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BC’s Ban on AirBnB Rentals Doesn’t Solve Anything – New Stats

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A recent Statistics Canada (StatCan) report reveals that short-term rentals, which could be repurposed as long-term housing, make up only a small fraction of the total housing stock in British Columbia. Despite efforts to regulate these rentals, their impact on overall housing availability remains minimal.

According to the report, the proportion of short-term rentals in B.C. that could be converted into long-term housing nearly doubled between 2017 and 2023, surpassing rates seen anywhere else in Canada. However, these “potential long-term dwellings” still account for less than 1% of all available housing units.

“In the housing market, short-term rentals still represent a small share of the total housing units,” the report’s authors noted.

This analysis coincides with the introduction of stricter regulations in B.C. designed to curtail the number of short-term rentals and boost housing supply. As of May 1, new rules restrict short-term rentals to homeowners’ principal residences, including basement suites or laneway homes on the same property.

Premier David Eby defended the legislation, stating, “The number of short-term rentals in B.C. has skyrocketed, removing thousands of long-term homes from the market. We’re taking strong action to rein in profit-driven mini-hotel operators, create new enforcement tools, and return homes to the people who need them.”

Despite these measures, StatCan’s data shows that short-term rentals eligible for long-term use comprised less than 0.5% of housing units in Canada’s five largest metro regions in 2021, with Metro Vancouver recording the highest rate at 0.45%.

These findings align with a 2023 report from the Conference Board of Canada, which concluded that Airbnb activity in most cities is too small to significantly affect rental prices.

“The short-term rental market simply isn’t large enough to influence rental prices meaningfully,” said Tony Bonen, an executive director at the Conference Board of Canada. He described the impact of short-term rentals on the housing supply as “a drop in the bucket.”

Bonen emphasized that the number of short-term rentals is too small to bring about widespread changes in rental prices. “If the goal is to reduce short-term rentals to lower rental prices across the market, it’s just not going to happen,” he added.

The StatCan report concentrated on short-term rentals that could be converted into long-term housing, specifically units listed for more than 180 days a year. Vacation properties like cottages and dedicated vacation homes were excluded. The report also acknowledged that housing affordability is influenced by many complex factors, including multiple-property ownership, population growth, and interest rates.

In Vancouver, around 2,400 short-term rental units in 2021 could have been used as long-term housing, representing 0.8% of all housing in the city. This was the highest rate in Metro Vancouver, but cities like Kamloops, Kelowna, and Victoria had even higher rates—1.4% in Kamloops and 0.9% in Kelowna and Victoria.

Tourist destinations such as Whistler, Sun Peaks, and Tofino had much higher rates, ranging between 20% and 40%. These areas are exempt from B.C.’s short-term rental regulations due to their importance in supporting tourism and stimulating the local economy.

Bonen noted that the remote locations and limited accommodation options in some of B.C.’s resort towns likely contributed to the higher proportion of short-term rentals suitable for long-term use. “Short-term rentals have filled a gap in some of these harder-to-reach areas,” he said, emphasizing the need for a balanced approach in resort communities.

“The major challenge remains making rent affordable for Canadians,” Bonen concluded. “While regulating short-term rentals can be part of the solution, it’s not going to have a substantial impact on its own.”

Vancouver Real Estate Market Update – August 2024

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Metro Vancouver’s housing market is experiencing a surge in newly listed properties, with inventory rising nearly 20% year-over-year in July. Despite this increase, the number of transactions has not kept pace, highlighting a disconnect between supply and demand.

According to the Greater Vancouver REALTORS® (GVR), residential sales in the region totaled 2,333 in July 2024, a 5% decrease from the 2,455 sales recorded in July 2023. This figure is 17.6% below the 10-year seasonal average of 2,831, suggesting that buyers remain cautious despite favorable market conditions.

“The trend of buyer hesitation that began a few months ago persisted in July, even after the Bank of Canada reduced the policy rate by a quarter percentage point,” said Andrew Lis, GVR’s director of economics and data analytics. “Given the recent half-point decline in the policy rate and the abundance of inventory, it’s surprising that transaction levels are still below historical norms as we reach the mid-summer point.”

In July 2024, there were 5,597 newly listed detached, attached, and apartment properties on the MLS® in Metro Vancouver. This represents a 20.4% increase from the 4,649 properties listed in July 2023 and is 12.7% above the 10-year seasonal average of 4,968.

