Keeping it Real
Meet Jacquie McCarnan your host for Keeping it Real, the Vancouver and area residential real estate podcast that aims to demystify all things real estate in our crazy market.
Jacquie has been a licensed Realtor since 2016 and, in that time, has come across just about every scenario you can think of in our residential market. From hoarder homes to those for sale by owners to crazy strata situations and more, Jacquie provides real stories to help you navigate real estate in Vancouver and surrounding areas.
Each episode of Keeping it Real is short and to the point and provides you with great information about the topic discussed. Jacquie is always available to answer more in-depth questions and is happy to feature your own experience in future episodes.
Episodes also contain additional, non-real estate info about local businesses, experiences, and hidden gems around town that will make you sound like a local expert!
If you live in Vancouver or surrounding areas you know that the #1 thing people talk about is real estate (then the weather) if you want to sound knowledgeable and up to date on the real estate part listen weekly to hear topical issues that affect our market. We try to pick the most interesting and current issues to demystify each week and eagerly anticipate your input.
Join us every week for the very newest info on residential real estate in Vancouver and area.
Keeping it Real
Ep 28 - Can You Still Make Money Investing in Real Estate in BC with New RTA Rules?
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Can you still make a profit in British Columbia's real estate market amidst evolving regulations and fluctuating market conditions? Discover the answer in our latest episode where I, Jacquie McCarnan, guide you through the latest trends impacting the BC property landscape. We'll explore the implications of increased listings versus declining sales and home values since early 2024. Despite a slight dip in interest rates, buyer activity remains low, hinting at a shift towards a buyer's market. You'll learn about the latest rental regulations and changes in Airbnb policies, and hear the compelling story of long-term homeowners Darlene and Erica as they navigate the current market dynamics.
But that's not all. We also dive into the challenges real estate developers face, particularly with the SSMUH initiative aimed at boosting rental units. High building permit costs and infrastructure fees are making waves, prompting questions about the allocation of federal infrastructure funds. How does this all play into housing affordability and the broader market? We emphasise the need for individualised planning for both buyers and sellers in these uncertain times. Plus, stay tuned for an update on the market's current state and an exclusive invitation to a special event at Plunge in Squamish. Join us for an episode packed with insights and expert analysis on BC's real estate market.
Feedback: info@northvanhomesales.com
Homes for People: https://www.bcbuildshomes.ca/
RTA New Rules: https://news.gov.bc.ca/releases/2024HOUS0017-000461#:~:text=increasing%20the%20amount%20of%20time,to%20specific%20non%2Dresidential%20uses.
Hey everybody, welcome back to Keeping it Real, the Vancouver and area residential real estate podcast. That hopefully makes you think I am Jackie McCarnan, your host for Keeping it Real. I'm a North Shore, downtown Vancouver, all over the lower mainland, really in Squamish a residential realtor. I dabble in commercial, do a little commercial leasing, that sort of stuff, but you know, primarily residential, but I like the other stuff too. This episode of Keeping it Real was a request from a listener asking can you still make money in real estate with all the new rules, and once I started digging into this it became a much bigger topic and so I'm going to kind of split it into two things, but I'll make it all make sense toward the middle. But first I really want to talk about why we're in the situation we're in. So I'm going to start in with my disclaimer that for my managing broker just to say that a lot of research went into this particular episode and there are things that I couldn't find out and that will be available at some later date that I will update you on. But also I want to let you know that there are lots of ways to interpret statistics from the real estate board, and I'm just going to give you the info and tell you what I think, but there are going to be different interpretations, so you are more than welcome to investigate this on your own, and if you have any questions about what I'm presenting today, please let me know. I am more than happy to answer them. So, without further ado, let's get into it.
Speaker 1:Even though this episode is a request about whether you can still make money as an investor in real estate in BC, I thought that it might really help us to talk about what's happening in the current market. So a couple of quick things that I want to let you know. Number one we are seeing an enormous number of listings, for I tailored this to North Vancouver, but it's true for the whole lower mainland. We're way up on our listings almost 800 listings in June but our sales are super low just around 217 in June and the values the home values have dropped quite a bit every month since February 2024. So the average home price is still high, but most of the people I spoke to in preparation for this believe that we have now hit the peak, so the peak for home prices and we cannot continue to. Prices can't continue to go up, given what's happening in the market at the moment. A lot of people thought or predicted that when the interest rate dropped in June, that we would see a lot of buyer activity and what happened instead was all the sellers who were waiting to list their homes. When the interest rates dropped, all those sellers listed their homes. So what we got was a ton of new homes listed and a whole bunch of buyers who were still very reluctant to pull the trigger on purchasing a home. That means there are now I'm not going to say more sellers than buyers, but we are.
