The City of Vancouver released a heat map Thursday showing the distribution of residential properties where owners haven’t yet made a declaration to avoid its new empty-homes tax, and the highest concentration is in condo-rich Yaletown.
The city says about 182,000 residential property owners — about 98 per cent — have submitted their declarations but another 4,000 still haven’t. Most of the undeclared properties are in the downtown core and the highest concentrations are in Yaletown, Coal Harbour and the West End.
Homeowners in the three condo-dense neighbourhoods who have not declared occupancy risk paying a one per cent tax on their properties’ assessed values. Assessed values of residential strata units — such as condos — in Metro Vancouver skyrocketed this year by five to 35 per cent.
Residential property owners had until Feb. 2 to declare occupancy, however, the city extended the deadline to March 5 in order to give the 4,000 who had not declared a chance to avoid penalties and fines.
The empty-homes tax, a nationwide-first, was approved by councillors in 2016 as a tool to spur owners to rent out their empty homes. Any property owner that fails to declare by March 5 is subject to the tax plus a $250 fee. Declarations will be subject to an audit process and false declarations could result in fines of up to $10,000 per day, according to the city.
“With a near-zero vacancy rate in Vancouver, our key goal is to shift empty or under-used housing into the rental market. The city has done extensive advertising and notifications about the Empty Homes Tax for more than a year — all homeowners should know that they have to file a declaration, or their homes will be considered empty by default,” Mayor Gregor Robertson said in a news release.
Andy Yan, director of Simon Fraser University’s City Program, who has been researching the distribution of empty homes in Vancouver, said the city’s heat map matches well with a map he generated from city data identifying private dwellings not occupied by usual residents. It also matches closely with a map of population density he prepared based on 2016 census data.
But Yan questions whether the city will have any luck collecting declarations from the 4,000 property owners represented in its heat map. He believes some owners may not understand the implications of non-filing, have political motive to not respond as a form of protest or simply may not have received notices because the homes are, in fact, unoccupied.
“Are these people even home? Is there even somebody to receive the notice: ‘Are you an empty home?’” he said. “This could potentially show where the really, really empty homes are.”
Yan said he hopes the city will eventually release a comprehensive map of empty homes once they have been identified.
The latest census counted more than 25,500 empty homes in Vancouver. That amounts to more than eight per cent of the city’s total housing stock. The results came in while residents continued to grapple with a rental vacancy rate resting just above zero.
The groundbreaking comes at a time when Vancouver’s downtown vacancy rate of 5.2 per cent is the second-tightest in North America. Reliance went forward with the project without pre-leasing because it felt office space can’t be built quickly enough to meet demand.
Jon Stovell, president and CEO of Reliance, said space to meet the growth projections of large companies currently doesn’t exist in Vancouver.
“The market is remarkably strong,” said Stovell. “Tenants need to know that the building is going to be there before they’ll start to make plans to move in … We see the opportunity to execute. The last wave of office construction was very successful. Now, there’s a whole new wave coming. And this building will be the first to be delivered into the market.
“With a premier location, exceptional design and world-class amenities, The Offices at Burrard Place will give tenants a competitive advantage in finding and retaining highly sought-after professionals.”
Part of Burrard Place mixed-use project
The project is located at 1280 Burrard Street, the southern gateway to downtown. It is part of a million-square-foot Burrard Place mixed-use development, where the 60-storey One Burrard Place luxury residential tower is also currently under construction.
The project is biggest development underway in downtown Vancouver.
The office tower is the last commercial building designed by the late world-renowned architect Bing Thom. The $500-million Burrard Place project will also include two high-rise residential buildings.
There are five new downtown office towers in various stages of planning and construction in Vancouver.
Commercial real estate firm Colliers International says a low vacancy rate, coupled with strong demand, has led to a spike in rent in Vancouver’s downtown office market by as much as 20 per cent in the past year and those rates are expected to continue to climb. At the end of the 2017, asking net rent in the market was $31.89.
“Large companies have an extremely limited number of options. An average tenant in the downtown core looks for approximately 5,000 to 6,000 square feet of office space, but today’s demand is driven by tenants looking for multiple floors with some needing as much as 150,000 square feet,” said Maury Dubuque, managing director of Colliers International Vancouver, the brokerage leasing The Offices at Burrard Place.
