Canadians cite belief that home prices may come down, lack of affordability and economic unpredictability as main reasons for delaying purchase
Over 80 per cent of Canadians feel that buying a home is a good or very good investment.
Only one-quarter of Canadians plan to purchase a home this year (down from 29 per cent in 2016); and highest among millennials (aged 18 – 34 years).
One in three Canadians would be concerned if their mortgage payment increased by more than 10 per cent.
The idea of a white picket fence may be antiquated, but the dream of home ownership is alive and well in Canada. But with the average Canadian home price topping out at over $500,000 (Canadian Real Estate Association) many Canadians are finding home ownership to be out of reach.
Despite this, according to the 2017 RBC Home Ownership Poll the majority of Canadians (82 per cent) believe that home ownership is a good investment…just not right now. The number of Canadians intending to buy a home within the next two years has decreased to 25 per cent, from 29 per cent in 2016. Millennials (aged 18 to 34), however appear to be feeling more optimistic than other age groups with two in five (39 per cent) saying they intend to buy a home in the next two years.
Why are Canadians delaying home buying? Among Canadians who are delaying purchasing a home, the top three reasons cited include: belief that house prices may come down (58 per cent), uncertainty about the economy (51 per cent) and concerns about affordability (38 per cent).
“For many Canadians, buying a home is a financial and personal milestone – often the biggest investment one will make,” says Nicole Wells, Vice President, Home Equity Financing, Products and Segments, RBC. “In today’s market, the best advice is to start with understanding exactly how much you can afford and focus on your wants and needs ahead of starting the house hunt. This will help set expectations and get you started on finding the home that fits your budget and lifestyle. Knowledge and education are key.”
Ongoing cost of ownership As home prices and carrying costs continue to climb, Canadians admit they are feeling the pressure. Fewer Canadians believe they are well positioned to weather a downturn in the market (65 per cent versus 73 per cent in 2016) or a potential increase in interest rates (57 per cent versus 63 per cent in 2016). Another one-third of Canadians (36 per cent) would be concerned if their mortgage payment went up by 10 per cent or more.
“The homeowner journey starts long before you get the keys, and continues well beyond the first mortgage payment. Create a budget by knowing what you can comfortably afford throughout the home ownership journey. From there, arm yourself with expert advice, the right tools and resources to stay informed today, tomorrow and well into the journey,” adds Wells.
Empowering consumers to make informed decisions In the information age, consumers are not starved for resources – they are starved for time. Understanding what tools are available and using them can help get the home buying research started how they want, when they want. With tools available to help with everything from assessing affordability, to interest rate changes, determining the best type of mortgage for your situation and even finding the neighbourhood that matches your lifestyle, research and information are critical to good decision making when buying a home.
Regional expectations on price vary When it comes to housing prices, expectations vary greatly from region to region. Residents in British Columbia and Ontario feel strongly that they are living in a sellers’ market where demand is exceeding the number of homes available. But that is where the comparisons stop. For the first time in three years, fewer residents of B.C. believe prices will go up by this time next year, showing a change in perception that may impact the trend of the market. Meanwhile, all other provinces show an increase in the number of people who feel that prices will go up.
Believe prices will go up
Whether it is your first or fifth time buying a home, RBC offers the following tips for success:
Be patient: It is easy to get worked up and emotional during the home buying process. Staying focused and patient can help ease the stress that comes with this financial investment and can stop you from making a rushed decision on a home.
Be informed: From budget constraints, to neighbourhood desires, know what you want and what you are willing to compromise. Try RBC’s True House Affordability tool to get pre-qualified in 60 seconds, and understand how much home you can afford.
Be flexible: Stay open-minded to different locations that match your preferences and budget. Try RBC’s Neighbourhood Finder and learn what neighbourhood may be right for you, what amenities are nearby and the cost of homes. Although you might have your heart set on a specific neighbourhood, a nearby borough or even a similar pocket elsewhere might fit into your price range and still offer the lifestyle and amenities you want.
Go local: The RBC poll shows that the home buying journey varies for Canadians based on where they live. Seek advice from market experts who know your city and neighbourhood as they will be able to offer the best advice for your situation. If you are considering your next home, try RBC’s Home Value Estimator and find out what your current home is worth today versus when you first bought it.
