Tag Archives: real estate

9 tips for buying profitable investment condos in Toronto

Photo: Jenny Henderson

Real estate is not a one-size-fits-all strategy. Pierre Carapetian, a top 1 percent agent in Toronto and an avid real estate investor himself, shares what we should know about buying an investment property in Toronto. Here are his tips to profitable purchases.

1. Understand your goals

The type of product you invest in will depend on your goals as an investor. Are you investing for equity gains or are you looking for an investment that generates cash flow?

Cash Flow

Toronto’s lucrative condo market and rising interest rates have raised carrying costs, making it more challenging to find cash-flow positive properties. There are, however, strategic ways to improve your margins, like a higher downpayment or purchasing the right product. Your Realtor will know best.

Type of property to invest in: Resale

Equity Gains

If it’s equity gains you’re after, you’ll need to think long-term. Toronto condos are a great option as prices in the core have been stable and rising substantially. An experienced Realtor can help guide you to the right product and the right neighbourhood so that you can achieve higher equity gains.

Type of property to invest in: resale or pre-construction

2. Know your budget and closing costs

Ensure you know how much cash you will need and how much mortgage you can afford to carry. This will influence the types of properties to evaluate when investing. If this is your principal residence you are allowed to purchase with as little as 5 percent down. However, as an investor purchasing a secondary property you must have at least 20 percent down.

5 Percent vs. 20 Percent Downpayment

Different products have different downpayment structures:

Type of property to invest in with < 20 percent downpayment: resale
Type of property to invest in with 20 percent + downpayment: resale or pre-construction

Closing Expenses

Beyond your downpayment, you’ll also need to account for closing expenses. These include Land Transfer Taxes and, on pre-construction condos specifically, HST (capped at $24,000).

Use this Land Transfer Tax Calculator to find out how much you’ll owe. First-time buyers are also eligible for a partial Land Transfer Tax rebate.

When investing in a pre-construction condo, you’ll need to pay HST on the registration date (approximately four years after purchase) to a maximum of $24,000. With a one year lease in place though, this amount is fully refundable as you’re able to file for a full HST rebate.

3. Understanding price per square foot averages in the neighbourhood

Paying attention to the price per square foot is a great indicator of an investment’s profit potential. Look for properties that have a low price per square foot compared to a comparable unit trading in that same neighbourhood. This will also help you determine if the best deal is pre-construction or resale.

“If the average resale condo in King West is trading for $900 per square foot and the current pre-construction deal is selling for $1,100 per square foot, you’re likely going to generate higher returns investing in resale,” says Pierre.

Photo: Jenny Henderson

4. Know how to spot a good deal

Beyond the price per square foot, there are many other factors to consider when spotting a profitable investment condo. Some of these include:

  • Does the builder have a good reputation?
  • Does the location or floorplan allow you to rent for a premium?
  • Is there future infrastructure development coming to the area?

We aren’t all real estate whisperers — if you don’t know how to spot a good deal, or maybe don’t have the time, hire an experienced Realtor to help you.

“I’m always scouring the market for profitable purchases that I can send along to my investor clients.”

5. Purchase investments where you can charge a premium in rent

There are key factors to look for as you search that will help guide you to a profitable investment property.

Rental prices favour condos along major transit/subway lines. You can also typically charge about the same rent for a two-bed, two-bath, 750-square-foot condo as you would a two-bed, two-bath 800-square-foot condo if they are in the same building. That 750-square-foot condo, however, will cost less to purchase, so you actually will improve your margins and lower your carrying costs.

6. Buy in gentrifying neighbourhoods

When it comes to equity gains, the biggest wins to be had are in pre-construction properties in up-and-coming neighbourhoods. If you can invest in areas when prices are low, you’ll reap the benefits in years to come as the area becomes more desirable.

Leslieville is a great example of how gentrification impacts property values. Condo prices there have increased 50 percent since 2014.* Investment opportunities in up-and-coming neighbourhoods where rental inventory is low will also allow you to charge a premium in rent.

