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How the return to work could impact Canada's real estate landscape – Coast Reporter

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At the beginning of 2021, 32% of Canadian workers aged 15 to 69 worked the majority of their hours from home.

In 2016, that number was only 4%, according to Stats Canada.

Though some believe that the changes to our working styles are permanent, it’s likely that we’ll see somewhat of a return to work for many employees if COVID-19 cases fall and remain relatively low.

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There are many ways the real estate market could react to more and more Canadians returning to work.

Here’s a look at some of the potential changes we could see take place over the coming months and years.

1. Renters could return to city centres

The return to work in major city centres is likely to draw more renters back to downtowns across the country. At REW.ca, B.C.’s largest home search platform, search data reveals that rental searches in the City of Vancouver were up 40% month over month in July 2021, and up 35% in Toronto. These search habits could indicate that more renters will return to major cities this fall.

Few major North American cities have built more apartment units per capita in the last decade than in Canada’s three largest metropolitan areas, and with softening rental markets, inventory shouldn’t be a problem.

Another potential situation that could be unfolding is the return of more renters to areas near post-secondary institutions. Remote learning will continue to be the preferred method of education across the country for the remainder of the year, but should the return to the office prove to be successful this fall, the return to school could be next.

2. More renters lead to more investors

As renters return to city centres, expect investors to follow. Single-family detached home inventory is scarce, but investors currently have more options in the Canadian condo market.

Greater Vancouver condo prices pulled back slightly in July 2021, and are currently flat from where they were three years ago. With the Canadian market finally cooling after a peak in March 2021, sales of condos have consumed a rising share of the market.

More renters, more immigration, low interest rates and flat condo prices should continue to push investors off of the sidelines and into the resale market in several major Canadian cities. We’re already seeing investors jump into new developments at a high rate, as pre-builds have become an attractive option for those looking to secure today’s interest rates, among other reasons.

3. Work flexibility and the potential impact of semi-remote work

Though the inventory for detached homes and townhouses may be scarce, that doesn’t mean that the preference trends we’ve seen from buyers will drastically change with a semi-return to work.

For some, commuting two days per week will make a move to the suburbs more desirable, especially if their employer announces that a flex schedule will become permanent for their position. Expect people in this situation to continue to weigh the options of a move outside the city, where a down payment goes further per square foot than it would in a city centre.

With many workers returning to the office for just a few days a week to start, there will also be a continued interest in renters and buyers needing spaces with home offices. This is a change that new developers and those tackling renovations have paid close attention to, so expect the demand for home offices to be one of the trends brought on by the pandemic that is here to stay.

Whether it comes quickly or slowly, the return to work will no doubt have a significant impact on Canada’s real estate landscape for years to come. Renters, buyers, sellers, and investors will watch and adjust to the trends in kind, with changes in housing preferences likely to continue throughout the near future.

Justin Kerby is a columnist for REW.ca, Canada’s premier home search platform.

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How Sellers Should Approach The Current Vancouver Real Estate Market – Storeys

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STOREYS Custom Studio

We often hear “buyer beware,” but when it comes to the up-and-down real estate market, sellers would be wise to do the same — but not too much.

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Is this a good time to sell? Should I even be thinking about selling? These are questions people often have difficulty answering with confidence. But Kevin O’Toole, Vancouver-based Managing Broker at Sotheby’s International Realty Canada, sees the solutions simply.

“If you’re selling out of fear [of a market downturn], that’s not a good play,” O’Toole says. “Take a breath. Talk to your financial advisors. Talk to your realtor.”

O’Toole — who has 15 years of experiencing in the Vancouver real estate market — says if you want to sell because you need more space, or you want to downsize, or you’re being transferred for work and need to move, then go ahead and do it, because there is a decent chance you’ll be dealing with the same market influences in the future that you’re worried about now.

When O’Toole is faced with a client who has this kind of conundrum, he says he always makes a genuine effort to listen. He asks them personal questions, such as “What do you want to achieve?” and “What are your concerns?” or “What do you think would be a better investment?”

Once clients answer, O’Toole says he will often say “tell me more.” He jokingly says it makes him feel like a psychologist, but also says that he genuinely views himself — and other realtors — not as salespeople, but as consultants. And it’s times like those we’re in today when, he says, realtors provide the most value. “Realtors deliver value when there is uncertainty,” he says.

Realtors are not biased towards buying or selling, he adds. So if after the heart-to-heart, an agent feels like selling would indeed help you achieve your goals, they’ll tell you. And if they think it’s in your best interest not to, they’ll probably tell you that as well.

RELATED: Amidst Uncertainty, Vancouver Island’s Market Remains a Beacon of Stability

Once you’ve reached the point where you’ve decided to sell, O’Toole says it’s important to again work with your realtor to set a reasonable asking price. He says in the past month or so, he’s starting to see both sellers and buyers are getting a better idea of where the market is after a series of interest rate increases, and are often coming together to work out a deal.

