SOME RECENT STATS
Demographia International released its 15th Annual housing affordability survey which bases affordability on the average housing income. Their findings have the Vancouver market as the second least affordable in the world, behind Hong Kong. Victoria is ranked 13th, and Nanaimo is the 19th least affordable, tied with the Comox Valley. The survey rates housing affordability using the “median multiple” which is the average housing price divided by the median household income in a market. A median multiple of 5.1, where the home costs five times more than the average household income, is considered “severely unaffordable. Vancouver’s median multiple is at 12.6, Victoria’s is 8.5, Nanaimo is 8.0 and the Comox Valley is 7.5.
Ladysmith can claim the highest relative population growth in B.C. last year for towns over 5,000 population after jumping from 9,093 to 9,417. Ladysmith is classified among larger municipalities (greater than 5,000 population) and topped the category with a growth rate last year of 3.6 percent. The City of Langford came second with 2.9 percent.
2018 saw numerous legislative changes which have affected our provincial housing market.
THE STRESS TEST
As intended, the mortgage interest rate “stress test” has cooled the housing market since its inception on January 1, 2018. Previously, stress test requirements only applied to insured mortgages (less than 20% down-payment) and most variable mortgages and terms of less than 5 years. Now buyers with uninsured mortgages (more than 20% down-payment) also need to prove that they can afford payments based on the greater of the Bank of Canada’s five-year benchmark rate or their contract mortgage rate plus two percentage points. This measure has reduced the number of new home buyers with debt levels that extend well beyond their incomes and has contributed to slower growth in house prices. Locally we have seen an unprecedented number of deals collapse due to financing. It is more crucial now than ever before to speak with your lender and make sure you qualify for a mortgage.
SPECULATION & VACANCY TAX
The tax was designed to target foreign and domestic speculators who own residences in BC but do not pay taxes here. March 31, 2019 is the deadline to claim your exemption for the speculation tax. 99% of British Columbians are exempt so you probably won’t have to pay but you do have to register. For those that do have to pay:
For properties owned on December 31, 2018, the tax rate is the same for everyone: 0.5% of the assessed value of your residential property on July 1, 2018. B.C. owners are eligible for a tax credit of up to $2,000 on secondary properties to offset their tax payable. The credit is limited to $2,000 per owner and $2,000 per property (in the case of multiple owners) per year.
For 2019 and onwards, the speculation and vacancy tax rate will vary, depending on your residency and where you pay income tax:
- 2% for foreign owners and satellite families
- 0.5% for British Columbians and other Canadian citizens or permanent residents who are not members of a satellite family
The speculation and vacancy tax applies based on ownership as of December 31 each year. Please refer to the government website for exemptions and more information.
ADDITIONAL PROPERTY TRANSFER TAX FOR FOREIGN BUYERS
This tax applies to foreign nationals, foreign corporations or taxable trustees. On Vancouver Island properties in the Regional District of Nanaimo and the Capital Regional District where property transfer was registered on or after February 21, 2018 are subject to a tax amount of 20% of the fair market value of your proportionate share. Please refer to the government website for exemptions and more information.
THE LEGALIZATION OF CANNABIS
- In the RDN cannabis production facilities are allowed in the ALR and
- Area F Industrial zones
- Everywhere else in the RDN requires rezoning
- Must have Health Canada license for cannabis production facilities
AGRICULTURAL LAND RESERVE CHANGES
The agricultural land reserve was established in 1973 to protect land with prime agricultural conditions for farming and ranching.
As of Feb 22, 2019:
- No more mega mansions on ALR land – the maximum house size in the ALR will be capped at approximately 5,400 sf
- 2nd dwelling is for farm workers only (family use no longer allowed)
- A secondary suite allowed in main dwelling only
2019 FEDERAL BUDGET – HOUSING HIGHLIGHTS
On March 19 the Government of Canada released its 2019 Budget. The budget includes several initiatives focused on first time home buyers and attempts to address the lack of housing supply for both ownership and rental purposes.
- First Time Homebuyers Incentive. The Incentive would allow eligible first-time home buyers who have the minimum down payment for an insured mortgage (5%) to apply to finance a portion of their home purchase through a shared equity mortgage with Canada Mortgage and Housing Corporation (CMHC).
- CMHC would offer qualified first-time home buyers a 10 per cent shared equity mortgage for a newly constructed home or a 5 per cent shared equity mortgage for an existing home.
- The Incentive would be available to first-time home buyers with household incomes under $120,000 per year. At the same time, participants’ insured mortgage and the incentive amount cannot be greater than four times the participants’ annual household incomes.
- Home Buyers Plan Withdrawal Increase. Proposal to increase the Home Buyers’ Plan withdrawal limit for first-time buyers from $25,000 to $35,000 of their RRSP. This would be available for withdrawals made after March 19, 2019.
- Budget 2019 also proposes that individuals that experience the breakdown of a marriage or common-law partnership be permitted to participate in the Home Buyers’ Love Real Estate Group – RE/MAX of Nanaimo Plan, even if they do not meet the first-time home buyer requirement. This measure would be available for withdrawals made after 2019.
- Increasing Housing Supply. Help build 42,500 new housing units across Canada, with a focus in areas of low rental supply, through an expanded Rental Construction Financing Initiative. The budget makes available an additional $10 billion in financing over nine years, extending the program until 2027–28.
- Invite communities and other groups to propose initiatives that break down barriers limiting new housing. This new Housing Supply Challenge will run through the Impact Canada Initiative, with funding of $300 million.
- The creation of an expert panel on the Future of Housing Supply and Affordability jointly established by the Federal Government and the Province of British Columbia. CMHC will invest $4 million over two years to support the panel’s work, and $5 million over two years for state-of-the-art housing supply modelling and related data collection.
- Tackling Tax Non-Compliance and Money Laundering in the Housing Market.
- Creating four new dedicated real estate audit teams at the Canada Revenue Agency to monitor transactions in the real estate sector.
- Strengthening the enforcement framework by improving monitoring of private sector partners and collaborating with government leads in order to deter financial crime in real estate, including mortgage fraud and money laundering.
- Exploring opportunities to improve data sharing on real estate purchases between the federal government and British Columbia to inform enforcement efforts on tax compliance and anti-money laundering. As part of this initiative, the Government will provide up to $1 million to Statistics Canada starting in 2019–20 to conduct a comprehensive federal data needs assessment to further streamline data sharing and monitoring of purchases of Canadian real estate.
There are far too many multi-family developments in the works in the Regional District of Nanaimo and particularly the City of Nanaimo, to mention them all here but if you’re into a deep dive a great source is the City of Nanaimo’s “What’s building” tab on their website.
There you can search for rezoning applications, development permits, building permits, etc. A quick look has our count at well over 2,000 units of multi-family residential, both owned and rental housing to come on line within the next couple years. This number does not even include single family housing or the creation of new residential lots
The peak of the market 2016/2017 saw housing prices surge past local incomes leaving people paying a greater portion of their income toward housing leading governments to react with cooling measures in 2018. Now seeing the effects of those measures there is some stimulus announced in the new federal budget with the first-time home buyer’s incentive and the proposed increase to the home buyers plan.
While retirees will continue to play an important role in the island housing market the demand from retirees will be somewhat offset by economic conditions in Vancouver and other parts of the country where it may be harder to sell a home to enable a move.
These factors along with the increase in new housing construction in the area will lead our market to balanced conditions and away from the seller’s market of the past few years. For buyers this is good news as there will be more time to think and make an informed decision. For sellers remember it’s all relevant if you are buying and selling into the same market. You may sell for less, but you will also buy for less.