This will be the year that kills home-ownership dreams for many aspiring first-time buyers
This is the year that kills home-ownership dreams for some aspiring first-time buyers.
Mortgage rates are expected to creep higher in 2018, which means declining affordability. As expensive as houses in some cities are, they may never be as accessible to the first-time buyer as they are today. The choice these buyers face is to jump in now, or accept that they may never own a home unless they settle for a condo, move to a cheaper city, get help from parents or advance their careers in a way that brings a big pay increase.
Higher rates were for years a phantom menace that never showed up. But rates for borrowers did move a little bit higher in the latter half of 2017 and there's an expectation of further increases in 2018. In its most recent Housing Trends and Affordability report, RBC Economics predicted the Bank of Canada's trendsetting overnight rate would rise by a total of 0.75 of a percentage point this year, and that the longer-term rates guiding mortgages would rise in tandem. "Our view is that the days of ultra-low interest rates in Canada are over," RBC said.
The toughest now-or-never decisions about home buying will be made by people in Toronto, Vancouver and Victoria, which were singled out by RBC as being the most unaffordable markets. Ottawa and Montreal were showing "affordability tensions," while the Prairie and Atlantic regions weren't bad at all for buyers.
In late November, the mayor of Saint John posted a note on Facebook inviting Toronto and Vancouver residents to move to his city to benefit from short commutes and houses priced well under $200,000. But we haven't seen evidence yet that desperate home buyers are migrating out of expensive cities.
Higher rates might depress housing prices or cause them to stagnate – that's an argument for not rushing into a house purchase. But higher rates and lower prices can offset each other in affecting your mortgage payments. On a house bought at the national average price of $503,852 in November with a 10-per-cent down payment, your monthly cost would hardly change from current levels if rates rose half a percentage point and prices fell 5 per cent.
A sharper increase in mortgage rates could really hurt the housing market, as could a recession. But neither outcome seems likely in today's slow-growth world, where the economy has struck a balance between exuberance and despair. Housing is maybe the biggest winner of all economic sectors right now. Rates remain exceptionally low on a historical basis, yet the economy is healthy enough to sustain demand for homes.
Another reason not to procrastinate about home buying is the potential for more measures from government and regulators to make it harder to get a mortgage. The latest steps, including a stress test to see if people with down payments of 20 per cent or more can afford higher mortgage rates, kicked in Jan. 1.
The housing sector would love for governments to rescue first-time buyers. The Canadian Real Estate Association has proposed the remarkably bad idea of allowing parents to withdraw money from their registered retirement savings plans to help their children buy a home. But governments now seem to understand the housing market needs less stimulus, not more. On balance, there's no significant help for buyers coming from the provinces or Ottawa.
If you're struggling to decide whether to get into the housing market, consult The Globe and Mail's Real Life Ratio calculator. I designed it to help first-time buyers and current owners see if they can afford to own a house and cover other expenses like saving for the future, making car payments and paying for daycare.
The RLR calculator shows how much money is left over for you and your household after the cost of owning a house and other financial obligations are covered. If you have a down payment saved and an RLR score of acceptable or better, it's hard to see any benefit in delaying a home purchase.
It's a natural result of having a dynamic housing market that some people will never be able to buy a single family home in the city of their choice. In 2018, aspiring buyers and the rest of our housing-addled population will have to accept this reality and move on with their lives.
B.C. Real Estate Association predicts further dip in home sales in 2018
It's cautioning would-be home buyers that prices likely won't soften, however.
Government housing market measures hurting, not helping first-time buyers, says Macdonald Realty
The federal government’s tougher mortgage lending rules and the British Columbia government’s affordable housing measures are working against each other. Ultimately, these moves will hurt first-time buyers the most, says a senior real estate executive with a leading Vancouver-base
Canada’s banking regulator, the Office of the Superintendent of Financial Institutions, says it wants to reduce the risk of mortgage defaults due to high levels of household debt. But applying stricter lending guidelines is making it more difficult for home buyers to access mortgage funds, says Dan Scarrow, vice-president at Macdonald Realty.
Last year, the former Liberal provincial government offered first-time home buyers help in covering the cost of a mortgage down payment with an interest-free loan of up to $37,500 that is pay
ment-free for the first five years, Scarrow said, adding the new NDP government says it wants to continue the program for the time being.
These initiatives, on top of government intervention with the 15 per cent foreign buyers’ tax introduced last year and two interest rate hikes this year, are causing major market distortions, such as overheated entry-level home buying and a cooling of the higher priced homes in Vancouver, he said. Over the past year, MLS statistics show that the benchmark price for a single-family home in greater Vancouver rose only 2.9% to $1,617,300 while condo prices soared 21.7% to a benchmark price of $635,800.
In the end, all these initiatives are hurting the very people that various levels of government are trying to help, says Bill Dick, managing broker for Macdonald Realty.
“Since many of the government reforms have been implemented, the top end of the market has softened while the entry level has performed extremely well,” he said. While Macdonald Realty realizes there is a place for some government intervention in the housing market, it is against the mortgage regulation changes that it sees as unnecessary, especially considering that Canadian banks have long been recognized globally for managing their business well.
“The regulators have arbitrarily insisted that buyers undergo stress testing that artificially limits the amount that they can borrow, making it harder for first-time buyers to compete with already wealthy landowners,” Scarrow says. “The banks have their own risk assessment and they have made the determination that these are acceptable risks and returns that they are willing to take.”
Macdonald Real Estate Group employs more than 1,000 people in over a dozen real estate offices across British Columbia. Last year, sales volume exceeded $8.9 billion while assets under management grew to over $5 billion
2016 - A year full of changes to the mortgage industry
As we ring in the new year and start thinking about our goals and resolutions, we thought this would be the perfect time to take a look back at 2016 and all the changes this year has brought to the mortgage industry.
1) Increase of minimum down payment for mortgages over $500,000
On February 15, 2016 the minimum down payment for new insured mortgages was increased to 10% for the portion of the house price above $500,000. This means that for a purchase price of $600,000, the minimum down payment is now actually 5.8%
2) Property Transfer Tax for NEW constructions up to $750,000
All buyers (whether first time buyers or not) no longer pay Property Transfer Tax on purchases of NEW homes up to $750,000 in value
3) Property Transfer Tax on properties over $2 million
There is now a 3% tax on amounts over $2 million. The 3% is only paid on the amount over $2 million, not the full price. For properties less than $2 million, there will be 1% tax on the first $200,000 and 2% tax on the balance between $200,000 to $2,000,000.
4) Additional 15% property transfer tax for Non-Residents purchasing properties in the lower mainland
5) MORTGAGE STRESS TEST - Increase in qualifying rate for ALL high-ratio mortgages. On October 17th all insured homebuyers must now qualify for their mortgage using the BOC's posted rate (currently 4.64%) This reduced most peoples purchasing power by about 20%.
6) NEW down payment assistance program for First Time Home Buyers
The BC Government announced a new down payment assistance program which will enable first time home buyers to obtain down payment funds from the BC government to assist with the purchase of their first home.
7) Reporting the sale of your primary residence on your personal income taxes
8) Fixed mortgage rates have started to rise
With all the new rules and the recent effects of the Trump nomination, we've seen interest rates go up and this is expected to happen again in January.
9) Changes in the rates offered by lenders
Again thanks to the new rules and due to the cost of funds to the lenders, most banks are charging higher rates for mortgages on rental properties and in some cases for refinances.
BC Assessment has published its 2017 property value data online, and homeowners across Greater Vancouver have found their residences are being assessed at rates that are considerably higher than they were a year ago.
The values reflect market value as of July 1, 2016. The total value of all property in Greater Vancouver has been assessed at $825.2 billion; this is a 29.7% increase from $636.2 billion in 2016. Just under $11 billion of this increase relates to new construction, subdivision and rezoning.
How much a property’s assessment has increased depends on the home type and its location.
“The majority of residential homeowners within the region can expect a significant increase compared with last year’s assessment,” said Jason Grant, an assessor with BC Assessment. “Increases of 30-50% will be typical for single-family homes in Vancouver, North and West Vancouver, Burnaby, Tri-Cities, New Westminster and Squamish.
“Typical strata residential increases throughout these areas will be in the 15-30% range.”
One of the biggest increases was seen in Burnaby’s Buckingham area, where the average single-family home value jumped 46% to more than $2.7 million. Single-family homes in North Vancouver’s Lynn Valley (up 46% to more than $1.6 million) and in Ambleside in West Vancouver (up 42% to more than $3.9 million) saw some of the region’s biggest increases.
