Category Archives: housing costs

Ontario’s Peel Region ends homebuyer loan program similar to B.C.

As British Columbia plans to roll out interest-free loans to thousands of people seeking to buy their first home, the Peel Region in Ontario is suspending a similar loan program so it can instead use the resources for much-needed social housing.

Last week, B.C. Premier Christy Clark announced her government would soon start offering interest-free loans to help first-time home buyers with their down payments in a market where skyrocketing real estate has priced many out of owning property in and around Metro Vancouver.

Under the program, the B.C. government will match down payments of up to $37,500 made by first-time buyers purchasing any home priced up to $750,000. These applicants can get only the 25-year loans – which are free of interest for the first five years – if they commit to living in the unit for those initial five years.

Critics panned the move as heaping additional risk on young families while stoking property prices at a time when Ottawa is warning of abnormally high household debt and introducing measures to cool the frothy housing sector.

In Peel, where more than a million people live in the communities of Mississauga, Brampton and Caledon, the regional government says a similar program of loans was successful in helping 681 renting households become owners over the past eight years. Those wanting to buy a property priced up to $330,000 can have a loan of up to $20,000 for a down payment. That debt is forgiven if they make that home their principal residence for the next 20 years.

Beth Storti, the manager who oversees Peel Region’s loan program, said there was not enough funding in recent years to meet demand from aspiring homeowners.

“Last year was a very, very busy year for us,” she said.

The tiny program, which has committed to lending about $8.5-million over its lifetime, is being suspended at the end of this month so that funds can be used to reduce waiting times for poorer renters applying for social housing.

Ms. Storti said B.C.’s new fund is more audacious and much larger – with up to 15,000 successful applicants expected annually over the next three years – but lessons can be drawn from this case study to the east.

Perhaps the most important, she said, was the need to educate these first-time buyers on the responsibilities – and hidden expenses – that come with owning one’s home.

After a review of the program in 2014 found some new owners were surprised by all the extra costs, the Region of Peel made all successful loan applicants attend mandatory information sessions held in co-operation with the Canada Mortgage and Housing Corp., which warned them of the risks of borrowing in this overheated market.

“You’re told that you can afford it and so you go out, put yourself out there and then something happens – so we’re really making sure people are well-informed,” Ms. Storti said.

In October, the federal government implemented new measures designed to slow the housing sector, including higher affordability thresholds that borrowers have to meet to qualify for mortgages.

A recent report from the Bank of Canada warned the proportion of the most at-risk group of borrowers (loan-to-income ratios that surpass 450 per cent) out of the total number of high-ratio mortgages is growing and rose last quarter to 39 per cent in Vancouver from 37 per cent a year earlier.

Starting next month, B.C.’s new loan program will target those applying for these high-ratio mortgages and match up to a maximum of 5 per cent of the purchase price so that they can afford a down payment.

Several economists from the University of British Columbia and Simon Fraser University criticized the program after it was announced, saying it will ask people to stretch themselves even further to achieve home ownership, a risky proposition if interest rates increase significantly in the future.

The Premier, who faces an election in May in which the lack of affordable real estate is likely to be a central issue, said the new buyers all must pass the new mortgage stress tests and B.C. does not expect them to be enough of a force to drive up prices further in Metro Vancouver.

David Hulchanski, a University of Toronto professor and expert on community planning, said Canadian politicians have wooed voters before elections with similar programs over the past century.

In 1935, prime minister R. B. Bennett, facing an election he ultimately lost as a result of his unpopular response to the Great Depression, passed the Dominion Housing Act to give loans to those buying homes.

Again in 1973, prime minister Pierre Trudeau rolled out an assisted home-ownership program ahead of an election, Dr. Hulchanski said.

He said these repayable loans offer politicians a cheaper option than building more social housing or rental supply.

“We’ve had these programs forever,” he said. “Why help somebody who is on the cusp of owning?

Source: MIKE HAGER VANCOUVER — The Globe and Mail Published Monday, Dec. 19, 2016

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High Housing Prices Forcing Young Canadians To Team Up With Friends, Family


TORONTO — When Jeremy Campbell purchased a house in Ladner, B.C., with his sister and her husband in 2010, it was meant to be a temporary arrangement until he could upgrade to a place of his own.

“The initial plan was to do this short term just to get into the market, build some equity … get my foot in the door,” says Campbell, who covered one third of the down payment on a 2,000 square-foot home that’s split into two suites.

But with home prices in the Lower Mainland’s red-hot real estate market soaring, Campbell says they’re thinking of staying put.

“We’ll invest in the house to expand it versus selling and going our separate ways,” says Campbell, noting that a renovation is needed to accommodate the growing family, which now includes his fiancee, their new dog and his three-year-old niece.

