Summer 2016 – Vancouver Real Estate Predictions

Oleg Articles, For Buyers, For Sellers, Opinion

What to expect from the Vancouver real estate market for the summer 2016 season.

Vancouver Coal Harbour Marina

 

 

Friends, we are entering uncharted waters. The demand is at the all time high. The inventory is the at the all time low. We are having one record-breaking month after another. What’s next? Will the market crash? Will the prices go down? Will the market remain just as strong?

Short answer – “I don’t know”. In fact nobody knows, and whoever claims that they know is probably a psychic. However, as an experienced Vancouver Realtor I can make some predictions.

Real Estate Prices

We can anticipate the prices to go up slightly over the next few months in most of the Vancouver neighbourhoods. The price increase will not be as extreme as what we’ve seen in the winter and spring of 2016.

Condo prices in some Vancouver neighbourhoods might even plateau. In my opinion we will not see any price drops during summer 2016.

Buyers’ Demand

Buyers’ demand in Vancouver remains strong. However, we can already see early signs of the buyers fatigue. Properties that were receiving 8-10 offers in March and April are now getting 3-4 offers. Still a lot of demand. Perhaps people looking for properties during summer months notice a drop in the competition levels.

The market is still a very strong sellers market and will most likely remain a strong sellers markets for the summer months.

Inventory Levels/Houses or Condos for Sale

Vancouver real estate market tends to go through the seasons. Spring is generally a busy season and summer is slower.

We have seen a fifty percent drop in inventory from the previous years.  We can anticipate even lower levels of inventory during this summer season. This could be a good opportunity for potential sellers to list their home as there are less competing properties.

In summery, the Vancouver real estate market will slow down a little for the summer months.  The lower buyer demand will be balanced out by the lower inventory levels. For the most part – business as usual.

 

NOTE: This article represents my personal opinion. Do your own independent research before taking any actions. 

Spring 2016 – Vancouver Real Estate Market Update

Oleg Articles, For Buyers, For Sellers, News, Opinion

What you should know about the Vancouver real estate market in the spring 2016.

vancouver skyline

Vancouver real estate market is a topic of conversation. It’s hard to turn on the news without hearing about a tear-down that’s been sold for three hundred thousand dollars over asking price or how the last few months were record breaking for local real estate.

Here are the trends I’ve noticed over the last couple of months:

The buyers demand seems to be cooling off as we head into the summer season.

Properties that used to receive 8-10 offers now receive 3-4 offers. Real Estate market activity usually goes though seasonal cycles. There are high activity seasons such as spring and fall, and lower activity seasons such as summer and winter.

A cool-off in real estate activity is natural as we enter summer season. But this could also be an early sign of over-all cool down of the hyper-active Vancouver real estate market. It is still too early to tell which one is it.

The prices are still remaining high and show no signs of going down.

Even though the buyers demand is cooling-off the real estate market still remains a very strong sellers’ market.

Real estate prices continue climbing up but perhaps not as fast as they did at the end of winter/early spring 2016. As we head into the summer season, we can anticipate real estate prices to slow down.  More on this in my article –  “Summer 2016 – Vancouver Real Estate Predictions”.

Inventory is still at the all time low.

We have seen a fifty percent drop in inventory from the previous years. This lack of available properties for sale is one of the most important components fuelling such strong seller market.

We can expect even less inventory being available for the upcoming summer season, which will balance out the lower buyer demand and continue current real estate climate.

In summery, Vancouver real estate market remains a very strong sellers market with roughly 3-4 buyers for every property for sale. Until we solve the demand issue in Vancouver or there is a major change effecting real estate market (ex. increase in the interests rates) we will continue seeing a version of the current market climate for the foreseeable future.

 

NOTE: This article represents my personal opinion. Do your own independent research before taking any actions. 

Why is AirBnB evil? According to Vancouver

Oleg Articles, News, Opinion

 

Lately, there has been a lot of debate about AirBnB. Is AirBnB legal? Should it be allowed? Does it effect real estate prices? Does it effect rental rates? Is it a good investment strategy for landlords? All are good questions. In this article I will attempt to answer some of them. Keep in mind I don’t have any preferences for or against AirBnB. I am simply trying to give you some facts and explanations as to why Vancouverites might be against AirBnB.

