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Archive for February, 2019

Convert your thinking on property measurements

It never fails to amaze me how the real estate community stubbornly sticks to the old imperial measurements in a country which supposedly converted to the metric system back in the 1970s.

Let’s take the marketing of real estate. The generally accepted practice in the real estate community is for condominiums, homes and lot sizes to be priced in dollars per square foot.

The imperial system is still alive in the U.K., Canada and other parts of the former British Empire. The metric system is used everywhere else except the U.S.

I doubt that the average purchaser would know if a condominium being offered for sale at $800 per square foot is equivalent to $8611.14 per square metre, or if a 1,000-square-foot unit is 92.903 square metres. In my experience, virtually all real estate here is sized and priced in the imperial system. 

When I first starting searching titles years ago, we had to search back a minimum of 40 years or more to find a solid starting point, or root of title. Sometimes, that meant going back to some point in the 19th century.

I recall searching titles to rural properties where the original deed from the Crown, and many subsequent deeds, were expressed in the pre-imperial system — when lengths were set out in chains and links. I had to convert the numbers using the formula that one chain was 66 feet, divided into 100 links.

Most of our city streets today are officially based on the old surveyor’s chain of 66 feet, even though the pavement may be much narrower.

Today, when I review property measurements with clients, using either a land survey or a subdivision plan, most of them still think in feet, although younger buyers are generally more comfortable with metres. Registered plans for new homes and condominiums are invariably shown in metres, but buyers still think of area in terms of square feet rather than square metres.

Real estate listings for houses and condominiums are usually published using imperial measurements for dimensions and area as the default, although a button on the online listings may allow conversion to metric measurements.

Most of my clients who have come to Canada from metric countries are comfortable with both systems. Others who were educated in Canada during and after the time of Pierre Trudeau are familiar with both systems, but typically prefer imperial when it comes to real estate.

Bob Aaron is a Toronto real estate lawyer and frequent speaker to groups of home buyers and real estate agents. 
He can be reached by email at, phone 416-364-9366 or fax 416-364-3818.

Smaller banks, alternative lenders may be pressured by OSFI rules

Canada’s smaller banks and alternative lenders may be more pressured by proposed OSFI rules on liquidity than larger lenders according to Fitch.

The ratings firm says that because these lenders are more reliant on brokered deposit funding, their profitability and competitiveness may be affected more than larger lenders.

Fitch says that even those smaller/alternative lenders that have elevated levels of liquidity, such as Tangerine and Simplii, the new rules could limit long-term loan asset growth under their current deposit raising strategies.

The firm’s analysis matches that of Moody’s and other commentators who say that larger lenders have more room to adjust mortgage rates and other positions to boost competitiveness.

The OSFI proposal, which aims to shore up the liquidity of less-stable deposits, would increase the estimated runoff rates, or the percentage of retail deposits vulnerable to withdrawal under a stress scenario.

The regulator has been acting to firm-up the ability of financial institutions to cope with potential financial crises following Home Capital’s liquidity issues in 2017.

Under the proposal, banks would be required to hold liquid assets of up to 40% of high interest savings accounts or deposits sourced from third parties, depending on particular characteristics. Currently, runoff rates for all categories of deposits range between 3% and 10%.

In a hypothetical case where a bank held the minimum liquidity coverage, and where estimated runoff rates of deposits rose up to 40% from 10%, the new rule would require the bank to increase its high-quality liquid assets as a percentage of total assets, reducing interest earning assets by an equal amount. All else equal, net interest income would fall in proportion to the re-allocation of earning assets to non-earning, high-quality liquid assets (HQLAs).

OSFI’s consultation period for comments runs through March.

by Steve Randall

27 Feb 2019




Open banking might pave the way for better mortgages

Open banking will lead to a much-needed level of healthy competition that would foster technological and product innovations in Canada’s highly concentrated financial services industry, according to proponents of the concept.

PwC Canada’s Canadian Banks 2019: Open banking is coming analysis released last month indicated that Canadians are increasingly preferring a banking and borrowing environment that would grant them greater control and security over their financial data.

“Customer expectations are evolving rapidly and they are looking for a one-stop-shop where they can find all their financial information,” PwC Canada national banking and capital markets leader Diane Kazarian said.

Lenders and other financial institutions will benefit from the open banking revolution as well, since they would be able to ensure greater operational efficiency and security.

“Banks could be among the biggest winners of open banking if they seize the opportunities it brings to create a better customer experience,” Kazarian added. “It also has the potential to reduce risks, such as fraud and money laundering, as sharing data between institutions will make it easier to spot anomalies.”

