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Volume 28 Number 460
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New housing market data says you are more likely to save up to 35% by settling in particular Vancouver neighborhoods than others. IN this article, MLS data shows which neighborhoods are a better investment over time than others. To see how much homes depreciate over the years in particular Vancouver neighborhoods, a comparative analysis between newly built apartments and townhouses (aged 0-2) and 10 years-old apartments and townhouses (aged 6-15 with the average of 10) was calculated to determine the percent at which the price
depreciated. In looking at a heatmap of the data, it became clear that in some Vancouver neighborhoods, home depreciation was much more significant than in others. But even more interestingly, in some areas, home depreciation did not exist at all--in fact, home value increased over time (Figure 1). Vancouver neighborhoods that saw the most depreciation in house price over time:
Marpole: 35% decrease (West) South Cambie: 34% decrease (West) Kerrisdale: 31% decrease (West) Downtown West-end: 27% decrease (West) Fairview: 26% decrease (West) Vancouver neighborhoods that saw the least depreciation in price over time: Strathcona: -3% decrease (East) Hastings-Sunrise: -7% de-
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crease (East) Fraser: 1% decrease (East) Renfrew: 1% decrease (East) Kitsilano: 1% decrease (West) Figure 1: Newly built versus 10-year-old depreciation values *Insert Mohammad’s interactive graph here* To understand why some apartments and townhomes depreciate in price while others do not it can come down to several fac-
tors such as sales history, neighborhood, market conditions, size, appeal, age and condition, and local amenities. However, it cannot be certain to which of these factors had the most effective on the depreciation of these Vancouver neighborhoods, but there are a few trends in the data that are worth noting. The first is Vancouver West versus Vancouver East. By looking at and comparing the data, generally, houses
depreciate more in Vancouver West than they do in Vancouver East with the exception of some areas such as Kitsilano (a Western neighborhood, which on average, only depreciates by 1%). We can also see more depreciation among the Southern Vancouver neighborhoods such as South Cambie, Marpole, and Kirrsdale which depreciate up to 35%.
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B.C. court strikes down lawsuit that claimed foreign buyers tax is unconstitutional A B.C. Supreme Court judge has dismissed a class action lawsuit that claimed the province’s foreign buyers tax is unconstitutional and discriminates against Asian immigrants. In his decision released Friday, Justice Gregory Bowden said the tax — which was introduced by the previous Liberal government — falls under the province’s powers within the constitution to introduce taxes that produce provincial revenue. The BC Liberals brought in the 15 per cent tax in an effort to cool Metro Vancouver’s housing market, which had become the most expensive in Canada by 2016. In 2018, the current NDP government raised the tax to 20 per cent. The tax is applied to anyone who isn’t a Canadian citizen or permanent resident. According to a report from Simon Fraser University economics professor Andy Yan that was submitted into evidence by the province, Metro Vancouver’s housing market was affected by foreign buyers using real estate “as a financial instrument disconnected from its function as housing.” Bowden noted other economic experts had accepted that foreign buyers were contributing to the high cost of housing in the region. He also pointed out Metro Vancouver saw the price of a single-family home increase by nearly 40 per cent in the year leading
up to the tax, with a similar jump in condo prices. Class-action lawsuit launched against B.C. foreign home buyers’ tax But the lawsuit’s representative plaintiff, Jing Li, argued the tax disproportionately targeted and affected Asian buyers, particularly those of Chinese descent who make up a majority of immigrants to Greater Vancouver. Li, a Chinese national, moved to Canada in 2013 to complete a master’s degree in public administration at the University of Saskatchewan. She later moved to Burnaby before putting an offer on a Langley home listed for $587,895 including GST in July 2016. Eight days before the law was announced, Li paid a non-refundable deposit of $55,990. The tax then added $83,850 to the purchase price, which Li had to pay or risk forfeiting her deposit. Li was seeking to certify the case as a class action lawsuit, which was first proposed in September 2016. Her lawyers argued
