Vancouver Real Estate - October 2016
In This Issue

The impact of the 15% Property Transfer Tax on Residential Property to Foreign Buyers in BC: A focus on the short term and long term aspect. 

After the perennial real estate slow summer months and the implementation of the 15% foreign buyer tax on August 2nd, the Vancouver real estate landscape is facing a new market environment.
 
Interestingly, B.C. isn’t the only jurisdiction that sought relief from high home prices focused on an influx of speculative foreign money.  Let's see what the impact of those policies have had on a few real estate markets a few years down the road.

1. Hong Kong
Hong Kong instituted a 15-per-cent surcharge on non-residents buying into the city’s hyperactive residential market back in 2012. The tax, aimed at reducing speculation by wealthy mainland Chinese, is in addition to document and transfer taxes paid by Hong Kong resident buyers. Singapore charges a similar tax on foreign buyers.

This graph shows that the various policies set up by the government did not impacted the price over the long term. And the current decline in Hong-Kong's real estate price is primarily correlated to the economic situation of the country and its connection to Mainland China, as China’s economy has been slowing down over the last one year. Many wealthy Asian also prefer investing abroad and spread their wealth.

As explained in an article dated June 24th, 2016 in the Global Property Guide by Lalaine Delmondo, Hong Kong’s residential property skyrocketed by 134% (95.7% inflation-adjusted) from 2008 to 2013, driven higher by a flood of money from developed markets’ central banks in the wake of the global financial crisis. However, the market slowed sharply in the first half of 2014, with house prices rising only by 2.9%, due to government cooling measures. But the housing market bounced back quickly in the second half of 2014, with prices rising by 8.2% in Q4 2014, 14.6% in Q1 2015, 16.9% in Q2 2015, and 12.7% in Q3 2015. Hong Kong’s currency peg to the dollar kept borrowing costs near record lows, fuelling continued property demand.

Thereafter, the housing market has slowed sharply in the past several months mainly due to the sharp decline in the flow of money following the intensification of government crackdowns on the wealthy in Mainland China. Worse, other factors are now aggravating the situation, including the following: 

• The increase in housing supply
• Intensified competition from other global cities like Tokyo, Singapore or London
• Hong Kong’s economic slowdown
• The potential interest rate rise in the U.S.
• The continuing implementation of government cooling measures

The country’s housing market is expected to remain down in the coming months, amidst anemic demand for new developments and low sales transactions. House prices are projected to drop by around 10% this year, according to Colliers International.

2. Australia
Six years ago, Australia responded to rising prices in Melbourne and Sydney by implementing a ban on foreign purchases of existing housing unless the house is demolished and redeveloped in a way that increases the number of housing units. Foreign buyers are mainly restricted to buying new housing. Temporary foreign visitors can buy existing homes as long as they are resold before that person leaves Australia.
 
Sydney: An article of the Business Insider dated July 2016 stated that "house prices in Sydney are still rising at insane levels” House prices in the city grew by a further 1.2% in June, taking the quarterly increase to a mind-boggling, and slightly disconcerting, 6.8%.Yes, that’s not a misprint. Compounded, that equates to an annual growth rate of 30%. Not something that could be sustained — at least you’d hope. From January 2009, prices in the city have now surged by 87.9%.

Melbourne: Home prices keep rising, Melbourne overtaking Sydney as reported by business journalist Michael Janda on Oct 2nd, 2016.  Home prices continue to rise strongly, with Melbourne taking the lead in growth over Sydney during the September quarter. Melbourne posted quarterly home price growth of 5 per cent, boosted by a 2.3 per cent rise during the month of September. Sydney still recorded strong price increases of 3.5 per cent over the quarter, but only 0.8 per cent last month.

On an annual basis, Sydney's 10.2 per cent price growth is still the nation's strongest, but Melbourne is closing in at 9 per cent. CoreLogic's head of Asia-Pacific research Tim Lawless said affordability constraints are becoming significant in Sydney, in particular."Household incomes, typically across New South Wales, are growing at about 4.5 per cent and we're seeing dwelling values rising at a little bit more than double that pace of growth," Mr Lawless told ABC News Online.

3. United Kingdom 
In the United Kingdom, lawmakers increased the property transfer tax in 2008, 2010 and 2012 and made it steeply more progressive in 2014 with a highest rate of 12% applied to the house value above GBP1.5m. Plus a 3% increase in stamp duty came into effect in April 2016 which applies to all Buy-to-Let purchases, and is on top of already-high existing Stamp Duty rates.

