By Robert Frank
Vancouver’s new urban planning leadership has made spectacular advances, John Stovell acknowledged, but still-stovepiped processes have become so slow and reactive that major development projects can take 15 years to complete.
“Municipalities, particularly Vancouver, are not getting enough land out there ready to build on,” warned Reliance Properties ceo. His solution? Anticipate housing demand and identify land in time to develop homes that will be ready right when they’re needed.
“Planners have stopped pre-zoning land,” he regretted. “They need to get ahead of the market. Otherwise supply will never catch up with demand.”
That imbalance has driven stratospheric property prices in the province.
“We’re starting to see cities become more willing to rezone single-family areas,” Stovell observed. “Single-family is inefficient and unavailable to the vast majority of the population, hence a subsidy to the rich.”
Taxing foreign purchases buys only temporary relief, since it fails to solve the underlying supply shortage. Spiking price points and stagnant interest rates have spurred a shift from strata market housing to rental development.
“Developers see huge potential in rental as a hedge against undersupply,” Stovell added. “If municipalities don’t approve enough properties, they make rental more valuable.”
Besides the red tape tie-ups, often-contradictory government intervention remains a topline risk.
“Vancouver is bringing in a vacancy tax. The province, in turn, increased the property tax on homes worth more than $2 million from 2% to 3% and tacked on an additional 15% for foreigners, who now must pay 18%,” he said. “The federal government has restricted access to the market for first-time homebuyers by increasing stress testing for insured mortgages. Then the province turned around and raised the threshold for the property transfer tax for first-time homebuyers to $500,000 and offered them a second mortgage—which is exactly the opposite of what the federal government is doing.”
A combination of uncertainty south of the border and the need to attract funds to finance government deficits in Canada also makes interest rates another wild card.
“Interest rates have been so low for so long that we’ve all forgotten that they’re the single biggest factor driving demand in all real estate sectors,” Stovell concluded.
This report first appeared in the Spring 2017 edition of Canadian Real Estate