“For a while, sellers wanted the price that they saw in the early-spring, but are now more amenable to prices for buyers,” he says.

Looking forward, he recognizes there are a few unknowns that could potentially impact the market. Premier David Eby recently announced changes to the Province’s Strata Property Act that would allow stratas to be rented out in all strata buildings. O’Toole says that could impact the market because it could open up another possible solution for those who are selling primarily due to financial concerns.

“There can be a ton of valid, and right, reasons to sell,” O’Toole says. “But selling out of fear is one of the wrong ones.”


This article was produced in partnership with STOREYS Custom Studio.

Written By
STOREYS Custom Studio

Content by STOREYS Custom Studio is created in partnership with companies and brands looking to tell their own stor(e)y.

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Ontario's real estate industry regulator is ineffective, Auditor-General says – The Globe and Mail

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Ontario Auditor-General Bonnie Lysyk speaks during a news conference at Queen’s Park in Toronto on Dec. 4, 2019.Aaron Vincent Elkaim/The Canadian Press

Ontario’s Auditor-General says the province’s real estate regulator has been ineffective in policing the multibillion-dollar residential property industry.

In a report released on Wednesday, Auditor-General Bonnie Lysyk found the Real Estate Council of Ontario (RECO) does not adequately ensure that the industry complies with the regulations and has failed to do enough to protect consumers.

Topping the Auditor-General’s list of concerns was the fact that RECO does not fully inspect real estate brokerages on a timely basis. The Auditor-General found that 27 per cent of registered brokerages have never been fully inspected.

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As well, the Auditor-General said RECO does not have a consistent process to assess those applying to be realtors and who say they have a criminal history. The report looked at a sampling of 25 professionals who had disclosed a criminal conviction or charge and found that RECO had approved 20 of them and did not provide any documented reasoning for why it did so.

RECO was also criticized for how it deals with ethics violations in real estate transactions. The report said the average fine imposed on realtors was often below the amount of the commission they earned in a transaction, and said the fine could be viewed as a cost of doing business instead of a “sufficient deterrent to future misconduct.”

RECO said it is committed to developing a plan that will address the Auditor-General’s concerns. RECO’s response was included in the Auditor-General’s 51-page report. Under the province’s real estate act, every real estate brokerage, broker and realtor must be registered with RECO.

The Auditor-General identified a host of other shortcomings ranging from RECO’s failure to track and analyze complaints, which would help it identify and address systemic problems, to a lack of protocols to ensure that students do not cheat on virtual real estate exams.

The report said one glaring lack of enforcement occurs after RECO inspectors discover a brokerage is violating rules. The regulator rarely follows up “to confirm that the brokerage has addressed the violations,” the report said.

The report also noted that RECO does not have a process to inspect whether real estate professionals are complying with anti-money-laundering laws.

“It is probable that money laundering is occurring undetected in Ontario’s real estate market,” Ms. Lysyk said in a press release accompanying the report.

During the pandemic real estate boom, blind bidding was heavily criticized for contributing to the spike in home prices when properties sold for hundreds of thousands of dollars over the listed price.Lars Hagberg/The Canadian Press

Realtors and brokers are required to report suspicious and large cash transactions to the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC), which monitors money laundering.

But over the past five years, when more than one million Ontario properties worth $760-billion were sold, hardly any transactions were reported to FINTRAC. The federal agency received no reports of large cash transactions from 2017 to 2020. Only last year, which was a record period for home sales, FINTRAC received 18 reports of large cash transactions, according to the Auditor-General.

The report recommended that RECO work with FINTRAC to share information. It also recommended that RECO update its procedures to ensure that brokerages’ reporting obligations are properly reviewed.

RECO said it had already begun to “explore opportunities” to share information and collaborate with FINTRAC.

Over all, the Auditor-General had 25 recommendations for RECO and the Ministry of Public and Business Service Delivery, which oversees the regulator. In the report, both RECO and the ministry said some of the recommendations would be addressed next year when the province’s new real estate rules go into effect.

That law includes a purported change to an opaque real estate sales tactic known as blind bidding, where competing buyers in a multiple-bid situation do not know what others are offering to pay for a home.

During the pandemic real estate boom, blind bidding was heavily criticized for contributing to the spike in home prices when properties sold for hundreds of thousands of dollars over the listed price.

The real estate industry has repeatedly defended the practice as giving homeowners choice. The new law, which comes into effect in April, includes a provision that will allow the homeowner to disclose the competing offers. However, homeowners are already allowed to sell their homes via an open auction.

The Auditor-General report recommended that RECO work with its overseeing ministry to gather data on which sellers choose an auction process.

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Real estate industry braces for foreign buyer ban

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Ottawa’s two-year foreign buyer ban applies to corporations and individuals who are not citizens or permanent residents of Canada and includes direct and indirect purchases of homes in the country.Graeme Roy/The Canadian Press

With financial markets roiling and house prices tumbling, investors in countries around the globe appear to have a diminished zeal for buying real estate outside of their own borders.

