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A $75-billion snapshot of foreign-owned Vancouver real estate

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“This is like a Polaroid image … As we see the image emerge, are we going to like what comes out of it?”

As the picture of foreign property ownership in Vancouver comes into clearer focus, new analysis shows non-residents of Canada own a much bigger proportion of local housing than previous official reports, with at least $75-billion worth of Vancouver-area residential real estate tied to offshore owners.

It wasn’t long ago that high-profile figures, in both industry and government, played down the role of foreign homebuyers in Vancouver’s housing market, using the information available at that time. Addressing the Greater Vancouver Board of Trade in November 2016, Canada Mortgage and Housing Corp. president Evan Siddall said it would be “convenient” but divisive and wrong to blame foreign buyers for skyrocketing prices, and, to bolster his point, cited recent CMHC data showing offshore buyers owned only 2.2 per cent of Metro Vancouver’s condos.

Now, using new methodology and more data, a report this month from the CMHC shows about 11 per cent of Metro condos are owned, at least in part, by people living outside Canada. Drilling further into this month’s data release, Andy Yan, director of Simon Fraser University’s City Program, found the percentage is higher still in certain segments of the market: Of recently built condos in Richmond, for example, one-in-four has a non-resident owner.

Of the $965-billion worth of residential real estate in the Vancouver census metropolitan area, $75 billion is tied to at least one non-resident owner, Yan found. And, in Vancouver, non-residents of Canada are involved in the ownership of at least $34-billion worth of residential real estate, about 10 per cent of the $341-billion total in the city.

Apples-to-apples comparisons over the years are difficult because methodologies have changed. But these figures reflect significant increases, in both total dollar value and percentages, since the CMHC data cited by Siddall in 2016. Previously, the CMHC tried to determine the percentage of foreign ownership of condos via phone interviews with building managers and strata boards, a method Yan describes as “fraught.”

These new numbers come after, by many accounts, foreign buyers’ interest in Vancouver real estate has already been waning, since the B.C. government’s 2016 introduction of the foreign-buyers tax, followed by the City of Vancouver’s empty-homes tax taking effect in 2017. There are, of course, other factors influencing local real estate at the federal level and beyond; like Vancouver, some other formerly scorching urban housing markets from Asia to Australia have also cooled recently.

December 2017 brought the first release from the Canadian Housing Statistics Program (CHSP), an initiative supported by both Statistics Canada and the CMHC. While that release made international headlines and was hailed as the most comprehensive study to date on foreign ownership of Canadian real estate, the director of the new StatsCan division overseeing the CHSP told The Vancouver Sun at the time that it represented the “tip of the iceberg.”

This month’s CHSP release further refines the picture. One significant change this year is the CHSP research tracked homes in which at least one non-resident is an owner, instead of only counting those where a majority of owners were non-residents, as they did in the 2017 report.

It’s impossible to know now how the actual picture of property ownership changed between 2016 and today. But the image we have today is clearer, representing “an evolution of our understanding of this phenomenon,” said Eric Bond, a CMHC market analyst and one of the authors of this month’s report.

“There are data gaps in our knowledge of different phenomena in the housing market, so that’s why CMHC and Statistics Canada are looking to close those, so we can have an informed public discussions about these phenomena of interest,” Bond said this week. “We do strongly believe that the best decisions and debates are based on data and evidence, so that’s what we’re looking to provide.”

Around the time in 2016 when Siddall was citing his own agency’s research to play down the issue of foreign ownership, he was far from the only high-profile figure doing so. Many, like previous Vancouver mayor Gregor Robertson, shifted their public positions on these issues in recent years.

It’s also impossible to know what might have been different, if voters, bureaucrats and elected officials alike had access three years ago to this clearer picture. We don’t know what policy decisions or priorities might have looked like at the municipal, provincial or federal level.

But the hope, at least, is that a more clear picture will lead to more informed discussion going forward.

There’s still a lot we don’t know. “Non-resident” property owners, for the purpose of the study, includes both foreign nationals and Canadian citizens living abroad, although we don’t currently know what proportion each of those categories represent. And while the CMHC tracks properties owned by corporate entities, the data doesn’t currently reveal how many of those Canadian-registered corporations have directors or owners based overseas.

Yan, in particular, has been working for more than a decade to get a more clear idea of foreign property ownership in Vancouver, and its impacts on local residents.

“This is like a Polaroid image,” Yan said. “As we see the image emerge, are we going to like what comes out of it? … It’s taken 10 years to develop this picture, and now that we have it, what are we going to do, when one-in-five of our new condos are being purchased by those who don’t even live in the country?”

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Blackstone raises $20.5 billion for largest ever real estate fund

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U.S. private equity firm Blackstone Group Inc said on Wednesday it has raised the largest ever real estate fund, amassing $20.5 billion to be invested in property assets around the world.

Large buyout firms such as Blackstone have been attracting a lot of capital from investors seeking higher returns not available in public markets.

The capital ready to be deployed has swollen to over $2 trillion, according to data provider Prequin, driving up asset prices and deal making activity.

Blackstone said in a statement the fund, named Blackstone Real Estate Partners IX (BREP IX), has already made its first investment: the purchase of U.S. industrial warehouse properties from Singapore-based logistics provider GLP for $18.7 billion.

The deal, in which BREP IX co-invested with other Blackstone funds, was announced in June and is expected to close in coming weeks, the company said.

