Property Transfer Tax Increases for Foreign ownership of residential properties

Updated data on foreign investment show more than $885 million in foreign investment flowed into Metro Vancouver’s residential real estate market in just five weeks, representing 86% of the capital invested in the sector by foreign purchasers throughout the province.

Beginning Aug. 2, 2016, an additional property transfer tax rate of 15% will apply in Metro Vancouver to purchasers of residential real estate who are foreign nationals or foreign-controlled corporations.

As part of Budget 2016 government began collecting data to identify foreign purchasers, and better understand whether and to what extent foreign capital is having an effect on residential real estate prices.

Data collection began June 10, 2016. From June 10 through to July 14, data for all of B.C. show:

• 19,383 residential property transactions in British Columbia
• 1,276 transactions involved foreign nationals
• This shows a rate of 6.6% of transactions involved foreign nationals
• The total investment by foreign nationals was $1,024,031,118 representing 7.9% of the total investment

Data specific to Metro Vancouver show:

• Metro Vancouver accounted for 49.7% of the real estate transactions in B.C., and 73.3% of transactions by foreign buyers
• By value, Metro Vancouver accounted for a total $8.8 billion worth of transactions; foreign purchasers accounted for $885,393,373.
• The average investment by Canadian citizen or permanent resident buyers in Metro Vancouver was $911,425, while the average investment by foreign buyers was $946,945.

Updated data specific to the City of Vancouver, Burnaby, Richmond, Surrey and the capital region are shown in the attached tables.

While foreign investment in residential real estate markets is only one factor driving price increases in Metro Vancouver, it represents an additional source of pressure on a housing market struggling to build enough new homes to meet demand. The Province’s additional tax on foreign purchases will help manage foreign demand while new homes are built to meet local needs.

Property transfer data also show that the measures announced in Budget 2016 continue to benefit families buying newly built homes. Budget 2016 introduced the Newly Built Home Exemption to the Property Transfer Tax, which can save purchasers up to $13,000 in property transfer tax when purchasing a newly constructed or subdivided home worth up to $750,000.

Data to July 14, 2016, show:

• 4,027 families have saved an average of $7,698 on their newly built homes.
• Total savings to families: $31,770,029
• 191 per week on average (21 weeks)
• 27 per day on average.

The existing First Time Buyers Program has also helped more than 11,000 families buy their first home this year.

Learn More:

Data on foreign investment in residential real estate: https://news.gov.bc.ca/files/Property_Transfer_Tax_Report_Jun_10_to_Jul_14_2016.pdf

Presentation: https://news.gov.bc.ca/files/Housing_Data_Update_July_26_2016.pdf

Housing affordability: http://housingaffordability.gov.bc.ca/

Down Payment & Property Transfer Tax Changes

More major changes were implemented in the mortgage industry last week. Both the Federal and Provincial Governments had their say, targeting Down Payments and Property Transfer Tax. One to suppress the heated housing market and the other to stimulate new builds and generate more tax revenues from luxury home buyers. Between 2008 and 2012, four rounds of Federal Government changes have been made to tighten eligibility rules for new insurable loans, including:

• Increase the minimum down payment to 5 per cent;
• Decrease the maximum amortization period to 25 years;
• Limit the maximum insurable house price to below $1 million;
• Apply maximum debt service-to-income ratios; and,
• Apply a mortgage rate stress test for mortgages with terms of less than 5 years or variable rates.

This is in addition to Mortgage Insurer, CMHC, removing stated income and second home programs in 2014 and announcing increased premiums in 2015, which was followed by Genworth and Canada Guaranty, two privately owned mortgage insurance companies.

DOWN PAYMENT CHANGES

Effective Monday February 15, 2016, homes purchased over $500,000 will require more than a 5% down payment.  For any portion over $500,000 up to $1,000,000, the minimum increases to 10%. The down payment over $1,000,000 remains at 20%.

Department of Finance Release, "Government of Canada Takes Action to Maintain a Healthy, Competitive and Stable Housing Market"

Department of Finance FAQs

Globe & Mail reports, "New mortgage rules go into effect, part of Liberal plan to limit risks."

PROPERTY TRANSFER TAX CHANGES

After announcing on Tuesday February 16, 2016, new Property Transfer Tax (PTT) changes came into effect Wednesday February 17, 2016.

Despite repetitive appeals by the BC Real Estate Association to lobby for lower PTT, most recently in October 2015, as noted in the article "Major Change to Property Transfer Tax Unlikely" covered by Barbara Yaffe of the Vancouver Sun, tax cuts were not part of the announcement.

