Busy this week? Don’t worry, we’ve got you covered with our cheat sheet on this week’s top real estate stories.
Canadian Real Estate
Regulators are confirming that obtaining a mortgage with foreign income is getting harder. OSFI B-20 Guidelines subject banks to “rigorous” verification of borrowers, and this extends to those with foreign income as well. Foreign sourced income will now need to be proven, from official sources. Those with foreign income may also be subject to a foreign credit report going forward.
Carrie Law, the CEO of China’s largest overseas real estate portal, doesn’t think a foreign buying tax is going to change much. Providing some insights from her own databank, she observes that Chinese demand for Vancouver “peaked” in 2015. Since then, Vancouver has become “overpriced,” reducing foreign demand. Which she believes is the real reason behind tapering Mainland Chinese sales.
Law, one of the most powerful real estate execs in Asia, explains there are two main types of foreign buyers. The first, are wealthy buyers looking for trophies. These types of buyers will not be deterred by a foreign buyer tax, in her opinion. These clients are typically moving for personal, or professional reasons. That doesn’t change, tax or not.
The second are families with plans to immigrate to the city. Those people typically have a more modest income, and will likely factor the tax into their buy. Many will shift their buying until after they obtain residence, exempting them from the tax.
The Chinese government is alleging Wu Xiaohui, the former CEO of Anbang, has committed “economic crimes.” While that gets sorted out, the China Insurance Regulatory Commission (CIRC) will be taking control of the company for a period of at least one year. This places a number of landmark properties under direct control of the Chinese government, including billions of dollars of Canadian real estate. CIRC is attempting to “reduce risk” with the company, which may include the sale of these buildings.
Toronto Real Estate
Toronto real estate price declines stopped, according to the Teranet-National Bank Index… kind of. Toronto prices are up 8.73%, just under the national urban index of 8.73%. However, analysts from the firm note that Toronto “stopped trending down… due entirely to condo dwellings.” That is, condo prices are rising so fast, that it offsets the decline in other segments. Sounds healthy. 🙄
Speaking of Toronto condos, they reached an all-time price high for a second time in January. The benchmark condo (a.k.a. “typical” condo) now costs $469,800, up 19.88% from last year. Sales declined 21.9% compared to last year, which is expected as prices climb. What’s not expected is the rise of inventory, which increased 33% from last year. More sellers appear to be realizing profits, as prices climb.
The benchmark price of a condo saw an increase of 41.37% over the past two years. Meanwhile, the price of a detached home increased 25.16% over the same period. The faster rise in condo prices, is quickly closing the gap between the two, but how close is normal?
Currently a typical condo costs 55.04% of a typical detached home. This is up from the 46.19% it was this time last year. Turns out that gap was unusually large. Since 2005, the median ratio has been 56.8%, so we’re actually 3.19% under that level. This doesn’t mean that any segment of homes are over or undervalued. It does mean that we’re not seeing anything unusual with the gap. Well, it’s less unusual than last year.
Vancouver Real Estate
The Government of British Columbia released the most aggressive anti-speculation measures in Canada. New rules include an annual speculator tax of 0.5%, which rises to 2% in 2019. The luxury tax on property transfer value over $3 million rises from 3% to 5%. The foreign buyer tax is going to extend to almost all heavily populated regions of BC, and increases from 15% to 20%. It also includes an end to hidden ownership, designed to tackle money laundering through real estate. OSFI B-20 was already expected to provide downward pressure on prices, but these new rules almost guarantee it.
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