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Archive for September, 2018

NAFTA negotiations highlight looming crisis for homeowners

Interest rates have been expected to rise all year, but ongoing negotiations for a new North American Free Trade Agreement have quashed the latest planned hikes.

“The Bank of Canada indicated that if there were another increase of the interest rate and then there was a collapse of the trading relationship with North American partners, that would significantly negatively impact the economy,” said Tim Hudak, CEO of the Ontario Real Estate Association. “Certainly from our point of view, that’s bad for the housing market, so the Bank wisely took a wait-and-see approach until the trade negotiations are completed.”

Minister of Foreign Affairs Chrystia Freeland has been on the file for the Trudeau government, but working diligently behind the scenes is Canada’s Ambassador to the United States David MacNaughton. While that could abet a favourable outcome for Canada, rising rates in conjunction with the mortgage stress test open up another can of worms.

“Every economist may not agree on the timing, but interest rates are heading up, which means mortgage rates are heading up, and if you add 200 basis points onto every increase, you’re really pushing a lot of first-time homebuyers out of the market and impairing the dreams of move-up buyers who have kids and want a little more space,” added Hudak.

Hudak believes the tribulations surrounding a new NAFTA agreement illuminate a looming problem for Canadians, and that the time is nigh to revisit the Office of the Superintendent of Financial Institution’s B-20 stipulations, notably the mortgage stress test.

“In an era of rising interest rates, whether that rise is stalled by uncertainty in NAFTA or not, we need to drive home the importance of revisiting the stress test. It doesn’t make sense to keep piling up more expensive mortgages on top of rising rates from the Bank of Canada.”

Guideline B-20 was put in place largely to curtail exorbitant price escalation in Toronto and Vancouver, however, it’s chilled the Canadian housing market from coast to coast, with smaller markets bearing the brunt of what Croft Axsen calls restrictive policies.

“I’m not saying they shouldn’t be trying to address housing prices in Toronto and Vancouver, but I think most of that has to do with supply,” said Axsen, owner of Dominion Lending Centres Jencor Mortgage Corporation in Calgary. “There’s this overall restriction throughout the entire economy about who can get a mortgage, how many people can get a mortgage, and how big the mortgage they can get is. I don’t think they understand what they’re doing. It makes me nervous that bureaucrats are making these decisions and not bankers.”

By Neil Sharma

$70.8 million affordable housing investment for Ottawa

Middle-class families in Ottawa will benefit from 243 new rental units being built in the city with an investment from the federal government.

Two projects will be financed through the CMHC's Rental Construction Financing initiative including $70.8 million for the construction of a twenty-seven storey building with 227 rental housing units. More than 200 will have rents lower than 30% of median household income in the area.

"The project represents a major step forward in sustainable design with ambitious design targets to reduce energy consumption by 50% and reduce carbon emissions by over 75% with an integrated geothermal system for the project,” said Neil Malhotra, Vice President, Claridge Homes who will build the 70 Gloucester development.

The other will be $3.9 million for a passive housing Centretown Citizens Ottawa Corporation project on Arlington Avenue. It will feature 16 rental housing units with rents well below 30% of median household income in the area.

"Through the National Housing Strategy, more middle class Canadians – and those working hard to join it – will find safe, accessible and affordable homes where their families can thrive and have the stability and opportunities they need to succeed. Our Government is committed to increasing the supply of rental units for Canadians through projects like the ones we are announcing today,” added Jean-Yves Duclos, the Minister responsible for Canada Mortgage and Housing Corporation.

by Steve Randall 24 Sep 2018

Nation’s capital enjoying renaissance

Construction in the nation’s capital is on fire.

According to Ameera Ameerullah, CEO of Canada Mortgage & Financial Group, the firm has been lending on a lot of construction projects this year.
“We are currently facilitating about $47mln in land development and construction financing in Ottawa presently,” she said. “It ranges from land assembly and construction for single-family detached bungalows to a 76-unit low-rise condominium development in three phases, and land assembly for a retirement facility and golf course.”

Given that Ottawa is an historically stable market, and one that’s growing, Canada Mortgage & Financial Group’s presence there isn’t surprising.

“It’s a growing community in Canada, specifically in Orleans, which is up and coming with a stable job market due to the federal government,” said Ameerullah. “Orleans has one of the strongest household income levels in Canada, and the rental vacancy has been close to 2% over the past 10 years.”