On the other side of the coin, the smallest increases were found in apartments and townhomes. For example, strata high rises in the Metrotown area of Burnaby saw increases of 19%, with the average value reaching $608,000.
Chart: Summary of estimates of assessment increases. Source: BC Assessment press release
Commercial and industrial properties also increased, with average values up 15-40% in the year.
“Commercial properties being purchased for eventual redevelopment will often exceed these ranges,” Grant said.
Assessments are in the mail. Property taxes payable for 2017 will be based on these assessed values at a tax rate to be set in spring by each municipality. Homeowners are encouraged to contact BC Assessment as soon as possible if they have concerns about the assessed values of their properties. To appeal, they must submit a Notice of Complaint by January 31.
Homeowners can find more information about the assessments at BCAssessment.ca.
Last year was Metro Vancouver’s third highest home-selling year on record: REBGV
REBGV president Dan Morrison | BIV files
Sales cooled off toward the end of the year, but in 2016 overall, the number of homes sold across Metro Vancouver was the third highest on record, after 2015 and 2005.
A total of 39,943 homes changed hands last year, which was a 5.6% drop compared with the 42,326 units sold in 2015, the highest year on record, according to Real Estate Board of Greater Vancouver data released January 4. It was also 20.6% higher than the 33,116 homes sold in 2014.
REBGV president Dan Morrison called 2016 “an eventful year,” and said the low supply and high demand caused a lot of attention to be focused on the area’s real estate.
“As prices rose in the first half of the year, public debate waged about what was fuelling demand and what should be done to stop it,” Morrison said. “This led to multiple government interventions into the market.”
These interventions included the 15% foreign buyer’s tax implemented last summer and new federal mortgage rules put in place in October.
The composite benchmark price for all home types across Metro Vancouver was $897,600 at the end of the year, which was a decrease of 2.2% compared with the end of June but up 17.8% year-over-year. The benchmark price for detached properties increased 18.6% over the year, reaching $1,483,500. For apartments, the benchmark price climbed 17.3% to $510,300, and attached property prices increased 20.4% to $661,800.
Sales falter in December
In the final month of the year, 1,714 homes were sold, which was a 39.4% drop compared with the 2,827 sales in December 2015. It was also a 22.6% decrease compared with November, when 2,214 homes were sold.
A total of 541 detached property units were sold in the month, which was a 52.4% year-over-year decline. The number of apartments sold dropped 25.3% to 915, and a total of 258 attached properties were sold – a drop of 44.6%.
BC government to offer down payment loans for first-time buyers
Premier Christy Clark unveiled a new loan program today to help first-time home buyers come up with their down payment.
The BC Home Owner Mortgage and Equity (HOME) Partnership program will offer qualifying home buyers loans of up to $37,500, interest and payment free, for five years.
The province will begin accepting applications on January 16, 2017.
To qualify, buyers must:
• be buying their first home;
• obtain a high-ratio, insured first mortgage for at least 80 per cent of the purchase price;
• have a combined gross household income not exceeding $150,000;
• have saved a down payment amount at least equal to the loan amount;
• be a Canadian citizen or permanent resident for at least five years; and
• have lived in BC for at least the full year preceding their application.
The loans will be due in full if the buyer defaults on a payment, ceases to use the home as a principle residence or resells the home.
• The loans will match a home buyer’s contribution to a down payment up to five per cent of the home’s purchase price.
• The maximum purchase price to qualify for a loan is $750,000 (excluding taxes and fees).
• After five years, buyers can either repay their loan or enter into monthly payments at current interest rates.
• Loans through the program are due after 25 years.
“This program will boost sales to first-time home buyers. Without question, they’ll take advantage of it wherever they can,” said Helmut Pastrick, Central 1 Credit Union chief economist.
The province estimates this initiative will help at least 42,000 buyers or households province-wide over the next three years. About half of these buyers will be in the Lower Mainland, according to Pastrick.
Click here for more information.
B.C. Government Announcement re First Time Home Buyers
Not sure if you have heard but the Premier today announced a new program to help first time home buyers. We are still working out the details but the basics are as follows.
The government will lend the buyer funds equal to the down payment up to $37,500, or 5% of the purchase price. The loan will be secured by a second mortgage with no payments over the first 5 years. The amortization period for the second mortgage will be 25 years, and payments will start in year 6. Buyers must be preapproved for an insured high ratio first mortgage and use the property as their principal residence.
Applications do not start until Jan 16, 2017 and loans advanced from Feb 15, 2017 to March 31, 2020. The Buyer must be a Canadian citizen or permanent resident for at least 5 years, resided in BC for at least 12 months, make less than $150,000 (as a family) and must be pre-approved for the first mortgage before applying.
I have no other details at this point, but as I learn more I will send something out, likely early in January. The government announcement can be found at https://news.gov.bc.ca/releases/2016PREM0153-002759?WT.cg_n=Hootsuite.
SUMMARY OF CURRENT MORTGAGE CHANGES AS OF DECEMBER 1,2016
INSURED MORTGAGES - BEST RATES
- Client pays the Insurance Premium
- Generally Less than 20% Down Payment
- Must Meet Stress Test - Benchmark Rate (currently 4.64%)
- Standard Salary Income
- Owner Occupy or Second Home
- Property Value under $1M
- Maximum Amortization of 25 Years
- Minimum Credit Score of 600
FIRST TIME HOME BUYER
Jim and Debbie are first time home buyers with annual combined SALARY income of $97,000. They bought a condo for $475,000 condo and put 5% down payment and need a mortgage for $451,250. They will be required to pay mortgage insurance premium of $16,245 for a Total Mortgage Loan of $476,495. Under this scenario, they will need to qualify using the 4.64% benchmark rate and their maximum amortization is 25 years. Using a 2.59% rate, they will be paying $2138.71monthly payments.
INSURABLE MORTGAGES - HIGHER RATES (BEST RATE+0.15% or more)
- Lender pays for insurancepremium but pass highercost to borrower
- Usually 20% or More Down Payment
- Can use contact rate to Qualify if 20% down payment or more
- Standard income or BFS
- Owner Occupy, Second Home
- Prop ert y Value under $1M
- Maximum Amortization of 25 Years
- Minimum Credi t Score of 680
*** This Program is still Subject to Change***
Tom and Carol and young professionals with a combined SALARY and BFS income of $120,000. They are upgrading from their current condo to a Townhouse. Their NEW townhouse was purchased for $800,000 and they are putting 20% down payment from the proceeds of sale on their condo and need $640,000 mortgage. Under this scenario, they can qualify using the contract rate and the lender will cover the insurance premiums however, because the clients are putting 20% down and have a BFS component to their income, they will be paying higher rates. Using a 2.79% rate, they will be paying $2960.23 monthly payments.
UNINSURED MORTGAGES- BEST RATES
- No Insurance Required
- Minimum of 20% Down Payment
- Standard Salary Income
- Can use contract rate to Qualify
- Purchase or Refinance
- Purchase price can be over $1M
- Amortization over 25 Years - Maximum 30 Years,
- Minimum Credit Score of 680
PURCHASE OVER S1M
David is a certified accountant with an annual salary of $200,000 and purchased a home for 1.65M. He has 50% down payment which is a combination of his own funds and gift from parents. He will need a $825,000 mortgage. Under this scenario, No insurance required as the purchase price is over $1m and can qualify using the contract rate. David will get BEST rates because he has strong qualified income and has the option for 25 or 30 year amortization . Using 2.74%, they will be paying $3775.05 monthly payments.
UNINSURED MORTGAGES - HIGHEST RATES (BEST RATE+0.25% or more)
- No Insurance Required
- Minimum of 20% Down Payment
- Salary or BFS income
- Can use contract rate to Qualify
- Refinance and Rental Properties
- Property Value can be over $1M
- Amortization over 25 Years - Maximum 30 Years, can go up to 35 Years
- Minimum Credit Score of 680
Bill and Lisa are well established professionals and current own a house in East Vancouver with a small mortgage. They are looking to diversify and purchase an investment property in Delta. They have a combined SALARY income of $160,000. The new condo purchase price is $500,000 and they will need to put 20% down payment and expect $1800 in monthly rent. They will need to debt service their existing mortgage and lender will allow a portion of the rent to offset the new mortgage of $400,000. Under this scenario, they can qualify using the contract rate and NO insurance premiums is required, however, they will be paying higher rates because the property is a RENTAL. Using 2.99% rate, they will be paying $1890.93 monthly payments.
Foreign home buyers trickle back to Vancouver, but Greater Victoria sees more action
Foreign home ownership levels have nudged their way up in metro Vancouver despite a tax brought in by the provincial government which adds an extra 15 per cent to the purchase price for any overseas buyers.
