May 2018 Real Estate Update

Most regions of the province’s real estate market saw dramatic decreases in the number of units sold. Greater Vancouver was the most heavily affected with a 35.1% decrease compared to May 2017. Active listings and new listings increased throughout much of the province, with Greater Vancouver having an almost 40% increase in active listings compared to May 2017. The Bank of Canada held the benchmark rate at 1.25% for the third straight rate announcement, though economists predict the July announcement will include a rate increase.

IN THE NEWS

The housing markets in Canada are still struggling to ward off stresses induced by the stress test that requires borrowers to qualify for a higher rate than the contractual rate and provincial taxes to discourage foreign homebuyers. April and May are usually a time of intense sales activity, however across Canada, housing prices were down 11.3% in April 2018 compared to the same month in 2017 and housing transactions were down 13.9% over the same period. The sluggish trend suggests that housing markets are set for another summer of discontent. Condominium prices across Canada are bucking the trend and experienced a 14.7% increase in April compared to the same month last year. The changes to the mortgage rules are likely the cause, as would-be homebuyers settle for a less expensive condominium as a result of not qualifying for a higher mortgage.

British Columbia’s foreign-buyers tax is facing an impending court case. The 20% tax on foreign buyers of residential homes is at the center of the lawsuit filed by Jing Li, a Chinese citizen and international student who used family money to purchase a townhome in Langley. In effect, the lawsuit, scheduled to begin on June 25, is challenging what some believe is Canada’s sovereign right to impose a targeted tax on foreign nationals. Li argues that the tax is illegal because it discriminates against people on the basis of their national origin.

Li also said “I am not wanted in Canada… I feel that this anger has been directed toward people like me and other Asian nationals, due to unfair biases and stereotypes which the tax has further reinforced.”

The City of Vancouver is proposing a plan of spending for the next four years and included in the draft is a sharp increase in how much the public budget is tied to funds charged to real estate developers. Of the estimated $2.57 billion budget, over 55%, or $1.44 billion is scheduled to come from “development contributions” which are raised from charges to real estate developers. By comparison, the city’s last capital plan included development contributions of 33% or $366 million, and in 2012 it was 12% or $87 million.

A report from Royal LePage is forecasting approximately a 3% drop in the average price of a recreational home in British Columbia. The main reason for the expected downturn in prices stems from the speculation tax levied by the provincial government on out-of-province buyers. The tax for this year will be 0.5% and will rise next year to 2% for foreign investors and 1% for Canadian citizens and permanent residents not living in B.C. but owning properties in the province. The report was the result of 200 surveys conducted with real estate advisors who specialize in recreational properties.