DATE

tax man
Steve Saretsky -

CRA Takes Aim at Condo Assignments & Foreign Buyers With prices escalating out of control in recent years, it has attracted a growing herd of speculators, eager to profit on a historical bull market. And profit they did. Perhaps one of the most lucrative ways to do it is through pre sale condos. The Scheme is a speculator’s dream, allowing buyers to leverage a favourable deposit structure and a rising market to flip the contract at a higher cost before completion. These flips are incredibly difficult for CRA to track especially if the buyer is overseas. A perfect concoction to make a quick buck and dodge the tax boogeyman. Feds Take Developers to Court That dream could be coming to an end. First reported over at BIV, The federal government is taking the developers behind the Marine Gateway project on Marine Drive and the Residences at West on southeast False Creek to court, probing for information on buyers who flipped their presale contracts before construction was completed to verify compliance with the Income Tax Act. This could be the first of many shoes to drop. As many Vancouver developments are being flooded with assignments, such as Kensington Gardens, which has seen

Steve Saretsky -

Vancouver Real Estate Overheating Led by Condo Market CMHC has it’s eye on Vancouver once again. Canada’s National housing agency believes the Vancouver real estate market is showing signs of overheating as per their latest report. “Conditions in different segments of the Vancouver market have further diverged since the beginning of the year. The townhouse and apartment markets are currently above the threshold for overheating, leading to higher asking prices and more dwellings selling in multiple offer situations.” Of course if you’ve been reading this blog this would come as no surprise. There’s been a clear divergence between the detached market and the condo market. Both appear to be going in opposite directions. The Vancouver detached market, although having a nice recovery in the spring, has failed to climb back to peak prices. The average sales price is down 8% year over year. On the other hand, you have the Vancouver condo market which could be reaching peak insanity, the sales to actives ratio recently exceed 200% for one bedroom units. Further, the average sales price is still climbing, up 14% year over year in June. The surge in condo prices is hardly surprising after a BC Government first time

Steve Saretsky -

Vancouver Condo Price to Rent Ratios Exceeds Major US Cities There seems to be no end in sight for Vancouverites hoping for more affordable housing. Vancouver condo prices are accelerating by about 2% each month, while renting isn’t getting any cheaper. According to PadMapper Vancouver was the most expensive city to rent in Canada. In June the median rent price for one bedroom units grew by 2.5%, settling at $2,090, while the median rent price for two bedrooms increased by 2.5% to $3,230. While rent prices have been increasing, they haven’t been able to keep pace with purchase prices. Hardly surprising since you can’t take out a mortgage to pay for rent, therefor rents tend to align much closer to local incomes. Here’s how the price to rent ratio’s shake up in Vancouver compared to a couple big time US cities that Vancouverites love to compare to. One Bedroom Price to Rent Ratio [table id=40 /] Two Bedroom Price to Rent Ratio [table id=41 /] So what does this mean? Here’s how Trulia Interprets Price to Rent Ratio’s: Price-to-Rent Ratio of 15 or less: Buying a home is a better deal than renting for people planning to live in a home

Steve Saretsky -

Demand For the East Side Explodes As Buyers Get Priced Out of the West As prices continue to surge, buyers are being squeezed further and further east. In fact, an incredible shift is underway, particularly amongst younger first time buyers who are desperate to enter the market.  East has become the new West, as hipsters multiply on Main Street. A great migration is underway… In June 2017, 60% of East Vancouver condos sold over asking price, that’s higher than the 53% on the West side. But even more gruesome is the sales to actives ratio in East Vancouver. It reached a mind boggling 148% in June, a new record that has never been seen before. Just for context, a sales to actives ratio of 20% is considered a sellers market. The ten year average for the month of June is 29%, so 148% last month is truly considered a blow off top. One Bedroom Condos Face Explosive Demand The demand for one bedrooms is even more fierce. One bedroom inventory has plummeted 45% year over year, pushing the sales to actives ratio to a whopping 206%. That means for every new listing there are two sales. Buyers Spend Over $96

