Vancouver, BC – October 7, 2024. With the British Columbia election less than two weeks away, the BC Real Estate Association (BCREA) is calling for major housing tax reform aimed at increasing affordability and fairness in the province, the Association announced today. 

As outlined on their housing policy resource hub launched in the lead-up to the election, BCREA noted that BC housing taxation levels are some of the highest in the world and have risen sharply since 2016. This has had a significant negative effect on the cost of housing in the province. 

BCREA recommendations include: 

• a systematic review of the Property Transfer Tax (PTT), which was launched in 1987 as a “luxury tax” and intended to only apply to five per cent of real estate transactions, but now applies to nearly 100 per cent in the Lower Mainland and roughly 70 per cent even in the relatively more affordable areas of the province; 

• a review of policies related to foreign investment, including the Foreign Buyer Tax, to ensure that the province continues to attract investment from outside of Canada as a means of reaching aggressive housing targets; and 

• the immediate repeal of both the Speculation and Vacancy Tax (SVT) and the yet-to-be-implemented Residential Property Short-Term Holding Profit Tax (Flipping Tax), which are both duplicated at the federal level. 

Trevor Koot, BCREA CEO, noted that a vital first step would be the review of the PTT, which now accounts for $1.95 billion in annual tax revenue for the province. 

“The Property Transfer Tax was originally supposed to be a ‘luxury tax,’ but it’s evolved into a heavy burden for all British Columbians,” Koot said. “The PTT has far outlived its original purpose without ever facing a systematic review, and the time has come for that to change.”

While taxes are a necessary tool for funding public services, Koot added, they shouldn’t be a barrier to homeownership or add unnecessary complexity to real estate transactions. The way forward is a long, hard look at the current policies, which must be undertaken by BC’s next government to ensure fairness for British Columbians. 

BC Real Estate Association Calls for Review of BC's Short-Term Rental Ban 

Vancouver, BC – September 23, 2024. The British Columbia Real Estate Association (BCREA) is calling for significant amendments to BC's short-term rental laws to mitigate the major disruption they've caused for specific business and tourism sectors across the province, the Association announced today.  

On May 1, 2024, the BC Government enacted a widespread ban on short-term rentals, with the intent of returning homes to the long-term rental market. However, as part of a new housing policy resource hub launched in the lead-up to the 2024 Provincial General Election, BCREA identified multiple groups of British Columbians negatively affected by the ban, including: 

• medical employees transferred to remote areas; 

• those receiving multi-week medical care as well as caregivers in urban areas; 

• film sector workers in town for weeks at a time; 

• those attending or employed by short-term but large events for which hotel space is inadequate (such as a Taylor Swift concert or the FIFA World Cup 2026); and 

• those needing short-term housing due to delays in being able to take occupancy of homes or apartments. 

As part of the analysis, the Association stressed that provincial and regional economies need to be factored into policy decisions of this magnitude. 

“While housing affordability is extremely important, there are additional considerations in communities across BC that have been paved over with the implementation of this policy,” said Trevor Hargreaves, BCREA Senior VP, Policy and Research. “There are numerous exemptions desperately needed to make this a workable and successful policy moving forward.” 

Hargreaves added, “There is no question that some of these short-term rental units should be functioning as long-term rentals, but there are some legitimate uses for short-term rentals that are no longer permitted under the legislation.” 

The Association proposed several exemptions from the ban across a wide variety of categories, including high-tourism areas and the groups listed above. 

full article here:https://www.bcrea.bc.ca/advocacy/bc-real-estate-association-calls-for-review-of-bcs-short-term-rental-ban/

October 15, 2024

Please Note

• Left Column: shows interim counts for all property types so far this month

• Right Column: shows final counts for all property types for the same month last year

Month-To-Date Market Statistics

October 07, 2024

Please Note

• Left Column: shows interim counts for all property types so far this month

• Right Column: shows final counts for all property types for the same month last year

Highlights *article from bcrea

• Canadian bond yields falling as markets expect deep rate cuts by US Federal Reserve and the Bank of Canada.

• Economic growth slowed through the summer but will lower rates stimulate a second half recovery?

• The Bank of Canada is on a glide path to a 2.75 per cent policy rate.

Mortgage Rate Outlook
Canadian mortgage rates continue to fall, with the Bank of Canada in the early stages of what could be deep policy rate reductions and the US Federal Reserve on the verge of beginning its own cutting cycle.

The key question for mortgage rates going forward is where the Bank of Canada is going to stop. If the destination for the overnight rate is 2.75 per cent, the midpoint of the Bank’s “neutral range,” historical data implies a five-year bond of about 3.25 per cent and a five-year mortgage rate of 4.85 per cent. However, that implies a five-year bond yield that regains its usual 50 basis point spread over the overnight lending rate, a significant increase from its current negative level.

