Planning a Move to Vancouver BC? In this weeks video, Jamie discusses the 7 things you will want to know about Vancouver before moving there.
As a lifelong resident and expert realtor in Vancouver, Jamie understands the city very well and shares his thoughts.
Everything you need to know about Vancouver’s Real Estate Market –
Below is a Video Transcription
Today we are going to talk about buying a home in Vancouver, and the 7 things you should know before doing so.
The first thing I want to talk about is why it is a good investment to purchase real estate in Greater Vancouver. Let’s talk about population growth and how the city has grown since the end of World War 2. In 1945, at the end of World War 2, there were approximately 450,000 people in Greater Vancouver. By the time the Worlds Fair got here in 1986, the population was 1.3 million people. By the year 2000, there were 2 million people and today there are 2.8 million. They say by 2040 the population will have reached 4 million. Why this is important to you is because Vancouver is a landlocked city, and now I will explain to you the investment benefits.
Vancouver is a landlocked city and what that means investment wise is that there is virtually no more developable land. You cannot go south because we are right on the U.S. Border. You cannot go west because you will hit the Pacific Ocean. And lastly, you cannot go north as you will hit the mountains. The only way, in years past, where developers could find more land was to typically head east and move farther from the city. However, now when you get out towards Abbotsford there is virtually no land left anywhere to develop. What we are seeing is a focus on increasing the density in the city by re-zoning of single-family areas into multi-family areas all over the Greater Vancouver District. From a lifestyle point of view, you might not like it, but from an investment point of view, it’s a great thing.
The 3rd thing you might want to know about is the mortgage Stress Test. The Canadian Government, around 18 months ago, wanted to tighten up the banking lending rules. They came up with a program where you actually have to qualify higher than the interest rate you are going to pay. As of today, at the time of making this video, the best 5-year rate that we can get is 2.99%. That is in actuality what you would pay for on your mortgage, but you have to qualify for that mortgage at 2% higher. You have to qualify at a rate of 4.99%. How does that affect a buyer in real life? First of all, let’s say that you have a $100,000 family income. You could qualify to purchase a $700,000 home, with 20% down. You would put $140,000 down and have a mortgage of $560,000. That is the most you could qualify for with an income of $100,000 per year. Prior to the stress test, you only had to qualify at 2.99%; you would have been able to buy a $900,000 property. Your buying power is down by 22% to 23% of what home you can buy. That has definitely had an effect on the market around here for the last 18 months.
The 4th point would be the taxations on your purchases. There are some taxes in Vancouver and in BC that are unique to other parts of the country. The first one is the property transfer tax, which is on a graduated scale where the higher you go up the higher you pay. It is 1% of the first $200,000 of your purchase and 2% up to 2 million dollars. For instance, on a million dollar property, you would pay approximately $18,000. Once you get above 2 million dollars, the property transfer tax increases even more, with anything over 2 million dollars you will pay 3%. If you purchased a 2 million property you would pay $40,000 in taxes to the provincial government.
The other tax we have is the foreign buyer’s tax. Originally implemented in 2016, the foreign buyer’s tax was 15%, and today the foreign buyer’s tax is 20% for non-Canadian residents. Those are a couple of the big one you want to know about before purchasing.
The next topic I would like to touch on is leaky condos. This was a big problem and a mess all through the mid to late nineties all the way up to about 2005. What happened was, any building built between 1980 and 1999 had different building codes from today. The building codes simply weren’t strong enough to make these buildings water resistant. They had a lot of water ingress issues, and there were major problems. I have no idea of the exact figure, but probably more than 50% of the buildings built between 1980 and 2000 had problems down the road. Massive assessments were put on these buildings to pay for the repairs, as they were literally rotting away. You want to make sure that any building you purchase from that era has had an engineer report, so you can see if they have looked into any problems and have dealt with them. To this day, you can find a building built in this era that has never had an engineer come on to check. There are not many, but there are still some out there. Make sure if a building was built between 1980 and 1999 that you do your homework before placing an offer.
The 6th point I would like to talk about is assignment sales. Assignment sales have been a big deal around Greater Vancouver since the early 2000’s. The condo market has essentially gone straight up during that period of time. People would go in and buy 2, 3, 4, 5 units at a time, never intending on completing on them. They were buying them like playing the stock market, counting on them appreciating before they had to close. Let’s say I go in and buy 3 units in a building in 2015 knowing that the building is not going to be ready until 2018, and I put $100,000 down on each unit. By 2017 I am thinking “Ok, the market is up by 25%, I am going to see if anybody wants to buy my contract from me and pay me the 25% the market is up”. Lots of people did this, never intending on completing, selling the contract, making a profit and walking away. Now that has kind of changed. The condo and townhouse market, in the last 12 months, has not appreciated. It has either been flat or declining slightly. People with assignment sales are having a hard time selling them because they are trying to get more out of them but they are actually getting less out of them. That is something to really keep an eye on over the next few years to see what happens with all of these pre-sale condos.
The last thing you want to know about buying a house in Greater Vancouver is that this market may have bottomed out. I am not saying it has, I am saying it may have. There are some signs and indicators from previous markets that tell us this could be an excellent time to buy. I will leave that up to you decide!