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Archive for April, 2018

Property management crucial in purchasing decision

Property management companies are becoming crucial factors in buying condos that make long-term economic sense.

Right At Home Realty Broker Manu Singh says exceptional property management is the chief determinant in how little maintenance fees increase during his clients’ tenures in their condos.

“We see that there are property managers that have good historical records of upkeeping buildings, yet remaining cost-efficient,” he said. “There’s an inverse relationship between maintenance fees and selling price down the road, so if the property manager can be prudent in their management strategies, we see in the long run that they’re able to keep maintenance fees in check and that helps a lot with future retail value with the condo.”

Amenity packages also largely determine the severity of condo fees. Singh’s clients are “sophisticated downtown professionals,” for whom he recommends eschewing superfluous amenities.

“All downtown professionals really want is a party room, as well as an exercise facility, and if it’s good enough they can save on a monthly gym membership,” said Singh. “But they don’t necessarily want excess, like basketball and tennis courts, saunas, steam rooms—extra stuff they won’t use because that hits their costs and then their maintenance fees rise. Buyers are selective and prefer buildings that are efficient. They’re prudent and savvy around not having any extra amenities they’re not going to use. That huge pool is a deterrent nowadays.”

While reputable property managers are paramount, so, too, are builders. Does the builder traditionally develop low-rise suburban homes, but has decided to give condo building the old college try? How do the condo units appreciate over, say, five years?

“If it’s Tridel or Daniels, they’re top-notch brands, but we look at history too, like how many total projects there are in that particular area,” said Singh. “We also look at how many projects are currently on the go. You can see premium builders that take the time to put in good, quality materials, and these are the types of things that help buyers realize their investment is likely to be secure.”

Canada’s three largest real estate markets are saturated with condominiums, so research is imperative—especially if sales agents want happy, returning clients.

“The number one thing I look at is the builder,” said Akshay Dev of REMAX Realty One. “Their background and past record are important—what kind of buildings have they built in the past and how have their values held up? Are they using the same property manager the builder set up or has the board of directors found new property management? If the property management has changed, I dig deeper to find out what happened. Some builders have their in-house property management companies, like Tridel whose company is called Del Property Management. But one has to see on a case by case basis.”

by Neil Sharma of REP magazine

25 Apr 2018

Vancouver’s empty homes tax

The city of Vancouver's new empty homes tax is expected to bring in $30 million in revenue in its first year.

Vancouver Mayor Gregor Robertson said $17 million has already been collected from owners of almost 8,500 properties that were determined to be vacant or under utilized for at least six months of the year.

“For those who didn't rent their empty property and chose to pay the empty homes tax, I just want to say thank you for contributing to Vancouver's affordable housing funding and making sure we can invest more in affordable housing,'' Robertson said at a news conference Monday. “For those who did rent their empty homes, thank you very much for adding to the rental housing supply here in Vancouver. It's desperately needed.''

The tax is the first of its kind in Canada, requiring homeowners who do not live in or rent out their properties to pay a one per cent levy based on the assessed value of the home.

Robertson said the tax was intended to address the city's near-zero vacancy rate.

The most recent figure from the Canadian Mortgage and Housing Corporation puts the city's rental vacancy rate at 0.8 per cent, up slightly from the previous year, the mayor said.

It's unclear yet if the tax has increased the availability of rental accommodation, Robertson said, adding that the city is developing better data collection methods to monitor the impact of initiates like the tax more closely.

The city previously said about 60 per cent of properties affected by the tax are condominiums.

The tax on the properties where owners said their home was empty ranged from $1,500 to $250,000, Robertson said, noting the highest tax bill came from a $25-million home.

The funds will support the city's affordable housing initiatives and residents can provide feedback on exactly where the money should be spent.

Robertson said increasing capacity at homeless shelters or adding to the city's rent bank, which provides one-time interest-free loans to low-income residents in a financial crisis, are among the possible initiatives that could benefit.

The median tax due is just under $10,000 and Robertson said anyone who doesn't pay up will face fines and have the bill added to their property taxes next year.

“Those who are not playing ball here and who are skirting the system, we will get you,'' the mayor said.

Nearly 99 per cent of homeowners completed an empty homes tax declaration.

The tax cost the city $7.5 million to implement and annual operating costs for the first and subsequent years are pegged at $2.5 million.

Audits are underway and the city said just under 1,000 complaints or disputes have been filed that need to be addressed in the coming months.

Robertson said it will be up to city council to decide whether the tax is having the desired effect, and that will likely take a few years of data to determine.

“I would say at this point it looks like some signs of success,'' he said.

by Linda Givetash The Canadian Press

April 23, 2018

Bank of Canada makes interest rate announcement

18 Apr 2018

The Bank of Canada is maintaining its trend-setting interest rate as its careful assessment of the timing of future hikes continues amid a backdrop of moderating growth.

The central bank, which kept its rate at 1.25 per cent Wednesday, said slower first-quarter growth of about 1.3 per cent was largely a result of housing markets' responses to stricter mortgage rules and sluggish exports. The bank had predicted the economy to expand by 2.5 per cent in the first three months of the year.

