Property Assessments

[Teja]

One of the more interesting annual summary reports is BC Assessment's "Market Movement" report (attached). It shows the increase for each of the main class pools (residential, strata residential, commercial and industrial) in each assessment reporting area ... surprised to see the size of some of the increases, both on the low and high side. They would make it a lot easier for forecasting property tax increases if they included the $ value for each of the pools and if there was government jursidiction operating and property tax revenue budget increase details. Biggest issue we have now is rapidly escalating local government operating budgets (which translates to rapidly escalating property tax needs). There should be a property tax revolt in some local jurisdictions during this fall's municipal elections ... we need the property owners to get out and vote as the non-property owners don't necessarily have the same motivation (will be a bit of a have vs have not vote this fall).

 

[Aquaholic]

any interest rate increase will crush this market

Don’t you believe the stress test was brought in to not have that happen?

 

[Aquaholic]

Up 400k in white rock. The problem is houses are selling around here for way over assessed value.

What does assessed value have to do with market value?

 

[wildmanyeah]

Don’t you believe the stress test was brought in to not have that happen?

increased interest rates will slow down overall inflation and IMO put some breaks on the stock market. I don't think the housing market will go down as we live in a coastal city, I think it could slow things down dramatically tho.

Even the most smallest of interest rate increase will just be a bit of a reality check on things.

thats my thoughts anyways

 

[Rain City]

increased interest rates will slow down overall inflation and IMO put some breaks on the stock market. I don't think the housing market will go down as we live in a coastal city, I think it could slow things down dramatically tho.

Even the most smallest of interest rate increase will just be a bit of a reality check on things.

thats my thoughts anyways

I think even a 1.5% interest rate hike will cause a complete **** storm of foreclosures.

 

[wildmanyeah]

Yeah but I’m talking about a few small 0.25%

 

[N2013]

Govt needs to definitely bump things slowly like wildman says. A 1.5% would cause a major economic blow and wouldn’t be smart.

 

[Aquaholic]

I think even a 1.5% interest rate hike will cause a complete **** storm of foreclosures.

That is not a small rate hike, that would be huge all in one go. There is a current shortage of homes, hence all the multiple offers. Is it possible these "foreclosing" homes will just sell to the people waiting for some product? Some seem to believe an interest rate increase will affect all mortgage holders at the exact same time and day, however not all are on variable mortgages, these things take a while to make themselves apparent.

 

[sir-vivor]

In the 20 odd years I was in banking, when prime was at its lowest, a new creative way was developed by the banks called "FEES" , no need to increase rates now as most people cant figure out the fee rate your being screwing on and the only reason to increase the prime is to make the bond market more lucrative for the international market. If it wasn't for that , you'd probably never see a prime interest rate increase. If you think your bank isn't getting their pound of flesh on your low rate paper, you better give your head a shake ... look at the fee that is hidden in it and never mind puffing out your chest that you got a low rate ... hahaha used to love guys that told me how low their rate was at another bank, until I pointed out the fees in the deal and watch them deflate hahaha. And YES Rain if they ever increase the prime the markets will in my opinion create more harm then what will be gained from the bond market (canadian $$$ interest) so thats why there hasn't been one .... so far !

 

[ziggy]

The scary thing is this is all wealth based on paper. It’s only actual money if you cash in and is gone again as soon as you buy a new home. We all need somewhere to live. Suddenly average middle class people are rich on paper which makes it easier to tax them and plays into divisive politics. Will housing be subject to Capital gains at some point? Every time we have these on paper massive increases of wealth it seems more likely. Consider if you’re out of the market, would you give a pass to someone talking about their new wealth. I’m sure the government is looking closely.

 

[Aquaholic]

I usually go through the recent assessment values for my clients and do a year over year comparison. Looks like assessed value is above market value for the time being on most properties, even though the new numbers were derived in July of 2021.

 

[Teja]

I think even a 1.5% interest rate hike will cause a complete **** storm of foreclosures.

... and it will shutdown the construction of new rental housing unless the federal government increases rate subsidization on that side. If rental housing construction shuts down, it put more demand side pressures on market housing which will cause even more bank of mom and dad investment support and that will soak up the foreclosure related supply. There is incredible Gen Y and Gen Z pressure on housing supply of all types.

It will be interesting to watch it play out on the interest rate side as the Feds are loathe to unleash interest rates as they understand the consumer debt burden tipping point issue and they know we desperately need new housing stock and new rental housing stock. For many years, new rental housing feasibility has been dependent on either tax incentives (historic) or more recently preferred interest rates thru government (CMHC) financing. In recent years it has become even more challenged in B.C. with reduced allowable annual rent increases and rapidly increasing non-controllable expenses (property taxes, insurance, utilities, etc.) that impact operating feasibility, and with slow approvals and increasing government levies on new development that reduce development feasibility for rental housing.

We need more housing supply and the Feds have taken steps to induce it and the Province and local govts (most but not all) have taken steps that have reduced it. Anecdotally, between 2006 and 2020, the number of "purpose built" rental apartment units in the lower mainland of Vancouver increased from approx 108,000 units to approx 116,000 units (only 8,000 inits over 14 years) given feasibility issues and the number of rental condos increased approx 29,000 units to approx 77,000 units (48,000 units over 14 years) during the same period largely due to the rental of condos by offshore investor owners. Both the Province and some local govts took tax based steps to turn off the foreign investment and slow the housing market down but not surprisingly, when government acts there are often unexpected and untoward consequences ... in this case, less supply creation of both market housing and rental housing (purpose built and rental condos) against stable or increasing demand leads to price increases and the upward pressure should remain even if all 3 levels of government start to work together (versus against each other) as it takes years to get housing projects approved and built. We need more housing supply and it is becoming increasingly painful to build anything in B.C.

