Following is a quick take on a couple of recent events. While these primarily affect the city of Vancouver, similar scenarios may at some point play out in other communities within the Metro area.
The empty homes tax
Two clients have recently contacted me to sell their Vancouver condos due to the new Vancouver City bylaw to tax “vacant homes". Both owners have owned their homes here for between ten and twenty years. Both live elsewhere in Canada part of the year, and in Vancouver for the remainder. Both have contacted the city to see how city staff would interpret their situation, and both have concluded that their properties will be subject to the bylaw.
Suddenly two retired families have, in one case, a tax increase from $1000/yr. to $4000/yr (400%!), and, in the other case, an increase from $2,000/yr. to $12,000/yr (600%!). While this bylaw may encourage absentee owners to rent their homes, it also inadvertently encourages many to consider selling as well. Ironically, these types of sales will do little to help the rental market, as the bylaw was meant to. With relatively low rates of return for rental suites in the city, it's likely that most new owners will occupy the suites, rather than hold them as a rental investment. There's likely dozens of similar stories about to play out.
From what I've learned, the bylaw seems to be somewhat arbitrary, and open to interpretation by city officials. For example, from what I understand, condo buildings with rental limitations (but not full restrictions) are not addressed. How will such cases be handled? And under what conditions will the $10,000/day fine for non-compliance be applied? Further, the idea of a municipal government having this sort of taxation power is disconcerting and, some would say, scary. I’ve heard rumours of a developing legal challenge to the bylaw; however, this may take years to resolve.
You may be on either side of the debate regarding the merits of this new tax. I’m prepared to bet, though, that pushing Canadian grandparents to sell their second homes in Vancouver, where their families and friends are, is not what most of us had in mind as a way to improve rental availability here in Vancouver.
The impact of foreign students on the rental market
A recent article by Douglas Todd in the Vancouver Sun brought to light some interesting numbers regarding foreign students. Approximately 130,000 foreign students currently attend college or university here in BC, up 50% from five years ago. Close to another 70,000 are attending the dozens of language schools scattered throughout the Metro area, particularly downtown. These students need to live somewhere. Some of the wealthier offshore families have bought houses and condos for their student children; other students rent. Most of these rentals are in and around Vancouver's downtown core and west side. It doesn’t take advanced math to realize how such a large influx could affect the housing market, for both sales and rentals.
It's also reasonable to assume that some proportion of foreign students are from wealthier families, with a more generous housing budget than many local students, working young people, and families that desire a home in the same areas. This student influx may help to explain our fast rising rental costs, virtually zero vacancy rate, and increasing home prices throughout the Metro area. An SFU professor quoted in the Todd article referred to the “studentification” of various neighbourhoods. As prices increase in these neighbourhoods, renters and home buyers move out to further neighbourhoods, displacing those who could afford that area, and so on and so on.
Foreign students help fund our colleges and universities, and no doubt enrich our city in other ways. This enrichment, however, comes at a cost.
More about our conflicted city in my next newsletter, later this month.
And the market?
If you're thinking of selling, don't be alarmed about real estate market doom and gloom as reported in the media. Every deal I've done this year has had multiple offers, whether house or condo. And all at new high prices that exceeded expectations. The very top end of the market, and some particular neighbourhoods or sub-areas, may be weak, but other areas, housing types and price-points are flying.
Thinking of selling or buying in 2017? Email or call me at 604-328-9006 any time to discuss the right strategies for your situation. As a real estate advisor with 15+ years experience and close to 600 homes sold in all market conditions, I'll help you successfully navigate our changing real estate landscape.
(This article was originally published in my March e-newsletter. Drop me a line if you'd like to subscribe.)