July 2019 Edition
You’re on holiday and leisurely enjoying your coffee at the local café. And out of the corner of your eye the local real estate paper seems to beckon. Soon you find yourself casually flipping through listings, dreaming of what it would be like to own your own home in the Gulf Islands, Whistler, the Sunshine Coast, Tofino or the Okanagan.
We’ve all been the casual vacation home browser and for good reason. We are apt to fall in love with the places where we holiday, where lifelong memories are created and where we are in a less hurried state of mind. With a bevy of amazing options within hours (or less) from the Lower Mainland and with primary residences having doubled to quadrupled in value since they were purchased, the curiosity makes sense. So we thought, given that it is summer and all, we would focus this month’s feature story on whether you indeed should buy that vacation home, and share a bit of professional advice of what’s in store if you decide to move forward.
Across BC recreational property sales decreased 22.5% over the past year according to the Royal LePage Recreation Report. At the same time, prices in many markets have seen slight decreases. The recreational market is showing more resilience to price declines than urban markets, perhaps because of trends notes in the Recreation Report of baby boomers selling their urban residences and using the equity to buy recreational homes as primary residences. While there may be more inventory in the future to choose from, prices are unlikely to experience large declines.
GETTING A MORTGAGE
Financing applications within known recreational markets are typically looked upon more favourably by banks than uncommon ones. BC Business reports that if the home is more remote, often it falls outside of the traditional models of the banks and therefore they could require a minimum 35% down payment. And even then banks may decline a mortgage all together if there are concerns about water portability, the state of the septic system, and non-continuous foundations. If the lot is not already serviced, expect a minimum 50% down deposit or perhaps even a denial. Through helping to sell properties like Block 9 Narrows Arm and actively talking to buyers interested in Lot 39 on Hardy Island, we have become pros at understanding mortgages for recreational properties. Just ask.
If you want to vacation there, surely many other people do as well. However, there are some things that make the home ideal versus difficult to rent. Sure there are the obvious factors like a pool and waterfront access that make a home more desirable to vacation renters. According to Airbnb it is also about the small amenities that matter. If you are looking for the best gear to outfit your rental with (or even your home), look no further than this Wirecutter article.Keep in mind that some communities require you to acquire a permit to rent your home. Check on the permitting process, and, of course, enquire about previous permits the owners have received or been denied to rent the home. And yes, rental income is taxed by CRA based on your income bracket, which can be up to 44%.
WRITING OFF THE PROPERTY
After a few recent court rulings, the CRA has taken the position that if you use the property personally and rent it out the rest of the time, your business use is only the period when you can reasonably expect to rent out the property. Therefore, deducting a loss on your taxes can only be done for the time the property was viable to be rented and did not. The same goes for expenses and GST on purchase. This article is a helpful reference.
The party(ies) who purchase the property can have significant tax consequences depending on who holds the title. Carefully considering the legal property owners from the outset may save you huge on capital gains down the line. There are reports of Millennials so called “mortgage hacking” by buying a vacation home and declaring it as their primary residence for tax purposes, and renting in the city. And with the RE/MAX 2019 Recreational Properties Report showing that 56% of Millennials are in the market for a recreational property as compared to 40% of all Canadians, investing in a recreational property can be a very good long term appreciation strategy.
SPECULATION AND VACANCY TAX
As you are likely aware, the provincial government has imposed a new tax on homes that are not primary residences, nor being rented. It is important to consider whether this tax should be part of your calculations in determining what you can buy and where. Note that there are many exemptions from the tax and regions where the tax does not apply.
While we certainly couldn’t convey everything in this article, we are always happy to chat about the ins and outs of buying a vacation home. And that goes for anywhere, not just in BC, as we are connected to esteemed agents across Canada and the U.S. Give us a call or drop us a message anytime, even if the question seems to be a simple one.
UPCOMING NORTH SHORE EVENTS
The long awaited 8,000 square-foot water park with splash pools and sprayers is set to open on the 20th after the opening ceremony that starts at 2:30. You may want to come early though as there will be activities starting as early as 11AM including games, a performance by Bobs & Lolo, chalk art and a history walk. And while this should be enough to get us through summer, the 12,000 square-foot outdoor skating facility will open come winter.
July 20 | 3:30PM
Everyone’s favourite summertime fireworks are back and promise to be bigger than ever. While the fireworks are not until after dark, music acts start just after 2PM each day. To see the full lineup click here.
July 27, July 31, August 3 | 10PM
This ten-day North Shore arts festival is celebrating its 29th year and for good reason. With over 150 free events, it truly offers something for everyone spanning the visual, culinary and performing arts. Harmony Arts should also be commended for being a Zero Waste Festival. The Festival takes place in West Vancouver along the waterfront on Argyle Avenue from 14th to 16th Street. For the full calendar click here.
In case you missed the Horseshoe Bay Dinner on the Dock, consider this a second chance to dine waterfront under the stars in North Vancouver’s Burrard Dry Dock Pier. Tickets include happy hour cocktails, a four course meal by Chef Joel Green, desserts, live music and gift bags. To purchase tickets click here.
August 7 | 5:30–10:30PM
Set against the backdrop of the North Shore mountains, come watch spectacular tennis on the intimate courts of Hollyburn Country Club. This year’s tournament features stars such as Johanna Konta, Marcos Baghdatis, Eugenie Bouchard, Vasek Pospisil, Rebecca Marino and Brayden Schnur. There is no tournament in Western Canada that allows you to get this close to such talent. And if you have kids, August 14th is a free-day for them to catch the action, and take a clinic as well. Sign up here.
6484 Pitt Street, West Vancouver, BC
This Cape Cod style home is on a flat lot that basks in sunshine all-day on its oversized pool. With over 2,300 square feet it has five bedrooms with two and a half baths. The modern open-concept design means everyone can enjoy the well-appointed kitchen, not just the chef. And when the meal is ready, head outside to your oversized deck overlooking the pool and Bowen Island.
To see more photos please click here. 6484 Pitt Street is offered for $1,890,000 and available to view at the Open House Sunday, July 21, from 2–4:00 PM. Listed by Keith Bowker and shared by MLS® reciprocity.
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JUNE MARKET STATS
June typically underperforms May, and this year was no different. There were 2,098 homes sold of all types in Greater Vancouver compared to 2,467 sales in June last year. This was the lowest amount of sales in the month of June since 2000. The average home price declined 8.7% to below $1M (albeit barely) for the first time since May 2017. However, West Vancouver detached and condo home prices both rose compared to May. Please contact us if you’d like specific information in your neigbourhood or where you are considering moving.
Metro Vancouver Snapstats
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Greater Vancouver Snapstats
Fraser Valley Snapstats