Lingering fears of a weaker-than-expected US economy have pushed markets to expect a more aggressive cutting cycle in Canada and the United States. Consequently, Canadian bond yields have fallen to 2.75 per cent, implying that markets are currently pricing a Bank of Canada overnight rate of 2 to 2.25 per cent. While perhaps over-done, if not reversed, those expectations could drive Canadian fixed mortgage rates even lower, particularly if the economy shows signs of weakening into 2025 rather than rebounding as the Bank is currently forecasting.

Ultimately, we expect that the Bank’s rate cuts will stimulate stronger economic activity, prompting the yield curve to normalize and five-year fixed mortgage rates to settle around 4.85 per cent.

Economic Outlook
Canadian economic growth surpassed the Bank of Canada's expectations in the second quarter but was largely driven by government spending while household consumption slowed. Monthly GDP growth in June slowed, and preliminary estimates for July show further weakness. Moreover, Canadian GDP per capita continues to struggle amidst rapid population growth. Employment has continued to soften from the previous quarter, with the unemployment rate hitting a three-year high of 6.6 per cent in August, as positive job growth has not been enough to keep up with an outsized pace of population growth.

A slowing economy comes in the context of continually improving inflation, which hit 2.5 per cent last month, although price appreciation is still being largely driven by high shelter costs due to pressures in the rental market and a jump in household mortgage costs over the past year. Core measures of inflation have also fallen under 3 per cent and should continue to move lower in the coming months.

We expect the Canadian economy to eke out about 1 per cent growth in 2024 but head into 2025 with some falling interest rate-driven momentum. As such, we could see a somewhat Goldilocks-like Canadian economy in 2025 growing slightly above 2 per cent with inflation falling back to target.

Bank of Canada Outlook
Following three consecutive rate cuts by the Bank of Canada, the focus for each interest rate decision going forward has shifted from whether the Bank will lower rates to how large those rate cuts should be, with some analysts even looking for larger 50 basis points cuts in the future. While the Canadian economy is certainly under-performing, particularly on a per-capita basis, its not clear that the Bank is ready to shift from the current gradual approach implied by the Bank’s inflation forecast.

While the Bank publishes its forecasts for growth and inflation, it does not reveal the assumed path of interestrates that generate those forecasts. However, a comparison of the BCREA macromodel with the Bank of Canada’s reveals a strikingly similar response of inflation to changes in the policy rate in both models. Given a similar inflation forecast from our model to that of the Bank’s, we can get a pretty good sense of the Bank’s thinking on the path of rates over the next year. What that shows is that as long as inflation isn't deviating from expectations, and employment is not significantly weaker, we should see continued rate cuts at an orderly 25 basis points pace until the Bank reaches its neutral range between 2.25 and 3.25 per cent in 2025 with a likely destination of 2.75 per cent by the end of 2025.

What Is Radon?

Radon is an odourless, invisible gas that seeps up through the ground and can enter a home through unsealed foundations, cracks in the foundation, gaps in construction materials, and plumbing system components, including sump pumps or drains. Radon gas is also a product of uranium decay. Like uranium, it is radioactive; unlike uranium, it can permeate through rocks or soil, escaping into the air or groundwater. All rocks or soil contain some uranium, but granite, shale, and sandy soils are higher in uranium or radon than clay, limestone, or very moist soil.

Why Is Radon Bad?

Concerns arise when radon gas accumulates in living spaces, as radon is highly carcinogenic. It is the second leading cause of lung cancer, behind smoking, causing over 3,000 deaths per year in Canada – almost eight times more than asbestos.

Where Is Radon Found?

The BC Centre for Disease Control provides a map of certain residential radon testing results across BC,3 but warns that radon gas levels can vary widely from house to house, even in the same neighbourhood.

Cracks in a home’s foundation or bare dirt floors in a crawlspace under the house can provide easy paths for radon to permeate from the soil into living spaces. Due to their improved insulation and airtightness, new homes can accumulate radon gas at even higher levels than older ones. While higher radon levels are found in a home's basement or lower levels, in apartment buildings or towers, radon gas levels can be higher on the top floors due to the “stack effect” or the rise of warmer air.

How Can You Test for Radon?

The radon level in a home can be measured using commercially available and relatively inexpensive radon test kits.4 A proper radon test takes at least 90 days to complete and is often recommended to carry out over the winter when homes are more likely to be sealed up. Opening windows and doors, as folks often do in the warmer months, can vent radon gas, yielding false low results. Shorter-term tests are available but are less accurate.5

How High Is Too High for Radon Gas Levels?

