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Vancouver Real Estate - November 2016
Anne's Real Estate Update
In This Issue


Cameron Muir, Chief Economist, BC Real Estate Association
Policy changes curb demand in the near term

My Commitment To You
How I will facilitate your property sales & acquisitions. It can be a great experience!

Sotheby’s hopes JUWAI.COM Chinese partnership will boost Vancouver real estate sales
o   Sotheby’s signs deal with ‘Zillow of China’ as companies look for edge attracting foreign buyers
o   Sotheby’s signs strategic partnership with Juwai.com, allowing listings worldwide from
     Sotheby’s to be automatically uploaded to the property portal in China.

Real Estate Board of Greater Vancouver - November 2nd, 2016
Home sale and listing activity dip below historical averages in October

Department of Finance - New Mortgage Rules
New mortgage rate stress test for all insured mortgages

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Policy changes curb demand in the near term


The Metro Vancouver housing market is grappling with a number of important factors this fall. Two policy changes at the provincial level and one significant change from the federal government are squeezing demand from both the high and low end of the market. These changes are expected to temporarily depress demand and add some uncertainty to the housing market.

The introduction of a third tier to the Property Transfer Tax earlier this year has crimped the budgets of wealthier households. While it’s easy to argue that a progressive tax is for the public good, the impact on our children and grandchildren will be more severe, as the absence of some form of indexing to inflation will mean more and more transactions with be subject to the tax in the years to come.

The second policy change was the sudden implementation of a 15 per cent tax on foreign national homes buyers. According to government figures, the tax could impact as many as many as 10 per cent of home sales in Metro Vancouver and even more in certain communities. While this tax is unlikely to curb all foreign buying activity, it'll have a discernible impact on housing demand, not to mention new construction activity and related employment growth.

Many first time buyers have just experienced the sharpest decline in housing affordability in years as a result of a third policy change. New rules introduced by the federal government on October 17 mean that home buyers securing a high ratio mortgage must now qualify at the five-year benchmark rate, even if they have negotiated a much lower five-year fixed term rate with their lender. This change will cut millennials’ and other first time and low-equity home buyers’ purchasing power by as much as 20 per cent.   

Housing demand isn’t linear. It oscillates, sometimes dramatically. This creates a significant structural problem to housing affordability as the ability of builders and developers to supply the market can either come up too short or else over shoot consumer demand. Over the long term, the housing stock expands in tandem with household growth. However, short-term oscillations in demand can lead to significant under and over supply conditions that have real consequences to home prices, as was experienced earlier this year.    

Home sales in the region reached a cyclical high in the first quarter and have been trending lower ever since. While this trajectory is typical in Metro Vancouver, the reversion back to more average consumer demand is being accelerated by the three policy changes noted above. In addition, public perception of market risk resulting from these policy changes is likely magnifying their impact and may contribute to a larger contraction in demand.

Against this backdrop are the powerful underlying forces of population growth and nation leading economic performance, along with the attendant employment growth and a large contingent of millennials who’re now entering their home buying years. This means that slowing housing demand will be a temporary event. Households will retrench their finances, pent-up demand will once again intensify and another cycle of strong demand will undoubtedly unfold. 

Cameron Muir
Chief Economist, BC Real Estate Association

CLICK HERE for the original article on REALTOR.CA.
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My Commitment To You

In addition to the standard service offered by Realtors®, I will write  a LIFESTYLE STORY, BRAND your house and SHOWCASE it. This includes:
  1. FREE  staging services: I will create an ideal environment for future buyers to imagine themselves in this new space and make it very inviting and welcoming.
  2. HIGH-DEFINITION PICTURES: The use of a professional photographer and 20 High-definition pictures to showcase your home.
  3. The creation of a HIGH-END VIDEO of your property, including drone imaging.  Having  Sight , Sound and Motion will allow to transport the consumers into your home.  This will highlight  the lifestyle associated to living in your neighbourhood area and features its benefits. A video tells best the story of your home. 
  4. Thick glossy brochures with high-definition pictures, floor plan and description of your property