The total number of properties currently listed for sale on the MLS® in Metro Vancouver is 14,326, a 39.1% increase from July 2023, when there were 10,301 listings. This is also 21.5% above the 10-year seasonal average of 11,788.

The sales-to-active listings ratio for July 2024 across all property types is 16.9%. For detached homes, the ratio is 12.8%; for attached homes, it is 20.1%; and for apartments, it is 19.3%. Historical data suggests that home prices face downward pressure when the ratio stays below 12% for a sustained period, while upward pressure occurs when it exceeds 20% over several months.

“The market is experiencing balanced conditions, with inventory levels not seen in years,” said Lis. “Price trends across all segments have leveled out, with modest declines month over month. While it’s uncertain if softening prices and improved borrowing costs will encourage buyers as we approach the fall market, it’s worth noting that it can take time for better borrowing conditions to translate into increased transactions. We will be monitoring the market for signs of increased activity in the coming months.”

The MLS® Home Price Index composite benchmark price for all residential properties in Metro Vancouver is currently $1,197,700. This represents a 0.8% decrease from July 2023 and a 0.8% decrease compared to June 2024.

Detached home sales in July 2024 reached 688, a 1% increase from the 681 detached sales recorded in July 2023. The benchmark price for a detached home is $2,049,000, representing a 2.1% increase from July 2023 and a 0.6% decrease compared to June 2024.

Sales of apartment homes totaled 1,192 in July 2024, a 6.9% decrease from the 1,281 sales in July 2023. The benchmark price for an apartment home is $768,200, which is a 0.3% decrease from July 2023 and a 0.7% decrease compared to June 2024.

Attached home sales in July 2024 amounted to 437, a 6.2% decrease from the 466 sales in July 2023. The benchmark price for a townhouse is $1,124,700, representing a 1.4% increase from July 2023 and a 1.2% decrease compared to June 2024.

Metro Vancouver Sees Largest Quarterly Presale Inventory Release In Two Years

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Metro Vancouver has just experienced the largest quarterly presale inventory release since mid-2022, according to a recent report by real estate sales and marketing firm MLA Canada. The second quarter of 2024 saw a significant influx of new units hitting the market, with varied absorption trends across the region.

In Q2 2024, around 5,850 units were released: 1,600 in April, 2,000 in May, and 2,250 in June. This surpasses the supply release of over 3,000 units in October 2023 and is comparable to Q2 2022, which saw approximately 5,900 units released.

However, despite this surge in inventory, sales velocity in the presales market has been slow. Demand, as measured by the number of units sold and same-month absorptions, was higher in previous quarters than in Q2 2024. MLA Canada notes that while same-month absorptions were notably high at the start of the year, fueled by projects that had been previewing for months, absorption rates began to decline by May and June. This decline can be partly attributed to the seasonal shift from the active Spring market to the slower Summer months.

Overall, in the first half of 2024, the Lower Mainland saw an average same-month absorption rate of 33%, with 2,848 units sold out of 8,593 released units across 68 projects. Interestingly, the Fraser Valley outperformed the Greater Vancouver region, with more units sold (1,631 out of 4,546) and released than Greater Vancouver (1,217 out of 4,047). The Fraser Valley’s higher sales-to-listings ratio, at around 36%, compared to Greater Vancouver’s 30%, is largely due to its more competitively priced offerings.

Due to reduced sales velocity, developers are extending the length of sales campaigns, and sales teams are no longer seeing towers sell out within weeks of launch. This has led to increased competition among developers, resulting in more options and incentives for prospective buyers.

Looking ahead, MLA Canada projects 10,500 units across 42 more launches in the second half of the year, with an average same-month absorption rate of 35%. Although this level of activity is an improvement from 2023, it remains below historical norms and is expected to align with slower years.

“Presale buyer urgency is low, and almost every deal involves negotiations, especially at the higher end of the pricing spectrum,” said MLA Canada’s Director of Advisory Garde MacDonald. “We foresee that the remainder of the year will build on existing trends. While we anticipate a seasonal upswing in the Fall, the market outlook for H2 2024 does not look markedly different from today.”

Vancouver Luxury Condo Prices Are Starting to Crack

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The signs of distress are everywhere. Many of Vancouver’s priciest condos are being offered at big discounts.