Is AirBnB legal in Vancouver?

No, according to the bylaws imposed by the City of Vancouver – AirBnB is not allowed. However, this city bylaw is virtually impossible to impose and there hasn’t been any cases (as far as I know) of the City penalizing anyone…yet

Does AirBnB cause rental rates to go up?

Yes, it does! Let’s say you have 1,000 unfurnished long term rental units. Suppose 20% of the landlords decide to rent out their units on short term rentals with AirBnB instead of keeping them as unfurnished long term rentals. All of the sudden the demand for the remaining 800 units increases and the rent rate goes up.

 Does AirBnB effect real estate prices?

There is no definitive answer to this question. AirBnB might effect real estate prices slightly. As the rental rates increase more investors are interested in buying real estate thus driving up the real estate prices.

Why are Stratas in Vancouver against AirBnB?

There are a few reasons why more and more Stratas are creating bylaws specifically against AirBnB and even going as far as monitoring the website for units within the building. Landlords caught advertising their units for rent on the website face penalties.

  1. Security. Many Stratas would argue that giving strangers access to the building is dangerous and makes some residents feel unsafe.
  2. Insurance. If you rent out your unit on AirBnB some insurance companies will not cover you. If your short term tenant off of AirBnB floods 3 floors below, you might be responsible to pay for the damages out of your own pocket. Some damages could cost hundreds of thousands of dollars. Stratas don’t like to take any chances.
  3. Noise. A lot of people that use AirBnB are in town on vacations and like to throw parties.
  4. Reduce quality of the building. Tenants in general don’t have a great reputation for taking care of the common properties such as hallways, party rooms, gyms and swimming pools. Stratas fear that short term tenants might be even more careless with the common property.
  5. Building bylaws. Every building has a set of rules and bylaws that everyone follows. Long term residents of the building know these rules and follow them (for the most part). Having new tenants in the building a few times a week makes it very hard to enforce any of these rules.

AirBnB is a new concept and like most new concepts causes a lot of controversy. It will be interesting to see what happens with AirBnB in Vancouver over the next few years and what effect it will have on local real estate as well as hotel industry. What are your thoughts on AirBnB in Vancouver?

Vancouver’s proposed affordable ownership program

Oleg Articles, For Buyers, News, Opinion
Vancouver skyline / new affordability program
JENNIFER GAUTHIER/METRO

Earlier this week City of Vancouver announced that it plans to create new affordability program for local residents. The purpose of the program is to address unaffordability issues in Vancouver BC. Specifically, Vancouver’s residents not being able to afford to purchase their first home due to rapid increase in the real estate prices.

If you feel skeptical about such program, you’re not alone. However, there are similar programs already in place in Calgary, Toronto and United Kingdom.

Don’t get too excited about the program just yet. To implement this program the city needs to secure permission from the province to change the Vancouver Charter. The Charter doesn’t necessarily prevent city from having a shared homeownership program. But the council is sticking with the motto – “better safe than sorry”.

How would the program work?

Details aren’t finalized, but the program would involve the city purchasing about 20 per cent of a units in a new development so the buyer – who would be subject to numerous restrictions – wouldn’t have as high of a down payment or mortgage payments. If the value of the property goes up upon sale of one of the unit in the “affordability program” City of Vancouver would receive it’s share of profits. If there are any remaining profits, these would be shared with the homeowner. It’s a win-win situation.

Who would qualify for the program?

  • Must be a resident of the city for a minimum of five years
  • Must be a permanent resident or citizen
  • Must never have owned property before (first time buyer)
  • Must be employed in Vancouver
  • Earn less than $67,540 per year for one-bedroom units (as a household)
  • Earn less than $96,170 per year for two and three bedroom units for people with children (as a household)
  • Must complete a home buyer education course

How many units will be available in the program?

The city aims to create 300 affordable units within the next 3 years. At least half the the available units will have two to three bedrooms. City officials said they might create a lottery system to see who gets to buy in. There are estimated 30,000 qualified households in Vancouver at the moment.