Vancouver attracting tech companies
He said Vancouver has become a magnet for technology-based companies. According to the Vancouver Economic Commission, the city has about 75,000 tech workers with the industry growing by six per cent each year.
“The last building cycle was snapped up very quickly and thanks in part to these large technology companies developing footprints in the market,” said Dubuque. “And, as a result, we are effectively out of space in Vancouver.”
According to Colliers, upcoming new downtown office supply includes: 400 West Georgia Street, a 24-storey tower by developer Westbank with completion expected in 2020; 601 Hastings Street West, a 25-storey tower by developer PCI with completion expected in the second quarter of 2022; 753 Seymour Street, a 34-storey tower by GWLRA Developments with completion expected in 2021; and Rogers Arena Towers-East Tower, a nine-storey building by developer Aquilini Investment Group with completion expected this year.
“I don’t think it would be too wild a statement to suggest that all of those buildings would 75 per cent to fully leased before they’re completed,” said Dubuque.
One Burrard Place under construction
Ian McKay, CEO of the Vancouver Economic Commission, said there are an increasing number of multinational corporations and homegrown start-ups choosing to expand and scale up in Vancouver. There are also thousands of tech-related seats added to post-secondary institutions across the province.
“The city’s knowledge-based economy is set to continue growing at an accelerated pace,” he said. “The Burrard Place development is the investment community’s vote of confidence in Vancouver’s future.”
One Burrard Place, when completed in the third quarter of 2020, will be Western Canada’s tallest all-residential skyscraper and the third-tallest building in Vancouver. It will have 444 units and is already sold out. There will also be about 60,000 square feet of office space and a Meinhardt Fine Foods store.
Beside the office tower will be a three-storey Toyota showroom, being built at the same time.
Council approved an architecturally distinct, 24-storey office tower planned for the corner of Georgia and Homer streets at a public hearing Feb. 20. The decision came after speakers from the Downtown Vancouver Business Improvement Association and the CBRE, a commercial real estate firm, outlined the need for more new office space in the city.
The rezoning application, submitted by Merrick Architecture on behalf of Westbank Project Corps., was for 400 West Georgia St. across the street from library square. Aside from office space, the project includes commercial space on the ground floor. A restaurant is proposed for the Homer Street side of the building and improvements are also planned for the public space at the base of the building.
The tower itself features stacked four-storey boxes articulated with green walls.
The new building will be two-and-a-half times the density permitted under the previous zoning, but it will create an additional 228,000 square feet of employment-generating space, Michael Naylor, a senior rezoning planner for the downtown district, told council before the vote.
People attending a public open house about the project last fall were generally supportive, noting both the need for office space and the distinctive design of the tower. There was some concern about the durability of the plants on the exterior green walls.
“In response, the applicant is proposing a perforated screen treatment for these walls so that in the season where there are no leaves on the vines, visual interest will be maintained,” Naylor said. “Hearty plants such as Virginia creeper will also be specified. This is the type of vine that grows on the Sylvia hotel.”
While a small portion of the tower projects into the view cone, the impact was considered modest.
Competing with the suburbs
Charles Gauthier, president of the Downtown Vancouver Business Improvement Association, said the organization supported the rezoning application.
Gauthier said diverse office space is a critical element in the long-term success of the city and its economy.
“Increasingly, Vancouver competes not only with suburban office markets but with other cities that may be more attractive to business for a variety of reasons,” he said. “Talent tends to want to be in a vibrant urban area that caters to their lifestyle. Businesses are responding to this need in many North American cities where large technology companies, who would traditionally seek out suburban locations, are increasingly moving into the urban core. This is the environment to which Vancouver has to respond. Our downtown office space has to be able to compete with other cities on this level.”
Gauthier said the BIA’s “Reimagine Downtown Vancouver” initiative a few years ago also found that people want “exciting and unique” architecture in the downtown.
“The cantilevered pods and exterior green walls are striking features of the futuristic design for 400 West Georgia,” he said, adding that aside from providing much-needed office space, the building is also in a prime location with close proximity to transit, shopping and services for the employees who will work in it.
Norm Taylor, executive managing director of CBRE’s Vancouver brokerage operation, also spoke in favour of the development, citing statistics about the vacancy rate in the downtown core, which is made up of 24 million square feet of total product.
At the end of 2017, Taylor said the vacancy rate sat at five per cent. That figure represents 1.2 million square feet of total area available.
