Is housing bubble about to pop or is it just a correction?
Foreign buyers tax, new mortgage rules, realtor reform among variables
JOANNE LEE-YOUNG
The Vancouver Sun
Metro Vancouver’s stratospheric real estate market is showing signs of slowing, as properties are sitting longer and some prices are falling even as official benchmarks hang onto their highs.
One central bank economist predicts a six-month to year-long correction, after which sales and prices could rebound. Others deem it the popping of the biggest housing bubble on the planet.
In the meantime, there remain a few bothersome loose ends in all the market craziness.
Low interest rates and tight supply contributed to skyrocketing prices — over 40 per cent a year in some areas. But they did so in tandem with the fuel of foreign money, unscrupulous agents, lightningfast deals and lax regulation.
So, are buyers just sitting on the sidelines in the aftermath of the foreign buyers tax? Where are we now with realty firms that were being investigated for questionable practices? How about the more nebulous task of clamping down on unlicensed sales? What about the future of real estate boards, and their stranglehold on market information in a time of digital transactions? How is the provincial government moving in with tighter oversight after having declared the real estate industry unfit to regulate itself?
FOREIGN BUYERS TAX
Observers say that the housing market had already been slowing from unheard-of highs, but there’s no doubt the so-called foreign buyers tax of an extra 15 per cent charged by the province starting Aug. 2 on buyers of Metro Vancouver properties who are not Canadian citizens or permanent residents has jolted the market.
Sales numbers in the initial weeks following the tax fell off a cliff in neighbourhoods with higher percentages of buyers declaring themselves as non-citizens and residents. But almost every pundit also says it will take at least six to 12 months for the market to digest the real impact of the tax, as well as new, tighter guidelines for mortgages, on both local and foreign buying appetite.
REALTORS UNDER INVESTIGATION
As home prices hit record highs over the last few years, stories emerged of realtors engaging in dubious practices ranging from “shadow flipping” to counselling clients on how to avoid a new tax on foreign homebuyers. A number of realtors and realty companies were put under investigation by the Real Estate Council of B.C.
Among the highest-profile targets for investigation is New Coast Realty, described as a fast-growing, Richmond-based firm. In April, the company was put under a series of so-called “licence conditions” by the Real Estate Council after the Globe and Mail published allegations that company owner Ze Yu Wu was training his agents to secure deals with tactics in violation of their fiduciary responsibility to clients. New Coast has also come under fire for its alleged aggressive shadow flipping of homes.
The Real Estate Council said this week it “could not give updates on its active, ongoing investigation” into New Coast.
UNLICENSED ACTIVITY
Dubious practices of licensed realtors are one thing, but there is also the pressing issue of residential real estate being promoted by “agents,” who profit off fees they or their associates or partners charge, but who do not have realtor licences.
The Real Estate Council has investigated and disciplined some players associated with Vanfun. com, a Chinese-language website run by a Shanghai-based company that lists and arranges tours for its clients, who are based in mainland China, of single-family homes, as well as showrooms for major presale condo developments, in Vancouver. They don’t have licences to promote or sell B.C. real estate, but instead work and split commission fees with local agents, who do.
REAL ESTATE BOARDS: BIGGER IS BETTER?
There has been a plan for B.C.’s 11 regional real estate boards and the B.C. Real Estate Association to merge in order to “reduce overlap and maintain high and consistent professional standards,” but there is at least some disagreement on whether one big board is better than many smaller ones.
These associations represent the interests of their members, who are real estate agents, but some have been criticized for not making disciplinary decisions public.
The BCREA has said that merging the boards will better “address the current fragmented decision making that slows the industry’s ability to foresee and address issues in a timely manner.” It maintains the proposed amalgamation could also eliminate duplication of operations and possibly reduce the overall cost of running these boards by $10 million a year.
On Dec. 6, six real estate boards, including the Real Estate Board of Greater Vancouver and the Fraser Valley Real Estate Board, will vote. More than 15,000 members and the BCREA must vote in favour in order for the merger to happen.
But, in June, five boards opted out of even participating in the vote. They include the Chilliwack and District Real Estate Board, Kootenay Real Estate Board, Powell River and Sunshine Coast Real Estate Board, Vancouver Island Real Estate Board, and the Victoria Real Estate Board.
“Our board is very well run and makes quick, good decisions. We have a good CEO and we haven’t had any main issues to justify changing,” said Margo Hoffman, president of the Vancouver Island Real Estate Board. “We haven’t had the same issues that ( boards in Metro Vancouver have seen). We have a business practices committee and there were not six complaints last year, and they were minor.”
Proponents say having one voice speaking on behalf of all realtors in the province would be an advantage for an amalgamated board, but others point out the wide discrepancy between the different boards in terms of the number of members they have and the kinds of transactions they handle.
“I think the Real Estate Board of Greater Vancouver should spend its time improving consumer protection, which is the best way to protect the reputation of real estate agents in the Lower Mainland,” said Re/Max agent Keith Roy.
MLS INFORMATION HELD BY BOARDS
One reason real estate boards matter so much is their control of the Multiple Listing Services database, which allows real estate agents to see sales and pricing information as it is logged as soon as deals are firm and “under contract,” but before they “close” and details are recorded in land titles.
Once a month, the boards release a snapshot of this sales information and also its MLS Home Price Index.
This measures the rate of price change for so-called “typical” homes in different categories that are picked every year for being “in the middle of the pack” compared to the majority of homes in their category.
The use of “typical” homes has been in place since 1996 because the boards believe averages can easily be skewed by higher- or lower-end property sales.
But with residential real estate selling as quickly as copies of documents can be sent by a smartphone swipe, there is growing interest in real-time data that might show interest in a specific type of property in a certain neighbourhood such as provided by Zolo, a national real estate brokerage.
A few agents have also taken to publishing information about sales gleaned from MLS information the public can’t easily access.
Vancouver real estate agent Steve Saretsky posted last week: “More realtor complaints regarding my tweets and blogs.”
He declined to elaborate, but had been posting screenshots of interesting sales as they were appearing on the MLS site that only realtors can access. Saretsky has also blogged about his count of condos selling for over the asking price each month, and how this number has been falling. For example, in October, six out of 43 listed condos, or only 14 per cent, sold over asking, compared to much higher numbers and percentages in April, May and June, when 58 out of 89 listed condos, or 65 per cent, sold over the asking price.
“Apparently, (I) can do that, because it doesn’t give a specific address (that might breach privacy rules or jeopardize a deal), but (even) when it comes to stats and numbers (like this) a lot of realtors don’t like it being out there,” said Saretsky.
“I’m a firm believer that the real estate boards need to be more transparent, and one way to do that is for sales data to be available to the public. You lose your value proposition if you are a gatekeeper to information. In an information age, to be hoarding information is not a true value proposition. Realtors need to diversify their services.”
The boards have previously said that their members pay fees for exclusive access to the MLS information.
THE PROVINCE TAKES OVER ENFORCING RULES
The province’s newly appointed superintendent of real estate, Michael Noseworthy, takes office on Oct. 19. Last week, the government started naming members to a Real Estate Council that used to be selfregulated, but will now fall under Noseworthy’s watch. The aim will be to begin implementing changes to the industry, many of them as recommended by an independent advisory group in late June.
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