Tag: National News

Nov

What is iBuyer? The Real Estate Industry Buzzword of 2018

Buzzwords, the world has been suffering these terms for a long time! Everyone talks about ‘FinTechs’, being an ‘Entrepreneur’, or going on the ‘Keto Diet, just to name a few of 2018’s buzzwords. Society always seems to come up with a new buzzword that we all use, yet its much more hype than real substance. The real estate industry’s buzzword of 2018 has without a doubt been iBuyer.

The term iBuyer has been the talk of Wall St and the real estate industry over the last few months. Everyone is trying to get into this space; Zillow, OpenDoor, and even Coldwell Banker have been engaging with this buzzword. With all of this hoopla around iBuyer, let’s take a look and see what it’s all about.

What is iBuyer? (Hint it’s an algorithm)

At its core, it is a platform that uses an algorism to generate an offer on a property. The platform uses the algorithm to calculate the value of a home based on a variety of factors including location, size, potential work needed, and discounted cash flows to come up with a value for the property. This value is not the true market value of the home. It is a slightly discounted value that creates a profit margin for the buyer.

How does the Process work?

The process is relatively simple. A Seller would fill out a form about their home and provide details about the house. If the algorithm deems it a worthy property, the iBuyer would make an offer, conditional upon inspection. After which, a price reduction may be asked for. Alternatively, someone representing the Buyer can go inspect the property, take their findings to the platform and use it to make an unconditional offer on all things considered. Once the offer is made, the Seller can accept it, reject it, or counter it. Once a deal is finalized, the closing date of the deal can be done in a matter of days. Everyone likes a quick closing in real estate!

How does the Buyer benefit from iBuyer?

First and foremost, the majority of people that use iBuyer are the owners of the platform i.e. Open Door or Instant Offer on Zillow. These large platforms build the platform and algorithms in order to buy properties for a discount that they can resell for a profit in the future on their platforms. Typically, these “Buyers” are looking for properties that need repairs so they can add value through renovations. Sounds like the oldest business model in the book, buy low and sell high.

What are the Seller’s Benefits?

Seller have a lot of headaches when it comes selling their home the traditional way. They have to make sure their home is always showing ready with everything perfectly placed and staged to show your home in the best way. This standard of being showing ready is incredibly difficult, it’s something that most people struggle to keep up with. There are dishes, toys, iPad’s, books, bags, and whatever else you have all over the place (Yes, we all have messes in our homes). Add in the consistent upheaval of your schedule from Buyers wanting to see your place from 8 am to 8 pm 7 days a week, you have a nightmare on your hands. Not only do you have to clean up after your every single move, but you have to put your whole life on hold to let people into your home. I’m getting anxious just writing about it. In comes iBuyer to save the day! Get your home showing ready once, get a photographer to take amazing photos, and then your done. You can relax, have your own mess, and have your life back while you sell your home. In some cases, you don’t even have to do that. All you need to do is fill a form online and presto! Offer received.

iBuyers provide lighting speed offers with quick closing dates, which means you could sell your home faster. Imagine you’re on vacation, sitting on the beach. The ocean view is breathtaking, you can smell the salt of the water. As you’re enjoying the view with your favourite mocktail (who are we kidding, cocktail!), you get an email with an offer on your home. Wow, what a dream! iBuyer makes this a reality… at least the offer part. The vacation is probably not paid by iBuyer.

Do Sellers Really Win?

Most sellers aren’t inclined to accept a below market value offers (5% – 10%) plus a commission (4% – 6%). There would be a subsect of Seller that would take advantage of this i.e. in the case of a divorce, bankruptcy, or relocation. Otherwise, I don’t see Sellers, at large, accepting anything less than top dollar for their homes. For the iBuyer service providers, there is an unspoken risk to them. Most of these providers are technology companies, not construction companies. Their goal is to buy properties at below market value, do a minor or major renovation to the property and sell it on the market at a premium. Sounds pretty easy right? Wrong. Warren Buffet has said on multiple occasions, “Invest in what you know and understand.” With all due respect to these companies, their core competency is in building the technology of these platforms, not in the construction business or understanding the real estate market. My prediction is that these companies will struggle with controlling construction, have higher financing costs, and shrink their profit margins. Combine that with a peak in the real estate market, these companies could be holding massive losses on their books if they’re not careful. As most of these companies are publicly traded, you can expect to see lower than expected earnings and a drop in share price.

