The vacation home market across Western Canada is plentiful with bargain and luxury options alike. In B.C. alone, you can buy entire islands for the multi-millions, or settle for large acreages for less than $100K outside of Greater Vancouver. While recreation properties may offer several purchase opportunities in secondary markets, new Metro Vancouver statistics reveal building permits for new housing are way down over last year, despite an alarmingly scare inventory. The housing shortage is also at the root of a recent surge in secondary suite and laneway homes, but changes to capital gains taxation could impede on progress.
Here is Western Investor’s pick of the top four buzz-worthy commercial real estate articles published this week.
Luxury waterfront properties highlight B.C.'s recreational scene – Western Investor
Our editor Frank O’Brien gives readers the rundown on B.C. recreational properties currently for sale that offer buyers their own private island oasis.
British Columbia’s coastal recreational real estate market is ramping up once again after nearly seven years in the doldrums. Prices on the Sunshine Coast and the Gulf Islands are up about 20 per cent this year compared to 2016, according to real estate agents, and demand for higher-end property is attracting both local and foreign interest.
Western Investor has culled four of the top listings from Sotheby’s Real Estate and Colliers’ Unique Properties offerings to present four of the trophy recreational – and potential investment – waterfront real estate properties on the market right now.
Six-acre Whitestone Island on the Sunshine Coast is 30-minute flight or a 90-minute ferry-drive from Vancouver. Listed by Shaz Karim of Sotheby’s Real Estate Canada, the private island features a secured dock, municipal power and water, newly designed and quality constructed custom built four-bedroom house with a 270-degree uninterrupted view of the ocean. “Whitestone provides the comfort of modern amenities with the secluded privacy of an Island home.” Price: $4.5 million.
Mark Lester and Alan Johnson of Unique Properties Group of Colliers International have listed Bull Island, a 175-acre completely private island nestled between Lasqueti, the Jedediah Island Marine Park and Rabbit Island in BC's Georgia Strait. Situated about 35 kilometres northwest of Nanaimo, Bull Island is easily accessible by boat or float plane and features an all-weather dock and basic cabins that are suitable for seasonal uses. The island has a number of smaller coves and beaches, excellent ground water, and plenty of space to build a new home. Bull Island features two legal titles, offering the potential to purchase in partnership or to sell off one title. Price: $3.25 million.
Located in Silva Bay just off the southeastern shore of Gabriola Island, Sear Island is a completely private 28-acre island that benefits from sheltered waters while only a stone’s skip from commercial services and amenities. Sear Island boasts a luxurious two-storey 3,040 square foot main residence, and a 1,000 square foot guest cabin. The property also boasts a boathouse, deepwater dock and boat ramp. The island is serviced with municipal power, high speed internet and telephone. Sear Island has two legal titles and the current zoning allows for the development of two more residences. The property is listed by Unique Properties Group, Colliers International. Price: $5.95 million.
Cheapest recreational properties in Western Canada – Western Investor
Not feeling the price tag of owning your own private island? Here are some lakefront properties with equally-beautiful views at much more budget-friendly prices, spanning from B.C. to Winnipeg.
The benchmark price of a detached house in Metro Vancouver is now $1.3 million and a typical condominium apartment is $600,000, so $50,000 will buy less than 80 square feet of housing in the city.
But it is much different in the recreational market of vast British Columbia, where a day’s drive can lead to lakefront acreages for less than $40,000, according to exclusive data provided to Western Investor’s annual Recreational Investment Report by Niho Land and Cattle Company and its subsidiaries, LandQuest Realty Corp. and Landcor Data Corp., which tracks all B.C. real estate title transactions on a weekly basis.
We also scoured the Prairie Provinces to unearth the best recreational land prices east of the Rockies.
In British Columbia, the lake-rich Cariboo offers the best recreational value, according to Niho founder Rudy Nielsen. This year, the average price paid for a Cariboo recreational title is $87,845, a 21 per cent increase from three years earlier.
After a near-decade slump, prices are slowly recovering in the Gulf Island archipelago between the Lower Mainland and Vancouver Island. The average recreational property sale price this year is $222,624, up just 4 per cent from 2014. In the first five months of this year, 48 parcels have sold on the Islands, with an average lot size of 3.5 acres.
“The lots on Sidney Island remain the best value in the Gulf Islands in my opinion,’ said Richard Osborne, LandQuest president. “We have sold 17 lots since 2015 but there are still a few really good deals left.”
These include strata-titled oceanfront properties from $199,000 to $390,000. A new breakwater and community dock being built this summer will add value to the island community, just off the southern tip of Vancouver Island.