Consider the costs: Saving for a home is no easy feat and it starts well before you begin your house hunt. Start by having a savings plan in place and aim to put down more than the minimum required down payment. Run scenarios to see how much you can afford over time as your monthly income fluctuates. This includes factoring in future events like having children.
About RBC Royal Bank of Canada is Canada’s largest bank, and one of the largest banks in the world, based on market capitalization. We are one of North America’s leading diversified financial services companies, and provide personal and commercial banking, wealth management, insurance, investor services and capital markets products and services on a global basis. We have over 80,000 full- and part-time employees who serve more than 16 million personal, business, public sector and institutional clients through offices in Canada, the U.S. and 35 other countries.
RBC helps communities prosper, supporting a broad range of community initiatives through donations, community investments and employee volunteer activities. For more information please see: http://www.rbc.com/community-sustainability/.
About the annual RBC Home Ownership Poll These are some of the findings of the annual RBC Home Ownership Poll conducted by Ipsos from January 13 to January 25, 2017 on behalf of RBC, through a national survey of 2,073 Canadians ages 18+ who completed their surveys online. Quota sampling and weighting are employed to balance demographics to ensure that the sample’s composition reflects that of the adult population according to Census data and to provide results intended to approximate the sample universe. The precision of Ipsos online polls is measured using a credibility interval. In this case, the poll is accurate to within +/- 2.5 percentage points, 19 times out of 20, had all Canadian adults been polled. The credibility interval will be wider among subsets of the population. All sample surveys and polls may be subject to other sources of error, including, but not limited to coverage error, and measurement error.
SOURCE RBC Royal Bank
For further information: Sophie Connor, email@example.com, RBC Communications, 647-823-4790
Housing starts are trending higher at 211,342 units in March 2017, compared to 205,521 units in February 2017, according to Canada Mortgage and Housing Corporation (CMHC). This trend measure is a six-month moving average of the monthly seasonally adjusted annual rates (SAAR) of housing starts.
“March housing starts were at their highest level since September 2007, pushing the trend in housing starts upward for a third consecutive month,” said Bob Dugan, CMHC’s Chief Economist. “Stronger residential construction at the national level is reflected by a rising trend in single-detached and multi-unit starts in Ontario and continued growth of new rental apartments in Quebec.”
Vancouver housing starts trended lower for the fourth consecutive month but, remained above the five-year average. Actual housing starts reached the highest level on record for March since 1972, driven by new apartment construction. Starts activity in the Vancouver CMA is also picking up again after an unusually cold winter.
In Toronto, the total starts trend moved higher in March, supported by all housing types. While apartment starts registered the strongest trend increase in March, single-detached home construction has been trending higher since the end of last summer. Demand for new housing is growing as supply in the rental and resale markets is short, reflected by low rental apartment vacancy rates and declining active listings.
The decline in townhouse starts contributed to a downward trend in Hamilton CMA total housing starts, despite the strength in single-detached and semi-detached housing starts. Notwithstanding this month’s decline, strong demand from local residents and out-of-town buyers continued to support townhouse construction as this type of dwelling remains the most viable option for many first time homebuyers.
‘Demand’ is the story in St. Catharines-Niagara. As buyers from Toronto and Hamilton seek the relatively affordable options, resale inventory is being squeezed and prices are soaring. This is prompting buyers to turn to the new housing market, where singles in land-abundant Niagara Falls remain a sought-after commodity.
Multi-unit residential construction in the Montreal area remained significant in March. In addition to several seniors’ residences, many rental apartments were started in all parts of the metropolitan area this past month, and new rental units reached a 25-year high. With the decrease in inventories of unsold condominium units, renewed growth was also noted in this segment, as many new projects got under way.
The pace of residential construction in the Quebec area has slowed down since the beginning of the year. This decline has been mainly due to a decrease in activity in the purpose-built rental housing segment. It should be mentioned that starts of this type reached historically high levels in 2015 and 2016. Consequently, given the significant number of rental apartments currently under construction and the recent increase in the vacancy rate in the area, a downward adjustment was expected.
There is an upward momentum to residential construction in Charlottetown. Strong population growth coupled with a tight supply of both resale homes and rental units has led more home buyers to look to the new home market. Singles starts over the first quarter of 2017 reached levels not recorded since 1987.