Down the line as these platforms and consumer behaviour evolves, I can see the consumer being able to make pricing decisions online with readily available, relevant, and accurate sales data (through platforms likes DigiRealty.com). I can also see everyday buyers making an offer online through these platforms with relative ease. All of this said, the one thing that won’t change is our fundamental human emotions. We all feel happiness, anger, sadness, and excitement. Those emotions will always play a roll in our lives. And when you walk into a home and see a little doggy door that reminds you of the house you grew up in, that emotional connection you have to that memory is what connects you to a home. Not an iBuyer platform.

Real Estate Franchises are Losing Stock Value

Oct

Large Real Estate Franchising Groups are Losing Stock Value, and Fast

Remax and Realogy Stocks Tank Amidst a Changing Industry

No one seems to be talking about this. Large Real Estate Franchising Groups are Losing Stock Value, and Fast.

The two largest conventional bricks and mortar brokerage conglomerates stocks are tanking. Remax and Realogy have lost close to 50% of their stock value in the past 52 weeks.

On the other side of this news, private investments are fueling over $2 billion in new funding into efficient/scalable broker concepts. $2 billion in market cap lost on one side, $2 billion in market cap gained on another.

Royalty Fee Models Don’t Align With Franchisor and Agent Member Long-Term Growth

Brokerage Holding companies such as Realogy and Remax rely on incremental individual contributions from their Franchisors agent base. These royalties flow upward from the Franchise to the Holding Companies. The challenge with this model is that both the Franchisor and the Holding Companies are not truly aligned with the agent members due to the conventional cap system. The cap model sees contributions diminish, if not disappear, once an agent member hits certain annual milestones. Low producing agent members (of which form the majority of membership base) contribute a royalty through their Franchise to the Holding Company, in an amount that is very similar to that of a top producing agent member.

In an industry where consumers are demanding efficiencies, the bottom is being weeded out and the 2-10 annual transaction type REALTORS^®are finding it harder to justify their value. It is only obvious that the days of mass agent membership are under pressure and the result will be disastrous to the large franchise brands of the past.

Large Real Estate Franchises are Losing Stock Value, and Fast

If this opinion proves to be correct, unless these large franchise holding brands can divert their strategic resources into acquisitions of emerging counterplays, this trend will continue with the steep and aggressive slide that is becoming of a fragmented industry. Paving way for a bright future for forward-thinking scalable, agile operations and technologies, such as DigiRealtyTechnologies.com and others.

These large brands are proving to be the authors of their own misfortune. The brands in the position to stand out as industry stewards became balance sheet adjusters and profit wielders, as opposed to innovators. The results will be obvious.

Apr

Smoking Pot Inside Condos When Legalized? Think Again.

A hot topic right now in the condo world touches on the Federal government’s push to legalize marijuana across Canada. Many condo owners are becoming increasingly concerned as legalization nears, with what legal rights and measures their respective buildings can take in order to prevent smoking pot inside condos and common areas in condo buildings. One condo board in Toronto near Sheppard and Don Mills wants to prohibit the smoking of cannabis, as it already gets countless complaints about marijuana odours wafting between units, triggering asthma and allergic reactions. – nowtoronto.com

Further, Ottawa Public Health agency recently made a recommendation to the province to outright ban smoking pot inside condos and apartments, including balconies. – cbc.com

The question is – Is it within the rights of Condominium Boards to ban this soon-to-be legal substance within privately owned units? According to Michelle Kelly, a specialist in condominium law, bans such as this are done by the Condo Corporation creating a rule (under Section 58 of the Condominium Act). – globalnews.com This rule would then be circulated to owners, and unless the owners call for a vote, and vote against it, it enters into force. Rules such as these are created in order to promote the safety, security or welfare of the owners, and to prevent unreasonable interference. Things such as the pungent smell of second-hand smoke could be considered a nuisance, and therefore a new rule would be reasonable.

