In more bad news for renters in the province, BC has announced the rent cap for 2024 will increase, and it’s a significant jump from previous years.
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Canada facing deficit of 500,000 homes due to high immigration levels
Economists with TD Bank are suggesting the federal government needs to achieve a better balance between the rationale driving its heightened immigration targets and its considerations on the resulting impacts of immigration on housing affordability and supply.
Following the already-elevated numbers of 2021 and 2022, the immigration targets moving forward are even higher at 465,000 in 2023, 485,000 in 2024, and 500,000 in 2025. By 2025, under the new targets, over 60% of the admissions of new permanent residents will be within the economic class.
The federal government’s targets are strategically intended to directly address Canada’s aging demographics, low birth rate, and the dire labour supply shortage, which is greatly exacerbated by the pandemic. Economic growth, tax revenues, and the social system will be highly strained over the long term without immigration.
As a result of federal policies, Canada’s population has grown by 1.2 million — now reaching more than 40 million residents — over the past 12 months, which is the same growth the United States saw over the same period with 10 times the total population. Following last year’s historic numbers, Canada’s population is expected to further grow by another over one million more people in 2023.
According to a new TD Bank report, at this rate of population growth and the inability for new housing supply to meet real demand, Canada faces a housing shortfall of about 500,000 units within the next two years.
A national deficit of 500,000 homes is equivalent to the total number of homes that currently exist in the province of Saskatchewan. It would also be equal to 3% of the total of 16.3 million homes in existence in the country, according to the 2021 census.
“The speed at which [immigration growth] unfolded was not telegraphed and caught many economists off guard,” reads the report. “Evaluations of the future housing stock, be it for ownership or rental, were already pointing to worsening affordability across the country even before this sudden influx… Recent government policies to accelerate construction are unlikely to offer a stopgap in this short time period due to the natural lags that exist in adjusting supply.”
“While the right hand has been solving for labour market shortfalls, the left hand has not put in place the appropriate infrastructure to absorb this large influx of people, particularly if the intention is for a continuation on a longer-term basis. Policy needs to strike a balance with sustainable growth, lest we tip into the drink.”
Canada has also far exceeded its pre-pandemic target for increasing the number of international students. There were 240,000 international students in the country in 2011, just before the target of growing to 450,000 over the span of a decade by 2022 was established. But Canada’s educational institutions reached the target well in advance in 2017, and continued pushing further in more recent years, with the number of student permits reaching 807,000 in 2022. While international students add to housing pressures, they have also been a major source of much-needed labour.
Most job vacancies in the country are in lower pay positions and lower-skilled industries. The report suggests governments need to lower the barriers for entering the workforce in order to introduce new labour supply from the existing population.
Other than housing supply, the impacts of high immigration levels should also account for the resulting strained infrastructure, healthcare, and childcare systems. It is estimated Canada will have a deficit of between 243,000 and 315,000 childcare spaces by 2026.
“Greater thought and estimation needs to occur on what’s a true absorption rate for population growth. Policy cannot be singularly focused on the perceived demands of employers, and even educational institutions,” continues the report.
“While population growth is a good thing and a necessary remedy to aging domestic demographics, the benefits erode if it occurs too fast relative to a country’s ability to plan and absorb new entrants within the economic and social infrastructure. Chronic tensions can quickly become acute for provinces and cities that absorb a higher population share. Dislocations widen, creating an even larger come-from-behind strategy in addressing housing affordability and quality of life issues.”
Lower Mainland REALTORS to enhance transparency for buyers involved in a multiple offer situation
Home buyers in a multiple offer situation in the Lower Mainland will soon receive additional information about other competing offers.
On July 17, the Real Estate Board of Greater Vancouver (REBGV), Fraser Valley Real Estate Board (FVREB) and the Chilliwack and District Real Estate Board (CADREB) are implementing a new disclosure form for multiple offer situations that Realtors, and the home sellers they represent, must complete, sign and share with everyone who made an offer on the property.
“This new form will help confirm and bring comfort to prospective home buyers in the region that every offer was fairly presented and considered in the process. The real estate profession believes that this change will help inform the public and build greater trust in the real estate transaction process — specifically in instances when competition and emotion run highest.”
Jeff King, REBGV CEO
The new Disclosure of Multiple Offers Presented Form will list each of the competing offers the home seller received and the name of the real estate brokerage of record that submitted an offer on a client’s behalf. The selling Realtor and the home owner will then be required to sign this form and provide it to all parties that submitted offers no later than one calendar day after the seller has made a decision.
“The implementation of this new disclosure is the result of considerable research and discussion by a committee of brokers and Realtors since the record-breaking market activity we experienced during the pandemic,” Baldev Gill, FVREB CEO said. “By providing a record of the number of offers received, this change aims to increase buyers’ confidence in the process by demonstrating that their offers are always presented and considered by the seller.”
The new disclosure form seeks to balance home buyers’ rights around transparency and disclosure with home sellers’ right to privacy during the sale of their home. In order to protect a home seller’s negotiating position in the event that the sale fails to complete after accepting an offer, the disclosure form will not include the price of the various offers nor the conditions or reason the seller accepted or rejected a particular offer.
