There may be more to this summer than the usual sun, sea and sand.

For prospective buyers of homes in Metro Vancouver, it could mean the arrival of a balanced housing market.

There may be more to this summer than the usual sun, sea and sand.

For prospective buyers of homes in Metro Vancouver, it could mean the arrival of a balanced housing market.

A new report by real-estate marketing firm rennie suggests it’s possible.

“Maybe—just maybe—we’ll find ourselves with balanced market conditions just in time for summer,” states the rennie review that came out Wednesday (May 11).

A balanced market means that sellers and buyers are on equal footing.

To explain, it involves a sales-to-listings ratio of between 12 percent and 20 percent.

That may not come this summer for certain, but there are signs that should give some hope for potential buyers.

“The early returns for May are showing moderate sales counts, similar to those in April, as inventory continues to expand,” the rennie report stated.

How did April 2022 look in the markets covered by the real-estate boards of Greater Vancouver and Fraser Valley?

The rennie review related that sales last month totalled 4,826, a 30 percent drop from March and 38 percent below April 2021.

“Having noted this, we’d be remiss if we didn’t also point out that both March 2022 and April 2021 posted atypically-high sales totals; indeed, compared to the past-decade April average, last month’s sales only came in 1% lower.”

Meanwhile, new home listings are rising.

“It was the fourth consecutive monthly increase in supply, though inventory remains relatively constrained overall: the 13,475 homes for sale at the end of April are still 14% below April 2021’s level, and 25% below the past 10-year April average.”

As well, the sales-to-listings ratio dropped to 36 percent in April from 59 percent in March.

This means that the “market is still tilted in favor of sellers”.

However, “conditions have markedly improved for buyers insofar as having a greater range of housing options to choose from”.

“It can be said, then, that market conditions have shifted—moderated, more pointedly,” the rennie review stated.

Are you looking to buy or sell property? If you’d like, we can have a real estate expert show you the most efficient process that saves you thousands of dollars, a lot of time, with little or no inconvenience to you. Contact us today!

Souce:  Georgia Straight

Richmond detached home prices starting to lower but unlikely to tumble, say realtors

Rising interest rates and buyer fatigue are some of the reasons.

As sales decrease for detached homes in Richmond, their prices are starting to follow suit.

According to data compiled by HouseSigma, average sale prices for detached homes in Richmond have decreased slightly from February to April 2022 – from $2.15M to $1.96M.

“In the short term, prices will probably come down a bit if not stabilize, relative to what we saw… February or March was probably the peak of the market as far as price is concerned this year,” said a local Richmond realtor.

“Prices shoot up very rapidly in a market where you see an imbalance in demand and supply, but they are very slow to come down, even as sales fall off,” said the realtor.

The market saw a high demand but a lack of supply for detached homes during that period, which could be why prices rose, he explained.

But the demand appears to be softening due to different factors, such as rising interest rates and buyer fatigue.

“I’ve been working with a number of clients that, over the last number of months, have been in a market where they’re competing with others looking at properties. And some of these people are frustrated and dejected at having to be in a market like we’ve seen, and some have exited the market,” said the local expert.

Although HouseSigma’s latest data for May shows that prices might be going back up, it could be because less sales have been completed this month so far.

“If we look at the numbers that we got from April, there is a record of 65 properties that exchanged hands. For May, to date, there’s only 14. As the number gets smaller, they will get a bit skewed because there’s not enough data to date yet to pinpoint on exactly if the trend has gone upward or downward,” said a local agent at HouseSigma.

Simply put, one sale that is more expensive or cheaper than the rest can easily affect the average, so it would be best to consider May prices at the end of the month, when more sales have been completed.

Will prices continue to drop in summer?

This decrease in sale numbers and prices appears to be similar to last year’s market.

HouseSigma data for the same period last year also shows a gradual decrease in average sale prices from $1.90M in February to $1.79M in April and then $1.67M in May.

This could have something to do with people’s real estate habits.