It's expecting the economy to rebound in the second quarter with 2.5 per cent growth, in part because of rising foreign demand, to help Canada expand by two per cent for all of 2018. The economy saw three per cent growth in 2017.

“Canada's economic growth has moderated, and the economy is operating close to capacity,'' the bank said in its latest monetary policy report, which was released alongside the rate announcement.

“While a moderation was anticipated, temporary factors … are resulting in sizable short-term fluctuations in growth.''

The bank reiterated it expects further interest-rate hikes to be necessary over time and that it will follow a cautious, data-dependent approach when weighing future decisions.

“Some progress has been made on the key issues being watched closely by governing council, particularly the dynamics of inflation and wage growth,'' the bank's statement said.

“This progress reinforces governing council's view that higher interest rates will be warranted over time, although some monetary policy accommodation will still be needed to keep inflation on target.''

The bank will also continue to watch the economy's sensitivity to higher interest rates and how well it builds capacity through investment, which would enable Canada to lift growth beyond what is viewed as its potential ceiling without driving up inflation.

Signs suggest the economy has made some progress in building this capacity, the bank said.

The bank is also keeping a close watch on the evolution of external risks.

Exports and business investment in Canada have been held back by competitiveness challenges and trade-policy uncertainties, which include escalating geopolitical conflicts that risk damaging global expansion, the bank said.

It laid out estimates on the growth impacts on Canada due to tax reforms in the United States, which are expected to lure more investment south of the border. Due to these investment challenges, it predicts Canada's gross domestic product to be 0.2 per cent lower by the end of 2020.

Exports are also expected to take a hit from reduced investment and trade uncertainties. The bank projects that Canada's GDP will be 0.3 per cent lower by the end of 2020 due to the negative impacts on exports.

Fiscal stimulus introduced in recent provincial budgets is expected to help offset these effects by adding about 0.4 per cent to Canada's real GDP by the end of 2020.

Governor Stephen Poloz introduced three rate hikes since last summer in response to an impressive economic run for Canada that began in late 2016. But due, in part, to factors such as mounting trade unknowns, Poloz has not raised the rate since January.

The bank offered an analysis Wednesday of some of the key indicators it's watching ahead of rate decisions.

On inflation, the bank said temporary downward forces weighing on the rate have largely dissipated. Other transitory factors, including higher gasoline prices and recent minimum wage increases are now expected to raise inflation above the bank's January predictions.

Canada's annual pace of inflation in February sped up to 2.2 per cent – its fastest pace in more than three years – to creep above the central bank's ideal target of two per cent. Meanwhile, the average of the agency's three measures of core inflation, designed to omit the noise of more-volatile items like gasoline, climbed slightly above two per cent for the first time since February 2012.

For wage growth, the bank said despite recent improvements it remains below what would be expected if the economy no longer had slack in its labour force.

On Wednesday, the bank also released new economic forecasts in its monetary policy report.

For 2018, it's now predicting two per cent growth, as measured by real gross domestic product, compared to its 2.2 per cent prediction in January.

The bank raised its growth projection for 2019 to 2.1 per cent, up from its previous prediction of 1.6 per cent, before easing to 1.8 per cent in 2020.

It noted that these readings would still be slightly above Canada's estimated potential output for the next three years.

by Andy Blatchford of Canadian Press

and also published by REP magazine

Toronto’s investors disappear and re-emerge down 401

According to professional real estate investor Rachel Oliver, avoid Toronto.

“A lot of people from the GTA are gravitating to Ottawa because it’s cheaper there and they can pick up rental properties,” said Oliver, co-host Mothers of Real Estate TV show, co-author of MORE Confident Real Estate Investor Course, and Rent to Own Expert. “The government is a pretty stable source of employment, so as an investor you have people with stable demand who are employable and have employment options. You have demand from people who are migrating and driving up appreciation. They’re driving up the need for more rental properties.”

Sales agent Sabrina Mtanos agrees that the stability provided by government employees and students makes Ottawa attractive to investors, but she says other factors have conspired in their favour as well.

“Ottawa is currently in a sellers’ market, which essentially means there's a low inventory of homes for sale and a large demand from buyers, which leads to many buyers competing for the same property and paying full asking or above asking for the property,” said Mtanos. “The market has shifted since last year and we're seeing a lot of rental properties going into bidding wars as well. A lot of buyers are missing out on a property, which leads them to renting instead. It's becoming very common for tenants to compete with other applicants for a rental unit thus making the Ottawa Real Estate market hot for investors and landlords.”

But according to Oliver, smaller towns and cities are ideal places for investors because, typically, purchase prices tend not to exceed $500,000—and even for that price you can get a lot of house. Oliver says that helps investors recoup 1% of their investment through rents—a virtual impossibility in large cities like Toronto and Vancouver.

“One percent of the purchase price is an indicator of how much the investor can collect from rent in order to cash flow,” said Oliver. “If a property is listed for $400,000, the 1% Rule suggests that property needs to have a monthly income of $4,000 in order to cash flow. So after the investor factors in carrying costs, property maintenance, vacancy, etc., there is a positive cash flow they can bank on every month.

