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Archive for March, 2013

Ottawa resale market up from January

Members of the Ottawa Real Estate Board sold 914 residential properties, including condominiums, in February through the Board’s Multiple Listing Service® system, compared with 1,008 in February 2012, a decrease of 9.3 per cent.

“It is clear that the Ottawa resale market has slowed down in comparison to this time last year,” said Tim Lee, President of the Ottawa Real Estate Board.  “The government was successful in its quest to “cool down” the market. However, if we look at February’s sales in comparison to the previous month’s sales, the market seems to be picking back up as we approach the busy spring season – 315 more homes were sold in February over January, even with three fewer days.”

The average sale price of residential properties, including condominiums, sold in February in the Ottawa area was $346,774, a slight decrease of 1.1 per cent over February 2012. The average sale price for a condominium-class property was $264,953, a decrease of 3.1 per cent over February 2012. The average sale price of a residential-class property was $373,337, a very slight decrease of 0.6 per cent over February 2012.

Single level condominium apartments: February’s figures showed 98 sales for the month, compared with 126 in February 2012. Although the volume was down, the average price in February 2013 was $309,998, a minimal decrease of 1.5 per cent over the previous February.

Two story condominium townhomes: February’s figures showed 109 sales for the month, compared with 102 in February 2012. The average price in February 2013 was $225,069, a minimal increase of 0.8 per cent over the previous February.


Flaherty blasted for pressuring Manulife to reverse mortgage rate cut

By Robert Hof

This is from the Ottawa Business Journal

Finance Minister Jim Flaherty is coming under fire for using his position to pressure a private sector mortgage lender to raise its interest rates.

“That’s Banana Republic behaviour,” said NDP Leader Tom Mulcair, who added the minister has no business interfering with the free marketplace.

Liberal interim leader Bob Rae called the minister’s actions “ridiculous” and in essence working to increase borrowing costs for Canadians.

moneykeys

“Either we have a market or we don’t,” he said. “The banks have huge profits. The idea that they shouldn’t be able to give a break to consumers is ridiculous and the idea that the Minister of Finance would basically be trying to create some kind of a cartel among the banks and the financial institutions as to what they can offer consumers by way of interest rates is I think completely inappropriate, completely wrong actually.”

On Tuesday, Flaherty admitted he asked a member of his staff to phone Manulife Financial Corp. (TSX:MFC) after it had cut its posted rate for five-year fixed mortgages to 2.89 per cent from 3.09 per cent.

The company quickly reversed its decision, saying only that “after consulting with the Department of Finance, Manulife Bank has withdrawn the promotional campaign and reverted to our previous posted rate.”

It’s the second time in a few weeks that Flaherty interfered in the mortgage market. Earlier in the month, he called the Bank of Montreal (TSX:BMO) after it had dropped its posted five-year rate to 2.99 per cent, but on that occasion BMO did not reverse itself.

Afterwards, he thanked other institutions for not following the BMO lead, at least until Manulife’s brief discounted offering.

Since the government tightened mortgage rates in July, Canada’s housing market has slowed considerably in terms of sales, starts and even prices. Two weeks ago, the Bank of Canada signalled it was no longer as concerned about Canadian debt levels, saying it does not expect the situation to worse appreciably from its current high levels.

Slowing home sales and credit, however, has intensified competition among financial institutions and banks for a dwindling slice of the mortgage market, a relatively safe and lucrative sector of the industry.

Flaherty told reporters he acted with Manulife to keep lenders from taking on risky loans and was happy with the company’s subsequent decision.

“As I said before, we encourage prudent lending practices, we don’t want a race to the bottom on mortgage rates by our financial institutions so I’m pleased at their response,” he said.

“I had one of my staff call them and indicate my displeasure, which is the same thing I did with the BMO except I called myself.”

But the opposition leaders said the government has no right to interfere in the free marketplace once it sets the ground-rules. To act otherwise is to substitute its opinion for that of the players in the market.

“That company is operating completely with full respect of the law, they see an advantage in attracting clients at this rate, why shouldn’t they go out to do that?” Mulcair asked.

“It’s none of his business. It’s the minister’s opinion, it’s nuts. We’ve never seen this before.”

Flaherty has for the past several years complained that Canadians are borrowing beyond their means, particularly on mortgages, and worried they will be trapped once interest rates start to rise.

To slow down borrowing, he has tightened the rules on four occasions, reducing the amortization rate to 25 years from a historic high of 40 years, which was reached under Flaherty’s watch.

As well, he has asked the federal watchdog on financial institutions to enact stricter lending practices and controls.

While the first three attempts did little to slow down the housing and credit growth, the last move in July seemed to accomplish the trick. The market has been on a steady downward slide ever since, with analysts predicted prices may fall between 10 per cent and 25 per cent over the next few years.

The central bank notes that credit growth has also slowed, adding it expects household debt to disposable income to remain at or near the record level of 166 per cent, where it has been the past two quarters.

But while the Conservatives have apparently succeeded in pricking the housing bubble, one of the offshoots of the policy has been to slow down economic growth to below two per cent.