The British Columbia government released data Tuesday that shows during October foreign buyers were behind 140 residential properties valued at $115 million which equated to about three per cent of the 4,700 transactions in the metro area and 3.2 per cent of the $3.6 billion in dollar volume of deals.
The percentage of deals going to foreign buyers is still well below the peak of 13.2 per cent of the market before the tax went into effect, but above the 1.8 per cent in September as the full impact of the tax began to be felt.
The government first announced the measure on July 25 with it going into effect on Aug. 2, a decision that had people scrambling to close deals early to avoid the tax which adds an additional 15 per cent on land property transfer fees for any foreign entity.
“There is a period of distortion in the market any time a tax is introduced or changed. Many transactions that would have occurred in the months following the introduction of the tax were moved to July to avoid the tax,” the province said, in a release. “As time goes on and the market readjusts, trends such as the rate and volume of foreign demand will normalize to levels we can expect to continue.”
There had been some fears that foreign money would flow into other parts of the province where the tax did not exist. The government numbers show foreign nationals were involved in 189 residential property transactions in October outside of the metro Vancouver area which represented about 2.9 per cent of all transactions. Transactions involving foreign nationals in the rest of the province totalled $129 million.
However, in the Capital Region District which encompasses the southern tip of Vancouver Island and includes Greater Victoria, there was a larger foreign presence. About 6.3 per cent of transactions representing 10.3 per cent of the value of all transactions can be tracked to foreign nationals.
“Government continues to monitor this data closely,” according to the release.
In the city of Vancouver about 2.5 per cent of October transactions involved foreign nationals, which represented about 2.8 per cent of the dollar value of those deals. In Richmond, foreign nationals were involved in 6.7 of all residential transactions, representing 7.2 per cent of the total value.
The government of British Columbia plans to release more detailed breakdown on property data sales on a monthly basis.
CBC – November 15, 2016 - Vancouver council voting on empty homes tax today
If approved the 1% tax on empty homes would be the first in the country
A vote at Vancouver city council this week is expected move the proposed empty-home tax one step closer to reality but not everyone thinks that's a step in the right direction.
The proposed scheme would level a one per cent tax on homes that aren't principal residences and aren't rented out for at least six months per year.
The tax was on the agenda for Tuesday's council meeting. It was discussed for some time before being postponed to tomorrow's City Finances and Services committee meeting.
If approved, the tax would be the first of its kind in the country
Mayor Gregor Robertson, an advocate of the tax, has said it will persuade owners of thousands of empty apartments and houses to put them up for rent.
"There's almost no rental stock available. We're anticipating that this will be enough incentive for people to do that, or they're going to end up paying an additional tax," he told CBC's On the Coast on Thursday.
Robertson has called the measure a way to combat what he called the housing crisis in Vancouver, and justified the tax as a "business tax"on owners he said were treating housing as an investment property.
The tax however has detractors, including NPA Councillor George Affleck, who told CBC's The Early Edition the tax will not add to the city's rental stock.
"They're saying this is going to create a whole bunch of rental apartments — that's bull. That's not going to happen," he said.
"What we're going to do is create a huge bureaucracy in the city."
He's not the only one — Tony Gioventu, executive director of the Condominium Homeowners Association, has argued many of the properties targeted by the tax are luxury homes and the owners will be reluctant to rent them out.
Affleck also questioned whether requiring owners to report the residential status of their home themselves will be an effective method of assessing the tax.
"I think it's going to create a culture of dishonesty in the city because people will find ways around it, which is never a good thing in a tax," he said.
Other critics — like Michael Ferreira of Urban Analytics — have said the same, saying the tax will not be good for community moral and might even inspire neighbours to snitch on one another.
Robertson has said owners who try to skirt the rules will face severe penalties and the city is planning on doing random audits to catch cheaters.
If the tax is approved, staff have said it will be implemented in early 2017 with the first payments due in 2018.
Financial Post – November 15, 2016 - Royal Bank raises its discounted mortgage rates across the board
Another major Canadian bank is raising its borrowing rates, citing market conditions for the increase.
Royal Bank of Canada said it is raising its rates for amortizations 25 years or under, effective Nov. 17, a move that follows a decision by Toronto-Dominion Bank earlier this month to raise its prime rate from 2.7 per cent to 2.85 per cent for variable rate mortgage customers.
The Royal Bank changes affect new customers with fixed rate loans for terms of three, four and five years. The fixed rate for three years rises from 2.69 per cent to 2.79 per cent, four years goes from 2.79 per cent to 2.89 per cent and five years rises from 2.94 per cent to 3.04 per cent.
Contract Changes Benefit Real Estate Consumers
Vancouver, BC – May 10, 2016. Consumer awareness took a step forward with the announcement of new requirements for real estate contracts.
Following on a promise made by Premier Clark in March, as of May 16, 2016 the government will require contracts prepared by real estate licensees to include clauses stating that the contract cannot be assigned without the written consent of the seller, and that any profit from an assignment goes to the initial seller. Clients can instruct licensees to omit or change the clauses.
"Real estate consumers now have a tool to help them decide whether they want their contracts to be assignable," says BC Real Estate Association (BCREA) President Deanna Horn. "Like many other provisions in the contract, buyers and sellers have the option of keeping the new paragraph, changing it or striking it out completely—but at least the conversation is more likely to happen now."
BCREA supports the new requirements. To help consumers and REALTORS® with the transition, the Association is adding the following paragraph to the residential and commercial Contracts of Purchase and Sale:
The Seller and the Buyer agree that this Contract: (a) must not be assigned without the written consent of the Seller; and (b) the Seller is entitled to any profit resulting from an assignment of the Contract by the Buyer or any subsequent assignee.
"Assignment" is the practice of someone assigning their rights in a contract to someone else before the transaction completes. In simple terms, someone can buy the right to step into the original buyer's shoes to complete the contract. Assigning one's right to a contract is a legitimate practice, allowed by common law and also by section 36 of the Law and Equity Act.
Also today, Minister of Finance Mike de Jong announced that, starting in June 2016, the provincial government will begin collecting citizenship data of real estate owners through the Property Transfer Tax form.
Canadian real estate market outlook 2016
Don’t expect a bubble to burst in this status quo environment
If you could rewind 365 days to January 2015, would you short the Canadian real estate market? Given the predictions back then—of an imminent bubble burst and a housing market crash—hedging on real estate losses would’ve been a smart, speculative position. Of course, any active investors who did bet against the real estate market wouldn’t have done too well.
Contrary to all the predictions, the Canadian real estate market, once again, had a record-breaking year in 2015. Toronto and Vancouver continued their hot streak even as Alberta and Saskatchewan cities watched their housing sales slide; still, the rest of the nation’s housing markets started to balance out—moving closer and closer to a more stable, reasonable market.
So, what should we expect from Canada’s real estate market in 2016? This time the analysts are predicting more of the same. It’s a safe position, but one that’s well-grounded in the economic fundamentals currently impacting our nation’s economy. Here’s what to expect.
A tale of three markets
The three housing markets that currently make up Canada’s real estate sector will continue, says Gurinder Sandhu, executive vice president, RE/MAX Integra Ontario-Atlantic Canada region. “High demand coupled with limited supply will continue to support the strong Toronto and Vancouver markets,” says Sandhu. “Virtually the rest of the country is now balanced so expect only modest price increases, while the markets that are oil dependant will see more price reductions and a smaller number of transactions, which will push average prices down.”
Bank of Canada weighs in
For Alyssa Furtado, CEO of RateHub.ca, the worrisome aspects of the Canadian housing market haven’t gone away—even if the market is still operating under the status quo.
“If the Bank of Canada were just examining the nation’s housing market, they would’ve increased interest rates by now,” explains Furtado. But the economy is an intricate web of interrelated factors—some of them domestic and some of them global. As a result, the BoC announced, on January 20, 2016, that it would maintain its overnight target rate at 0.5%.
But this doesn’t mean the central bank isn’t concerned about potential housing bubbles.
Over the course of the last 12 months, arm’s length government agencies have implemented changes to help slow down quickly appreciating housing markets. For instance, in early 2015, the Canada Mortgage and Housing Corporation raised premiums on high loan-to-value mortgages—mortgages, where the buyer puts less than 20% down to purchase the house—not once, but twice. Then the newly elected Liberal government announced changes to the minimum down payment on homes valued at $500,000 or more (for more on how these new minimum down payments work, go here.) The new minimum requirements are scheduled to take effect on Feb. 15, 2016.