For a successful sale, I will leverage my Experience and Expertise in a very competitive market by:
  1. Helping you reach the Local, Asian, American and European markets with language proficiency in English, Mandarin and French.     .
  2. Advertising  in the major local newspapers and send out newsletters and flyers to  promote your property. Putting a sign on your lawn is just the beginning: I spend lots of my costs to “PUSH” your property to get it sold in the fastest time frame. 
  3. Offering “boutique” service, and am committed to personally (no realtor's assistant) showing your house at the Open Houses and each appointment request. 
  4. Negotiating on your behalf to ensure that you receive the highest possible sale price for your home. 
  5. Warranting you to receive full transparency and open communication through the entire process.
  6. Providing a Personal & Courteous service. 

Other ancillary services that I can assist you with include:  
  1. Arranging for owners rent back
  2. Having access to architects/designers/ builders/ trade people (painting, flooring, plumbing and electrical). 
  3. Leveraging my expanded referral network and partners:
    - CPA: Tax strategies and investment planning
    - LAWYERS: Advice and guidance for your investments
    - FINANCING: Creative loan solutions for local and international buyers

Why using Sotheby’s International Realty Canada? 

Sotheby’s offers UNPARALLELED MARKETING REACH AND ADVANTAGES.

Sotheby’s International Realty is currently the most trusted name in real estate bringing instant credibility and recognition with Buyers and Sellers. Reaching the most influential group of people in the world. 

Sotheby’s International Realty has an extraordinary name in real estate and in the luxury world. 
Luxury is in Sotheby’s DNA:  has sold most cherished valuable in the world and is truly a unique global luxury brand.

GLOBAL EXPOSURE on many platforms: www.sothebysrealty.com and the cascading websites. 
  • In 2015: Sotheby’s reached 1,2 billion viewers.  In 2016: +15%  
  • Already in 2016, Sotheby’s engaged 1/7th of the world!
  • Juwai.com. All the properties are on Juwai.  (#1 real estate site in China).
  • Sotheby's offers a powerful network of 15,000 agents and 849 offices  worldwide giving access to affluent community of buyers.
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Sotheby’s signs deal with ‘Zillow of China’
as companies look for edge attracting foreign buyers
November 2, 2016

Sotheby’s International Realty says it has signed a strategic partnership with one of the leading real estate portals in China, just the latest example of real estate companies trying to get a toehold in the country.

The move comes despite new efforts to crack down on overseas investors from the British Columbia government, a move being watched closely in Ontario amid speculation some Chinese buyers have shifted their attention to Toronto.

Brad Henderson, chief executive of Sotheby’s International Realty Canada, said the parent company has spent the last two years trying to get a deal with Juwai.com — a domestic Chinese site that generates two million monthly visitors.

“It’s not that people are buying and selling through these portals, it’s how they are connecting,” Henderson said. “In China, there is the great firewall. Essentially the Chinese government have made it difficult for most if not all traffic between the rest of the world and China to get through that firewall. The benefit of Juwai is it operates on both sides of the firewall.”

Sotheby’s says China is now the second-largest source of visits to the real estate company’s website after the United States and accounts for 10 per cent of all visitors. Juwai.com says Canada is the third-largest destination for Chinese buyers, after the United States and Australia.


“The reality is that global exposure is now paramount for Canadian real estate: it is what attracts the most-qualified buyers, and the highest price for our clients’ homes. China is an important market for us, and we are proud to now be the only global luxury real estate brokerage to be able to reach Chinese purchasers who we know are interested in living, working, retiring and investing in Canada,” Henderson said.

Sotheby’s has offices in Beijing and Hong Kong but the challenge with 1.3 billion people is trying to reach the burgeoning middle class, which is growing faster than similar population segments in North America.

One industry source, who didn’t want to be identified, said he considered the deal with Juwai to be a coup for Sotheby’s.

In China, there is the great firewall.… The benefit of Juwai is it operates on both sides of the firewall

“It’s like the Zillow of China,” he said, referring to the online real estate site that is among the largest in the U.S. with 110 million homes on its database.

Dan Scarrow, vice-president of Macdonald Realty, which set up the Canadian Real Estate Investor Centre about two years ago in China, said demand for Canadian real estate remains strong in the country.