“A lot of people like to get that out of the way earlier in the year, especially families that are coming to the end of the school year, perhaps moving out of school and wanting to get into a new house, a new school district area during the summer,” said the realtor.

 But even as the demand for detached homes softens, it is unlikely that prices will tumble, they told the News.

“Prices shoot up very rapidly in a market where you see an imbalance in demand and supply, but they are very slow to come down, even as sales fall off,” they said.

“What we see in the marketplace is that there are properties that are very desirable that are out there, and those properties are still getting multiple offers and offers above asking,” they added.

At the end of the day, there is still a shortage of supplies despite the softening demand, which will continue to deter prices from dropping, the expert explained to the News.

The local realtor advised that buyers and sellers should gather as much information as possible so they can better understand what’s going on in the marketplace.

“For those that are perhaps waiting for that 10 to 20 per cent drop in prices, I don’t think that’s coming in the short or medium term,” he added.

Are you looking to buy or sell property? If you’d like, we can have a real estate expert show you the most efficient process that saves you thousands of dollars, a lot of time, with little or no inconvenience to you. Contact us today!

Source:  Richmond News

List your home and you could be packing more than your boxes.

 Because when you list your home with your RE/MAX® agent, you can enter to win 1 of 3 prizes of a gift card for $10,000 towards a vacation rental. Use it to leave town while your home is listed, to celebrate the sale before starting your next chapter, or to decompress after your move – it’s totally up to you.

Finding the right buyer for your home? That’s up to us.

Click the link below to enter! Good Luck!

https://blog.remax.ca/saleaway/

Are you looking to buy or sell property? If you’d like, we can have a real estate expert show you the most efficient process that saves you thousands of dollars, a lot of time, with little or no inconvenience to you. Contact us today!

Source:  RE/MAX

How to get your finances in order before buying a home

 

Take these steps to ensure you're truly ready to pay for a mortgage

Many people aspire to be homeowners, but since it’ll likely be the most significant financial decision you’ll ever make, it’ll take careful consideration. You need to ensure you take the proper steps to put yourself in a good position to buy.

Have steady income

Unless you have a ton of cash on hand, you’ll need a mortgage to buy a home.

Whether you’re a full-time employee or freelance, how much of a mortgage you’ll qualify for depends on your income. Generally, the more you make, the more you’ll be eligible for.

Generally, lenders want to see that you’ve had a job with the same employer for at least 12 months. This is important to lenders because they may not want to take a risk on someone that just got a new job and has a chance of not passing the probation period. Having steady employment gives lenders peace of mind.

In the case of freelancers, small-business owners or self-employed individuals, lenders want to see consistent income. They would qualify you based on the income listed on your CRA notice of assessments from the last two to three years.

Improve your credit score

Your credit score is listed as a number between 300 and 900. The higher your number, the more creditworthy you are. This number matters a lot to lenders since it’s a quick way to determine how likely you are to repay loans.

If your credit score is in poor standing (below 660), you may have difficulty getting approved.

Lenders may see you as a risk. They may deny you loans, or only be willing to provide you loans with unfavourable terms, such as a high interest rate.

Before applying for a mortgage, try to improve your credit score by paying down debt and limiting your credit usage. Keep in mind that your credit score won’t improve overnight. A meaningful increase may take months or even years.

Save for a down payment

You need to have a down payment to qualify for a mortgage when buying a home. How much you need will depend on the purchase price of your home.

$500,000 or less purchase price – 5 per cent down payment required

$500,000 to $999,999 purchase price – 5 per cent down payment required for the first $500,000, 10 per cent for the portion above $500,000

$1 million or more purchase price – 20 per cent down payment required

Any mortgage with less than a 20 per cent down payment is considered a high-ratio mortgage. A high-ratio mortgage would require you to get mortgage default insurance, which is 2.8 per cent to 4 per cent of the mortgage amount.

Saving more money, ahead of house hunting, means your monthly payments will be lower. However, when real estate prices rise, your savings rate may not outpace the year-over-year increases.

Become familiar with government incentives

A few different government incentives can help first-time home buyers achieve their goals.