One downtown condo that was bought for almost $3 million is now on the market for $2.3 million. At the elite, funky Alberni, designed by starchitect Kengo Kuma, an “extremely high” inventory of 26 condos is for sale, says realtor David Hutchinson. At the similarly over-the-top Hotel Georgia, 14 units are listed. The 48th-floor penthouse was once put on sale at $35.8 million, now it’s going for $20.8 million. In the neo-futurist Vancouver House, where Hutchinson says even storage lockers have sold for $150,000, more than 30 opulent apartments are up for grabs. There have only been three sales in six months, and those are smaller units going at about 10 per cent below list price.

This inflated inventory coincides with a residential highrise construction boom in Metro Vancouver, including glamorous Westbank condos about to be finished at Oakridge Park and in downtown’s sky-high Butterfly. This isn’t to mention thousands more coming on stream in new highrise clusters in Burnaby and beyond.

Many of these condos have been aimed at the international market. Analysts point to globalization, particularly the trans-national effects of China’s depressed housing sector. China’s massive housing market is bursting after an incredible bubble. As Vancouver’s Steve Saretsky says, there has been a drastic drop in what was once an “unprecedented Chinese appetite to take capital out of the reach of the Chinese government” — mostly by investing in Western real estate.

There is no doubt values in Vancouver and Toronto, which are among the world’s most unaffordable cities, were impacted dramatically by what economists dub “China shock.” The B.C. Business Council’s David Williams and former Simon Fraser University professor Josh Gordon showed how the volume of money pouring out of China into real estate into Australia and Canada jumped by up to six times between 2016 and 2019.

David Ley, University of B.C. geography professor emeritus, describes how a decade ago large Vancouver property developers opened scores of sales offices in East Asia to serve business-class immigrants and other affluent transnationals.

At the time, the director of marketing at Westbank, Michael Braun, said: “China is now a big part of this business … right now I have a rule when we talk about projects: If the Chinese market doesn’t want it, I have no interest in it.”

Even though developers of both high- and medium-end Vancouver condos continue to market in East Asia, distributing most of their advertising in both English and Chinese languages, there are strong signs “China shock” is easing, becoming unpredictable.

As Saretsky notes, the overall price of homes in Greater Vancouver is down by just 3.6 per cent compared with two years ago (and by 7.5 per cent less in Greater Toronto). Values would be lower if not for rapid population growth through international migration. Nevertheless, Saretsky says the pounding on luxury condos is intense.

“Globalization is now reversing,” says Saretsky. “What happens if further Chinese wealth destruction necessitates Chinese liquidation of foreign housing ownership?”

Michael Peregrine of Santiago Capital says that over the last 10 years China’s property market has “fallen precipitously.” And there is “more downside to come.”

The problem has been that many real estate companies in English-speaking countries integrated East Asia’s housing boom into their profit dreams.

“The higher Chinese property prices went (valued at US$50 trillion), the more wealth was generated that could then be invested in other property markets around the world,” Peregrine writes in a 50-page report.

“The Chinese property juggernaut (bought) massive foreign housing inventory at inflated prices,” says Peregrine. “It forced locals to pay up in their own markets to compete against Chinese investors.”

Now China’s boom, which was fueled by debt, is unwinding.

“Canada will be at the forefront of Chinese selling,” Peregrine says, particularly since both the federal and provincial governments have been instituting various forms of foreign buyer restrictions and vacancy taxes, albeit with loopholes.

“Toronto condo sales,” Peregrine says, “are already down 85 per cent from their peak volume in 2022.”

Analyst John Pasalis adds that this June a record number of Toronto condos are for sale.

All this financial destruction, however, doesn’t mean the river of money from China has dried up completely. China still has by far the world’s highest number of millionaires trying to get their wealth out, with Canada showing up as the fourth most desired country for international multimillionaires ready to pay for a so-called “golden passport.”

The Canadian condo scene now comes with trans-Pacific turbulence. Hutchinson says many of the scores of pricey condos now on the Vancouver market were originally “sold in presentation centres offshore.” Most were snapped up as pre-sales designed for flipping. Now many speculators are in a bind.

While their financial pain might end up going deep, there is a chance others could benefit, with a possible trickle-down effect on prices.

Still, in Metro Vancouver we’ve learned not to hold out too much hope for real affordability.