Ontario Landlords are also becoming increasingly concerned with the upcoming legalization. The concern lies with the major financial cost that could be associated with removing the smell of marijuana after the tenant vacates. – nowtoronto.com Currently, landlords are able to ban smoking for new leases, yet with existing leases, it is illegal to modify any of the clauses before the natural end or termination of the lease.

An even further grey area is whether condominiums can ban smoking for those who have a medicinal license to do so. Many argue that medical consumers would be exempt under the Ontario Human Rights Code, which may result in a legal challenge by Condominium Boards. Needless to say, this hot topic is not going anywhere anytime soon.

Feb

New DND Headquarters Helps Stimulate West End Real Estate

Most of us are familiar with the landmark “needlepoint building” that once housed Ottawa’s largest tech company, the now fallen Nortel, located just off Moodie Drive right near the 417 Highway. This iconic building sat empty for several years after the Nortel collapse, until the Department of National Defense (DND) finally made a successful bid to revamp this large 370-acre campus into their new DND headquarters. – Ottawa Community News

As with many major retrofit projects, delays were inevitable. Nearly a decade into this 800-million-dollar project, it is running almost two years behind. The end result of this three-phase shift will see 8,500 Civilian and Military personnel being transferred to the old Nortel campus, with the end target being March 31, 2020. – Ottawa Citizen

One area that is seeing significant growth from the first phase of 3,500 workers being transferred is real estate in Ottawa’s west end. Month after month the west end districts have seen the majority of price hike growth on properties, according to the Ottawa Real Estate Board. Coincidentally, the bottom 10 districts are located around the current DND Headquarters located at 101 Colonel By Drive, which will be shutting it’s doors once the new DND headquarters is staffed. – Ottawa Citizen

Although it is still too early to determine exactly the influence that the new DND headquarters will have, this early evidence is a strong indicator that prices will continue to grow in the clustered communities surrounding this major new employment hub.

Feb

Canadian Mortgage Rates are Rising. What to Expect

Canadian mortgage rates are rising. Back in mid-2017, news sites predicted the Bank of Canada was preparing to raise its interest rates to reflect the current economy. Speculation was rampant as to how much the rates were going to climb, with many economists predicting increases of a quarter of a percentage point. They were right. Lending rates went from 0.5% to 0.75% in early 2017.

And then they went up again. 0.75% to 1%.

Just this month, the Bank of Canada announced they were raising their interest rates yet again, this time to 1.25%, a move once more pegged to the booming Canadian economy. The bank is expected to raise rates to 1.75% by the end of 2018.

Canadian mortgage rates are rising with the country’s six largest banks, anticipating the move, already increasing their prime rates as well as their fixed rates. The industry is speculating that this move is an effort to cool down the blazing real estate market to prevent a crash. Of course, this sudden hike breaks no records and is still significantly lower than pre-2014 mortgage rates.

It’s too soon to predict the long-term outcome of the banks’ actions, but house sales are expected to continue at a similar breakneck pace as evidenced by the increase in activity for the 5th consecutive month, recorded at the end of December 2017. There are simply too many factors affecting the housing market like the low unemployment rate and millennial ageing which the rate increase will be unable to buttress.

What does this mean for Canadians?

So, what does this mean if you’re a homeowner? Well, if you have a fixed rate mortgage, then you’re free to flip to the other page. That is until your mortgage comes up for a renewal. In this case, that’s about 47 percent of you with 31 percent due to follow within the next one to three years.

These rates should be of particular interest to variable rate holders as it could affect their mortgages. The increases were anticipated, with several real estate companies advising customers to renew their mortgages or switch to fixed rates as soon as possible. As one or two more increases are expected by the end of the year, it’s not too late to take this advice.