Even so, Canadian real estate mavens are brushing up on the temporary foreign buyers’ ban, which is set to come into effect on Jan. 1.

John Zinati, lawyer with Zinati Kay Barristers and Solicitors, warns that fines of up to $10,000 may be coming to any industry player working with a foreign buyer.

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“We’re going to be the ones subject to the fine,” says Mr. Zinati, including lawyers in that cohort – along with agents, brokers and developers.

Parliament passed the Prohibition on the Purchase of Residential Property by Non-Canadians Act earlier this year after the Trudeau government unveiled the plan in the 2022 federal budget.

The two-year ban applies to foreign corporations and individuals who are not citizens or permanent residents of Canada and includes direct and indirect purchases.

Mr. Zinati says many details are still unclear but the information provided so far suggests that people who knowingly assist in a contravention of the law may be subject to monetary penalties on conviction.

“For every transaction after January 1, we’re going to be asking for proof” of Canadian citizenship or permanent resident status,” Mr. Zinati says of his firm.

The rules allow some exemptions, Mr. Zinati adds. Refugees, students and an individual purchasing with a spouse or common-law partner who is not subject to the ban may be eligible, for example.

Buildings with more than three units are not covered by the ban.

One aspect Mr. Zinati is keenly watching for is more information on how the rules will be enforced and whether the final regulations will be less stringent than the government’s original stance appeared to be.

“On the face of it, we could be subject to a fine, which is pretty aggressive,” he says.

Mr. Zinati points out that the Federation of Ontario Law Associations has raised concerns with the legislation. Some lawyers also believe the law may be challenged on the grounds that property rights fall under provincial government jurisdiction.

Interestingly, a sales agreement signed in violation of the law won’t be invalid, explains Mr. Zinati. The seller and the buyer would still be required to stick to the contract.

After that, the federal government would have the task of asking a court in the province where the property is located to order the property sold. The foreign buyer would not be allowed to profit from that sale.

Mr. Zinati says the process of enforcement would be so onerous, he wonders if the act will mostly serve as a deterrent.

“They may be relying on people in the industry to be afraid to do deals with foreign buyers.”

Mr. Zinati adds that the regulations will not apply to agreements signed in the remaining weeks of 2022, even if the deal closes in 2023.

Mr. Zinati says purchases by foreign buyers who have no ties to this country are rare. Looking at his own firm, lawyers are aware of the occasions when they need to remit Ontario’s foreign buyers’ tax on behalf of a buyer.

“That is not a very common instance.”

Mr. Zinati also believes the new ban will have little impact because the market has fallen since the spring when the budget was announced.

“This came about when the market was hot,” he says. “We have the not uncommon phenomenon – trying to calm a market that by all accounts is calming on its own.”

Mr. Zinati adds that the Ontario government recently raised the province’s foreign buyers’ tax to 25 per cent from 20 per cent.

Clients have been calling to ask him why the tax is being raised if purchases by foreign buyers are banned. The two levels of government are not working in tandem, he points out.

The City of Toronto also plans to implement a vacant homes tax. The annual tax will be levied on unoccupied homes beginning in 2023.

All residential property owners will be required to submit a declaration of their property’s occupancy status for the previous year.

For its part, the Canadian Real Estate Association (CREA) says the experience in British Columbia, which introduced a foreign buyers’ tax in 2016 and a speculation and vacancy tax in 2018, suggests that such measures have a small and temporary effect on real estate markets, housing availability and affordability.

The effects are largely isolated to large, metropolitan markets, with no statistically significant impact in smaller communities, according to CREA.

CREA made several recommendations, including a suggestion that the ban include an exemption for buyers from the United States and Mexico in order to avoid a reciprocal response from Canada’s trading partners.

The association is also watching for clarifications and definitions in the regulations when they are released. The legislation may be complicated, CREA cautions, so it is advising members to consult a lawyer for guidance and advice.

Simson Chu, real estate agent with Chestnut Park Real Estate Ltd., has not seen any signs of a rush to buy from overseas investors before the ban comes into effect on Jan. 1.

Mr. Chu adds that the ban is aimed at buyers who have no connection to Canada, and very few buyers land in that category.

Mr. Chu keeps an eye on the global real estate market, and he sees the slowdown permeating many economies as buyers wait for deals and further declines in prices.

At Capital Economics, chief global economist Jennifer McKeow, is forecasting widespread recessions next year, including shallow dips for Canada and the United States.

The economist notes that several countries are facing headwinds from tighter money policy and a move by banks to tighten their lending criteria.

“One consequence of this is that housing activity, which has already weakened, is set to deteriorate further and we anticipate declines in house prices across several major advanced economies,” Ms. McKeown says in a note to clients.

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