“We have one of the tightest markets in North America,” he said, calling it the lowest vacancy rate of any major urban city in Canada and second in North America.
“Our three-year rolling absorption, which is the measure of vacancy and leasing activity, is positive. That’s at 700,000 square feet per year, meaning that we have less than two years supply of vacancy,” he said.
Taylor noted that pension funds and major landlords that look at product will underwrite any office building with a structural vacancy of five per cent, which means if a building has a five per cent vacancy, they write it off as completely leased.
“They need that for growth of their existing tenants and they need that for project space in case somebody has to do a renovation within the office tower,” Naylor said. “So, for all intents and purposes, right now, our market is full.”
Of the 1.2 million square feet of available space, he said very little is suites greater than 50,000 square feet. Taylor said 165 suites are less than 5,000 square feet, 56 are between 5,000 and 10,000 square feet, 19 are between 10,000 and 20,000 square feet, three are between 20,000 and 50,000 square feet, and three are greater than 50,000 square feet.
“When we talk about business growth and people coming to this market and looking at global relocation into Vancouver as a world-class city, when you only have three alternatives that are greater than 50,000 square feet, it’s very limiting, especially when you consider — not to talk out of school — but two of three alternatives that are greater than 50,000 square feet right now are conditionally under offer and likely going to be leased within the next three to six months,” he said.
There are also multiple offers for some the 20,000 to 50,000-square-foot properties.
Taylor said much of the demand is from technology businesses, which prefer to be in the downtown core rather than the suburbs. If they can’t find space in Vancouver, they may opt for other cities such as Calgary or Toronto.
Since 2015, two million square feet of new supply has been added in Vancouver but only two of buildings are under 100 per cent occupancy and he expects that space will be gone in the next six months.
“It’s quite easy to see we need this office building. There’s nothing we hate more than having tenants from our international platform come into this market saying, we’d like to be here, show us what’s available, and we say, I’m sorry we can’t house you. Off to Calgary or Toronto,” he said.
Council voted unanimously in favour of the rezoning.
“It’s going to be a great addition to the architecture and the quality office space downtown that we need downtown so desperately right now,” Mayor Gregor Robertson said. “…I think it was only a couple of years ago that industry folks were saying we were over building at that point. Clearly, our economic growth keeps out-pacing the space coming online and that is a concern.”
In a report from real estate company CBRE, Metro Vancouver’s available industrial space dropped from 3.9 per cent to 2.3 per cent between 2016 and 2017, and they predict that by the end of 2018 it will fall to a historic 1.7 per cent.
The report says rent is up 13.6 per cent year-over-year in Metro Vancouver, at an average $10.23 per foot by the last quarter of 2017.
Senior vice president of industrial, Chris MacCauley, said that small businesses wanting to expand may be pushed out of the province.
“People are gonna have to go to not maybe an ideal spot for their business. They’re gonna have to go down the list.”
MacCauley said while it used to take six to 12 months for businesses to find a space, it now hovers between 24 and 36 months.
He added that costs are also going up each year.
“Property taxes increased by over 20 per cent, so it’s very difficult to maintain an operation in Vancouver.”
He added real estate rates and Metro Vancouver’s geography are also to blame.
The B.C. government is offering modest relief on the rising cost of child care, housing and medical services plan premiums, funded by a raft of new tax hikes that target businesses, foreign buyers, housing speculators and expensive homes.
Published on: February 20, 2018 | Last Updated: February 20, 2018 4:18 PM PST
THE 2018/19 B.C. BUDGET AT A GLANCE:
• A new child care program that makes care effectively free for some low-income families, and offers modest subsidies for others based on income. There’s no mention of when, or even if, government will meet its $10-a-day child care election promise.
• An immediate increase to the foreign buyer tax from 15 per cent to 20 per cent, and an expansion to Kamloops, Kelowna, Greater Victoria and the Fraser Valley.
• The elimination of Medical Services Plan premiums by 2020 to be replaced by a payroll health tax for businesses.
• $6.2 billion over 10 years to create 33,700 affordable housing units.
• A crackdown on fraud and tax evasion in the housing market, as well as a new two per cent speculation tax on those who don’t pay income tax in B.C.
• A hike on the property transfer tax on Feb. 21 from three per cent to five per cent on properties worth more than $3 million, as well as an increase on school taxes.