“Having a presence in China is important but you really need to know the market. The strength of your partner is key, but you really need to know about Canada,” he said, adding that he doesn’t see the Asian market slowing over the long-term despite tax changes in Vancouver. “China is going to be important for the foreseeable future.”

Edmond Luke, a Vancouver-based partner at the law firm Fasken Martineau and the head of the firm’s China practice, said for at least two or three years developers have been actively courting Chinese consumers in the country or marketing their websites in Chinese.

“They’ve doing road shows for a while,” said Luke, adding that it works for pre-sales of condominiums, but that many Chinese consumers are making real estate purchases on mini-vacations in Canada, which are partially set up to consider investments. “You’ve also got so many immigrants who have already landed here and they are probably friends or family of people who want to buy a property here. Those investors might be prepared to buy a property sight unseen because they trust relatives already here. Or they might co-invest.”

Garry Marr
Post Media

CLICK HERE to view the original article.
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Sotheby’s hopes JUWAI.COM Chinese partnership
will boost Vancouver real estate sales
November 2, 2016


The president of Sotheby’s International Realty Canada says the B.C. government’s tax on foreign buyers has put a damper on the housing market in the Vancouver region, but Sotheby’s is optimistic about a new partnership with a leading online property-listing service that targets purchasers in China.

“Our belief is we should be helping buyers and sellers of real estate on a global basis to unite the people who want to buy and sell homes,” Brad Henderson said in an interview.

Sotheby’s in Canada is part of a global network that signed a strategic partnership recently with Juwai.com, allowing listings worldwide from Sotheby’s to be automatically uploaded to the property portal in China.

“When we’re engaged by a seller, their expectation is that we’re going to expose their property to the broadest audience possible because that is going to ensure that more buyers have the opportunity to see the property,” Mr. Henderson said.

The latest batch of B.C. government statistics adds more evidence to suggest the 15-per-cent provincial tax on foreign buyers in Metro Vancouver that took effect on Aug. 2 is having a significant effect to reduce the level of non-Canadian purchases in the market.

In the seven weeks leading up to the tax’s implementation, foreign buyers accounted for 13.2 per cent of the region’s total, according to the B.C. government’s data based on land title registrations. During the two-month period after the tax was introduced, foreign purchasers accounted for only 1.3 per cent of the total number of deals closed and registered in Metro Vancouver.

Mr. Henderson said the B.C. government’s intervention came at a time when the housing market in the Vancouver region already was cooling off. “You’re trying to tinker with a market that is very complicated and very sophisticated and has a large number of players,” he said. “To say to somebody who owns a piece of real estate that they’re going to have to sell to a local buyer and not sell potentially at a higher price to someone else is, in my opinion, meddling.”

Sales volume began sliding after peaking in March, and average prices in many neighbourhoods have been decreasing from record highs earlier this year, industry observers say. “In April, the interest in real estate in Vancouver was slowing down. That was primarily from price exhaustion – in other words, people were getting anxious about the seemingly never-ending price increases in real estate,” Mr. Henderson said. “Certainly, the introduction of the 15per-cent tax caught the market by surprise. What we’re finding is that the market pauses, or freezes perhaps might be better term.”

It is too early to tell whether the tax on foreign buyers will have a long-lasting impact in scaring away foreign buyers or whether some of that demand might return, Mr. Henderson said.

Ross Kay, founder of Ross Kay Realty Consultants, said the partnership between Sotheby’s and Juwai.com is focused on catering to the needs of sellers. “They’re strategically using this promotional strategy for sellers. It’s a marketing ploy to try to get listings,” Mr. Kay said. “You have a legal obligation when you’re representing sellers to get them the highest price possible.”

The industry’s benchmark price, which depicts the sale of typical properties, reached a record high of $1.58-million in September for detached houses sold within the boundaries covered by the Real Estate Board of Greater Vancouver.

