Mortgage Update by Paula Siemens | Invis

An overall Global Economic slowdown caused by tariffs, and overall political uncertainty has caused the bond market yields to fall. We may not see a recession in 2020 as originally thought, but there is tremendous volatility in play at present.

In July, the jobless rate rose causing the Bank of Canada to come up with a plan to buy Canadian bonds back to create a stabilization to our bond yields. Falling yields are good for fixed mortgage rates. We have recently seen rate sales increase for purchases of homes under $1M and for mortgages coming up for renewal through lenders’ transfer programs. Refinance and rental rates have seen a modest reduction as well.

We are currently in an inverted market where variable rates are higher than the 5 yr fixed rates. If you are in a variable rate mortgage you may wish to explore your rate to convert into a new 5 yr fixed rate, you may end up saving money by locking in. However, it is very important to consider that locking your rate in also exposes you to a higher exit penalty. If you plan on selling to buy a bigger place, or downsizing you may be better off staying in a variable mortgage as your penalty will be be capped at a 3 months interest penalty for a traditional variable mortgage product.

The Non-Resident Vendor

Carolynne R. Maguire, Notary Public

In residential conveyancing, there are numerous circumstances under which funds must be retained in trust after the transaction is completed, but none more onerous than that contemplated by Section 116(5) of the Income Tax Act (the “Act”). Therein, a non-resident of Canada is obligated upon disposition of real Canadian property to apply to Canada Revenue Agency (“CRA”) for clearance as evidenced by a certificate (“Certificate”). In order to be protected from potential tax liability, their purchaser will require receipt of same prior to closing or must holdback from sale proceeds an amount prescribed by the Act.

The calculation of the holdback is based primarily upon the use of the sold property and has no relation to the amount of the withholding tax, if any, expected to be paid. As a general rule, if the property was never income producing, having been occupied only by family members for personal use, the amount need only be 25% of the sale price. Alternatively, if the property was ever tenanted, the holdback must be calculated as 25% of land value plus 50% of improvement value, usually pro-rated from current assessed values to actual price. When the history of the property’s use is unclear, the latter will prevail.

Clearly, the impact of such a significant holdback can affect the viability of a transaction and should be addressed prior to listing. Vendors with any question as to their residency for tax purposes should first satisfy themselves in this regard, perhaps with assistance from an accountant. Once determined non-resident, another important consideration for a vendor will be whether their financial position could support both the required holdback and full repayment of a mortgage and/or other transactional obligations. If not, hardship provisions may apply and, under very limited circumstances, the Certificate can sometimes be issued within days and made available to the purchaser before closing, thus eliminating the need for the statutory holdback.

The takeaway here for both parties to a real property transaction is to identify the residency of the vendor as early as possible and to be alert to the implications of non-residency in Canada. The purchaser is obligated to make reasonable enquiry in this regard and the vendor must be prepared to represent their residency under oath or obtain clearance. Just another reason to work with an experienced real estate agent and conveyancing firm!

For a more complete discussion on this subject, my original article published in 2003 can be found at: https://www.notaries.bc.ca/
resources/scrivener/winter2003/12_4_19.pdf

Additional relevant information is also available in the FAQ’s on our website under “Distance Clients”:  https://marpolenotary.com/services/real-property/
and/or by contacting me directly at: notary@marpolenotary.com

Market Update – May 2019

The real estate market in Vancouver continues to chug along at a consistent moderate pace with the odd spits and spats of activity.

Through our 38+ Point Marketing Plan, we have been successful in generating a high turnout and multiple offers on most of our listings resulting in well above market sales. The attached product is very active now with 1, 2, and 3 bedroom condos, townhomes, and half duplexes making up the vast majority of sales in our current market.

Our upgrade buyers are sitting pretty as they are in a super strong position selling their hotter entry to mid-level product and upgrading into the higher end detached product (houses) which is relatively quiet. Listing agents are rolling out the red carpet and making us lattes when we show their listings. It’s easy to setup tours, they are friendly, and accommodating and are hoping we choose their home to offer on. What a great market to buy a house in (see recent House article).

Our biggest challenge today is not necessarily the low activity stats, the numerous government tax programs, or the difficult loan qualification process (although these are not helping) but rather that the consumer confidence is down. Most buyers are playing the waiting game. If everyone waits, nothing happens. The market stays soft and prices flatline. . . . . It’s the perfect time to buy!

