Every January homeowners receive their Property Assessment Notice. This is an estimate of property value established by the BC Assessment Authority for Home in Burnabyproperty tax purposes. Many get upset when values goes up because they expect property taxes would increase accordingly. This is not always the case. If the municipality in where you live decides to raise taxes to improve public services, or if TransLink or Greater Vancouver Regional District does the same, your property taxes would increase even if your assessment value dropped. Many also believe that this truly is what their property is worth.

 

So how accurate is this property assessment value if you wanted this to be used when you sell your home? Imagine two million properties in BC being reviewed every year by a group of appraisers from the BC Assessment Authority. That’s quite a few for each staff member.  Have you ever had someone enter your property from BC Assessment Authority to establish value? Furthermore, the current assessed value is estimated as at July 1 of the previous year. If you have been a property owner in BC, in particular the Lower Mainland, you will realize that real estate values are cyclical between and within years. I would suggest the property assessment is merely a starting point established in part by some mathematical formula and assumptions.  Only a licensed Realtor® or a certified appraiser would be able to provide the true current value of a property based on their local market knowledge.

 

If a property came up for sale priced below “assessed value”, would you jump on it without thinking twice? I wouldn’t bet my house on it.  Would you be paying too much for a house priced well above the “assessed value”? Many might be led to believe so. But is it really?
 
 -- Arthur Ng
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I've been feeling very old recently. Ever since Vancouver's housing market really took off I've been hearing and reading about people talking about houses as investments, to grow or depreciate as the market develops. I can see the validity of this viewpoint – how can I not with all this foreign investment flooding Vancouver's shores? – but until now I've only ever seen a house as a place to live and raise my (future) family.

Housing Market InvestmentThat's been changing. Now, when I see a For Sale sign and look at the house, I wonder how much the seller has gained from his investment since he first purchased it. Has he considered inflation when he calculates his per-year take-away? What about renovation costs, or holding costs, or transaction costs? Would that money have been better invested in stocks? Nevertheless, that there is no capital gains tax on a principal residence helps.

I can't sleep, cook, or raise a family in a stock portfolio so for me, a house will always be a place to live first and an investment a distant fifth or sixth. My parents live in a neighbourhood where many houses within a week of being listed in this current market  are sold after a bidding war selling over asking price.  A house across the street from my parents just sold for over one million dollars. Dad just rolled his eyes. "What do I care if my house is worth a million dollars?" he asked. "I'm not selling."

There could be some stock in the argument that treating houses as an investment (or perhaps the growing number of people who are treating houses as an investment) has actually created the searing hot real estate market in Vancouver today, a market that is driving home prices further into the stratosphere. With prices this high, one could argue, prices have only one direction to go. This is economics at its best, balancing the market in another turn of the cycle. If it happens.
-- Sarah Mah
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Downtown Vancouver Condo on WaterfrontCan it be? Is the Vancouver housing market seeing the first signs of buyer fatigue?

The Real Estate Board of Greater Vancouver released its property sale
statistics for April based on the Multiple Listing Service and, while not the plunge many people are predicting, the numbers are trending down.

Residential property sales – including detached, attached, and apartment properties – in Greater Vancouver reached 3,225 in April 2011.  Compared to the 3,512 residential sales in April 2010, that's an 8.2 per cent decrease, which is still modest when compared to the 21 per cent decrease from March of this year when 4,080 residential properties were sold.

It's the same story with new listings in Greater Vancouver.  April 2011 saw 5,847 new listings for detached, attached and apartment properties.  This is a 23.5 per cent decrease from April 2010 (admittedly an "all-time record for April") and a 14 per cent decrease from March 2011.

Rather than a sign of dropping market activity these statistics are more likely a sign of returning normality, especially compared to the strong sales we've witnessed over the last few months.  These changes are only minor and it'll take several more months of statistics to get a real handle on the Vancouver real estate market trend.  This slight fall could just be the lull before the spring storm, as sellers finish renovations, repairs and landscaping in preparation for a sunnier May.  If sales and listing numbers keep inching down as they did in April, though, we can look forward to more balance between supply and demand for residential properties.

Buyer fatigue? Probably not. This is just the coffee break.
 