“These regulatory changes are much less severe than an interest rate increase,” says Furtado, “and didn’t cool the hottest markets.” As a result, Furtado believes there are more changes to come. “I anticipate the government will continue to make little tweaks and if markets don’t cool we will see more changes in the future.”
BoC takes wait and see approach prior to first Liberal budget »
Part of the reason for these smaller, more incremental changes is that Canada’s housing market is one of the few robust industries left in the current economic environment. “Deliberately cooling the market is a dangerous tactic,” explains Will Dunning, chief economist for Mortgage Professionals Canada (formerly known as Canadian Association of Accredited Mortgage Professionals). “Housing interacts very powerfully with our GDP and we could do immense damage to the broader economy by trying to cool specific markets.”
“We have to ask: What problem are we actually trying to solve?” For Dunning the real problem is lack of supply. “We don’t have excessive demand, because units are being absorbed. We have a lack of supply problem and that won’t be addressed by rate changes or mortgage regulations.”
Debates aside, Robert McLister, mortgage planner at intelliMortgage and founder of RateSpy, doesn’t see mortgage rates rising anytime soon. “With the commodity crash decimating Canada’s growth outlook, long-term inflation expectations have plunged,” says McLister. “Since mortgage rates are so tied to inflation, there’s a good chance rates will stay rock bottom in 2016.”
These rock-bottom rates has implications for Canada’s rising household debt numbers. In its most recent Monetary Report, the bank conceded that their own rate cuts last year helped fuel the increase in debt spending, but the Bank apparently feels confident that recent regulatory changes, and rising real income due to lower oil prices, will result in more moderate spending levels. As 2016 unfolds, the BoC expects the economy to strengthen and for borrowing rates to “begin to normalize,” which will help keep “the housing market and household indebtedness…to stabilize.” This is the point where house prices, even in hotter markets, will start to slow down and stabilize—at least, that’s what the BoC predicts.
Expect more foreign interest
While it can’t be argued that low interest rates are the driving force behind the almost daringly strong Toronto and Vancouver housing markets, there are other factors that impact Canada’s housing market to consider. One that briefly dominated media headlines last year was the impact foreign buyers had on Canadian housing prices.
“The Canadian housing market is considered the darling of the real estate world because of our stable regulatory environment,” explains Sandhu. “The regulations in place make sure that our national market stays on even footing.” This coupled with loonie’s decline in value, means those with access to non-Canadian currencies may find our housing stock more attractive. “When you examine housing prices in Toronto and Vancouver and compare it to London, UK, New York, or Singapore, we’re still seen as a more affordable option.”
Still, Sandhu isn’t too concerned about the impact foreign buyers will have on the market. “These aren’t buyers who live outside of Canada and simply buying an empty nest. These are new Canadians entering the market. They’re starting families, buying homes and setting down roots,” says Sandhu. “Remember, Canada is very attractive because it’s stable politically and economically, it’s got great education and the best places to work.”
Overall picture for home owners in 2016
For homeowners in the enviable position of having a stable income, this is a great year to ride out a variable-rate mortgage, if you’ve already got one, or to shop around for a cheaper, short term mortgage, says McLister. “There’s no rush to lock and there won’t be until the 5-year government bond yield hold above 1.20%.”
Homeowners may also want to tackle their biggest debt by paying down their mortgage faster. For tips, read Crush your mortgage, although, there are some valid arguments against paying down your mortgage sooner when rates are still so low.
Five tips for coping with food inflation »
The take-away for home buyers in 2016
In the vast majority of Canadian housing markets, this year will present buyers with the opportunity of time. This is in stark contrast to the housing market buyers faced between 2012 and 2015, when prices drastically and consistently increased. “It’s a luxury,” says Sandhu, “as it gives the buyer an opportunity to shop around to find something that best suits their needs.”
Still, Laurin Jeffrey, real estate agent with Century 21 Regal Realty, won’t be surprised if there’s a spike in sales before the higher down payment rules take effect in mid-February. “We’ve seen it before: buyers panic easily prompting a surge in sales in the months leading up to a major market change.”
Buyers looking to hold off until after the new rule takes effect probably won’t make out too well, says Jeffrey. “Historically, the spring market is the busiest house buying season and prices can spike as much as 10%.”
In addition to the spring buying surge, buyers in Toronto and Vancouver should brace themselves for tougher mortgage requirements and a return to bidding wars.
Those brave enough to buy in oil producing provinces, such as Alberta and Newfoundland, may see a further erosion of housing prices—which could translate to paying less for more house. Keep in mind, though, that the eroding job market in these commodity-dependent provinces could mean more lender losses and this could translate into tougher lending conditions. For those looking to get a mortgage, expect more due diligence from your lender, which could take more time and require you to submit more paperwork.
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What sellers can expect in 2016
In most markets in Canada, sellers will have to adjust to a slower market where multiple offers are no longer the norm. “Expect your home to stay on the market for a little longer as buyers take time to shop around,” says Sandhu. However, this advice doesn’t apply to homeowners planning to sell single family detached, semi-detached or row homes in Toronto and Vancouver. In 2015, these housing types made up the lion share of all sales in the Greater Toronto Area—accounting for 88% of the resale activity in 2015. Sellers with low-rise properties in hot markets can expect continued bidding wars and further price escalation during the hotter buying seasons in 2016.
In oil producing areas, such as Calgary and Saskatoon, prolonged low oil prices will mean further job losses. This will cause more people to lose their homes, which weakens home prices in these markets. Sellers should keep this in mind when pricing their home for sale. When possible, waiting to list until oil prices rebound (and jobs return) may help to mitigate any potential loss due to a declining housing market.
Why the stock market is tanking right now and what comes next »
The top tips for real estate investors in 2016
Despite all the advice about not buying a residential property for income purposes, many still do. “Investors are in the catbird seat,” says Jeffrey. “The rental market is tight as vacancy rates still hover in the mid-1% range. Buying any property to rent out continues to make sense, as long as you have a large enough down payment to ensure that rent covers expenses.” For that reason, Jeffrey prefers multi-unit houses over condos—”houses are historically better at holding their value and appreciating over time.”
For Toronto investors keen on condo purchases, Jeffrey suggests sticking with east end properties. “Condos east of Yonge Street have almost caught up to west-end and downtown prices, but still currently sell at a bit of a discount.” He suggests checking out the Canary District, the area east of Bay and Front Streets, Regent Park, Riverside and the strip between Sherbourne and Broadview. “Personally, I think the option to get in at a pre-sale is best.”
This said, anyone thinking of buying an investment property should first start with a financial plan and a budget.
Will there be a housing market crash in 2016?
Fast forward 365 days and the number one question regarding Canada’s housing market is whether or not there will be a housing market crash?
CIBC Chief Economist Benjamin Tal discussed concerns at a TREB event on January 18. “The world economy is in unchartered territory, but we have to keep things in perspective.” He concedes that lower oil prices and a devalued loonie are taking a toll on household budgets, but arguers this is just part of much-needed world-wide rebalancing of an economical equation. “Prior to 2016, oil producers were making more money than oil consumers.” As a result, we’re just seeing a transition: A rebalancing between oil producers and consumers. “No question, 2016 is a transition year,” says Tal, “from something bad to something better.” But he believes the biggest obstacle the Canadian real estate market must overcome is perception. “I was in New York and investors were convinced we are the poster child of a housing bubble.” He argues this belief will turn into reality without information. “This requires accurate data”—data that must become a priority for the government to collect, says Tal.
But does that mean we’re on the verge of a bursting bubble? No, says Tal. “The fundamentals just don’t support this.”
Spiking property assessments may leave thousands without Home Owner Grant
A spike in property assessments in Metro Vancouver means thousands no longer qualify for the Home Owner Grant, unless the provincial government steps in.
The property assessments for 2015 released on Monday confirmed the value of many properties in Greater Vancouver jumped 10 to 30 per cent in value in the past year.
That has pushed the assessed value of many homes over the threshold of $1,100,000 to qualify for the full $570 grant.
Anyone whose primary home is worth up to $1,214,000 is still eligible to receive a reduced grant, but above that value, homeowners in Greater Vancouver, the Fraser Valley and Greater Victoria will no longer qualify for a grant.
City Councilor Nick Volkow has lived in Burnaby for more than three decades. He's watched the value of his home just keep climbing.
"My assessment went up from $956,000 last year, which I thought was completely insane, to this year $1,311,700, which is completely insane," said Volkow.
Like many Metro Vancouverites, Volkow's house is now worth too much for him to qualify for the annual Home Owner Grant.
Volkow says losing that grant can be tough for a lot of people — especially those on a fixed income.