PRO-TIP: Be on the look-out for investment opportunities on the Danforth along the subway line.

7. When purchasing, think long-term

When it comes to investing, it’s always wise to think long-term. The longer you hold your investment, the more equity you amass. As your investment’s market value goes up and your mortgage goes down, you’re able to leverage that equity into other investment condos. Learn about Pierre’s leveraging strategy and building a real estate portfolio.

PRO-TIP: Borrowing to invest can dramatically improve ROI.

8. Understand the tax implications

Knowing how your investment will affect your taxes — and the amount you owe — can make all the difference when purchasing property.

Capital Gains

When you sell your investment property, you are required to pay Capital Gains Tax. This means that 50 percent of your net profit will become taxable income. You are entitled to deduct expenses incurred during the investment from these gains (like interest on a loan and cash-flow losses).

HST

As we mentioned earlier, when investing in a pre-construction condo you’ll need to pay HST to a maximum of $24,000 when the building registers with the city (typically four years after your initial purchase). Your lawyer can file for a full HST rebate, refunded approximately four to six weeks later, provided you have a one year lease in place.

If you do not rent out your property for the minimum one year, you are not eligible for the HST rebate.

9. Ensure you’re playing by the rules

Ensure you play by the rules when investing. This includes understanding the rules regarding short-term rentals (eg. Airbnb) in the building to flipping condos and the financial consequences that come with it.

If you sell your investment too quickly you run the risk of being taxed as a trader rather than as an investor, which means you can be taxed on 100 percent of your profits as it’s seen as business income. It is best to get legal and property advice from your lawyer and/or accountant regarding tax implications as a flipper.

When it comes to spotting profitable investment opportunities in Toronto, just remember: it’s not about buying something, it’s about buying the right thing. Equipped with these nine investment tips, you can rest assured you’ve invested with sound advice and guidance from one of Toronto’s top real estate brokers.

You can read more on Pierre’s investment strategies here.

*Based on E01’s average condo price for 2018 compared to 2014

 

Source: Livabl.com – Feb 11, 2019

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Immigrants prefer single-detached homes less than local buyers

Immigrants prefer single-detached homes less than local buyers 

Immigrants are not as enticed by single-detached residences as their Canadian-born counterparts, fresh numbers from Statistics Canada indicated.

From 2016 to 2017, immigrants accounted for 46% of Toronto’s population total, and 41% that of Vancouver.

The cohort accounted for 43% of residential ownership in Toronto, and 37% in Vancouver. However, the proportion of single-detached homes that immigrants possessed showed a marked difference in the two red-hot markets.

Toronto has approximately half of its immigrant-owned properties as detached properties, while the figure was 60% for owners born in Canada, Yahoo! Finance Canada reported.

Meanwhile, Vancouver’s single-detached homes represented 39% of the city’s immigrant-owned properties, compared with 48% for domestic owners.

“These data show that there is ongoing opportunity to reduce taxes on earnings for typical residents, and especially younger folks and renters who are particularly harmed by the current housing market, by taxing high home values more when owned by foreigners, immigrants and locally-born residents.” UBC professor Paul Kershaw said in an interview.

“Just focusing on wealth brought by immigrants will miss an important, and large, piece of the housing unaffordability puzzle.”

 

An early January analysis by the Altus Group stated that intensified immigration will boost Toronto’s population growth, and in turn feed into greater residential sales activity.

“Markets in the Greater Golden Horseshoe, including the GTA, have the most upside potential for an increase in sales activity in 2019 given the depth of the decline in 2018 and building off of the sales recovery noted in the back half of 2018,” Altus wrote in its market outlook for this year.

Vancouver might not fare as well, however, given that higher borrowing costs and growing construction costs are expected to discourage would-be buyers, Canadian-born or otherwise.

“A key challenge that has become more apparent as of late in Vancouver has been the price sensitivity of consumers, with higher priced projects, or those priced above the competition, experiencing below average sales rates.”

Source: Mortgage Broker News – by Ephraim Vecina 31 Jan 2019

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The State of the Mortgage Market

 

Mortgage Professionals Canada released its marquis State of the Mortgage Market report last week.

While much of the media focus was on the report’s assessment of the mortgage stress test and its ramifications, the annual report was once again chock-full of enlightening statistics that help paint a picture of the current state of the mortgage market.

Author Will Dunning, Chief Economist of MPC, noted that consumer confidence is expected to dampen due to a “depressed” resale housing market and constrained house price growth.

“Housing markets across Canada were due to slow to some extent as a result of higher interest rates, but the reductions in activity that have occurred have been much larger than should have been expected, due to the mortgage stress tests, on top of prior policy changes that have constrained home buying,” he wrote.

We’ve extracted the most relevant findings below. (Data points of special interest appear in blue.)

*  *  *

The Mortgage Market:

  • 6.03 million: The number of homeowners with mortgages (out of a total of 9.8 million homeowners in Canada)
  • 1.6 million: The number of Home Equity Line of Credit (HELOC) holders
  • 11%: The percentage drop in resale activity compared to 2017
    • Resale activity is down 15% from the all-time record set in 2016.

Mortgage Types and Amortization Periods

  • 68%: Percentage of mortgages in Canada that have fixed interest rates (The percentage is the same for mortgages taken out in 2018)
  • 27%: Percentage of mortgages that have variable or adjustable rates (30% for mortgages taken out in 2018)
  • 5%: Percentage that are a combination of fixed and variable, known as “hybrid” mortgages (2% for purchases in 2018)
  • 89%: Percentage of mortgages with an amortization period of 25 years or less (84% for homes purchased between 2015 and 2018)
  • 11%: Percentage with extended amortizations of more than 25 years (16% for recent purchases between 2015 and 2018)
  • 22.2 years: The average amortization period

Actions that Accelerate Repayment

  • ~33%: Percentage of mortgage holders who voluntarily take action to shorten their amortization periods (unchanged from recent years)
  • Among all mortgage holders:
    • 15% made a lump-sum payment (the average payment was $22,100)
    • 16% increased the amount of their payment (the average amount was $450 more a month)
    • 8% increased payment frequency

Mortgage Sources

  • 62%: Percentage of borrowers who took out a new mortgage during 2017 or 2018 who obtained the mortgage from a Canadian bank
  • 28%: Percentage of recent mortgages that were arranged by a mortgage broker
    • This is down substantially from 39% reported in the previous report in 2017 (and 43% in 2016; 42% in 2015). While Dunning says the latest 2018 figure could be the result of a statistical anomaly, he also surmises that broker share may in fact be down. “The lending environment has become more challenging for brokers, especially since changes to mortgage insurance regulations are making it much more difficult for small lenders to raise funds via mortgage-backed securities,” he wrote. “It also appears that some of the large banks are becoming less reliant on the broker channel.”
  • 5%: Percentage of recent borrowers who obtained their mortgage through a credit union (vs. 7% of all mortgages)

Interest Rates

  • 3.09%: The average mortgage interest rate in Canada
    • This is up from the 2.96% average recorded in 2017
  • 3.31%: The average interest rate for mortgages on homes purchased during 2018
  • 3.28%: The average rate for mortgages renewed in 2018
  • 68%: Of those who renewed in 2018, percentage who saw their interest rate rise
    • Among all borrowers who renewed in 2017, their rates dropped an average of 0.19%
  • 3.40%: The average actual rate for a 5-year fixed mortgage in 2018, about two percentage points lower than the posted rate, which averaged 5.26%

Mortgage Arrears

  • 0.24%: The current mortgage arrears rate in Canada (as of September 2018)
    • “The arrears rate… ( 1-in-424 borrowers)…is very low in historic terms,” Dunning wrote.

Equity

  • 74%: The average home equity of Canadian homeowners, as a percentage of home value
  • 4%: The percentage of mortgage-holders with less than 15% home equity.
  • 56%: The average percentage of home equity for homeowners who have a mortgage but no HELOC
  • 58%: The average equity ratio for owners with both a mortgage and a HELOC
  • 80%: The equity ratio for those without a mortgage but with a HELOC
  • 92%: Percentage of homeowners who have 25% or more equity in their homes
  • 50%: Among recent buyers who bought their home from 2015 to 2018, the percentage with 25% or more equity in their homes

Equity Takeout

  • 10% (960,000): Percentage of homeowners who took equity out of their home in the past year (up slightly from 9% in 2017)
  • $74,000: The average amount of equity taken out (up substantially from $54,500 in 2017)
  • $72 billion: The total equity takeout over the past year (up from $47 billion in 2017)
  • $38 billion was via mortgages and $34 billion was via HELOCs (the HELOC portion is up from $17 billion in 2016/17)
  • Most common uses for the funds include:
    • $23.8 billion: For investments
    • $17 billion: For home renovation and repair
      • 55% of homeowners have done some kind of renovation at some point. 27% renovated between 2015 and 2018 with an average spend of $41,000.
    • $16.4 billion: For debt consolidation and repayment
    • $8.6 billion: For purchases
    • $6.2 billion): For “other” purposes
    • Equity takeout was most common among homeowners who purchased their home during 2000 to 2004

Sources of Down payments

  • 20%: The average down payment made by first-time buyers in recent years, as a percentage of home price
  • The top sources of these down payment funds for all first-time buyers:
    • 52%: Personal savings (vs. 45% for those who purchased between 2015 and 2019)
    • 20%: Funds from parents or other family members (vs. 16% over the last four years)
    • 19%: Loan from a financial institution
    • 9%: Withdrawal from RRSP (this has been trending down over the last decade)
  • 98 weeks: The amount of working time at the average wage needed to amass a 20% down payment on an average-priced home
    • This is down from 105 weeks in 2017, but nearly double the figure from the 1990s.

Homeownership as “Forced Saving”

  • ~43%: Approximate percentage of the first mortgage payment that goes towards principal repayment (based on current rates)
    • Down from ~50% in 2017, but up from 25% 10 years ago
    • Dunning notes that rapid repayment of principal means that “once the mortgage loan is made, risk diminishes rapidly”
    • He added that “net cost” of homeownership, “which should include interest costs, but not the principal repayment,” is low in historic terms when considering incomes and relative to the cost of renting equivalent accommodations. “This goes a long way to explaining the continued strength of housing activity in Canada, despite rapid growth of house prices,” Dunning writes.

A Falling Homeownership Rate

  • 67.8%: The homeownership rate in Canada in 2016 (the latest data available)
    • Down from 69% in 2011

Consumer Sentiment

  • 90%: The percentage of homeowners who are happy with their decision to buy a home
  • 7%: Of those who regret their decision to buy, the regret pertains to the particular property purchased
  • Just 4% regret their decision to buy in general

Outlook for the Mortgage Market

  • Data on housing starts suggests housing completions in 2019 will decrease slightly compared to 2018. “The data on housing starts tells us that housing completions in 2019 will be slightly lower than in 2018, but will still be at a level that results in a significant requirement for new financing,” Dunning writes.
  • “Another factor in the past has been that low interest rates mean that consumers pay less for interest and, therefore, are able to pay off principal more rapidly,” he adds. “Recent rises in interest rates are resulting in a slight reduction in the ability to make additional repayment efforts, and this will tend to fractionally raise the growth rate for outstanding mortgage principals.”
  • 3.5%: The current year-over-year rate of mortgage credit growth (as of September 2018)
    • Vs. an average rate of 7.3% per year over the past 12 years
    • Dunning expects outstanding mortgage credit to rise to $1.60 trillion by the end of 2019, from $1.55 trillion at the end of 2018

Source: Canadian Mortgage Trends – Steve Huebl Mortgage Industry Reports

Survey details: This report was compiled based on online responses compiled in November 2018 from 2,023 Canadians, including homeowners with mortgages, homeowners without mortgages, renters and those living with family.

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Five Ways To Tell If You’re Cut Out To Be A Landlord

 

Getty

Investing in real estate by purchasing rental properties can be a smart way to balance your portfolio, hedge against inflation and build long-term wealth. Not everyone is cut out to be a landlord, though — but even if you feel you’re not landlord material, you can get the same portfolio benefits by investing in real estate indirectly through a private loan fund or a real estate investment trust. Here are five questions to help determine if investing directly in real estate is right for you.

1. Do you have 20% down payment and 5% to cover repairs and unexpected expenses?

Buying a rental property takes a much bigger down payment than buying a personal residence. Most lenders want at least 20% down, even if the property will generate enough income to pay the mortgage plus expenses like property taxes and hazard insurance. Having another 5% set aside to cover repairs and big-ticket expenses, such as replacing a roof or an HVAC system, may keep you from having to dip into personal funds to pay for unexpected problems.

2. How will you handle renters who don’t pay and the possibility of evicting tenants?

At some point, almost every landlord has to deal with tenants who stop paying rent. Eviction is a financial decision with emotional underpinnings. When tenants don’t pay rent, you still have to pay the mortgage, the property taxes, the water bill and all the other holding costs. But sometimes, nonpaying tenants are families with children or have unexpected circumstances like a serious illness or accident occur, leaving them unable to pay rent. If it’s too emotionally taxing to handle the eviction yourself, you can hire an attorney to represent you in court and movers to remove the tenants’ possessions from the property. Before becoming a landlord, you should know that the possibility of evicting a tenant might become a reality.

3. How do you feel about other people using your stuff?

Landlords hold security deposits because damage happens. Carpets get stained, hardwood floors get scratched and there is a fair amount of general wear and tear that should be expected in and on your property. As long as the cost to repair damages doesn’t exceed the security deposit, there shouldn’t be an issue. The real question becomes, what happens when the cost of repairs required exceed the security deposit? How will you confront your tenant to address these issues?  If contemplating this (somewhat common) scenario is stressful, becoming a landlord may not be an optimal option for you.

4. Can you wait at least 15 years for your investment to pay off?

Real estate is a long-term investment for a couple of reasons. First, the transaction costs are high. Real estate sales commissions, state and local transfer taxes, appraisals and settlement costs all reduce your resale profit. Second, the length of your mortgage dictates the monthly payment. The longer your keep your mortgage, the lower the monthly payment.

 

Source: Forbes – Bobby Montagne, CEO of Walnut Street Finance

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A LOOK BACK AT 2018

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As we approach the end of January 2019, I would like to take a moment to reflect on the accomplishments of our team during the prior calendar year.
 
As a result of changes in government regulations, the mortgage industry was impacted in ways not seen in more than a decade. Many mortgage professionals, including myself, had to rethink our strategies. It became evident that a team approach would result in a more comprehensive market approach.
 
The primary focus of 2018 was building that team. By July of 2018, the right mix of individuals were identified and began a concerted approach in servicing our clients effectively, amidst the unfamiliar territory created by the government changes.
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The team includes myself with in excess of two decades of banking, lending and mortgage brokering experience. My son Stefan McMillan, fully licensed as a mortgage professional since July 2017. Anis Rahman licensed as both a mortgage professional and a realtor since January 2017, but has in excess of thirty years of entrepreneurial experience. Nasir Zia also a licensed mortgage professional and realtor, who is the tech savvy member of the team. The final member of the team is Sidra Zia who is a licensed mortgage professional. Among the team, a total of 5 languages are spoken.
 
Each member focuses on a specific area of our mortgage brokering business. Building relationships with non-bank prime lenders is the focus of Anis. Relationships with ALT-A, B lenders and private lenders is the focus of Stefan. Nasir and Sidra both provide in depth research on new real estate opportunities for real estate investor clients outside of the Greater Toronto Area. I serve as the quarter back of the team by coaching them on client interactions, CMHC and Genworth mortgage products, client prospecting, sales forecasting, managing renewals and mortgage maturities and other business development tools.
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This team approach allowed us to finish the year with tremendous success. Two members of the team, Anis and Stefan, both received top producer awards from our broker office, Centum Supreme Mortgages Ltd. This could not have been a greater achievement for two industry professionals who have both been licensed for less than 2 years. We expect 2019 to yield much of the same successes.
 
The McMillan Group
Real Estate and Mortgages Made Simple
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Why cash flow doesn’t matter

Although it may seem counterintuitive, cash flow is not the be all and end all of investing in real estate.

“Everyone has such a cash flow mindset, and don’t get me wrong, cash flow is amazing and will help support a different lifestyle eventually, but making those dollars year-over-year is where the wealth comes from,” said veteran investor Lee Strauss of Strauss Investments. “If you have an extra $1,000 in your pocket every year, the return on investment is dismal and doesn’t even add up. But if you take $26,000 year-over-year, now we’re talking.”

Strauss is, of course, alluding to tenants paying down a mortgage’s principal balance for the investor while the latter rides the property’s appreciation.

“On average for a single-family dwelling, the principal pay down is going to be about $6,000 a year,” he said. “The other reason is you have an income-producing asset that is hedged against inflation, and that income-producing asset appreciates, on average, 5%.

“If you purchase a $400,000 property and it goes up by 5% in one year, that’s $20,000 in the first year. Five percent appreciation plus mortgage pay down, which you’re not paying and will be about $6,000, is $26,000 in one year.”

Mind, appreciation is a compounding factor.

“After year three, you’re at about $460,000 on an asset you bought for $400,000, and it’s been paid for by somebody else for three years, so now it’s worth more. After three years, the pay down is $18,000. That’s why people have always invested in real estate; they just didn’t know it.”

Laura Martin, COO of Matrix Mortgage Global and director of Private Lending Hub, notes that the process by which equity is built can be expedited in a couple of ways.

“The first process is by lessening the amortization period and increasing the payments of the mortgage in order to pay it down faster. This means there would be next to no cash flow, but there will be less money going towards interest payments on the loan,” she said.

“The second way is to ‘force’ equity in the home by making improvements that will drive up the property’s value. It’s referred to as ‘forced’ because it doesn’t rely on the external factors of appreciation caused by the real estate market.”

Martin adds that the extent to which an investor ameliorates the property should be determined by how far below market value they paid for it.

Mortgages have some of the best terms available of any loan type, says Martin, and that flexibility can be leveraged to purchase more properties.

“At an average of 3.5-4% on a fixed mortgage with down payments of around 25% and with amortization periods at 25 years—coming across such favourable financing terms with other investments is highly unlikely,” she said. “There is also leverage, in terms of using the asset as collateral, to finance other properties, thus making an increase in net worth more attainable.”

Source: Canadian Real Estate Wealth – by Neil Sharma 24 Jan 2019

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10 Charts That Show How Out Of Whack Things Are In Canada’s Housing Markets

For sale signs line along a road where houses are for sale in Calgary, Alberta, April 7, 2015.

TODD KOROL / REUTERS
For sale signs line along a road where houses are for sale in Calgary, Alberta, April 7, 2015.

Years of rock-bottom interest rates and rising prices have created some problematic conditions.

After years of boom times, Canada’s housing markets are at a turning point. Rising interest rates and tough new mortgage rules have taken some steam out of the market. But job growth is strong and wages are rising steadily, suggesting there will be homebuyers around to keep the market humming.

So which way are things going? That’s really anyone’s guess. But one thing is clear: After years of — let’s face it — unsustainable growth, things in Canada’s housing markets are looking a little messy when it comes to things like prices and mortgages.

Below are 10 charts illustrating just how out of whack things have become. Vancouver’s housing market is looking especially WTF these days, which is why it gets a bit more attention in these charts than other places.

Canadians have never had to shell out more of their income to own a home

THE ECONOMIST/HUFFPOST CANADA

This chart, which uses data from The Economist magazine, shows the ratio of house prices to incomes in Canada over the past four decades. Never have house prices been so disproportionately high when compared to what people are earning. Only years of rock-bottom interest have made this situation “affordable” for homeowners. Which is why rising interest rates should be — and are — a major concern among Canada’s policymakers.

Condo construction is at an all-time high …

BMO ECONOMICS

Construction of condos in Canada is at record highs, which for some experts is a warning of falling house prices ahead, though others disagree, given Canada’s suddenly accelerating population growth. Meanwhile, single-family home construction is in the dumps, driven in part by a near-total collapse of detached home construction around Toronto. Canadians in the largest cities are moving into condos, whether they like it or not.

… But young families don’t want to live in them

SOTHEBY’S/HUFFPOST CANADA

And apparently they don’t like it. In a survey of “young urban families” last year, Sotheby’s International Realty Canada found that 83 per cent of this group would prefer to live in a detached home, if money were no object. Only five per cent would choose to live in a condo. But with detached homes in Canada the least affordable they’ve ever been, 43 per cent of this group have given up on ever owning a detached home, the survey found.

You need to be a one-percenter to own an “average” Vancouver home

NATIONAL BANK FINANCIAL/HUFFPOST CANADA

There’s nothing “average” about buying an average-priced home in Vancouver these days. According to estimates from National Bank Financial, it now requires an income of $238,000 to qualify for a conventional 20-per-cent down mortgage on average Vancouver home. That’s not much less than the $246,000 you would have to earn to be in the top one per cent of earners in the city.

Despite the slowdown in the market, prices remain very high, and now rising interest rates and the new mortgage “stress test” have further pushed up the amount of income a household needs to qualify for a mortgage.

… Because Vancouver homes are comically overpriced

RBC ECONOMICS

This chart from Royal Bank of Canada shows that the cost of home ownership in Vancouver, as a share of income, is the highest ever. For detached homes (the top line), costs are far beyond any previous historical precedent. But condo costs (bottom line) — while elevated compared to historic norms — are not actually outside their normal historic range.

Vancouver’s new distinction: Worst housing market

KNIGHT FRANK

Vancouver used to dominate the lists of world’s hottest housing markets like few other cities in recent memory, but those days are history. Global real estate agency Knight Frank’s most recent real estate index ranked Vancouver at rock bottom among 43 world cities. How the mighty have fallen.

There aren’t enough new residents to prop up Vancouver’s market

RBC ECONOMICS

Demographic shifts are about to give Vancouver real estate a bit of a kick in the pants. The region’s population of homebuyers — meaning adults — is currently growing at a much slower pace than has been the historic norm. Combine this with the above-mentioned record-setting levels of condo construction and the also above-mentioned unreasonably high prices, and it looks like Vancouver’s housing correction could go on for a while yet.

… But Toronto has as much as it can handle

RBC ECONOMICS

Toronto’s housing market is in an uneven slump, with some parts of the market sliding (detached homes) while others keep performing strongly (condos). But the experts are saying don’t expect a major decrease in house prices, because the city is seeing accelerated growth in its adult population. Growth is now near a 15-year high, which ought to put a floor under any price declines in this era of mortgage stress tests and rising interest rates.

Mortgage growth is at historic lows

BANK OF CANADA

Those mortgage stress tests sure have had an impact. The value of mortgages on Canadian lenders’ books rises year after year no matter what, through recessions and boom times alike. Last year, that growth fell to its lowest level since the 1990s.

Investment condos often lose money

CMHC/CIBC/HUFFPOST CANADA

Buying an investment condo has become the national pastime for Canadians with cash, but with prices at these levels, they’re no guarantee of profit.

A study by CIBC and Urbanation last year found that 44 per cent of the condos taken possession of in 2017 in Toronto would rent out for less than the cost of ownership (assuming a 20-per-cent down mortgage). CMHC looked at the high-rise condo towers in Montreal’s downtown core and concluded the same is true for 75 per cent of them.

We weren’t able to find estimates for Vancouver, but given how realtors there are busy trying convince people negative cash flow can be a good thing, we’re guessing it’s pretty much the same there.

Investors can still turn a profit if the resale value rises. But house prices have stopped rising. Buyer beware.

Watch: The extreme measures Canadians go through to buy a home

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