The provincial government announced its 2017 budget on Tuesday, Jan. 21, including new housing measures to cool Vancouver’s housing market. Meanwhile, soaring land values in the city continue to lead to big-ticket condo sales and increased investment in institutional sectors. Canadian real estate investors are also seeking profitable property in global markets, offering a cheaper alternative to development costs in Canada and the U.S.
This week’s top stories cover real estate-related highlights of the new B.C. Budget and multi-million dollar Canadian transactions.
Condo owners cash out with $51 million project sale – Business in Vancouver
Land assessment values have increased exponentially year-over-year, causing strata councils to consider dissolving and selling to developers for a considerable pay off. This trend is fairly new but picking up steam, as one complex in North Vancouver became among the first to get court approval to sell their complex for whooping $51 million.
The BC Supreme Court approved Anthem Properties’ $51 million bid for the 6.5-acre Seymour Estates project on Lytton Street in North Vancouver district in December. The transaction closed in late January.
Justice Lisa Warren noted the sale price is 50% higher than the property’s assessed value of $32 million, according to court documents. This pencils out to an average of $447,368 for each of the 44-year-old units.
Seymour Estates is not a strata complex. It was created as a “common-law condominium corporation” – an ownership model popular in the 1970s that the province has since banned.
Unlike a strata complex, in which each owner individually owns his or her unit in a common-law strata, each Seymour Estates owner has a “fractional interest” in the whole complex.
2017 B.C. Budget: Property transfer tax cut, more foreign tax revenue – Business in Vancouver
The new provincial budget hopes to slow the housing market by deterring foreign buyers. The tax brought in a considerable amount of revenue but is expected to decline moving forward. Property taxes will rise, bringing in even more revenue.
A projected slowdown across the B.C. housing market is expected to leave the province with $483 million less revenue from its property transfer tax in 2017/18 – a 23.9% drop year-over-year as market activity for the year ahead is forecast to return to 2015/16 levels.
Over the following two years, the province projects revenue to fall an average of 3.9% annually to reach $1.4 billion in 2019/20, compared with the more than $2 billion generated last year.
The anticipated market slowdown tracks, in part, housing starts, which are expected to drop by 28.4% this year, compared to the 33% increase seen in 2016.
“We don’t expect the real estate market to be percolating along at the level it was last year,” said Minister of Finance Michael de Jong.
Certain taxes on real estate however are expected to generate greater revenue over the years to come.
Once the current fiscal year ends, B.C. expects it will have earned $100 million in taxes on residential purchases made by foreign buyers in the Metro Vancouver region.
Total revenue from the province’s foreign buyers’ tax – implemented in August of last year – is expected to hit $150 million annually over the next three years: tax generated by $1 billion in residential properties purchased by foreign buyers annually through to 2019/20.
According to Minister de Jong, where foreign activity in Metro Vancouver’s residential real estate once constituted 15-17% of market activity, levels have dropped to between 3-5%, a sign the tax has had the “desired impact.”
B.C. also expects to see property taxes grow by an average of 4.6% per year over the next three years, bringing in an additional $593 million in taxes by 2019/20 over the current fiscal year’s estimates.
To address housing affordability, the B.C. government announced in its budget for 2017 that it will be increasing the threshold of the province’s first-time homebuyer’s program to $500,000 from $475,000, a move it estimates will save first-time buyers up to $8,000 in property transfer taxes.
The Urban Development Institute applauded the transfer tax relief. UDI President and CEO Anne McMullian said the move "will enable more locals and families to get onto the first rung of the property ladder."
Calgary developer invests in Mexico's booming resort market –Western Investor
Former Canadian Olympian and current Calgary developer Cary Mullen has recently dispelled myths about nvesting in Mexican real estate, proving the resort ownership can be safe and incredibly profitable. New property ownership changes by the Mexican government allows Canadian’s to enter the Mexican market easier than ever before.
