Tag Archives: real estate bubble

Ontario to place 15 per cent tax on foreign buyers to cool GTA housing market: Sources

Ontario to place 15 per cent tax on foreign buyers to cool GTA housing market: Sources

The Canadian Press has learned that the Ontario government will place a 15-per-cent tax on non-resident foreign buyers as part of a much-anticipated package of housing measures to be unveiled today.

The measures are aimed at cooling down a red-hot real estate market in the Greater Toronto Area, where the average price of detached houses rose to $1.21 million last month, up 33.4 per cent from a year ago.

Premier Kathleen Wynne and Finance Minister Charles Sousa have said the measures will target speculators, expedite more housing supply, tackle rental affordability and look at realtor practices.

Sousa says investing in real estate is not a bad thing, but he wants speculators to pay their fair share.

He says the measures will also look at how to expedite housing supply, and he has appeared receptive to Toronto Mayor John Tory’s call for a tax on vacant homes.

Sousa has also raised the issue of bidding wars, and has suggested realtor practices will be dealt with in the housing package.

The Liberals have also said that the government is developing a “substantive” rent control reform that could see rent increase caps applied to all residential buildings or units. Currently, they only apply to buildings constructed before November 1991.

Source: The Canadian Press – April 20, 2017

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Observers air concerns about unrelenting price appreciation in Toronto

Observers air concerns about unrelenting price appreciation in Toronto

By all accounts, the Toronto market’s exceptional performance remains the main contributor of strength to the national housing sector, but a local real estate professional is more cautious of where these continuous increases in demand and home prices will lead to.

A noteworthy example of this outsized growth is a three-bedroom semi-detached home on Palmerston Ave., which got listed on the market for $1.375 million earlier this week. The property was purchased in December 2014 for just $851,750—fully over half a million dollars less than its current price, and representing a sharp 62 per cent appreciation in just 2 short years.

Realosophy president and broker John Pasalis noted that the listed value of the Palmerston home would have purchased a larger and more spacious house as recently as last summer.

“If this is getting $1.4 million what does that mean for anyone who wants to buy in this neighbourhood?” Pasalis mused in a Toronto Star report. “When you see appreciations of 30 per cent a year it generally doesn’t end well. That’s a concerning thing.”

And at the rate it’s going, Toronto’s price growth might not grind to a halt in the foreseeable future.

“My instinct is that Toronto’s going to keep going like this until there’s some outside policy decision,” Pasalis stated.

One policy intervention that has proven effective in another hot market was the 15 per cent tax slapped by the B.C. government on foreign buyers in mid-2016. Since then, Vancouver price growth has seen a significant cooling down from its prior rate of over 20 per cent a year.

However, such a measure in Ontario would only have a limited impact at present, considering that less than 10 per cent of real estate investors in Toronto are foreign nationals.

“The numbers are still in the mid single-digits from what we can tell. The foreign demand we have is more from immigration, people that are choosing to raise their families in Toronto,” Re/MAX Hallmark Realty managing partner Gurinder Sandhu said.

“There’s political certainty, there’s economic certainty and, when you look at all the uncertainty around the world, all of a sudden Toronto becomes that much more in demand.”

Source: MortgageBrokerNews – by Ephraim Vecina | 20 Jan 2017
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What’s in store for Canadian real estate in 2017?

We have the answers to all your investment questions in our Property Forecast Guide — the industry’s very own crystal ball, which will appear in the January issue of CREW.

Think of the guide, which spans dozens of pages, as your handbook for investing in real estate in 2017. Want to know what’s in store for the economy? How about hot, up-and-coming areas? This guide will help you get rich – or even richer – by giving you the best research, right in your lap. 

We spoke to veteran investors, respected economists and profiled every market and every trend that investors need to know about.

Below is just a sample of what you can expect.

Dan Campbell on GTA and the surrounding area

Tech Triangle (KWC) 
Strong and growing economy, stable and growing post-secondary institutions, airport, expanding highways, increase Go Train service and now a rapid transit system all point to a strong year for the KWC real estate market. Rental demand will continue to grow, especially around the new LRT and Go Train stations as well as the renewed downtown cores. This region is growing into Millennial Central and that bodes well for market demand for decades to come.