Key points of the PTT budget include:

1. First Time Home Buyer Exemption - No Change No changes to the First Time Home Buyer Exemption limits.  This remains at $475,000 or lower, with partial exemptions between $475,000-$500,000;

2. Newly Build Home Exemption All buyers (whether First Time Home Buyers or not) no longer pay PTT on purchases of NEW homes up to $750,000 in value.  The Buyer must be a Canadian citizen or a permanent resident.  There is a partial exemption for homes between $750,000 and $800,000;

3. Higher Tax over $2 Million There is now a 3% tax on amounts over $2,000,000.

Read more by Huffington Post, B.C. Budget 2016: Real Estate Market To See Tax Changes.

QUESTIONS?

If you have any questions regarding these changes, please don't hesitate to call or email Irene at irene@irenestrong.com or 778-847-8466.

Simmy Sandu

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PERSONAL SNAP SHOT

About: Professionally Simmy has an extensive background with over 18 years in corporate sales, business development and marketing. She has made the career transition to starting her own business and taking a long time passion and interest for real estate to now working full time in the industry. She loves challenging herself, and being her own boss has allowed her that, which encourages her to continue learning and develop amidst the trials of running a small business in a fast paced industry. “Knowledge is everything in business, you can’t allow yourself to ever become stagnant.” Which is a true reflection of her professional standards and commitment of expertise to her clients.

Interests: Golf, yoga, running, health & wellness, and gourmet cooking – Food and Wine are definite passions.

Likes (If you had more time, what would you do more of): If she had more time, and financial resources Simmy would devote more of herself to charitable initiatives and work with under-privileged children. She would also focus on the Health and Wellness aspect of her life and take her interests and explore them through a full time practice. The thought of having a full time wellness and nutritional coach, personal trainer and yoga master at her daily disposal has enticing appeal!

Loves (can’t live without): Simmy’s love of things is ever evolving. Adaptation is the key word she lives by. However, the one the one thing that Simmy can’t live without is her family, and on a lighter note her Starbucks Coffee!

BUSINESS BASICS

Started as a Realtor in: October 2014.

Specialization: Vancouver West Side, Downtown and the Coquitlam/Burnaby area.

One-piece of advice for your clients: Don’t allow people to rush you into things. Take the time to make sound decisions. You are investing your hard earned money towards your future and you have the right to be picky. Make sure your needs are being met through a consultative process and what’s important to you is kept top of mind at all times. Build a relationship with someone who becomes your trusted advisor for the long term.

Why Dexter? Dexter has a solid reputation in the industry based on high levels of integrity, professional standards, ethics and personal service. Dexter invests in it’s professionals through training and education that is a cut above the rest. Of all the firms that I interviewed with, Dexter was 100% in alignment with my personal and professional values. Dexter also has a global presence through an exclusive affiliation with Frank Knight based out of the UK. The fact that a firm of Dexter’s size has captured such a large audience in my mind spoke volumes regarding the type of clientele the firm has dealt with over the years. What stands true for Dexter and its quality is “it’s not how big you are, but who you are that matters.”

Q & A

1. What differentiates you from the 11,000 licensed real estate agents in the Greater Vancouver area? My passion, integrity and professionalism are what I live by and I truly love helping people. I have a genuine concern for my clients and care about the decision they are making. I ensure that I focus on a long term relationship with my clients that entails becoming their trusted advisor, not just their realtor.

2. What do you think clients look for in a realtor? All clients have different mandates and needs, but the most important aspects clients should look for are to work with someone they trust, connect with, and easily build a rapport with. Like any relationship you have to like the person you are working with.

3. How do clients describe you and what’s your best feature? As a professional that comes with high standards who gets the job done, and will go the extra mile because of my genuine care for people. My attention to detail and ability to be creative would be my best features.

4. What inspired you to be a Realtor? I have been passionate about real estate my entire career and have always wanted to be a part of the industry, but my career always presented various opportunities that took me in a different direction. At this point I’m diving in and taking a long time passion and turning it into a full time profession.

5. What do you love most about your job? The ability to meet people from all walks of life, share in their experiences and help their dreams become a reality.

6. What is the hardest part of your job? I don’t find anything difficult, because for me this doesn’t feel like work. I enjoy even the most challenging components of the role and the toughest negotiations with an enthusiastic approach and a smile!

Contact Simmy Sandhu Dexter Associates Realty 1399 Homer Street Vancouver, BC V6B 5M9 c. 604.897.5880 o. 604.689.8226 e. simmy@dexterrealty.com w. www.dexterrealty.com

RRSP Deadline has come and gone. What can you do now?

If you count yourself amongst one of the many Canadians for whom March 2 came and went this year without a second glance at the calendar, don't worry: even though the contribution deadline for 2014 RRSP's has passed, there is another investment option that may be worth considering.