Vancouver real estate market update for June 2024

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Home sales in Metro Vancouver have declined in May, deviating from the typical seasonal trend. This slowdown has contributed to a continued rise in the number of homes available for sale, with over 13,000 properties now listed on the Multiple Listing Service® (MLS®).

The Greater Vancouver REALTORS® (GVR) reported 2,733 residential sales in May 2024, marking a 19.9% decrease from the 3,411 sales in May 2023. This figure is also 19.6% below the 10-year seasonal average for May, which stands at 3,398.

“The surprising element in May’s data is the softer-than-expected sales, coupled with a strong influx of new listings following April’s trends,” said Andrew Lis, GVR’s director of economics and data analytics. “These trends are influenced by multiple factors, including higher borrowing costs, economic uncertainties, and government policy interventions.”

In May 2024, 6,374 detached, attached, and apartment properties were newly listed on the MLS® in Metro Vancouver, a 12.6% increase from the 5,661 listings in May 2023, and a 7% rise from the 10-year seasonal average of 5,958.

Currently, there are 13,600 properties listed for sale on the MLS® in Metro Vancouver, a 46.3% increase from May 2023’s total of 9,293, and a 19.9% increase over the 10-year seasonal average of 11,344.

For May 2024, the sales-to-active listings ratio across all property types is 20.8%. This breaks down to 16.8% for detached homes, 25.1% for attached homes, and 22.5% for apartment properties. Historically, when this ratio falls below 12% for an extended period, it puts downward pressure on home prices, whereas a ratio above 20% exerts upward pressure.

“With the market shifting towards more balanced conditions due to the rise in new listings outpacing sales, we can expect slower price growth in the coming months,” Lis noted. “While prices had been rising modestly across all market segments, increasing inventory and softening demand might present more opportunities for buyers this summer, even with high borrowing costs.”

The MLS® Home Price Index (HPI) composite benchmark price for all residential properties in Metro Vancouver is now $1,212,000, reflecting a 2.3% increase from May 2023 and a 0.5% rise from April 2024.

In May 2024, sales of detached homes totaled 846, an 18.9% decrease from the 1,043 sales in May 2023. The benchmark price for a detached home is $2,062,600, representing a 5.9% increase from May 2023 and a 1.3% increase from April 2024.

Apartment sales in May 2024 reached 1,338, a 22.7% decrease from the 1,730 sales in May 2023. The benchmark price for an apartment is $776,200, a 2.2% increase from May 2023 and a 0.3% decrease from April 2024.

Sales of attached homes totaled 523 in May 2024, a 14% decrease from the 608 sales in May 2023. The benchmark price for a townhouse is $1,145,500.

Real Estate Scandal: $1.3 Billion in Unpaid Taxes Found in B.C.

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Canada’s tax regulator, the Canada Revenue Agency (CRA), has revealed a staggering $1.3 billion in unpaid taxes within British Columbia’s real estate sector. This discovery follows intensified audits and scrutiny over recent years, focusing on both personal transactions and professional activities.

**Targeting Metro Vancouver**

Jason Charron, Director General of the CRA’s Compliance Programs Branch, highlighted the agency’s concentrated efforts in Metro Vancouver. The region has been identified as having a significant level of non-compliance, prompting the CRA to focus its resources there. Since 2019, a dedicated real estate task force has been active, predominantly in Ontario and B.C., resulting in billions in reassessment notices and hundreds of millions in penalties.

**Comparative Findings: B.C. vs. Ontario**

Between 2015 and 2023, Ontario saw $1.4 billion in assessed unpaid taxes and penalties in the real estate sector. Despite having only a third of Ontario’s population, B.C. had nearly the same amount of non-compliance, totaling $1.3 billion. The nature of these unpaid taxes differed between the provinces: in B.C., the majority related to income tax, whereas in Ontario, it was largely due to unpaid GST and HST on new homes or incorrect tax rebate claims.

**Income Tax Non-Compliance in B.C.**

The CRA uncovered $957 million in income tax-related non-compliance in B.C.’s real estate sector, significantly higher than Ontario’s $178 million. This non-compliance included:

– Purchasing expensive homes without a clear source of income.
– Unreported profits from flipping homes.
– Non-residents failing to report capital gains on property sales.
– Unreported income earned outside of Canada.
– Non-compliance by realtors and developers.

