The Ups & Downs of BC Real Estate in 2016
What a year it’s been for real estate in BC. It was a roller coaster ride of positive and negative news, from soaring values in Vancouver to the shadow flipping scandal, the foreign buyers tax, tough new mortgage policies and then Donald Trump’s US presidential election win… 2016 has seen it all. Here are the highlights of our year in real estate.
Rocking the real estate world in February was the BC Budget, which sidelined first-time buyers in favour of subsidizing buyers of new homes, And first-time buyers were also shocked by the increase in the minimum down payment for homes above $500,000. Then came the "shadow flipping" scandal. Where some real estate agents were taking advantage of Greater Vancouver sellers by marking up and assigning their transactions to unsuspecting foreign buyers for big profits.
The spring real estate market in BC was accelerating at a break neck pace as March would turn out to be the hottest month of the year for Greater Vancouver home sales, and the busiest on record of any year. But After conducting a vacant home study, the Vancouver Mayor announced in June that 10,800 empty homes was unacceptable and that he would be implementing a vacant home tax “with or without” the province’s backing.
After incorporating new rules against contract assignments in May, the government also took away the real estate industry's self regulation, going further than its Independent Advisory Group's recommendations and announcing that the Real Estate Council of BC would be overhauled and governed by a new superintendent.
The big news of July came right at the end of the month, when the BC government did a full 180-degree turn and announced that a new foreign buyer tax, amounting to an additional 15 per cent in property transfer tax, would be imposed in early August. This left the real estate industry scrambling as buyers tried to complete their deals before the deadline and sellers anxiously waited to see if their contracts would complete. After numerous reported deals collapsing under the August deadline, the collateral-damage local victims of the tax launched a class-action lawsuit September 19 against the BC government for damages incurred.
Another policy-shocker in October came in the form of strict new mortgage qualification rules for all Canadians. The federal government announced that anyone applying for a new insured mortgage on a home, would have to undergo a “stress test” by qualifying for the mortgage under much higher hypothetical rates, to ensure they could afford a rate increase in the future. first-time and low-income buyers would be the most affected by this policy, which could push many of them out of the reach of home ownership entirely.
If all of the above wasn’t enough, early November saw the shocking victory of Donald Trump’s US presidential campaign. Immediately, Lower Mainland home searches from US sources tripled the day after the election.
In early December, the City of Vancouver approved an additional 0.5% property tax increase in order to create a $3.5 million fund to help solve the fentanyl crisis sweeping the city (and, indeed, country). After already burdening Vancouver homeowners with a 3.4% tax increase this essentially put them firmly on the hook for the opioid epidemic.
Premier Christy Clark provided even bigger news in December announcing a new loan program to match first-time home buyers' down payments up to five per cent of the home's value. This move was received with extremely mixed reactions from the real estate industry and local economists, and some confusion from buyers themselves. Especially considering all the warnings from the government to intervene with further regulations as household debt continues to rise.
Change is in The Air
The British Columbia government is in the midst of a wide-ranging overhaul of how the housing market is regulated and taxed, amid growing concerns that foreign ownership, rampant speculation and unscrupulous agents are fueling an affordability crisis. These sweeping changes will affect how we all do business in real estate. Transactions are getting more complicated, liability is increasing for all parties and knowledge and expertise are becoming evermore important.
Government authorities introduced many changes that are affecting all property Buyers and Sellers, including:
- CSA certification for all factory built homes including modular, mobile & park model homes
- WETT certification of all wood burning appliances
- GST implications for income producing properties
- Mandatory licensing of water wells
- New stress tests for buyer financing
- Interest free down payment loans to first time buyers
- Mandatory declaration of the sale of your principal residence on your tax return
- Increase to Property Transfer Tax
Whether you're the buyer or seller of residential real estate, it is important to understand the associated risks before issues arise that could hinder the sale or cause litigation. An example of some recent issues that I have witnessed between buyers and sellers:
- Inability to distinguish between a rent to own agreement vs vendor financing
- difference between an easement and right-away
- purchasing without confirming home has a registered home warranty program
- Not obtaining a survey map if unsure of existing property lines.
It will be hard to beat the insanity of 2016 as it brought emotional reaction to many problems and changes that can affect us all. We're hoping to see a little more balance in 2017 but as we experienced last year, anything can happen.