Steve Saretsky -

Multiple Offers Surge for Vancouver Condos, Particularly on the East Side The Vancouver condo market continues it’s upwards surge into parabolic territory. In my Vancouver Condo Report June 2017 I highlighted that new listings fell year over year, and inventory plummeted 20% year over year. This has created a flurry of bidding wars, price discovery has been thrown out the window. Multiple Offers Increasing Multiple offers seem to be expected on just about any condo. Sales over asking price have been rising. In June, sales over asking price for Vancouver West condos hit 54%, that’s above last years 49%. Not included on this chart is the East side of Vancouver, where the madness was even more severe, 143/237 condos sold over asking price, or 60%. Sales to Actives Ratio Still Increasing The sales to actives ratio hit a whopping 82% in June which is indicative of an insanely hot sellers market. Days on Market Still at Record Low Naturally, days on market has remained low, currently sitting at 8 days. The standard procedure of listing it and giving it one week exposure before multiple offers is very prevalent. Buyers are being forced to speed up much of their due diligence

Steve Saretsky -

Homeowners Could Be Suppressing New Listings In Vancouver & Toronto There’s been much chatter about the apparent bursting of the Toronto real estate bubble. Home sales have plummeted 37%, meanwhile the average sales price has sunk by 14%. Sounds awfully familiar to the Vancouver real estate market after the shock of a foreign buyers tax, doesn’t it? In fact, you could argue things were even worse in Vancouver at one point. Back in January, sales in Vancouver had fallen 39% year over year, with the average sales price having plunged 24% from January 2016. Since then, Vancouver has rebounded nicely, mostly thanks to a purge of new listings. There’s been an extremely close relationship between sales and new listings in Vancouver. As sales plunged, sellers refused to sell in a falling market, slowing the bleeding. At first glance, it looks like Toronto is following a different path, sales have plunged and new listings are soaring, up 16% year over year for June… However, recent data from President of Realosophy Realty, John Pasalis, suggests new listings are now beginning to trend downwards. It begs the question, will Toronto homeowners follow in Vancouver’s footsteps and suppress new listings? Or will further policy

Steve Saretsky -

If you read my post the other day (What Rising Interest Rates Mean for Vancouver Real Estate) then you were fully prepared for today’s interest rate hikes. To little surprise, the Bank of Canada Governor Stephen Poloz hiked interest rates 25 basis points. Yep, the first rate hike in 7 years. A tweet storm erupted as a hawkish Poloz hinted at another potential rate hike coming in October. Here’s a roundup of commentary from the smartest minds in the biz. Mohamed A. El-Erian, New York Times best selling author and chief economic adviser at Allianz believes the move was aimed to tame Canadian real estate prices. Meanwhile, Jared Dillan, Strategist at Mauldin Economics and author of The Daily Dirtnap believes the move was targeted at investors who have been shorting the Canadian dollar. Of course the Canadian dollar surged after the rate hike to it’s highest levels since August, 2016. Benjamin Tal, the Deputy Chief Economist of CIBC downplayed the Bank of Canada’s rate hike and instead believes the latest stress testing which I discussed last week will have a more significant impact on the Canadian real estate market moving forward. To little surprise all 5 Canadian Banks also raised their

Steve Saretsky -

Bank of Canada Expected to Hike Interest Rates This Week Markets appear to be pricing in an imminent Bank of Canada rate hike on Wednesday. Here’s why Maclean’s believes interest rates are going up. Should Stephen Poloz and the Bank of Canada follow through with an expected 25 basis point increase it will likely have a few impacts on Vancouver Real Estate. Changing of the Guard First, it has the potential to create a psychological change or a shift in the market. The real estate market has gotten comfortable with historically low interest rates, the first rate hike in over a decade should signal to the market that borrowing money is about to get more expensive, and ultimately buyers purchasing power will be lowered. Could this trigger sellers to cash in now? With condo inventory at a decade low it would certainly be a welcoming change. HELOC Debt Will Rise Canadians owe $211 Billion on Home Equity Lines of credit. With real estate prices rising, more and more Canadians have been using their homes as ATM’s. With the average balance of a HELOC around $70,000 and nearly 40% of people with HELOC’s not making regular payments against the principal, rate

