The survey utilizes an affordability scale that factors in a city’s median home price along with the median pretax household income.

Hong Kong is at the top of the scale at12.6.  Vancouver falls at number 2 on the list at 10.6.

Want more affordable housing?  In the US the winning cities are:

Detroit  1.4
Atlanta  1.9
Phoenix  2.2

In Canada?   Edmonton ranked at at respectable and affordable 3.5.

In this short video (2:47) Setticasi explains what took place in the Vancouver housing market over the past month.  If you are interested in finding out whether the market is going up, down or sideways Setticasi has all the charts and graphs you need to figure out what is happening.

For more news and statistics visit us at http://www.rebgv.org

November 2011 Market Update

With the recent defeat of the HST (to be implemented in March 2013), I have received some questions about how this will affect the real estate market. The short answer is: there will be a minimal effect, and some people will win, while others will lose.

While we can prognosticate about how these changes will affect the market, the government has yet to come up with a set of transition rules for how this will go ahead. However, to predict how things will be affected, we must break down its effects into 3 categories: New Construction, Resale, and Fees.

New Construction

This category is the one that is likely to be most influenced by the change back from HST to GST. All new residential construction will be taxable at the 5% rate rather than the previous 12%. However, the government will also be eliminating the New Housing Rebate, which was introduced to offset the burden of the HST on a property valued up to $525,000. For new construction valued at over $525,000, the rebate of $26,250 is being eliminated as well, but with the lower tax burden, there should be a net savings.

But that’s not the end of the story. The change back from the HST to the GST & PST will result in higher construction costs as government rebates for input costs are eliminated. That means that while the tax burden may go down on these homes, the cost base will go up.

The net result is that for homes valued at more than $525,000, the overall cost will likely go down, while homes that are valued at less than $525,000, the overall cost will likely increase.

Resale

The change back to GST should have little to no effect on the resale market as ‘used’ homes are not subject to HST and will not be subject to GST or PST. Instead, the government has a Property Transfer Tax, which will remain the same: 1% on the first $200,000; 2% on the balance.

Fees

The change back to GST will apply to the fees associated with a transaction and will lead to a slight decrease in these fees. That said, many of the fees currently associated with transacting a home already charged both GST & PST so there will be no change; however, the taxes on a realtor’s fees will decrease by 7%. For a $1,000,000 home, real estate commissions typically average 2.95% of the purchase price. A tax decrease of 7% on this amount means that the tax on a typical realtor commission should decrease by roughly 0.2065% of a home’s purchase price.

Taking all of this into account, it is clear that the change back to the GST will have a positive effect on the market, but only slightly so. That said, depending on your asset class, you may end up behind.

In addition to the change in tax regimes, one must also be aware of the typical hidden costs of buying or selling a home.

I’ve spelled them out below:

Hidden Costs of Buying or Selling a Home:

Traditional Sellers’ Costs:

• Lawyer’s Fees: Attending to Execution of Documents
• Costs of Clearing Title including:
  • Discharge Fees charged by Encumbrance Holders
  • Mortgage Prepayment Penalties
• Real Estate Commission

Traditional Buyers’ Costs:

• Inspection
• Appraisal (if required for Financing)
• Lawyer or Notary Fees and Expenses including:
  • Searching Title
  • Investigating Title
  • Drafting Documents
  • Land Title Registration Fees
• Insurance
• Property Transfer Tax (1% on the first $200,000; 2% on the balance)
• Goods and Services Tax (5% on new product)

This is by no means an exhaustive list, but it will give you an idea of some of the additional costs associated with a Real Estate transaction.

November 2011 Market Update

If you would like to learn more, please feel free to contact us by phone or by clicking on one of the links below:

Simon Clayton 604-764-0711

Jason Low 604-790-5276

Sandra Ens 604-263-1911

Jenny Stephanson 604-675-6214

Jason Feinstadt 604-263-1911

MacDonald Realty 604-263-1911

October 2011 Market Update

2011 has been the tale of two real estate markets, as mainland Chinese buyers influence some areas and asset classes while ignoring others altogether. The biggest beneficiaries of the influx of Chinese immigrants have been Vancouver and Richmond, and to a lesser extent, Burnaby, White Rock, and West Vancouver. Many areas of these cities have seen their single family home prices increase 20+% over the past 12 months, with some areas approaching a 50% increase!

Historically, big price increases in single family homes in these areas have resulted in upward pressure in both the surrounding communities and alternative asset classes as people cash in by selling their Westside homes and downsize to a condo or house in the suburbs, the Interior, or the Island.

Interestingly, this has yet to happen.

Prices for multifamily homes – condos and townhouses – have remained relatively stable, while prices in the surrounding suburbs of Vancouver as well as on Vancouver Island and in the Interior have more closely tracked the price gains of the markets in the rest of Canada rather than the core cities of the Vancouver area.

So what will happen in the fall and winter?