The Department of Finance Canada has stated that as of last week, it has received more than 95 entries in its request for submissions to the federal-level consultation on the open banking framework.

Among those who submitted was independent lender Equitable Bank, which argued that open banking would encourage Canadians to shop around instead of settling for the most accessible option at the moment.

This is because the “competitive intensity” would force banks to start providing the greatest value for the financial products that their customers are willing to spend on.

“We don’t really think that that’s necessarily provided by one institution,” Equitable president and CEO Andrew Moor said in a recent interview with the Financial Post. “And open banking makes all of that much easier.”

by Ephraim Vecina


26 Feb 2019

Is real estate’s business model impinged upon or expanded?

American virtual office website (VOW) Redfin’s entry into the Canadian market is a telltale sign that real estate’s business model has expanded, but what does that mean for the traditional way of doing things?

According to the Hamilton Spectator, the Redfin has 1,400 sales agents across 85 U.S. markets, and in 2017 it conducted $60 billion worth of sales, in addition to having a website that attracts 27 million visitors each month. The VOW charges 1% commission on each sale, but pays its agents salaries with bonus incentives tacked on.

“It takes away the hustle from agents, and if they want to be successful in their own right, they’re the only ones who can create it,” said Erica Mary Smith, broker of record and co-founder of Stomp Realty. “That said, some agents might like the nine to five job, but for agents who want to make $400,000 to $500,000 a year, and who have bigger goals for themselves, it takes away from their ability to do those things.”

As for the lower commission rates—which total around 3.5% by the conclusion of the transaction—Smith says they’re fairly common in today’s industry. Of course, price determines priority.

“You don’t see a lot of 5% anymore; 3.5% is quite common,” she said. “If you’re staging a house and have to put a lot of money into marketing, you have to charge more, especially if there’s no buy involved. We’re not a discount brokerage by any means, but we want to do good business and give good value, so if you list with me and buy with me, I’ll give you a break on the list side.”

As Redfin’s CEO Glenn Kelman told the Spectator, there’s opportunity for the brokerage in Canada and he believes it can become a positively disruptive force.

“There’s just this sense that we can make real estate better in Canada, just like we did here,” he said.

But according to Sotheby’s International Realty Canada’s President and CEO Brad Henderson, Canadian consumers expect a level of service that might not be reflective of Redfin’s pricing structure.

“For people not looking for the full-service approach to real estate, which tends to be people bargain hunting or people purchasing something that’s on the lower end of the value range, their service will be appealing,” said Henderson. “But, for the most part, people still feel that buying a home is one of the biggest purchases of their lives and they want to make sure they have the best-qualified person guiding and advising them, so they’ll continue gravitating towards full-service organizations.

“Redfin isn’t good or bad; it’s just a different level of service.”

by Neil Sharma 14 Feb 2019

Property owners’ fight for land severance plan didn’t have to be this hard

One way of making better use of scarce residential land we have in the GTA is to intensify housing.

The City of Toronto’s official policy is pro-intensification. But its planning department seems to be actively opposed to squeezing more housing onto existing land.

The case of Mr. A and Mr. B is a good example of the city working against its own policy and opposing an application by the two owners to create three houses where only two existed previously.

M. A and Mr. B  owned adjoining parcels of land close to North York’s downtown area and less than 500 metres from the North York Centre subway station.

Each parcel has a frontage of 15.24 metres (50 feet), with the two properties together having a combined frontage of 30.48 metres (100 feet).

Each parcel had one house which complied with current zoning regulations. The owners proposed to demolish both houses and create three lots and three new houses.

They applied to the Toronto Committee of Adjustment for permission to split the two parcels — a procedure called a severance. The plan was to create a westerly parcel 9.76 metres (32 feet) wide, plus a middle and an easterly parcel each 10.35 metres (33.95 feet) wide.

The proposed houses for the three new lots would be marginally larger and longer than permitted by the North York zoning bylaw. So the owners sought zoning variances for construction on the three lots.

City planners opposed the property division into three lots; the Committee of Adjustment turned down the owners’ applications.

The owners then appealed to the Local Planning Appeal Tribunal (formerly the Ontario Municipal Board), and the hearing took place last year before tribunal member Gerald Swintin.

The issue the tribunal had to decide was whether the proposed land severance would “respect and reinforce the physical character of the neighbourhood, especially with regard to the proposed size and configuration of the lots.”