Steve Saretsky -

OSFI Calls for Stress Tests on Uninsured Mortgages In a potential landslide move, OSFI (Office of the Superintendent of Financial Institutions) released draft changes to the Residential Mortgage Underwriting Practices and Procedures, which included a stress test for uninsured mortgages & a ban on bundled mortgages. The proposed changes to Canadian mortgages include: Requiring a qualifying stress test for all uninsured mortgages; Requiring that Loan-to-Value (LTV) measurements remain dynamic and adjust for local market conditions where they are used as a risk control, such as for qualifying borrowers; Expressly prohibiting co-lending arrangements that are designed, or appear to be designed to circumvent regulatory requirements. So what does this all mean? It means all mortgages including those which have a down payment with 20% or more will be required to pass a stress test. The stress test would likely include an additional 2% rate on top of the borrowers proposed mortgage rate. This means borrowers will likely qualify for less. Further, the proposed ban on bundled mortgages targets mortgage providers teaming up with unregulated rivals to circumvent rules limiting how much they can lend against a property. This will hurt alternative lenders like Equitable Group where 10% of the company’s new mortgage originations

Steve Saretsky -

MLS Benchmark Jumps 3% Month Over Month in Vancouver The latest June data has been released and If you haven’t already read my Vancouver Real Estate Detached Report June 2017 or the Vancouver Condo Report June 2017 some of these numbers may surprise you. The MLS Benchmark price for Vancouver jumped nearly 3% month over month to $1,233,200. Full disclosure, this includes all three market segments (detached, condo, and townhouse). Vancouver MLS Benchmark For those who might be mystified by this price acceleration it’s important to also factor in real time price movements, which I find are best noted using the average sales price. As you will see below, the average sales price paints a slightly different picture. The average sales price indicates prices actually fell month over month, and have been treading water for the past year. The average sales price is up 0.3% year over year. Now this is not to say the MLS benchmark is not accurate, it just tends to lag, and does not show larger price fluctuations in a more volatile market. So how does one interpret this all? Here’s my take. The detached market appears to have flatlined, according to the average sales price

Steve Saretsky -

Vancouver Condo Inventory Plummets 20% In June This is beginning to sound a little repetitive (May Numbers Here) but the Vancouver condo market continued it’s torrid pace in June. Thanks in large parts to falling inventory, which dropped 20% year over year. Sales remained strong, as a plethora of buyers were stuck competing over the few listings available. Full analysis of sales, new listings, and prices below. Vancouver Condo Sales Condo sales fell 8% year over year but were still 13% above the ten year average. I’d argue sales could have been higher if we had more inventory as many buyers remain shutout after losing in multiple offers. New Listings/ Inventory Levels New listings dropped 3% year over year in June, and were 13% below the ten year average. Sellers appear to be nervous about selling as competition to re enter the market is fierce. Vancouver condo inventory fell to a paltry 835 units available for sale. This is a 20% drop year over year, and the fewest available condos for sale of any June in the past decade. This graph highlights just how severe the lack of available inventory really is. Vancouver Condo Prices Condo prices continued to rise

Steve Saretsky -

Detached Market Continues to Stabilize, Inventory Up 9% The detached market appears to have begun it’s seasonal downturn. This comes after a relatively decent spring season where sales returned to more normal levels. In case you missed the May 2017 numbers, you can check those out here. Let’s analyze the June numbers below. Detached Sales REBGV detached sales fell 14% year over year in June. Although it’s still a pretty substantial drop, you’ll notice it’s not nearly as steep as the 50% declines we were seeing back in the winter of 2016. However, the detached market really began to cool in the Spring of 2016, therefor the year over year sales declines from here on out should not appear very significant. REBGV detached sales were 3% below the 10 year average, which suggests a stabilization. New Listings & Inventory New listings are also recovering. There have been wild swings over the last 8-10 months as sellers have faced a ton of uncertainty with new housing policies. It appears to be business as usual, REBGV new listings were up 1% year over year in June, while Inventory is also up 9% overall. Sales to Actives Ratio REBGV- 24% Vancouver East- 20%