Hamilton 
It is still a market where investors and homeowners need to have very localized knowledge in order to ensure they aren`t buying in neighbourhoods that will underperform the market. 2017 should begin a slowing of demand from investors and landlords, but increased Go Train service, a renewal of Hamilton`s reputation and the promise of LRT will keep interest high.

Barrie and Orillia 
Although two very separate cities, they are economically co-joined. In one year Barrie will lead in growth and housing demand, and in the following Orillia will. Orillia looks to grab the lead in 2017 with the Hydro One purchase of the local utility and the development of a high-tech research center bringing in above average salaried employees. The demand in Barrie’s mid-range market should continue to be strong as new mortgage rules push people out of Vaughn and Toronto.

GTA 
Anything ground-oriented (single family homes, semis, townhomes) are poised to outperform the rest of the market, especially given the Provincial Places to Grow act limiting the amount of new-land sprawl, thus driving up the price of developable land within these constrained boundaries. Condo demand will continue with a movement to larger and therefore further from the core units beginning to feel the upward demand pressures as young families begin to grow and require more room. Units located within 800 Meters of TTC subway stations or 500 meters of street car stops will feel the highest demand increases in both rental and purchase in 2017.

Canadian Real Estate Wealth is the country’s premier guide for real estate investors. It includes the most timely and in-depth market analysis, delivered right to your doorstep six times a year.

Source: by REP 11 Nov 2016

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4 Factors That Will Determine Canada’s Real Estate Market In 2016

REAL ESTATE GRAPH

Other than the weather, 2016 has not been particularly kind to Canada.

The Loonie is the lowest it has been in 15 years, a barrel of gas is trading for less than $30 and Canada’s National Men’s Junior hockey team didn’t even reach the semi-finals! Compare these factors against the rising U.S. greenback and you get one gloomy economic forecast. However, there is one section of our economy that seems to be unaffected, as the real estate market is showing little signs of slowing down on a national level.

Despite the troubling forecast, don’t expect any price breaks in Canada’s real estate market for 2016. TREB is predicting an increase in the average price of a home to rise by nearly 10 per cent, a number skewed by big markets where demand outweighs supply like the GTA.

The Canadian housing market is coming off a truly remarkable run, and RentSeeker is here to help you prepare for the road ahead. These will be some of the biggest factors affecting the housing market in 2016 and must be considered by anyone who is currently in or thinking about entering it.

Oil Prices

Oil prices have hit lows we haven’t seen in decades as the price of a barrel plummeted more than 60 per cent since June of 2014. Currently trading for less than $29 a barrel, the ‘bottom of the barrel’ seems more like an endless pit.

Certain oil producing countries and companies have flooded the market with a surplus of supply, driving down the cost of crude. As a result it’s been a downhill slide for the Canadian energy sector that plays a huge role in the national economy.

The oil, gas and mining sector accounts for more than a quarter of the national GDPand many workers have been laid off as Canadian oil production has come screeching to a halt.

When the energy sector is in good shape, so is real estate, particularly in Western Canada. However, the market in British Columbia is soaring as house prices in Vancouver continue to skyrocket, although Alberta is definitely taking a hit after experiencing numerous years of growth.

The Low Loonie

The Canadian dollar is worth less than 70 cents U.S., a rate we haven’t seen since 2003 — a time before Netflix and when most people didn’t have Internet access on their cell phone.

Furthermore, our currency has lost more value against the U.S. than other major currency, including the Pound or Yen, leading some economists to state that we’reflirting with recession.

Depending on where you live in Canada, these overwhelming numbers will have a drastic affect on the housing market in your area. At this point, many economists believe the worst is still yet to come, and that may be tough to believe for those living in Western Canada.

Many companies in Canada are suffering from increased expenses and people are loosing jobs. The Toronto Star has shut down its printing plant, and Goodwill shut down 16 stores in Ontario — two examples of companies that have experienced hard times and are cutting jobs.

When Canadians lose jobs, the real estate market suffers. We will see how the low Loonie affects the unemployment rate and which provinces will be hit the hardest.