• A steep hike on tobacco taxes, as well as on taxes for luxury vehicles worth more than $150,000.
• $5.2-billion in new spending over three years, and $5.5-billion in new taxes.
• An estimated $219-million surplus in fiscal 2018/19.
VICTORIA – The B.C. government is offering modest relief on the rising cost of child care, housing and medical services plan premiums, funded by a raft of new tax hikes that target businesses, foreign buyers, housing speculators and expensive homes.
Finance Minister Carole James unveiled a budget Tuesday with an estimated $219-million surplus, the first full fiscal plan for the NDP government since it assumed power last July.
James earmarked $1 billion over three years to create child care benefits of up to $1,250 a month for an infant in a low-income family starting in September, effectively making child care free for a family that earns less than $45,000 a year. The subsidies dwindle to as low as $240 for a middle-income family, depending on the age of the child (see a full table at the bottom of this story).
The subsidy, as well as a separate program of per-space government fee reductions, are first steps toward a “made-in-B.C. universal child care program,” said James.
“With these commitments we are starting ourselves on a path to universal child care,” she said, adding it will help 86,000 families get the child care benefit, 50,000 families get the reduced fees, and approximately 27,000 low-income families will get both and virtually eliminate their fees, by 2021.
“This represents real transformation care in our society.”
The government will also create 22,000 new spaces, said James, and give incentives for unlicensed day cares to convert to licensed.
But it’s a far cry from the $10-a-day NDP election platform, and government officials were unable to say when, or even if, the government could honour that promise.
“Although this is our first budget and we will have been government for seven months, the expectations are huge,” said James.
“The expectations we will do everything in our first budgets are huge. So it’s even more important from my perspective to make sure we’re focused on our priorities.”
Nonetheless, child care advocates praised the move. Sharon Gregson, from the child care coalition that created the $10-a-day campaign, said the government was making the right early moves and once parents get into the program it will naturally begin to expand toward its original goal.
“This is a very meaningful first step today,” said Gregson. “We’re very pleased families will see meaningful changes, they will see affordability, there will be new spaces and an investment in the workforce. This is good news and we’re celebrating, it’s a victory for families.”
Paul Kershaw, a University of B.C. professor who represents the Generation Squeeze organization, said he also thinks government stuck to its promises to achieve $10-a-day by year eight, even if it doesn’t explicitly acknowledge that.
“They look on pace to achieve something very similar to what we recommended by year eight,” said Kershaw.
Janet Austin, CEO of the YWCA Metro Vancouver, said her organization was “very pleased” with both the child care and housing announcements, because the YWCA offers both services. She said government hit the right notes of affordability, maintaining spaces and quality of care in the child care plan.
“It represents a really massive investment,” she said. “It’s a long-term vision as well. One of the challenges will be essentially managing expectations, because building a systemic change in a universal program will take time to ramp up.”
Several groups said they hope government does not continue with its income-tested child care supports, and reverts back to universal affordable care for everyone regardless of their income level.
“The slogan doesn’t matter to me, I don’t care what they call it,” said Kasari Govender, executive director of West Coast LEAF. “But what I want to see is true affordability and true universality. We don’t see that here, we see a focus on affordability and lowest income people, I appreciate that. What we don’t’ see is a move to universality.” But on the whole, Govender added the NDP’s early steps on child care exceeded her expectations and it was a strong start.
The government outlined $5.2-billion in new program spending over three years, for child care, housing, free disability bus passes, a freeze on B.C Ferries fares, health care improvements, more teacher hires and boosts to skilled trades training.
To pay for it, the NDP are relying upon more than $5.5 billion in new tax measures, including raising the foreign buyer tax from 15 per cent to 20 per cent on Feb. 21 and expanding it from Metro Vancouver to include the Fraser Valley, Greater Victoria, Nanaimo and the Central Okanagan Regional Districts.
The government is also hiking the property transfer tax on Feb. 21 from three per cent to five per cent on properties worth more than $3 million.
And the province will levy a new “speculation tax” of two per cent on those who buy B.C. properties but don’t pay income taxes in the province, with exemptions set for primary residences and rental properties. As well, it’s increasing the school tax on properties worth more than $3-million.
“We’re asking those who benefited from high prices to give a bit more back,” said James.