"I worry more for the residents in our community that are long-time homeowners that have lived in their home."
Threshold under review
Volkow blames the federal and provincial governments for not doing something to curb rising real estate prices.
But the threshold for the grant is under the control of B.C. Finance Minister Mike de Jong, who is said to be reviewing the issue.
It is up to the provincial government to set the threshold for which properties qualify for the Home Owners Grant. (Getty Images/Gallo Images)
In 2009 and 2010, the province set the threshold at $1.05 million. In 2011, the threshold was raised to $1.15 million.
But it does not always go up. In 2014 de Jong lowered the threshold to $1.1 million in an effort to save the province some cash and help balance the budget.
At that time the Finance Ministry said at least 93.8 per cent of homeowners will still be eligible for the grant, down from at least 95 per cent when the threshold was originally set.
It remains unclear exactly how many homeowners will still qualify for the grant this year, based on the new property assessments and the existing threshold.
In a statement, a spokesperson said the finance minister is currently reviewing the threshold, but has to make those decisions in context of a balanced budget.
Anxious home owners may have to wait until February to find out what de Jong plans to do, when he releases the upcoming provincial budget.
Values on the rise
The rising home assessment don't come as a complete surprise. Last month B.C. Assessment sent out warning letters to about 37,000 property owners — mostly in Greater Vancouver — to brace themselves for a sharp rise in their property assessments in the new year.
B.C. Assessment does not release the average value for properties in each municipality, but it did release the percentage increase in property values for municipal areas.
The municipalities with the largest increases in property values were:
- Lions Bay: 17.96 per cent.
- Squamish: 17.33 per cent.
- Burnaby: 17.01 per cent.
- West Vancouver 16.9 per cent.
- Vancouver: 16.84 per cent.
B.C. assessment also provided some examples of how the increases are affecting the values of a several homes. For example one house in East Vancouver built in 1983, which was assessed under $1 million last year, is now assessed at nearly $1.3 million, for a total increase of 28 per cent.
A similar increase of 27 per cent is coming for the owners of a 1971 Burnaby home in the Buckingham neighbourhood, which saw its value rise from $1.47 million to $1.86 million.
The increased assessments don't mean property taxes will go up the same rate, because municipalities normally adjust their tax rate based on the change in property assessments.
But homeowners whose assessed values increase more than the average in that municipality — owners of single family homes in most cases, as strata assessments will jump less than 10 per cent — will end up paying a greater share of property taxes.
Some relief still available
There are a number of programs that still provide relief for those who qualify as part of the provincial Home Owner Grant program
- Homes below the threshold outside the Capital, Greater Vancouver and Fraser Valley regional districts qualify for a larger grant of $770.
- Homes above the threshold in rural and northern areas are eligible to receive a partial grant up to a higher level of $1,254,000.
- Homeowners may also qualify for a higher grant amount if they are:
- a veteran
- a person with a disability
- living with a person with a disability
- a senior
In order to be get any of the cash though, home owners must file an application. Further details are on the government website.
Metro Vancouver home sales set an all-time record in 2015
In a year when the number of homes listed for sale was below historical averages, actual home sales in Metro Vancouver set a new record.
The Real Estate Board of Greater Vancouver (REBGV) reports that 2015 home sales were the highest annual total in REBGV history. This was powered early in the year by four straight months with more than 4,000 sales a month from March to June, another first for REBGV.
Sales of detached, attached and apartment properties in 2015 reached 42,326, a 27.8 per cent increase from the 33,116 sales recorded in 2014, and a 48.4 per cent increase over the 28,524 residential sales in 2013.
The total number of homes listed for sale on the MLS® in 2015 ranked fifth in the last ten years, while the MLS® Home Price Index (HPI) saw double-digit year-over-year price increases.
The number of residential properties listed for sale on the Multiple Listing Service® (MLS®) in Metro Vancouver in 2015 reached 57,249. This is an increase of 2.1 per cent compared to the 56,066 properties listed in 2014 and an increase of 4.6 per cent compared to the 54,742 properties listed in 2013.
With sales-to-active-listings ratios above 25 per cent for 11 months in 2015, the Metro Vancouver market experienced seller’s market conditions for much of the year.
"Home buyers were active and motivated throughout 2015 despite the pressure on supply of homes on the market," Darcy McLeod, REBGV president said. "Housing markets typically experience quieter periods within a calendar year, but that wasn't the case in Metro Vancouver last year."
The MLS® Home Price Index composite benchmark price for all residential properties in Metro Vancouver ends the year at $760,900. This represents an 18.9 per cent increase compared to December 2014.
“We often hear economists say that seller’s market conditions put upward pressure on home prices,” McLeod said. “That was certainly the case in 2015, with price increases ranging from 14 to 24 per cent depending on property type.”
Residential property sales in Greater Vancouver totalled 2,827 in December 2015, an increase of 33.6 per cent from the 2,116 sales recorded in December 2014 and a 19.8 per cent decline compared to November 2015 when 3,524 home sales occurred.
New listings for detached, attached and apartment properties in Greater Vancouver totalled 2,021 in December 2015. This represents a 7 per cent increase compared to the 1,888 units listed in December 2014 and a 40.4 per cent decline compared to November 2015 when 3,392 properties were listed.
The total number of properties currently listed for sale on the MLS® system in Metro Vancouver is 6,024, a 41.6 per cent decline compared to December 2014 and a 25.6 per cent decrease compared to November 2015.
Sales of detached properties in December 2015 reached 1,136, an increase of 36.4 per cent from the 833 detached sales recorded in December 2014. The benchmark price for detached properties increased 24.3 per cent from December 2014 to $1,248,600.
Sales of apartment properties reached 1,225 in December 2015, an increase of 34.3 per cent compared to the 912 sales in December 2014.The benchmark price of an apartment property increased 14 per cent from December 2014 to $436,200.
Attached property sales in December 2015 totalled 466, an increase of 25.6 per cent compared to the 371 sales in December 2014. The benchmark price of an attached unit increased 13.6 per cent from December 2014 to $543,700.
Changes in downpayment requirements.
Today Finance Minister Bill Morneau announced changes to down payment requirements. Effective February 15, 2016, the minimum down payment for new insured mortgages will increase from five per cent to 10 per cent for the portion of the house price above $500,000. The five per cent minimum down payment for properties up to $500,000 remains unchanged.
For example, once the new rules come into effect, the minimum down payment required to purchase a $800,000 home will be $55,000 which is calculated as 5% of $500,000 ($25,000) plus 10% of $300,000 ($30,000).
The Georgia Straight did not report that the City of Vancouver is shutting down a popular East Side grocery store and café, Le Marché St. George.
But reporter Carlito Pablo did quote the owner, Pascal Roy, saying the effect of the city's regulatory approach—including banning seating and the sale of warmed food—will make his business unviable.
“We’re allowed to sell cigarettes…lottery tickets…magazines, porn magazines…junk food, but my business is going to be closed down because we’re selling crepes,” Roy told the Straight.
Others have suggested that the city is forcing the end of the quaint gathering place in East Vancouver.
As a result, the city has issued an adamant denial.
"In response to several media requests, the City would like to clarify that Le Marche St George, a popular local market in East Vancouver, is not about to be shut down by the City, Reports about an imminent closure as early as this weekend are completely false," the city declared. "As stated yesterday, City staff will work with the owners to better understand business practices and look at options to enable the activities at Le Marche St George to continue.
"The City values local businesses and wants to increase and enable cafés and patios throughout the city. The Council motion of June 23rd is the latest example of these efforts.
"Le Marche St George is approved as a grocery store. A recent complaint from a neighbour identified some bylaw issues related to their restaurant and special events. Regulations of food service industry falls to Vancouver Coastal Health. The City is always looking to update outdated bylaws to enhance quality of neighbourhoods and support local independent markets and cafes, and looks forward to working with the owners to ensure the market and its activities can continue."
Yesterday, Vision Vancouver councillor Geoff Meggs posted a short article on his blog also maintaining that the grocery store and café at the corner of St. George Street and East 28th Avenue is not being closed by the city.
NPA councillor Melissa de Genova told the Straight the same thing.
In a note to council, acting city manager Sadhu Johnston wrote: "The property-use inspector informed the owners of Le Marché St. George that they cannot use the residential space as retail without proper approvals in place, which may require a rezoning application if so desired."
More than 13,000 people have signed on online petition entitled "Save Le Marché St. George!"
Vancouver real estate prices will keep rising for 2 years, predicts economist
Central 1 Credit Union's Bryan Yu says median price for detached Vancouver-area home will shatter $1-million
The Canadian Press Posted: Nov 10, 2015 1:37 PM PT Last Updated: Nov 10, 2015 1:41 PM PT
British Columbia homeowners can celebrate the latest predictions about real estate prices — but would-be home buyers could face even more pressure.