If you’re hoping to purchase your first home and are dissuaded by these reports, don’t be. As a future homeowner, the best move will not be backing away from your property-owning dreams. Rather, you should consider getting pre-approval and locking in a closed mortgage to cushion yourself against any more changes. With the market bracing itself for more action as Canadian mortgage rates are rising, there’s no better time than the present to purchase a property.

Overall, market experts are not particularly worried about Bank of Canada’s moves. We’re still a long way from eye-popping 15% rates as anyone who purchased a home in the 90s will tell you. Combine this relative stability with an iron-hot economy, there’s no doubt that the market has more than enough resilience to ride this wave which means, as a homeowner, you can rest easy. Check out this National Post Article.

Oct

LeBreton Flats Redevelopment: Soil Rich With Canadian History

The LeBreton Flats redevelopment has been quite the topic of conversation in Ottawa’s municipal news. Something exceptional is about to hit the 84-hectare region that sits a mere 20-minute walk from Parliament Hill, and it is about time! The majority of LeBreton Flats’ sprawl has sat virtually empty for decades. Why? Let’s take a look at the rich history buried beneath the soil of Ottawa’s most talked-about land.

The Early Years

Much before hockey stadiums and condo towers were in demand, sacred ceremonies were performed at the Chaudière Falls by the First Nation people. Indigenous groups including the Algonquin, Huron and Iroquois would conveniently set up camp around the corner on LeBreton Flats. Nevertheless, the harmless and pure nature of the First Nations could only last for so long.

Both Europeans and Americans started setting foot near the grounds in the early 1800’s and it wasn’t long until industrialists decided to capitalize on the powerful Chaudière Falls. Robert Randal of Maryland, USA, purchased the Flats, known as Lot 40 at the time, in 1809 for paper milling purposes. Soon after, he went bankrupt and his land, full of potential, sadly sat empty for the next few years.

During the War of 1812, plans were made to connect the Ottawa River and the lower Saint Laurence River with a military canal. Royal Engineer and British Surveyor-General Joshua Jebb gathered that a canal was achievable once improvements were made to the Ottawa River in order to direct it toward the Chaudière Falls.

Construction began in 1818 and in 1820 George Ramsey, the Earl of Dalhousie, toured the area with the idea of the canal addition in mind. He knew that the Richmond military settlement officers needed a place to safely store their cargo and equipment away from the weather, wildlife, and burglars. Shortly after noticing the potential of all the empty land, he publicized his idea to purchase Lot 40 at an officer’s dinner. Captain John LeBreton was in attendance that evening.

Captain John LeBreton was England-born but raised in Newfoundland and at the time was residing in the Nepean Township of Britannia, Ottawa. Living so close to Lot 40, LeBreton decided to pursue the lucrative plot of land without Dalhousie knowing. In 1820, he discovered Lot 40 was being sold in Brockville at a sheriff’s sale. Needing more capital to invest, LeBreton teamed up with a Brockville lawyer named Livius Sherwood. They purchased the land for £499 (approx. $835 CAN) from the newly-released but severely in-debt Robert Randall. Lot 40 was understandably renamed LeBreton Flats and Sherwood Heights.

The cheeky LeBreton then went to Dalhousie and the government and offered to sell his eponymous piece of land for £3000 (approx. $5,024 CAN). Absolutely infuriated, Dalhousie rejected his offer after realizing the man had scammed him. An intense feud began and Dalhousie assured LeBreton that the government would never purchase the Flats; Dalhousie took this grudge to his grave.

As a result, the canal was hastily moved to Entrance Bay, the current location where the Rideau Canal joins the Ottawa River. The overall cost of construction was significantly higher as extra locks and a longer route for the canal was necessary. To further redeem himself, Dalhousie also purchased a piece of land called Fraser Parcel which soon became the village of Bytown and Barracks Hill, the future location for Parliament Hill.