According to the owners, their proposal conformed to the goals of the city’s official plan, “to ensure the replenishment and replacement of housing in the neighbourhoods and preferably achieve some level of intensification, in a manner where the dwellings will fit within the character of the neighbourhood.”

In opposing the owners, the city took the position that “the magnitude of the reduction in lot frontage and lot area is significant and would result in a set of lots which fail to remain in character with the area.”

Much of the evidence before the tribunal involved comparing lot frontages in the local area, and somewhat farther afield.

A neighbour who objected to the proposal feared that “the narrowness of the lots will disrupt the current spacing and rhythm of the street, and that it will result in two ‘cookie cutter’ houses.”

I didn’t realize city streets had rhythm.

Another neighbour did not understand “why the owners can’t simply build two new homes on the two lots.”

In the end, the tribunal swept aside the City’s objections and allowed all five appeals of the owners.

Bob Aaron is a Toronto real estate lawyer. He can be reached at or on Twitter: @bobaaron2

Canada’s debt burden is easing but saving is still a challenge

Canadians are generally optimistic about their finances in 2019 with more expecting to add to their savings this year.

A BMO Financial survey found that 15% of respondents added $10,000 or more to their savings in 2018, helping them achieve their financial goals including buying a home.

But a quarter of respondents saved nothing last year and the survey found that rising interest rates are making an impact on household finances.

However, the figures show that Canadian households are taking on less credit due to costs and the B-20 stress test.

“Household credit is now rising the least in 35 years, and with consumers expected to spend at the slowest rate in a decade in 2019 due to higher interest rates and tougher mortgage rules, the debt ratio should stabilize if not fall modestly," noted Sal Guatieri, Senior Economist, BMO Capital Markets. "There's no better time to tighten the fiscal purse strings than when interest rates are on the rise."

Saving for goals, rainy days
Carola Corti, Managing Director, Everyday Banking, BMO Bank of Montreal added that the current environment is putting pressure on finances.

"However, it is encouraging to know that Canadians are coming into 2019 with saving top of mind – it's critically important to prioritize putting money aside, even in smaller amounts," she said.

Of those who said they are planning to dip into their savings this year, almost half are planning a vacation, 20% home renovations, and 15% will spend on seasonal activities such as birthdays.

While 36% say they are saving regularly for an emergency, 4 in 10 say that it’s not enough.


by Steve Randall  13 Feb 2019

REBBA reform could curb irrational price escalation

The Ontario government may soon amend the Real Estate and Business Brokers Act, and if successful it could prevent the kind of runaway market prices that have rendered Vancouver and Toronto unaffordable.

Consultations were launched late last week to determine whether or not REBBA needs updating so that if there are multiple offers on a property, a seller’s broker must disclose details on all of them.

Sunny Sharma, president and co-owner of Leading Edge VIP, says that could avert the kind of rapid, unruly price escalation that has single-family detached homes in Vancouver selling for more than $1 million.

“If bids were all open, people wouldn’t blindly bid $50,000 or $100,000 more than their competitor—maybe it would just take a few thousand more,” he said. “If bids were open, we wouldn’t have those absurd price increases caused by bidding wars like we saw in Vancouver and here in Toronto.”

According to the Ontario Real Estate Association, open bids would enhance the professional standards to which sales agents are held and protect consumers.

“The rules governing realtors were set 16 years ago, when smartphones weren’t invented and fax machines were the norm,” OREA CEO Tim Hudak said in a statement. “The industry has changed tremendously since then. It’s time for the legislation, as well as enforcement to catch up with the modern real estate market. Updating the rules will increase professionalism in our industry, which is what Realtors want and what home buyers and sellers deserve.”

For the last couple of years, OREA has lobbied for REBBA review and Minister of Government and Consumer Services Bill Walker is at least willing to entertain the idea, albeit with public input.

“We need to make sure the rules governing real estate professionals, and the brokerages that employ them, are efficient, fair and up-to-date with modern realities,” Walker said in a statement.

While open bids could conceivably keep homes on the market longer, Sharma says that isn’t such a bad thing considering that, when making one of the most important financial decisions of one’s life, the stakes are high. He added that in the digital age, there’s no reason things cannot be done expeditiously.

“Send out an e-blast to all agents that the current price has changed with the latest bid,” he said. “It might take a little longer to sell the house, but is it a more balanced scenario in which people bid intelligently rather than emotionally and maybe even irrationally? Absolutely.”

by Neil Sharma  04 Feb 2019

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Which home features most interest buyers?