The Tax-Free First Home Savings Account (FHSA) is being introduced in 2023 and is arguably the biggest help. Those looking to buy a home can contribute $8,000 a year to their FHSA, up to a total of $40,000. Contributions provide a tax deduction and any interest or capital gains earned are tax-free.

There’s also the Home Buyers’ Plan (HBP) that allows you to withdraw up to $35,000 from your Registered Retirement Savings Plan (RRSP) for the purchase of your first home. This applies to each buyer, so couples buying together could access up to $70,000. If you use the HBP, you need to repay what you withdrew over 15 years.

Another program to consider is the First Time Home Buyer Incentive (FTHBI). With this program, the government will provide you with up to 10 per cent of the purchase price. This would increase your down payment amount, which would lower your monthly payments. However, the government would take a share of your home’s equity. For example, if the FTHBI provides you with five per cent of the down payment, the government gets five per cent when you sell your home.

Get pre-approved for a mortgage

Getting pre-approved for a mortgage is arguably the best way to prepare for homeownership. During this process, lenders would formally run your numbers and verify your details. They’d look at your income, down payment, credit score, outstanding debt, and more.

Based on that information, they’d be able to provide you with an amount and the interest rate for a mortgage. This is vital as you’ll now know exactly how much you’ll be able to afford. Best of all, lenders can typically hold the rate offered for 90 to 120 days, so you can search for a home within your budget knowing that you have the financing secured.

It’s worth noting that a pre-approved mortgage is different from a pre-qualification. With a pre-qualification, lenders aren’t verifying any of your information. It’s simply a quick way for them to tell you how much you’ll roughly be approved for. Since pre-approvals are more formal, you’re getting a guarantee that the funds will be made available to you.

Create a realistic budget

Getting pre-approved for a mortgage is great, but it doesn’t factor in every expense. Therefore, it’s a good idea to create a budget that factors in all of your expenses and goals. For example, you may want to include the cost of raising children, vacations, and retirement savings.

By factoring in these expenses in advance, you can budget accordingly. That might mean that your actual maximum affordability is below how much your lender is willing to provide you in the form of a mortgage.

Remember, mortgage lenders only calculate things on the basis of whether you can make your monthly mortgage payments. They’re not considering any other goals you have. The last thing you want is to be house poor.

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.

Are you looking to buy or sell property? If you’d like, we can have a real estate expert show you the most efficient process that saves you thousands of dollars, a lot of time, with little or no inconvenience to you. Contact us today!

Source:  Financial Post

Renovations That Pay Off on the Resale Market

 

If you’re a home-buyer, owner or seller, you’re probably wondering how to maximize your investment. The answer depends on a number of factors, such as market conditions, your current circumstances and long-term goals, but there are some home renovations that pay off on the resale market, whether you’re looking to stay in the home or sell it.

Renovations on the Rise in a Hot Housing Market

In a seller’s market, there are more buyers than homes for sale, so technically you don’t need to renovate to turn that For Sale sign to Sold. However, the right renovations can help sellers secure a homebuyer faster, and potentially for a higher price. On the buying side, renovating a fixer-upper may allow buyers to get into their neighbourhood of choice at a lower price. Meanwhile, for homeowners who aren’t quite sold on moving or who find themselves challenged given limited inventory of listings, renovations have become a way to get a bigger, better home without having to tackle this competitive market.

 According to a 2021 RE/MAX Canada report, more than half of Canadians renovated their home for personal enjoyment. According to a survey, three in 10 Canadians renovated to enhance their lifestyle, such as recreation and entertainment projects, while another three in 10 renovated to maintain their home. Last but certainly not least, 16 per cent of Canadians said they renovated to increase the market value of their home in order to sell within in the next one to three years.

 Regardless of their reasons for renovating, 59 per cent of Canadians said they always consider the return on investment that a renovation will have on their home’s market value. So, home renovations pay off on resale? We surveyed RE/MAX brokers across Canada about the top renovations that give home sellers the biggest payouts.