ver of Chinese descent are equally impacted by housing unaffordability and equally will benefit from any measures that improve affordability,” the ruling says. In addition, the judge said Li failed to prove the tax prevents people from immigrating and settling in Metro Vancouver, citing provincial rules that allow buyers to have the tax rethe tax placed an ar- But Bowden said Li countries,” the deci- funded after proving bitrary disadvantage failed to show the sion reads. citizenship. on non-Canadian tax actually made ra- “Further, buyers from During the federal and non-permanent cial stereotypes and Asian countries have election campaign, residents because it prejudices worse, the same opportuni- Prime Minister Justin assumes foreign na- and that saying they ty to seek permanent Trudeau pledged that tionals are richer and existed or were men- residency status or a a re-elected Liberal better able to outbid tioned around the provincial nomina- government would domestic homebuy- time of the tax was tion so as to be ex- impose a national ers. B.C. small busi- not enough to sup- empt from the Tax.” one per cent tax on ness owner sues, port her argument. How government properties owned by says $269K bill for Further, the judge policies are impact- non-Canadians and foreign buyers tax said while a majority ing B.C.’s real estate non-residents in an ‘unfair’ of buyers who were market for better or effort to curb foreign She also argued Chi- subjected to the tax worse speculation in real nese immigrants, in- in its first year were estate. cluding those who from Asian counties Bowden also cited held Canadian citi- and particularly Chi- Yan’s report and tes- The tax would help zenship, were being na, it didn’t mean the timony that indicat- deter foreigners who unfairly perceived as tax affected Asian ed “overwhelming wish to speculate in causing Vancouver’s buyers “in particu- support” for the tax the housing market, overheated real es- lar.” among Asians living which has been a tate market. In her in Metro Vancouver. key contributor to a argument, she said “There is no burden surge in home prices the enactment of the imposed on buyers “Professor Yan states in other Canadian tax sealed those ste- from Asian countries that Canadian citi- markets in recent reotypes in Canadi- that is not imposed zens or permanent years, Trudeau said ans’ minds. on buyers from other residents of Vancou- in September.
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showing a higher sales-to-
Detached 174 182 Apartment 293 682 Average Price in October 2019 Townhouse $843,400 $1,098,900 Apartment $548,300 $754,800 Single Family Detached $1,358,700
The second is that the price for a 10 years-old property in Hastings-Sunrise is about 7% higher than new buildings, as for Strathcona it is about 3%. A reason for this could be the availability of larger newly-built homes in these two areas which made the average price per square feet of new units somehow become less than 10 years-old units. For example for Hastings-Sunrise, the average floor area of a newly-built apartment is about 1,577sqft while the 10 years-old average floor
smaller in size makes the older homes in these two areas to be sold at a higher price per square feet levels. The third is that the Vancouver East versus Vancouver West debate shows Vancouver’s housing market in two different lights. Vancouver West, in which housing is more expensive with more detached and bigger housing and Vancouver East, in which housing is less expensive with less detached and smaller in size (Figure 2). Becuase of this, the data shows Vancouver East
$2,894,400 Figure 3: Sales-to-ActiveListings ratio for October 2019 Whether the price, size, age or popularity is the reason why the East is shown to depreciate less than the west, poses an interesting question that may need further investigation. But if you happen to be in the market for long-term housing and are looking to save (or even earn) a buck or two along the way, Vancouver East
may save you up to 35% in home value depreciation. Disclaimer: Although the depreciation can be calculated for the majority of the Vancouver neighborhoods, some Vancouver neighborhoods do not have a sufficient amount of data for either newer apartments and townhouses, older apartments and townhouses or both. In addition, this data shown only represents data relevant for 2019 and does not account for lesser years.
active-listings ratio than Vancouver West. In other words, Vancouver East is selling at a more frequent rate than Vancouver West (Figure 3). Figure 2: Vancouver East. Versus West: Housing Type, Price Vancouver East Vancouver West Average Number of Sales in October 2019 Housing Type Attached 107 118
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CONSTRUCTION
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Four steps that will make your home renovation a little less painful The national average cost of a midrange major kitchen renovation is $66,196, according to an analysis by Remodeling Magazine. Homeowners recoup an average of 62% of the cost at sale. Ignoring fine details, including ensuring that your contractor pulls permits and closes them with the city inspector, could interfere with the sale of your home in the future. Beware of mechanics’ liens, which unpaid contractors and subcontractors can attach to your property if they’re not properly paid. “They might say that the materials are of a similar grade, but often they aren’t,” said Douglas Miller, a real estate attorney in Minneapolis. Your contract should specify how change orders — additions to the project — are handled and paid for. These work updates should always be in writing. Finally, be on the lookout for arbitration clauses, where you’d give up your right to take your builder to court, said Miller. “Don’t agree to arbitration,” he said.