While RRSP’s are a wonderful vehicle for many Canadians, for others they are not necessarily the best option for everyone. An alternate or complimentary investment strategy consideration for many Canadians is the Tax Free Savings Account (TFSA). TFSA’s are simply another investment vehicle, but the taxation rules are different. Interestingly, many people are surprised to learn that despite having the words “savings account” in its title, their TFSA can hold the exact same investments that their RRSP can, such as GIC’s, mutual funds, or stocks, amongst other choices. TFSA’s can be a phenomenal tax shelter, when used properly and invested wisely.

Canadians in the lower income tax brackets may find a TFSA makes more sense over investing through an RRSP as they are perhaps not as concerned with receiving tax deductions upfront, and would rather experience tax-free growth and withdrawals down the road. For others, a combination strategy could provide a better long-term outcome.

Why not speak to a financial professional to determine what investment vehicles and strategies will make your money work as hard for you, as you do for it?

Please don’t hesitate to contact me if you have any questions about RRSP’s or TFSA’s and what might make the most sense for you, or if you’d like a complimentary no-obligation review of your current portfolio.

Jaclyn Carmichael Financial Coach 1 (604) 888-4934 (w) 1 (604) 220-5719 (m)

Heading South

We have since toured Tsawwassen and North Delta for suitable areas for our new family home.  This time, we decided to head South to WhiteRock/South Surrey to see if there was anything of interest.  The entire family was able to make the afternoon adventure with the hope of hitting 11 opens.  We didn’t get every home, but we did get a goods sense of some of the key areas including: WhiteRock, Morgan Crossing and Summerfield.

With moving south, there are some great value adds: better cost per square foot, more space and storage, newer build options, community connectedness, access to yards and nearby schools.  However, the negatives were actually quite surprising restrictive, considering the distance away from Vancouver proper and the extra 30 minute+ drive we would both have to our offices in Richmond . Many location had little to no visitor parking, some were townhomes and not single family dwellings for the price point, some school catchments had shocking low ratings, while others had considerable distances to shopping and recreation.

Mark, my husband, liked the Morgan Crossing area, but wasn’t overly excited with any of the properties we viewed.  I lean towards White Rock.  If I’m going to be south, I would like to be nearby the beach to really enjoy my summers.  There is interest, but needless to say…we’re still searching.

13507 15th Avenue $599,900 (was $629,000) 3 Bed / 3 Bath 1,558 sqft / 5,460 lot Built in 1978 Taxes: $3033	1983 148A Street SOLD $677,700 4 Bed / 3 Bath 2,253 sqft / 5,926 lot Built in: 1980 Taxes: $3,222
15 2456 163rd Street  $648,000 4 Bed / 3.5 Bath 2,653 sqft Built in: 2009 Taxes: $3,469 Maintenance: $300.24	2853 160A Street $779,900 4 Bed+ Den / 3.4 Bath 2,488 sqft / 2,691 lot Built in: 2012 Taxes: $3,956
17366 0B Avenue $759,900 6 Beds / 3.5 Bath (suite included) 3,250 sqft / 3,677 lot Built in: 2014 Taxes: $2,019	17378 0B Avenue $768,000 6 Beds / 4 Bath (suite included) 3,214 sqft / 3623 lot Built in: 2013 Taxes:$2,014
33 15977 26th Avenue  $659,000 (GST/HST included) 5 Bed / 4 Bath (with in-law suite) 2,400 sqft Built in: 2012 Taxes: $2,930 Maintenance: $190	47 15988 32 Avenue $699,000 5 Bed / 4 Bath (with in-law suite) 2,998 sqft Built in: 2014 Taxes: $3,207 Maintenance: $269
14306 N. Bluff Road $689,880 5 Bed / 3 Bath (with suite) 2,619 sqft / 5,487 lot Built in: 1976 Taxes: $3,772

The average house price was $700,000, so let’s take that property value with taxes of $2,700  ($3,270 – homeowners grant of $570) and $100 for heat.  We won’t consider maintenance fees in this equation.

Total Purchase Price: $700,000 Current Interest Rate: 2.94%

High Ratio Loan (less than 20% down payment) Amortization: 25-year Down Payment (5%): $35,000 CMCH fees: $20,947.50 Total loan: $685,947.50 Monthly Mortgage Payments: $3,225

Approximate income required: $133,000

Conventional Loan (20% or more down payment)
 Amortization: 30-year Down Payment (20%): $140,000 Total Loan: $560,000 Monthly Mortgage Payment: $
2,337

Approximate income required: $100,000

From my home to yours -
Irene