Speaker 1:So we're in technically, we're in what's called a balanced market and there's a formula for that. But we're moving toward a buyer's market, which we don't see very often here in BC. It's happened a few times in my career, but it's not the norm here and it feels like a buyer's market even when we're in a balanced market. And one of the ways we, one of the factors we look at, are days on the market. So the current average days on the market for a listing is 14 days, which is a little bit longer than it has been over the last few months, and what that means is, if your home is priced to the market, so, priced correctly for the current market, it should sell within two weeks, and if it sits longer than that, it's likely to sit for quite some time likely to sit for quite some time. The only way to fix this now is to drop the price significantly and hope that buyers are sufficiently incentivized to come and make an offer on your house.
Speaker 1:But this is kind of all bringing me around to some of the obvious questions, and I think the biggest question here is how'd we get here? If you are a normal red blooded uh Vancouver, all you think about is weather and real estate, and if you've been paying attention, you've been watching our provincial government make a whole bunch of new changes. Some of those changes are around renting, and some of those changes are around development, and some of those changes around Airbnb Airbnb. So lots and lots of changes happening very, very quickly, particularly for government, because, as we know, normally the government doesn't work super fast, but in this case things are moving very fast.
Speaker 1:It's important to work out why we are where we are. So we have new rental rules that I talked about last week, and the new rental rules include things like landlords are required to give four months notice now for their personal use of a property. That's going to have a negative effect on selling that property, because if a buyer comes in and they want to buy that, the owner has to give tenants four months notice and most mortgage approvals are three months. So then they'll have to get re-approved is that a thing for a mortgage within the time before the completion of the sale. So that's going to cause a lot of difficulty. Now what that might do is somebody with a vacant property or an owner-occupied property might be in a much better position to sell, because a tenanted property is going to become harder and harder to sell as we move through these new rules. Another reason there are lots of places on the market is the former Airbnbs. You know people don't want to risk the fines from the municipalities, so they are selling their Airbnbs. We saw some of that last year. That's not quite as new as the other issues, but I do think it is a factor in things coming to market. Obviously, interest rates are another reason why we might see more things on the market, more listings on the market, and for that one I have a story.
Speaker 1:So Darlene and Erica have lived in their home for over 20 years. They worked really hard to pay down their mortgage and when it was manageable, they used a HELOC, a home equity line of credit, to buy an investment condo in Lower Lonsdale. It was 2021 and the mortgage payments weren't too bad because money was free. So they rented it out at just below market value because they wanted to get great renters, but they also wanted to cover their expenses, so they just covered their expenses with the rental income. This year their mortgage term is ending and they have to refinance. And guess what? They have to refinance at a whole bunch more points than their original mortgage. So now their monthly payment, their monthly mortgage payment, is far above what they were renting the place for, even if they did cost of living rental hikes yearly. This new payment amount is going to be quite a bit more, and so they now have to sell.
Speaker 1:I do think I mean it's been my experience that this is more often the sort of and I'm making air quotes, I don't have a video on but investor that we run into. It's not usually some wealthy land baron that runs into trouble trying to build a little generational wealth through real estate, and they're the ones who have been getting caught in trouble with the higher interest rates and now the new rules around renting. Unfortunately for Erica and Darlene, their property isn't very attractive to a large portion of buyers. So first of all, it's not attractive to investors because investors have to leave the tenant in, but Darlene and Erica, they haven't rented it for as much as it should have been rented for. It's not rented at market value. So if you put their condo up against somebody else's condo that's rented at market value, the investor will obviously pick the second one because it's a better deal for them, and obviously we all want what the best deal is for us.