The tax increases also incorporate a steep jump on tobacco, which will generate almost $100 million for the province, and increased fees on luxury vehicles that sell for more than $150,000. New legalized marijuana is set to add $50 million per year.
The carbon tax is increasing $5 per tonne per year, adding $212 million a year. The NDP will also see the first full year of revenue from its decision to increase the corporate tax rate and high-income tax rate last year.
James said the government will eliminate MSP premiums in January 2020, to be replaced by a new payroll health tax on businesses that hits corporations with a payroll of $1.5 million and greater with a full 1.95 per cent, but levies no charges on smaller businesses with payroll of fewer than $500,000. For a business with a $1.5 million payroll, the annual cost will be almost $30,000.
The new payroll health tax comes into effect in 2019, meaning the government earns $463 million this coming fiscal year by double-charging some companies for both a payroll tax and existing MSP payments they may pay on behalf of employees.
Eliminating MSP fees entirely was also a key promise of the NDP during the May 2017 provincial election.
“I’d expect people will understand this is a more fair system, a less regressive tax system,” said James.
Opposition Liberal critic Shirley Bond chastised the government for hitting the revenue-generating corporate sector of B.C. with more taxes while not even following through with the promise for true $10-a-day child care.
“Of course there needed to be investments in child care, and we applaud the efforts this government has made. but let’s be clear, they went to British Columbians and promised $10-a-day day care, they did not deliver,” said Bond. “They did not deliver on 114,000 units of affordable housing. They did not deliver on the renter’s grant either.
“Yes we are willing to recognize the government has made important investments. Our question is how on earth are they going to pay for them, not just today but into the future?”
Business groups also slammed the tax.
Val Litwin, of the B.C. Chamber of Commerce, called the tax pressures added to businesses a “dog pile.”
“When I look at the dog pile of increasing corporate tax, increasing minimum wage, loss of neutrality around the carbon tax, now we get to add to that a payroll tax, that’s going to be leaving business by 2021 footing an almost $2-billion bill,” said Litwin. “By the time we reach 20201 the business community is picking up 70 per cent of the tab. That’s a lot. It’s too much. The impacts are real and I think it will stifle growth and investment in key sectors.”
The MSP move to a payroll tax came as a “nasty surprise,” said Jock Finlayson, executive vice-president of the B.C. Business Council.
“We’re not very happy with a new employer health tax because we weren’t expecting it,” he said.
But Finlayson also said he sympathizes with the pressure on the government to do something about housing affordability and generally supports the initiatives.
The Canadian Federation of Independent Business said it supports a $500,000 threshold for the new health payroll tax, below which businesses would not have to pay. “There’s some good things in here for small business,” said Richard Truscott, CFIB vice-president.
“The employer payroll tax is obviously a concern, but putting in at the same time an exemption for small business is both wise and welcome. Having said that, it’s probably too low. A payroll of $500,000 may seem like a lot but that’s probably only eight to 10 people. We would have like to see the threshold double.”
The budget includes what James said is the largest investment in B.C.’s history for affordable housing. That includes $1.6-billion over three years to build and maintain affordable rental housing, as well as boosts for post-secondary campus housing and housing for women and children fleeing domestic violence.
The B.C. Non Profit Housing Association praised the move, having helped government craft the targets.
Renters will see a $930 per year increase to the rental income assistance program, as well as a funding boost to the seniors’ shelter grant and new legislation to toughen rental laws while allowing strata corporations to levy more fines and penalties against those who break the rules.
There was no mention in the budget of the promised $400 annual renter rebate promised during the election, though James said would consider it in the future along with other reforms for renters such as changes to the annual homeowner grant program to support renters.
The housing measures come with a suite of reforms to crack down on tax evasion and fraud, including forcing numbered companies and corporations to declare the beneficial ownership behind their transactions, and the creation of a new database on the pre-sale condo assignments to make sure taxes are paid on pre-sale flips.
“Our goal is fairness,” said James. “Fairness for the people who live here, work here and who pay their taxes here.”
In total, there are $1.3 billion in new housing-related taxes.
“They are taxes related to correcting the housing crisis in this province,” said James. “The public has been asking for those taxes to be brought in, the public has been asking for the market to be corrected.”
The NDP dismantled the Liberal-created B.C. Home Owner interest-free mortgage program for first-time buyers, using that money to create a new “Housing Hub” agency that will work with non-profit groups, churches and the private sector to find land for housing projects.
