Monthly Market Intelligence - December 2022 Edition

December 2022

EXTENSIVE CHANGES TO BC REAL ESTATE

With the holiday season upon us and 2022 soon coming to a close, we cannot help but step back and note that this year has been one of tremendous flux in our local, and indeed in the British Columbia real estate market. The New Year, 2023, looks set to continue that trend with a bevy of new rules, regulations and legislation all designed to remedy our Province’s housing woes: Bill 44, the “Anti-Flipping Tax”, a Foreign Buyer Ban, the Home Buyer Protection Period, and the Pro vincial government issuing quota’s to municipalities for new housing development starts.

Besides these aforementioned changes to legislation, on December 7th, the Bank of Canada raised its benchmark rate by 50 basis points to 4.25 per cent for the last time in 2022. Despite the added pressure on lending and those needing financing, this move was also accompanied by some optimistic news. The Bank of Canada released their accompanying statement, signaling that a pause in rate hikes could be coming. This language from the central bank marked a departure from previous rate hikes earlier this year whereupon each was accompanied with outright certainty that rates must go higher... Sitting at its highest rate since 2008, many experts consider we could be at the peak of the tight ening, and rates may go unchanged for most of 2023.

This past week David Eby moved Bill 44, The Building and Strata Stat utes Amendment Act, 2022, through the provincial legislature in what

might have been the fastest Bill to receive royal ascent in history. This new legislation has changed the Strata Property Act. The changes are primarily aimed at improving housing supply across the province. The two most significant changes this bill has introduced are:

1. No Rental Restrictions - Strata’s in British Columbia may not enact any bylaw that restricts rentals other than “Short-Term” (e.g. VRBO or Airbnb) as defined by municipal regulations or the courts. A strata may not make their own definition of what is a “Short-Term”. This change, simply put, is immense. Effective immediately, any owner of any strata property can rent their units to a long-term tenant despite the desires of the Strata. Considering that on the Peninsula, perhaps 1 out of 10 condominiums allow rentals and even then, many restrict the number of rentable units to three or less. Purchasers looking for investment property who needed to rent in order to avoid the vacancy/speculation tax had very little inventory to draw from. This rule change has immedi ately opened every single strata property up to investment purchasers across all of British Columbia.

2. Age Restrictions - A strata in British Columbia may no longer enact or enforce any age restriction other that 55+. This rule change has a few exceptions and deserves some further explanation. Strata’s can only re strict “residency” of the unit and they cannot restrict a purchaser from owning a property in a 55+ building. This means an under 55 owner could purchase a unit in a 55+ property for renting it as an investment. This rule change also includes language allowing existing under 55 res idents to be grand-fathered should the strata pass a bylaw, making the building 55+ age restricted. It’s important to understand however, that should an under 55 owner’s residency status change for any reason (e.g. they rented the unit for a few months), if during that time the build ing became 55+ those owners could not move back in! Indeed, the age restriction amendment to the Strata Act has lawyers considering many hypothetical scenarios where an owner possibly loses theirs rights to residency with this change.

Unfortunately, when Bill 44 was first reported on by the media, many news outlets stated rental restrictions would be allowed in 55+ build

Absorption Rate

ings. This is patently false. Rental restrictions of long-term tenancies by strata bylaws are no longer enforceable in British Columbia.

The provincial government’s housing platform also showed that in the new year we will also see introduced a “Flipping Tax”. While specific de tails have yet to be released on this tax, the intent is slowing down the rapid rate of home price escalation from speculative demand. Applying a tax to the sale of residential properties sold within two years, the tax rate would decrease based on the time passed since purchase. They will apply exemptions to builders/developers and owners with special circumstances such as death, divorce, employment loss and disability.

From the federal government, January 1st, 2023 brings us the “Prohi bition on the Purchase of Residential Property by Non-Canadians Act”, commonly referred to as the foreign buyer ban. Non-Canadians will be banned from buying homes across Canada. The act prohibits non-citi zens and non-permanent residents from purchasing property in Cana da for two years. The Act also restricts non-Canadians from avoiding the ban by using corporations or other entities to purchase residential property. There is still a significant amount of information we do not know about the foreign buyer ban, namely the exemptions. While not yet formally announced, we expect that the proposed legislation will contain an exclusion for recreational properties, residential property located outside of large urban centres, and vacant land zoned for mixed use by municipal authorities within large urban areas. Whistler is a great example of this potential exemption

Finally, effective January 1st, 2023 purchasers of residential properties in British Columbia will be provided with a mandatory three business day “Homebuyer Protection Period”. During this period, buyers may choose to walk away from an accepted offer to purchase a residential real estate property for any reason. Similar protection has existed for quite some time in Strata pre-sale and the purchase of new construc tion. The key difference here is the application of this “cooling-off” peri od applying to the resale market.

The goal is to allow buyers the opportunity to consider their offer before it is final, by permitting the buyers an option to rescind an offer that

they may have made in haste because of the pressures of a fast-moving real estate market. Use of this will come at a cost. The seller will be rewarded a charge of 0.25% of the purchase price from the purchaser should they rescind an offer through the protection period. For exam ple, $2,500 on a $1,000,000 purchase. This cost, while not insignificant, is likely much lower than a buyer losing their deposit if they cannot complete the purchase.

While British Columbia leads the country in regulation of the real es tate market and property ownership rights, the intention is to help the market overall. Only time will tell if the Government’s well-meaning intentions will come with any collateral damage.

Now more that ever, Terry and I remain steadfast to you, our clients, in providing the most educated and thorough understanding in this time of uncertainty. If you would like to further the conversation on the current market, discuss buying/selling strategies or gain an understanding of the market value of your home, we would be delighted to hear from you.

Being a part of our boutique brokerage means benefiting from the strength of the whole. It means coming together with fellow real estate professionals who are constantly rethinking industry norms and pushing themselves further through technology, design and service.

It’s real estate without boundaries.

It’s real estate that moves you.