If radon gas is detected in a living space, remediation measures can be undertaken to lower its levels. The World Health Organization recommends a threshold level of 100 Bq/m3 (or about 3 pCi/L) for initiating remediation measures. In the US, threshold levels of 4 pCi/L (or 148 Bq/m3) require remediation. Health Canada recommends remediation within two years for any homes with radon gas levels exceeding 200 Bq/m3, and within one year for any homes with radon gas levels exceeding 600 Bq/m3.

New Construction Standards

As of March 2024, new homes built in BC are required6 to have a radon gas vent pipe installed to allow the venting of soil gases from the ground beneath the basement or crawlspace to the roof or exterior of the building. This pipe is called a passive sub-slab depressurization system. While often effective at reducing high radon concentrations, a passive sub-slab depressurization system may not bring those concentrations below the guideline levels. The British Columbia Building Code does not require builders to install a fan system in the pipe to turn this into an active sub-slab depressurization system. However, homeowners may wish to install a fan system to reach levels below the recommended threshold.

Retrofitting Older Homes

Older homes can be retrofitted with radon gas mitigation systems that can range from relatively passive methods, such as sealing porous concrete and repairing any cracks in basements or crawlspaces, to more active and costly methods, such as installing a heat recovery ventilation fan in the basement or the whole home or installing a passive or active sub-slab depressurization system like those required in new home construction.

Buying or Selling a Home and Disclosure of Radon Test Results

Property owners are not required to conduct radon testing of their properties. Still, sellers are encouraged to disclose in writing (for example, in the Property Disclosure Statement) whether they have carried out any radon testing and, if so, what the results were.

Released to media today:

Victoria real estate market current conditions benefit buyers and sellers

A total of 571 properties sold in the Victoria Real Estate Board region this September, 15.8 per cent more than the 493 properties sold in September 2023 and a 4.8 per cent increase from August 2024. Sales of condominiums were up 21.9 per cent from September 2023 with 189 units sold. Sales of single family homes increased by 19.3 per cent from September 2023 with 272 sold.

“The real estate market in Victoria right now is much more stable and more predictable than it has been in recent years,” said 2024 Victoria Real Estate Board Chair Laurie Lidstone. “We have seen a few solid months of near-balance in the market, which means it’s neither a seller’s nor a buyer’s market and positives exist for both sides of a transaction. With downward trending interest rates and stable pricing combined with more inventory on the market, our current conditions are the most comfortable for consumers to navigate that I’ve seen in a few years.”

There were 3,361 active listings for sale on the Victoria Real Estate Board Multiple Listing Service® at the end of September 2024, an increase of 5.3 per cent compared to the previous month of August and a 24.5 per cent increase from the 2,699 active listings for sale at the end of September 2023.

“In times of more balanced markets,” adds Chair Lidstone. “There is less pressure on pricing and more opportunity to take time to make big decisions on real estate. However, there are still situations where you can encounter competition. When the house, price and location are all highly desirable for buyers, we can see situations where there are competing offers. As always if you are thinking about making a move, connecting with a local REALTOR® to start building your strategy is advisable.”

The Multiple Listing Service® Home Price Index benchmark value for a single family home in the Victoria Core in September 2023 was $1,316,100. The benchmark value for the same home in September 2024 decreased by 2.8 per cent to $1,279,700, down from August’s value of $1,287,400. The MLS® HPI benchmark value for a condominium in the Victoria Core area in September 2023 was $583,400 while the benchmark value for the same condominium in September 2024 decreased by 5.1 per cent to $553,400, down from the August value of $559,200.

Two massive Victoria developments to forge ahead, others may get shelved

A potentially precedent-setting ruling from the Residential Tenancy Branch has prompted B.C. Minister of Housing Ravi Kahlon to review regulations for special rent increase applications from landlords.

At issue is the recently published May 8 ruling that allowed a landlord to increase the rent charged to their four tenants by an extra 23.5 per cent because the landlord claimed their increase in mortgage financing costs, due to a sharp rise in interest rates in 2022, “could not have been foreseen under reasonable circumstances.”

Questions are now being asked in the B.C. real estate industry as to whether this will prompt more applications for rent increases beyond those allowed by the provincial government.

“Landlords will definitely apply,” said Keaton Bessey, owner and managing broker at Greater Vancouver Tenant and Property Management.

Corporate landlord got stuck on variable rate

Last February, the branch received an application from company Kriss Canada Ltd. claiming it needed to increase the rent of its tenants by 23.5 per cent in addition to the government-mandated rent control increase of 3.5 per cent for 2024.

In B.C., landlords must apply to the branch for such increases beyond the rent control cap, set annually by the ministry.

Bessey said such applications typically involve increases for one-time capital infrastructure improvements, such as new pipes.

However, Kriss Canada utilized what Bessey said has been an otherwise dormant regulation that allows a landlord to apply for a special rent increase for financial losses incurred for the financing costs of purchasing a property.