In my opinion it is fantastic the City of Vancouver is creating such programs. It is no secret that there are a lot of people that can’t afford to purchase their first condo in the city. With such programs we boost economy and help first time buyers. That’s why I love Canada, more specifically Vancouver! Where else will you find government care so much about people’s well being (outside of Toronto, Calgary and United Kingdom lol)?

One simple way to protect yourself agains “Shadow Flipping” in Vancouver

Oleg Articles, For Sellers, Tips

Turn on the TV or go online and you will see countless news stories about “Shadow Flipping” in Vancouver BC. It is a scary thing for some homeowners. Nobody want’s to have their property flipped for profit before the sale even completes. In some cases the “flipper” can make hundreds of thousands of dollars in a matter of days. So how do you protect yourself from the “shadow flipping” as a seller?

By default every Contract of Purchase and Sale has an “assignment clause” in it. The “assignment clause” is the clause investors abuse to assign/sell contracts for profit. The general rule, in the absence of wording in the contract to the contrary, is that BUYERS MAY ASSIGN their rights under the contract as long as they do not prejudice the rights of the sellers. For example, if the sellers are carrying the mortgage, they may not want the contract to be assigned to another party.

If you are concern about “shadow flipping” and want to protect yourself just add a simple clause in your Contract of Purchase and Sale. This will eliminate the assignment clause and thus eliminate the ability of anyone to assign (or sell) the contract to a third party.

Here is an example of the no assignment option clause:

 

“No Assignment Option Clause

The Buyer agrees not to assign this contract in whole or in part to any third party.”

 

That’s it! Now you can sell your property without worrying about anyone trying to flip it before the completion date. Feel free to contact me with questions about selling your property (house or a condo) in the Greater Vancouver area.

 

DISCLAIMER: Seek independent legal advice before implementing any of the idea discussed in this article.

The truth about “shadow flipping” in Vancouver

Oleg Articles, News, Opinion

 

“Shadow flipping” is the new term thrown around quiet a bit in the last two weeks. Turn on the news or go online and all you see are evil realtors taking advantage of the public, earning 10 commission on each sale and directly causing global warming.

Let’s make sense of all of this.

What is “shadow flipping”?

It’s a controversial “sales technique” used to sell the assignment of the Contract of Purchase and Sale before the completion date. Real estate agent would collect real estate commission for each assignment of the contract.

For example:

Buyer#1 “buys” a house for $2 million. Before the sale completes (all money is paid) the contract is sold to the buyer#2 for $2.3 million. The buyer#1 who sold the contract makes $300,000 (minus the real estate commissions). The original seller is left with $2 million (minus the real estate commission and expenses). And the real estate agent collects real estate commission 2 times; once for the sale of the property to the buyer#1 and once for the sale of the contact to the buyer#2.

 

 

Most news articles use similar examples, but in their examples the contract is sold (assigned) twice and the real estate agent collects 3 real estate commissions. In my opinion these examples are ridiculous. Hypothetically speaking it is possible to assign (sell) the contract unlimited number of times but selling (assigning) the same contract twice is very very rare. These examples are used to scare the public and reinforce the message, but only make things more confusing. Nevertheless, shadow flipping is wrong and scary without ridiculous examples.

Some real estate agents and savvy investors found a way to abuse the “assignment clause” in the Contract of Purchase and Sale.  In some cases the original seller doesn’t get a full value for their property. In some cases the buyer of an assignment overpays for the property. Most of the time someone in the transaction is taken advantage of. As real estate agents we have a fiduciary duty to work in our clients best interest, however we still have to follow the code of ethics. We can not put our own interest before the interest of parties involved in the transaction and the general public.

“Shadow flipping” is not a new concept. In fact a lot of “get rich quick from real estate” schemes depend on this strategy. You’ve seen the infomercials. It has been around for a long time. “Shadow flipping” is not limited to British Columbia either. Most of Canada and the US have the “assignment clause” in their Contacts of Purchase and Sale. It’s actually a beneficial clause if used right.

It is very sad to see some of my real estate colleagues participate in such shady schemes. It shines a negative light on the industry as a whole. It is not fair that a few dishonest realtors bring negative publicity to everyone. These cases should definitely  be investigated.  These responsible need to be brought to justice.

Real estate industry as a whole does not support unethical behaviour of a few.