Once that big announcement in the media comes through that our market is recovering, prices are already well on their way up and those waiting buyers have missed the bottom end of the market cycle. At that point buyers begin climbing over each other to buy and prices climb faster than anyone anticipates.

So, if you are planning to make an upgrade, there is no better time than right now. Don’t miss this window as it will not last.

Best Options:
1. Do an equity take out on your current home and invest in an entry level detached house in East Vancouver.
2. Sell your condo/townhouse/duplex and buy your first house in the smallest marginal upgrade market cost we have seen in years.
3. Purchase with a friend or family member with a 3-5 year plan to cash out when the market decompresses and potentially earn 50 times more than what you are earning now in your investments.
4. Etc. etc.

Mortgage Update

by Paula Siemens | INVIS The Siemens Group

The Bank of Canada announced that they will be holding the overnight rate as is, citing a slower than expected 2019 economic outlook; which will keep the prime rate as is. Posted fixed rates should also remain stable. However, lenders’ cost to underwrite a mortgage have increased substantially over the past few years due to legislative changes. It now costs on average $1500-2000 to underwrite a mortgage application due to increased scrutiny and reporting required. The lenders feel that the current climate is a race to the bottom, leaving very little profit margin for your average mortgage. At some point lenders will feel that they can no longer offer the same rate sales, meaning we could see some effective mortgage rates rise slightly while the Bank of Canada Rate and Bank Posted rates remains unchanged.

The Bank of Canada will likely try to increase the overnight rate in 2020.

The 2019 Ride To Conquer Cancer

Every year Adam and I and Team Pospischil Realty join the Ride To Conquer Cancer to raise funds in our community for the BC Cancer Foundation. The funds raised annually go directly into cancer research and treatment options right here in BC. Thanks to your continued support over the past 10 years Team Pospischil Realty has raised over $325,000 in this fight against cancer.

This year’s route of 200+ km will run from Vancouver To Hope (100% Canadian!) and will take place over the August 24th/25th weekend.

This year for the 2019 Ride, we are pleased to announce that in partnership with our friends at West Point Cycle, we promise to have our most supported and successful ride ever!

As a cancer survivor myself I know the challenges cancer patients and their families face in their journey through diagnoses, treatments, and the roller coaster of emotions towards the finish line. I have travelled the cancer road 3 times in my lifetime, my brother Rudy has had cancer twice, and both my parents have battled cancer. My quest is personal and so may be yours as everyone is touched by this disease.

Our annual ride reminds me personally of my past challenges and enables me, and those that joined us through their support, to help push the boundaries of research and treatments to help those on the journey today, and in the future. And perhaps one day we can celebrate a victory in a cure to cancer.

We thank you for your continued support in our campaign. With your help cancer can be beaten within our lifetime. Join us in our fight against cancer and support our ride by simply clicking the link below:

Grand Office Opening

The day has finally come where Pospischil Realty opens its doors at our new head office located at 1638 W 1st Ave. After 6 months of construction, we officially open the office doors for business in early February.
Our new state of the art office is centrally located to best service our entire Vancouver market area. We also built in some little surprises into the new design like our “wall of success”, our new Kids Area, NY loft ceilings, some creative furniture, and generous glass-walled presentation rooms. It’s a great place to celebrate Vancouver real estate and link in with the latest in our market. We would love for you to drop in for a coffee or espresso to see the new digs and say hello.

Market Update

There is a new energy abound in Vancouver that began early in the New Year. I am not going to bore you with all the graphs and copious amounts of data we have to show you the carnage over the past 18 months but in summary: detached houses have softened, and strata condominiums and attached townhomes/duplexes have held their own and appreciated a healthy amount. On a lighter note, call volume is up, plus appointments for listings and buyer meetings are up dramatically, signalling a very promising spring market.

Now that the dust has settled from 2018, we are witnessing many buyers stepping back into the market including first time buyers, clients purchasing investment property, and upgrade buyers taking advantage of the compressed market. The threat of increased interest rates has calmed and current rates, which are well below the historical average, are holding nicely (see Paula’s Mortgage Update article).

With inventory beginning to build and buyers entering into our market we will likely see a stabilization and possibly some growth for 2019 despite the doom and gloom we are all reading in social media and the newspapers. Remember the media reports on past data, but we are on the front lines and see firsthand the activity and behaviour in our market. And it’s looking very very promising.