With limited supply and increasing housing prices, multiple offer situations are becoming more prevalent, and some prospective buyers have expressed a desire for more information about the process in a more consistent communication format. With this change, the real estate profession seeks to better meet this public demand.
What to expect from the next Bank of Canada interest rate announcement
The Bank of Canada will issue an interest rate update on July 12.
This will mark the fifth interest rate announcement of 2023. Three more are scheduled to follow this year.
In 2022, the bank hiked its interest rate seven times. Then, in January 2023, another increase followed, bringing the key rate to 4.5%. The central bank held its key rate at 4.5%, precisely as experts predicted, until June 7, when it was raised to 4.75%.
These hikes are primarily aimed at relieving inflation. Canada’s inflation rate fell to 3.4% in May, but Statistics Canada reports that consumer spending has remained high.
Paired with the fact that June already brought a rate hike, experts aren’t sure if we’ll see another 25-basis-point spike or a rate hold.
Ratehub.ca co-CEO and president of CanWise mortgage lender James Laird shared his thoughts with Daily Hive.
“If the Bank hikes the policy rate by 25 basis points, variable mortgage rates will move up immediately,” said Laird in an email. “The bond market will also move, which will cause fixed mortgage rates to go even higher.”
Laird advises planning for the worst but hoping for the best.
“This means that anyone with a variable-rate mortgage or home equity line of credit (HELOC) should be budgeting for a rate hike.”
He suggests variable-rate holders with floating payments budget for their mortgage payment if their mortgage rate goes up by 25 basis points.
“If you are shopping for a home, get a pre-approval to hold today’s fixed rates for up to 120 days,” Laird said. “If your mortgage is up for renewal within the next year, it’s a good idea to hold a rate with a new lender now.”
Laird believes this is the right move because you can break your existing mortgage if rates jump up further. Switch to that new lender before your rate hold expires to lock in the lower rate.
“A hike will put downward pressure on home prices, which have rebounded since the beginning of the year, and cause transactions to slow over the summer,” the CEO noted.
Ratehub has shared an example to show what would happen if a 25-basis point increase is announced on Wednesday. The hypothetical home price used here reflects Canadian Real Estate Association (CREA) averages for Ontario.
“According to Ratehub.ca’s mortgage payment calculator, a homeowner who put a 10% down payment on a $928,897 home with a five-year variable rate of 5.80% amortized over 25 years (total mortgage amount of $861,923) has a monthly mortgage payment of $5,413,” the mortgage brokerage noted.
“If the Bank of Canada announces a 25-basis point rate increase next week, their variable mortgage rate will increase to 6.05%, and their monthly payment will increase to $5,540.”
Laird clarified that the homeowner would pay $127 more per month, or $1,524 per year, on their mortgage payments.
Metro Vancouver real estate board suggests property transfer tax changes to aid first-time home buyers
The Property Transfer Tax (PTT) put in place by the provincial government is in need of reforms to ease the burden on residents upgrading their housing arrangements from renting to ownership, according to the Real Estate Board of Greater Vancouver (REBGV).
Continue reading →Vancouver’s Empty Homes Tax could be lowered from 5% to 3%
More than a year after the previous makeup of Vancouver City Council approved a hike of the municipal Empty Homes Tax (EHT) to 5%, staff with the City of Vancouver are now recommending that the hike starting in 2023 be rescinded and return to its previous rate of 3%.
Continue reading →Over 40,000 new homes needed in B.C due to demand from record immigration
BC Real Estate Association (BCREA) is warning all levels of government need to do much more to work together to build a lot more housing to meet record-high immigration levels.
Continue reading →Window closing on Vancouver’s Empty Homes Tax declaration period
Residential property owners required to declare by February 2.
Residential property owners are reminded that there are 2 weeks left to submit their annual Empty Homes Tax (EHT) declaration. Declarations, which relate to the property’s status in the 2022 tax year, are due by February 2, 2023. A $250 by-law fine will apply to declarations received after this due date.
As of January 19, 64.8% of residential property owners in Vancouver have completed their property status declaration, and 69,985 still need to declare. Reminder notices have been sent to those who have not yet declared. All property status declarations are potentially subject to an audit process to determine their validity and encourage compliance.
If a property is declared vacant or deemed or determined vacant under the EHT program, it will be subject to the tax at a rate of 3% of its 2022 assessed property value.
Most home owners will not be assessed the tax, as it does not apply to principal residences, properties that are rented out for at least 6 months of the year, or properties that are eligible for an exemption. Even if a property meets these criteria, an annual declaration is still required. If a property is co-owned, only one owner is required to declare.
An overall review of the EHT is currently underway and will be coming forward to Council in the spring for consideration.
Visit the link below to declare now!
Declare Here
City of Vancouver proposes allowing multiplexes for all single-family neighbourhood zoning
Starting in early February 2023, staff with the City of Vancouver will kick off public consultation on the most significant change to single-family residential zoning in the city in decades, exceeding the gravity of the introduction of laneway homes in 2009.
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