The other B.C. oceanfront parcels for less than the price of a Vancouver bachelor suite include on Haida Gwaii, where $139,000 will buy 6.8 acres, with sandy beach on the Pacific Ocean; and north of Tofino on the western edge of Vancouver Island, where 2.7 acres of oceanfront in Hot Springs Cove is listed at $79,000.
If you want the biggest bang for your cottage buck on the Parries, land-of-a-thousand-lakes Manitoba may be your best bet.
The average price of a Manitoba lakefront cottage is $238,600, flat from a year ago, and the lowest of any province west of the Atlantic, according to Royal LePage. Prime riverside and inland cottages located an hour northeast of Winnipeg on the west shore of the Winnipeg River are selling for an average of $340,000 and $200,000, respectively.
Vancouver housing start plunge ‘a surprise’ – Business in Vancouver
Despite high demand and a record-low inventory, new housing starts in city are down 80% from a year ago, Frank O’Brien reports for BIV. Are developers losing steam?
Single-family detached starts in the city declined from 708 to 462 houses, while starts of condominium apartments fell from 3,290 in the first half of 2016 to just 880 this year, a 73% decline.
“It is a surprise, considering the high demand,” said Vancouver real estate consultant and author Ozzie Jurock.
A report prepared for the Urban Development Institute, Pacific Region, found that, despite near-record construction levels, there were fewer than a dozen new and unsold condominium apartments in Vancouver in the first quarter – a record low.
Total housing starts across the Metro Vancouver region also fell, but by a smaller margin, to 12,200 units so far this year, compared with 14,840 in the same period a year earlier.
Increases were seen in the larger suburban communities of Burnaby, Surrey, Coquitlam and New Westminster.
Eric Bond, CMHC principal market analysis in Vancouver, noted that the number of homes under construction hit a record high of 39,141 units across all of Metro Vancouver in May and remained near that level in June. He suggested the downturn in Vancouver starts may relate to developer fatigue.
“The constraints on builders are very real in terms of the availability and costs of equipment and materials, which means further increasing the pace of construction is challenging,” Bond said.
Vancouver developer and architect Michael Geller said the lack of condo starts in Vancouver may be linked to a current backlog of applications. “[The developers] are probably waiting for permits,” he said.
CRA tax shift collides with municipal rental incentives – Business in Vancouver
Greater Vancouver city departments are trying to entice landlords to rent out more suites and build laneway homes in an attempt to add inventory to the region’s rental market – however, a recent adjustment to the capital gains tax may make landlords planning to sell their principal residence think twice.
Vancouver, North Vancouver, Coquitlam and Port Moody are among the municipalities that now or will soon allow from two to four rental suites to be contained on a detached housing lot, through rental suites and laneway houses.
The move is meant to increase the rental inventory through low-impact density and allow house owners to tap rental income to support mortgage payments on the most expensive housing in Canada.
But in 2017, Canada Revenue Agency (CRA), for the first time, will require the reporting of sales information on principal residences, which are exempt from capital gains taxation. However, the portion of a principal residence lot, such as detached laneway house, used to generate rental income could be subject to capital gains taxation when the property is eventually sold.
As an example, the City of North Vancouver now allows two rental units, including a laneway house, on single-family detached lots. In Vancouver, a proposed city-wide zoning change could allow older houses to be converted into multiple rental units and allow a laneway house on the same lot, which may even be allowed to be sold as a strata unit.
If CRA interprets the principal residence exemption to exclude some or all if the rental portion, a house owner could be subject to capital gains tax when the house is sold.
Capital gains relate to the gain in value of a property and, according to the Real Estate Board of Greater Vancouver (REBGV), the typical detached house in Vancouver has increased in value by 112% in the past 10 years and by an average of 140% in the city of Vancouver.
A Vancouver house with a laneway home and two other rental units, valued at a total of $3.6 million – the current benchmark detached house price on Vancouver’s west side – could be subject to capital gains taxation on $1 million if the regulations are strictly enforced.
“If we assume the taxpayer is at the top marginal rates payable in B.C. of $200,001 and over, the marginal tax rate will be 23.85%, so the taxes would be $238,500 on a $1 million capital gain,” explained William Cooper, a tax lawyer with Boughton Law in Vancouver.
Cooper said CRA’s closer look at principal residence taxation goes beyond foreign speculators.
“The principal residence exemption is one of the biggest tax loopholes in the history of the Canadian Income Tax Act. It has likely resulted in billions of dollars in lost tax revenues. Ordinary taxpayers played fast and loose with the reporting of taxable gains on the sale of their residences,” he said.=
No reporting of a sale of a principal residence was required by the CRA until the changes were announced in October 2016.