Due to confidentiality laws, the CRA did not disclose specifics on the categories of non-compliance or how the $957 million was divided among them.

**Increase in Audits and Penalties**

The number of income tax-related audits in B.C. surged almost tenfold, from 114 in the 2015 fiscal year to 1,089 last year. Correspondingly, the value of audit assessments—comprising unpaid taxes and penalties—also skyrocketed, averaging $155.1 million annually over the past two years, compared to $6.4 million annually from 2015 to 2017, marking a 2,300% increase.

**Government Funding and Results**

The federal budget of 2019 allocated $50 million over five years to the CRA for a real estate task force. The 2024 budget further increased this funding to $73 million for the next five years. Tom Davidoff, an associate professor at the University of B.C.’s Sauder School of Business, remarked that these audits are proving to be highly effective, addressing longstanding concerns about tax compliance in B.C.’s real estate sector.

**Community and Expert Reactions**

For years, British Columbians have raised alarms about tax evasion in real estate. Although the crackdown may not significantly impact housing affordability, it ensures that substantial sums of money are reclaimed by the government. Davidoff’s research indicated that the top 5% of homes in Greater Vancouver had a median value of $3.7 million, with median income taxes of just $15,800, suggesting that most luxury homes were bought with untaxed wealth.

**Industry Responses**

While the CRA’s efforts have intensified, representatives from the Greater Vancouver Realtors and the Canadian Home Builders Association of B.C. reported no significant feedback from their members regarding changes in CRA activities.

**Advocacy for Continued Efforts**

Canadians for Tax Fairness, a non-profit advocacy group, has expressed support for the CRA’s increased enforcement. They emphasize the importance of adequately funding the CRA to ensure compliance across sectors, noting that tax avoidance costs Canadians billions annually.

In summary, the CRA’s intensified efforts in auditing B.C.’s real estate sector have revealed significant tax non-compliance, leading to substantial recoveries of unpaid taxes. This ongoing scrutiny aims to enhance tax compliance and ensure that all owed taxes are collected, contributing to the overall fiscal health of the country.

Canada’s Housing Market To SKYROCKET End Of 2024? Experts Predict A Price Surge!

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Royal LePage’s latest market forecast paints a vivid picture of Canada’s real estate landscape, predicting a significant 9% year-over-year increase in home prices by the fourth quarter of 2024. This upward revision stems from a robust first quarter, with strong price appreciation expected through the second and third quarters before tapering off towards year-end, aligning with seasonal trends.

The forecast highlights notable upgrades in major markets, particularly the Greater Toronto Area (GTA), where prices are anticipated to surge by 10%, surpassing the national average. Montreal follows closely behind with an 8.5% projected increase, while Calgary, Quebec City, and Greater Vancouver are forecasted to experience respective jumps of 8%, 8%, and 5.5%.

Royal LePage President Phil Soper attributes the current modest price rises to consumers, particularly first-time buyers, adapting to higher borrowing costs. However, he anticipates a steeper appreciation curve once the central bank enacts anticipated rate cuts, drawing in rate-focused buyers.

While easing rates will influence price upticks, the fundamental driver remains the severe housing shortage across the country. Soper warns of an intensifying seller’s market, foretelling a busy spring and fall for Canadian buyers and sellers alike.

Looking ahead, Royal LePage’s forecast suggests that by the end of 2026, the majority of mortgages will have transitioned into an elevated borrowing rate environment. Yet, this is not expected to significantly dampen the housing market’s resilience. Soper points to Canadians meeting their mortgage obligations amid record-low default rates and income growth offsetting increased mortgage costs. However, he anticipates a pullback in discretionary spending as individuals prioritize maintaining homeownership.

In summary, Royal LePage’s forecast outlines a dynamic Canadian housing market characterized by soaring prices, driven by a combination of factors including adapting consumer behavior, impending rate cuts, and the persistent housing shortage. Despite looming challenges, the market remains robust, with buyers and sellers navigating towards a seller-centric environment amidst projections of continued price appreciation.

Listings Are UP! But Sales Are NOT! Vancouver March 2024 Real Estate Market Update

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In February 2024, Metro Vancouver’s housing market saw a notable increase in new listings, alleviating concerns about potential overheating. According to Greater Vancouver REALTORS® (GVR), new listings rose by 31% year-over-year, reaching 4,560 properties listed for sale on the Multiple Listing Service® (MLS®). This surge in listings provided buyers with more choices as the spring and summer markets approached.