If you think bringing your garish 1960s-era kitchen up to date is just a matter of new paint and appliances, think again. Home renovations modernize your dwelling, potentially make it more energy-efficient and may enhance its appeal when you sell your home. The trouble is that an overhaul of your house can often be more complex — and more expensive — than originally anticipated. Consider that a midrange minor kitchen remodel — wherein you’re replacing the front of your cabinets and swapping out countertops — costs an average of $22,507, according to Remodeling Magazine. A major kitchen renovation is about three times that ($66,196) and often includes a new island, updated appliances and custom lighting, Remodeling found. A gut renovation, where contractors rip a room down to the studs, could also reveal a multitude of unexpected problems that will add to the bill. My kitchen and first floor bathroom are about four weeks into a gut renovation, including a new floor. Some of the surprises we’ve uncovered include an incorrectly installed window and faulty plumbing in the shower. “Someone might say, ‘Let’s have our bathroom redone,’ and they live in a house that was built in the 1950s or 1960s,” said Frank Lesh, a retired home inspector and spokesman for the American Society of Home Inspectors. “Something downstream from that could affect the work that’s being done,” he said. “For example, if your house was built with steel pipes, which was common in the 50s and 60s, those pipes tend to be corroded.” Here’s what you should know before you renovate your home. Shop your project to multiple con-
tractors as you get an idea of the price range for your renovation. Check the background of your contractors and make sure that they are licensed in your state and locality. Licensed contractors are typically required to pass an exam, pay a licensing fee, be bonded and carry insurance for property damage, liability and worker’s compensation. “Make sure everyone is licensed and insured,” said Daniel Lorch, a realtor in Teaneck, New Jersey. “The last thing you want is for someone’s electrician to be working in your house and they get electrocuted.” “If they don’t have insurance, they can sue you,” he said.
2. Review your contract Contract details should include an estimated start and finish date, the payment schedule — never pay your professional the whole sum up front — and specifics on what the contractor’s responsibilities are, including whether clean-up and trash removal are included. The agreement should spell out, in detail, the scope of the project, too. Watch out for red flags, which include a provision that allows the builder to substitute materials.
3. Be sure they get permits Generally, state and local jurisdic-
tions require that contractors obtain permits for large projects, including remodeling and new electrical and plumbing jobs. This way, your city’s building authority can inspect the work and ensure it meets safety codes. Your city’s inspector will “close” the permit if the project is up to code. More from Personal Finance: Here’s how the Fed’s rate cut affects you More than half of adults over 50 would rather die than do this Two reasons why you should repo-
sition your portfolio right now Failure to get the proper permits and undergo the inspection process could mean that your new project is rife with structural problems. Worse yet, your homeowner’s coverage likely won’t pay for any damages related to the work done with-
out a permit. Further, “open” permits — where the building authority hasn’t signed off on the completed project — could interfere with the sale of your home. 4. Avoid liens Wealth manager: Buying a home is usually a terrible investment Depending on the state in which you live, your contractor or subcontractors may be able to file a construction lien against your house if they haven’t been paid. Liens can keep you from selling your home and prevent you from refinancing your mortgage. Protect yourself by obtaining a sworn construction statement from your builder, itemizing who worked on your property, said Miller. Afterward, obtain a lien waiver — where the contractor gives up the right to lien your home in exchange for getting paid — and paid receipts from all of the parties who’ve worked on your home, he said. A little bit of legwork can save you a lot of heartache. “You may even want to call the subcontractors and verify that they have been paid,” said Miller.