“When I first started, I believed the rumours rather than knowing the facts,” said Mullen. “I spent thousands of dollars with lawyers in Mexico learning about the specific steps and process.”
Mullen purchased oceanfront property near Puerto Escondido in Oaxaca to build Vivo Resorts, a 76-acre gated community of luxury residences.
Some of the rumours Mullen refers to were that developers had to have property held by a Mexican bank trust and that they had to have Mexican partners.
“I learned that you could also have the trust be through some international banks such as HSBC or Scotiabank,” Mullen explained. “I learned the government had changed that rule [about partners] and a Mexican company can be owned 100 per cent by a foreigner and it can own Mexican property outright.”
Vivo, which offers built, under-construction and pre-construction condos, overlooks 800 metres (2,624 feet) of beachfront. At full build-out Mullen expects to have 114 home sites and 400 condos. Priced from US$249,000 to US$500,000, condominiums range from 1,288 square feet to 1,600 square feet. Private homes with pools range from US$329,000 to US$949,000.
Mullen said that despite some confusion in property ownership rules, sales have not been impacted. As soon as the owners find out the facts, they feel confident about buying, he said.
Diane and Bill Veniot of Edmonton were two owners who bought into the Vivo development in early stages when it only had one building up. They heard about it at a home show in 2012 and, knowing they didn’t want fractionals or time-shares, Vivo – and Mullen – attracted them.
“Cary was able to explain the ins and outs of buying,” said Diane Veniot. “He knew how to do business here, so we were confident.”
They estimate their $250,000 purchase has gone up by 40 per cent in four years.
Ottawa approves sale of B.C. retirement-home chain to Chinese group with murky ownership – Globe and Mail
Foreign investment in residential housing may be on the decline, but multi-miliion dollar institutional sales are still ramping up. The federal government recently approved a majority-stake sale in Vancouver-based Retirement Concepts to China’s Anbang Insurance The deal is said to be worth over $1 billion – but details are being kept mum, causing the Globe and Mail to question approval of the sale.
Anbang emerged from relative obscurity in recent years to snap up acquisitions around the globe – a string of deals that in 2016 helped push Chinese purchases of overseas real estate to new heights.
The company has faced repeated questions in the United States over who actually owns the giant firm and what ties it has to the Chinese state. The New York Times last year reported that a majority of Anbang was held by firms fully or partly owned by relatives of Anbang’s chairman.
It found that 92 per cent of Anbang was held by firms fully or partly owned by relatives of Anbang’s chairman, Wu Xiaohui; or his wife, Zhuo Ran, the granddaughter of former Chinese leader Deng Xiaoping; or Chen Xiaolu, son of a famous People’s Liberation Army general.
Canadian officials said on Tuesday their review of the takeover included a screening for any potential impact on national security. “No issues were raised,” a spokeswoman for Innovation, Science and Economic Minister Navdeep Bains said.
Federal officials did not explain how they have been able to get a clear picture of Anbang’s ownership and corporate structure.
Lack of transparency has emerged as a problem for the company. Last year, Anbang withdrew an application for regulatory approval of a purchase of Iowa-based Fidelity & Guaranty Life, according to Reuters, after the New York Department of Financial Services sought more details about the Beijing firm’s funding and shareholder structure – information Anbang was not immediately able to provide.
The acquisition of Retirement Concepts, a family-owned business since 1988, gives Anbang an important role in the delivery of health care in British Columbia. Concerns have been raised about what will happen when that slice of B.C.’s health care system passes into foreign control.
Retirement Concepts is the province’s highest-billing provider of assisted living and residential care services. The B.C. government paid Retirement Concepts $86.5-million in the 2015-16 fiscal year, more than any other of the 130 similar providers.
Retirement Concepts owns and operates about 24 retirement communities, mostly in B.C., except for several properties in Calgary and Montreal. It also owns unused or partly developed land that would allow a major expansion of facilities.
The Vancouver firm last fall defended the sale by saying the company’s executive team will operate the retirement-nursing homes on behalf of Anbang.