Central 1 Credit Union senior economist Bryan Yu predicts B.C. home prices and sales will continue to rise for the next two years.
He says average prices in the province will leap six per cent this year to $425,000, reaching $462,000 by 2017, with median prices for detached Vancouver-area properties shattering the $1-million mark.
According to Yu, few available homes, Alberta's recession and a weak mining sector will slow — but not cap — demand in the Interior, while lack of land and relentless demand fuels sales in Greater Vancouver.
Central 1 also predicts low mortgage rates through 2017 will keep sales sizzling.
It says sky high prices and a seller's market reveal the start of a long-term switch as families give up detached homes on pricey land and instead choose 'forever homes' in higher density condos and apartments.
Statistics for October 2015 East Vancouver
The sale of seven older houses on the Granville Street block between 45th and 47th avenues earlier this year netted the owners over $22 million.
The buyer is Hui Xiang International Realty Developments Ltd., a B.C. incorporated company with directors who list their address in Wenshan, a city in China’s far-flung southwestern province of Yunnan, which borders Myanmar, Laos and Vietnam. It’s also the location of their Wenshan Huixiang Real Estate Company, a former auto parts maker turned property developer.
The sale offers a more detailed glimpse at one example of the oft-referenced, but faceless mainland Chinese investor at the heart of the debate over Vancouver housing affordability.
It also set the bar for other land assembly sales on this part of Granville Street, said Macdonald Realty agent William Lew, who is listing a row of “up to 11 houses” farther south between 49th and 52nd avenues.
To the north, Dexter Associates Realty agent Surinder Holat is offering a block of six homes between 45th and 43rd avenues. She hasn’t hung street signs declaring them for sale, but has run “low-key” ads: “A rare opportunity for investors to acquire a potential development site … There is a possibility in the street corridor for multi-family developments to replace single-family homes in the future.”
Prospective buyers would be taking a gamble.
This stretch of Granville is zoned single-family, and City Hall has said it is not designated for rezoning. The companies buying properties here are holding them for future development, something the city has been trying to discourage.
Typically, when developers assemble land in this way, homeowners in the surrounding area get caught up in the sales hype. The idea is that, cobbled together as a single parcel, their properties will sell for more than they would individually because they can be worth much more to a developer who builds condos or townhouses (if City Hall agrees to rezone the parcel).
For developers, it’s a minefield trying to time multiple, long closing times and then rushing to secure rezoning applications in a rapidly rising real estate market.
The complication on this marquee strip of Granville Street north of 57th Avenue and south of 41st Avenue is that it sits in a bit of a rezoning no man’s land.
It’s just north of Marpole, where the city is allowing for the building of three-storey row houses below 57th Avenue, and then higher ones beginning at 62nd Avenue. It is also just south of Shaughnessy, where a hot debate is brewing about how to add density in an area with some of the highest land prices in Vancouver and also historic character dating back to the city’s earliest days.
Sandwiched between this, buyers in this space could be forgiven for thinking it’s only a matter of when, not if, further density will be approved, even if there is a whole other level of speculation as to what might happen.
Asked about a plan for the properties Hui Xiang bought, company director Chou Shuang Jie said: “We don’t have (one) yet as we are waiting to see what the government there will do.”
Chou, reached by telephone via her company office in Wenshan, confirmed ownership, but she declined to be interviewed further, referring queries to Michelle Yu, the Re/Max agent who handled the sale.
Greater Vancouver house prices jump 20 per cent to average $1.47-million
The average price for single-family detached homes in Greater Vancouver has jumped 20 per cent to a record $1.47-million over the past year as the affordability gap widens between houses and condos.
“It’s really the value of the land that is driving prices higher for detached properties and widening that gap,” said Darcy McLeod, president of the Real Estate Board of Greater Vancouver.
The average price for detached homes in Greater Vancouver was $952,809 higher than the average price for condos last month, compared with a gap of $771,298 in August, 2014.
The most expensive properties are within the City of Vancouver. “For anyone who wants a detached home in Vancouver proper, it has become a luxury item,” Mr. McLeod said in an interview Wednesday. “If you want a detached house, you might have to move farther away from the city’s core.”
Condo prices in the region have hit a high, averaging $521,666 in August, or a 14-per-cent gain from a year earlier. But the condo market has been relatively flat over the past five years, compared with the boom in detached properties.
Mr. McLeod prefers to concentrate on a statistic called the home price index (HPI), saying that averages skew the picture because the most expensive properties are included. The benchmark HPI is a representation of the typical house in an area, providing a better barometer of real estate trends than average resale prices, he said.
Over the past five years, benchmark prices for detached homes have surged 40.7 per cent to a record $1.16-million in Greater Vancouver, while condo prices have risen a relatively modest 11.3 per cent to $405,400, according to sales data released by the board.
Mr. McLeod said concerns about the influence of offshore buyers, notably from China, have been overstated because those purchasers focus on higher-end detached properties costing at least $3-million within the City of Vancouver.
Condos and townhouses in the suburbs are within the reach of many buyers, he said, adding that the benchmark price for Coquitlam condos was $274,700 last month, up 9.6 per cent over the past five years. In Maple Ridge, the HPI for detached homes last month was $518,400, up 13.4 per since August, 2010, said Mr. McLeod, who lives in Maple Ridge.
“As you move toward the centre of Vancouver, prices go up,” he said.
Last month’s median price for detached properties sold on the Multiple Listing Service reached $2.87-million on Vancouver’s west side and $1.29-million on the east side.
For Greater Vancouver as a whole, there were a total of 3,362 detached homes, condos and townhouses that changed hands last month, up 21.3 per cent from August, 2014.
The Real Estate Board of Greater Vancouver’s territory covers a large portion of Metro Vancouver, including Burnaby, Richmond and New Westminster. But Metro Vancouver is a broader political entity that has 23 members, including other suburbs, such as Surrey, White Rock and Langley – whose sales fall under the Fraser Valley Real Estate Board.
The benchmark price for Fraser Valley detached homes climbed 10.5 per cent to $629,400 over the past year while sales volume increased by one-third to 1,734 transactions.
Fraser Valley board president Jorda Maisey said strong consumer confidence and low interest rates spurred sales this summer.
Greater Vancouver and the Fraser Valley have both watched housing demand spike while total listings drop sharply.
House prices may stay high in Canada: Here's why
A friend of mine sold her Toronto house because prices were so high. She didn't want to get caught in the downdraft.
If you've been listening to all the warnings from foreign banks about a Canadian house price crash, that sounds smart. But before you congratulate my chum on her forethought, you should know she made that decision several years ago.
Of course, since then Toronto house prices have only continued their dramatic rise. Although Toronto and Vancouver lead the way with soaring real estate, prices in many other Canadian cities continue to rise.
In the face of a series of recent reports of houses selling for hundreds of thousands of dollars over their asking prices, I thought it a good time to look at why all the gloom-mongers have been wrong, and why they may still be wrong. At least for a while yet.
The question is no small matter for older boomers trying to capture the value of their homes. For most Canadians a home is their single biggest asset.
People heading into retirement could have their plans seriously upset if house prices fell by 63 per cent, as one international bank projected earlier this year.
On the other hand, if prices continue to rise by nearly 10 per cent a year, as they did this year, it would be difficult for boomers to find a more lucrative, tax-free income on an investment worth up to a million dollars.
Boomers aren't the only ones watching this market. New buyers would be even worse affected.
A decline in prices of as little as 10 per cent could wipe out their hard-won down payment. A decline by the 30 per cent suggested by the Bank of Canada, never mind 63 per cent suggested by Deutsche Bank, would leave many facing years making payments while trapped in a home worth less than they owe.
I am one of those who have warned repeatedly of what happens to an economy when house prices see a general decline. I have also warned that house prices go through cycles, with long price rises followed by sharp declines. But there are at least two reasons why that downturn may not be yet.
One is the continued weakness in the global economy. The second is the seemingly insatiable demand from overseas for the relative safety of the Canadian economy and Canadian real estate.
Global economic weakness may seem a counterintuitive stimulant for the Canadian house market. But the link becomes more obvious when you look at the miserable growth figures from the United States and Canada, and the impact on interest rates.
One of the main fears for real estate is that interest rates will rise. For long-term mortgage rates, the interest rate that counts is the rate on bonds in New York. That rate depends, at least indirectly, on the rate set by Janet Yellen at the U.S. central bank.