 9 Home Renovations That Pay Off on the Resale Market

#1 Kitchen – 93.5% of RE/MAX brokers said kitchen renovations give the best ROI, including new or updated cabinets, countertops and appliances. This can be attributed to the scale, cost and the general inconvenience (albeit a temporary one) of a kitchen renovation. Yes, renovating the kitchen yourself once you take possession of the home will be cheaper, however many homebuyers simply don’t want to put themselves through it – especially if they just completed a kitchen renovation on the home they are selling. The “move-in ready” factor is significant.

#2 Bathroom – 61.3% of RE/MAX brokers identified bathroom renovations as a great high-return renovation. By the same logic as the kitchen renovation, homebuyers who want move-in ready homes with all the bells and whistles generally don’t want to take on expensive, time-consuming and inconvenient renovations, such as bathroom.

#3 Paint – 58% of RE/MAX brokers said a fresh coat of paint is the simplest and cheapest investment, and it pays off on the resale market. Aside from giving the home an instant refresh, home stagers also recommend light and neutral paint colours to make a home appear bigger, brighter and cleaner.

#4 Flooring – 45.2% of RE/MAX brokers said new flooring is a popular upgrade among homebuyers. Homebuyers largely prefer hardwood or tile over wall-to-wall carpets, which tend to trap stains and odours, and can really show a home’s age. This is a must, and if the seller is lucky, tearing up that old carpet could even reveal a hardwood floor underneath that just needs some TLC to bring it to its former glory.

#5 Finished basement – 16.1% of RE/MAX brokers said finished basements are a great selling feature on the resale market. In fact, any renovations that add liveable square footage to a home are always in demand. A lower-level family room, home office, an extra bedroom or bathroom in the basement can all give your listing a significant boost at the offer table.

#6 Outdoors/landscaping – 12.9% of RE/MAX brokers said outdoor projects can provide good ROI. As a result of the pandemic, people have been spending more time at home and thus, large years, pools and hot tubs, decks and patios, and landscaping are all appealing on the resale market. Depending on the scope of the project, this could be one of those low-investment, high-return upgrades that pay off on resale.

#7 Roof – 12.9% of RE/MAX brokers said roofing was a good option to invest some renovation dollars before listing a home for sale. New roof tied in sixth place with outdoor projects and landscaping.

#8 Open-concept floor plan – 9.7% of RE/MAX brokers said redesigning a home with an open-concept floor plan can pay off. This isn’t a small or inexpensive project by any means, but removing wasteful walls and halls can instantly modernize an older home and make it live larger than its actual square footage would otherwise allow.

#9 Windows – 6.5% of RE/MAX brokers said new windows net higher offers on the resale market. While this isn’t exactly the sexiest of renovations, astute buyers will appreciate the tens of thousands of dollars that new windows will cost, so having these replaced before listing can benefit both buyer and seller. Furthermore, new windows can give your home an understated refresh, inside and out.

Need Some Home Renovation Inspiration?

Watch this video to see how you can update and upgrade your home before listing it for sale.

The financial returns that sellers may reap on resale depend on a number of factors, including buyer demand and market conditions. If you’re planning to sell your home, thoughtful, targeted renovations can help you maximize your investment. A professional real estate agent can give you an advantage, by zeroing in on market demand before you dig into your renovation.

Are you looking to buy or sell property? If you’d like, we can have a real estate expert show you the most efficient process that saves you thousands of dollars, a lot of time, with little or no inconvenience to you. Contact us today!

 Source:  RE/MAX

 

RBC Economics says home buyers across the country will “feel the pinch of rising rates”.

The Bank of Canada has so far raised its interest-setting rate twice this year, and it’s not yet done.

RBC economist Robert Hogue believes that the central bank will hike rates by one percent more, bringing it to two percent by the end of 2022.

Hogue is convinced that rising interest rates will be a game changer in the Canadian housing market as this will make mortgages more expensive.

To illustrate, a one percent increase in the Bank of Canada rate translates to $526 more in monthly payments for a typical home in Vancouver.

