Blog › September 2016

AirBnB and Other Short-Term Rentals to Require Business Licence


Vancouver condos and apartments

Home owners renting out their units through AirBnB, VRBO or other short-term rental platforms will be required to get a business licence first – and will only be granted one if the property is their primary residence, according to a proposed City of Vancouver policy announced September 28.

The move is intended to encourage the kind of AirBnB use that is considered vital to the “sharing economy” – such as renting out your home while you’re on vacation, or staying elsewhere – without allowing short-term stays to dominate the rental market and price out local long-term renters.

Investment properties and secondary residences in the city, which are subject to the new empty homes tax that aims to encourage those properties to be put into the long-term rental market, will not be granted a short-term rental licence.

Mayor Gregor Robertson said that the proposed short-term rental licence could force up to 1,000 Vancouver homes back into the long-term rental pool.



Dodging Vancouver’s Vacant Home Tax Could Result in $10K Fine


Vancouver condos
More details of Vancouver’s proposed vacant home tax came to light September 20, as staff presented their report to City Council and requested approval for their public consultation budget.
The presented report, which is available online, confirmed that the “Empty Homes Tax” will operate using a self-reporting process – just like income tax – and will be audited by the City on a random basis and in response to complaints made to the City by neighbours and other residents.
Staff told council that the penalties for those found to be avoiding the tax should be stiff – as much as $10,000, which is the maximum fine the city can issue.
Staff are also asking council to approve the $220,000 budget needed for the public consultation process on the tax, to be held this fall – some $210,000 of which will pay for letters to the public informing them of the consultation process, with $7,500 paying for open-house discussions and workshops, and $2,500 for the final report to be presented to council.
The proposal report outlines scenarios in which home owners would be exempt from the tax, such as those using it as a primary residence, those who have tenants or family members living in the property full time, those who live in the property for part of each week on a commuting basis, and where homes are awaiting demolition or renovation, with permits.
However, the public consultation will be used to determine whether certain grey-area scenarios should be exempt from the tax or not – such as where the home is used for just a few months of the year by the owner, whose primary residence is elsewhere.
The process will also help staff determine the amount of the tax that will be levied, which the report says could be as low as 0.5 per cent or as high as two per cent of the assessed value of the home, payable on an annual basis.
On an empty home worth $1 million, that would come to between $5,000 and $20,000 a year in additional taxes, on top of regular property tax.
Arnon Dachner, partner at Dentons LLP, was jokingly asked at an Urban Development Institute luncheon September 16 whether he would complain to the City if he thought a neighbouring home was left vacant. He said, “I’m not really a snitcher – as long as they don’t park in front of my house while leaving their house vacant, I don’t mind! I don’t really hold with the ‘snitching on your neighbours’ process. But a lot of our taxation systems, like income tax, are based on self-reporting. And yes, there will be audits. But I don’t relish the idea of people knocking on each other’s doors to try to ascertain whether the home is vacant.”
He added, “I think it will make for a great new business – the guy who mows the lawn, who drops off the fake grocery bags, who takes out fake garbage bags…”


Canadian Home Sales Take a Vacation in August


Sales activity down month-over-month in 60 per cent of Canadian markets – an anticipated August lull for many, with the Lower Mainland a national anomaly

house for sale sign

The number of home sales in Canada fell by 3.1 per cent compared with the month before, which was the largest monthly drop since December 2014, according to statistics released September 15 by the Canadian Real Estate Association (CREA).

This was led by a steep decline in Greater Vancouver following the introduction of a new property transfer tax on homes purchased by foreign buyers, said the association. CREA pointed out that August marked the sixth consecutive monthly decline for home sales in the Lower Mainland, as transactions in Greater Vancouver and the Fraser Valley had already been falling from their peak of spring 2016.

Much of the monthly declines in national sales in recent months reflect slowing activity in the Lower Mainland, added the report.

home sales Canada vs Greater Vancouver August 2016

However, when home transactions are examined year-over-year, sales activity (not seasonally adjusted) was up 10.2 per cent across the country compared with August 2015. Sales were up from year-ago levels in about three-quarters of all Canadian markets, led by Greater Toronto. Greater Vancouver was not one of those markets, however, posting the largest year-over-year sales decline.

“The sudden introduction of the new property transfer tax on homes purchased by foreign buyers in Metro Vancouver has created a cloud of uncertainty among home buyers and sellers,” said Cliff Iverson, CREA president.

“That the tax applies to sales that had not yet closed shows how the details for a new tax policy can unnecessarily destabilize housing markets. More broadly, it speaks to the importance of evidence-based decision making to ensure that unintended consequences and collateral damage are minimized when new policies or tighter regulations affecting housing markets are being actively considered.”

Gregory Klump, CREA’s chief economist, pointed out, “Single family homes sales were already cooling before the new land transfer tax on foreign home buyers in Metro Vancouver came into effect. The surprise announcement of the new tax caused sales to brake hard.”

The national average price for homes sold in August 2016 was $456,722, up 5.4 per cent compared with the same month last year, which is the smallest annual increase since January 2015. CREA said that the national average price “continues to be pulled upward by sales activity in Greater Vancouver and Greater Toronto, which remain two of Canada’s tightest, most active and expensive housing markets.”

home prices Canada vs Greater Vancouver August 2016

The report said that if Greater Vancouver and Greater Toronto are excluded from calculations, the average price is reduced by nearly $100,000 to $357,033.

However, the report added, “Greater Vancouver’s share of national sales activity has diminished, causing it to have less upward influence on the national average price.”

The slowing activity in the Lower Mainland was a driver in the CREA’s updated housing forecast for 2016, which was also issued September 15.