With some political windows opening up, beginning with the Nanaimo provincial by-election January 30th, there is further opportunity for a political shift back towards the right which would be a positive impact on our market. The upcoming Federal election this October 21st could also offer some easing of existing restraint programs assisting new buyers. The bottom line is our population in Greater Vancouver is expected to grow by 30,000 people per year, or 1.2 million people by the year 2040 for a total number of residents of 3.4 million. All of these new Vancouverites will need a place to live. Even with increased densities and increased rental stock, the demand on this limited supply of land will grow significantly. So, the opportunities are in place for our market to come back and, with any luck, 2019 could be a ‘revival year’ for Vancouver real estate.

Get Ready… The BC – Speculation Tax is Coming!

The Ministry of Finance said letters outlining the first year of speculation tax fees and exemption processes will begin showing up in the mail at all homes in Greater Victoria, Nanaimo, Kelowna and Metro Vancouver (excluding Bowen Island and Lions Bay, but including Abbotsford, Mission and Chilliwack) starting this week. Make sure to complete this declaration by following the letter instructions before March 31st, 2019.

The tax rate is 0.5% of a subject property’s assessed value in 2018, which would be $10,000 a year for a property assessed at $2 million. Starting in 2019, the rate changes to 2% for out-of-province owners, foreigners owners and satellite families (this is defined as households that have more than 50% of income coming from outside Canada).

Owners are exempt from the tax if the property is their principal residence, they rent it at least six months of the year (only three months is required in 2018), they are disabled, the property was just inherited, it’s valued below $150,000, or a person was away and it was vacant due to residential care, medical challenges, work or spousal separation.

Strata property units in buildings where strata bylaws ban rentals are also exempt, but only for 2018 and 2019, to give stratas time to change their bylaws, according to the ministry.

Other exemptions are allowed for First Nations, charities, co-ops, some not-for-profit organizations, local governments, and developers working on construction or renovation of property.

British Columbians with second homes (IE vacation property) who are not exempted will be allowed to get a credit intended to negate the tax on the assessed value up to $400,000, with the remaining value of the property then levied and taxed at the full rate.

Details of this tax are still evolving and changing, so visit the provincial government website for up to date info: https://tinyurl.com/yb6dmt4c

Mortgage Update

We have seen rates rise in late 2018, however, we are now in a position for rates to decrease as the bond yields fall. The Bank of Canada also held off increasing the overnight rate during January’s meeting due to uncertainty of the overall economic performance within Canada and globally. The US Government shutdown is also keeping the Bank of Canada from increasing their overnight rates. We expect to see rate sales pop up as we approach the spring market.

CURRENT RATES:

1-year Fixed 3.19%
2-year Fixed 3.19%
3-year Fixed 3.39%
4-year Fixed 3.64%
5-year Fixed 3.39%
7-year Fixed 3.69%
10-year Fixed 3.89%

BC Assessments

We have received many calls every year regarding assessment values. Let’s review a few quick facts: BC Assessment sent home owners their 2019 assessment notices a couple weeks back, which reflect a mostly computer-generated figure “value” as of July 1, 2018 (in other words by the time you can access the info online or get it in the mail, it is 6 months old); furthermore this value from July 1st of 2018, is based on the property condition as of October 31, 2017 so as you can gather looking at these dates, these figures are just a “Ballpark” for tax purposes and very out-dated at best. This is in contrast to a formal market value appraisal done by a Realtor or appraiser using recent sales (where ready, willing, and able buyers made a purchase of similar properties) taking into account current physical details of the property, market, etc.

Many people are concerned about their decrease in assessed value, and some with the increase in assessed value. Many assume that just because your assessed value goes up so will your taxes. Rest assured this is not necessarily the case. The City of Vancouver calculates your annual taxes by dividing their annual budget by the total assessed value of all the properties in Vancouver (the mill rate) and multiplying this factor by your assessed value. So, if all the assessments are up (across the board) your taxes should not change. Your taxes will change, however, with City Hall’s new Budget (that’s what you should be scrutinizing – not the assessments). If the budget is up, and your assessed value is up, your taxes will likely go up. Or, if by chance, your assessment has jumped above your neighbours because of a renovation, then your taxes will go up accordingly.

Fun fact: Total value of real estate on the 2019 BC assessment roll is $1.99 trillion, an increase of 7.45 percent from 2018.

Property owners who decide to appeal their property assessment should review information on the Property Assessment Appeal Board website on how to prepare for an appeal and then complete a Notice of Complaint (Appeal) Form. The deadline to appeal your assessment is January 31, 2019. For more info visit the BC Assessment site at www.bcassessment.ca