Residential sales in the region totaled 2,070 in February 2024, marking a 13.5% increase from the previous year. However, this figure was 23.3% below the 10-year seasonal average, highlighting a slower pace compared to historical trends. GVR’s director of economics and data analytics, Andrew Lis, expressed relief at the increase in new listings, stating that it would ease the pressure that had built up in January.

Despite the rise in listings, the total number of properties currently listed for sale on the MLS® system in Metro Vancouver increased by 16.3% compared to February 2023, totaling 9,634 properties. This was 3% above the 10-year seasonal average. The sales-to-active listings ratio for February 2024 stood at 22.4%, with varying ratios for detached homes (16%), attached homes (27.9%), and apartments (25.9%).

Lis noted that the increase in new listings did not sufficiently counterbalance the pace of sales to prevent price acceleration. Consequently, the market remained in sellers’ territory, contributing to modest price growth across all segments. However, benchmark prices were still below the peak observed in the spring of 2022, before the full impact of the Bank of Canada’s tightening cycle was internalized.

The MLS® Home Price Index composite benchmark price for all residential properties in Metro Vancouver reached $1,183,300, reflecting a 4.5% increase from February 2023. While there was modest price growth across all property types, benchmark prices remained below the 2022 peak.

Detached home sales increased by 8.3%, reaching 560 in February 2024, with a benchmark price of $1,972,400. Apartment home sales saw a 17.7% increase, totaling 1,092, with a benchmark price of $770,700. Attached home sales reached 403, marking a 10.1% increase, with a townhouse benchmark price of $1,094,700. Overall, the market demonstrated resilience, showing both increased supply and demand, with moderate price growth in February 2024.

Here is what you need to know about the new “flipping tax” in British Columbia

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New Home Flipping Tax to Hit B.C. Property Sales: Here’s What You Should Know

Premier David Eby has set his sights on speculators, and with the unveiling of the 2024 budget, his government has introduced the “BC Home Flipping Tax” aimed at curbing speculative activity in the housing market.

Effective January 1, the new tax mandates that any profits accrued from the sale of a residential property within two years of its purchase will be subject to taxation, albeit with certain exceptions.

Outlined in the forthcoming legislation to be passed during the spring session, the tax will follow a progressive scale: 20 percent on profits from homes sold within the initial year, gradually decreasing to 10 percent if sold within 18 months, and ultimately dropping to zero after two years of ownership.

According to the Ministry of Finance, this tax measure is anticipated to generate approximately $43 million in annual tax revenue.

“The tax will be applicable to income derived from the sale of properties with a housing unit and those zoned for residential use. It will also extend to income generated from the assignment of contracts related to the purchase of these properties,” states the Budget and Fiscal Plan.

However, exemptions will be granted for individuals selling their primary residence within two years of acquisition, with a maximum exclusion of $20,000 when calculating taxable income.

Exceptions for circumstances such as divorce, death, illness, and work-related relocation will also be considered to waive the tax liability. Details regarding the appeals process and required documentation are yet to be finalized, with tax administrators expected to develop forms and guidelines between now and January.

The revenue collected from this tax will be earmarked for the construction of new affordable housing units across the province, aligning with the government’s objective to bolster housing supply.

Set to take effect on January 1, 2025, the tax will be applicable to properties sold after this date, regardless of the purchase date.

In addition to the new tax, the B.C. budget confirms substantial investments in housing initiatives, including programs like BC Builds. The budget also offers a comprehensive analysis of the housing market’s current state and future trajectory.

Despite challenges such as declining building permits, growing unsold inventory in certain regions, and inter-provincial migration losses, the ministry anticipates a rebound in home sales activity in 2024. Prices are projected to increase by an average of 2.3 percent in the current year and 2.9 percent in 2025, indicating a cautiously optimistic outlook for the real estate market.

 

A big downtown Vancouver development has gone bankrupt

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The ambitious high-rise project in Vancouver’s West End is facing a multitude of challenges, as developers find themselves in receivership, according to recent filings in the Supreme Court of British Columbia. The venture, located at the intersection of 830-850 Thurlow Street and 1045 Haro Street, was designed to feature a striking 55-storey strata condo tower alongside a 15-storey counterpart, comprising a total of 450 strata condominiums and 66 rental units. The project, as outlined on its website, also included provisions for 42,000 sq. ft of retail space, a 49-space childcare facility, and a brand-new public plaza, making it a significant addition to Vancouver’s skyline.

