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Archive for January, 2019

Shots fired ahead of election

28 January 2019

With the federal election just under 10 months away, housing affordability appears destined to become a key issue, with the Liberals being the latest party to fire a shot across the opposition’s bow.

“Their front-end loading plan is a recipe to bankrupt housing providers right across the country,” Liberal MP Adam Vaughan said of the NDP’s proposal to build half a million units of affordable housing.

Last Monday, NDP leader Jagmeet Singh suggested that the half-million units could be subsidized by removing the GST from the cost of their construction. While that proposal has been met with some skepticism from housing experts, Vaughan’s comments are baffling to some.

“I’m not sure what he means by bankrupted,” said Jeff Morrison, executive director with the Canadian Housing and Renewal Association. “I’ve never known anyone to go bankrupt from getting money.”

However, building 50,000 units per annum without so much as a strategy seems unrealistic, says Greg Suttor, a senior researcher at the Wellesley Institute.

“That is more or less equivalent to a quarter of total production of housing by the private sector in Canada,” said Suttor.

Singh also accused the Liberals of resting on its laurels instead of solving the housing crisis, but in late 2017 Prime Minister Justin Trudeau announced a 10-year strategy to add up to 60,000 new affordable units and repair 240,000 existing ones.

Last week, Finance Minister Bill Morneau said that the federal government is exploring ways to help millennial-aged Canadians become homeowners, although he did not offer additional details.

The Conservative Party has also been critical of the government’s housing policies. Last year, the Deputy Shadow Minister for Finance declared the party’s intention to make B-20 a contentious issue leading up to the Oct. 21 election.

“It will be an election issue, absolutely,” said MP Tom Kmiec, who tabled two motions last year to study B-20, both of which were rejected by the Liberals.

“This is an affordability issue. The Bank of Canada is raising interest rates, and I don’t fault them for it, but rules like B-20, and then provincial rules, are compounding and make it unaffordable for young people to get into their first home.”

By Neil Sharma

With files from The Canadian Press

Most Canadians not aware of HELOC terms warns FCAC

Home equity lines of credit (HELOCs) are widely sold products but it seems that many borrowers are not fully aware of their terms and conditions.

Over the past 15 years, HELOCs have emerged as the single largest contributor to the growth of non-mortgage household debt in Canada—more than double that of either credit cards or auto loans.

A study by the Financial Consumer Agency of Canada (FCAC) shows that most of the 4,800 participants in a HELOC terms knowledge test scored below 50%.

The agency is warning that borrowers are risking over-borrowing, persistent debt, and wealth erosion from their uninformed decision making.

It’s urging lenders to help educate consumers about the potential downside to HELOC borrowing.

"These results point to a pressing need for financial institutions and FCAC to help Canadians realize that not using HELOCs responsibly can have serious repercussions on their financial well-being. Without a repayment plan, consumers may carry debt longer than anticipated and slip into patterns of behaviour that trap them on a treadmill of debt," said FCAC commissioner Lucie Tedesco.

Over-optimistic borrowers
FCAC says that the average HELOC balance held by around 3 million Canadians was $65,000.

However, a quarter of respondents are only repaying interest but 62% of them still believe that they will clear their loan within 5 years.

The survey reveals that 19% of respondents had borrowed more on their HELOC than they intended; and younger borrowers (aged 25-34) were more likely to say a $100 increase in the monthly payment would be a struggle to afford.

by Steve Randall

Sales activity, base prices might be relatively muted this year

The B-20 regulations introduced in early 2018 are highly likely to continue making themselves felt well into this year, according to a recent analysis by real estate portal Zoocasa.

The impact will be especially apparent in both sales activity and base prices, with the CREA predicting overall Canadian sales to decline by another 0.5% in 2019 after an 11.2% drop last year (down to 458,200 transactions), and average prices to minutely grow by just 1.7% (up to $496,800).

Calgary, Newfoundland, Ontario, and British Columbia are predicted to bear the greatest strain. As with their plight last year, millennials should brace themselves for the worst effects of the stress tests.