- Sarah Mah
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The increase in foreign investment and the recent changes in mortgage qualifications have not helped first time homebuyer in Vancouver.  In fact it feels more like a concerted effort on the part of the city to drive these young Canadians out of this market.  Even without the weight of tens of thousands of dollars of student debt, many young people simply cannot afford the price of a home in Vancouver.  Consider this fact from The Vancouver Sun’s Bob Ransford: today, the average cost of a home in Metro Vancouver is nearly ten times the median household income.  And the RBC is surprised that young Canadians are waiting another year before buying their first home.  Even for established two-income households, a mortgage of seven hundred thousand dollars, or more, is worthy of at least a moment’s consideration.  What hope does a young, likely-single resident of Vancouver have of owning in this market?

From Spanish Banks to Downtown VancouverA likely resolution, and that accepted by many Canadians, is to look elsewhere in other markets that are not overly impacted by foreign investment and heightened mortgage qualifications.  Those things that sway a person to look in a certain area – neighbourhood, job prospects, social connections – are seemingly trumped by the sheer cost of housing.  So the question then becomes whether or not these market forces are good for the local economy.  After all, they are driving away the young, educated minds that the GVRD has produced and will produce in the foreseeable future.
Another alternative is perhaps to allow higher density in various neighbourhoods or relax secondary suites. While the thought of owning a single family home may be more challenging within the city, there are options for the more affordable apartments and townhouses. The market price is determined by supply and demand. And Vancouver's reputation as the "place" to be internationally likely means that affordability won't get any easier.
 
- Sarah Mah
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While foreign investment has been a noticeable factor in pushing out young and first time homebuyers in Vancouver’s real estate market, there have been other more domestic factors as well.  Over the last year the government has made it systematically more difficult for people to purchase a home albeit to keep the threat of homeowners overextending themselves.

View of North Shore Mountains in Vancouver from Point Grey ListingIn the spring of 2010 mortgage lending rules changed, requiring all homebuyers to qualify for a standard five-year, fixed-rate mortgage.  With the highest rates compared to most mortgage options, five-year fixed-rate mortgages are the most secure but also the most difficult to qualify for. 

On July 1st 2010 the BC government rolled in the controversial Harmonized Sales Tax, combining the Provincial Sales Tax and Goods and Service Tax into an overall 12% tax that covered a wider scope of goods and services.  What goods and services the HST actually applies to when purchasing, building, or selling a house is difficult to nail down but has increased the costs of buying a home, especially on new construction.

And finally, in March of this year, mortgage rules changed again, decreasing the maximum amortization period for a mortgage from thirty-five years to thirty, thereby increasing monthly payments.

Not only are young Canadians facing tougher mortgage qualifications from their government, but the social factors weighing down on them from their education, including property ownership – are actually proving a detriment rather than a benefit.

So where does this leave the first time homebuyer in Vancouver?
- Sarah Mah
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RBC recently released their annual Homeownership Study in which they declare, with apparent shock, that fifty-five per cent of young Canadians plan on waiting a year or more before purchasing their first home, and that forty-six per cent of young Canadians who already own their own home say their mortgage uses up too much of their income – to which I must ask: Why are you surprised?

Downtown Vancouver Real EstateOver the last two years there have been several economic, market-based, and social forces pushing young and first time homebuyers farther to the fringes of Vancouver’s housing market.  RBC’s report doesn’t bring any new information to the table (other than definitive statistics) that most, if not all, young Vancouverites are already well aware of: You can’t buy here unless you have realistic expectations.

The most obvious of these forces is the new wave of foreign investments in Vancouver’s housing market, the second such wave to occur in the last thirty years.  The first wave launched property values into the stratosphere and they didn’t seem to come down until a US housing crash brought everything else down with it, but even then prices didn’t fall as drastically as those in other markets.  This second wave is elevating prices much as the first did, and to all new heights.  In Burnaby’s real estate market—the current hot spot in the GVRD—residents who paid less than one hundred thousand dollars for their property less than thirty years ago are finding themselves millionaires because of the unquenchable overseas demand for housing.

While the inflow of foreign money benefits the economy and raises the city’s status internationally, it does not help young residents looking to break into the market where their parents live and raised them.  And foreign investment isn’t the only factor keeping young Canadians out of the Vancouver housing market.  Government-driven market changes, as well as ongoing social norms, are converging to hand young Canadians a heavy disadvantage while foreign investors are seemingly courted into the market by local authorities.
Despite such discouraging news there are pockets where the market is not as active. Speak to one of our agents to see how we can help you. It's not as bad as it seems.
 
- Sarah Mah
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