Experts say an increasing number of first-time homebuyers are contemplating arrangements like Campbell’s as sky-high prices in markets such as Toronto and Vancouver have eroded affordability.

Young Canadians look to family and friends for housing help

A recent RBC poll found that roughly one in four millennials would consider purchasing a home with a friend — up from only 11.7 per cent the previous year.

The number of young buyers who would consider going in on the purchase with a family member was 24 per cent, up from 14.7 per cent in 2015, the survey said.

“Particularly in some of the larger markets in Canada, affording that first home or condo is increasingly more challenging,” says Erica Nielsen, vice-president of home equity finance at RBC.

In addition to higher prices, premiums for mortgage default insurance have risen, presenting an additional obstacle for first-time buyers, Nielsen adds.

A home for some, an investment for others

The online survey of 2,000 Canadians was conducted by Ipsos on RBC’s behalf between Jan. 28 and Feb. 4. The polling industry’s professional body, the Marketing Research and Intelligence Association, says online surveys cannot be assigned a margin of error because they do not randomly sample the population.

While many co-purchases involve both parties living together in the home, that isn’t always the case.

When Richard Wiebe bought a $340,000 two-storey house in Toronto’s east end with a close friend in 2012, they each paid half of the down payment and agreed to split the cost of all of expenses and any capital gains when they sell.

But only Wiebe lives in the home. For his friend, the transaction is purely an investment.

“I consider him my platonic husband because we own a house together,” quips Wiebe.

“It’s an awesome way to get into the market sooner without having to find ‘The One.”’

“I consider him my platonic husband because we own a house together.” — Richard Wiebe

Experts caution that such arrangements come with risks.

“When you purchase an asset together, it’s basically like starting a business together,” says Chantel Chapman, financial fitness coach at online lender Mogo Finance Technology.

“There are going to be points in time where things might not be amazing, and you need to account for that.”

Chapman recommends working with a lawyer and drafting up a written plan that outlines everything from what happens if one party wants to sell to how the cost of repairs will be split.

“Your name and your credit file is attached to that debt, so if the partner you are purchasing with loses their job or something happens and they can’t make their part of the mortgage payments … that’s going to impact you, as well,” says Chapman.

Source: Canadian Press  By Alexandra Posadzki Posted: 04/26/2016 11:39 am EDT

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Architecture for the ages

Architects Janna Levitt and Dean Goodman designed a house that could easily shift to accommodate children, future renters and, one day, their golden years.

Architects Janna Levitt and Dean Goodman designed a house that could easily shift to accommodate children, future renters and, one day, their golden years.

Young adults are getting squeezed out of the housing market. Their parents, meanwhile, want to downsize without leaving familiar neighbourhoods. The solution couldn’t be simpler to a growing group of designers: Rethink (and rebuild) the family home to suit several generations for the long haul.

When a strange young man entered her bedroom, Kelly Rossiter wasn’t entirely surprised. “He had had a bit too much to drink,” says Rossiter, who lives in Toronto, “and had gotten lost on the way to the front door.”

On the way, that is, from a party at her daughter’s place; Rossiter and her husband Lloyd Alter live below their daughter Emma, now 28, in a 1913 house that’s been split into two apartments. The door that links the suites in their home is usually left unsecured. “But after that night, I began locking the door whenever she had a party,” Rossiter says.

That incursion was a “rare hiccup” for the three family members, who occupy the same house that Alter, 63, and Rossiter, 57, have inhabited since 1984. Recently, instead of trading it for a condo in another area, they hired David Colussi of Workshop Architecture to divide the rambling building into a duplex. Now they live in a suite in the first floor and basement; Emma is upstairs with her fiancé and a roommate.

Janna Levitt and Dean Goodman designed their family home so that part of it could be converted into a rental when their children moved out.

Janna Levitt and Dean Goodman designed their family home so that part of it could be converted into a rental when their children moved out.


Janna Levitt and Dean Goodman designed their family home so that part of it could be converted into a rental when their children moved out.


Like a growing number of Canadians approaching retirement, Alter and Rossiter have taken a creative approach to the architecture of the “empty nest.” Rapidly rising housing prices – particularly in Toronto and Vancouver – are squeezing the middle-class expectation of home ownership for young adults. At the same time, their parents, people such as Alter and Rossiter, are not always eager to move into apartment living or to give up on the advantages of a familiar neighbourhood.

Rather than moving house, why not reshape our houses to fit us?

Such adaptability can be built into a house’s architecture. One example is the Grange Triple Double, a house by Williamson Chong Architects: Their clients, a Toronto couple in their 30s with a young son, decided to move in with the husband’s parents. They built a bespoke house that would accommodate them all together with rental income – and then change, multiple times, as the family’s needs evolve through the decades.