Also, those who qualify for a mortgage will “see higher rates reduce the size of the mortgage they can get—and the price they can pay”.

Citing as example, Hogue noted that Canadian households earning the median income will have their maximum purchase budget reduced by 15 percent.

This will cool down the market that saw red hot activity in 2021 because of low interest rates.

“We now expect home resale activity to slow more quickly than previously anticipated and, perhaps more important, we see prices peaking this spring as market sentiment sours from extreme bullishness,” Hogue wrote in a report released on April 21.

“In this altered landscape,” the economist continued, “local markets could experience a mild price correction, partly reversing outsized gains recorded in the past year.”

Hogue wrote that the most expensive housing markets in Canada will feel the effects of rising rates the most.

“We expect downward price pressure to be more intense in Vancouver, Toronto and other pricey markets,” the economist wrote.

Hogue continued, “This will translate into larger annual price declines in 2023 in British Columbia and Ontario.”

“By comparison,” the RBC economist went on, “we expect activity and prices to be more resilient in Alberta, where local markets have more catching up to do following a prolonged slump before the pandemic.”

Although resale numbers are projected to decline and prices to experience a “modest” correction, prospects for the Canadian housing market are not really grim.

“While it can’t be completely ruled out, we view the odds of a market crash as low,” Hogue wrote.

The economist explained that “solid demographic fundamentals will continue to support Canada’s housing market”.

 “Millennials—in their prime home-buying years—will remain a force, and growing immigration will further boost demand for housing. These factors will keep demand from falling into a deep-freeze,” Hogue wrote.

Overall, Hogue believes that rising interest rates are “likely to bring welcome changes to the market—including more sustainable activity, fewer price wars, more balanced conditions, and modest price relief for buyers”.

“After the extreme price increases and heated bidding wars of the last year, this would be a positive shift,” Hogue concluded.

Are you looking to buy or sell property? If you’d like, we can have a real estate expert show you the most efficient process that saves you thousands of dollars, a lot of time, with little or no inconvenience to you. Contact us today!

Source:  Georgie Straight

 

Market is rent is often requested by lenders to better understand debt servicing ratios. Market Rent can be given to most self-contained living units, given they have private access, a full working kitchen and bathroom. This is easy enough for apartment units, townhomes, and single family homes. But what if the home has a suite, or two suites? Let Jerry Seinfeld explain it.

What’s the deal with market rent for illegal or unauthorized suites?

1. 4 Important Facts: (as per Appraisal Institute of Canada)
2. Appraisers can provide market rents for a basement suite if the zoning allows for a secondary suite
3. The suite does NOT have to be legal – it can be an illegal suite
4. If the zoning does NOT allow for a secondary suite, no rent can be provided
5. If the property has 2 suites, but the zoning allows for 1, only 1 rent can be provided

I hope this clears things up. The Appraisal Institute provides clear instructions on how to handle all rental situations. If you are having issues with your appraisal and believe the appraiser to be acting contrary to these guidelines, please contact Appraisal Institute of Canada for a review.

Here is the full summary from the Appraisal Institute of Canada.

Illegal Suites

Question: How do I address illegal suites and their rent in my report?

Answer: There are four potential scenarios a member may encounter where a suite exists in a single-family residential property.

• A Suite is Permitted by Local Zoning Bylaws

If:

suites are permitted by local zoning bylaws

Then:

a member must determine if the subject suite was constructed following the local building permit process

If:

the local municipal authority indicates that the suite was constructed with proper permits

Then:

this suite is considered a legal suite and a member may provide a market rent analysis for the suite

• A Suite is Permitted but Does Not Meet Local Building Permit Process

If:

suites are permitted by local zoning bylaws but the subject property’s suite was not constructed following the local municipal building permit process

Then:

a member may invoke a Hypothetical Condition and Extraordinary Assumption that this suite was constructed legally and may complete a market rent analysis for the suite.  Per CUSPAP 7.10.5, a member must clearly note throughout the report the assumptions and conditions applied and that their absence would result in a different value

• Local Zoning Bylaws Do Not Permit Suites but Likelihood of Change

If:

local municipal zoning may not currently permit the presence of suites in residential properties, but there exists a good possibility that local bylaws may change, thus permitting suites, or a variance could be obtained permitting the presence of a suite in the subject property

Then:

a member may invoke a Hypothetical Condition and Extraordinary Assumption that this suite was constructed legally and may complete a market rent analysis for the suite.  Per CUSPAP 7.10.5, a member must clearly note throughout the report the assumptions and conditions applied and that their absence would result in a different value

• Local Zoning Bylaws Do Not Permit Suites and No Likelihood of Change

If:

Local zoning does not permit the presence of suites and there is minimal to no likelihood that this will change in the foreseeable future.

Then:

a member should not provide a market rental analysis of the subject suite

In a Report:

Members should note if:

• a property contains a suite
• local zoning bylaws permit legal suites
• the local municipal office indicates the subject suite was approved and developed through the appropriate permit process

Members may also note:

• the rent the suite currently receives

            *this is not an opinion of market rent, but a note of the suite’s factual current rent

Bear in Mind

An illegal rent does not reflect the Highest and Best Use of a property; market value is premised on Highest and Best Use. AIC members are advised not to provide a market rental analysis for an illegal suite because this would not reflect market value.

In some situations, providing an analysis of market rent for an illegal suite can be contrary to CUSPAP and may invalidate a member’s insurance coverage.

Alternatives

A Member may still be able to complete a Consulting Report that provides information on market rents for legal suites in similar properties within the area in which the subject property is situated.

The Member would complete and provide their client with two reports:

• an appraisal report for the dwelling and
• a Consulting Report for the market rents in the neighbourhood.

Are you looking to buy or sell property? If you’d like, we can have a real estate expert show you the most efficient process that saves you thousands of dollars, a lot of time, with little or no inconvenience to you. Contact us today!

Source:  Adlaw Appraisals

Do Staged Homes Sell Faster?

Do staged homes sell faster, and for a higher price? The short answer is yes and yes. Even in a hot seller’s market, smart sellers seek out ways to give themselves an advantage. This includes engaging an experienced, professional real estate agent, evaluating market demand and comparables, setting the right price, and then staging the property to appeal to the biggest pool of buyers.

Do staged homes sell faster?

According to a study by the Real Estate Staging Association, staged homes spend 73 per cent less time on the market than their un-staged counterparts. Truthfully speaking, even an un-staged property can sell under the right market conditions. A seller’s market, characterized by high demand and low inventory, generally means buyers are likely to scoop up what they can get. In a buyer’s market, there are more homes for sale than there are buyers, which means competition is greater among sellers and buyers have the upper hand. Under these circumstances, staging your property could tip the scales in your favour.

Do staged homes fetch a higher price?

The same Real Estate Staging Association study revealed that 85 per cent of homes analyzed sold for five per cent to 25 per cent above listing price. The answer to this question isn’t always black and white, as the final selling price can depend on a number of factors, including buyer demand, competition and the condition of the property. With all else being equal, a staged home is more likely to leave buyers with a better impression than one that hasn’t been staged, with the potential to fetch higher offers.

What is home staging?

Home staging is the process of preparing a home for sale by increasing its appeal to a wide range of homebuyers. Home staging isn’t as involved as a renovation, and can involve decluttering, depersonalizing and deep-cleaning; painting the walls in a fresh, neutral hue; updating hardware and lighting; rearranging existing furniture or renting some new pieces to help show the home in the best possible light. When a buyer can see your home as their home, they are more likely to make a competitive offer.

Since the majority of homebuyers start their home hunt online, it’s critical to make a good impression through your digital listing photos. Buyers will weed out the homes that don’t meet their criteria, and proceed to an in-person tour of the homes that they are seriously considering.

Decluttering and depersonalizing the home of family photos and other personal items can help. Also consider that potential buyers need to think beyond what their eyes are showing them. Staging helps them to visualize themselves living in and using the space. Is the home an ideal place for a growing family, as a live-work space, for recreational pursuits or to enjoy retirement?

DOWNLOAD THE RE/MAX HOME STAGING GUIDE

Virtual Home Staging

A new twist on home staging is “virtual” staging, which leverages technology to digitally enhance photos in order to demonstrate the possibilities. Virtual staging is ideal for vacant properties, which pose added challenges for sellers and the buyers who are trying to imagine it as their new home. Virtual home staging eliminates the need, effort and cost associated with renting or buying furniture and accessories.

Staging a home doesn’t have to be complicated. Evaluate every room and be critical, because prospective buyers will be. Viewing your own home objectively can be difficult, especially for those who have lived in their home for a long time. A professional home stager and your real estate agent can give you an honest opinion as to what works in your home, what doesn’t, and what the seller might consider changing in order to appeal to homebuyers.

When you’re ready to sell, work with a professional real estate agent who can help identify market demands, navigate conditions and turn that For Sale sign to Sold. Click HERE to find a RE/MAX agent near you.

Are you looking to buy or sell property? If you’d like, we can have a real estate expert show you the most efficient process that saves you thousands of dollars, a lot of time, with little or no inconvenience to you. Contact us today!

Source:  RE/MAX

 

The proposed federal budget for 2022 has introduced a number of new rules relating to real estate, including new rules to dampen speculation in the Canadian real estate market (for a full list of the housing affordability measures announced,(click here). 

Investors should be generally aware of these changes and where they may affect transactions, and accounting advice should sought prior to a binding contract being entered into.  For Sellers, this advice should occur at the time of listing unless a Seller’s subject conditions are going to be included in the contract of purchase and sale.

Residential Property Flipping Rule

A commonly held belief was that one had to hold a property for more than a year to obtain many of the tax benefits of the principal residence exemption.  This requirement will now be codified into the Income Tax Act, and “property (a taxpayer has) held for fewer than 12 months (will) be subject to full taxation on profits as business income, applying to residential properties sold on or after January 1, 2023.” 

There are certain “life event” exemptions proposed once effective (2023); however, Sellers who have held title to the property for a period of less than 12 months should  obtain tax advice prior to listing. Remember that the date the title was initially transferred into the name of the Seller can be found on a Title Search next to the heading “Application Received” and this date may be very different than the date the contract was entered into--especially where the property was purchased as a pre-sale development. 

GST on Residential Assignment Sales

GST will be now applicable on all assignment sales of new (or substantially renovated) housing (where GST is applicable to the Purchase Price). In the past, an Assignor may have argued that they did not have to pay GST on the Assignment Amount since they may have intended to reside in the property as their principal residence. This deeming provision now prevents the taxpayer from taking that position and makes GST payable by the Assignor on any Assignment Amount. 

Section 5.18 of the BCREA Assignment of Contract of Purchase and Sale New Development standard form states that “The Assignment Amount is inclusive of any GST payable with respect to the Assignment Agreement and the Assignor shall remit any GST payable.”  Importantly this means that the Assignor will be required to pay GST on the Assignment Amount (commonly called the lift). 

 Note that GST will not be payable by the Assignor on the Total Purchase Price (as the developer receives the GST on the Original Purchase Price portion and will be required to remit that), nor will GST be payable on the return of the Deposit amount (as this amount is not income). 

To illustrate this, let us consider how this would work for a residential pre-sale, with an original purchase price of $800,000 and an assignment purchase price of $900,000, between a Developer (who is likely a GST registrant) and an Assignor and Buyer (who are not GST registrants).

For the Buyer/Assignee, they would pay:

1. Original Purchase Price: $800,000, plus
2. GST on Purchase Price: $40,000, plus
3. Assignment Amount: $100,000 

For the Assignor, they would receive:

1. Assignment Amount: $100,000, less:
2. Brokerage Commission, as applicable; and
3.  GST on Assignment Amount  and
4.  Income Tax on Assignment Amount 

The result is that the Assignor is netting less than the amount of the profit in the assignment. 

Assignors’ Payment to the Canada Revenue Agency 

As most residential Assignors are not GST registrants or filers, this makes remittance of the GST amount on the Assignment Amount rather cumbersome.  Additionally, most law firms who do residential conveyance do not file compliance filings with the Canada Revenue Agency, and this means that the Assignor, following receipt of the Assignment Amount (which will include both the GST and Income Tax portions payable), will need to engage an accounting firm to make such payment to Canada Revenue Agency within 30 days of the Completion Date of the transaction. 

Seek Professional Advice

Best practices would be to investigate the possible tax implications upon their sale of property with accounting and tax professionals.  Specialized tax advice is beyond the scope of a Realtor. For Sellers and Assignors of residential real estate, the recommendation to seek independent professional tax advice at the time of listing the property and prior to any contract being entered into. 

Are you looking to buy or sell property? If you’d like, we can have a real estate expert show you the most efficient process that saves you thousands of dollars, a lot of time, with little or no inconvenience to you. Contact us today!

Source:  BCREA

Metro Vancouver home sales return to more traditional levels in April

Home buyer demand in Metro Vancouver* returned to more historically typical levels in April.

The Real Estate Board of Greater Vancouver (REBGV) reports that residential home sales in the region totalled 3,232 in April 2022, a 34.1 per cent decrease from the 4,908 sales recorded in April 2021, and a 25.6 per cent decrease from the 4,344 homes sold in March 2022.

Last month’s sales were 1.5 per cent above the 10-year April sales average.

“So far this spring, we’ve seen home sales ease down from the record-breaking pace of the last year,” Daniel John, REBGV Chair said. “While a small sample size, the return to a more traditional pace of home sales that we’ve experienced over the last two months provides hopeful home buyers more time to make decisions, secure financing and perform other due diligence such as home inspections.”

There were 6,107 detached, attached and apartment properties newly listed for sale on the Multiple Listing Service® (MLS®) in Metro Vancouver in April 2022. This represents a 23.1 per cent decrease compared to the 7,938 homes listed in April 2021 and an 8.5 per cent decrease compared to March 2022 when 6,673 homes were listed.

The total number of homes currently listed for sale on the MLS® system in Metro Vancouver is 8,796, a 14.1 per cent decrease compared to April 2021 (10,245) and a 15.3 per cent increase compared to March 2022 (7,628).

“With interest rates climbing and the total inventory of homes for sale inching higher, it’s important to work with your local Realtor to understand how these factors could affect your home buying or selling situation,” John said.

For all property types, the sales-to-active listings ratio for April 2022 is 36.7 per cent. By property type, the ratio is 25.3 per cent for detached homes, 47.1 per cent for townhomes, and 45 per cent for apartments.

Generally, analysts say downward pressure on home prices occurs when the ratio dips below 12 per cent for a sustained period, while home prices often experience upward pressure when it surpasses 20 per cent over several months.

The MLS® Home Price Index composite benchmark price for all residential properties in Metro Vancouver is currently $1,374,500. This represents an 18.9 per cent increase over April 2021 and a one per cent increase compared to March 2022.

Sales of detached homes in April 2022 reached 962, a 41.9 per cent decrease from the 1,655 detached sales recorded in April 2021. The benchmark price for a detached home is $2,139,200. This represents a 20.8 per cent increase from April 2021 and a one per cent increase compared to March 2022.

Sales of apartment homes reached 1,692 in April 2022, a 26.1 per cent decrease compared to the 2,289 sales in April 2021. The benchmark price of an apartment home is $844,700. This represents a 16 per cent increase from April 2021 and a 1.1 per cent increase compared to March 2022.

Attached home sales in April 2022 totalled 578, a 40 per cent decrease compared to the 964 sales in April 2021. The benchmark price of an attached home is $1,150,500. This represents a 25 per cent increase from April 2021 and a 1.1 per cent increase compared to March 2022.

Are you looking to buy or sell property? If you’d like, we can have a real estate expert show you the most efficient process that saves you thousands of dollars, a lot of time, with little or no inconvenience to you. Contact us today!

Source:  REBGV