LeBreton earned a notorious reputation in the region, however, he is said to be one of the only people to fully recognize the land’s potential and future commercial value. Over the years, LeBreton and Sherwood began dividing their land into smaller portions and selling them to reap huge profits.

The Great Fire of 1900

By the mid-1800’s, LeBreton Flats was a fully functioning and well-established lumber mill community. While there was residential housing for workers and owners alike, a rail line including a station and yards were built to fuel industrial development. Hotels, taverns and other community-oriented stores were also open for business to the local population of LeBreton Flats, Chaudière Falls and Victoria Islands. Sawmills were established at the falls and the land encompassing Chaudière became lumber yards with a plethora of wood piled up to dry out.

On April 26, 1900, there was a defective chimney that caught fire across the Ottawa River in the heart of Hull, Quebec. Although fires were common and manageable, an intense wind began causing incurable problems. Soon half of Hull was burning and the south-travelling fire was rapidly heading toward Ottawa. Once it reached the E.B. Eddy Pulp and Paper Plant there was no point of return. Flames spread across the Chaudière Falls to the numerous lumber yards set on both sides of the Ottawa River. Stacks of lumber transformed into one huge bonfire.

The wind died down by midnight, but 14 hours of fire had done irreversible damage. Two-thirds of Hull was burnt to the ground and 440 acres sprawling from the Chaudière Falls to Carling Avenue on the Ottawa side was destroyed. Although only seven civilians were killed, 15,000 were left homeless as 3,000 buildings from Hull to Ottawa became piles of rubble, splintered wood and melted steel. The regions suffered an estimated $10 million in damage.

LeBreton Flats was once an endearing community to build a home and set up shop in. After the devastating fire of 1900, the region was rebuilt but locals were scared of repeating events. The Flats became a purely industrial area and the only residents living there were workers with nowhere else to reside.

The Tear Down and Current LeBreton Flats Redevelopment

LeBreton Flats became an industrial desert of train yards and lumber production for decades. Fast forward to 1962, the Diefenbaker government was working on gentrifying the area, which didn’t fit into the prestige of Canada’s capital. Officials planned to spruce up the area with a new defence headquarters and offices for the Government of Canada.

On April 19, 1962, all residents of LeBreton Flats and the direct surrounding area received notice of expropriation to beautify Ottawa’s central area. Roughly 2,800 residents in the 150-200 acres were forced to vacate their homes and make way for demolition. By 1965 the last of the houses and small businesses were gone, with the teardown costing a total of $15 million.

However, there were many conflicting viewpoints on the use of the land and soil contamination from the stakeholders of the redevelopment. Intense disputes between the National Capital Commission and the municipal government lead to figuratively demolished plans. For over four decades, LeBreton Flats lay vacant. It was primarily used as a snow dump during Ottawa’s brutal winters, while runoffs from the excess snow caused further contamination to the land.

Fast forward again to the 2000’s. The Canadian War Museum opened on a northern section of the LeBreton Flats redevelopment in 2005, the first actual initiative of the LeBreton Flats redevelopment that the city had seen in years. It is currently home to a multi-residential development, Mill Street Brew Pub and a connection of pathways for buses, bikes and cars. Ottawa’s popular 12 day Bluesfest festival grounds are also located at the LeBreton Flats redevelopment site. Furthermore, Canada’s National Holocaust Monument and the city’s first Light Rail Transit System will be situated there as well.

So, with all this in mind, 2016 will be one for the books with the LeBreton Flats redevelopment! The NCC accepted applications for the LeBreton Flats redevelopment in the area in December 2015 and the RendezVous LeBreton proposal won the hearts of officials. The three-phase development will take years, even decades, to complete but for the first time in centuries, the LeBreton Flats redevelopment has concrete plans to finally live up to its original potential.

Historical facts and dates extracted from Leveller.ca’s Article The Ugly History of LeBreton Flats Article and NCCWatch.org’s The Blunder: LeBreton Flats article.

Aug

Airbnb: Short-Term Rentals Have Never Been So Easy… Or Have They?