“The ingredients for this kind of house,” explains partner Betsy Williamson of Williamson Chong, “are spaces that are discrete yet flexible.”

The Triple Double, at about 3,200 square feet plus basement, sits on a corner; it is a three-bedroom, three-bath home which spills across three levels – and abuts rental space located on the ground floor and in the basement. The tenant space can be configured as one or two apartments; half or all of it can also be joined to the main house with the removal of cabinets or wall sections. In addition, one of the house’s bedrooms can be closed off as a semi-private area for the older residents. In time, the architects imagine that the house could take many different configurations; for instance, one or both of the grandparents might move into the main floor rental space.

The Grange Triple Double, a house by Williamson Chong Architects, was designed and built to change, multiple times, as the owners' needs evolve through the decades.


The Grange Triple Double, a house by Williamson Chong Architects, was designed and built to change, multiple times, as the owners' needs evolve through the decades.


The Grange Triple Double, a house by Williamson Chong Architects, was designed and built to change, multiple times, as the owners’ needs evolve through the decades.


From the architects’ point of view, such adaptability is fairly easy to design. The house’s heating and ventilation systems can be separately controlled in each of three potential units; extra sound insulation provides a buffer of privacy. But the biggest consideration is, as Williamson explains it, a matter of space. “You need rooms,” she says. “You need rooms that are closed off that can be opened up to each other.”

This logic can be applied to houses that don’t have the scale or the unusual geometry of the Triple Double project. Janna Levitt and Dean Goodman of LGAArchitectural Partners, who are married and have two children, designed their own house a decade ago, when they were in their early 50s. “When we moved in, we had teenagers,” Goodman explains, “so we tried to figure out, what kind of house would work for that age of our family and what would work after that?”

‘It’s important to think about what you’re building for,’ Goodman says, ‘not just right now, but in the longer term. And how much longer?’

‘It’s important to think about what you’re building for,’ Goodman says, ‘not just right now, but in the longer term. And how much longer?’


‘It’s important to think about what you’re building for,’ Goodman says, ‘not just right now, but in the longer term. And how much longer?’


The first need was privacy: Their kids wanted their own space, and they got it in the basement, which is high (the windows start three feet off the ground) and has two bedrooms, a bathroom and a living room, plus generous windows.

That basement has room and the plumbing rough-ins for a kitchen; it also has a space for a front door and staircase which is, for now, buried under soil in the garden. (“We thought, if we give the kids their own door when they are 14 or 15 years old, we’ll never see them,” Goodman explains.) Now the kids have moved out, and the couple is preparing to rent that space out, providing a source of income.

And the upper levels, with about 1,600 square feet, two bedrooms, are still larger than the average Canadian house of 50 years ago. Goodman says he and Levitt are happy to reduce their ecological footprint, and simply don’t need any more space.

There is a lesson in this: Design matters. Levitt and Goodman are excellent architects, and their house is efficiently planned to be comfortable and adaptable despite its relatively modest size. “It’s important to think about what you’re building for,” Goodman says, “not just right now, but in the longer term. And how much longer?”

The upper levels of Levitt and Goodman's house, with about 1,600 square feet, are still larger than the average Canadian house of 50 years ago.

The upper levels of Levitt and Goodman's house, with about 1,600 square feet, are still larger than the average Canadian house of 50 years ago.


The upper levels of Levitt and Goodman’s house, with about 1,600 square feet, are still larger than the average Canadian house of 50 years ago.


That raises the question of old age and a potential loss of physical mobility. Levitt and Goodman will live, still, on two levels; this goes against the emerging wisdom of “retirement communities,” in which people are choosing to retire to houses that are often on one level and wheelchair-accessible. Kelly Rossiter and Lloyd Alter have likewise chosen to live on two floors.

But is that even a problem? Alter, who is a writer on design and sustainability and an adjunct professor at Ryerson University, argues passionately that being located in a walkable neighbourhood, served by transit and connected to neighbours, is what matters as one ages.

“Older people, when they move into single-family houses in subdivisions, they’re setting themselves up for failure,” he says. “It’s a hell of a lot likelier that they’ll lose their keys before they lose their ability to walk up the stairs.

“This is one solution: this re-intensification of our neighbourhoods.”

Levitt and Goodman plan to live on two levels into retirement.

Levitt and Goodman plan to live on two levels into retirement.


Levitt and Goodman plan to live on two levels into retirement.


As Alter correctly points out, the conversion of houses into apartments (and back again) is nothing new – especially in Toronto, where such ad hoc adaptations have always provided a major portion of the city’s rental housing. But for upper-middle-class families, they now make sense. “Now we’re going into a generational change where the kids don’t have enough money,” Alter says, “and the parents have the house and don’t need it.

