whole was up by 15 per cent to $863,910.
“The actual, or normalized, effect of the Ontario Fair Housing Plan remains to be seen. In the past, some housing policy changes have initially led to an overreaction on the part of homeowners and buyers, which later balanced out. On the listings front, the increase in active listings suggests that homeowners, after a protracted delay, are starting to react to the strong price growth we’ve experienced over the past year by listing their home for sale to take advantage of these equity gains,” said Jason Mercer, TREB’s Director of Market Analysis.
Major Point: AGREED! (Look also answer under Questions.)
The Numbers, The Numbers – Montreal
5,057 residential sales in May 2017 represented a 15 per cent increase compared to May of last year: A new sales record for the month of May. Sales surpassed the previous peak for a month of May, which dates all the way back to 2007.
Interestingly, it was all five main areas of the Montréal CMA that saw an increase in sales in May. However, the areas of Vaudreuil-Soulanges and the Island of Montréal were the winners with respective sales increases of 25 and 22 per cent. The North Shore and Laval rose by 14 per cent and 11 per cent, respectively.
- The South Shore registered a more modest sales increase of 4 per cent.
- Condominium sales registered an impressive increase of 24 per cent across the Montréal CMA, with 1,637 transactions.
- Plexes (467 transactions) also turned in an excellent performance, with a 19 per cent jump in sales.
- Single-family homes, whose sales grew by 10 per cent in May, remain the most in demand property category, as 2,950 transactions were concluded.
- The median price of a single-family home stood at $319,000 in May in the Montréal CMA. This was a 6 per cent increase compared to May 2016.
- Active listings stood at 28,137 but decreased for a 20th consecutive month, falling by 15 per cent compared to May 2016.
Major Point: We recommended Montreal last year … but only if you speak French! You can assume that the foreign money poured in Vancouver and then swirled to Victoria and Toronto. When the tax grabbed those cities … more of the cash flowed in the Montreal.
• British Columbia •
Here Are The Real Numbers On B.C.’s Housing Market
Most of us look at CMHC housing start data and the MLS feeds from various real estate boards to get a handle on what is happening in the BC housing market. But there are other, more accurate, data that track starts before they start and sales that never get listed on MLS but go through the Land Titles Office.
So here is what happened in Metro Vancouver, the Okanagan and Vancouver Island during the first three months of this year:
Starts we are using here are from the mandatory registrations of new homes through the BC Homeowner Protection Office (HPO) for home warranty insurance. The HPO data does not include purpose-built rental units, so these multi-family starts are all stratas.
The registrations must occur before a building permit is even issued, so they are a harbinger of what is coming.
For Metro Vancouver, the HPO data shows there were 1,358 registrations for detached houses in Q1-2017, which is down 10% from the same period a year earlier.
Strata multi-family registrations, were down 18% in Q1-2017 from Q1-2016, to 2,718 units. The decrease equates to a 71% plunge in strata registrations in the city of Vancouver and a 22% drop in the Greater Vancouver region (registrations were down 18% in the Fraser Valley).
We find this rather shocking: according to the Urban Development Institute there is not a single new condo or townhouse that is not pre-sold right now in the city of Vancouver, despite record high prices. There were only 11 concrete condos not pre-sold across Metro Vancouver in Q1, the lowest level on record. Standing inventory new wood-frame condominiums in Q1-2017 reached an all-time low of four units. This is down from 164 units in Q1-2016.
Something screwy is going on here.
Why would developers be failing to even register strata units, considering that they must have their HPO registered to even apply for a permit? I will leave it to your imagination why big developers would be holding back on delivering new condos into the highest-priced market Vancouver has ever seen!?!
Now onto the resale and prices in B.C., in three regions, based again on the first quarter of 2017:
Land title transfers, provided to us by the fine Landcor Data, show that total transactions of homes in Greater Vancouver fell 22.9% in Q1 from Q1-2016 and the total value of sales dropped 29.4% to $8.8 billion.
The average price of a detached house sold in Greater Vancouver in Q1 was up 2.4% from Q1-2016, to $1.54 million.
The average price of a condominium apartment increased 11.6% in the same period, to $524,614;
while the average townhouse price advanced 12% to $596,150.
On Vancouver Island, total housing sales in Q1 were up 13% to 5,541 and the total dollar volume was up 30% to $2.54 billion.
The average price of a detached house sold on the Island in Q1 was up 14.9% from Q1-2016, to $567,269. The average price of a condominium apartment increased 14.6% in the same period, to $331,641; while the average townhouse price rose 15.3% to $409,478.
In the Okanagan, total transactions of homes in Q1 were up 31.6% from Q1-2016 and the total value of sales soared 50% to $1.3 billion.
The average price of an Okanagan detached house sold in Q1 was up 14% from Q1-2016, to $505,892. The average price of a condominium apartment increased 8.1% in the same period, to $279,887; while the average townhouse price rose 16.3% to $360,760.
Major Point: This granular data underscores what we have been telling rental cash flow investor readers this year: sell in Vancouver and buy on the Island (especially north of Victoria) and in the Okanagan (close to Kelowna or Vernon). Prices are half of that in Metro and rents and vacancy rates are nearly the same.
Whistler Cracks Down On Airbnb-type Rentals
Licensing system is effectively a $1,000-per-day fine
As of July 31, Whistler property owners will need a $165 license to offer short-term rentals – but there is a catch.