“The days of everyone being able to have a white picket fence and a detached house of their own are rapidly receding,” Vancouver Real Estate Board president Don McClintock told the Financial Post.

“Young people have to be prepared to live in townhouses and duplexes, and maybe even condominiums. We’re going to have to change our expectations to meet the new budget.”

A slowdown in the number of new mortgages, which was already well underway last year, is almost certain to continue in 2019. The CMHC’s Q2 report noted that new mortgage volume in 2018 shrunk by 11.9% on an annual basis, down to 205,000.

by Ephraim Vecina

07 Jan 2019

Housing, economic confidence slumps among Canadians

Housing, economic confidence slumps among Canadians

With multiple tensions and pressures playing major market roles, Canadians are entering 2019 with a sense of trepidation surrounding the housing market and the national economy, according to the latest edition of the Bloomberg Nanos Canadian Confidence Index.

“Western Canadians continued to be mired in a consumer sentiment malaise with confidence noticeably lower in the Prairie provinces and B.C. than the rest of the country,” Nik Nanos of Nanos Research said.

At the end of 2018, the Index closed at 55.1, which was markedly lower than the 62.2 in 2017.

Around 39.6% of the poll respondents are expecting a weaker economy over the next 6 months, with the ratio having more than doubled annually. Meanwhile, 39.7% are dreading considerable increases in home prices in the next half-year, compared to the 18% who are looking forward to a decrease.

Purchasing power was also a very real concern. Around 24.9% of respondents said that they were worse off financially compared to a year ago, while only 18.8% believed that their situations were better.

However, there was an unexpected bright spot: Young Canadians age 18 to 29, who are currently bearing the brunt of housing affordability challenges, were found to be the most optimistic demographic, with an Index measure of 61.5. Outlook actually becomes worse with each higher age group, reaching 50.1 for those 60 or older.

by Ephraim Vecina

January 3, 2019

The biggest real estate stories of 2018

Canadian real estate has been red-hot in recent years, and it’s for that reason that nobody can argue 2018 has been an uneventful year.

The biggest story of the year has been the Office of the Superintendent of Financial Institutions’ Guideline B-20 that stress tests new mortgage originations 200 basis points. However, should borrowers want to shop around their existing mortgage for a better rate, they too will be subjected to the stress test, effectively handcuffing them to their current lender. 

 “In five years, people who will have mortgages up for renewal will be used to it – anybody who refinanced or purchased would have qualified under the stress test – but it’s these people coming due in the next two, three years: they’re the ones who will have a terrible time,” said Doreen Walsh, First National’s regional sales manager for Ontario and Atlantic Canada.

During the second quarter of 2018, refinances in the private mortgage channel surged 67% over the same quarter in 2016. It’s just one reason why Benjamin Tal, deputy chief economist of CIBC World Markets, believes B-20 has set a course of unchartered territory.

“I supported B-20 because I believe we need to save Canadians from themselves,” Tal said in October, during a keynote speech at the National Mortgage Conference in Montreal. “However, I do believe that, at this point, alternative lenders are the fastest growing segment of the mortgage market. They’re transferring risk from the regulated part of the market to the unregulated market. They’re transferring risk from where there’s light to where it’s dark.”

Vancouver and Toronto cool
The two most frenzied housing markets in the country finally cooled in 2018, largely because of B-20, but in Vancouver’s case also because British Columbia’s provincial government implemented a series of cooling measures. The provincial government increased the foreign buyer tax from 15% to 20% and introduced a 2% vacancy tax to curb speculation. Vancouver is also hobbled by demand vastly outpacing supply.

“Vancouver has slowed down based on concerns of government intervention and a shortage of inventory, so people are on the sidelines and there’s a mismatch between buyers’ and sellers’ expectations on price, and activity level has slowed down,” said Sotheby’s International Realty Canada’s President and CEO Brad Henderson. “Product stays on the market longer and sells at a discount of what it would have been at the end, even the beginning, of 2017.”