That idea drives much of the business for the Vancouver design-build firm Lanefab, which specializes in energy-efficient laneway houses. Since the city made zoning changes in 2009 to allow such projects (small new houses in the backyards of existing houses), the firm has worked with clients who are house-rich, aging, and ready to simplify their lives.

“If you’ve got an 80-year-old house in Vancouver, being able to move into a new building that’s energy-efficient – that’s appealing,” says Lanefab’s Mat Turner. “They can stay in their neighbourhood, in a house that’s custom-designed for them.”

This sort of promising equation may be enough to break some middle-class expectations about dwelling and family. Alter and Rossiter, with their upstairs-downstairs living in Toronto, are finding that their friends love the idea. “People come, they see it, and they say, ‘I’d love to do this,’” Alter reports. “‘If I could ever get my kids to go for it.’”


Source: ALEX BOZIKOVIC The Globe and Mail: Thursday, Feb. 25, 2016

Janna Levitt and Dean Goodman designed their family home so that part of it could be converted into a rental when their children moved out.

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Take advantage of low interest rates while they last

Interest rates are low enough today that it’s pretty cheap to get caught up on your savings. (istockphoto)

When I was young, I remember going to the bank to have my bank book updated by the teller. I would always appreciate seeing the “interest deposit” line every month. This week, our youngest son went online for the first time to view his bank account activity. There it was: an interest deposit made at the end of last month.

“Dad, the bank gave me some money,” he said.

“I know, Michael. Isn’t that great?” I replied.

“Sure, but it’s just four cents,” he said.

“Well, interest rates are very low right now,” I told him.

“So, with the amount of money I have today, it will take about 83 years before I have enough to buy a scooter.”

“That’s right, son. I tell you what. When you reach age 50 and you haven’t got enough for that scooter, I’ll give you the rest.”

The Bank of Canada’s key interest rate dropped to just 0.5 per cent last summer, so interest rates are just about rock bottom. This is bad news for those interest deposits each month, but good news for taxpayers. Consider one of these strategies today to take advantage of low interest rates while you can.

1. Borrow for RRSP contributions

It’s the time of year to think about making a contribution to your registered retirement savings plan (RRSP). The deadline for contributions that can be deducted on your 2015 tax return is Feb. 29, 2016.

If you have significant unused RRSP contribution room, it can make good sense to take out an RRSP catch-up loan to use up that room and create a sizable tax deduction.

Although you won’t be able to deduct the interest on a loan to contribute to your RRSP, interest rates are low enough today that it’s pretty cheap to get caught up on your savings. Try to pay back the RRSP loan within a year, but even a three- or five-year loan can make sense if it means a shot in the arm to your savings.

2. Refinance your bad debt

There may be two key problems with your current debt: The interest may not be deductible, and your interest rate might be too high.

Based on current interest rates, consider consolidating any high-interest borrowing (such as credit cards or non-secured loans) into one lower-rate loan.

If you can, make your interest deductible at the same time. How? If you have any cash or investments available, consider paying down your non-deductible debt with that cash or those investments (count the tax cost first), then reborrow to replace the cash or investments. As long as you use the newly borrowed money for the purpose of earning income, you’ll be able to deduct the interest.

3. Borrow to invest

Borrowing money to invest can create a tax deduction for the interest costs. This is valuable at a time when tax deductions are in short supply.

Borrowing to invest can also help you to accumulate wealth more quickly, and with interest rates so low today, the cost of using someone else’s money to grow your wealth is low. Now here’s a caveat: Borrowing to invest is not for everyone. Most importantly, you need a stable income and a long time horizon. I’ll talk more about this next time.

4. Consider employee or shareholder loans

Now is a good time to consider borrowing from your employer or your own corporation. Why? You may be able to borrow at low or no interest.

You’ll face a taxable interest benefit in this case, but that benefit today will be calculated at the very low 1 per cent prescribed rate currently in effect. And if you choose to use those borrowed funds for investment purposes, or to buy a vehicle for use in your work, you’ll be entitled to claim a deduction for the amount of the interest benefit. Speak to a tax pro about shareholder loans, because the rules are complex.

5. Make a loan to your spouse

It can make good sense to lend money to your spouse to invest if he or she is in a lower tax bracket than you. The income earned by your spouse can be taxed in his or her hands if you charge the taxman’s prescribed rate of interest on the loan – which is just 1 per cent today.

The best part is that you can lock in that rate of interest indefinitely. Your spouse should sign a promissory note as evidence of the loan, and should pay you any interest owing by Jan. 30 each year for the prior year interest charge.

Source: Special to The Globe and Mail Published Thursday, Jan. 07, 2016  by Tim Cestnick

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Bank of Canada says housing, debt threaten financial system

Bank of Canada governor Stephen Poloz told a news conference on Tuesday that the bank is watching a small group of Canadian households that are highly indebted.