On April 15, 2016, Quebec became the first Canadian province to regulate home-sharing services. Now, under the provincial law, homeowners who frequently rent out their property must acquire the same certification as hotel and bed-and-breakfast operators. In other words, if you’re interested in vacationing in a Quebec home, the owners are obliged to charge lodging taxes up to 3.5%. Why? All because of a company called Airbnb.

Founded in San Francisco in 2008 and currently valued at over $25 billion, Airbnb is a fairly new company for its success. The online platform prides itself on being a trusted community marketplace for people to list, discover and book unique accommodations around the world. The statistics easily prove this statement correct, with over 60 million guests and 1.5 million listings in 34,000 cities across 191 countries. Airbnb allows anyone to sign up and rent living room couches, small apartments, beautiful houses, penthouses and even castles for their dream vacation, all at a wide range of prices to accommodate every budget.

Why Airbnb?

Airbnb isn’t just for travellers who need a place to crash in a foreign city. Without renters, there would never be short-term leasers. Anyone who owns residential property can register to be an Airbnb host and rent out their space under three categories: the entire home, private rooms or shared rooms. Of course, homeowners don’t open their doors to the public just to flaunt what they have. Hosts pick the price of their listing depending on a few suggested factors such as size, location, amenities, and when a guest books their home Airbnb only takes a small 3% service fee. The remaining money is pocketed by the homeowner making Airbnb a respectable and effortless money incentive.

Canada is one of Airbnb’s largest markets across the globe, with Montreal ranking in its Top 10 cities and statistics showing over 650,000 guests having stayed at Airbnb rentals during their travels in the country over the past year. In May 2016, there were roughly 9,500 Airbnb listings in Toronto with just over 60% being for entire houses. Similarly, over 4,200 hosts in Vancouver provided 6,400 units for rent through Airbnb, with 70% of those listings for entire homes.

A study shows the average Canadian Airbnb host makes about $6,500 annually through occasionally renting out space. Although this sounds like a sizeable amount of disposable income, further studies show that renters aren’t just pocketing their earnings. Aaron Zifkin, Airbnb’s country manager for Canada, stated that over half of people listing their properties do so to pay off their mortgage or to put towards monthly expenses. In large cities like Vancouver and Toronto where housing bubbles are inflating prices, Airbnb is a great opportunity to earn supplementary income to put towards the hosts’ basic costs of living. For example, an Ottawa townhouse owner who pays a $1,000 monthly mortgage has been earning $8,000 per year renting out a spare room on Airbnb. This helps them cover two-thirds of their year’s total mortgage.

Airbnb versus The Nation

However, as Airbnb’s popularity grows so do the negative side effects. To begin, Airbnb’s country-wide growth of 125% means an increased number of hosts in each city competing for guests. Furthermore, this new type of market has caused a slew of regulatory problems with city bylaws, landlords and even the national economy’s well being.

On a macroeconomic scale, Airbnb is a suggested factor affecting the Canadian housing bubble. Vancouver, and on a smaller scale Toronto, has seen extreme price increases for residential units while supply has stayed low. However, a recent analysis revealed that there are over 5,000 short-term accommodations listed in the Metro Vancouver region. So, while municipal councillors grapple to generate more rental housing for locals to live and work in downtown Vancouver, there are still thousands of places for tourists to stay on their visit to the west coast city.

The biggest threat is homeowners who frequently list their “entire home” for short-term rental over a long period of time. Doing so implies that hosts aren’t residing in their property and using it as an investment to generate income. Therefore, British Columbia has teamed up with the City of Vancouver to impose a vacant home tax in hopes of freeing up empty residences and increasing housing supply for long-term rentals or purchases.

Similarly, a nation-wide coalition craftily named “Fairbnb” has called on Toronto to regulate short-term rentals in the city and across the country. Chairwomen Lis Pimentel has a very open-minded approach to their mission and has no intention on outlawing Airbnb. Rather, she is opening up a discussion about affordable residential housing and how it is shrinking due to commercial and tourism intentions. Fairbnb is kindly asking “Canadian cities [to] modernize their laws and enforcement so that there are fair, consistent and respectful market rules for short-term rentals.”

