HST repeal appeal
It was only a matter of time before the repeal of the HST was touted as an investment advantage.
John Gee, an apartment broker and vice-president, investment sales, with Colliers International, stepped up, noting that the rejection of the HST by voters will combine with an allowable rental increase this year of 4.3% to hand landlords a significant boost to cash flow over the next two years.
Here’s how it works: the harmonization of federal and provincial sales taxes in July 2010 boosted the year-over-year inflation rate, which dictates the annual allowable rental increase landlords can ask of tenants, as set by the Residential Tenancy Branch. (Provincial regulations allow landlords to increase a tenant’s rent by the inflation rate plus 2%.) A higher inflation rate in 2011 boosted the allowable rental increase for 2012 well above the 2.3% increase allowed in 2011.
But when the HST is terminated in 2013, don’t expect rents to come down. Cash-hungry landlords aren’t about to give up the gains unless the bottom falls out of the rental market (unlikely). The embedded rental increase and lower operating costs when the HST disappears (assuming all previous exemptions are restored) will – according to Gee – translate into an increase on rental income of close to 6.5%. Add in low financing costs, and the gain is even greater. Gee was keen to point out these facts in light of the rapid sale of 1937 Pendrell Street, which sold within hours of being offered to the market in mid-August at $13.5 million (or a staggering per-square-foot price $588). While the HST didn’t factor into the decision of the buyer (Eclat Investment Ltd.), Gee said Eclat will benefit from the changes.
Progress report
A reader wanted to know more about the once-controversial townhouse project on the former Nichol property at the southeast corner of Granville and 16th Avenue.
The 15-home project is steadily taking shape, and the first units are slated for completion by early next year. But the question that seems to be on people’s minds is: what are buyers paying for the homes?
Brian Bell, president of developer Arthur Bell Holdings Ltd., deflected the answer, saying that the homes aren’t being marketed yet so there is no price. He’s waiting to complete the development before taking the homes to market, at which point he’ll offer them at current market rates.
“It’s better to show something in the flesh than try to sell off paper,” he said.
Preliminary research indicates that pricing the homes is going to be difficult because of the attention being paid to each detail. Moreover, the unique corner site serves as the entrance to Shaughnessy and is at the top of the toney South Granville shopping district with its high-end shops and salons.
Bell added that roof-decks on the units taking shape on the higher elevations of the property offer views toward Point Grey, downtown and the North Shore as far as Lighthouse Park, potentially boosting their value.
The buzz around the development is a neat compliment for a site that stirred opposition when it was first proposed. The Shaughnessy Heights Property Owners Association argued that the project would compromise the character of the neighbourhood and set a precedent for the wholesale densification of properties surrounding “The Crescent.”
“People have realized that it’s not as bad as maybe they anticipated it would be,” Bell said. “I always thought the product would speak for itself once it finally appeared.” •