Household indebtedness and imbalance in the housing sector are key vulnerabilities to Canada’s financial sector, the Bank of Canada says in a financial system review.

Specifically, the central bank is worried about young people who have taken on high levels of debt so they can buy homes in expensive markets.

The number of households with debt-to-income ratios of 350 per cent and above — considered highly indebted households  —  has doubled in the past 10 years to eight per cent of the population, the bank said.

About 80 to 87 per cent of the debt is from mortgages, it said. Many of these overburdened homeowners are in markets in Ontario, British Columbia and Alberta where house prices have escalated.

“Income growth hasn’t kept pace with the growth of borrowing, as house prices have continued to rise in these markets,” Bank of Canada governor Stephen Poloz said in a news conference in Ottawa.

A handful in trouble

“There is a not only more of these households, but they also carry a larger portion of household debt.”

He estimated there are about 720,000 such highly indebted households in Canada, and they are a concern because they are concentrated in pockets.

Debt and housing are the same problems flagged in last financial system review six months ago, but the vulnerabilities are “edging higher,” Poloz said.

The risk to these households is an economic downturn that could result in widespread job loss, the bank said.

“Household vulnerabilities could be exacerbated by a severe recession that is accompanied by a widespread and prolonged rise in unemployment,” the central bank said in a news release.

“This could reduce the ability of households to service their debt and cause serious and broad-based declines in house prices.”

Poloz said in his news conference that he is not predicting such a downturn, nor does he believe the banks are at great risk, because of strong underwriting practices in Canada.

Last week, the federal government tightened mortgage rules, with CMHC requiring a 10 per cent down payment on the portion of any mortgage it insures over $500,000, up from a five per cent down payment.

Poloz says the Bank of Canada advised Ottawa on the changes and expects they will help cool some excessive borrowing.

“Recent changes to mortgage financing will mitigate these risks as we move into 2016,” he said.

New key risks

Poloz said the central bank still has more tools to try to address risks in the housing market if it needs them.

The bank said it believes that the Canadian financial system is resilient and that the global financial system has been made safer through the implementation of recent reforms, such as larger capital reserves at financial institutions.

However, it identified some key risks it is monitoring in the months ahead:

  • a sudden increase in global risk premiums which would lead to higher borrowing rates.
  • stress emanating from China and other emerging-market economies.
  • prolonged weakness in commodity prices.

Canadian banks are exposed to low commodity prices, as are all parts of the economy, but they are resilient enough to withstand the shock, Poloz said.

Source: CBC News Posted: Dec 15, 2015 11:30 AM ET 

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Canadian real estate magnate to help house refugees

A Canadian real estate magnate is working to provide temporary housing for Syrian refugees.
Property developers Ian Gillespie, founder of Westbank Developments, is renovating and furnishing a 12-unit property in Vancouver to provide temporary accommodations to refugees awaiting permanent homes in British Columbia, according to a CBC News report.

“For me, it started with what I’m best able to do,” Gillespie told CBC News. “Some can volunteer time, donate money. …We’re in the property business, so it seemed an obvious place to start.

Gillespie said that his company did an audit and found that the building – which was awaiting demolition to make way for a major redevelopment by the company – was sitting empty. He called the Immigrant Services Society and offered a minimum commitment of four months’ use, according to CBC News.

“I don’t even think he finished his sentence before I said yes,” the Immigrant Services Society’s Chris Friesen told CBC News.

Gilliespie, meanwhile, told CBC that he was disappointed by some of the negative reactions to the refugees.

“Some of the dialogue you’re hearing isn’t particularly Canadian. I think a lot of people need to show some leadership and turn the conversation into a positive,” he said. “We had a well-earned reputation for being good citizens. I think we lost some of that and have lost the concept of (all of us) being immigrants. We are one of the most multicultural cities in the world.”

Gillespie told CBC that Canada has a responsibility to help where it can.

And to those who might be fearful, grow up,” he said.

Source: Canadian Real Estate News – Ryan Smith November 23, 2015

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When foreign buyers abandon Canadian housing: Don Pittis

A housing development south of Vancouver, where anecdotal evidence indicates foreign investors have helped push property prices higher. But as Don Pittis says, poor data on how much of the investment in Canadian real estate is 'hot money' means we may be unprepared when foreign investment slows or stops.

There is little doubt that overseas money has had an impact on the high cost of Canadian real estate.

Even the Canada Mortgage and Housing Corporation appears to have conceded the fact. In a speech this week, CMHC president Evan Siddall said that despite having poor data on foreign ownership, it was likely pushing up the price of Canadian housing.

There are two things that are less clear that may be crucial to the value of your home. The first is the size and distribution of the effect. The second is what will happen when foreign ownership dries up or withdraws.

