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Hot housing market presents a presale condo conundrum

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Summary

One NDP MLA-elect thinks people are trying to cheat the system

The benchmark price for properties around the region are up, says the REBGV

VANCOUVER (NEWS 1130) – Metro Vancouver home sales reached near-record numbers for the month of May — and a local politician says the spike in numbers is coming before a potential NDP-Green Party government can bring in additional measures to cool the market.

One NDP MLA-elect says some speculators are cheating the system to get around taxes.

The party’s housing spokesperson, David Eby, feels those loopholes are around presale condos. “The issue with presale condos is twofold, one is that they are exempt from the foreign buyer’s tax, the second problem is that if you are buying and selling presale condos you don’t have to pay the property transfer tax.”

He adds those condos have been marketed heavily overseas. “There are two different taxes that presale condos are exempt from that make them very appealing to speculators to buy them up and then sell them like concert ticket resellers, and it’s a problem. So we need to address these loopholes.”

Economist Tom Davidoff with UBC’s Sauder School of Business agrees there is probably a lot of foreign influence on the pre-sale market.
“What effect that’s having now and in the future on affordability is a little bit complicated,” he explains. “If you think about somebody who buys a presale agreement, pays the developer the 25 per cent down and then sells the right to buy two years later to somebody who is going to live in the unit, all that foreign buyer and seller has done is essentially provide financing for the builder.”

He would rather the provincial government focus on other areas. “To shift the tax burden in the province away from working for a living and on to just owning property here without contributing to the local economy.”

The Real Estate Board of Greater Vancouver says home sales across the region returned to near record levels in May. And numbers are still about 10 per cent lower than sales recorded in May 2016 which was mere months before the BC Liberals implemented the foreign homebuyers tax that cooled off the market for several months afterward.

The board says new listings for detached, attached and apartments in the region totalled 6,044 last month. That’s a nearly four per cent decrease when compared to the 6,289 units listed in May 2016 but a 23.2 per cent increase compared to April 2017 when 4,907 homes were on the market.

The number of properties listed for sale in Metro Vancouver right now is 8,168, a 5.7 per cent increase compared to May 2016 (7,726) and a 4.5 per cent increase compared to April 2017 (7,813).

The benchmark price for all residential homes in Metro Vancouver is about $967,500. The board says that’s an 8.8 per cent increase over May 2016 and a 2.8 per cent increase compared to April 2017.