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The Canadian Economy

Steve Saretsky -

CRA Takes Aim at Condo Assignments & Foreign Buyers With prices escalating out of control in recent years, it has attracted a growing herd of speculators, eager to profit on a historical bull market. And profit they did. Perhaps one of the most lucrative ways to do it is through...

Steve Saretsky -

Vancouver Real Estate Overheating Led by Condo Market CMHC has it’s eye on Vancouver once again. Canada’s National housing agency believes the Vancouver real estate market is showing signs of overheating as per their latest report. “Conditions in different segments of the Vancouver market have further diverged since the beginning...

Steve Saretsky -

Vancouver Condo Price to Rent Ratios Exceeds Major US Cities There seems to be no end in sight for Vancouverites hoping for more affordable housing. Vancouver condo prices are accelerating by about 2% each month, while renting isn’t getting any cheaper. According to PadMapper Vancouver was the most expensive city...

Steve Saretsky -

Demand For the East Side Explodes As Buyers Get Priced Out of the West As prices continue to surge, buyers are being squeezed further and further east. In fact, an incredible shift is underway, particularly amongst younger first time buyers who are desperate to enter the market.  East has become...

Steve Saretsky -

Multiple Offers Surge for Vancouver Condos, Particularly on the East Side The Vancouver condo market continues it’s upwards surge into parabolic territory. In my Vancouver Condo Report June 2017 I highlighted that new listings fell year over year, and inventory plummeted 20% year over year. This has created a flurry...

Steve Saretsky -

Homeowners Could Be Suppressing New Listings In Vancouver & Toronto There’s been much chatter about the apparent bursting of the Toronto real estate bubble. Home sales have plummeted 37%, meanwhile the average sales price has sunk by 14%. Sounds awfully familiar to the Vancouver real estate market after the shock...

Steve Saretsky -

If you read my post the other day (What Rising Interest Rates Mean for Vancouver Real Estate) then you were fully prepared for today’s interest rate hikes. To little surprise, the Bank of Canada Governor Stephen Poloz hiked interest rates 25 basis points. Yep, the first rate hike in 7...

Steve Saretsky -

Bank of Canada Expected to Hike Interest Rates This Week Markets appear to be pricing in an imminent Bank of Canada rate hike on Wednesday. Here’s why Maclean’s believes interest rates are going up. Should Stephen Poloz and the Bank of Canada follow through with an expected 25 basis point...

Steve Saretsky -

OSFI Calls for Stress Tests on Uninsured Mortgages In a potential landslide move, OSFI (Office of the Superintendent of Financial Institutions) released draft changes to the Residential Mortgage Underwriting Practices and Procedures, which included a stress test for uninsured mortgages & a ban on bundled mortgages. The proposed changes to Canadian...

Steve Saretsky -

MLS Benchmark Jumps 3% Month Over Month in Vancouver The latest June data has been released and If you haven’t already read my Vancouver Real Estate Detached Report June 2017 or the Vancouver Condo Report June 2017 some of these numbers may surprise you. The MLS Benchmark price for Vancouver...

Steve Saretsky -

Vancouver Condo Inventory Plummets 20% In June This is beginning to sound a little repetitive (May Numbers Here) but the Vancouver condo market continued it’s torrid pace in June. Thanks in large parts to falling inventory, which dropped 20% year over year. Sales remained strong, as a plethora of buyers...

Steve Saretsky -

Detached Market Continues to Stabilize, Inventory Up 9% The detached market appears to have begun it’s seasonal downturn. This comes after a relatively decent spring season where sales returned to more normal levels. In case you missed the May 2017 numbers, you can check those out here. Let’s analyze the...

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The Saretsky Report. December 2022