Ottawa is experiencing a rental shortage, and savvy foreign investors are swooping in.
“There’s a shortage of inventory in the rental market here, so there’s a need for rental properties,” said Chris Lacharity, a sales representative with Marilyn Wilson Dream Properties, which deals in the luxury market. “An astute buyer knows that. There are a lot of foreign buyers who buy for personal use, but there’s a lot of investment, too.”
The nation’s capital is situated between Toronto and Montreal—two cities with significant foreign buyer activity—so the presence of non-resident investors shouldn’t come as much of a surprise.
“Ottawa is growing faster than it ever has, but there’s still growth potential,” said Lacharity. “It has a ways to go, in terms of growth, but it’s also a capital city, a government city. It has rivers and lakes, and it’s aesthetically pleasing. If you have a family, it’s safe and hasn’t experienced all the issues that come with large metropolises. It’s also close to Montreal and Toronto.”
Montreal has arguably the hottest real estate market in Canada right now. Government initiatives brought in to cool skyrocketing housing prices in Vancouver and Toronto are believed to be responsible for that. But Ottawa is another city in the midst of a renaissance. In addition to an LRT project, it has a thriving tech sector, robust student population, and well-paying government jobs.
It is also very stable—and given investors’ distaste for volatility, that’s perfect.
“Real estate doesn’t just shoot up, it conservatively rises here 3-5% on average,” said Lacharity, adding foreign buyers park money in the city’s real estate. “It’s a pretty safe bet for that.”
Bernadette Deschenes of Your Choice Realty notes overheating in Toronto and Vancouver are catalysts for foreign buyer activity in Canada’s capital city. But the city’s two universities have also impelled foreign buyers into action.
“They buy more student residences, like condos or townhomes,” said Deschenes. “Most of our foreign buyers are buying for their children who are attending university. We have a huge student population in this city. There’s a fair bit of older brownstone that’s near Ottawa U in the Sandy Hill region.”
May 9th 2018 – by Neil Sharma of REP magazine
The Ontario Real Estate Association is leading the charge to remedy the unaffordability crisis that’s gripped the province, and especially its largest city, just in time for the provincial election June 7.
Unaffordability has become especially acute among millennials aged 25 to 34, and OREA believes several of its proposals are the panacea they need.
“Housing has one of the highest taxes after alcohol and tobacco, so lower the tax burden on first-time homebuyers,” said OREA’s CEO Tim Hudak. “The second suggestion is to increase the supply, particularly for starter homes, and put more and more options into the market. The third is to focus on the missing middle – these are often stacked townhouses or mid-rises in our cities. Too often, outdated municipal zoning bylaws restrict them, but they’re a perfect solution for millennials looking for their first homes, and also for empty nester parents who want to stay near their grandkids but can’t find a place.”
Missing middle housing could free up homes and succour mobility – and, in the process, lower prices. However, inefficiencies must first be addressed.
“To their credit, the government is putting a lot of money into subway expansion and LRTs, but it makes no sense to limit development around them to two or three storeys. They would be the perfect location for mid-rise housing. A lot of Canadians would love to live above a subway or GO station, given our weather patterns.”
The Ontario Real Estate Association has launched an initiative called Keep the Dream Alive in which citizens can lobby their MPPs with open letters elucidating their concerns.
Hudak, a former leader of the Ontario Progressive Conservative Party, says that homeownership is a priority for all three political parties, but an accumulation of policies has resulted in soaring price points.
“Over time, there’s been an accumulation of government actions that have made finding a home more expensive and more difficult, or even getting a mortgage more challenging for young people,” he said. “That has accelerated in the last two years. Affordability is always a concern, but it was nowhere near as high on the priority list as a political issue as it is today. That comes from a lot more demand, millennials coming of age, more immigration, a stronger economy, and sustained low mortgage rates combined with lack of supply. There are a lot more people chasing fewer homes.”
A poll commissioned by OREA found 83% of millennials aged 25 to 34 still believe in homeownership but lament its unaffordability. The poll also revealed housing affordability ranks highly with environmental degradation.
“For the first time in 130 years, the dominant form of housing for millennials aged 25 to 34 is still with mom and dad,” continued Hudak. “The old homesteading days have come back. Again, I’m not talking people just out of college; these are people with careers and who are thinking of getting married and having kids.”
Royal LePage has studied ‘peak millennials’ (aged 25 to 30) at length and one of the findings was that 61% of them were willing to relocate and change jobs to own a home.
“What I believe we will see happen, because people desire homeownership so greatly, is some migration of people to other areas other than our biggest cities,” said Phil Soper, CEO of Royal LePage. “We will see migration of young families from Vancouver and Toronto to, say, Kelowna and London, ON. That’s going to happen. Moving to Oshawa or Burlington doesn’t change the cost dynamics enough for a lot of people.”
Soper added that people have already become tolerant of longer commute times, and that it will continue into the future.
“They live farther than the city cores in order to own a home,” he said. “They’re allocating personal time to commuting.”
As expensive as housing has become, Hudak does not believe the point of no return has passed.