Speaker 1:The other thing is if they're selling to, let's say, first time homebuyers who just recently got pre-approved for a mortgage and they want to move in, darlene and Erica have to give their tenant four months notice, which is going to put the buyers in a difficult position of having to reapply for a mortgage. We're in a position right now where it's not super likely that interest rates are going to go up in the next three months. But who knows right Things happen, all kinds of things can happen that would cause it could cause that Anyway it's going to if interest rates go up between the time that somebody has an accepted deal on a place and the time they complete and they've had to get approved again, there's going to be a ton of chaos. What I think this is going to do is it's going to cause buyers to look at places that are considerably less expensive than what they would have normally gone for. So if they got pre-approved, you know, for a million dollar mortgage, maybe they start looking at things that are quite a bit less money than that. So 700,000 instead of a million, I don't know.
Speaker 1:The moral of this story is twofold. Number one tenanted properties are going to become harder to sell. That's pretty much undisputed, undisputed, undisputed. But it also might make owner-occupied or vacant properties much more attractive to buyers, both investors and people who want to live in the units. So if you have a unit for sale that is vacant, it's probably going to become more attractive to potential buyers now that they would have to go through so many hoops to get a tenanted property. Another factor and this is going to we're going to loop back to this later. This is going to be a long one, I don't know, maybe half an hour.
Speaker 1:Anyway, people who have secondary suites in their homes. They're going to think twice about renting those out, because getting the tenants out are going to. If, let say, you have three bedrooms up and two bedrooms down and you have three little kids and two of them share a room, but as they become teenagers, you want to take over that downstairs part, and, yes, you can give them four months notice, but if the tenant doesn't want to leave, there could be a dispute, there could be all kinds of stuff that happens. So I think that the new rules for landlords are really strict and I don't think that that's a bad thing necessarily. What I do think is that the people who made it so that we need to have these new rules, the baddies that flouted the rules in the first place, are also going to be the people who flaunt the rules this time, like the people who follow the rules, aren't going to be the ones who get hurt by this considerably more than the people who just don't pay attention, don't care about the rules. So I don't know what do you think? Going back to the original question can you still make money in real estate in BC with all these new rules? I think the answer is yes, but it's going to be to the detriment of sellers, I think. So, yes, you could make money in real estate. If you're able to purchase a vacant or owner-occupied unit that has been sitting on the market for a while that is now going for less than market value, then you can rent it at market value and if you keep up with the rental increases, it's probably a pretty good opportunity for people who are able to afford it.
Speaker 1:Since we're onto the subject of the new provincial rules, I did want to talk a little bit about the about the developer side of this. Like I've talked to you before about the small scale multi unit housing initiative, or SHMUI terrible acronym that has eliminated single family lots in BC in favor of multi-family lots, and this, once I started digging into this, oh my gosh, you guys are going to love this. I'll amend the question to say can a developer make any money now here in BC? And I wonder, because this is a, this is an amount for the city of Vancouver, because I have been looking into the city of North Vancouver and the district of North Vancouver but I can't quite find the actual amounts. But before any developer breaks ground, 30 to 33% of the build is fees and taxes to the city. That's bananas, and when I say developer, I also mean anybody doing this infill housing. So they I just did the whole developers course and if you are building a house yourself, it's complicated and I can get into it another time. But you're not subject, you're not exempt from having to pay the fees just because you build the carriage house yourself or organize the trades yourself.
Speaker 1:The whole idea behind SMU SMUI is to increase the number of rental units in the province, with the potential of having so many that prices for rent decrease. That's kind of the, I think, the general idea, and when I first heard about it I thought, okay, well, that's kind of cool. That makes a lot of sense. You know, some people are sitting on pretty big pieces of land. Why don't we develop those to add more housing and get us out of this rental or this housing crisis? I feel I was a little bit naive back then. Condo units in the city of North Vancouver. They have to pay the city building permit prices of $62.17 per square meter, which works out to about $8,477 a foot times 75 units. So that's $635,000, but that's just for the building permit. It's very likely and I wasn't able to find out. I did send them an email, but I don't have time to wait for the reply because I'm recording this on Thursday instead of Friday or Monday. But there's very likely to also be a density fee or an infrastructure fee.