“Invest in specific markets primed for growth. Understand the fundamentals about whether future appreciation will kick in. You buy for future appreciation, not total demand because you don’t want full saturation, otherwise you’ll be overpaying.”

Article by Neil Sharma of REP magazine


The Fair Housing Plan’s forgotten victims

During last year’s first quarter, the housing market was full of highs and lows—that is, highs for sellers and lows for buyers whose new purchases depreciated in the blink of an eye.

Buyers in a Mattamy subdivision in Oakville called Preserve were among the latter when they purchased in February 2017 only to watch the Fair Housing Plan quash any appreciation they hoped to ride. In tandem with the B-20 mortgage rules requiring buyers to prove they can endure a 200 basis point interest rate hike, the buyers feel hopelessly hamstrung by a series of what they called irresponsible government intervention.

“We’re not investors. We purchased homes to raise our children,” Shahina Khan, who, with her husband, purchased one of the Preserve houses. “If the government wanted to implement cooling measures, why was it so reckless? Why did they not stop and think about the families that were in the middle of a transaction.”

“It’s not something (the government) could have forgotten about. It’s something they dismissed,” she added. “There’s some level of accountability with everybody and nobody’s stepping up.”
Unable to recoup their money on the resale market, nor able to secure a favourable mortgage, the group of buyers have called on the government, banks and homebuilders to conjure a solution.

But as Brad Carr, President of Mattamy Homes, told the Toronto Star’s Tess Kalinowski, while he’s sympathetic to the buyers’ plights, their contracts are binding for a reason.

“When a homebuyer makes a firm and binding decision to Mattamy to have us build them a home, we in turn take that promise, that commitment, and we make a whole series of promises to our trades, to our suppliers, to our employees about what now we can do on the strength of those firm contracts to employ them,” he said.

The Star spoke to three couples, all with children, whose houses were purchased for between $1mln and $1.6mln, and if they walk away from their contractual obligation with Mattamy, their deposits will not be refunded and they could get sued by the builder.

The Star also reported that Mattamy refuses to grant the buyers leniency.

The buyers also told the Star that if they secure financing through the alternative lending channel, they will be incapable of paying their monthly bills.

Carr also said that the Preserve buyers’ quandary isn’t unique—countless others throughout the market have been felled by similarly bad luck. 

“The individuals who signed up for these houses … did so with full understanding of where we were in the full housing cycle, in the same way anyone else would,” he said, adding that there was extensive media coverage of the heated housing market around the time the buyers purchased.

“You also have to remember we’re talking about price points and a type of housing that are right at the top end of the band.”

The unfortunate story highlights the perils of trying to time the market, as well as the pressures people feel about being priced out. It also elucidates how, even in a bid to spur affordability, government policy decisions sometimes leave casualties in their wake.

Article written by Neil Sharma and reproduced with permission.

Millennials set to drive housing boom reveals RBC poll

Homebuying intention is at its highest in eight years as the growth in the Canadian economy fuels consumers’ confidence.

Despite the mortgage stress tests introduced at the start of 2018, a third of Canadians polled by RBC say they are very or somewhat likely to buy a home in the next two years.

Among millennials, the homebuying intention is even higher with 50% likely to buy.

Although more than half of potential buyers say that the OSFI mortgage regulations are affecting their buying decision, it does not mean they won’t buy at all.

A quarter of respondents said they will buy with a larger down payment and 18% will seek a smaller home or one in a less expensive area. Just 19% said the mortgage rules will delay their purchase and 39% were not aware of the stress tests.

Getting financial assistance from family is the plan of 36% with the same share having a dedicated savings account of their own which will fund the down payment.

Finding the right home is the top challenge cited by the RBC Home Ownership Poll, followed by deciding how much they can afford.

Interest rates are an important factor in the homebuying decision with 61% of respondents saying they are concerned about rates and a combined two thirds citing current low rates, or the potential of rate rises, for wanting to buy a home sooner.

by Steve Randall of REPmagazine

April 04, 2018

International online retailer selling Canadian houses like shoes

Chinese real estate portal Juwai—which collects staggering quantities of data on Canadian housing—has struck a deal with online retailer to start selling homes like shoes.

Juwai markets overseas properties to buyers in China’s Mainland and, according to a statement buyers can view houses listed for sale “like milk, shoes and other household goods.”

In addition to Canadian real estate, home listings from Australia, the U.K. and U.S. will also be advertised on—all popular markets for Chinese investors., which is often referred to the Chinese equivalent of Amazon, made a special request for Canadian real estate because of how popular of a commodity it’s become among Chinese consumers.

China forbids capital outflow exceeding USD$50,000, but it’s in the midst of loosening such restrictions and retailers like—China’s second-largest retailer after Alibaba—are champing at the bit.

However, news about the deal between Juwai and is bound to inflame tensions between domestic and foreign buyers, whom believe responsible for rising unaffordability.

Countries like New Zealand, Britain, Australia, Switzerland and Singapore, to name a few, have taken measures to protect their housing markets from foreign speculators, while Canada has steep foreign buyer taxes in its two most expensive real estate markets.

Article by Neil Sharma and reproduced with permission from REP Magazine

Always interesting…