Airbnb versus The Hosts

With all this in mind, Quebec has been the first province to make a move in the “fair” direction. Now, short-term renters will be registered and certified like all lodging establishments. This will help distinguish who is using their residential unit for commercial use and tax them accordingly. There will also be a penalty for those who dodge these taxes. A Montreal man has recently been charged $60,000 by Revenue Quebec after realizing he wasn’t claiming income tax from his Airbnb profits. Officials got wind of this after the man posted a video online explaining how he was able to pay off $500,000 in debt and then earn an additional $200,000 from short-term rentals.

In Quebec, tenants must obtain the landlord’s permission to rent their unit in the short-term. The neighbouring province of Ontario has a Residential Tenancies Act which states that the occupant cannot sublet their residences for a greater amount than what the landlord is charging. Furthermore, many condominiums forbid short-term rentals due to the safety of the building’s residents. Homeowners who violate any of these circumstances to cash in a few extra dollars through Airbnb risk excess taxation, legal fees, or even worse, eviction.

Perhaps most importantly, hosts should consider the overall well being of their home when listing it on Airbnb. Allowing an unknown face into the comfort of your own home, whether you’re there or not, is extremely trusting and can leave your property vulnerable to disrespectful sublets. A prime example of this is the infamous Calgary incident, where renters engaged in what the police described as a “drug-induced orgy”, resulting in roughly $75,000 in damage. Although Airbnb offers a $1 million insurance policy there are still loopholes in the fine print that do not cover all areas of potential damage.

Potential Hosts Be Wary

You may need a little extra help paying off expenses or perhaps be going on vacation and don’t want your property to sit empty, but there is a lot to consider when becoming an Airbnb host. Therefore, if you’re looking to list your home or condo do your research beforehand.

To begin, familiarize yourself with provincial and municipal laws. Is your lot zoned accordingly? Do you need a permit or license to legally allow short-term guests into your house? Are you subject to rental income taxes? Local policies vary quite a lot from city to city so make sure you are fully informed on your specific region so you can avoid penalties or hefty fines.

Once you fully understand the provincial and municipal legal aspects of being a host, acquaint yourself with your property-specific situation. If you live in a condominium, does renting with Airbnb adhere to your building’s board rules? If you’re a tenant, does your landlord endorse your listing and pricing of the unit? Of course, don’t forget to look into the Airbnb insurance policy as well as your own house insurance to see what is covered and what possible scenarios and assets are subject to risk.

Lastly, consider the extraneous variable that is out of your reach – the actual guest’s behaviour. You could be unlucky and host a bad guest who may not be respectful of noise, cleanliness, damage or even criminal activity. As a host, you are liable for what goes on inside your property, so ask yourself: is the risk worth the reward?

All this being said, Airbnb is an extremely well-regarded company that has connected renters with owners for good value through an extremely convenient platform. After operating for over eight years, the website has worked out a lot of its kinks to make each rental a pleasant experience on both ends of the spectrum. Listing a property is easy, but knowing your ownership rights, property-specific regulations and the locals’ laws are a lot less straightforward. Consider all aspects before signing up and if the risk is worth the reward then you might have a few extra dollars in your bank account!

Aug

Chinese Investors in Canada’s Condo Market

Back in 2013, the Chinese government decided to crack down on their very own housing bubble. This included implementing stricter regulations on the 20% capital gains tax for property sales as well as increasing down-payment requirements for mortgages on second homes. Chinese investors, both commercial tycoons and yearning homeowners, needed a new place to go and spend their money.

Meanwhile, housing sales in Canada were on the decline. The country’s largest condo markets, Toronto and Vancouver saw a 7.8% and 25.5% drop respectively in existing high-rise and apartment sales. It was around this time where the Chinese saw the potential to capitalize in Canada and began investing in the Canadian real estate market. In recent months, this effect has been accentuated since China’s turbulent stock market has become virtually unprofitable for investors. Therefore, their citizens have even more incentive to buy into Canada’s real assets.