Home sales across Canada are forecast to rise by 6.0 per cent year over year to a record 535,900 units in 2016, which is just slightly down from CREA’s previously predicted sales increase of 6.1 per cent to 536,400 units this year. Strong gains in Ontario are expected to be offset by a slight decline in anticipated whole-year activity for BC.

Despite this, among the larger provinces, British Columbia is still forecast to post the largest annual increase in activity this year (up 14.6 per cent), even though "much of that strength is in the rearview mirror at this point,” according to the CREA.



Fraser Valley Real Estate, August 2016


Fraser Valley real estate sales dropped slightly year-over-year in August and by a significant margin compared with July, according to Fraser Valley Real Estate Board (FVREB) figures released September 2.

The decline was driven by a fall in detached home sales, with condo sales continuing to rise both month-over-month and year-over-year, and benchmark prices for all property types also increasing.

However, those benchmark prices varied wildly between different neighbourhoods, as our infographic below reveals.

To read the full story and analysis of FVREB’s August statistics, click here

FVREB Statistics August 2016



Vancouver Home Sales Down in August – But Not by as Much as Predicted


Real estate transactions drop 26 per cent, far less than early August figures suggested, as benchmark prices hold steady 

Vancouver from West Van Lions Gate bridge

Metro Vancouver home sales in August fell by 26 per cent year over year and by nearly 23 per cent compared with July, according to a Real Estate Board of Greater Vancouver (REBGV) report published September 2.

However, the overall sales decline in August is markedly less dramatic than suggested by early August figures, which showed transactions for those two weeks were down by as much as 63 per cent year over year. The new figures suggest that the first two weeks of August saw a brief hiatus in activity following the introduction of the new overseas buyer tax, which then recovered towards the end of the month.

Nevertheless, sales were still low for August, with the number of transactions falling below August's 10-year average for the first time in many months.

“The record-breaking sales we saw earlier this year were replaced by more historically normal activity throughout July and August,” said Dan Morrison, REBGV president. "Sales have been trending downward in Metro Vancouver for a few months. The new foreign buyer tax appears to have added to this trend by reducing foreign buyer activity and causing some uncertainty amongst local home buyers and sellers.

“It’ll take some months before we can really understand the impact of the new tax. We'll be interested to see the government's next round of foreign buyer data."

Despite the slowdown in sales, the board’s benchmark home price (the price of a typical home, based on its features, in a given area) continued to rise. The MLS® Home Price Index composite benchmark price for all residential properties in Metro Vancouver increased to $933,100 in August – a 31.4 per cent rise compared with August 2015 and a 4.9 per cent increase over the last three months.

“In aggregate, we continue to see an imbalance between supply and demand in most communities. However, we’re also seeing fewer detached sales in the highest price points and fewer detached home sales relative to all residential sales,” said Morrison.

“This is causing average sale prices to show a decline in recent months, while benchmark home prices remain virtually unchanged from July.”

The board explained that the average price of a home is the simplest home price measure but is not the most accurate since it may be skewed by the mix of properties. More high-end or low-end sales will skew the number up or down. Based on the Consumer Price Index, MLS HPI® benchmark prices are a more reliable and stable indicator of typical home prices across regions over time, said the board.

Sales and Listings

Residential property sales in Greater Vancouver totalled 2,489 in August 2016, a decline of 26 per cent compared with the 3,362 sales in August 2015, and a decline of 22.8 per cent compared with July this year. August's sales were 3.5 per cent below the 10-year sales average for August, which is the first time it has dipped below that measure in many months.

 

Looking at August’s figures by property type reveals huge variations. Once again, single-family home sales saw the biggest drop with only 715 sales last month, a decrease of 44.6 per cent from the 1,290 detached sales recorded in August 2015.

Sales of attached properties such as townhouses and duplexes in August totalled 431, a decrease of 25.4 per cent compared with the 578 sales in August 2015.

There were 1,343 condo-apartment sales in the region in August 2016, a decrease of 10.1 per cent compared with the 1,494 sales in August 2015.

New home listings on the Greater Vancouver MLS® increased by 0.3 per cent year over year to 4,293 in August 2016. However, this is an 18.1 per cent decrease compared with July this year when 5,241 properties were listed, as ever-fewer sellers listed their homes during the summer months.

Total listings on the MLS® in Metro Vancouver as of the end of August stood at 8,506 homes, a 21.9 per cent drop compared with August 2015’s 10,897 listings, and a 1.9 per cent increase from July 2016 (8,351).

The sales-to-active-listings ratio for August stood at 29.3 per cent. Although this ratio continues to put the region firmly in a seller’s market, this figure is currently falling after a sustained period of 50 per cent or more.

Benchmark Prices

Even with the fall in home sales over the past two months, the board set another record benchmark composite home price in August at $933,100, slightly over that of July ($930,400) and a 31.4 per cent increase compared with August 2015.

However, breaking this down by property type reveals that detached home prices took a slight hit in August, with the benchmark price falling compared with the previous month, now at $1,577,300 compared with July’s $1,578,300. However the August figure is still 38 per cent up over August 2015.

The August benchmark price of a townhome or other attached unit in Greater Vancouver rose by 31.1 per cent compared with August 2015 to $677,600, up from July’s $669,000.

Condo-apartment benchmark price in August rose 26.9 per cent from August 2015 to $514,300, a slight rise over July’s typical condo price of $510,600.

Home prices vary widely throughout the REBGV region. To get a good idea of home prices in a specific location, check the detailed MLS® Home Price Index in the REBGV full statistics package.