Borrowing Costs

Mortgage rates can’t get much lower! The low, low Loonie and price of oil have been major contributors to muted borrowing costs for Canadians. Mortgage rates are extremely affordable, making it easier than ever for many new home-buyers (despite the modest increase in a minimum down payment for properties over $500,000), especially in smaller markets outside the Big Three (Vancouver, Toronto, Montreal).

This CBC article states that “many economists predict Bank of Canada governor Stephen Poloz will be forced to lower the interest rate yet again because low crude prices are cutting into Canada’s economic growth.”

As long as borrowing money is cheap, real estate prices won’t be. For those who are priced out of the housing market, while rents have also risen across the country, it is the only option for many. Apartment finders like RentSeeker.ca and classifieds like Craigslist and Kijiji are a good place to search for those looking for an apartment to rent across the country.

Foreign Investment

Foreign investment in the Canadian real estate market has always been a double-edged sword. For those who own property, increased foreign investment has been welcomed as they have seen their own property value increase. However, for the majority of Canadians who rent, foreign investment means increased real estate prices that were already unaffordable.

Many people who have lived in Vancouver for years are being driven out of the city due to over inflated real estate costs, and locals are demanding government intervention. A prime example of the double-edged sword, Dirk Meissner of theCanadian Press pointed out that the B.C. Finance Ministry could lose $1 billion in real estate sales and nearly 4,000 construction jobs if the government intervenes to minimize foreign investment activity.

For better or for worse, foreign investment is a major factor, and a low Canadian dollar makes foreign investment very attractive. Don’t expect a decrease for in-demand cities like Vancouver, despite a gloomy economic outlook.

Our new prime minister inherited a difficult situation on the economic and political front, and the Liberal Party has a tough road ahead. The Liberals have traditionally not been a “finance first” organization, and the current economic situation is one of the worse we have experienced in decades.

Rona Ambrose has clearly stated her concerns that a “very new and untested” Liberal Government isn’t prepared to deal with the future, but let’s hope she’s wrong.

Despite the rocky start to 2016, our real estate market isn’t showing signs of slowing down. We’ll just have to wait and see how things turn out.

Source: HuffingtonPost.ca Posted: 01/22/2016 2:25 pm EST

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O’Leary: Real estate makes for a poor asset given current market conditions

In an interview hosted by Business New Network, O’Leary Financial Group Chairman Kevin O’Leary shared his take on the current housing market; he revealed that he does not see the 30 to 50% correction that other industry experts are anticipating, but still considers real estate a very poor investment for this cycle.

“You’d be an idiot to buy a house,” O’Leary said during the interview.

He reasoned that investing in real estate is a bad decision, stating that he does not think that homes would considerably appreciate in value within five years. He also noted that buyers still have to pay real estate taxes and transfer taxes on the land, as well as pay their brokers 3 to 5%. All these closing transaction costs make real estate one of the more expensive asset classes to trade.

O’Leary surmised that it would cost investors between 8 to 12% to trade real estate assets. He also added that given the way things are, the chance an investor would enjoy a 12% appreciation over five years on a property is next to zero.

For close to 18 years, Canada has experienced a housing bull market, with perpetually low rates encouraging both homebuyers and speculators to snap up properties with almost zero capital. O’Leary expects that at the very best conditions will plateau soon, slightly improving chances of material appreciation on houses.

He goes on to mention the potential housing bubbles other pundits have observed in areas such as Vancouver, Montreal, Ottawa, and Toronto, where “shoebox condos” have begun sprouting to accommodate the large number of immigrants and/or millennials looking to move into the cities. With too many buyers and speculators participating in these popular markets, only time will tell when the bubbles will eventually burst.

O’Leary suggested that investors look into short duration, investment-grade corporate debt, as he sees it as an even more attractive and safer option than real estate. He also suggested to prospective homebuyers to look into renting instead, so that they can invest their cash into other things.

Source: MortgageBrokerNews.ca  04 Dec 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.

CANADA-CHINA/HOUSING

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.

CANADA-TORONTO/BUILDING BOOM

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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