CMHC uses the trend measure as a complement to the monthly SAAR of housing starts to account for considerable swings in monthly estimates and obtain a more complete picture of Canada’s housing market. In some situations analyzing only SAAR data can be misleading, as they are largely driven by the multi-unit segment of the market which can vary significantly from one month to the next.
The standalone monthly SAAR of housing starts for all areas in Canada was 253,720 units in March, up from 214,253 units in February. The SAAR of urban starts increased by 20.2 per cent in March to 235,674 units. Multiple urban starts increased by 30.2 per cent to 160,989 units in March, while single-detached urban starts increased by 3.1 per cent, to 74,685 units.
Rural starts were estimated at a seasonally adjusted annual rate of 18,046 units.
As Canada’s authority on housing, CMHC contributes to the stability of the housing market and financial system, provides support for Canadians in housing need, and offers objective housing research and information to Canadian governments, consumers and the housing industry.
The Real Estate Council of Ontario announced today that the consortium of Humber College Institute of Technology & Advanced Learning and NIIT Canada will be the future provider of registration education for aspiring real estate salespersons and brokers (commonly called real estate agents) in the province.
After a rigorous Request for Proposal (RFP) process, Humber and NIIT Canada were selected to design, develop, administer and deliver the New Program. Their innovative solution best met the requirements set out in the RFP.
The New Program will launch on July 1, 2019. Students enrolling until that date will enroll with the current provider, the OREA Real Estate College.
“We’re pleased to announce that the New Program will be developed by this partnership of two innovative leaders in professional education,” said RECO Registrar Joseph Richer. “The New Program will bring together the best in local real estate knowledge and education delivery, and leading edge expertise in program development. It will help ensure that students are practice-ready when they begin their real estate careers.”
“Humber has a strong industry reputation for credential testing and delivery of professional designation programs,” said Alister Mathieson, vice-president, Advancement and External Affairs, Humber College. “Further, Humber is closely connected with our local and provincial communities, and the opportunity to deliver specialized education and skills to real estate salespersons and brokers will help contribute to Ontario’s economy as newly trained professionals enter the workforce.”
“NIIT Canada is truly honored to have been selected as the provider of the real estate professional training programs to RECO. We are looking forward to developing the highest quality of training programs for Ontario’s real estate professionals. Canada is a very important market for us and we are committed to expanding our operations in Canada, specifically Ontario, through our Toronto office to better serve the needs of our Canadian customers,” said Sapnesh Lalla, President, NIIT Corporate Learning Group.
This milestone follows a four-year process that included: extensive research and consultation with the real estate sector, education providers and regulatory bodies; the distribution of a white paper on RECO’s vision for registration education; and a public RFP that was distributed broadly.
Upon its launch in July 2019, the New Program will offer courses in-class, in real-time virtual classrooms, and through self-paced e-learning modules to more than 12,000 students annually.
The Real Estate Council of Ontario regulates real estate professionals in the province on behalf of the Ontario government by enforcing the Real Estate and Business Brokers Act, 2002 (REBBA 2002). We protect the public interest through a fair, safe and informed marketplace. RECO holds registered brokers and salespersons to professional standards, protects the public interest, and enhances consumer confidence in the real estate profession. In addition, RECO strives to educate consumers to ensure they understand the benefits of a regulated real estate sector.
About Humber College:
Established in 1967, Humber College is one of Canada’s leading post-secondary institutions offering programs to over 29,200 full-time students and 23,000 continuing education students. Humber College partners with government, industry and community in the development and delivery of customized training programs, and government and industry credential testing programs, including: Ontario Building Code certification examinations, and programs for IHM Property Management and Condominium Management and Administration. From the 1980s through to 2000, Humber College was a delivery partner of the original Real Estate Education Program, delivering courses to over 18,000 students.
About NIIT Learning Solutions (Canada) Limited:
NIIT Learning Solutions (Canada) Limited is a subsidiary of NIIT Limited, a global leader in skills and talent development, established in 1981. NIIT Limited offers multi-disciplinary learning management and training delivery solutions to institutions, individuals, and corporations in over 40 countries. NIIT’s comprehensive suite of Managed Training Services includes custom curriculum design and content development, learning administration and delivery, strategic sourcing, learning technology, and advisory services. NIIT’s global customers include leading global energy and petrochemical companies headquartered in Europe; some of the largest multi-national banks, insurance, and financial services companies in North America; and market-leading global technology companies. The Learning and Performance Institute, UK has internationally accredited NIIT as a forward-thinking, reputable provider, committed to learner outcomes, performance development, and customer satisfaction.