Foreign funding, from any nation, has started to fuel Canada’s housing market with the average investment from a Canadian citizen or permanent resident at $735,000 versus the staggering $1,157,000 from buyers abroad. However, a more shocking statistic from a recent study in British Columbia showed that 76.6% of foreign buyers for residential properties were from China. Furthermore, Chinese buyers are the largest foreign investors in Canada, holding 65% of the market within the first six months of 2016. This works out to be $1.3 billion, compared to the $309 million at this time last year.

What Is So Appealing From A Social Perspective?

There are of course more reasons for Chinese investors to purchase real assets abroad. Many of the Asian middle and upper class have enough money to establish a decent lifestyle in Canada where the way of life is slightly more refined. Many Chinese immigrants actually perceive Canadian tendencies to be generally more ethical and respectful than in their homeland.

Pollution plays another strong role. In China, AQI indices are checked regularly to predict the intensity of grey skies and smog. In stark contrast, Canada is known for its fresh air and a plethora of outdoor activities. Living in a society where surgical-style face masks are uncommon is truly enticing, not only for enjoyment but also for one’s overall health.

Statistically speaking, Chinese citizens have the second highest population out of the total number of Canadian immigrants, next to the United Kingdom. Furthermore, upwards of 1.5 million Canadians are of full or partial Chinese descent. With such a large Chinese community across the nation, it has proven to be quite easy for Chinese immigrants to assimilate into society. Some actually say they hardly feel like foreigners at all thanks to the strong sense of openness and pride amongst local Asian communities.

Canadian Developers Working In China’s Favour

When developing a condominium in Canada, lenders want a sense of security, generally asking for builders to sell around 70% of the building’s units before initiating construction finances. With so many condo projects nationwide, including over 115,000 individual units scheduled for completion in Toronto, developers have been heading directly to China to pursue foreign buyers.

Canadian real estate agents, who usually have ties to China, regularly travel to Beijing and Shanghai to showcase new developments to upper-class families and other potential buyers. Macdonald Realty Inc., a Vancouver based broker, actually has a sales office set up in Shanghai to sell Chinese investors a variety of condos units in Toronto, Montreal and the west coast.

Developers see this tactic as a great business strategy given the increased competition in the Canadian condo market and the never-ending announcements of new developments. Nevertheless, heading directly to Chinese investors is making it easier than ever for them to purchase properties without thinking twice. Not only does this add to the housing bubble but there is no sign of foreign buyers slowing down as long as developments continue to be built.

The Current Situation: Canada’s Market Vulnerability

What does all this Chinese investment mean for Canada’s housing market? With foreigner buyers, including Chinese investors, snapping up condos, supply decreases and prices are boosted. This leaves little leeway for Canada’s domestic population who are now struggling to afford a home for themselves. Prices for both single-family houses and condo units have risen dramatically over the past few years and local Canadians are suffering.

The best example of this is in Vancouver, where only a decade ago people of all ages could live a nice and comfortable lifestyle downtown. Now, home ownership is basically beyond the reach of the younger population. Nevertheless, over 10% of condos in the west-coast city remain vacant. This is partially because over the years foreigners have invested in properties with no intention of inhabiting them. Sadly, locals want to live in these empty units, but foreigners beat them to the punch with their higher bids.

Although a vacant home tax has been proposed for this specific issue, economists worry about how the Canadian housing market will react. It has reached a point of sensitivity that even the smallest change could send the industry over the edge. Imposing a special tax could decrease foreign investment, the main driver of the current market. Without foreigners to purchase condos, construction would surely slow and that would deprive the Canadian economy of countless jobs.

At a time where Canada’s dollar is weak and the market is delicate, it is hard to predict what is best for the national economy. Foreign investment is proven to be important, but so is the Canadian population’s right to live in housing where inflation is at a fair rate. It is a vicious cycle and only time will tell how it will all play out.