Kriss Canada claimed that it was entitled to impose the additional rent increase after incurring a financial loss for the financing costs of purchasing the residential property, having not foreseen under “reasonable circumstances” a historic rise in interest rates and having “acted reasonably” — both criteria the regulation stipulates as a requirement for a successful application.

The ruling states Kriss Canada Ltd., represented by “Landlord S.O. and Landlord K.O.,” purchased a four-plex home in October 2021 with an initial interest rate of 1.9 per cent on a variable mortgage from a Canadian bank.

In the intervening time, the Bank of Canada raised its interest rates from 0.25 per cent to 5.0 per cent, causing the landlord’s financing costs to soar to $80,058.99 in 2023, as opposed to $45,722.44 in 2022.

In April 2023, the landlord asked the four tenants to pay an extra $500 per month each; however, the tenants “were not agreeable,” the ruling noted.

The ruling addresses some thinking behind the landlord’s assessment of its own situation: “The Landlords stated that if they fixed their interest rate in 2023, the penalty would be very large. It was too early in their mortgage term.”

Two tenants identified as “V.D.” and “M.S.” told the branch that with a variable rate mortgage “it is reasonably foreseeable that the rate will change” and the landlord ought to have had a financial cushion to absorb increases. Tenant M.S. offered to pay an extra $50.

The branch arbitrator, who is not named in the ruling, accepted the landlord’s story that it did have a cushion but the rates rose too quickly and sharply.

“I find the world and economic events in reaction to the pandemic were not reasonably foreseeable and have impacted the Landlords, despite them taking reasonable precautions by accessing a mortgage through a recognized and well-known lender. I find the landlords exercised care, foresight, judgment, financial prudence, and due diligence in purchasing and financing the residential property, but significant increases in the mortgage interest rate occurred due to unforeseen events,” the arbitrator wrote.

The arbitrator then allowed the landlord to increase rent amounts by 23.5 per cent extra, over two years, causing rents to increase from between $1,282 and $1,550 to between $1,628.14 and $1,968.50, per month (not factoring in the standard 2025 increase).

Names of the landlords and tenants were redacted from the ruling and the location of the property was not disclosed by the arbitrator. Kriss Canada Ltd. was incorporated in Alberta in 2016 and has an attorney named Niranjan Konepally with a Terrace address, according to BC Registry Service. Glacier Media was unable to contact any of the parties involved for further comment.

Even landlords appear puzzled by ruling

Although Bessey has been publicly outspoken on social media against rent control, he called the ruling “weird” and “completely ridiculous” on account that the branch is in no position to assess financial planning.

“Nobody asked this person to go out and get a loan and buy a property,” said Bessey, who suggests the regulation is out of touch with reality.

“A loan on an investment property is personal to the owner. The loan is your problem. But if the pipes fall apart, it costs the same for whoever is doing it,” said Bessey.

Bessey described the nature of branch decisions as being fairly arbitrary on a case-by-case basis.

And while expressing doubt as to whether a precedent may be set from this decision, Bessey speculates the branch will see more such applications, particularly after greater publicity of this one case. But whether they will succeed is another matter, he added.

Hunter Boucher, vice-president of operations at Landlord BC, a non-profit advocacy and lobby group, also expressed doubts a precedent will be set.

“This process has been longstanding. It’s not new. That being said, applications under this (regulation) are exceedingly rare, especially over the past nearly 20 years,” as there has not been such a dramatic rise in interest rates, said Boucher.

Another matter at play, said Boucher, is that the regulation stipulates the financing losses are associated with the purchase of a property, so such applications are likely only relevant to landlords who only recently bought an investment property.

“If you’re renewing at this point, it’s hard to say it’s unforeseen,” said Boucher.

“We will see a bit of an increase in these decisions but a huge increase, certainly not,” Boucher speculated.

And, said Boucher, “the lack of decisions for these kinds of increases makes it difficult to determine how future decisions may go.”

Despite his opposition to policies that are unfavourable to landlords, Bessey said it would be “political suicide if they let this keep going” and “a lot of landlords think this is stupid.”

Notably, the regulations do not allow a tenant to claim lower rent should interest rates drop after having higher rent imposed on them via a special application.

Housing Minister Kahlon declined an opportunity to speak to the ruling; however, his communications staff provided a statement attributable to Kahlon:

“Renters are struggling with the high cost of rent. That's why we are taking action to fight the housing crisis and ensure renters have a home they can afford. Since 2018, we have kept rental increases at or below inflation, below the rate set by the previous government.

“The policy that allows these kinds of exceptional rental increases because of financing is an old policy from the old government and this is the first time an application like this has been granted since we started collecting data in 2021.

“I know people have a lot of questions and I've directed staff to review this policy and how it impacts renters in the current context.”

The ruling can be viewed online.