However, the grand vision has hit a roadblock, with the Bank of Montreal, a secured creditor of the project, submitting a receivership application citing an outstanding debt of $82.2 million in principal and interest. The legal ownership of the development site rests with Harlow Holdings Ltd., while the beneficial ownership falls under the Haro-Thurlow Street Project Limited Partnership (HTLP), which is itself owned by various entities, including 11044227 BC Ltd. (45%), Forseed Haro Holdings Ltd. (45%), and Terrapoint Developments Ltd. (10%). Interestingly, notable Vancouver-based developer Intracorp Homes is involved in the project as the development manager but is not directly implicated in the receivership proceedings.

The roots of the financial crisis lie in the developers’ struggle to meet the City of Vancouver’s stringent requirements for the project, an issue persisting for the past five years. A Council report from June 2022 highlighted concerns about the project’s encroachment on several view cones, prompting the ongoing review of the city’s view cones policies. Despite substantial efforts, the owners failed to secure a development permit, leading to a series of negotiations with creditors, primarily the Bank of Montreal.

The owners, facing mounting challenges, negotiated multiple amendments to their credit agreement, the latest of which occurred in September 2022. This extension pushed the “outside date” for the project to August 31, 2023. However, in early 2023, the Bank of Montreal informed the owners that no further extensions would be granted, compelling them to explore a potential sale of the property.

A significant development in this saga came when CBRE was engaged to facilitate the sale, leading to the reception of six offers by May 2023. These offers, ranging from $81.5 million to $100 million, fell substantially short of the property’s acquisition cost, leading to internal tensions among stakeholders. Notably, an offer by Chard Development for $93 million was not universally accepted, with Terrapoint supporting the offer, while Forseed and 11044227 BC Ltd. rejected it.

This internal discord, coupled with the owners’ resistance to accepting a considerable loss on their investments, led to an impasse. Terrapoint, a minority stakeholder, accused the majority partners of lacking “good faith” reasons for rejecting Chard Development’s offer. In response, the majority partners claimed they were actively seeking to refinance the debt, a claim met with skepticism due to the lack of supporting evidence.

The situation worsened when the owners defaulted on their interest payment in July 2023, prompting the Bank of Montreal to demand payment of $95,520,027.39 by August 29. Despite presenting a forbearance agreement, the owners declined to sign, leading to the initiation of the receivership application by the Bank of Montreal.

In a December affidavit, Kang Yu Canning Zou, a director of the entities under the receivership application, mentioned that the owners had identified three lenders willing to provide loans for debt repayment. However, the Bank of Montreal disputed this claim, stating that no evidence of such lenders had been provided.

The financial intricacies of the project involve a monthly interest cost of $620,000, while the existing rental complex on the site generates only $175,000 in monthly income. This considerable shortfall, combined with the owners’ failure to meet their obligations, eroded the Bank of Montreal’s confidence in their commitment to debt repayment.

In the receivership application, the Bank of Montreal sought the appointment of a receiver with the mandate to arrange a prompt sale of the property. An appraisal conducted by LW Property Advisors in July 2023 pegged the property’s value at $192 million, based on its development potential. However, concerns were raised about whether lenders would recognize this valuation.

Evan Allegretto, President of Intracorp Homes, expressed pessimism about the property’s current value, suggesting it might be even lower than the $93 million offer from Chard Development. Allegretto cited factors such as higher interest rates, tightening credit, rising construction costs, and the limited pool of potential purchasers for a property of this magnitude.

The owners, seeking more time to settle their debt, engaged in another dispute with the Bank of Montreal. The court ultimately ruled in favor of appointing Deloitte as the receiver as of January 12. However, Deloitte is restrained from undertaking any sales efforts until after February 23, and approval of sale offers is prohibited until after April 26.

If a sales process is initiated, the receiver is likely to collaborate with a commercial real estate brokerage for listing and marketing the property. The subsequent offers would be scrutinized, and the selected offer would require final approval from the court, adding an additional layer of complexity to the resolution of this intricate financial and legal quagmire.