No one really knows what the market will do, but traditionally, the fall and winter seasons have resulted in a slow-down in the market as families buckle down for the school year and weather patterns make buyer tours less pleasant. Because there are fewer buyers, many sellers decide to pull their properties off the market, which results in less supply to offset the drop in demand.

However, statistics consistently show that house prices tend to be lower in the winter than in the summer, which is why home price stats are seasonally adjusted. There are many reasons for this seasonal disparity, but simply put, people who sell in the winter are more likely to need to sell. And because there are fewer buyers, true negotiations between buyers and sellers are more likely to occur in place of auction-type multiple offer situations.

So what does this mean if you’re a buyer or seller? If you’re a buyer that has the flexibility to purchase during the winter months, your selection will be limited, but if you find what you like, you could very well get a good price for your home. If you’re a seller that needs to sell, the limited supply can work in your favour if you have a good realtor that can outline the unique features of your home.

October 2011 Market Update

If you would like to learn more, please feel free to contact us by phone or by clicking on one of the links below:

Simon Clayton 604-764-0711

Jason Low 604-790-5276

Sandra Ens 604-263-1911

Jenny Stephanson 604-675-6214

Jason Feinstadt 604-263-1911

MacDonald Realty 604-263-1911

The Real Estate Board of Greater Vancouver is saying:

Consistent increases in property listings and fewer home sales over the summer months has helped move the Greater Vancouver housing market into the upper end of a buyers’ market.

“There’s more competition amongst home sellers in today’s market, providing more options for prospective buyers,” Rosario Setticasi, REBGV president said. “Buyers now have more properties to choose from and more time to make decisions compared to the spring season.”

If you are a first time home buyer, it seems to be getting better and better.  Lower housing prices plus low mortgage rates.  You can shop around and spend the time to make a good buying decision, have home inspections and some bargaining power.

Give us a call and pre-qualify. Your mortgage broker will not only treat you better, but you will know exactly the price range you can afford.

604-736-1855

Check out the current mortgage rates here.

September 2011 Market Update

With the problems in the US and Europe and the resulting economic turmoil, it is hard not to think of how these factors influence our housing market. And while it’s true that consumer confidence plays a big role in the overall health of housing, it’s important to remember that Canada continues to look like an economic oasis in a desert of bad financial news.

As you know, the US housing market has been in a severe recession for the past several years. And while there’s been talk of a possible correction in the Canadian housing market, it is unlikely we will experience anything near as painful as our neighbours to the south.

There are 3 main reasons for this.

(1) Government Tax Policies
(2) Loan Qualification Policies
(3) Bank Lending Policies

Government Tax Policies

The US Government has long had a policy of encouraging home-ownership. Government-sponsored entities Fanny Mae and Freddy Mac have been getting most of the headlines recently for agreeing to purchase mortgage loans that encouraged unsound lending. However, the US Government’s tax policy of allowing homeowners to deduct mortgage interest payments may be more significant, as it has encouraged Americans to maximize their debt-loads in order to minimize their tax burdens.

Canada, of course, has no mortgage tax break for homeowners, with interest payment deductions only applying to investment properties.

Loan Qualification Policies

The secondary mortgage market in the US allowed the originators of mortgages to pass on the mortgage notes to investors throughout the world. Because of this, lenders and mortgage brokers were incentivized to originate as many mortgages as possible, with little-to-no regard for risk. These perverse incentives led to ‘liar loans’ – where individuals would simply lie to their mortgage broker about their income or employment knowing that there would be no incentive to conduct a background check – and ‘NINJA loans’ – where mortgage brokers offered mortgages to individuals with No Income, No Job or Assets.

In Canada, the originators of loans (typically the Big Banks) tend to hold on to them. Because of this, the correct incentives are in place to ensure that only individuals who can afford the mortgage receive them.

Bank Lending Policies

Another unintended consequence of the secondary mortgage market in the US has been the creation of extensive Adjustable-Rate Mortgage products with attractive ‘teaser’ rates. These products allowed mortgage-holders to pay an unrealistically low rate for a period of time before ‘resetting’ to a much higher, unaffordable, rate.

In addition to this, loans in the US tend to be ‘non-recourse’ meaning that the only collateral that a lender would have on a mortgage is the house itself. In Canada, mortgages tend to be ‘full-recourse’, with many banks demanding personal guarantees. This difference has resulted in people walking away from their homes in the US at a much higher rate than in Canada.

In the end, the result of all of these policy differences means that Canada is fairly well-insulated from the carnage that is occurring south of the border. Interestingly, our conservative, low-competition banking environment may have saved our housing market from a painful downturn.

September 2011 Market Update

If you would like to learn more, please feel free to contact us by phone or by clicking on one of the links below:

Simon Clayton 604-764-0711

Jason Low 604-790-5276

Sandra Ens 604-263-1911

Jenny Stephanson 604-675-6214

Jason Feinstadt 604-263-1911

MacDonald Realty 604-263-1911