 

$7-million mansion in Vancouver is now a tear down

Oleg Articles, News, Opinion

I was reading the news today and came across this article: The $6-million Vancouver mansion, complete with indoor pool and media centre, that’s just another tear down

Basically, Vancouver home owner has filed an application for a demolition permit for his luxury multi-million-dollar home located in Vancouver’s upscale Shaughnessy neighbourhood. The home has 7,200 square feet of living space, indoor swimming pool and a media centre. According to BC Assessments the property is worth $7.44 million today. It was purchased back in 2013 for just over $6 million.

The owner is technically not doing anything wrong. So why did this matter get so much media attention?

Vancouver is a known “green city” and tearing down a perfectly good home seems like a waste of resources. The house is not even 20 years old.

Vancouver council woman Adriane Carr plans to voice her disapproval over the application. “It’s just criminal that it should be torn down,” Carr told CTV Vancouver. “It’s an expensive home, it’s a big home, and the fact that it could be torn down and replaced, it goes against everything the city is trying to do to be the greenest city.”

We can understand both points of view. On one hand it doesn’t make sense to “waste” resources, but on the other hand private individuals can do what they want with their money. Forbidding someone to build a new home because their “old” one is a “perfectly good home” is the same as forbidding someone to buy a new television because their old one is a perfectly good television.  It is up to all of us as people to control our resources consumption.

As long as the new proposed house complies with all city by-laws and regulations, I don’t see any problem for the owner to obtain the demolition and development permits for his/her project.

$2.4 million 86-year-old Point Grey house. Is it worth it?

Oleg Articles, News, Opinion, Statistics

Last week an 86-year-old “rundown” house was listed for sale. The 4453 W 14th Street house has 2,000 square feet of living space and is located in Point Grey neighbourhood in Vancouver Westside. What’s so special about this property? The price tag of $2,398,000!

This property instantly received a lot of media attention and community outrage. Some online polls even popped up asking people  how much they would pay for this house? “Less than $500,000” is the most popular answer, followed by “you couldn’t pay me to live here” in a second place.

The house is sitting on “standard” Vancouver 33 by 122 plot. 2014 assessment value came in at $1,759,800 almost all of the value is in the land. The house is walking distance to Lord Byng Secondary and Queen Elizabeth Elementary.

So why does it have such a high listing price? 

Clearly, the house itself has little to no value. It’s the land in this prestigious Vancouver neighbourhood that dictates the listing price. 33×122 plot (also know as the Vancouver Special) is not very big. You can build almost 3,000 square foot home with a garage on it.

So is it worth $2.4 million price tag? 

In my opinion it is not. Some real estate professionals will disagree with me on this one. That’s totally fine.

There are many ways to calculate the value of the property. I based my evaluation on compatible currently active properties  on the market as well as the recently sold comparable properties. Also, I looked at the investment value of building a new home in the neighbourhood.

If I were to base my evaluation only on similar properties in the neighbourhood and their selling prices, the price tag of $2.4 million dollars would make sense. If I were a listing agent I would price it at a similar price point. There are a few examples of houses around the same age with the same lot sizes selling for $2.3-$2.4 million dollars in the Point Grey neighbourhood. Which leads me to believe that this house will sell for the asking price or maybe even for more than the asking price.

So why do I say it is not worth the price tag of $2.4 million? 

This house needs to be torn-down and a new house should be build in its place. In the current market, new houses in the neighbourhood (with 33X122 lots) are selling for around $3.1-$3.3 million. It will cost around $650,000-$700,000 to build the new house. If you account for taxes and extra expenses associated with the buying, building and selling process, this house does not make for a very good investment.

I think the buyer of this property is going to be an investor. He or she will justify paying the premium price by betting on future appreciation of the neighbourhood, which is completely fine. More and more real estate developers in Vancouver bet on the future appreciation as land prices in Greater Vancouver continue to rise.

This property could be a good investment if market continues to go up over the next 12 months at the same rate. Any experienced developer will tell you that the investment property has to make sense at the current market value. And NOT solely depend on the future appreciation.

Here is a graph of the real estate prices of detached (resell) houses in Point Grey neighbourhood over the last 5 years.