The Resort Municipality of Whistler (RMOW) will require anyone marketing or leasing short-term rentals – such as on sites like Airbnb – to acquire a business license. According to RMOW the new rule will enforce what it said are “illegal night rentals”, namely owners that are marketing units that are not properly zoned for tourist accommodation.
But here’s the catch: You can’t get a business license unless you’re properly zoned, so the city simply monitors the online ads and if people are marketing their units as available for nightly or short term rental, but they don’t have a business license, they will be issued a ticket with a fine of $1,000 per day.
Major Point: Why don’t they just call it what it is: outlawing short-term rentals to protect the Whistler hotel industry. Whistler values are soaring … a mad market. My real estate company is bringing 6 year old condos to market next week in Pemberton – in the $270,000 price range. If interested drop me a note.
Kelowna: Zoning Change Boosts Detached Values
There is a lot of buzz about Kelowna’s condominium market – a near pre-sale sell out of the new Skye condo tower and a bid by a Florida condo developer to build two of the tallest towers in B.C. outside of Vancouver are indications – but some of the city’s detached housing may prove a better investment this year. (The average Kelowna house saw a sharp increases of 17% y-o-y!) This is due to specific zoning changes that add density to existing single-family lots under Kelowna’s Infill new RU-7 zoning for downtown neighbourhoods that came into effect in January 2017. In all, about 700 lots are targeted in central neighbourhoods.
Under the zoning, detached house owners can add from two to four extra housing units to their lot, with four units, including a laneway house, on larger 50’ lots. For smaller lots zoned RU7, the bylaw will allow two or three units. Larger lots will be able to be developed with up to three residential units (and in some cases four if an existing rental suite exists).The zoning areas are in the downtown and the Pandosy neighbourhood.
Some of these neighbourhoods have already seen price appreciation since the zoning was brought in, but average prices are in the sub-$600,000 range (though some on larger lots are asking in the low $700K range).
Here are two examples:
MLS 10133972: a two-bedroom old timer with RU-7 zoning for a second dwelling, asking $514,000); and
MLS 10135733: three-bedroom with a pool and RU-7 zoning for $549,900. A key deal here is that units can be stratified (which is not allowed with similar density zoning in Metro Vancouver).
According to the city, a property zoned RU7 could be owned as a single real estate entity and rented to tenants, stratified along internal party walls (with party wall agreement), stratified into individual units, or subdivided into two fee simple lots. The zone is intended to encourage multiple forms of tenure and different ownership options.
The configurations can include stratified fourplexes, duplexes with detached rental units, or properties with two dwelling and two rental suites.
As a rental or a strata, the detached RU-7 makes sense for investors, especially since the local apartment building owners are holding onto their property with both hands.
The rental vacancy rate in Kelowna – which has seen an 8.4% population growth in the last 5 years to nearly 95,000 people – is in the 0.5% range, among the lowest in B.C.
The average condo price in the Kelowna area is around $280,000, up 2% from a year ago, according to Landcor Data’s first quarter numbers.
Major Point: Kelowna is white-hot again. More homes started this year in Kelowna than in Victoria or in any centre outside of the Lower Mainland. With house prices half that of Metro Vancouver, Kelowna is worth a close look.
June 9 is Tax Freedom Day, when Canadians start working for themselves and not government.
Tax Freedom Day measures the total yearly tax burden imposed on Canadian families by federal, provincial and municipal governments. If you had to pay all your taxes up front, you’d give government every dollar you earned before Tax Freedom Day. That day comes later and later every year as we pay more and more taxes!
PRICE OF A POINT GREY HOUSE RISING BY $168K A MONTH
Some interesting May sales stats out of Vancouver show that, as always, the rich are moving in a different jet stream than the rest of the population.
In May, in what many believe is a slowing detached housing market, the average price for a Point Grey detached house increased by $168,400 from April to May, when it reached $3.87 million – and with 18 sales in May, Point Grey posted the third highest detached sales of any Vancouver neighbourhood. No. 1 in Vancouver was Dunbar, with 22 detached house sales, and where the average house price increased $124,000 from April, to $3.12 million.
Major Point: While Westside detached house sales in May were down nearly a third from May of 2016 (before new assessment rules hit the market and the foreign buyer tax came in), the sales-to-new-listing ratio for Westside houses priced from $4 million to $4.5 million in May was 60%, which is considered a buyer’s market. There is indeed a two-tiered economy in Vancouver.
Mortgage Rates Headed Higher?
Late news. On Monday the BOC announced that they ‘may’ look at an increase an increase in interest rates – seeding the ground of expectations for some time in the distant future. Distant future! The bond market took it as a negative and 5 year bond yields rose by about 25%. Since long term mortgage rates (the traditional 5 year mortgage) are tied to the bond rate (as opposed to the short term mortgage tied to the Prime rate), the expectation is that 5 year money is about to rise. (Variable short term money can be had for as low as 1.7% – 2%) if you feel that rates will be raised by the BOC fast (not gonna happen) lock in your interest rates. If you have more than 2 properties that may be a good call anyways.
Edmonton: Brand new turn-key 2 bedroom 2 bathroom + media room California split investment condo. Price: $229,105 + GST. Investor friendly with NO Property Transfer Tax, No Foreign Buyers Tax, No Empty Home Tax and no rent controls. ONLY $247/SF compared to Burnaby at an avg. of $671/SF, Surrey at $397, New Westminster at $500/SF, Abbotsford at $260/SF, or Kelowna at $325/SF. Cash Flow positive after ALL operating optional rental management and Finance expenses. Estimated Yr. 1 ROI is 34%.
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