Vancouver has highest increase in luxury-home prices in the world

Surge of 20.4 per cent in prime real estate puts city at top of list

The price of luxury homes in Vancouver continues its skyward march, placing the city tops on yet another global real estate list.

Prices of Vancouver’s “prime” real estate, defined as the top five per cent of the housing market, surged by 20.4 per cent between September 2014 and September of this year, surpassing 33 other cities around the world,according to a new report by London-based international real estate consultants Knight Frank.

The price increase corresponds with tighter supply, with the number of homes for sale down 32 per cent and comes as “local demand is strengthening alongside foreign interest.”

Sydney and Shanghai placed second and third, also recording double-digit annual growth at 14 per cent and 11 per cent, respectively. But overall growth in the luxury real estate segment has slowed significantly, from seven per cent two years ago to two per cent this year, the report said.

Recent data from Vancouver real estate firms active in the local luxury homes market show similar findings.

According to Sotheby’s International Realty, sales of Vancouver homes in the $4-million range rose by 71 per cent in the first half of 2015, while sales of homes over $3 million in Greater Vancouver jumped 79 per cent over the same time period, said a report from RE/MAX.

David Eby, MLA for Vancouver-Point Grey, represents a west side riding where streets are lined with multi-million dollar homes. Yet in one of the wealthiest ridings in the region, many of his constituents are amazed at the continued climb of their home’s assessed value — as well as corresponding property tax hikes — and worried about affordability in the region.

“They’re just absolutely blown away by what is happening to the market,” said Eby. “It has no connection for them, and keep in mind these are doctors and business people who are relatively wealthy and … (real estate prices are) still disconnected even from their income levels.”

With Vancouver homes now a hot commodity globally, prices could keep spiralling up, added Eby, calling on senior levels of government to start collecting data on real estate buyers and take a hard look at the issue.

“We’re still lower than places like London and New York and Hong Kong. There’s still lots of spaces for prices to continue to rise and have a knock-on impact on the value of other homes in the Lower Mainland.”

The trickle-down effect of a soaring luxury homes market on prices in the rest of the region is up for debate. The argument is that buyers who are priced out of Vancouver’s tony west side are now moving east and south in Vancouver, which pushes other buyers out into the suburbs, resulting in a lack of affordable housing across the region.

The benchmark price of a single-family detached home in Vancouver’s west side rose 20 per cent to $2.77 million compared to last year. Other areas also saw significant year-over-year increases, including East Vancouver (23 per cent), Richmond (23 per cent), North Burnaby (24 per cent) and Tsawwassen (26 per cent).

Cameron Muir, chief economist of the B.C. Real Estate Association, said the price jumps are reflective of the high demand and low supply of single-family homes across the region, and have little to do with luxury home prices.

The luxury housing segment makes up only two per cent of the housing market in Metro Vancouver, said Muir. “It’s really nothing to do with everything else.”

Muir said less than two per cent of the sales in Metro Vancouver were priced over $3 million, and nearly 80 per cent were below the $1-million mark.

As densification builds and most housing starts today are for multi-family dwellings, single-family homes become scarcer, driving up their value.

“When we look at affordability in Vancouver, we have to look at the housing stock itself, not what homes are looking like in Point Grey.”


Original Article

How the Chinese send billions abroad to buy homes

Bloomberg News

The ranks of China’s wealthy continue to surge. As their economy shows signs of weakness at home, they’re sending money overseas at unprecedented levels to seek safer investments — often in violation of currency controls meant to keep money inside China.

This flood of cash is being felt around the world, driving up real estate prices in Sydney, New York, Hong Kong and Vancouver. The Chinese spent almost $30 billion on U.S. homes in the year ending last March, making them the biggest foreign buyers of real estate. Their average purchase price: about $832,000. Same trend in Sydney, where Chinese investors snap up a quarter of new homes and are forecast to double their spending by the end of the decade. In Vancouver, the Chinese have helped real estate prices double in the past 10 years. In Hong Kong, housing prices are up 60 percent since 2010.

In total, UBS Group estimated that $324 billion moved out last year. While this year’s numbers aren’t yet in, during the three weeks in August after China devalued its currency, Goldman Sachs calculated that another $200 billion may have left.

So how do these volumes of cash get out when Chinese are limited by rules that allow them to convert only $50,000 per person a year?

The methods include China’s underground banks, transfers using Hong Kong money changers, carrying cash over borders and pooling the quotas of family and friends — a practice known as “smurfing.” The transfers exist in a gray area of cross-border legality: What’s perfectly legitimate in another country can contravene the law in China.

“It’s not legal for people to use secret channels to move money abroad, because this is smuggling,” says Xi Junyang, a finance professor at Shanghai University of Finance & Economics. “But the government has kept a laissez-faire attitude until recently.”

Now, policy makers are starting to take the outflow seriously. While it’s not about to run out of money, China has intensified a crackdown on underground banks that illegally channel cash abroad. It’s also trying to capture officials suspected of fleeing overseas with government funds.

Longer term, China has pledged to remove its currency controls and make the yuan fully convertible by 2020. Here are some common methods millions of Chinese are using to get a head start:


Property Purchase Transfer Tax Changes in BC – Finally!!!

Screen Shot 2013-04-29 at 9.55.28 AMThe government has announced, effective February 19, 2014, under the Property Transfer Tax (PTT) First-Time Home Buyers’ Exemption program, qualifying first-time buyers can buy a home worth up to $475,000 and be exempt from paying the tax.  The previous threshold was $425,000.

  • The purchase must be a principal residence and a first time purchase
  • The value must be $475,000 or less and registered on or after February 19, 2014
  • The partial exemption continues and will apply to homes valued between $475,000 and $500,000
  • This cost can not be incorporated into a mortgage, so it must come out of cash funds the buyers had to save along with their down payment.

PTT is calculated as 1% on the 1st $200,000 of the home value & 2% on the balance and is charged on all residential purchases.   With this change, the government estimates 1,700 additional first-time buyers will annually be eligible to save up to $7,500 in PTT when they buy their first home.   Every bit helps especially with the outrageous cost of living in the lower mainland and the ridiculous amount of tax we pay here!

Apparently government estimates this measure will cost $8 million in lost tax revenue each year.  And we are supposed to feel sorry for the government for lost revenue?   Despite the fact that B.C. has the highest home prices in Canada, the province perversely imposes one of the most onerous such taxes in Canada.  The Real Estate Board of Greater Vancouver points out that B.C.’s tax, introduced in 1987, “is structured to reflect home prices in the 1980s, not the prices home buyers pay today.”

We would all like to see  more changes to the Property Transfer Tax, but this is definitely a step in the right direction.