Toronto, meanwhile, felt the weight of the new mortgage stress test and the market went cold until about June, when it briefly rebounded before cooling again during autumn. Like Vancouver, Toronto cannot get housing supply to market fast enough to satisfy demand, and as a result, prices have not come down. Fewer homes are being listed because the mortgage stress test has reduced choice.

“[Toronto] is suffering from lack of inventory because people are afraid that if they sell their house they won’t be able to find anything else,” said Henderson.

Montreal attracts foreign buyer attention
In the wake of B.C. increasing its foreign buyer tax by 25% – not to mention Toronto’s existing 15% tax on international buyers being dissuasive – Montreal has become a hotbed of foreign speculation. But according to Carrie Law, CEO of, a Chinese international real estate website, Montreal probably won’t supplant Toronto.

“If you are asking, will buyers fall in love with Montreal and lose interest in Toronto, the answer is no. Montreal is a wonderful destination that deserves a good deal more international investment than it now receives. Toronto has demand drivers that won’t disappear, including the English language, educational system, and job market.”

Interest rates are rising
Canada is officially in a rising rate environment and that could make stress testing mortgages a tenebrous affair for a great many Canadians. It has also led Tim Hudak, CEO of the Ontario Real Estate Association, to call for the stress test’s annulment.

“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,” he said.

“Our point of view at OREA reinforces the federal government to take a second look at the stress test because every time the interest rate goes up, the stress test goes up 200 basis points above that, making it even harder to get a mortgage and penalizing millennials, new Canadians and entrepreneurs trying to get into the housing market,” continued Hudak. “We certainly support government programs that encourage responsible and sustainable borrowing, but this pile-on of all kinds of new rules, regulations and taxes harms aspiring homeowners and sets back the potential of our economy.”

by Neil Sharma of REP Magazine

20 December 2018



Montreal riding a wave

Montreal has been riding a wave these last couple of years and it will continue through 2019.

According to Sotheby’s International Realty Canada’s President and CEO Brad Henderson, Montreal is replete with positive dynamics that should allow the city’s real estate market to scorch through next year.

“It’s a positive market that has shown positive dynamics with year-over-year growth in volume and modest increases in price,” said Henderson. “It’s been a market that’s been remarkably stable over the last number of years because of a good balance of supply and demand, having an easier time adding stock to the marketplace compared to Toronto and Vancouver, and that heretofore hasn’t been subject to vast buying and speculation by either international buyers or locals trying to capitalize on the hot market.

“The fundamentals going into next year will be positive, and we should expect more of what we saw in 2018.”

However, the same cannot be said for Vancouver, Canada’s priciest real estate market.

“Vancouver has slowed down based on concerns of government intervention and a shortage of inventory, so people are on the sidelines and there’s a mismatch between buyers’ and sellers’ expectations on price, and activity level has slowed down,” said Henderson. “Product stays on the market longer and sells at a discount of what it would have been at the end, even the beginning, of 2017.”

Toronto, buoyed by population growth and robust employment prospects, will be a strong, if unremarkable, market. Activity is being hampered by supply failing to keep pace with demand, and given the exorbitant price points throughout the largest metropolitan region in the country, qualifying for a new home under the B-20 mortgage stress test is proving insurmountable for many of the city’s residents.

“It, too, is suffering from lack of inventory because people are afraid that if they sell their house they won’t be able to find anything else,” said Henderson.

Condominiums are largely behind Montreal’s ascent as the hottest real estate market in the country, and Henderson credits their relatively quick delivery to market as one reason. They also allow people to live within the vibrant city core.
Marie Champagne, a sales agent at Engel & Völkers Montreal, notes that the largest city in Quebec is routinely on lists of the world’s most livable cities. Not only is it engaged in a constant tug of war with Boston as having North America’s most students per capita, it’s appealing to millennials for both its vibrancy and its affordability.

“It has access to housing and excellent transportation,” she said. “The city isn’t too big, so it’s easy to get around. The food is great, and it has that ‘cool factor’ because of the nightlife, festivals and culture. Quality of life is really important for Montrealers; they need balance between work and family. The city is also very tolerant for immigration, gender equality and LGBT rights. That makes us attractive.”