Once the U.S. economy begins to heat up, goes the theory, Yellen must raise rates to prevent a long-awaited, long-feared bout of inflation. In some ways this is an optimistic analysis, in that an increase in rates will only come once the Federal Reserve anticipates a return to economic growth.
Recently a gloomier analysis has been making the rounds: Rather than kicking into growth, the developed world is following a path much more like Japan's over recent decades, a long stretch of below-trend growth. If so, just as in Japan, central banks will have no reason or desire to increase interest rates.
Just as low interest rates since the credit crunch of 2007 to 2008 have stimulated asset prices around the world, a continuation of those low rates will mean the best place to have your money is in real assets, including Canadian housing.
That kind of thinking is not lost on overseas investors looking for a safe place to store their money. While most analysis shows the number of foreign buyers to be a small percentage of the whole market, it is a case where the economics of "the margin" takes hold.
At whatever level the market stands now, overseas cash looking for a safe home is not concerned with domestic considerations such as affordability.
Just as in other markets, the way to take a stake is to find out what the current market is demanding and offer a little bit more. Just a few such bids at the current price levels keep the entire market from falling.
This may all change eventually if foreign demand dries up. And in the long run a return to roaring economic growth may be the best thing that could happen to us all.
Sales, prices jump for Vancouver homes with inventory down
VANCOUVER -- There appears to be no ceiling for the cost of homes in the Vancouver area, as more properties keep selling for higher prices.
The Real Estate Board of Greater Vancouver released statistics Wednesday showing July sales of homes jumped 30 per cent compared to the same time last year. The average price for a residential property in the board's 16 cities, districts or municipalities was $700,500, an 11.2 per cent increase from 2014.
While the demand is high, there are fewer homes on the market, and board president Darcy McLeod said that can lead to multiple offers on homes in desirable areas.
In such cases, he said agents often have a day or two to do their due diligence. "Certainly, setting that strategy out ahead of time with your Realtor is great advice for anybody who's entering into buying into the marketplace."
A home inspector may be waiting in the wings and financing needs to be secured, he said, adding some people take an inspector with them to open houses.
The board estimates there are 5,000 to 6,000 fewer homes on the market compared to the last five to six years. McLeod said increased buyer demand creates hesitation on the part of sellers who want to move within the same region because they are worried about what they'll buy in an aggressive market.
Sales of detached homes also jumped by almost 18 per cent in July, with the composite price at more than $1.14 million. However, McLeod said that figure doesn't really represent the entire market. Price increases can be very localized, with neighbourhoods that are really hot alongside those that are not, or others where the average price increased a year ago but remained static this year, he said.
There is still plenty of inventory -- over 70 per cent -- under the $1-million price tag, McLeod said. Key factors for higher sales and pricing included desirability for living in a region, the low interest rate, and most importantly, high consumer confidence, he said.
"Although we hear stories that it might be an over-inflated market, consumers don't seem to think that. They're speaking with their chequebook, so to speak, and stepping up and purchasing homes." He doesn't see a cooling trend soon in a market that is driven by world factors, noting the region is attractive to people moving from other parts of the globe.
"Greater Vancouver continues to be -- in terms of a global perspective -- an affordable place to live. We think it's very expensive but if you look at the overall housing stock, not everybody is living in a million-dollar detached house," McLeod said.
"Will the prices fall significantly any time in the near future? I doubt it."
Is Vancouver due for a home price correction in 2016?
As the Vancouver real estate market reaches new heights, TD economists warn the city’s house prices are due for an imminent price correction.
As the Vancouver real estate market reaches new heights, TD economists warn the city’s house prices are due for an imminent price correction.
“It would not be extraordinary for Vancouver to suffer a price correction on the heels of the sharp acceleration recorded over the past year,” economists Derek Burleton and Diana Petramala concluded in a July 30 report.
The pair pointed to unexpected benchmark rate cuts made this year by the Bank of Canada as one major reason Vancouver and Toronto have seen real estate demand accelerate even in the midst of a cooling economy.
The cuts lowered the rate of borrowing at banks, making affordability more viable for homeowners.
“But as affordability continues to erode, sales activity will likely cool heading into 2016,” the report said.
“In Vancouver, a pull-back in sales projected for next year might seem large, but it would follow two years in which sales rose by almost 50%.”
A July report from Royal LePage found the average price of a detached home in Vancouver sat at $1.2 million in the second quarter, up 12.6% compared with the same period a year ago.
The agency noted supply for detached homes is limited in the city, which is likely to keep demand high.
But the TD report noted valuation could drop as housing affordability falls out of reach, as dictated by price-to-income ratios.
“Current readings suggest that home prices in both (Vancouver and Toronto) would need to drop by a stunning 40% to bring these ratios back in line with the long-term trend,” the economists said.
Metro Vancouver detached home prices up 16.2% in July: REBGV
A seller’s market persists as home sales and prices continue to...
A seller’s market persists as home sales and prices continue to rise in Metro Vancouver, according to the Real Estate Board of Greater Vancouver.
The benchmark home price reached $700,500 for all home types in July, representing a year-over-year increase of 11.2%. Detached home prices saw the biggest jump, increasing 16.2% to $1,141,800. The benchmark price for attached units jumped 7.8%, reaching $511,500, and the cost of apartment properties grew 5.9% to $400,900.
“Today’s activity continues to benefit sellers as home buyers compete for the homes available for sale,” said REBGV president Darcy McLeod.
July saw 3,978 units sold across the region. This is 33.5% higher than the 10-year average for the month and an increase of 30% compared with July 2014. Apartment sales were the biggest factor, with 1,729 units changing hands – up 42.7% compared with last year. Total detached home sales reached 1,559, which is a jump of 17.9% year-over-year. A total of 690 attached homes were sold – up 30.9% compared with July 2014.
"Much of today’s activity can be traced to strong consumer confidence, low interest rates, and a reduced supply of homes for sale.” McLeod said. “We have about 5,000 to 6,000 fewer homes for sale today than we've seen at this time of year over the last five to six years.”
Summer heat doesn’t slow home buyer activity
Metro Vancouver home sales were more than a third above the 10-year average in July, while the number of homes listed for sale continues to trend below recent years.
The Real Estate Board of Greater Vancouver (REBGV) reports that residential property sales in Metro Vancouver* reached 3,978 on the Multiple Listing Service® (MLS®) in July 2015. This represents a 30 per cent increase compared to the 3,061 sales recorded in July 2014, and a decrease of 9.1 per cent compared to the 4,375 sales in June 2015.
Last month’s sales were 33.5 per cent above the 10-year sales average for the month.
“Today’s activity continues to benefit sellers as home buyers compete for the homes available for sale,” Darcy McLeod, REBGV president said.
New listings for detached, attached and apartment properties in Metro Vancouver totalled 5,112 in July. This represents a 3.8 per cent increase compared to the 4,925 new listings reported in July 2014.
The total number of properties currently listed for sale on the region’s MLS® is 11,505, a 26.3 per cent decline compared to July 2014 and a 5.5 per cent decline compared to June 2015.
"Much of today’s activity can be traced to strong consumer confidence, low interest rates, and a reduced supply of homes for sale.” McLeod said. “We have about 5,000 to 6,000 fewer homes for sale today than we've seen at this time of year over the last five to six years,"
The MLS® Home Price Index composite benchmark price for all residential properties in Metro Vancouver is currently $700,500. This represents an 11.2 per cent increase compared to July 2014.
With the sales-to-active-listings ratio at 34.6 per cent, the region remains in seller's market territory.
“Although there aren’t as many homes for sale today compared to recent years, home buyers continue to have a range of housing options, at different price points, to choose from across Metro Vancouver,” McLeod said. “The diversity of housing options is part of what’s driving today’s demand.”
Sales of detached properties in July 2015 reached 1,559, an increase of 17.9 per cent from the 1,322 detached sales recorded in July 2014, and a 24.8 per cent increase from the 1,249 units sold in July 2013. The benchmark price for a detached property in Metro Vancouver increased 16.2 per cent from July 2014 to $1,141,800.
Sales of apartment properties reached 1,729 in July 2015, an increase of 42.7 per cent compared to the 1,212 sales in July 2014, and an increase of 42.9 per cent compared to the 1,210 sales in July 2013. The benchmark price of an apartment property increased 5.9 per cent from July 2014 to $400,900.
Attached property sales in July 2015 totalled 690, an increase of 30.9 per cent compared to the 527 sales in July 2014, and a 41.7 per cent increase from the 487 attached properties sold in July 2013. The benchmark price of an attached unit increased 7.8 per cent between July 2014 and 2015 to $511,500.
