Condo Speculators In Toronto and Vancouver A Risk To Economy

In its financial system review released last week, the Bank noted that the housing markets in many Canadian cities have reversed themselves. After years of single-family homes rising in price faster than condos, condo prices are now rising rapidly even as the detached home market cools.

“This greater activity — even as carrying costs (including mortgage payments, property taxes and maintenance fees) have increasingly exceeded rental revenue — suggests that investors have been counting on a continuation of large price increases,” the bank wrote. In other words, the condo market is now in the thrall of real estate speculators.

Even as foreign buyers’ taxes and new mortgage rules have reduced demand, condo prices have continued to rise, clearly showing that something other than market fundamentals are driving them forward.

The bank’s report noted that in B.C.’s Fraser Valley, condo prices have been soaring at an annualized rate of 60 per cent in recent months. Condos there are more than 40 per cent pricier this spring than last, according to the local real estate board.

Source: Bank of Canada, Huffpost

Home renovation spending drops to 5-year low in Canada

The amount Canadians spent renovating their homes has dropped to a five-year low this year, according to a CIBC report.

The study, released Thursday, found that renovation spending is down five per cent to an average of $11,000 per planned spend in 2018. The study found that 45 per cent of Canadian homeowners planned to renovate this year, down from 48 per cent in 2017.

“Canadians continue to see the value of investing in their homes, but they’re taking a very practical approach by focusing on lower-cost projects this year,” CIBC Executive Vice-President, Personal and Small Business Banking Edward Penner said in a release.

British Columbia is seeing the steepest renovation spending drop, with a planned $9,900 expenditure per household. That figure marks a 35 per cent decline from the $15,522 B.C. residents spent in 2016.

A move away from major renovations contributed to the decline, with 52 per cent of respondents classifying their planned projects as “basic maintenance.”

“Staying on top of maintenance and repairs may not be as exciting as remodeling your kitchen, but these smaller projects can go a long way to brighten up your home and save you money down the road,” Penner said.

However, only 44 per cent of respondents expect to pay for their renovation up front. One-third of respondents expected to have the work paid off within a year, while an additional 15 per cent expected it to take one year or more.

Nearly two-thirds of respondents (63 per cent) admitted to not having a budget for their upcoming projects.

Source: CIBC, BNN Bloomberg

Housing prices are going up in Ottawa, but experts say it’s too early for panic

As the volume of home sales across Canada stagnates, there’s one place where you can still find lines out the door for open houses on a Sunday afternoon: Ottawa.

The nation’s capital is in the midst of a real estate frenzy that experts say is unlikely to fizzle anytime soon.

Bidding wars are becoming common in popular districts, and with them, more homes going for tens of thousands of dollars more than the list price.

It’s no longer unusual to see multiple offers, lightning-fast closings or a waving of conditions, and listings are vanishing almost as quickly as they appear. Well-situated tear-downs are selling for in excess of $500,000.

It’s no longer unusual to see multiple offers, lightning-fast closings or a waving of conditions, and listings are vanishing almost as quickly as they appear. Well-situated tear-downs are selling for in excess of $500,000.

With the highest median household income in the country (more than $86,000) and growing employment via the tech sector and the federal government, locals enjoy better-than-average job security and significant purchasing power.

Still, recent numbers make it clear that Ottawa remains a seller’s market.

At the end of April, there were fewer than 3,600 residential properties available to buy, a drop of 24 per cent from the same month in 2017. On the demand side, April also saw a total of 1,616 residential sales, up 9 per cent year-over-year. Condo sales were up a whopping 33 per cent, and around a quarter of residential properties have been selling above list price.

Source: Global News

Parents go to court to kick out 30 year old son from home

The parents of a 30-year-old man have resorted to drastic measures in an effort to get their son to fly the coop: they are suing him.

Court documents say Michael Rotondo does not pay rent or help with chores, and has ignored his parents’ offers of money to get him settled.

Despite doling out five eviction letters, Christina and Mark Rotondo say their son still refuses to move out.

Michael is arguing that legally, he was not given enough notice to leave.

Mr and Mrs Rotondo filed their case with the Onondaga County Supreme Court, near Syracuse, New York, on 7 May, after months of unsuccessfully urging their son to leave.

The would-be empty nesters’ lawyer, Anthony Adorante, told the couple did not know how else to get their adult son out of their house.

“We have decided that you must leave this house immediately,” reads the first letter, dated 2 February, according to court filings.

When Michael ignored the letter, his parents wrote up a proper eviction notice with the help of their lawyer.

“You are hereby evicted,” a 13 February notice signed by Mrs Rotondo reads.

“A legal enforcement procedure will be instituted immediately if you do not leave by 15 March 2018.”

The couple then offered their son $1,100 (£819) to move out – along with some sharp commentary about his behaviour.

“There are jobs available even for those with a poor work history like you. Get one – you have to work!” they said.

By 30 March, however, it was becoming clear their son had no intention of leaving.

In April, Mr and Mrs Rotondo went to their local town court to see if they could evict their son.

But they were told that because Michael is family, they would need a Supreme Court justice to officially send him packing.

Source: BBC

Rent or buy? How stagnating home prices and high rents affect that equation

This year, the spring housing market looks very different from what so many Canadians have become accustomed to. Across the country, for-sale signs are lingering on home lawns. And — with the notable exception of condo markets in and around Vancouver and Toronto — bidding wars are becoming rarer.

The volume of home sales in April touched a seven-year low for the month, the Canadian Real Estate Association said on Tuesday. And home prices in most markets are stagnating.

But if Canada no longer looks like a sellers’ market, buying a home hasn’t exactly become a cakewalk. Unless you’re shopping for a detached house in the country’s two priciest cities, you probably haven’t seen home prices decline.

Renting isn’t cheap either. Forty per cent of the 4.4-million Canadians who have a landlord rather than a mortgage spend over 30 per cent of their pre-tax income to keep a roof over their heads. And things could get worse if rising interest rates and tougher mortgage rules force more Canadians into the rental market.

So, what’s the least bad option in this era of stalling home values and sky-high rents: being a tenant or a homeowner?

Common wisdom has it both ways when it comes to the rent vs. buy question. Many people argue that renting is a waste of money: You’re not building equity in your home and your housing costs will never go down.

Others argue that since rent is usually much cheaper than the carrying costs of owning a comparable home, you can build wealth by investing what you’re saving by not having to pay for things like property taxes and home insurance.

Unfortunately, both arguments can be wrong, depending on your individual situation and the conditions of the market. Crunching some numbers will usually give you a better idea of what renting or buying entail in your specific case.

Source: Global News

Mortgage stress test pushing more Toronto home buyers into Hamilton market

Canada’s mortgage stress test is reinforcing the migration of home buyers from Toronto to Hamilton in search of deals.

And that is adding to the already competitive market created by the stress test, which is cutting the buying power of house hunters in Hamilton.

Industry experts say the stress test is pushing buyers into smaller homes and in some cases, out of the area altogether.

The stress test — forcing buyers to qualify for a mortgage at a higher interest rate than currently exists — is meant to put the breaks on runaway prices.

They say prices have dropped, but not by as much as the drop in buying power created by the stress test, putting more pressure on lower end homes- particularly those being sought by first-time buyers.

Realtors Association of Hamilton-Burlington CEO George O’Neill said the average price for all property types dropped 8.9 per cent last month, compared to the same period last year — from $609,664 to $555,661.

Meanwhile, he said, the buying power of people looking to purchase a home has plummeted an estimated 15 per cent since the new mortgage rules were put in place on Jan 1.

“It’s fair to say people are qualifying for less,” he said. “It’s not going to be the same house. It’s going to be less expensive, or will need more work to fix up.”

Source: CBC

Millennials are feeling higher rates in their wallets

More than half of Canadians under 35 years old said they are spending less because of recent interest rate increases, according to a survey by Nanos Research.

Some 30 per cent of respondents in that bracket report higher rates are having a negative impact on their personal spending, with another 23 per cent saying the effect is somewhat negative. Among respondents of all ages, 41 per cent reported at least a somewhat negative effect from higher rates. Nanos conducted the polling on behalf of Bloomberg between April 28 and May 4.

The survey suggests that higher borrowing costs are already beginning to curb demand in the economy. It also underscores how the impacts will reverberate well beyond real estate as households offset rising interest payments by cutting back on other things. A slowdown in consumer spending is the primary reason why most economists — including those at the Bank of Canada — are anticipating the economy is poised to drop off in coming years.

“Research suggests that age is a significant determinant of the possible impact of rate hikes on the personal spending of Canadians,” said Nik Nanos, chairman at Nanos Research. “The spending of younger Canadians, under 35 years of age, will likely be squeezed the most.”

The situation is particularly acute for younger Canadians borrowing to buy into a housing market that has seen prices double in cities such as Vancouver and Toronto over the past decade.

Because households have amassed record levels of debt during the recent period of extremely low borrowing costs, the Bank of Canada predicts the economy is as much as 50 per cent more sensitive than before to rate hikes. Canada’s central bank has raised borrowing costs three times since July, and investors are anticipating two more increases later this year.

Source: BNN Bloomberg

Rent in the Canadian housing market has become dangerously high

The common wisdom is that households should only spend 30 per cent of their income on rent in order to stay financially stable, but that’s becoming less and less possible for many Canadians.

In fact, according to the 2018 Canadian Rental Housing Index, nearly half of Canadian renters are spending more than that recommended 30 per cent — and one in five report spending more than 50.

“The data shows that spending more than 30 per cent of income on housing has become the new normal for individuals and families in almost all areas of Canada,” writes Acting CEO of the BC Non-Profit Housing Association Jill Atkey, in a statement.

The index also found that average rental costs are outpacing increases to household incomes. In Ontario, average rent costs increased by 20 per cent from 2011 to 2016, while average income increased by only 12 per cent.

As affordability issues increase, living conditions worsen. According to the index, more than 417,000 Canadian renters lived in homes considered overcrowded.

These challenges come as more and more Canadians are opting to rent. Between 2011 and 2016 there were 400,000 new rental households added for a total of 4.4 million rental households nationwide — or 32 per cent of Canadians.

Source: BuzzBuzzHome


Higher rates could spell disaster for 3.4 million subprime borrowers in Canada

For many Canadians, higher interest rates are reason to grumble. But for the country’s 3.4 million subprime borrowers, they could spell disaster.

Borrowers with impaired credit histories may have limited access to emergency funds compared with their prime counterparts, giving them less wiggle room when debt servicing costs rise. That puts them on the frontline of the Bank of Canada’s recent interest rate increases.

Jason Wang, vice president of risk analytics at Progressa, an alternative lender that services mostly subprime clients, hasn’t yet seen evidence that higher borrowing costs are leading to more missed payments, but that could change, he says. Of 28.4 million “credit-active” Canadian consumers, 11.9 per cent fall into the subprime category, according to estimates from TransUnion, one of the country’s two credit-reporting agencies.

Progressa’s loss rate, which measures the number of clients 90 days past due on their payments, is a lagging indicator. “I am curious to see if, in a few months, the Bank of Canada raises the rate again, if that would be trickling into our data,” Wang said in a telephone interview.

The next opportunity to gauge the impact of higher rates will come with the firm’s next quarterly risk report in July, Wang said. Depending on the results, the lender would decide what action to take and that may include adjusting its risk profile for acquiring new clients, he said.

After the Bank of Canada’s three 25-basis-point hikes since July, Wang calculates, someone with a $60,000 variable-rate loan would need to pay an extra $37.50 in interest every month. And with rates bound to go higher, those costs will mount.

Implied odds from swaps trading show about a 33 per cent chance of another hike at the bank’s May 30 meeting, and a 95 per cent chance of two increases by the end of the year. The Bank of Canada last lifted its benchmark rate to 1.25 per cent in January.

“A non-subprime person might say, ‘Well, what does that mean? That’s one dinner I could do less in a month,’” he said. “For subprime, and we see this every day, when they are budgeting down to every $10, this is a lot.”

So far, they’ve been able to absorb the higher interest costs because the economy is doing well, and “increased income and employment prospects” are probably balancing things out, he said. “It might take another couple of rate hikes for us to see anything.”

Source: BNN Bloomberg

Montreal is next hot housing market in Canada

An economic revival in Canada’s second-biggest city is fueling a real-estate renaissance, speeding up sales, shrinking inventories, and luring foreign buyers. More stringent lending rules have curbed transactions and slowed price growth in Toronto but have had little effect on Montreal, where buyers are flocking to new condos and sellers are gaining the upper hand.

The trend continued in April, as home sales rose 10 per cent from a year earlier. By contrast, Toronto posted its weakest sales for the month in 15 years, while activity in Vancouver fell 27 per cent, even as prices in both markets were stable.

Montreal’s rebirth is showing in ways big and small. Devimco Immobilier Inc., a developer that sold a record 1,180 condos downtown last year, is moving up two towers because of high demand, with calls coming in from as far away as China, special adviser Marco Fontaine said in a phone interview. Montreal, long the “neglected child” at Canadian real-estate conferences, is now a topic of discussion, he said.

“There’s an incredible buzz,” Fontaine said in a phone interview. “We’re much cheaper than Toronto and Vancouver and that’s attracting a lot of interest.”

The biggest drive is economics. According to think tank Institut du Quebec, Montreal added more jobs in 2016-17 than in the previous eight years, with companies including Inc. and International Business Machines Corp. opening new data and tech centers. The city, where both French and English can be heard on the street, is also growing into an artificial intelligence hub that’s home to Thales SA and Facebook Inc. research labs.

Analysts don’t see signs of overheating yet. Houses in the city, which is known for a vibrant food and cultural scene and universities such as McGill and Universite de Montreal, are still a bargain compared with the country’s most expensive markets. At $317,000, the median detached house price for the greater Montreal region compares with $870,000 in Toronto and $1.4 million in Vancouver, according to the local real estate boards.

Still, the number of properties that sold for more than $1 million grew 20 per cent last year according to Sotheby’s International Realty, which expects Montreal to lead major cities in the luxury market segment this spring. Growth for both benchmark prices and the number of transactions in the resale market has outpaced Toronto’s this year. And pressure on prices — which rose 7 per cent for houses and 3 per cent for condos last year — is set to creep up, the Canada Mortgage & Housing Corp. said in a report last week.

“Demand is strong and the number of properties for resale is down, so market conditions are getting tighter,” CMHC analyst Francis Cortellino said in a phone interview. “The Montreal market is very dynamic at the moment.”

Daniel Cholewa, who as chief executive officer of Keller Williams Urbain in downtown Montreal oversees a network of more than 100 brokers, says transactions in the first quarter were up 45 per cent from a year ago, the best market he’s seen since entering the business a decade ago. Stories of bidding wars and 48-hour sales are becoming more frequent, he said.

“The market has been so stagnant and has been such a buyers’ market for so long here that growth is natural and it’s necessary,” he said in a phone interview. “The fact that this has been happening is a really good thing.”

Source: BNN Bloomberg