SOURCE Real Estate Council of Ontario
For further information: James Geuzebroek, Director, Communications, Real Estate Council of Ontario, 416-207-3108, james.g@RECO.on.ca
Disciplinary records from provincial mortgage regulators now in one, convenient place
A new online database helps consumers find out if mortgage brokers have broken the rules that govern their profession.
Consumers can enter a mortgage broker’s name or company into the search-friendly database and see disciplinary actions (e.g., licence suspensions, administrative penalties, cease and desist orders) that have been taken against a broker by their provincial mortgage regulator and other Canadian regulators.
The database, developed by the Mortgage Broker Regulators’ Council of Canada (MBRCC), integrates disciplinary records from most provincial regulators into a single, convenient place. It helps consumers save time and provides additional peace of mind when choosing a mortgage broker.
In addition, mortgage brokerages and regulators across Canada now have easier access to disciplinary information. Brokerages can use the new tool to look up potential brokers, and provincial regulators can use it to assess the suitability of brokers who want to be licensed in other provinces.
Developing the database supports the MBRCC’s mandate to improve and promote harmonization of mortgage broker regulatory practices across Canada.
“Mortgages are often the biggest financial commitment Canadians make. Mortgage brokers are regulated professionals who can help you find the right mortgage to finance your home. This new, easy-to-use database gives consumers a way to help check a broker’s background before entrusting them with such an important financial transaction.”
Cory Peters, Chair, MBRCC
More than 23,000 mortgage brokers are currently licensed across Canada.
Disciplinary actions will be posted on the database for varying amounts of time, matching how long each regulator posts records in their own province.
Consumers should still visit their provincial regulator’s website to get licence status information for mortgage brokers authorized to operate in that province.
The MBRCC is an inter-jurisdictional association of mortgage broker regulators that seeks to improve and promote harmonization of mortgage broker regulatory practices to serve the public interest. Its members work together and with stakeholders to identify trends and address common regulatory issues through national solutions that support consumer protection and an open and fair marketplace.
MBRCC members represent the nine provinces that currently have legislative and regulatory frameworks governing mortgage brokers or have an interest in developing one; British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Quebec, New Brunswick, Nova Scotia and Newfoundland & Labrador.
SOURCE Mortgage Broker Regulators’ Council of Canada
For further information: Shani Ratnapala, Mortgage Broker Regulators’ Council of Canada, Shani.Ratnapala@fsco.gov.on.ca, 416-590-2036
The online mortgage application can be filled out on your phone or tablet/computer and the printable one can be emailed to firstname.lastname@example.org, faxed back to 705-506-0501, or dropped off at 35 Worsley Street suite 201, in Barrie.
Please Note: If you are just “shopping around” for mortgage rates, or if you are currently working with another mortgage broker or financial institution, having multiple credit bureau checks done in a short period of time can actually harm your credit rating, as this is often an early indication of fraudulent activity. Credit Bureau checks will show when and who has been checking. Some lenders may refuse to deal with a borrower who has multiple recent credit checks on their credit report, or may require a valid reason why multiple credit checks were done.
Mortgage Applications will be processed by:
Michael Curry (705)717-5598 Mortgage Agent (Lic. M1200155) VERICO The Mortgage Wellness Group Head Office 35 Worsley Street, Suite 201 Barrie, ON L4N 1L7
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The Mortgage Application Process
From filling in the paperwork, to signing on the dotted line.
There are various steps that will have to happen before you will be approved for a mortgage loan for a home purchase:
Choosing a potential lender
A pre-approval process if you want to know how much money you’ll have to shop with
Meeting and information download
A Debt Service Ratios analysis
A property analysis if you have identified the home of your dreams
Completing the Application
Negotiation and commitment
Closing process liaison
Choosing a potential lender
Using a mortgage broker/agent
If you are using a mortgage broker/agent and when they know all they need to know about you and your needs, they will start to consider which mortgage might be a good fit for you. They will think about whether you meet various lenders’ qualification requirements.
The mortgage broker/agent will provide you with options based on an assessment of the lender, the mortgage, its structure, its features and its risks in light of the information you have provided about your circumstances. The mortgage broker/agent must also explain his or her rationale for the options that have been identified.
Make sure the mortgage broker/agent provides you with information that will help you determine whether you can afford the mortgage, including an estimate of the total cost of borrowing for the term of the mortgage. The total cost of the mortgage depends on the terms and conditions for paying it back, such as the interest rate and the amount of time it takes to pay off the entire mortgage or “amortization period”. The total cost can be much more than the amount you are borrowing. You need to determine if the rate, amortization period and total cost of the mortgage are right for you.
Going direct to a lender or through other channels
Make sure you shop around to find a mortgage at a rate and for a term that is affordable for you, and with conditions with which you can live. If you are using a private lender, lending their own money on the security, make sure that they are either licensed if doing business as a mortgage lender, or otherwise are using a licensed Mortgage Brokerage.
Want to be Pre-Approved?
It is a good idea to get pre-approved for a mortgage before you start your search for a new home as it might help you keep a budget range in mind. You can ask a mortgage broker/agent to help you with this process, or go straight to a financial institution or other lender.
You will receive written confirmation for a certain amount at a particular interest rate and the offer will be good for a specified amount of time. Keep in mind however that a pre-approved mortgage is not a guarantee of being approved for the mortgage loan, as that depends on a number of things including the property you want to purchase.
Meeting and Information
Your mortgage broker/agent or your lender will ask you for information to help them better understand you, your goals for the mortgage loan, and the type of mortgage you want or need including:
Your financial circumstances
Your sources of income and/or funds, including employment
Your mortgage needs and objectives
Your knowledge of mortgages
Your preference in terms of amount, rate, term, amortization and conditions
Your risk tolerance
Other parties to the transaction
If you have identified a property you wish to purchase, information about the property that will become the security for the mortgage loan
If you know what your credit rating is
Your debt load or liabilities
The amount of down payment you have saved
They will also ask for documentation to confirm the information you provide.
Take the following information with you to your first meeting with a mortgage broker/agent or lender:
Information about your employment including confirmation of salary. A letter from your employer will be suitable for this
Information about any other sources of income you have and evidence
Details regarding where you bank
Proof of any assets including RRSPs or a savings account
Details of any loans or other debts such as student loans
Evidence of your down payment including information about the amount of down payment you have saved and where it’s coming from
The full address of the property
A copy of the real estate listing, if applicable
Your mortgage pre-approval certificate, if one was issued and you have now identified a property
Contact information for your lawyer or notary
A copy of the agreement of purchase and sale
Estimates of your monthly housing costs (e.g., property taxes, utilities, etc.)
Proof that you have the funds to cover any closing costs
Lenders or mortgage brokers/agents will rely on the information you provide. This information helps them find the mortgage option(s) and/or lender(s) that are right for you. It is critical that you are completely honest when providing them this information. Errors in your application can easily lead to a mortgage that is not right for you or fit for your circumstances, plus misstating facts or providing false information in your mortgage application can have serious consequences. You could face up to 10 years of jail time.
Lenders and mortgage brokers/agents are expected to ask questions and seek additional information in the event of inconsistencies with the information you provide.
Debt Service Ratios Analysis
Your mortgage broker/agent or lender will need to make sure that you can carry a mortgage. They will do this by performing a Debt Service Ratio Analysis, basically comparing your debt to your income to see whether you can afford the mortgage loan you want.
Most lenders will require that your monthly housing costs (Gross Debt Service), including mortgage payments, property taxes, condo fees and heating expenses, are no more than 32 per cent of your gross monthly income.
They also want to know that your total monthly debt load, including for example car loans or leases and credit card payments (Total Debt Service), is not more than 44 per cent of your gross monthly income.
As well as qualifying for the mortgage loan at the rate offered by the lender, if you are putting less than 20 per cent of the purchase price down and are therefore applying for a high-ratio mortgage, you will also need to qualify at the Bank of Canada’s five-year fixed posted mortgage rate, which is usually higher. In that case your lender will also require that housing costs are no more than 39 per cent of your monthly income.
This extra “stress test” is the Government of Canada’s response to the sharp increase in house prices in certain Canadian cities, and concerns that currently low mortgage rates will eventually rise. All home buyers applying for a high-ratio loan, and therefore requiring mortgage insurance, or those required by their lender to get mortgage insurance for other reasons, are subject to the “stress test”. It assures mortgage lenders that the home buyer would still be able to afford the mortgage if prices or rates increase.
If you have already identified a property, your lender or mortgage broker/agent might need to analyze the property to ensure it is worth enough to provide security for the mortgage loan.
They might want to view the property online with you, view the property listing on MLS or a self-listing website and/or obtain a property appraisal or home inspection to determine fair market value. You may need to negotiate access to the property with the sellers, and you will be responsible for paying appraisal and home inspection fees, unless a lender pays as an incentive for you to sign up.
Completing the Application
If you are using a mortgage broker/agent to find you a loan, once they have your approval to approach a particular lender, they will complete your application including information about the property if you have chosen one, and information about you from your meeting. You should be asked to sign a written acknowledgement that they have disclosed the risks associated with the mortgage they have presented.
If you are dealing direct with a lender, you will complete the application with them.
The mortgage application will include basic information such as your name, address and telephone number, social insurance number, employer, income, number of dependents, and the name and address of your bank or other financial institution.
The application will also detail: your assets, such as mutual funds and RRSPs and liabilities, including credit cards, credit lines, loans or leases; the purpose of the loan; mortgage loan amount required; the type of mortgage loan you want; the mortgage term, amortization and interest rate you seek; plus a description of the property you want to purchase such as address, size, type and construction.
Make sure you read the application carefully before signing it, and never sign an incomplete form.
You will also need to sign a Credit Authorization Form giving the mortgage broker/agent or lender authorization to perform a credit check. A mortgage broker/agent cannot and should not request a credit report without prior consent from you.
Credit Bureau Check
A credit report from a credit bureau will tell a potential lender how well you have paid your debts and bills in the past, your outstanding debt levels, and employment, income and residence history.
The credit bureau report will include a credit score – a single indicator of how likely you are to repay your loan at the agreed upon terms. It summarizes all the information available about you and provides the findings as a single number.
The report will also include information about any bankruptcies, collections, judgments, garnishments or liens against you and whether you have gone through a foreclosure or Power of Sale proceeding in the last five to seven years.
Neither the lender nor your mortgage broker/agent will be able to give you a copy of this report, but can discuss issues with you and must note these issues in the mortgage application.
While the mortgage broker/agent or lender is required to do a credit check, you can always also get a copy of your own credit history and make sure it is complete and accurate. Doing this early in your home buying journey and before you meet with a mortgage broker/agent or lender gives you the chance to re-establish a good credit history if the report shows you currently have poor credit.
Once completed you will sign the mortgage application form, confirming that the facts on the application are correct.
Negotiation and Commitment
Once a potential lender lets you or your mortgage broker/agent know that they are willing to advance the loan, you or your mortgage broker/agent will then start to negotiate the deal. You will discuss a final mortgage rate and term for the loan and you or your mortgage broker/agent might need to supply more documentation to support your application.
Once you receive the official Mortgage Approval or Letter of Commitment, make sure to review all of the terms and conditions before you sign and return the agreement.
Closing Process Liaison
Once the lender has received your signed agreement the closing process will start. Your mortgage broker/agent may continue to liaise between you and the lender and perhaps even the lawyers involved for you and the seller.
Ongoing Mortgage Administration
If you have used a mortgage broker/agent to help you find a mortgage loan, and their brokerage is also licensed as an administrator, after the property sale closes and the funds are provided by the lender, your mortgage file may be sent to the mortgage brokerage’s administration department. They will track payments, calculate outstanding loan balances and might collect municipal property taxes. They may alert the mortgage broker/agent when your mortgage term is near completion so that the mortgage broker/agent can assist you with renewal or the selection of a new lender for the next term.
Agreement of Purchase and Sale A legal agreement that offers a certain price for a home. The offer may be firm (no conditions attached), or conditional (certain conditions must be fulfilled before the deal can be closed).
Amortization Period The time over which all regular payments would pay off the mortgage. This is usually 25 years for a new mortgage, however can be greater, up to a maximum of 30 years.
Appraisal The process of determining the value of property, usually for lending purposes. This value may or may not be the same as the purchase price of the home.
Appraisal Value An estimate of the market value of the property.
Blended Payments Payments consisting of both a principal and an interest component, paid on a regular basis (e.g. weekly, biweekly, monthly) during the term of the mortgage. The principal portion of payment increases, while the interest portion decreases over the term of the mortgage, but the total regular payment usually does not change.
Canada Mortgage and Housing Corporation (CMHC) The National Housing Act (NHA) authorized Canada Mortgage and Housing Corporation (CMHC) to operate a Mortgage Insurance Fund which protects NHA Approved Lenders from losses resulting from borrower default.
Certificate of Location or Survey A document specifying the exact location of the building on the property and describing the type and size of the building including additions, if any.
Certificate of Search or Abstract of Title A document setting out instruments registered against the title to the property, e.g. deed, mortgages, etc.
Closed Mortgage A mortgage agreement that cannot be prepaid, renegotiated or refinanced before maturity, except according to its terms.
Closing Costs Various expenses associated with purchasing a home. These costs can include, but are not limited to, legal/notary fees and disbursements, property land transfer taxes, as well as adjustments for prepaid property taxes or condominium common expenses, if any.
Closing Date The date on which the sale of a property becomes final and the new owner usually takes possession.
CMHC or GEMICO Insurance Premium Mortgage insurance insures the lender against loss in case of default by the borrower. Mortgage insurance is provided to the lender by CMHC or GEMICO and the premium is paid by the borrower.
Conditional Offer An offer to purchase subject to conditions. These conditions may relate to financing, or the sale of an existing home. Usually a time limit in which the specified conditions must be satisfied is stipulated.
Conventional Mortgage A mortgage that does not exceed 80% of the purchase price of the home. Mortgages that exceed this limit must be insured against default, and are referred to as high-ratio mortgages (see below).
Debt-Service Ratio The percentage of the borrower’s gross income that will be used for monthly payments of principal, interest, taxes, heating costs and condominium fees.
Deed (Certificate of Ownership) The document signed by the seller transferring ownership of the home to the purchaser. This document is then registered against the title to the property as evidence of the purchaser’s ownership of the property.
Deposit A sum of money deposited in trust by the purchaser when making an offer to be held in trust by the vendor’s agent, broker, lawyer or notary until the closing of the transaction.
Equity The interest of the owner in a property over and above all claims against the property. It is usually the difference between the market value of the property and any outstanding encumbrances.
Fire Insurance Before a mortgage can be advanced, the purchaser must have arranged fire insurance. A certificate or binder from the insurance company may be required on closing.
Firm Offer An offer to buy the property as outlined in the offer to purchase with no conditions attached.
Fixed-Rate Mortgage A mortgage for which the rate of interest is fixed for a specific period of time (the term).
Foreclosure A legal procedure whereby the lender eventually obtains ownership of the property after the borrower has defaulted on payments.
Gross Debt Service (GDS) Ratio The percentage of gross income required to cover monthly payments associated with housing costs. Most lenders recommend that the GDS ratio be no more than 32% of your gross (before tax) monthly income.
Gross Household Income Gross household income is the total salary, wages, commissions and other assured income, before deductions, by all household members who are co-applicants for the mortgage.
High Ratio Mortgage If you don’t have 20% of the lesser of the purchase price or appraised value of the property, your mortgage must be insured against payment default by a Mortgage Insurer, such as CMHC.
Holdback An amount of money required to be withheld by the lender during the construction or renovation of a house to ensure that construction is satisfactorily completed at every stage.
Home Equity The difference between the price for which a home could be sold (market value) and the total debts registered against it.
Inspection The examination of the house by a building inspector selected by the purchaser.
Interest Rate Differential Amount (IRD) An IRD Amount is a prepayment charge that may apply if you pay off your mortgage principal prior to the maturity date or pay the mortgage principal down beyond the prepayment privilege amount. The IRD amount is equivalent to the difference between your annual interest rate and the posted interest rate on a mortgage that is closest to the remainder of the term less any rate discount you received, multiplied by the amount being prepaid, and multiplied by the time that is remaining on the term.
Interim Financing Short-term financing to help a buyer bridge the gap between the closing date on the purchase of a new home and the closing date on the sale of the current home.