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New CMHC change means basement suites can help qualify homebuyers for higher mortgages
“Good news” allows rent to be counted as income "
A change by Canada Mortgage and Housing Corporation (CMHC) that will allow buyers to count 100% of rental income from a secondary suite towards their income is “good news” for Vancouver area first-time buyers, analysts say.
The ruling will also help landlords who hold up to four rental suites, even if they don’t live in the building.
CMHC is Canada’s largest mortgage insurer and provides coverage for those with less than a 20% down payment.
Effective September 28, the agency will consider up to 100% of the gross rental income from a two-unit home as personal income for mortgage qualifications. Previously up to 50% of the rental income could be counted as income, at the discretion of mortgage lenders.
For up to four-unit rental properties, the net income can form part of the mortgage borrower’s gross annual income, whether the property is owner-occupied or not.
“This is definitely good news for anyone who is looking to buy a home and subsidize the cost with a mortgage helper,” said mortgage broker Peter Kinch with Dominion Lending Centres, based in Port Moody. “This can certainly make the difference for many homeowners and may move a larger number from condo purchases to a single-family house with a mortgage helper.”
Kinch sees most of the take up coming from first-time buyers trying to purchase a detached house in suburban markets.
Realtor Colette Gerber of Sutton West Coast Realty, the director of the West Side division for the Real Estate Board of Greater Vancouver, said the change may also encourage the addition of more rental suites in the city.
According to CMHC, Vancouver has 26,600 secondary rental units, which can include basement suites, in-law suites or detached laneway houses built on existing single-family lots. These make up about 20% of the rental stock in Vancouver, where the apartment vacancy rate is 1.4%.
“This move is very opportune considering how tight Vancouver’s rental market has become. With the increasing challenge of finding affordable housing in Vancouver this will have a positive impact on the rental market,” Gerber said.
The CMHC change comes with some caveats. The rental income must have been sustained over at least two years; and homebuyers should have a minimum credit score of 680 to have all of the gross rental income counted as personal income.
Vancouver House Prices to Rise by 9.4% in 2015: Royal LePage Forecast First half of 2015 was red hot across all housing types and market shows no sign of cooling, despite economic uncertainty, says report.
Despite the clouds hanging on the economic horizon across Canada, Vancouver’s red hot market is showing no sign of cooling off over the rest of the year, according to the Royal LePage House Price and Market Survey released July 14.
The report is forecasting that house prices in the city will rise by 9.4 per cent in 2015 compared with 2014.
Looking back at 2015’s second quarter, the average price for a detached two-storey home in Vancouver was $1,368,125, a rise of 13.6 per cent compared with the same period last year, said the report.
Royal LePage observed that there is a diminishing supply of single-family homes, which is the property type in the highest demand.
“There is a finite supply of detached homes and they continue to be one of the most desired property types by a wide range of buyers,” said Chris Simmons, manager of Royal LePage Westside in Vancouver.
Detached bungalow prices rose 12.6 per cent to an average $1,247,125 in Q2 2015, whereas condos increased a more modest 6 per cent to $521,425, compared with the Q2 2014.
“Average prices for homes in Vancouver continued their sharp ascent in the second quarter as a result of high demand and tight supply,” said Bill Binnie, broker at Royal LePage Northshore.
“Vancouver is a highly sought-after destination for homebuyers with a very limited supply of properties, which puts the market firmly in the hands of sellers.”
Binnie added, “The market is firing on all cylinders. The low interest rate environment is encouraging many buyers to make their purchase now while the rates remain attractive. There is little indication that demand will taper off in the short term.”
According to Simmons, activity in the condominium market is picking up as buyers are priced out of the single-family home market. “With a diminishing supply of detached homes, buyers are starting to gravitate towards condominiums. If there is an uptick in sales activity and decrease in inventory, it would not be surprising to see price appreciation quicken in this category.”
Nationally, Canada’s real estate market performed strongly in the second quarter of 2015, with solid national average price appreciation across housing segments. However, Vancouver and Toronto markets are carrying the weight of this strong performance.
The report added, “Furthermore, the combination of high sales volumes and vigorous price appreciation in Canada’s largest cities has put the national residential real estate market on track for a record year in terms of total sales.”
Phil Soper, president and chief executive officer of Royal LePage, said, “Looking to Canada as a whole, 2015 is shaping up to be a record year for housing, despite the cloud of economic uncertainty caused by low oil prices and twitchy global economies.”
However, the report pointed out that a further interest rate cut this month “could over-stimulate markets such as Greater Toronto and Vancouver.”
JUNE 2015 VANCOUVER REAL ESTATE STATISTICS FROM REBV
Last month’s sales were 29.1 per cent above the 10-year sales average for the month. It’s the fourth straight month with over 4,000 sales, which is a first in the REBGV’s history. The previous highest number of residential home sales was 4,434, recorded in May 2005.
“Demand in our detached home market continues to drive activity across Metro Vancouver,” Darcy McLeod, REBGV president said. “There were more detached home sales in the region last month than we’ve seen during the month of June in more than 10 years.”
The MLS® Home Price Index composite benchmark price for all residential properties in Metro Vancouver is currently $694,000. This represents a 10.3 per cent increase compared to June 2014.
“Housing market activity comes in cycles; we’re in an up cycle right now that looks similar to the mid-2000s,” McLeod said. “It would be easy to point to one factor that’s causing this cycle, but the truth is that it’s a number of different factors.
“Conditions today are being driven by low interest rates, a declining supply of detached homes, a growing population, a provincial economy that’s outperforming the rest of Canada, pent-up demand from previous years and, perhaps most importantly, the fact that we live in a highly desirable region,” McLeod said.
New listings for detached, attached and apartment properties in Metro Vancouver totalled 5,803 in June. This represents an 8.7 per cent increase compared to the 5,339 new listings reported in June 2014.
“We’re seeing a steady stream of new listings entering the market, but the overall number of homes for sale is not keeping up with buyer demand,” McLeod said.
The total number of properties currently listed for sale on the region’s MLS® is 12,181, a 23.9 per cent decline compared to June 2014 and a 1.3 per cent decline compared to May 2015. This is the lowest active listing total for June since 2006.
The sales-to-active-listings ratio in June was 35.9 per cent. This is the highest that this ratio has been in Metro Vancouver since June 2006. A seller’s market typically occurs when this ratio exceeds 20 per cent for a sustained period of time.
“The competition in today’s market means that buyers have less time to make decisions,” McLeod said. “Given this, it’s important to work with your REALTOR® to gain insight into the local market, to get quick access to new MLS® listings, to develop a buying strategy that meets your needs and risk appetite, and to receive other services and protections that come from having professional representation.”
Sales of detached properties in June 2015 reached 1,920, an increase of 31.3 per cent from the 1,462 detached sales recorded in June 2014, and a 74.2 per cent increase from the 1,102 units sold in June 2013. The benchmark price for a detached property in Metro Vancouver increased 14.8 per cent from June 2014 to $1,123,900.
Sales of apartment properties reached 1,774 in June 2015, an increase of 35.6 per cent compared to the 1,308 sales in June 2014, and an increase of 66.1 per cent compared to the 1,068 sales in June 2013. The benchmark price of an apartment property increased 5.3 per cent from June 2014 to $400,200.
Attached property sales in June 2015 totalled 681, an increase of 7.1 per cent compared to the 636 sales in June 2014, and a 44.3 per cent increase from the 472 attached properties sold in June 2013. The benchmark price of an attached unit increased 7.1 per cent between June 2014 and 2015 to $506,900.
February 25th, 2013
Business in Vancouver reports that Vancouver City Hall will expand Laneway program
The City of Vancouver is planning to expand and tweak its laneway housing program to encourage the building of laneway homes and make them more liveable.
Since the program launch in 2009, the city has issued 800 permits for laneway houses and more than 500 laneway houses have been built in single-family neighbourhoods zoned RS-1 and RS-5. These zones make up 94% of single-family lots in the city.
The city has announced that, later this spring, city staff will report to city council with proposed amendments to the program and guidelines to expand the program to other single-family zoned areas.
According to the city, proposed amendments will seek to:
- encourage the development of more one-storey laneway houses, which has less impact on neighbours and is more accessible to aging populations and families with small children;
- make laneway housing more liveable by allowing more floor area for living and storage space, without increasing the size of the house; and
- allow a faster permit process for one-storey laneway houses and ensure the provision of one-site parking.
According to the city, the laneway housing program will be expanded into the following new zones: RS-1A, RS-1B, RS-3/3A, RS-4, RS-6 and RS-7.
Landlords need to declare basement suites for insurance purposes: