Vancouver Is About to Become Rental-Only City

Speculations of a Housing Drop Might Not Be Enough To Go On

The average Canadian home was said to be worth just over $500,000 according to a CBC article. And while figures show houses prices are down 10 per cent since April, Don Pitts from CBC says consumers should take this comment with a grain of salt.

However, the high house and condo prices currently are deterring young couples from buying properties, especially if they think prices are going to suddenly drop.

Especially as interest rates rise, buying condos to rent using borrowed loans may not be something worth getting excited about.

Pitts notes that we can’t just speculate that there will be a housing drop. Inflation figures tell us steel, lumber and stucco prices—all needed to build houses—have stayed the same. It’s the price of land and finished product that has gone up in price. So, if you’re just speculating, the risk might not be worth it.

Building Laneway House on Your Property Might Not Be Worth It

Building Laneway House on Your Property Might Not Be Worth It

Owners of laneway houses or basement suites could find themselves inadvertently or deliberately avoiding taxes partially due to the CRA requiring Canadians to report the sale of a principal residence on their income tax returns, starting in 2017.

While most people know that, not a lot of people understand the GST implications of building these rentals on one’s property—not to mention the income tax implications when the house is sold.

If you build a laneway house to be rented to others and is not registered for GST, you must self-assess GST on the fair market value of the laneway house and the land associated with it. But determining land value can be difficult. The CRA could potentially deem it to value a quarter of the total lot for example, so although the owner could be entitled to Input Tax Credit, the tax consequences could be huge.

But, if you decide to rent the property, you won’t have to self-assess the value of the laneway house because the status of the property will have changed to a “used residential complex.”

The rules are complicated, and you should always consult an accountant before building a laneway house on your property. However, the key idea is that a laneway house is not eligible for the same principal residence tax exemptions as the balance of the property.

Canada’s Suburbs Sees Rise in Older Crowd

6.7% Drop Largest in Last Seven Years

This June, home sales fell by 6.7 per cent—the largest amount in seven years, according to a CBC article; nearly three-quarters of markets slowed down during what is normally a popular time of the year for real estate.

But in Ontario, there are new rules at slowing the housing market around Toronto, which are bringing house prices down.

Gregory Klump, CREA’s chief economist, says the increase in interest rates could reinforce a lack of urgency to purchase or move some buyers off the sidelines before their pre-approved mortgage rate expires.

Sales have dropped, and prices remain flat. The average price of a Canadian home sold in June was $504,458—a 0.4 per cent increase in the past year.

However, the average house price rose in June in Alberta, Manitoba, New Brunswick and Prince Edward Island. But in every other province, the average declined compared to the previous month.

If the expensive Toronto and Vancouver housing markets were excluded, the average Canadian house cost $394,660 in June.  A year ago, that figure stood at $374,760, which means excluding Toronto and Vancouver, average Canadian house prices have increased by just over five per cent in the past 12 months.

Nationally, housing prices may decrease largely because of a cool down in the Ontario and British Columbia markets, but time will soon tell.

How is Foreign Currency Getting to Canada?

Foreign Investment Is Not Only Reason Contributing Canadian Housing Market

The limit to the foreign currency transaction was lowered to $9,000, but that isn’t the only factor contributing to the Canadian housing marketing, according to a Mortgage Broker News article.

Zillow senior economist Aaron Terrasaz says that Chinese capital into the housing market is a trend that isn’t going away anytime soon because Canadian and U.S real estate are some of the safest high-return investments out there.

  1. Capital Research Ltd. Research director Anne Stevenson-Yang notes that mainland’s controls won’t do much to deter people around these rules. A study by Juwai.com showed Mainland investment in Canadian real estate grew by more than 25 per cent year-over-year in 2016.

So while Chinese investors have spent over US$100 billion on overseas property investments in 2016, it is expected to rise in 2017. That being said, we can’t count this as the only factor, even though it has a big impact.

Bank of Canada

Interest Rate Rise Effects for Consumers and Corporations

Canadians have been used to low rates and lots of borrowing from banks according to a CBC article. So what happens now that interest rates have gone up?

But it’s not just consumers that might have to change borrowing habits, corporations might have to as well. The rise in interest rates is a sign that the economy is on a healthier track, but now the test is whether businesses will start investing again.

Goldy Hyder, CEO of Hill and Knowlton Public Relations firm, says this will require a behavioral change and that it’ll take some time to adjust.

The Bank of Canada governor, Stephen Poloz says he expects Canada’s economy to grow with expanded exports, but nothing is certain.

While it’s unknown if interest rates will continue to rise, if you’ve been adding up debt for the last 10 years, it might be time to start thinking about how you’re handling your money,

But, some might find an opportunity in the interest rate rise. Some people think the rise in interest rates may cool the housing market. Some might take the warnings and get their financial houses in order, and some businesses might take a risk and invest in innovation, jobs and creativity.

People not being overburdened in debt and companies investing in the economy is what is needed for the economy to grow.

Things Home Sellers Might Be Hiding From You

Sometimes, houses have defects that aren’t quite noticeable. But under Ontario Law, sellers must disclose defects a house might contain, according to an article by The Ross Firm.

There are two types of defects that may occur in a house: patent and latent. Patent defects are visible; some are obvious like ceiling blotches, or some may be found when closely inspecting the house. Latent defects are invisible; they could take form from a previous fire or a history of flooding, but the cosmetics have been repaired since. However, a seller who is aware of latent defects only has to disclose them if they pose a risk to future occupant’s health and safety.

Proactive Steps:

  1. Work with an experienced sales agent. He or she will ask pointed questions to the seller, conduct research, inspect related documentation and alter the purchase agreement if necessary
  2. Request a Seller Property Information Statement—a voluntary document where a seller discloses defects. However, information given is based on the seller’s best knowledge and honesty, therefore, it’s a controversial form and shouldn’t be solely relied on
  3. Purchase the services of a skilled home inspector

 

Over 300 Complaints in City of Vancouver due to Short-Term Rentals

In the last 18 months, the city of Vancouver has received over 300 complaints from residents regarding short term rental agreements like Airbnb and Expedia according to the Vancouver Courier.

They have been complaining about things such as noise, parking issues, garbage, property damages and concerns of safety.

To address these complaints, the city has prepared a report that recommends measures to regulate the growing short-term rental industry which makes up 30 per cent of Vancouver’s accommodations for tourists. The measures include:

  • Operators of short-term rentals must obtain an annual $49 business licence and pay a one-time “activation fee” of $54
  • Short-term rental services will apply a transaction fee of up to 3 per cent
  • All operators must pay applicable federal and provincial taxes
  • Operators must list their business licence number on the short-term rental site
  • Operators must comply with building safety, “neighbourhood fit,” and advertising and booking requirements
  • No secondary residences can be used as short-term rental properties

If and when the regulations are put in place, the city estimates at least 1,000 rental units that are currently used as short-term rental properties could be freed up for longer term rentals, which the mayor of Vancouver wants to focus on.

If council approves the regulations, Vancouverites will have a chance to weigh in at a public hearing in the fall.