Beware of the “Right to Buy” Offer

By Robert Hof

There are non-realtors out there who are trying to put real estate deals together, using an agreement called a “Right to Buy” or “Option to Purchase.” They then try to sell their right to a third party, taking a fee fo their efforts. A CBC story made national headlines about a BC couple who moved to Calgary after agreeing to an option to purchase agreement with a company called Kelowna Home Deals. This company then tried to sell the option to a tenant under a rent to own agreement.

Mark Weisleder

Mark Weisleder

The result was that the tenant paid money to Kelowna Home Deals, and then paid nothing else. The owners received nothing and the tenant feels that they were ripped off as well.
The idea of a rent to own agreement between an informed landlord and tenant, with professional representation, can be a win-win arrangement for both sides. This involves a lease with a separate option to purchase agreement, with appropriate protections for both the landlord and the tenant. But when there are no professionals involved, you can expect trouble, as was the case here.
See the attached link to the article that appeared in Canadian Real Estate Magazine, where I was quoted on what happened. If you need any assistance in setting up a rent to own agreement, please contact me.
http://www.canadianrealestatemagazine.ca/news/item/1526-caveat-emptor-warn-rent-to-own-landlords?tmpl=component&print=1

Brokers pursue mortgage break for first-time home buyers

By Robert Hof

In July of 2012, the federal government implemented new, tougher regulations surrounding mortgages, including shortening the maximum amortization period on insured mortgages from 30 to 25 years, and limiting refinancing to 80% of a home’s value, from the previous 85%. The new guidelines were instituted as a measure to cool what was feared to be an overheating housing market. Shorter amortization periods have proven to have a significant impact on first-time home buyers, effectively increasing the monthly payment on a given mortgage.

Jim Murphy, the head of the Canadian Association of Accredited Mortgage Professionals (CAAMP) recently made efforts to convince finance department officials that the new regulations were a step too far. His suggestions are to resume insuring mortgages with 30 year amortizations (with the caveat that the borrower must qualify for a 25 year amortization) and to increase the $750 tax credit that first-time buyers receive.

Door key

Although the finance department has not released a comment at this time, it is the belief that the likelihood of these steps being taken is low. Finance Minister Jim Flaherty has previously stated that he is pleased with the results that tightening the mortgage legislation has produced, and that his concern for inflating house prices remains.

Click here for the full article from the Globe and Mail.


Canadian home sales edge back in February

According to statistics released today by The Canadian Real Estate Association (CREA), national home sales activity edged back down on a month over month basis in February 2013 following an increase in January. View PDF.

Beware of the registration type of your future mortgage.

By Robert Hof

I received this Toronto Star article from our great mortgage specialist, Gemma Riley-Laurin, who wrote the intro. The link to the complete article is at the end of Gemma’s piece. Robert.

“This is a great article explaining why a collateral mortgage may not be in your best interest, long term.  TD, Scotia, ING, National Bank and RBC offer “collateral mortgages”.  “Collateral Charge” is a type of registration.  Most lenders will register a Home Equity Line of Credit or HELOC as a collateral as it can be re-drawn in the future.
A “collateral” registration for a mortgage means that you cannot have the mortgage “assigned” or “transferred” to another lender at maturity.  You as a consumer would have to go to the cost of legal fees to bring your mortgage elsewhere.  The option to register as a “collateral” reduces your overall competitive advantage in the future.
Some lenders “ING and TDCT) have taken the position that ALL of their mortgage be registered as “collateral” mortgages.  This should be explained at the time of application, but we believe it is not.  Most consumers do not cover this topic. “

http://www.thestar.com/business/personal_finance/spending_saving/2011/07/30/beware_the_pitfals_of_collateral_mortgages.html


Do you need to disclose a grow-house rumour?

By Robert Hof
Sensible advice from lawyer Mark Weisleder – as ever! I am often asked whether a seller needs to disclose that a property was once a grow-house. In my opinion, because of the damage that can be done to a property by a grow- house operation, it should be disclosed, together with any attempts that were made to correct any deficiencies. However, what happens if you are a subsequent owner and you just hear a rumour that a prior owner ran a grow-house operation? Read the attached case that decided that unsubstantiated rumours of a grow-house did not need to be disclosed by the sellers. If you have a question about whether a prior issue should be disclosed, please contact me.
Click here to read the article:

http://www.thestar.com/business/personal_finance/2013/03/08/false_grow_op_rumour_kills_house_sale_in_winterbourne_ont.html


Who gets the family home?

By Robert Hof

From Mark Weisleder’s newsletter…

Who gets the family home when a marriage breaks down?

When a marriage breaks down, one of the major questions for a couple is how to deal with the matrimonial home. On the one hand, there may be a desire for one spouse to stay in the home with the children, to provide some family stability. However, due to the tax advantages relating to the matrimonial home, legal advice should be sought before making any decisions. As the attached article indicates, there are many issues, including division of assets, support and taxation that will have to be determined. Click here to read the article:

http://www.thestar.com/business/personal_finance/2013/03/01/divorce_and_the_family_home_be_careful_when_marriage_breaks_down.html


Tax time is approaching…

By Robert Hof

Some great advice from The Toronto Star’s Evelyn Jacks, brought to my attention my our mortgage whiz, Gemma Riley-Laurin. Thanks, Gemma.

http://www.thestar.com/business/personal_finance/2013/03/02/avoid_these_8_common_tax_filing_mistakes.html