Ever wonder which home features most interest buyers? Well, Point2 Homes has crunched the numbers for you.

As one of Canada’s leading property search websites, Point2 Homes determined that pricing is buyers’ overriding concern during the home buying process. Listings under $100,000 receive 233% more leads and 45% more views than their more expensive counterparts. However, 70% of real estate sales representatives surveyed by Point2Homes say “charm pricing”—listing a home, for example, at $199,999 instead of $200,000—has no bearing on the number of leads they accrue.

Listing pictures are also very important, but post too few or too many and you’ll lose prospective buyers’ interest. Nine in 10 of them rely on the internet to research properties, meaning having listing pictures will generate zero interest.  The perfect balance, on the other hand, is six to 15 photos, even though agents like posting between 26 and 30 photos. Point2 Homes also found that listings with six to 10 pictures generate 52% more leads than listings with either one to five, or too many at 46 to 50.

Inundating prospective buyers with too much listing information, while apparently counterintuitive, tends to repel them. Keep it brief—Point2 Homes says no more than 250 characters—because the average prospective buyer spends only 20% of their time on listings’ details. What this means for sales agents is that they only have one chance to grab a potential buyer’s attention—about two seconds without a listing photo, and 20 seconds with a single one.

Another way to reel in buyers is by focusing on listing type. Point2 Homes found that two-bedroom condos are the most popular searches among Canadians since most urban centres have begun intensifying. Three-bedroom properties get the most views but two-bedroom homes nevertheless produce 14% more leads. One and a half bathrooms are also favourable when it comes to buyer preference, as they generate the most number of views and leads, even though homes with a single bathroom are cheaper. Lastly, condos receive 16% more leads than houses.

Prospective buyers pay close attention to amenities, too. According to Point2 Homes, sales representatives have a propensity to think buyers aren’t attracted to homes with pools, however, those properties actually generate 46% more leads than homes without pools. Properties with views of water also get 18% more leads than properties without those views.

by Neil Sharma

23 Jan 2019

Borrowing among Canadian seniors accelerates further

Canada’s total outstanding reverse mortgage credit massively grew by 31.68% year-over-year in November 2018, to reach a record-high $3.48 billion. This was also 1.85% higher than the month prior, pointing to a trend of an increasing proportion of elderly Canadians borrowing with their equity, according to the Office of the Superintendent of Financial Institutions The OSFI added that while annual growth in December 2018 was around 31% lower compared to the same month in 2017, the unprecedented heights of the outstanding total still indicated that the trend is not stopping any time soon. However, a significant number of Canadian seniors have recently voiced worries about their future prospects, considering the rate they are going through their home equity. According to the latest MNP Consumer Debt Index conducted by Ipsos, 41% of Canadians said that they are concerned about their existing accountabilities, and a larger 43% admitted that they regret the amount of debt that they have taken on in their lives. “Seniors are usually on a fixed income, meaning a big loan isn’t likely to be paid quickly. At that age, they also aren’t likely to find new additional income streams either. That adds up to borrowers that will rack up interest for a very long time,” Better Dwelling warned in its analysis of the OSFI data.

by Ephraim Vecina

29 Jan 2019

Impact of tighter rules, interest rates greater than anticipated

The Bank of Canada has admitted that the economic impact of strict mortgage regulations, local housing restrictions, and the upward trend in interest rates was more serious than expected.

“Staff analysis suggests that the combined effect of [these elements] has been larger than previously estimated,” the BoC noted in a statement earlier this month, as quoted by Business in Vancouver.

A major factor fuelling the problem is that both consumer spending and housing investment “have been weaker than expected” over the past year. This was because housing markets nationwide were still largely adapting “to municipal and provincial measures, changes to mortgage guidelines and higher interest rates,” the central bank explained.

Macquarie Group Canadian market strategist and NA economist David Doyle issued a similar cautionary missive late last week. Doyle warned that multiple economic risks such as the housing market’s affordability crisis would likely pull down the country’s GDP growth in the long run.

 “Canada’s economy, we think, is at this critical juncture, and it’s confronting several headwinds – that includes challenged demographics, low productivity, structural imbalances like the housing situation and our trade deficit,” Doyle said in an interview with BNN Bloomberg. “And we see a real absence of growth drivers.”

Taking the situation into account, the BoC has actually revised housing investment’s contribution to average annual economic growth to -0.1% in 2019, down from the +0.1% during the bank’s October round of predictions.

by Ephraim Vecina   31 Jan 2019