June 16, 2017
Real Estate News You Need to Know: Airbnb Crackdown, Foreign Buyer Tax Support, and a House that Spans Two Borders
Double the Citizenship, Double the Trouble
A historic home straddling the U.S.-Canadian border is proving to be a hard sell in either country, much to the chagrin of its dual-citizenship owners. Brian and Joan Du Moulin, who inherited the unique property four decades ago, wish to offload the 1782-era house, which is located smack between Beebe Plain, Vermont and Stanstead, Quebec, in order to live closer to family in Ontario. The home’s features include 7,000 square feet of living space divided into five apartments, thick granite walls, and entrances that back onto both American and Canadian soil.
Located directly across from the border entry, it is also under 24-hour armed surveillance from both countries; let’s just say you won’t need to pay for a home monitoring alarm service! Listed for a mere US$109,000, and with an estimated rebuild cost of $600,000, it has had six showings to date (including a gentleman from Toronto), but uncertainty around citizenship issues have been a deterrent to buyers thus far.
British Columbia Market in for Summer Heat
The mid-month numbers released by the British Columbia Real Estate Association find that while sales are down 7.9 per cent from May, short listing supply continues to put upward pressure on average home prices, which rose 4.2 per cent to $752,536.
“Market conditions have tightened considerably this spring as an upturn in consumer demand has not been accompanied by a rise in homes listed for sale,” said Cameron Muir, BCREA’s chief economist. “The supply of homes for sale in the province has fallen 50 per cent over the past five years.”
Conditions are especially tight in southern BC where the ratio of home sales to active listings is well over 20 per cent in nine out of 11 of real estate board territories, and over 50 per cent in Vancouver, Chilliwack, and Fraser Valley – indicative of an extreme seller’s market.
Affordable Home Policy to be Top Voter Consideration
Promising to improve real estate affordability will be key to winning the next Ontario election, according to a new poll from the Ontario Real Estate Association. Policies that make it easier to buy or rent a home will be heavily considered by voters, especially millennials and those planning to buy their first home.
The association revealed their findings at the Ontario Housing Summit in Toronto on June 13, which show 37 per cent of Ontarians strongly believe the topic should be in upcoming provincial election agendas. Thirty per cent of overall respondents said they would be more likely to vote for the party that makes it priority, while as much as 60 per cent in the millennial age group said it would be a deciding factor.
While speaking on the Summit panel, Ben Myers, senior vice president of Fortress Real Developments, said steep affordability and the need to change expectations is a particular point of contention with millennial buyers.
“That’s one of the things that is making people angry,” he said. “They’ve lived in their parental home and their parent bought in a very different market than exists today. A lot of them want that 2,000-square-foot family home, and it’s just not available. It’s $1 million, $1.5 million and they’re kind of stuck. Maybe they don’t want to live in a box in the sky.”
Support for Foreign Buyer Tax High, But Effectiveness Not Yet Clear
In the same poll, OREA also collected sentiments regarding the Non-Resident Speculation Tax, a 15 per cent tax on non-Canadian home buyers introduced in the Ontario Fair Housing Plan on April 20th. According to their findings, support for the tax is very high, with a whopping 81 per cent in favour of it.
However, it’s not year clear whether the measure, which was included in a 16-part package to help tame home affordability in the province, is actually reducing foreign speculation in the market. Stated provincial Finance Minister Charles Sousa to reporters outside the Summit, “We have different points of view from third-party sources, but what I’m seeing up to this point is that it’s in the same range.”
Related Read: Foreign Buyer Tax to Come as Fair Housing Plan Revealed
New Home Construction Slows More Than Expected
The pace of new housing starts dropped further than was anticipated in May, reports the Canada Mortgage and Housing Corporation. Only 194,663 projects broke ground, down from the 213,498 in April, and lower than the 205,000 expected by market analysts.
It’s believed a combination of the new Fair Housing Plan rules, potential of rising interest rates, and overbuilding in other centres has contributed to fewer developer projects.
Stated TD Bank Economist Michael Dolega to the Toronto Star, “Taken together, we expect housing starts in Canada to continue along their current trajectory and settle closer to 200,000 later this year and slightly below that level until 2018.
“Toronto’s market and its response to the new rules remain a key risk to this outlook, particularly in a rising interest rate environment which could also pressure prices and home building activity in other parts of the country.”
A Crackdown on Toronto Airbnbs
Toronto City Hall is mulling over a proposal that would greatly limit Airbnb use in the 416, as well as create a licensing and registration system for those who use the service to rent out their properties.
The new rules, which Mayor John Tory will be reviewing next week, would make it illegal to rent out a home or unit that is not also a principal residence. Short term landlords would still be able to rent out all or part (up to three rooms) of their homes.
The crackdown is part of efforts to limit the “constant shuffling of people in and out” of buildings, said Tory – a frequent complaint of those who live in Toronto condos where the practice is prevalent. Issues have also arisen from guests, who have no personal financial stake in the condo they’re staying in, damaging or disrespecting property and causing noise complaints, to the great annoyance of residents.
It remains to be seen whether limiting Airbnb use will have any impact on future condo investment demand.
Developers Call for Review of Rent Cap Rules
New rent controls introduced in the Fair Housing Plan that cap potential rent increases to 2.5 per cent regardless of building age are far too harsh say developers, who are calling for a revision. They argue the caps have effectively led to a decrease in planned rental purpose project, which will ultimately lead to fewer supply for renters.
Jim Murphy, CEO of Federation of Rental-housing Providers of Ontario, said representatives have urged the Ontario government to reconsider the move, and that a more manageable 10 per cent had been discussed prior to the implementation of the new plan.