“The provincial election is June 7 and municipal elections are in October,” he said. “It’s the perfect time for millennials, and their baby boomer parents who love them dearly but want them out of the house, to push for commitments at a political level.”
by Neil Sharma, reproduced with permission. May 4, 2018
The results of a new study conducted by Nanos Research Corporation for the Ontario Real Estate Association (OREA) showed that despite the provincial government’s plan to help make residential properties more affordable, 68.5% of young Ontarians agree or somewhat agree that home ownership remains unaffordable in their neighbourhood.
OREA stated that the research underlines the importance of affordable home ownership among voters who will participate in June’s provincial election this year. Fully seven in 10 Ontarian millennials agree or somewhat agree that they are more likely to vote for a political party that is committed to helping them own homes.
“The dream of home ownership is slipping away for an entire generation of young people,” OREA CEO Tim Hudak said. “Nearly half of Ontarians between the ages of 25 and 34 are still living at home with their parents. These are people who’ve done everything right – gone to school, worked hard, paid down their student loans – yet they’re struggling to take that next step in life to own a home. We need action to address this problem.”
78% of Ontario’s millennials agree or somewhat agree that the government needs to do more to help young people overcome the housing affordability hurdles. Saving enough for the down payment is the most significant obstacle to owning a home for 41% of young Ontarians, followed by getting a mortgage approved at 22%.
Moreover, the problem extends beyond the young generation. 58.7% of non-millennials in the province agree or somewhat agree that home ownership is unaffordable in their neighbourhoods.
“To date, most government action has been around higher taxes or making a mortgage more expensive – none of this is helping people get into the housing market,” Hudak explained. “It is time to take a different path. Keeping home ownership within reach comes down to increasing housing supply in Ontario, particularly ‘missing middle’ housing, like townhomes and mid-rises, and providing first time home buyers with some relief like increasing the first-home buyer tax rebate and helping with down payments.”
By Ephraim Vicina
with permission from REP magazine https://repmag.ca
In a Toronto townhouse development, 22 unit owners are living in condos registered to someone else — their real estate lawyers were not showing due diligence.
How is it that 22 condominium owners in a north Toronto project do not own the units they are living in?
This is the case at Liberty Walk Condominiums, an attractive stacked townhouse development. It was completed in March 2003 after a disastrous fire two years earlier destroyed the entire project during the course of construction.
In a letter to unit owners last month, the property manager reported that the condominium corporation has been made aware that the location of and registered title to a number of townhouses in the project do not match the physical units in which the owners are residing.
The affected project is Toronto Standard Condominium Corporation No. 1513. To date, the corporation is aware that 22 unit owners are living in townhouses that someone else in the complex owns.
Back in 2014, two owners in the project discovered that they owned each other’s units and exchanged deeds with the help of their lawyers.
In addition to the 22 affected townhouses, the same issue may affect other blocks of townhouses and some of the parking units may have been transferred to the incorrect unit owners. The number of affected units is currently unknown.
This situation did not suddenly arise. In the 15 years since the creation of the condominium, many of these units have changed hands four, five and even six times – and at no point was the discrepancy discovered. That means that in more than 80 or 100 transactions, the purchasers were probably not shown the floor plans of the condominium to verify the location of their units.
How did this happen? In my view, it is the obligation of the real estate lawyer and perhaps even the real estate agent, to obtain a copy of the condominium plans and review them with the buyers to make sure they are buying the correct unit. Unfortunately some real estate lawyers are not doing so.
Back in 2011, in a court case in which I was an expert witness, Justice Darla Wilson wrote in her decision, “I agree with the opinion expressed by Aaron that it is the lawyer’s responsibility when acting for a purchaser of a condominium unit to ensure that the client is getting title to what they believe they have transacted for. In order to confirm this, the client must be shown the plans to ensure that their unit is the one identified, in the correct location, the size, whether it has a terrace which might be an exclusive use common element, whether it is a single storey unit or multi-level.”
That decision, and my opinion, was upheld by the Court of Appeal.
Lawyers for purchasers can obtain copies of condominium plans to review with their clients for $15. Despite this nominal cost, it appears from the Liberty Walk situation that some real estate lawyers may not be spending the money or taking the time to ensure their clients are buying the correct dwelling, parking and locker units.
Who is going to pay for correcting the titles? The Liberty Walk condominium corporation has reviewed the problem with its lawyers and, despite the contents of hundreds of status certificates issued over the years, has denied any responsibility.
The property manager’s letter to unit owners says that this is a matter that “unit owners’ real estate lawyers (should) review in any purchase or sale of condominium units.”
A notation of this issue has been added to future status certificates issued by the corporation.
Ultimately, the title insurers for the buyers will have to spend the tens of thousands of dollars necessary to exchange all 22 deeds, and discharge and re-register the mortgages on each unit.
Written by Toronto real estate lawyer Bob Aaron, a frequent speaker to groups of home buyers and real estate agents.
He can be reached by email at firstname.lastname@example.org, phone 416-364-9366 or fax 416-364-3818.
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
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
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
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
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.
← Older posts
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