StreetWise:
fOR OWNERS Of iNcOmE pROpERtiES & dEvElOpmENt SitES
Second Half of the Year Promises Greater Certainty, Activity :
Many brokers were active in the weeks leading up to the June 25 hike in the inclusion rate for the federal capital gains tax, arranging the sale of long-term holdings so that owners could avoid the inclusion rate of 66% on capital gains above $250,000 and instead pay tax on just 50%.
While the uptick in activity was short, sharp and had a specific trigger, it was also welcome. With muted activity over the past year, any sign of life in the market is a sign of hope.
But we think the roots of optimism in the second half of the year run deeper than this one surge in activity. The change to the capital gains tax, while not welcome, gives investors certainty after months of wondering just what the government was planning. Originally announced in the April budget, the change wasn’t part of the budget bill. Instead, the details were announced at the last minute. Now investors know, and can price in the implications of the change.
Combined with the capital gains change is a move to reduce interest rates. The initial cut of 25 basis points on June 5 was minor, but a welcome sign after more than two years of rising rates that remained high for longer than some believed was necessary. Now that interest rates have started to fall, buyers who have been on the sidelines – and rushed in when owners seeking to avoid the capital gains hike came to market – will become more active. While there have been opportunities over the past two years, there is now a greater measure of certainty that will support investment activity. This will also spur sellers to enter the market, boosting the
range of options available because there will be a better sense of the pricing they can expect.
Moreover, any decrease in interest rates typically supports higher values, meaning assets purchased today have greater upside than those purchased deeper into the cycle.
During this year’s first quarter, investors were already showing renewed interest in local assets.
The greatest improvement versus a year ago was in multifamily properties, with the number of transactions up 92% to 23 and value up 251% to $354 million. This speaks to fundamental importance of housing as supply fails to keep up with demand. Shelter is a fundamental human need that never goes out of style, and developers are scouting sites for new projects.
Jobs space was also in demand, with both industrial and office properties seeing more sales in the first quarter than they did a year earlier. This pointed to greater confidence in the future and renewed economic activity. These things are likely to increase now that there’s greater clarity on various policies and costs associated with real estate.
With business normalizing, so is investment. We’re hearing from our clients that the time is right, to move back in. While uncertainties remain, there are fewer of them than there were two years ago. To discover the opportunities that await you in Metro Vancouver, contact us today.
Client Success Story
2-storey office building near Royal Columbian hospital 237 e Columbia street new Westminster
Challenge
testimonial
To assist a client with the purchase of a medical building that he can use right away for his existing business and with potential redevelopment in the future.
aCtion
• Our team scoured the market searching for the properties that fit our client’s criteria.
• Client was informed with weekly progress reports regarding our activity.
• Our letter to the ownership of our top choice building triggered the listing of 237 E Columbia Street.
Result
We focused on working with the medical building that our client was a tenant in, the building was a perfect fit for our client, however the building was listed at a much higher price. With persistent negotiation and our knowledge of the building, we were able to bring the price to $6,750,000. A fantastic price for my client, we exceeded our client’s expectations by getting the price in his favour.
“Sam Emam’s hard work and months of negotiation with our purchase was a success, we got the building we wanted with future development potential, close to transportation and for a great price. We very much appreciate the efforts of Sam Emam, he performed like a true pro and helped us get a complicated deal to the closing table. We will not hesitate to recommend him to our colleagues, friends and family.”
– Manouch Amel Current owner of 237 E Columbia Street