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HOUSING
HOUSING Retreat of first-time buyers may benefit investors
by Carlito Pablo
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Areport says the ongoing correction in the Canadian housing market is shunting aside two types of home buyers.
These are first-time purchasers and foreign buyers, who are feeling the pinch from a combination of factors ranging from higher interest rates to government housing policies.
And into the void created by this calming market comes a class of winners.
“This may prove a boon to investors,” Dexter Realty said in a Monday (August 8) report.
The report was prepared by Kevin Skipworth, who is the Vancouver realty company’s partner and managing broker. By investors, the report is referring to people “buying homes for rental income or appreciation”.
The bulletin noted that investors “traditionally” account for about 20 percent of real-estate transactions in Metro Vancouver. Sales have slowed down following four interest-rate increases made by the Bank of Canada starting in March 2022.
From the historically low level of 0.25 percent since the COVID-19 pandemic began in 2020, the central bank has brought its interest-setting rate up to 2.5 percent.
The report noted that determined buyers, including those who plan to live long in their properties, are not going to be deterred by the higher mortgages.
The paper pointed out that the average five-year fixed-rate mortgage at Canada’s six big banks has increased by “just 1.4% in the last six months”.
However, the cooling market has produced losers. “During the first half of this year, the number of B.C. first-time buyers fell 46% compared to the same period last year, accounting for just 4,426 purchasers,” Dexter Realty stated. It cited the federal government’s mandatory “stress test” as a “key reason”. It “requires buyers to qualify at an unrealistically high fiveyear mortgage rate that many first buyers have difficulty meeting”.
“Instead of buying, more than 4,000 will remain renters,” Dexter Realty stated.
Buyers need to meet the stress-test threshold, which is the higher of either their mortgage-contract rate plus two percent or the Bank of Canada’s mortgagequalifying rate of 5.25 percent.
With fixed rates now at more than four percent, this means that buyers applying for this type of mortgage will have to qualify at a higher rate than the central bank’s qualifying mark.
In the report, Dexter Realty noted that foreign home buyers in Metro Vancouver “may have accounted for 6% or more of all sales” before a 15 percent foreign buyer tax was adopted in 2016.
The tax has been increased and it now stands at 20 percent of the market value of the property. Dexter stated that foreign home buyers “now make up only 1% of Metro Vancouver transactions”, based on figures from the provincial finance ministry.
In addition to the 20 percent tax in the province, the federal government is also bringing in a two-year ban of foreign purchases, in January 2023.
“So, investors who are purchasing investment condominiums now are enjoying lower prices, zero competition from global investors, a captive audience of renters and rising rental rates,” Dexter noted in the report.
Moreover, “Investors realize that, despite all the government chest thumping over increasing the supply, Metro Vancouver housing starts as of July were down 23% from a year earlier and the new strata shortage is getting worse.” g
Dexter Realty released a report on the impact of rising interest rates on different buyers one week after this home with four bedrooms and three bathrooms on Tanner Street sold for $1.88 million.
– Dexter Realty
1835 Morton St., Vancouver, West End SOLD
#1506 - 1816 Haro St. Vancouver, West End
D
eveloper SEES DOUBLE
THIS STORY will likely sound familiar to many, especially in Vancouver.
In June 2018, a modest detached home in the neighbourhood of GrandviewWoodland sold for $1,751,000. The home was built in 1923, and it featured four bedrooms and a bath.
The residence was eventually demolished.
A development permit for a duplex, or two homes attached to each other, was issued by the City of Vancouver. In 2021, a new duplex was developed at the 1621 East 11th Avenue address.
On June 3, 2022, the two units came on the market, each asking $1,875,000.
This means that each unit was now more expensive than the original detached home that was purchased at $1,751,000 just four years earlier.
Two days later, the unit at the back, or Number 2, sold for $1,818,000. Number 1, the front unit, took a bit longer. On July 21, it sold for $1,735,000.
The total sold price for the two duplex units comes to $3,553,000.
For their trouble, the builder more than doubled the original purchase price of $1,751,000. Each duplex has three bedrooms and four baths. g by Carlito Pablo
SOLD OVER LIST PRICE
LIZ CARNEY
Century 21 In Town Realty | 421 Pacifi c at Homer