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Weekly mortgage applications fall despite rates crossing back below 4% Refinance applications dropped 8% for the week, after jumping 13% the previous week, according to the Mortgage Bankers Association. Mortgage applications to purchase a home increased 7% for the week and were also 7% higher than a year earlier. After a huge jump the week before, mortgage refinance demand pulled back sharply last week, likely because borrowers were less worried about rising rates. That caused total mortgage application volume to decline 2.2% for the week, according to the Mortgage Bankers Association’s seasonally adjusted survey. The week’s results include an adjustment for the Veterans
Day holiday. Refinance applications dropped 8% for the week, after jumping 13% the previous week. Refinance demand is highly rate-sensitive, and borrowers tend to move quickly when they think rates may be turning higher for the foreseeable future. Rates fell slightly last week, so borrowers may now be thinking they could go even lower. Refinance
demand was still 152% higher than a year ago, because rates today are significantly lower. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($484,350 or less) decreased to 3.99% from 4.03%, with points increasing to 0.33 from 0.31 (including the origination fee) for loans with a 20% down payment. The rate
was 5.16% one year ago. “U.S. and China trade anxieties and protests in Hong Kong pulled U.S. Treasurys lower last week, and the 30year fixed mortgage rate followed the same path, dipping below 4%,” said Joel Kan, MBA’s associate vice president of economic and industry forecasting. “Rates have stayed in the same narrow range of around 4% since July, so we may be
starting to see the expected slowdown in refinancing as the pool of eligible homeowners shrinks.” Mortgage applications to purchase a home increased 7% for the week and were 7% higher than a year ago. Housing demand is very strong this fall, thanks to lower mortgage rates and pent-up demand from a slow spring. The annual comparisons are also get-
ting bigger, since demand fell off sharply in the fall of 2018 due to a spike in interest rates. The refinance share of mortgage activity decreased to 59.5% of total applications from 61.9% the previous week. The adjustable-rate mortgage share of activity decreased to 4.6% of total applications.
Homebuilder confidence slips slightly in November The national association of Home Builders/Wells Fargo Housing Market Index (HMI) fell 1 point to 70, after rising steadily since June to the highest level of the year last month. Anything above 50 is considered positive. The index measured 60 last November. Of the index’s three components, current sales conditions fell 2 points to 76, traffic of prospective buyers dropped 1 point to 53 and sales expectations in the next six months rose 1 point to 77. Premium EA: PulteGroup construction new homes 170510 A PulteGroup housing development in San Jose, California. David Paul Morris | Bloomberg | Getty Images The nation’s single-family homebuilders are feeling very positive about their business, but a monthly sentiment indicator fell in November from a recent high. The national association of Home Builders/Wells Far-
go Housing Market Index (HMI) fell 1 point to 70, after rising steadily since June to the highest level of the year last month. Anything above 50 is considered positive. The index measured 60 last November. “Single-family builders are currently reporting ongoing positive conditions, spurred in part by low mortgage rates and continued job growth,” said NAHB Chairman Greg Ugalde, a homebuilder and developer from Torrington,
Connecticut. “In a further sign of solid demand, this is the fourth consecutive month where at least half of all builders surveyed have reported positive buyer traffic conditions.” Of the index’s three components, current sales conditions fell 2 points to 76, traffic of prospective buyers dropped 1 point to 53 and sales expectations in the next six months rose 1 point to 77. Sentiment, as well as housing starts, are stronger this
year thanks in part to much lower mortgage interest rates. The average rate on the 30-year fixed mortgage was around 5% in November 2018 and is now hovering just below 4%. Homebuilders are also finally starting to pivot more toward less pricey, starter homes. Several roadblocks remain at that price point. “We have seen substantial year-over-year improvement following the housing affordability crunch of late 2018, when the HMI stood
at 60,” said NAHB chief economist Robert Dietz. “However, lot shortages remain a serious problem, particularly among custom builders. Builders also continue to grapple with other affordability headwinds, including a lack of labor and regulatory constraints.” Stocks of the big public builders have been on a tear all year, rising as mortgage rates fall. Most builders have also been reporting solid beats in quarterly earnings, as buyer de-
mand surges thanks to job growth and a severe shortage of affordable, existing homes for sale The iShares US Home Construction ETF is up 50% year to date. Regionally, on a three month moving average, homebuilder sentiment rose 2 points to 62 in the Northeast and rose 3 points in the West to 81. In the South, sentiment moved 1 point higher to 74, while sentiment in the Midwest was unchanged at 58.
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