Our first Weekly Buzz of the New Year takes a look at the ever-buzzy topic of foreign ownership in Vancouver. Since the foreign buyer tax came into affect, studies have found the foreign buyers still continue to dominate the luxury home and condo markets. Meanwhile, the emerging popularity of Bitcoin currency has forced local real estate councils whether to accept it as a form of payment for real estate. Vancouver’s apartment market continues to be white-hot, while slow building starts suggest demand will remain on a high into 2018.
Here is Western Investor’s pick of the top commercial real estate stories published this week.
A study by Engel & Völkers shows that international buyers dominate luxury home and condo markets in areas such as Shaughnessy, which earns the distinction of having the most expensive homes in Canada.
Engel & Völkers maintains that foreign buyers remain a dominant force in Vancouver’s high-end housing sales, though a recent survey by Statistics Canada found that foreign ownership in Metro Vancouver now represents less than 5 per cent of all residential sales and 7.9 per cent of condo purchases.
“International buyers dominate Vancouver’s luxury property market, accounting for 85 per cent of transactions,” said Greg Carros, managing director and principal at Engel & Völkers Vancouver.
“Chinese citizens make up the largest buyer group here, followed by French and German buyers.”
Engel & Völkers picks East Vancouver for higher price appreciation in 2018, noting that a “new segment of affluent residents are starting to move into Vancouver’s downtown East Side at an accelerated rate. Gastown’s eclectic charm continues to keep the neighbourhood in demand in 2018.”
In Calgary, the highest priced homes were found in the Pump Hill community, at more than $12 million. The most expensive condo apartments were in the downtown and southwest and reached up to $700 per square foot, the survey found. Foreign buyers account for less than 15 per cent of Calgary’s luxury market, according to the study.
Toronto’s Bridle Path is the most expensive area for detached properties in that city. Asking prices here for detached houses were as high as $11 million. The highest price fetched for condominiums was in Rosedale, at $1,300 per square foot.
In comparison, the most expensive detached houses in Montreal’s famed Golden Square Mile peaked at $11.9 million in the survey, which used sales data to the end of September 2017. The highest asking price for condominiums was also in this downtown neighbourhood at the foot of Mount Royal, at $1,440 per square foot.
Further to our previous article, this story from North Shore News shows that foreign ownership forms a bigger part of the buyer market than what meets the eye, especially in West Vancouver.
Only about 3.3 per cent of the North Shore’s residential properties are owned by people outside the country, according to numbers released by Statistics Canada and the Canada Mortgage and Housing Corporation this week.
But an expert in housing and planning says there is much more to the numbers than may first appear.
Of West Vancouver’s 16,334 residential properties 6.2 per cent are owned by non-residents, which CMHC defines as an owner whose principle residence is outside of Canada. Only Vancouver and Richmond are higher at 7.6 per cent and 7.5 per cent respectively. Across the region, 4.8% of properties are owned by non-residents.
The District and City of North Vancouver both came in well below the regional average with 2.4 per cent and 3.8 per cent respectively.
But Andy Yan, director of community data science at SFU’s city program, said the most telling patterns only emerge when you drill down into the geography, housing type, price and age of the homes that non-residents own.
In West Vancouver, the average price of a home owned by a non-resident is worth just under $3.8 million while resident-owned properties average just over $3.1 million, a 22 per cent difference.
“That’s not chump change,” Yan said.
By contrast, in the City of North Vancouver, where non-residents were more likely to own condos than houses, non-resident-owned homes were worth roughly 20 per cent less than homes bought by residents.
Owners from outside the country are also more likely to buy new housing. Of the condos built in West Vancouver between 2011 and 2015, 18 per cent are owned by non-residents, according the Yan’s analysis, compared with the regional average of 10 per cent.
Nine per cent of the new condos that came onto the market in the City of North Vancouver in 2016 and 2017 are owned by someone whose primary residence is outside Canada, the stats show.
About 7 per cent of the single-family homes constructed in the District of North Vancouver in the last two years are non-resident owned. West Vancouver continued to top the regional average with 10 per cent of all new single detached homes being sold to people who lived outside the country in the last two years.
That West Vancouver is favoured by outsiders is a window into how local properties are marketed abroad, Yan said.
“It really shows you how network-driven these types of patterns are and what type of particular immigrant and global networks are at play here,” Yan said.
The data should colour the debate about development and the degree to which it can help the affordability crisis, Yan added.-
The Real Estate Council of British Columbia has forbad brokers from accepting cryptocurrencies, while some developers are open to Bitcoin practices.
“While bitcoins can be used legitimately for many purposes, there are also significant risks associated with them, including the risk that the currency may be used to disguise the source of money derived from criminal activities – commonly known as money laundering,” the Real Estate Council of British Columbia (RECBC) told Business in Vancouver in a statement.
The industry's regulator added that deposits on homes in B.C. must be held in trust, unless otherwise stated in the sales contract.
“Because bitcoins exist outside of the purview of banks and governments, they cannot be held in trust,” the RECBC said. “This means that brokerages and lawyers cannot receive a Bitcoin deposit and hold it in a trust account.”
The Canadian government’s Financial Transactions and Reports Analysis Centre (Fintrac) requires licensees to determine the identity of any individual involved in a cash transaction of $10,000 or more.
“Because the source of a Bitcoin payment may not be discoverable, as in a cash transaction, we advise licensees to carefully consider their Fintrac reporting requirements under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act,” noted the RECBC.
RECBC’s stance that brokers are not allowed to accept Bitcoin was a disappointment to Oneflatfee.ca realtor Mayur Arora, who told Business in Vancouver in January 2016 that he was willing to accept commissions in Bitcoin.
Soon after BIV reported Arora’s intention, RECBC officials told him that commissions could not be in Bitcoin.
“I could have been a multimillionaire had I done that, but I didn’t,” Arora told BIV last month.
Bitcoin was valued at about US$400 in January 2016, or little more than 2% of its current value.
Some apartment listings are going for nearly double the amount they were purchased for just last year, paving the way for a white-hot multi-family market in 2018.
Mayfair Properties Ltd. is selling MC2, bought from Intracorp Projects Ltd. in 2013 for $26.8 million. The 110-unit project is fully leased and listed with the Goodman team at HQ Real Estate Services Ltd. for $54 million.
“It’s been a very successful project from a lease-up perspective,” Mark Goodman said as the project hit the market last month. “There was very little precedent at the time for modernized new suites with dishwasher and laundry in a part of town that hadn’t really been developed.”
The project’s success has paid off for Mayfair, supporting a doubling of what it paid (and then some) in the current list price.
“It was a big price when they paid,” Goodman said. “They took the risk and now, fast--forward, very positive things have happened.”
Those things aren’t necessarily positive for renters, of course: vacancies in Vancouver rental apartments remain low despite new construction, and rents continue to increase. Average monthly rents in MC2 run from $1,430 for studios and one-bedrooms to $2,338 for two-bedrooms. This compares with the city of Vancouver average Canada Mortgage and Housing Corp. (CMHC) reports of $1,388 a month for leased units and $1,547 a month for vacant and available units.
Vancouver closed 2017 with promises of great advancements in affordable housing, including rentals. Yet as the year closed, starts lagged behind 2016 by nearly half.
CMHC figures indicate 1,717 rental starts in the city of Vancouver in 2017’s first 11 months, down from 3,245 in all of 2016. Hardest hit were non-market units, with just 31 units started versus 414 in 2016.
Regionally, 4,328 rental units were launched across Metro Vancouver in 2017’s first 11 months, down from 6,841 in all of 2016. Of these, 266 were non-market units – about half the 2016 tally of 536.