 

[Aquaholic]

... and it will shutdown the construction of new rental housing unless the federal government increases rate subsidization on that side. If rental housing construction shuts down, it put more demand side pressures on market housing which will cause even more bank of mom and dad investment support and that will soak up the foreclosure related supply. There is incredible Gen Y and Gen Z pressure on housing supply of all types.

here here...the private sector does not get enough credit for supplying "much of" the rental market product all these years.

 

[Rain City]

... and it will shutdown the construction of new rental housing unless the federal government increases rate subsidization on that side. If rental housing construction shuts down, it put more demand side pressures on market housing which will cause even more bank of mom and dad investment support and that will soak up the foreclosure related supply. There is incredible Gen Y and Gen Z pressure on housing supply of all types.

It will be interesting to watch it play out on the interest rate side as the Feds are loathe to unleash interest rates as they understand the consumer debt burden tipping point issue and they know we desperately need new housing stock and new rental housing stock. For many years, new rental housing feasibility has been dependent on either tax incentives (historic) or more recently preferred interest rates thru government (CMHC) financing. In recent years it has become even more challenged in B.C. with reduced allowable annual rent increases and rapidly increasing non-controllable expenses (property taxes, insurance, utilities, etc.) that impact operating feasibility, and with slow approvals and increasing government levies on new development that reduce development feasibility for rental housing.

We need more housing supply and the Feds have taken steps to induce it and the Province and local govts (most but not all) have taken steps that have reduced it. Anecdotally, between 2006 and 2020, the number of "purpose built" rental apartment units in the lower mainland of Vancouver increased from approx 108,000 units to approx 116,000 units (only 8,000 inits over 14 years) given feasibility issues and the number of rental condos increased approx 29,000 units to approx 77,000 units (48,000 units over 14 years) during the same period largely due to the rental of condos by offshore investor owners. Both the Province and some local govts took tax based steps to turn off the foreign investment and slow the housing market down but not surprisingly, when government acts there are often unexpected and untoward consequences ... in this case, less supply creation of both market housing and rental housing (purpose built and rental condos) against stable or increasing demand leads to price increases and the upward pressure should remain even if all 3 levels of government start to work together (versus against each other) as it takes years to get housing projects approved and built. We need more housing supply and it is becoming increasingly painful to build anything in B.C.

City council seems to be doing their best at making changes on that front. But watch at all the money go to the other side when they start building rental towers in Kits.

 

[Corey_lax]

I'm so sick of getting outbid on houses by $200,000.00-400,000. We have a stake in a double lot in Maple Ridge with a rental home and we are now thinking about tearing that down and building. Whats the current cost per square foot for a new build of a spec home?

 

[Aquaholic]

I'm so sick of getting outbid on houses by $200,000.00-400,000. We have a stake in a double lot in Maple Ridge with a rental home and we are now thinking about tearing that down and building. Whats the current cost per square foot for a new build of a spec home?

look at the potential long term gain, some of my clients are wishing they kept their investment properties with the old timer home in place and just let it appreciate instead of doing a new build. Depends on your end purpose though.

Have you tried going in with a huge deposit?

 

[Thunder21]

We'll see. I was of the mindset that any increase would squash it too, but I now believe the supply/demand balance will keep those prices up for some time. There is a huge bulge of the population in their 30s. They all want houses and the boomers are helping them get into the market with record setting 'gifting'/down payment lending. Time will tell.

https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=1710000501

I agree with this. I don’t think we are done yet. I think there is far too much demand for a crash , even with a bump in rates. I own a small rv park deal and over half of the tenants are from out of province and looking to buy here eventually. The only thing that will slow this down is either a huge spike in rates or a ban on foreign investment. We can all sit here and complain at the taxes going up but I think we would be complaining a lot harder if the values dropped 40% because the government stepped in to ban certain buyers . Because of the backlash they would receive , I don’t think they will do anything other than very small increases in interest over time.

 

[Aquaholic]

The only thing that will slow this down is either a huge spike in rates or a ban on foreign investment.

Basically none of the incredible buying activity increase since the COVID period was due to foreign buyers.

 

[Corey_lax]

look at the potential long term gain, some of my clients are wishing they kept their investment properties with the old timer home in place and just let it appreciate instead of doing a new build. Depends on your end purpose though.

Have you tried going in with a huge deposit?

I haven't tried the huge deposit thing. I'd have to get organized for that because I can't access too much within 24hours.

Last offer I averaged out the recent sales in the area at $527 per square foot and then my offer was $575 per square foot. We got outbid by $300,000......

I've seen lots of houses bought by holding companies and sold a few months later. They don't even move in. Just sell it a short period later for 20% more and pay capital gains.

 

[Teja]

City council seems to be doing their best at making changes on that front. But watch at all the money go to the other side when they start building rental towers in Kits.

The recent City of Vancouver policy change for their "streamlining rental around local shopping areas" is a step in the right direction but is a drop in the bucket (it will result in limited new supply) and feels much more like politicking in advance of the election ... they needed something positive to point to on their accomplishment list. It is just too difficult to make a buck commensurate with the risk in rental these days unless you have scale/size and close to zero cost of capital. The large equity investment required, slim returns and the long time frame for payback/investment return makes it impossible for most to build and in the City of Vancouver it is only made worse by excruciatingly slow approvals, overlapping policies, lack of decision making authority at all levels and continued increase in various fees and levies. It is so much easier to do business across the border to the south (COVID excepted).

p.s. as a long time Kits resident, I hear you re: Kits towers ... the meaningful impact impact to supply and disruption to existing residents' life both during and post construction will really come from the First Nations developments at the Burrard Bridge and at 4th/Highbury ... they have the size to make a real impact and the stakeholders to move forward.