Vancouver Sun

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

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. Steve Saretsky, Vancouver real estate agent 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.

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.

 ??  ?? As the housing market in Vancouver slows, real estate experts are wondering if it’s just a needed correction, or like a Jenga tower, ready to collapse under its own weight.
As the housing market in Vancouver slows, real estate experts are wondering if it’s just a needed correction, or like a Jenga tower, ready to collapse under its own weight.

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