BCBusiness

I t seems like just yesterday that the Vancouver con- dominium presale market attracted hordes of buyers. Condo prices were climbing rapidly, and the desirability and curb appeal of a brand- new unit looked too good to pass up. Desperate buyers would camp out the night before a new development's presales opened. In some cases they would pay people to sit in line and hold their spot, in the hope of securing a property. Presales have been highly speculative and, over the past few years, highly pro•table. Buyers simply needed to put down a 5-percent deposit to secure a home, with additional deposits spread out over the span of a year. Soon, just like clockwork, prices would in ate, and they'd reap a big return. With prices increasing 20 to 30 percent annually, and the cost of land and construction rising, many condo develop- ers began charging more than the current market value. For buyers, it made sense to lock in the price today when it would surely be higher in a couple of years. It was a speculative gamble, but one that largely paid o…—and, in some cases, created tax- free gains. Presale buyers were get- ting a contract to purchase an uncompleted unit, and the only paper trail was a list held con•dentially by the developer. A buyer would then assign— another word for ip—the contract to a new owner before the unit was •nished. Because nothing got registered with the land title o‰ce, tax o‰cials never learned of the capital gain. In fact, for the Canada Revenue Agency to obtain the list of presale buyers and/ or ippers, it had to take the developer to court. That's exactly what the CRA did. Big-name Metro Vancouver projects like MC2, Trump Inter- national Hotel & Tower and Wall Centre Central Park were ordered to hand over their lists of buyers. However, it's been a long and ine‰cient process for the taxman. That's all about to change, and so is the presale space. As if mortgage stress tests and a slew of other federal and provincial policies designed to cool the housing market weren't enough, the B.C. government has legislated that new developments must collect and remit the names of buyers and ippers of all presales. This move, along with condo prices trending lower, will put a damper on speculation. As of July, the average sale price in the city of Vancouver was about $860,000, according to the Real Estate Board of Vancouver, down 2 percent year-over-year. The shift is already under way, and many developments have begun o…ering incentives such as decorating bonuses—an allowance for ooring, appli- ance and other upgrades—to bring back buyers. The new presale registry is "extremely signi•cant," says Vancou- ver architect and developer Michael Geller. "People have been told presales are a great way to make money tax-free," Geller adds. "But as soon as you have registration, it's a game- changer. I think it will result in the cancellation of some proj- ects moving forward." › Despite the changes, hous- ing starts and permits to create new units are still running at all-time highs, suggesting that developers haven't inched yet. With the tides turning and the storm clouds closing in, though, they'll have to navigate the choppy seas ahead with fewer buyers. Flip Flop As the feds and the province crack down on tax-free prots from condo presales, will some projects fold? by Steve Saretsky ( the informer ) sOuRCEs: statistiCs CanaDa; stEVE saREtskY P R OP E R T Y WAT C H Building Up 12-month sum of new dwelling units created in b.C. OCtObER 2018 BCBusiness 21 25,000 30,000 35,000 40,000 45,000 50,000 DEC 11 maR 12 Jun 12 sEp 12 DEC 12 maR 13 Jun 13 sEp 13 DEC 13 maR 14 sEp 14 DEC 14 maR 15 Jun 15 sEp 15 DEC 15 maR 16 Jun 16 sEp 16 DEC 16 maR 17 Jun 17 sEp 17 DEC 17 maR 18 Jun 18 Jun 14

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