Newport Realty, operating out of Victoria, British Columbia is an exclusive affiliate of Christie’s International, as is Chestnut Park. In May, Newport Realty celebrated its first year anniversary as an exclusive Christie’s affiliate. Newport Realty celebrated the anniversary by inviting the Faith Wilson Group, the Christie’s exclusive affiliate in Vancouver, Zack Wright, Christie’s west coast and Asian Pacific co-ordinator, and me to make presentations to the Newport Realty sales team.
In Faith’s and my case, we were asked to speak about our respective real estate markets. Zack made a presentation outlining the current activities of the Christie’s Auction House and Christie’s International Real Estate. Of particular interest was the recent auctions of Audrey Hepburn’s estate and the Collection of Peggy and David Rockefeller. Both auctions were a tremendous success with the Collection auction generating $833 million. The Rockefeller name continues to weave a certain mystique, as evidenced by the fact that David’s gold money clip sold for a knock down price of $75,000.
On the Christie’s real estate front Zack spoke about Christie’s first resale brokerage with offices in the same building as the auction house. The brokerage is developing a strong presence in the New York market place. Our Toronto office has already sent a $4 million Brooklyn brown stone referral to the new Christie’s brokerage. We expect to do much more business with New York in the future.
Faith Wilson (principal of the Faith Wilson Group in Vancouver) was particularly interesting. The real estate market in Vancouver and the Lower Mainland has been dramatically impacted by the measures that the provincial government has taken in an attempt to make the resale market more affordable. It hasn’t worked. The government’s measures have dampened sales but nothing to make real estate more affordable.
The government has implemented a 20 percent foreign buyer’s tax. It has increased land transfer taxes. Imposed a vacancy tax, and has also increased the “school tax” to be paid by owners of homes that are valued at $3 million or more. Notwithstanding all these measures, the average price of a detached property is still more than $1,600,000, and condominium apartments, which are still the most affordable housing (sic) form, are selling for more than $750,000. By comparison, the average detached property in Toronto sold for approximately $1,300,000 and condominium apartments for slightly more than $600,000.
Aside from the fact that these measures have had no impact on affordability, they have been financially counter-productive. The sharp decline in sales (more than 25 percent) means that provincial land transfer tax revenues have also sharply declined. These are important lessons for whatever government Ontario elects in June. Government’s attempt to engineer the market place, to try to control the prevailing economic forces at play, can have unintended, and most often, negative consequences.
One very clear distinction between the Vancouver and the Toronto markets is the number of foreign buyers. In Toronto’s case, at their height, the numbers were negligible, at most about 4 percent. The numbers were much higher in the Lower Mainland. What is dramatically similar in both markets is the lack of supply, both properties for sale and rental accommodation. The vacancy rate in both cities is approaching crisis levels.
What my Victoria and Vancouver exploration has stunningly brought home is that it is imperative that our respective governments, including municipal governments, undertake and promulgate measures to stimulate supply, particularly rental supply. Tinkering attempts at controlling affordability are misguided. The sooner we accept that cities like Vancouver and Toronto have moved into the realm of cities like Hong Kong, New York, Paris, London, and some cities in Australia and New Zealand, governments can focus their efforts and legislative powers to encourage supply.
I should mention that Vancouver’s setting, the ocean, the mountains, and the climate certainly challenge anything we know and experience here in Toronto. Some things are the same and others very different!
Prepared by: Chris Kapches, LLB, President and CEO, Broker
Source: Chestnut Park Blog