But Mr. Kay calculates an average purchase price in the broader area known as Metro Vancouver. The price for detached properties sold in Metro Vancouver in September averaged $1.36-million, up 12 per cent from same month in 2015 but down 12.6 per cent from the peak of $1.55-million in April.
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News Release - Real Estate Board of Greater Vancouver
FOR IMMEDIATE RELEASE

Home sale and listing activity dip below historical averages in October
VANCOUVER, BC – November 2nd, 2016

Reduced home sale and listing activity are changing
market dynamics in communities across Metro Vancouver.

Residential property sales in the region totaled 2,233 in October 2016, a 38.8 per cent decrease
from the 3,646 sales recorded in October 2015 and a 0.9 per cent decrease compared to
September 2016 when 2,253 homes sold.

Last month’s sales were 15 per cent below the 10-year October sales average.
“Changing market conditions compounded by a series of government interventions this year
have put home buyers and sellers in a holding pattern,” Dan Morrison, Real Estate Board of
Greater Vancouver (REBGV) president said. “Potential buyers and sellers are taking a wait-andsee
approach to try and better understand what these changes mean for them.”

New listings for detached, attached and apartment properties in Metro Vancouver totalled 3,981
in October 2016. This represents a decrease of 3.5 per cent compared to the 4,126 units listed in
October 2015 and a 17 per cent decrease compared to September 2016 when 4,799 properties
were listed.

Last month’s new listing count was 9.5 per cent below the region’s 10-year new listing average
for the month.

The total number of properties currently listed for sale on the MLS® system in Metro Vancouver
is 9,143, a 4.5 per cent decrease compared to October 2015 (9,569) and a 2.3 per cent decrease
compared to September 2016 (9,354).

The sales-to-active listings ratio for October 2016 is 24.4 per cent. Generally, analysts say that
downward pressure on home prices occurs when the ratio dips below the 12 per cent mark for a
sustained period, while home prices often experience upward pressure when it surpasses 20 per
cent over several months.

“While sales are down across the different property types, it’s the detached market that’s seen the
largest reduction in home buyer demand in recent months,” Morrison said. “It’s important to
work with your local REALTOR® to help you navigate today’s changing trends.”

The MLS® Home Price Index composite benchmark price for all residential properties in Metro
Vancouver is currently $919,300. This represents a 24.8 per cent increase compared to October
2015 and a 0.8 per cent decline compared to September 2016.

Sales of detached properties in October 2016 reached 652, a decrease of 54.6 per cent from the
1,437 detached sales recorded in October 2015. The benchmark price for detached properties is
$1,545,800. This represents a 28.9 per cent increase compared to October 2015 and a 1.4 per
cent decrease compared to September 2016.

Sales of apartment properties reached 1,178 in October 2016, a decrease of 23.7 per cent
compared to the 1,543 sales in October 2015.The benchmark price of an apartment property is
$512,300. This represents a 20.5 per cent increase compared to October 2015 and a 0.3 per cent
increase compared to September 2016.

Attached property sales in October 2016 totaled 403, a decrease of 39.5 per cent compared to
the 666 sales in October 2015. The benchmark price of an attached unit is $669,200. This
represents a 25.7 per cent increase compared to October 2015 and a 1.1 per cent decrease
compared to September 2016.

Correction Notice:
Altus Group, the provider of the national MLS® Home Price Index (MLS® HPI), discovered a
calculation error in their September 2016 reporting. This error resulted in variances of between
0.1 and 5 per cent in the benchmark prices the REBGV released for September 2016. Corrected
September MLS® HPI numbers can be found at www.rebgv.org.


CLICK HERE to download the complete stats package.  (PDF \ 0.5 MB)

*Editor’s Note: Areas covered by the Real Estate Board of Greater Vancouver include:
Whistler, Sunshine Coast, Squamish, West Vancouver, North Vancouver, Vancouver, Burnaby, New Westminster, Richmond, Port Moody, Port Coquitlam, Coquitlam, New Westminster, Pitt Meadows, Maple Ridge, and South Delta.



New mortgage rate stress test for all insured mortgages


Why is the Department of Finance implementing these new changes?
These new regulations are aimed at protecting the financial security of Canadians and supporting the long term stability of the housing market in Canada.