The fact that Canada does not have a good official estimate of how much foreign money is invested in Canadian housing is a scandal. Other countries assemble the information as a matter of course.

Anecdotal evidence

In Canada, even the head of the CMHC admits he is dependent on anecdotal information, partly because without making it a legal requirement, buyers may be unwilling to divulge their ownership status.

“Most of the available information is anecdotal. And the problem is that many foreign investors may prefer to hide their ownership,” Siddall said in his speech this week.

Without an official way of gathering the data, private studies can be based on uncertain methods. They may fail to distinguish between investment by foreigners and purchases by new Canadians.


Signs with larger Chinese script outside a mansion under construction in Vancouver are the kind of anecdotal information indicating foreign money is coming to Canada seeking a safe investment. But such evidence fails to indicate whether the buyers are speculative investors or new domestic residents making a long-term investment. (Reuters)

Whether based on anecdote or private research, the conclusions are often unreliable or controversial. Most recently, a study using non-Anglicised Chinese names as an indicator of foreign money in the market was pilloried as racist.

The impact of Chinese investment in Vancouver’s red hot market is what most people imagine when they think of non-Canadian investment in domestic housing. Certainly the effect is clear in countries where they do collect that kind of data.

But anecdotal tales of foreign buyers purchasing blocks of condosmeans that overseas investors, especially those with family members in the country, would not necessarily restrict themselves to luxury homes, nor to the biggest cities.

Taking a stake

In principle, there is absolutely nothing wrong with foreign money taking a stake in the Canadian real estate market. Domestic investors do the same thing. It helps support the construction sector. It provides homes for Canadians without investment capital and homes for those whose mobile lifestyle is better suited to renting.

But as Siddall said, the exact nature of that investment makes a big difference.

“While both domestic and foreign investment activity can be speculative, foreign investment may be more mobile and subject to capital flight,” Siddall said. “This would increase volatility in domestic housing markets.”

Even if the percentage of overseas investors is small, what economists call the “marginal effect” can be large.

As economist John Maynard Keynes said, “Everything happens at the margin.” A simplified way of thinking of the principle is that if people want just a little more of something, the price goes up; if they want just a little less, the price goes down.


There are anecdotal reports of foreign buyers scooping up Toronto condos as an investment. But there is no data to show whether that means condo prices will fall if overseas money stops coming. (Mark Blinch/Reuters)

As Siddall says, foreign speculative investment, sometimes called “hot money,” can definitely drive real estate prices up as it pushes its way into the market. And as author and portfolio manager Hilliard Macbeth told me earlier this week when I was interviewing him for another story, hot money can also have the opposite effect.

Macbeth says international hot money has the choice of any real estate market in the world. While Canada may have been the prime destination for that cash for the last several years, there is no guarantee the investment will continue.

Best to worst

“You could go from the best place to put your real estate money to the worse place, literally overnight,” Macbeth says. “They wouldn’t probably be able to sell, but they wouldn’t be putting any new money in.”

In the domestic real estate market, most of the buying and selling is among people trading one house for another, says Macbeth. Price rises, he says, happen at the margin, consisting of new Canadian (usually young) buyers entering the market and foreign investors bringing new money from overseas.

We seem to be in another one of those periods when everyone, including the CMHC, is worrying about overpriced Canadian real estate. Such worries have come and gone before without hurting the speculative value of Canadian houses.

It’s not yet clear what the trigger might be for a turn from rising prices to decline. It could be rising interest rates. It could be the effect of our aging population. It could be an anticipation of those things as potential investors think they see the writing on the wall.

But just as when markets were rising, the hot money effect of overseas investors will accentuate the fall. And without reliable statistics on how big that sector is, we have no idea how great the effect will be.

Source:  Don Pittis, CBC News Posted: Nov 12, 2015 5:00 AM ET

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CMHC predicts housing market cooldown in 2016 and 2017

A sold sticker is seen placed on a for sale sign outside a house in east Vancouver, B.C., on Sunday September 20, 2015. (DARRYL DYCK For The Globe and Mail)

Canada’s housing market is set to cool over the next two years as the frantic pace of both new home construction and existing home sales in some markets slows down, the country’s housing regulator predicts.

National existing home prices will end this year at an average of $437,000, Canada Mortgage and Housing Corp. said in a quarterly forecast, up 7.2 per cent for the year. The federal agency upgraded its predictions for 2015 from a forecast it released in May, when it expected home prices to rise just 3.4 per cent this year to about $421,000.

The housing markets in British Columbia and Ontario have benefited this year from lower gas prices, rejuvenated exports and record-low interest rates, CMHC chief economist Bob Dugan wrote. But those effects will wear off in coming years. Home prices will continue to climb over the next two years, but at a much slower rate – 1.3 per cent in 2016 and 1.4 per cent in 2017, the agency predicts.