Speaker 1:When I was at the District of North Vancouver information meeting about this infill housing initiative, everybody went on and on about infrastructure and then I thought I was quite clever when I found out that the federal government is offering, or has set aside, $6 billion for infrastructure to go along with the housing initiative and there are conditions around it. But I believe that the province of British Columbia has met the conditions and that any municipality that meets the conditions will be able to apply for some of that $6 billion infrastructure fund. So for somebody who does not, I'm not in development, I don't build places To me it looks like the federal government said this to the provinces. The provinces said the federal government said this to the provinces. The provinces said we're going to try to build some affordable housing. You cities need to get involved in this and we're going to require you to do X, y and Z. And the city said sure, we'll do X, y and Z, but we're going to have to tax and add fees for infrastructure for all that and nobody I haven't heard anybody saying but hang on, there is a infrastructure fund that you can apply to for this, so why are you adding so much tax?
Speaker 1:I think possibly this is a bigger issue in the city of Vancouver, which I'm not positive since I don't have as much I don't work as much in the city of Vancouver, but it's just interesting to me. If I were somebody kind of outside of this looking in, I would wonder why doesn't the city of North Vancouver apply for infrastructure funding and not pass that on to the developer and then the developer not pass that on to the consumer consumer, because if he's at you know 600 000 or like immediately before he even breaks ground that doesn't include purchasing the lot and all that sort of thing then we're you know housing prices for those condos are not going to be affordable again. Right, obviously, and just so you know what the infrastructure fee is meant for, the infrastructure fund is meant for it's a direct quote. The money will be dedicated to the construction and upgrading of water, wastewater, stormwater and solid waste infrastructure, something cities have said is critical to building more housing. So somebody is listening about to what cities need to build more housing. I'm just not sure that the cities are passing that along Hard to find out. It's not like anybody has this on their website.
Speaker 1:When it comes down to, are you still able to build wealth through real estate in BC, the answer is yeah, kind of. You're certainly not. Probably not going to be able to do it by purchasing new homes or pre-sales, because, unless the rents continue to go up which is kind of not what this whole thing is about but building costs are need to have somebody who, a knows the market and, b has a very good understanding of the Residential Tenancy Act, so that you build out your plan knowing all the factors that are currently installed and, with regard to the current market, what's happening around town right now. It's complicated. Summer is generally slow. I would, of course, I want to see the fall pick up. I do think that buyers seem to be waiting for more indication that the interest rates are going to either hold or drop a little bit more. They don't seem to be in any big rush to buy, and that makes sense, since there's quite a bit of inventory available. So I think we are still sitting in a wait and see for the next couple of months anyway, at least for until the end of August. Typically, things pick up again in September. Anyway, it'll be fascinating to see what happens.
Speaker 1:I really tend not to predict what's going to happen. I think that doing so makes you look silly, because very often these predictors are wrong, and I learned that very early in my career when somebody I really thought knew things told me one thing and the opposite happened, so I don't know. It's important to note, though, that every single individual buyer or seller has needs to have their own plan. Not everybody can afford to sit and wait until the market recovers, or not everybody wants to wait to buy. Everybody needs to have their own plan, and that's where having a trusted advisor comes in. Obviously, I want you guys to pick me, but if you don't, I hope that the information that you find in these podcasts are helpful for you to ask the right questions from whoever you decide to work with.
Speaker 1:Y'all are probably getting pretty sick of me shouting out my daughter's business plunge in Squamish, but here's a little twist For the next week, I am actually going to be doing a plunge takeover and I will be hosting plunge in Squamish, so I'll be working from Squamish, and on Monday night we are going to do menopause Mondays, so please join me at plunge for a menopause cold plunge. Yeah, there's a sauna there for those of you who are not burning up from the inside like I am, but come up and join me. You can sign up on the website. It's going to be super fun and I would love to see you there.
Speaker 1:Thanks so much for joining me for this episode of Keeping it Real. I know it wasn't super funny this time and I couldn't figure out a way to make it funny, but I do hope that you found it interesting and informative and, again, I am always interested to hear what you have to say and what your thoughts are. I think there are going to be a lot of opinions about this sort of thing and I mean there's a great expression that I can't say on my podcast about opinions, but most of you probably are saying it in your head right now. You can get Keeping it Real at NorthVanHomeSalescom slash podcasts or on Spotify or Apple Music or anywhere you get your podcasts. See you next week.