Indeed, by all accounts Ottawa’s real estate market is on fire. According to Chris Allard, a broker with DLC Smart Debt, the growth in new construction is mostly occurring in the city’s east, south and west ends.

However, it’s creating frenzy for borrowers, brokers and lenders.

“We have some clients on waiting lists to even be able to put in an offer with a builder,” said Allard. “A builder only releases X amount of properties for a certain model and there’s already a waiting list. Those aren’t going to multiples, but you hope to be the next guy to actually put an offer in. I have clients who have slept in sleeping bags outside a sales centre just to put their names on a list.
“A lot of people need preapproval letters for builders, as well.”

Ottawa’s resale market is replete with multiple offer situations and, inevitably, broken hearts. Comparing it to what occurred in the Greater Toronto Area a couple of years ago, Allard says it’s ideal for sellers but tough on buyers.

“It means the parties involved are all a bit more stressed,” he said. “The borrowers are stressed because perhaps they did not put any financing conditions on their offer; the mortgage professional is stressed because if the borrower did put in a financing condition, then in a lot of cases the financing condition is very short, which means we need to be quick at getting an approval. That means we add pressure on the lenders to do everything quickly, but when there’s a hot market lenders are busy too, so the pressure goes down the chain from the borrower to the mortgage broker to the lender.”

By Neil Sharma

REP Magazine


Ottawa weathered tighter stress tests very well

In defiance of trends in other major metropolitan markets, hopeful home owners (in the average income brackets) in Ottawa are projected to qualify for 90% of active listings this year compared to 95% prior to January 1, according to a new analysis by

The current benchmark qualifying rate of 5.34%, which is nearly twice as high as the old 2.79% value, took effect at the beginning of the year.

Criticisms of the stress test by both observers and the general public have seemingly proven prophetic, as the study found that the new rules – along with BoC’s rate hikes since July 2017 – are preventing a significant fraction of Canadians everywhere (except in Ottawa and a few select markets) from achieving their home ownership dreams.

“When considered together, these changes mean that Canadians can qualify for less home, while also having to pay more per month for their mortgage,” RateHub stated.

RateHub added that those in Toronto and Vancouver would find it especially difficult, as they will qualify for less than half of active home listings in 2018 (20% and 8% of listings, respectively) compared to last year (43% and 20%, respectively).

The situation is more favourable for would-be buyers in Calgary and Montreal. Average earners in Calgary are expected to qualify for 77% of active listings, compared to 89% last year. Those in Montreal will qualify for 78% of home listings using the new stress test value, compared to 87% in 2017.

by Ephraim Vecina

REP magazine

TREB issues warning about “sold” data use

The Toronto Real Estate Board is reminding its membership not to compromise sales history.

In light of sold data being opened after the Supreme Court of Canada last week refused to hear TREB’s appeal in its litigation against the Competition Bureau, brokerages began posting sold data within hours. However, according to the Tribunal Order, sold data can only be posted on password-protected virtual office websites.

“This is required by the Tribunal Order,” said Brian Facey, a TREB legal representative. “It applies to VOWs, which are password protected, as defined in the Order.”

The country’s largest real estate board put out a FAQ about how brokerages are to proceed in presenting the public sold data. John Pasalis, president of Realosophy, a VOW that testified against TREB during the seven-year-long litigation, agrees with that a measure of responsibility is necessary in presenting sold data.

“I think you have to have some rules around how it’s being used, so I don’t disagree with TREB clarifying that,” said Pasalis. “We do need some clarity because you can’t have half the brokerages doing whatever they want, posting it without registration, and the others following the rules and requiring sign-ins, so it’s important for them to clarify these issues.”

The real estate board provided its membership with information and compliance guidelines, going so far as to threaten revoking membership and access to its MLS if guidelines are ignored. In a statement, TREB warned non-compliant individuals and service providers that it would pursue legal action against them.

“We are working with our members to ensure TREB is in full compliance with the order. TREB has issued a document to our membership on the decision and what it means,” TREB President Garry Ghaura said in a statement.

In the FAQ, TREB is clear that sold data cannot be “scraped, mined, sold, resold, licensed, reorganized or monetized in any way, including through the sale of derivative products or marketing reports. The data cannot be used for commercial purposes other than to provide residential real estate brokerage services between a realtor and client or customer. Breach of this by either a member or the member’s clients or customers may result in legal action (including damages) against the member and the cancellation of TREB membership and TREB MLS system access.”

By Neil Sharma

REP magazine