New home construction will also fall, with housing starts hitting 186,990 this year before dropping to 178,150 next year and to 173,650 in 2017. The residential construction sector will be forced to grapple with high numbers of newly built, unsold condos that “encourage some builders to channel demand for new housing towards existing inventory,” CMHC wrote.

Not everyone agrees with that assessment. In a Monday report, Canadian Imperial Bank of Commerce economist Benjamin Tal wrote that CMHC’s data on unsold condos appeared to be unreliably volatile and that higher levels of unsold condo inventory in the Greater Toronto Area could be mainly attributed to just five projects by four developers.

“To be sure, the GTA’s condo market will be tested as interest rates start rising in the coming years, and increased resale activity from domestic condo investors will result in excess supply and some downward pressure on price,” he wrote. “But for now, those who look at the rise in unabsorbed units as a sign of increased vulnerability are barking up the wrong tree.”

A look at what CMHC sees in store for regional housing markets:

The Good

Vancouver: The region’s scorching housing market will cool only slightly over the next two years. Housing starts in the Vancouver area will remain “elevated,” CMHC said, while, with 20,000 units under construction each year over the next two years, home resales are expected to hit their highest levels in a decade this year, before slowing slightly in 2016 and 2017. Average resale prices should end this year up 9 per cent before growth slows to 3 per cent next year.

Windsor and London, Ont.: A stronger economy will encourage more millennials to leave the family nest and buy their own homes, boosting housing starts in both cities by 6 per cent next year, CMHC said. Existing home sales in London should rise 3 per cent.

Montreal: An improving labour market will spark new home buyers over the next two years, pushing home prices up by 2 per cent a year. However, a surge in new rental construction to 10-year highs will also boost rental vacancy rates.

The Bad

Toronto: The soaring cost of home ownership will finally begin to weigh on the Toronto housing market. Housing starts should drop by 5 per cent next year and fall another 10 per cent in 2017. Much of that will come from fewer new detached homes, with multifamily construction making up almost two-thirds of new homes under construction in 2017. Existing home sales, which are on track to hit 100,000 this year, will drop to 87,500 by 2017 as more prospective first-time buyers find they’re priced out of the market.

Quebec City: A glut of new and existing homes on the market will push down housing starts over the next two years, but an improving job market will help boost resale home prices by 1 per cent next year and 1.5 per cent in 2017.

Atlantic Canada: An improving economy and private sector energy projects should give a lift to the region’s struggling housing market, but residential starts will likely fall over the next two years. In St. John’s, home prices should fall 2 per cent this year as developers move away from speculative home building. In Halifax, existing home prices will grow below the rate of inflation as the city undergoes its biggest rental-housing renaissance since the 1970s.

The Ugly

Calgary: The city’s housing market has undeniably felt the effects of the struggling energy sector. Construction of detached homes is expected to reach its lowest levels since 1988 this year. By next year, multifamily starts, which include condos, townhouses and other types of attached housing, are expected to be 43 per cent lower than peak levels last year. Existing home sales activity will likely fall by nearly 30 per cent this year. Average resale home prices should end the year down 2.1 per cent, and will rise by less than 1 per cent next year.

Edmonton: Despite the shock of falling oil prices in Alberta, Edmonton has undergone a residential building boom this year, with construction started on roughly 10,000 new units, mainly rentals and condos. That number should plunge to 5,500 next year as sluggish job growth, high rental vacancy rates and a backlog of unsold condos weights on developers. Resale activity is expected to fall by 12 per cent this year and rebound slowly over the next two years.

Saskatchewan: The Prairie province was already grappling with a surge in new home construction in 2014 when oil prices began to plummet. By this year, construction of detached houses in Saskatoon had fallen by 30 per cent to its lowest level since 2009. Multifamily starts are expected to end the year down 34 per cent. Average home prices should fall by 0.7 per cent and see only “modest increases” over the next two years. In Regina, detached housing starts will fall to their lowest level since 2001, while existing home prices will fall by nearly 2 per cent this year.


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Affordable housing advocates urge action on growing crisis

Quebec Moving Day 20130701

There are more than 4 million renters in Canada, as housing affordability nears crisis level

Four out of every 10 renting households in Canada spent almost a third of their income on rent, above the level that experts say is sustainable, affordable housing advocates said Thursday

Six affordable housing groups across the country Thursday unveiled theRental Housing Index, an in-depth look at the finances of Canadian renters.

Based on data culled from Statistics Canada from 2011, the interactive, map-based index looks at the state of affairs in Canada’s rental market. Despite constant headlines that seem to suggest home ownership is a Canadian obsession, more than four million households in Canada rent — that’s about 30 per cent of all the households in Canada.

