The cancellation of a pre-construction condo development in Toronto\u2019s Junction neighbourhood has left buyers and investors in the cold \u2013 and has prompted calls for increased consumer protections from the province.<\/p>\n
The Museum FLTS project was to be a 150-unit, 10-storey mixed-used development at 158 Sterling Road and part of the local neighbourhood revitalization plan. Touted as a \u201c\u2019vibrant mixed-use community\u2019 and a \u2018project which will bring new residents, new businesses, new jobs and new services\u2019 to the community”, units had been in hot demand from those looking to dwell in one of the city\u2019s trendiest areas.<\/p>\n
However, the developer, Castlepoint Numa, pulled the plug on the project this month, citing the failure to acquire building permits, long approval delays, and rising construction costs. \u201cRecently, the industry has been experiencing the most significant cost increases in a decade,\u201d they state on their website. The project was scheduled for completion in 2019.<\/p>\n
While buyers received their deposits back in full plus interest \u2013 a consumer protection for pre-construction condo purchases \u2013 many have complained to the media<\/a>\u00a0that while their cash was tied up in the project,\u00a0the market rapidly outpaced them and they can no longer afford to live in the neighbourhood. According to Urbanation, the price per square foot for pre-construction condos recently hit $951, and is anticipated to cross the $1,000 mark this year.<\/p>\n While a project not coming to fruition is a known risk in the pre-construction market, it\u2019s relatively rare \u2013 only 23 have been cancelled since 2012 in Toronto says Urbanation. However, this quashed project has raised calls to better protect consumers who buy on concept by requiring developers to be transparent about projects\u2019 financial status, and potentially insuring lost appreciation value.<\/p>\n According to the Ministry of Government and Consumer Services, these changes could come as an amendment to the Protecting Condominiums Owners Act and via Bill 166, a pending proposal that would mandate what kind of information must be provided to new home purchasers. \u201cFuture regulations could address matters relating to disclosures that condo purchasers must receive from a developer. This could address matters such as the status of the project, planning approvals for the proposal, etc.,\u201d states the Ministry.<\/p>\n New rules for real estate agents have been announced by the BC government, to take effect on March 15, 2018. Designed to better protect consumers from unscrupulous agents and unethical real estate prices, they’ll enforce greater transparency around agent compensation, restrict deals with “dual agency”,and cut down on the practice of shadow flipping, aka selling preconstruction condo units on assignment prior to closing<\/a>.<\/p>\n \u201cThese rules will significantly change the way that real estate services are provided in British Columbia,\u201d said Micheal Noseworthy, BC\u2019s superintendent of real estate. \u201cThe changes will empower consumers and provide clarity around the role of an agent. Ending dual agency removes the potential for conflict and serious problems. We want to create transparency for both consumers and licensees to ensure everyone understands in whose interest licensees must be working.\u201d<\/p>\n The rules are similar to those proposed in Ontario in August<\/a> by the Ontario Real Estate Association – they have also moved to ban dual agency (aka. double ending) practices, where one agent represents both the buyer and seller in the same real estate transaction. They are the result of recommendations made by\u00a0the\u00a0 Independent Advisory Group on Real Estate Regulation in BC in June 2016.<\/p>\n However, some agents aren’t happy about the new BC proposal, saying they don’t effectively address real buyer issues.<\/p>\n “These rules do nothing to change the impact of international money in the market [and they do] nothing to change the impact of people flipping houses [or] consumer protections around pricing,” said Keith Roy, a REMAX Select agent to the CBC<\/em><\/a>.<\/p>\n Is the foreign buyer\u2019s tax implemented last summer in Metro Vancouver a catalyst for booming demand in Seattle? The latest numbers suggest Asian-based buyers are shifting their interest south of the border, piqued by a similar climate, close proximity and \u2013 most importantly \u2013 cheaper prices.<\/p>\n Not only is the Seattle housing market unfettered by a foreign buyer\u2019s tax, its real estate is\u00a0generally less expensive at an average of US$735,00 ($934,000 CAD), compared to $1,617,000 CAD in Vancouver. However, that\u2019s a year-over-year surge of 17.6 per cent, which, according to a local real estate expert, was fueled by \u201cfrenetic\u201d foreign activity.<\/p>\n \u201cA lot of people who were looking in Vancouver are automatically looking further south to Seattle\u2026 no question there\u2019s a knock-on effect given your tax situation relative to foreign buyers,\u201d said Matthew Gardner, chief economist at Seattle-based Windermere Real Estate to the CBC<\/em><\/a>, adding roughly 1,000 people move to the city each week. Of those, half from out of country are Asian, he says.<\/p>\n Numbers from Juwai.com, a popular site used by Asian buyers to browse Canadian real estate, show a clear correlation between the tax and shopper activity, with searches increasing 8.7 per cent overall, with an uptick in other North America cities including Los Angeles, Montreal, and Toronto.<\/p>\n \u201cWhen these uncommitted buyers compare Vancouver prices plus the tax to what they can get somewhere else, sometimes they decide it\u2019s not worth it,\u201d Byron Burley, Juwai\u2019s BC-based VP, stated in a release. \u201cVancouver\u2019s tax is working by driving a share of buyers to other cities, especially Seattle.\u201d<\/p>\n However, he adds that doesn\u2019t mean demand has drastically dipped in BC\u2019s biggest city, though the tax effectively \u201ctook the froth off the top\u201d. The site\u2019s search volume doesn\u2019t show any prominent decline in Vancouver, with sales instead remaining flat like a \u201cdeflating souffl\u00e9\u201d.<\/p>\n The latest set of national housing sales and price data from the Canadian Real Estate Association<\/a> reveals that after an autumn of sliding sales, activity saw a slight uptick in October, increasing 0.8 per cent month over month. However, sales are still down 4.3 per cent from 2016 numbers (the seventh month in a row sales declined annually), and a steep 11 per cent from the March peak.