DISCLAIMER: This article represent my opinion only.  Do your own independent research before making any real estate related decisions.

Vancouver developer offers to sell condos with 0% downpayment

Oleg Articles, For Buyers, News
Image from: http://www.townline.ca/
Image from: http://www.townline.ca/

A local developer Townline Homes has made some headlines in the last couple of weeks. This Vancouver development company wants to sell condos in their new development – The Strand, in Port Moody with a 0% downpayment.  This proposal has been already accepted by BC Housing. However, Canadian Mortgage and Housing Corporation (CMHC) has not approved the proposal yet.

How does the program work? 

The price of the condos will be discounted for a minimum of 8% (as recognized by CMHC). This discount will act as a downpayment. The buyer then mortgages the entire remaining amount. This program will require no vendor take back mortgage or a second mortgage. You will have to own the property for a minimum of 2 years before selling to keep 100% of the profits (including the developer discount).

Who can qualify for the program? 

This program was designed for lower income families who can not afford the cash downpayment required for most purchases. In order to qualify for the program you must be making under $65,000 (as a household) for a one bedroom condo, and under $92,000 (as a household) for a one bedroom plus a den condo.  This regulation is put in place to prevent wealthy investors taking advantage of the program.

ST-I
1 bedroom + den + workstation floor plan

Why was this program proposed? 

The program is proposed to help lower income families get into the real estate market. It is a noble cause. Although, the developer might have another reason – PR! It makes them look good and brings a lot of attention to the development. It is worth mentioning that only a small percentage of units in the development are dedicated to the affordability program. The rest of the development is sold as usual.

It’s a win-win situation for the development company. If CMHC approves their proposal, it makes them look awesome. Selling these affordable units will be very easy. If CMHC does not approve their proposal, the developer still comes up on top. Hey, at least they tried to do something.

But lets dismiss this program as a PR stunt; it is a great initiative. It will help some young people get into the real estate market. It is a true win-win situation. The buyers get to buy a brand new condo with 0% downpayment and the developer gets some pretty good exposure.

In my opinion we will see more affordability programs like this one in the upcoming years.

Should you hire an inspector for a walk-through of your new property?

Oleg Articles, For Buyers, Opinion, Tips

Inspection-Passed

As real estate professional I get asked a lot of questions. “Should I get an inspection done, when I buy a property?” is among the most frequently asked questions. Here is a simple answer – YES! YOU SHOULD GET AN INPECTION DONE WHEN BUYING  REAL ESTATE! But what about brand new properties? Should you still get an inspection for brand new properties? If so, when should you do it?

The answer is YES! Even for the brand new house or a condo you should still hire an inspector. I am not some crazy “inspector employment advocate”. Experienced inspectors will be able to find hidden issues that might need attention, even in the brand new properties. If they don’t find anything, at least you will sleep better at night. That’s a scientific fact.

The question of “IF you should get an inspection?”, becomes “WHEN should you get an inspection?”.  Brand new properties can be either move-in ready, under construction or in the development stages. 

If the house or a condo is under construction or in the development stages the only time you will be able to hire an inspector is for the final deficiency report (also referred to as “walk-through”).

The deficiency report or the final walk-through is 1-3 hours inspection booked off for you and the developer to walk through the property and look for deficiencies. This date is usually set about a month prior to the completion date. All of the deficiencies found should be fixed before the completion date at the expense of the builder/developer. Ask your real estate agent about appropriate subjects to include in your contract. Feel free to contact me as well.

The walk-through is a great time to hire an inspector. He or she will be able to point out hidden deficiencies and save you time and money in the long run. As a curtesy let the developer (or selling agent) know that you will be hiring an inspector for a final walk through.

If the new property is move-in ready, I suggest adding an inspection clause into your offer, if possible. This way you will have 5-10 days to schedule the inspection and make sure that there are no hidden problems with the property before committing to the purchase. Ask your real estate agent about “the inspection subject”.

If the inspection is not possible before subjects’ removal (or you don’t inspection subject in your offer), you can still hire an inspector for the final walk-through. The same rules apply as before.

When buying real estate, it is always better to be safe than sorry. Always hire a professional inspector even when buying brand new construction.