While homeowners in many markets are keenly aware of rising prices in recent years, the numbers Thursday suggest renters aren’t immune to the increasing cost of housing.

Widespread problem

The problem is especially acute in some of Canada’s biggest cities. In Toronto, the group says there are 105,215 rental households that spend more than half of their total income on rent. That’s more than one out of every five renters in the city.

Quebec Moving Day 20130701

A man moves a mattress on moving day in Montreal, a city where close to 60 per cent of the population rents. (Graham Hughes/Canadian Press)

The ratio is based on gross income, which means the amount of money being spent on housing costs is actually even higher when one considers after-tax income.

In Vancouver, 136,025 households spend almost a third of their income on rent, and almost a quarter of the city’s renters spend half their money on rent.

Montreal may be the most rental-heavy city in the country, due to rents that were for a long time comparatively low for a city of its size. But those days are long gone, the data suggests. Close to 60 per cent of the city’s residents are renters, but more than one out of every five — or 108,875 in total — are spending half of their income on rent.

Nationally, 40 per cent of renters spend almost a third of their income on rent, and almost one in five spent half their money on it.  Affordable housing experts say a ratio that high puts them at high risk of becoming homeless, which costs the broader system a lot to address down the line for things like health care and other social services, in addition to a long-term erosion of the tax base.

Officials on hand Thursday said it will take time and money to fix the problem, but stress that action is cheaper than inaction.

“All the symptoms that come up from housing affordability we have an unlimited amount of money for,” said Tony Roy, chief executive officer of the BC Non-Profit Housing Association. “But all of those things are far more expensive than this core issue of rental housing affordability.”

Roy said the federal government has paid to build roughly 650,000 social housing spaces over the years, many of which are desperately in need of upgrading and repairs. Most of those units were built prior to 1993.

“This isn’t about more money being spent, it’s about using our money in a more wise way,” Roy said, noting that Ottawa spent $1.7 billion on social housing this year.

The issue has come up on the campaign trail, with the Liberals unveiling a plan that they say addresses the issue. The plan announced this week would provide $125 million per year in tax incentives for developers and landlords to build and renovate rental units, and would make investment in affordable housing and residences for seniors a priority.

Last month, NDP Leader Tom Mulcair said his party has a plan to create 10,000 social housing units “very rapidly” if his party forms the government.

A request for comment from the Conservative campaign on what its affordable housing policy is was not immediately returned.

Source: CBC News Posted: Sep 10, 2015 11:44 AM ET

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Real Estate: Study suggests first-timers fuelling market


According to a new survey by the Canadian Association of Accredited Mortgage Professionals (CAAMP), it seems that those responsible for keeping the housing market alive right now are actually the first-time homebuyers.

Even with the housing market prices currently at an all-time high, those purchasing a home for the first time are making up 45 per cent of the 620,000 homes sold over the past two-plus years in Canada.
The Toronto Real Estate Board’s director of market analysis, Jason Mercer, doesn’t disagree, but he believes there are a number of factors to consider as to why the housing market is still so strong.

“I wouldn’t necessarily disagree that it’s first-time homebuyers who are driving the market,” says Mercer of Toronto. “But there is also an added supply of housing now with new condominiums and project completions throughout the city.”

Mercer explains that, if we look at things like job creation and consider where unemployment rates have been trending in the last few months, we would see that Toronto’s local economy has been one of the best performing local markets.

He also credits diversity within the city as a factor in determining why we are seeing so many new homeowners.

“Toronto has one of Canada’s most diverse local economies, so there are a lot of different employment opportunities,” says Mercer. “It’s a virtuous circle in a sense that those employment opportunities attract a diversity of newcomers to Canada, and they choose to move into the Greater Toronto Area,” he adds.

The latest CAAMP consumer survey report released revealed that, even though 18 per cent of down payments are still being loaned to buyers (usually from parents), 53 per cent are using money that they themselves or their co-buyers have saved.

“Everyone questions where the money is coming from, and a lot of it is simply borrowed money, but nobody collects that data because of privacy laws,” says Sherry Cooper, chief economist of Dominion Lending Centres. She believes the money is coming from parents. “It’s baby boomer parents helping out their kids.”

However, Cooper doesn’t agree that it’s first-time homebuyers exclusively who are driving local housing markets, especially with regard to the biggest increases in Toronto and Vancouver.

“Employment might be growing in Toronto, but it is also dampening in places like Alberta, because of the oil patch, so places like Calgary and Edmonton have been negatively affected.” She stresses that the survey was based on all of Canada and to keep in mind that those markets are much cheaper than Toronto and Vancouver.

Source: Post City Toronto BY TINA ROBINSON Published: Tuesday, Jul. 28, 2015, 09:05 AM

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