<\/p>\n The national average home sale price rose 5 per cent year over year to $506,000. Not factoring in Toronto and Vancouver, which greatly skew the national average, strips out $120,000, to an average price of $383,000.<\/p>\n CREA\u2019s analysts believe the increase in sales activity could be due to buyers rushing into the market before tougher mortgage qualification rules take hold in January.<\/p>\n \u201cNewly introduced mortgage regulations mean that starting January 1st<\/sup>, all home buyers applying for a new mortgage will need to pass a stress test to qualify for mortgage financing. This will likely influence some home buyers to purchase before the stress test comes into effect, especially in Canada\u2019s pricier housing markets,\u201d stated CREA President Andrew Peck.<\/p>\n Related Read: Average Toronto Home Price Predicted to Rise to $863,610 in 2018<\/a><\/strong><\/p>\n Various rounds of provincial and federal regulation designed to improve affordability in the Canadian housing market may be temporarily successful – but prices will be higher than ever once the initial impact fades, states a new report.<\/p>\n In a research note titled \u201cThe Housing Market: When the Fog Clears<\/a>\u201d, CIBC\u2019s Deputy Chief Economist Benjamin Tal says the new changes – which include foreign buyer taxes, rental regulations, and new mortgage qualification rules – will \u201cstabilize and perhaps soften in the coming quarters as markets adjust to recent upcoming changes.\u201d<\/p>\n But, he adds, \u201cwhen the fog clears it will become evident that the long-term trajectory of the market will show even tighter conditions.\u201d<\/p>\n While policy makers are focusing on rampant demand, he argues, they\u2019ve ignored the issue of too-little supply, which he says will only get worse. \u201cShort of a significant change in housing policies and preferences, there is nothing in the pipeline to alleviate the pressure,\u201d he writes.<\/p>\n New mortgage rules that require all buyers applying for new mortgages to pass a stress test may especially miss the mark, he says. While they may effectively knock some borrowers out of the A-lending market, there are sufficient alternatives – such as turning to private lenders and credit units or extending their amortizations – that the number of new mortgages won’t decline drastically.<\/p>\n \u201cOn the surface, that change reduces the purchasing power of typical buyers by close to 20 per cent and we estimate that no less than 10 \u2013 15 per cent of mortgage originations will be impacted by that move. However, the actual reduction in demand is likely to be much less significant,\u201d he writes.<\/p>\n And, while the Vancouver and Toronto markets both experienced slowdowns following the implementation of their respective foreign buyer\u2019s taxes, Tal chalks this up to a psychological barrier that has rapidly been overcome. Rather, demand fundamentals remain strong in the face of factors that continue to limit supply.<\/p>\n \u201cZooming in on the GTA market, as we have indicated in the past, the main issue facing this market is a significant and worsening lack of land supply. And the numbers don\u2019t lie,\u201d Tal states, referencing development limitations as a result of the Ontario Places to Grow Act, and the overhaul of the Ontario Municipal Board<\/a>.<\/p>\n Speaking of improving supply, the Ontario provincial government unveiled this week a new plan for streamlining the housing development approval process, in efforts to speed up the creation of badly-needed inventory.<\/p>\n Part of the previously-announced Fair Housing Plan, this set of 14 recommendations was compiled by a roundtable of reps from the development, construction and real estate sectors. The plan lays out how to best align infrastructure with land use planning, improve zoning, and offer guidance for implementing new land-use policies. They\u2019ve also called for the approval process to join the 21st<\/sup> century, with a new task force to facilitate the introduction of e-approvals.<\/p>\n \u201cAffordable home ownership is one of the most important issues facing young people and families today. Ontario Realtors have been saying that creating the conditions for more housing supply is the best solution to ensure the Canadian Dream of home ownership doesn\u2019t slip out of the hands of the next generation,\u201d stated Ontario Real Estate Association CEO Tim Hudak in response to the recommendations.<\/p>\n \u201cThat is why Ontario Realtors are encouraged with today\u2019s release of the provincial government\u2019s Development Approval Roundtable Action Plan. Ontario Realtors brought forward a number of housing supply recommendations earlier this year including: tying infrastructure investment to better zoning by municipalities for more housing, cutting red tape for a more streamlined development approvals process, and a commitment for home development intensification along transportation corridors. We are very pleased to see all three ideas now incorporated into the Provincial Government Plan. We thank the Government for listening and we encourage them to put these sensible ideas into action.\u201d<\/p>\n A new bylaw recently passed by Vancouver\u2019s city council has slapped new restrictions on some short-term rentals. While homeowners can now legally list their homes on Airbnb, they will be required to pay an annual $49 licence feel, as well as a one-time fee of $54.<\/p>\n The biggest change, however, is that only principal residences can be listed on the short-term rental service, effectively hamstringing those who own several properties and solely rent them out on the online platform for profit.<\/p>\n Secondary suites (such as basement units) and laneway houses aren\u2019t eligible for Airbnb either, even if they\u2019re on the same premises as a principal residence. This has been a point of contention, with some city councilors arguing it could hurt the affordability of existing homeowners.<\/p>\nDouble Ending Now Banned in\u00a0British Columbia<\/h2>\n
Seattle: The New Vancouver?<\/h2>\n
Canada Real Estate Sales Pick Up in October: CREA<\/h2>\n
New Rules Will Cool the Market \u2013 But It Won\u2019t Last<\/h2>\n
Ontario to Fast Track\u00a0Housing Development Approval<\/h2>\n
Some Airbnbs Now Banned in Vancouver<\/h2>\n