In "The Week” dated September 27th, 2016 an article highlights that "Soaring London house prices prompt 'thirtysomething exodus'. Families leaving capital as valuations rise 37 per cent in three years and rents surge ten per cent."

On September 30th, 2016 in The Guardian, it is reported that "Earlier this month, the estate agent Savills said the “prime” central London markets – those where a typical property costs several million pounds – had been hit hard by “post-referendum uncertainty” and changes to stamp duty, including April’s 3% surcharge affecting landlords and second-home buyers. It predicted that prices in these areas were expected to end this year down 9%, equating to a £360,000 drop in value for a £4m property in 2016." 

"On the other hand, dollar-based overseas buyers have been taking the opportunity to snap up UK property and make a saving of around 12% (with the lost value of the Sterling Pound), and there has been a surge in interest in buy-to-let property from investors in the Middle East, Hong Kong and other countries with currencies pegged to the dollar.“ as mentioned in the Global Property Guide on September 20th, 2016.

In summary, all those policies do have short-term impacts on the various markets, but it seems that in the long term, the demand for homes in those markets is continuing to rise and the prices are still going up. 

SO WHAT ABOUT THE VANCOUVER MARKET?

Upon the implementation of the foreign buyer tax, many overseas buyers, that were then looking at buying in Vancouver, decided to buy somewhere else. Most of this money has not left BC or Canada, but has shifted to Toronto, Victoria, Kelowna, Squamish/Whistler and to Chilliwack/Abbotsford, as those areas are not geographically included in the tax scope. A few investors also decided to buy in Seattle instead.

According to Sotheby's:
“The introduction of the 15% foreign buyer tax by the Provincial government on August 2 injected uncertainty into the market, and is anticipated to moderate sales activity and velocity in the fall”.

“Despite temporary uncertainty, the city’s market fundamentals are robust and resilient, leading to anticipation that the market will return to more normalized but healthy levels of activity in spite of changes to tax policy.”

"Home affordability will remain a concern, however."

“Recent policy measures are not expected to significantly dampen real estate prices this fall during an adjustment period that is expected to span several months, while the long term effects of this tax remains to be seen.”


Based on my activity, I have observed a market shift especially within the single residential family dwelling segment. Single family home prices have gone down by an average of 7.5 % and up to 10% over the month of August in certain price brackets.  The wheel is turning in favour of the buyers and now might be a good opportunity to get into the West Side.

Contrarian buyers who had been on the look-out, but in the waiting mode are now back checking with their banks and are making sure they are pre-approved in case an interesting opportunity comes up.   The MLS HPI Benchmark price of detached homes on the West side is still remaining at +32.1% compared to last September and +32.4% on the East side as per the latest REBGV statistics.
 
It is interesting to note that the condo market is still holding strong, especially in the nice neighborhoods, great quality buildings with proactive-strata. Please see the article attached in my newsletter on the latest Bosa development named Cardero. 

While the market as a whole might still face some downward pressure, single family dwellings as you know are the rarity with strong fundamentals and therefore will be the first to bounce back. 
Vancouver remains a very good location to buy especially when you compare the cost of a 700 sqft LEASEHOLD condo in Shanghai that remains 2.5 times more expensive than what it costs here. 

The very positive economic factors for Vancouver include: 

• Immigration and population growth have been strong. As you may know, I have lived in Paris, Hong Kong, Dubai, Taipei and London, spend time in Sydney and finished by settling in Vancouver 18 years ago like so many of us have done, and future people will do the same, as Vancouver is such an amazing place on this Earth.
• Real GDP growth in BC is forecasted to lead the country at 3% in 2016 and 2017, the highest in the country.
• The loony is very low.
• The interest rates are remaining low.
• There is still a lack of housing for the high demand even though inventory is starting to increase. 
• Flight frequency between Asia and Vancouver are also scheduled to increase by 30% in the near future contributing to showcase Vancouver to many more tourists and potential investors.

My Commitment To You

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.

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. 

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

• In 2015, Sotheby’s reached 1,2 billion viewers thanks to its association with the Wall Street Journal, the Financial Times, the New York Times, Mansion Global, Yandex.com, Hong Kong Tatler, and many more. 
• Already in 2016, Sotheby’s engaged 1/7th of the world (Up 15% from 2015)!
• 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.

Tax shows no sign of slowing luxury condo market as Bosa's Cardero project sets new high price
September 27th, 2016