Taking it from concept to reality. I am proud of my clients who are finishing up their first development here in Okanagan. Going from building plans, renderings, to the build and final touches. It has been a challenging last 12 months with labour shortages, and supply chain constraints but it is all wrapping up this week. They have more to come, reach out if you want more information.
The price reductions are only part of the story, as listings are being relisted at lower prices.
Another rate increase of 0.5% was announced today, but you will find that information everywhere else in the news. This week I am looking into a new restriction in Canada for Foreign Buyers and the cooling-off period both of which are set to come into effect on January 1st.
The ban on foreign buyers is different than the foreign buyer's tax that BC already has in place for many sought-after areas that include Kelowna and West Kelowna but not Peachland and Lake Country. This is planned to be blanketed throughout Canada and activated on January 1st with a 2-year ban on all foreign buyers. There will be some exceptions in the legislation which will allow permanent residents, foreign workers, and foreign students, as well as foreigners buying their primary residence in Canada, to be able to purchase without this applying.
The cooling-off period is set to be introduced on January 1st and applies to home purchases in British Columbia. The cooling off period will give a 3-day window for a potential buyer to "cool off" and have the option to back out of the purchase. Despite having to pay a rescission fee directly to the seller of 0.25%, For example, if the purchaser exercises the right of rescission on a $1-million home, they’d be required to pay the seller $2,500. It is my understanding that this rescission fee will only apply to subject-free offers and not to offers with subject conditions.
The ban is designed to create more inventory for local residents which will bring down prices, and the cooling-off period is designed to avoid buyers from getting into precarious situations in what was a hot real estate market and protect home buyers who were making rash decisions. That was the hope, anyway. It might be too little, too late to implement.
With the housing market already dampened by the interest rate increases, unconditional offers right now are becoming rarer and rarer; and the ban on foreign buyers is in a way telling other countries not to invest in Canada and is sending the opposite message to them as we should be sending as we are looking to go into a tough economical period.
A recent article in the Western Investor went over the foreign buyer implications in this market that I believe is worth riding, that I have copied below, and
"One would think that a looming ban on buying and a lower Canadian dollar, which is down more than 7 per cent against the U.S. dollar this year, would trigger a rush of offshore buyers.
However, foreign investment in B.C. has flatlined, suggesting that currency valuations may not have an impact on real estate at the moment, especially in a market like Vancouver, noted Tsur Somerville, senior fellow at the University of British Columbia’s Centre for Urban Economics and Real Estate.
According to Brendon Ogmundson, chief economist for the British Columbia Real Estate Association, there has not been an uptick in foreign investment.
Instead, there is economic uncertainty due to interest rate hikes, said Somerville. In addition, inflation removes the competitive edge that a lower Canadian dollar may provide.
But economic angst is not the only reason foreign investors may see Vancouver as undesirable.
In a statement to Business in Vancouver, Joo Kim Tiah, CEO of TA Global and the Holborn Group, said that factors such as a small market and population, issues with workforce productivity, high personal taxes and safety issues downtown make Vancouver an uncertain investment.
“When it comes to real estate investment, Vancouver is super idealistic, with the highest standards in the world with regards to sustainability and livability, which we all know cost money, but at the same time, [Vancouver has] been very timid with regards to density.”
According to Tiah, other investment considerations include the time it takes to get permit approvals, and local government bureaucracy.
For many, the 20 per cent foreign homebuyer’s tax would also seem like a deterrent.
But, according to Tiah, it only acts as a consideration in the sense that it sends the wrong signal to foreigners.
“I mean we are supposed to be an open and welcoming country, and this goes against what Canada is supposed to stand for. Foreign investors that are looking to strictly invest would look at other regions or countries that don’t have this.”
Ogmundson said that the extra tax tells foreigners that they are not welcome to invest here. He acknowledged that a balance has to be met and that there is such a thing as too much foreign investment.
“But the correct number is not zero, either. There are sometimes, especially in larger projects, when you need to access deeper capital markets and maybe you need to go outside of Canada,” he said.
Meanwhile, Canadians are the second-largest buyers of U.S. residential real estate, second only to residents of China, according to the Washington, D.C.-based National Association of Realtors."
That's it for this week.
Let me know if you have any questions about any of these restrictions, bans and new Government policies.
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