Blackstone is the world’s largest alternative asset manager and one of the biggest property investors, with $154 billion in real estate assets under management. (Reporting by Chibuike Oguh; Editing by Sandra Maler)

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Real estate lessons to live by Pattie Lovett-Reid

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Real estate lessons

Disclaimer: I’m not a real estate expert but I am a real estate junkie.

I’ve often thought about the many ways there are to make money – and there are many. Throughout the years, we have created side hustles, worked hard at our jobs, built an investment portfolio and we have bought and sold a lot of real estate.

We love real estate, and over the past 25 years, we have bought and sold six principle residents and six recreational properties. The majority of our housing transactions made money, and we broke even on a couple. There have also been lessons learned along the way.

Here are a few.

1. Listen to the experts. They are qualified in their field so believe them when they say location sells. Try not to be the most expensive house on the street and don’t let your emotions drive your buying or selling decisions.

2. Don’t fall in love with your assets, or in this case, your home. Sometimes you need to make tough decisions financially and that may mean selling the family home. Your assets will never love you back but your family will.

3. When selling, don’t be greedy. If your home isn’t selling, it is priced too high. Listen to what prospective buyers are silently telling you as they move on and check out the next listing.

4. Get your home ready to sell as soon as you move in. Life has a funny way of throwing you a curve ball when you least expect it. Curb appeal matters but the inside likely matters more. This is where you live. Keep it neutral and up to date. Look at your home as a prospective buyer would.  Small changes can yield big financial results.

5. Avoid concentration risk. Don’t put all your money in the real estate basket.

6. Take the time to save up the down payment. Consider all-in and all-out costs such as insurance, appraisals, real estate, moving, land transfer costs and the dreaded unknown repairs. There will always be something that requires your financial attention.

7. Don’t buy beyond your means. I’ve been there and it isn’t fun. No one wants to be 100 per cent house poor. You aren’t expected to be flush with cash when you are new homeowner but you also don’t want to live life worrying about the next mortgage payment each month.

8. Buy low and sell high. Even if you love real estate you are always scouting out new opportunities, this investment mantra still must hold true.

9. Focus on your stage of life. Do you really want to be building your dream home for your family as your children head off to university or are beginning to build their own lives under their own roof? Just because you want your family there doesn’t mean they will be. Buy for reality not dreams.

10. Put in offers earlier in the week. You are more likely to have less competition and more likely to get a deal if you do. Everyone is out   looking on the weekends. Don’t follow the herd mentality.

11. Take advantage of the capital gains exemption on your principle residence. This is one of the best tax-savings opportunities to create wealth I know.

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B.C. Real Estate Association forecasts lower mortgage rates in 2019

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The cost of borrowing for a home is predicted to get a little cheaper this year.

That’s according to the latest mortgage rate forecast from the B.C. Real Estate Association.

“The average contract rate for 5-year mortgages has declined about 30 basis points from its peak in 2018, reaching 3.44 per cent in March,” the BCREA states in a two-page report. “Unfortunately, this still means a stress test rate of 5.44 per cent, even for the highest quality borrowers.”

However, the association points out that if five-year bond yields remain at the current level, “a 5-year qualifying rate of under 5 per cent should follow suit.”

The contract rate refers to the interest percentage listed on the face of a note or a bond.

The qualifying rate refers to a lender’s determination of what a borrower can afford. This takes into account a person’s income, debt obligations, utility, and living costs, as well as the amortization period and mortgage rate.

The qualifying rate is forecast to fall to 4.99 percent in the second quarter and 4.84 percent in the third quarter, before rising to 4.99 percent in the fourth quarter.

“While there is an outside chance of a rate cut from the Bank of Canada, our baseline is for the Bank to remain on hold for 2019,” the BCREA states. “Therefore, we are forecasting no change in the prime rate, from which variable rates are discounted.”

The BCREA predicts that the qualifying rate will rise to between 5.14 percent and 5.34 percent in 2020.

Metro Vancouverites carry large debt loads

According to the Canada Mortgage and Housing Corporation, Metro Vancouver leads the country in the ratio of liabilities to annual income at 242 percent.

The mortgage debt-to-interest ratio in this region is 178 percent, which is three times the figure in St. John, New Brunswick, which has the lowest rate in the country.

CMHC released this chart in December, showing that Metro Vancouver residents, on average, have the highest debt-to-income ratio in the country.
Canada Mortgage and Housing Corporation

In October 2017, the Office of the Superintendent of Financial Institutions announced that the minimum qualifying rate for uninsured mortgages to be the greater of two figures:

* the five-year benchmark rate published by the Bank of Canada;

* or the contractual mortgage rate plus two percent.

This meant that many homebuyers could not take out as large a mortgage, reducing the value of what they could afford to purchase.

That, in turn, is one of the factors cited in the monumental slowdown in the Metro Vancouver housing market in 2018.

The BCREA report questions whether these new mortgage stress-test rules can continue to apply to Canadians with more than 20 percent in home equity.

That’s because the association maintains that they “will be stress tested at a rate much higher than what we estimate as a long-run equilibrium mortgage rate”.

“Given the disruption caused in Canadian housing markets by the stress test at the presently lower rates, the stress test is not likely to be sustainable in the long-run as currently constituted,” the BCREA declares.

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