Partnerships for housing are key, because budgetary numbers show the NDP will fall well short of the 114,000 new units they promised during the election to build over 10 years.
The budget sets aside almost $6.2 billion over 10 years to create 33,700 housing units, with the private sector being required to generate the remaining 80,300 units if the party hopes to hit its election goal.
James said she hopes the overall impact of the taxes and new supply will be a “moderation” in the market that will drop prices.
“Our hope certainly is the tax measures we’ve put together, in particular in the housing strategy, will look at lowering the price of housing,” she said.
The budget begins to set aside money for the Pattullo Bridge replacement. And it allocates $1.8 billion over three years for new transit infrastructure, but no breakdown on individual projects like the Broadway subway line or Surrey light rail because individual negotiations on projects are incomplete.
Overall, the province’s economy is estimated to perform among the strongest in the country.
“We are economic leaders in Canada, but I do not believe we can consider ourselves leaders if we are not sharing the prosperity of our province with the British Columbians who helped create it,” she said.
The budget also set aside $548 million over three years for seniors care, to help with home and community care levels, residential care and assisted living.
“B.C. Budget 2018 has brought very good news for those who provide seniors’ care,” said Daniel Fontaine, CEO of the B.C. Care Providers Association. “Through these new investments, the BC government is acknowledging that seniors are an important priority.”
Much of the government investments are funded using a $15-billion taxpayer-supported capital plan over three years.
The province’s total debt is set to jump by $4.1-billion, the largest single-year jump since 2012/13.
British Columbia debt is expected to rise to $69.4 billion in 2018/19, though James said its indictors by revenue and GDP remain affordable. Almost four cents of every dollar of government revenue goes toward debt repayment.
As part of Budget 2018, which is also the BC NDP provincial government’s first, BC Minister of Finance Carole James announced a number of taxation changes on residential properties, which she said are meant to further address the housing crisis in BC.
However, in addition to increasing the tax by 5%, the FBT will also now be expanded to BC’s other major urban areas namely the Fraser Valley, Greater Victoria, Nanaimo, and Central Okanagan Region.
As well, to target the upscale real estate market, the regular property transfer tax for residential properties valued at over $3 million will go up from 3% to 5%.
“Increasing the tax should help to deter those speculating in BC’s housing market,” said James during today’s budget speech. “Extending it to other communities ensures that we don’t simply push the speculation into neighbouring communities.”
Speculation tax announced
In addition to the FBT increase, the provincial government announced it will be enacting a new annual speculation tax (ST) on residential property targeting foreign and domestic homeowners – including those who leave their properties vacant.
This includes taxing satellite families, which are households with high worldwide income but that pay little income tax in BC.
The ST will be directly collected by the provincial government and begins during the 2018 tax year, with rates starting at $5.00 per $1,000 of assessed value.
In 2019, this rate will increase to $20 per $1,000 per assessed value.
Put in context, this means that a home valued at $500,000, for example, will pay an additional property tax of $2,500 in 2018 and $10,000 in 2019.
However, for those who pay BC’s income tax, a non-refundable income tax credit will be made available to offset the new property tax being introduced.
“BC’s real estate market should not be used as a stock market,” continued James. “This will penalize people parking their capital in our housing market simply to speculate, driving up prices and removing rental stock.”
Other tax increases include an uptick of the provincial school tax on homes worth over $3 million and charging the 8% PST and up to 3% of municipal taxes on short-term rentals, namely Airbnb.
Loopholes that currently allow contract assignments in the condo pre-sale market – the selling and re-selling of a condo unit multiple times before the property is ready for occupation – and hidden property ownership will be closed.
There will also be a change in the property tax treatment of residential properties located within the Agricultural Land Reserve, to discourage the growing practice of using farmland for large homes or mansions.
James said new revenues generated by these tax changes will fund the provincial government’s ambitious $6.5-billion affordable housing plan.
During the 2019-20 fiscal year, forecasts show the new ST will add $200 million, increases and expansions to the foreign buyers tax and property transfer tax will add $40 million, increases to the school tax on residential properties will add $81 million, and the PST on short-term rentals will add $16 million.