CHANGE: mortgage rate stress test to all insured mortgages.  What is it?
Currently insured mortgages with a term of less than 5 years, and/or a variable rate mortgage had to qualify on the Bank Of Canada (B.O.C) rate.

Under the new Department of Finance regulations, all insured mortgages, regardless of term (fixed or variable) will now have to qualify on the B.O.C rate.

How does this affect a home buyer with less than 20% down payment?
The biggest effect will be on the amount that the home buyer will be able to qualify for. Previously, the five year fixed qualified at the lender contract rate. Now, the home buyer must qualify at the Bank of Canada Rate.

Previously, for example, a five year fixed mortgage at 2.39% rate, was qualified at a 2.39% rate, under the new rules a five year fixed rate mortgage at 2.39% must be “stress tested” by qualifying at the B.O.C posted rate (Currently 4.64%).

The net result is an approximate 20% reduction in the amount of mortgage money available.

How does this affect a home buyer with a down payment of 20% or more?
There is no significant impact anticipated for home buyers placing 20% or more down. MCC has many different options and there are still a variety of solutions for the majority of home buyers.

Do I still have the option to refinance my home?
Yes, home buyers will still have the ability to refinance up to 80% of the value of their property. Specifics may differ from lender to lender.
QUALIFYING RATE
is the Bank Of Canada Conventional 5 year fixed posted rate.
CONTRACT RATE
is the rate offered by the Lender on the home buyer’s actual mortgage payments are based upon.
WHAT IS AN INSURED MORTGAGE (High Ratio) VS. NON-INSURED MORTGAGE
(Conventional/low ratio)

An Insured Mortgage is when a home buyer has less than 20% down or the mortgage is insured by either Canada Mortgage and Housing Corporation (CMHC), Genworth, or Canada Guaranty.
  • The insurance premium is passed onto the borrower. 
  • This insurance provides security to the Lender in the event of home buyer default.
  • A Non-Insured Mortgage is when a home buyer has 20% or more for a down payment and therefore is not required to pay mortgage insurance.
LENDER DISTINCTION
Are all Lenders affected equally by the new regulations?

Some Lenders take out insurance on all of their mortgages regardless of whether they are high ratio or not. Under the new regulations, brokers may need to work with Lenders that do not insure all of their mortgages in order to help home buyers qualify.
The challenge through the upcoming days will be to rethink strategy and get pre-approved again with the stress test factor included.

Start the conversation to perhaps either increase down payment or start the process of looking for a new home within your NEW imposed budget.
To place this into perspective, in 2008, fixed rates were 5.99%. This is still much higher than the current qualifying rate of 4.64%. Interest rates that borrowers will actually get are still expected to remain near record lows.
CHANGE: Restricted insurance for low-ratio mortgages.  What is it?
Mortgage loans that Lenders insure for conventional mortgages will be required to meet the eligibility criteria that previously only applied to high ratio insured mortgages. The new criteria for low-ratio/conventional mortgages will include the following requirements:
  • Property must be owner occupied - rental properities are now excluded.
  • A maximum amortization of 25 years
  • A maximum property purchase price of, or below $999,999.99
  • Minimum credit score of 600
  • Maximum gross debt service (GDS) of 39% of home buyers income and a total debt service (TDS) of 44% calculated by using the Bank of Canada conventional 5 – year fixed posted rate.
CHANGE: New reporting rules for primary residence capital gains exemption. What is it?
Currently, any financial gain from selling your primary residence is tax-free and does not have to be reported as income. As of this tax year, the capital gains tax is still waived, but the sale of the primary residence must be reported at tax time to the Canada Revenue Agency.

Who does it affect?
Everyone who sells their primary residence will have a new obligation to report the sale to the CRA; however, the change is aimed at preventing foreign buyers who buy and sell homes from claiming a primary residence tax exemption for which they are not entitled.

Why?
While officials say more data is needed, Ottawa is responding to extensive anecdotal evidence and media reports showing foreign investors are flipping homes in Canada and falsely claiming the primary residence exemption.
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Anne Mainwaring REALTOR · 5660 Yew Street · Vancouver, BC V6M 3Y3 · Canada

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