National Features Editor at Daily Hive, the evolution of Vancity Buzz. He covers local architecture, urban issues, politics, business, retail, economic development, transportation and infrastructure, and the travel industry. Kenneth is also a Co-Founder of New Year’s Eve Vancouver. Connect with him at kenneth[at]dailyhive.com
Ask people this question and you will get a variety of answers. Most home owners will say 10% is what you should put down. However, if you speak with your grandparents, they are likely to suggest that 20% is what you need for a down payment.
The truth is 5% is the minimum down payment that you can make on a home in Canada. If you are planning on buying a $200,000 home then you need $10,000.
It all can be explained by the creation of the Canadian Mortgage and Housing corporation (CMHC) by the Canadian government on January 1st, 1946. Before this time, you needed to have 20% down payment to purchase a home . This made home ownership difficult for many Canadians. CMHC was created to ease home ownership. This was done by offering mortgage default insurance. Basically what CMHC does is it guarantees that you will not default on your mortgage payments. If you do, they will reimburse the lender who gave you the mortgage up to 100% of what the homeowner borrowed. In return lenders allow you to purchase a home with a smaller down payment and a lower interest rate.
CMHC charges an insurance premium for this service to cover any losses that may occur from defaulted mortgages. This program was so successful that CMHC lowered the minimum down payment to 5% in the 1980’s.
However, if you have little credit history or some late payments in the past they may ask you to provide 10% instead of the tradition 5% if they feel there is a risk that you may default at some time.
You should also be aware that the more money you put down, the lower your monthly mortgage payments will be. You also can save thousands in mortgage default insurance premiums by putting 20% down. At this time, home buyers who put 5% down have to pay a fee of 4% to CMHC or one of the other mortgage default insurers to obtain home financing. On a $400,000 home this is close to $16,000.
If you can provide a 10% down payment the insurance premium falls to 3.10% and if you can provide 20% it drops to zero. While 20% can seem like an impossible amount to save, you can use a combination of savings, a gift from family and/or a portion of your RRSP savings to achieve this figure. The best recommendation that I can make is to speak with your Dominion Lending Centres mortgage professional to discuss your options and where to start on your home buying adventure.
Article written by David Cooke https://dominionlending.ca/news/whats-acceptable-payment-house/
Your credit score is a big factor when you apply for a mortgage. It can dictate how good your interest rate will be and the type of mortgage you qualify for.
Mortgage Professionals are experienced helping clients with a wide range of credit scores so we can find you a mortgage product even if your credit is far from perfect.
The good news about your credit score is that it can be improved:
Stop looking for more credit. If you’re frequently seeking credit that can affect your score as can the size of the balances you carry. Every time you apply for credit there is a hard credit check. It is particularly important that you not apply for a credit card in the six months leading up to your mortgage application. These credit checks may stay on your file for up to three years.
If your credit card is maxed out all the time, that’s going to hurt your credit score. Make some small monthly regular payments to reduce your balance and start using your debit card more. It’s important that you try to keep your balance under 30% or even 20% of your credit limit.
It’s also important to make your credit payments on time. People are often surprised that not paying their cell phone bill can hurt their credit score in the same way as not making their mortgage payment.
You should use your credit cards at least every few months. That’s so its use is reported to credit reporting agencies. As long as you pay the balance off quickly you won’t pay any interest.
You may wish to consider special credit cards used to rebuild credit. You simply make a deposit on the card and you get a credit limit for the value of that deposit. They are easy to get because the credit card company isn’t taking any risks.
Contact a Dominion Lending Centres Mortgage Professional if you have any questions.
Article written by Tracy Valko https://dominionlending.ca/news/improving-credit-score/
It is no surprise that housing activity slowed in January following a pulling-forward sales surge as homebuyers hurried to purchase before the mortgage rule changes in 2018. The January 1 implementation of the new OSFI B-20 regulations requires that uninsured mortgage borrowers be stress-tested at a mortgage rate 200 basis points above the contract rate at federally regulated financial institutions.
Statistics released today by the Canadian Real Estate Association (CREA) show that housing activity retreated to the lowest monthly level in three years in January. Sales were down in three-quarters of all local markets, including virtually all major urban centres. Many of the larger declines in percentage terms were posted in Greater Golden Horseshoe (GGH) markets, where sales had picked up late last year following the announcement of tighter mortgage rules coming into effect in January.
Actual (not seasonally adjusted) activity was down 2.4% from January 2017 and stood close the 10-year average for January. Sales came in below year-ago levels in about half of all local markets, led by those in the GGH region. By contrast, sales were up on a year-over-year (y-o-y) basis in the Lower Mainland of British Columbia and Vancouver Island, the Okanagan Region, Edmonton, Montreal, Greater Moncton and Halifax-Dartmouth.
According to the CREA President Andrew Peck, “The piling on of yet more mortgage rule changes that took effect starting New Year’s Day has created homebuyer uncertainty and confusion. At the same time, the changes do nothing to address government concerns about home prices that stem from an ongoing supply shortage in major markets like Vancouver and Toronto. Unless these supply shortages are addressed, concerns will persist.”
New Listings Fall Sharply
The number of newly listed homes plunged 21.6% in January to reach the lowest level since the spring of 2009. New supply was down in about 85% of all local markets, led by a sizeable decline in the GTA. Large percentage declines were also recorded in the Lower Mainland of British Columbia and Vancouver Island, the Okanagan Region, Hamilton-Burlington, Oakville-Milton, Kitchener-Waterloo, London and St. Thomas, Kingston and Ottawa, closely mirroring the list of markets that saw the most significant sales declines in January.
With new listings having fallen by more than sales, the national sales-to-new listings ratio tightened to 63.6% in January compared to the mid-to-high 50% range to which it held since last May.
A national sales-to-new listings ratio of between 40% and 60% is generally consistent with a balanced national housing market, with readings below and above this range indicating buyers’ and sellers’ markets respectively. That said, the balanced range can vary among local markets.
Based on a comparison of the sales-to-new listings ratio with its long-term average, a little over half of all local markets were in balanced market territory in January 2018. The ratio in many markets moved one standard deviation or more above its long-term average in January due to large declines in new supply.
The number of months of inventory is another important measure of the balance between housing supply and demand. It represents how long it would take to liquidate current inventories at the current rate of sales activity.
There were 5 months of inventory on a national basis at the end of January 2018, which is close to the long-term average of 5.2 months.
The Aggregate Composite MLS® Home Price Index (HPI) rose by 7.7% y-o-y in January 2018. January’s annual price increase was the 9th consecutive deceleration in y-o-y gains, continuing a trend that began last spring. It was also the smallest y-o-y increase since December 2015. The MLS® Home Price Index (MLS® HPI) provides the best way of gauging price trends because average price trends are prone to be strongly distorted by changes in the mix of sales activity from one month to the next.
The deceleration in y-o-y price gains mainly reflects trends among GGH housing markets (the broad region surrounding Toronto) tracked by the index. While prices in the area have primarily stabilized in recent months, ongoing deceleration in y-o-y comparisons reflects the rapid rise in prices one year ago.
Apartment units again posted the most significant y-o-y price gains in January (+20.1%), followed by townhouse/row units (+12.3%), one-storey single family homes (+4.3%), and two-storey single family homes (+2.3%).
Composite benchmark home prices in the Lower Mainland of British Columbia continue to trend higher after having dipped briefly during the second half of 2016 (Greater Vancouver: +16.6% y-o-y; Fraser Valley: +22.4% y-o-y). Apartment units have been driving this regional trend in recent months, with single family home prices stable.
Benchmark home prices rose by about 14% on a y-o-y basis in Victoria and by about 20% elsewhere on Vancouver Island. These gains are similar to those recorded during the fourth quarter of last year.
Price gains have slowed considerably on a y-o-y basis in the GTA, Guelph, and Oakville-Milton; however, home prices in the former two markets remain above year-ago levels (GTA: +5.2% y o-y; Guelph: +10.9% y-o-y; Oakville-Milton: -1.2% y-o-y). Monthly prices in these markets have shown signs of stabilizing in recent months after having climbed rapidly in early 2017 and subsequently retreated.
Calgary benchmark home prices were down slightly (-0.5% y-o-y), as were home prices in Regina and Saskatoon (-4.9% y-o-y and -4.1% y-o-y, respectively).
Benchmark home prices rose by 7.2% y-o-y in Ottawa (led by an 8.1% increase in two-storey single family home prices), by 5.2% in Greater Montreal (led by a 6.2% increase in in two-storey single family home prices) and by 7.5% in Greater Moncton (driven by an 11% increase in one-storey single family home prices). (Table below).