Maturity Date Last day of the term of the mortgage agreement.
Mortgage Critical Illness Insurance Mortgage Critical Illness Insurance is available as an enhancement to Mortgage Life Insurance. Mortgage Critical Illness Insurance is underwritten by the Canada Life Assurance Company. Complete details of benefits, exclusions and limitations are contained in the Certificate of Insurance. It is recommended for all mortgagors. It can pay off your mortgage — up to $300,000 — if you are diagnosed with life-threatening cancer, heart attack or stroke.
Mortgagee and Mortgagor The lender is the mortgagee and the borrower is the mortgagor.
Mortgage Life Insurance A form of reducing term insurance recommended for all mortgagors. If you die, have a terminal illness, or suffer an accident, the insurance can pay the balance owing on the mortgage. The intent is to protect survivors from the loss of their homes.
Mortgage Term The number of years or months over which you pay a specified interest rate. Terms usually range from six months to 10 years.
Open Mortgage A mortgage which can be prepaid at any time, without requiring the payment of additional fees.
Payment Frequency The choice of making regular mortgage payments every week, every other week, twice a month or monthly.
P.I.T. Principal, interest and taxes. Together, these make up the regular payment on a mortgage if you elect to include property taxes in your mortgage payments.
Porting This allows you to move to another property without having to lose your existing interest rate. You can keep your existing mortgage balance, term and interest rate plus save money by avoiding early discharge penalties.
Prepayment Charge Compensation when the borrower prepays all or part of a closed mortgage more quickly than is allowed as set out in the mortgage agreement.
Prepayment Option The ability to prepay all or a portion of the principal balance. Prepayment charges may be incurred on the exercise of prepayment options.
Principal The amount of money borrowed for a new mortgage.
Refinancing Renegotiating your existing mortgage agreement. May include increasing the principal or paying out the mortgage in full.
Renewal At the end of a mortgage term, the mortgage may “roll over” on new terms and conditions acceptable to both the lender and the borrower. This is known as renewing a mortgage. Otherwise, the lender is entitled to be repaid in full. In this case, the borrower may seek alternative financing.
Building and Development Mortgages Canada Inc. (BDMC) announced today that lenders in a syndicate mortgage that funded Towns on Hall, a low-rise development in Richmond Hill by Fortress Real Developments Inc. (Fortress), received their principal back in full and an estimated annualized return of 8.13%.
The 1.3 acre infill site located just west of Yonge Street, in the heart of the old downtown Richmond Hill, was recently approved for 23 townhomes by the Ontario Municipal Board and a site plan application for the development was made in December 2016. “The increase in value was created by achieving zoning approvals. The trends we have seen for low-rise dwellings in the GTA, gave us an opportunity to explore a sale of the site while creating tremendous value for our stakeholders”, commented Vince Petrozza, COO of Fortress Real Developments.
This is the second exit in 2017 that has been generated by a sale of the lands through value created in the development and approval process. “Lenders received a healthy return over a 36 month period. The strong due diligence of the asset and market demand for low-rise approved sites created a positive return for all involved in the project,” said BDMC principal Ildina Galati. “We are pleased that syndicate mortgage lenders have benefited from this well analyzed opportunity.”
The sale of these lands marks the 19th exit for lenders who have funded Fortress projects through a syndicate mortgage. To date, over $80 Million of principal has been repaid to lenders, and the average estimated annualized returns in the 19 completed projects is 9.44%.
Fortress CEO Jawad Rathore remarked, “Fortress continues to seek out high quality real estate assets across Canada and our development team is able to bring immense value to all the projects in our portfolio. Real estate offers tremendous flexibility, with opportunities to exit a development at several different stages, and as we look forward, we anticipate a very busy 2017 as our portfolio of more than 70 sites matures.”
About the Companies
Building & Development Mortgages Canada Inc. – established in 2007, is a premier mortgage brokerage licensed in Ontario, Nova Scotia, Alberta, Manitoba, British Columbia and Saskatchewan. BDMC closes all of the syndicate mortgage transactions that fund Fortress projects. For more information visit: https://bdmc.ca
Fortress Real Developments Inc. is a Canadian real estate development company that seeks out and analyzes opportunities in major Canadian markets. The company is focused on quality projects with recognizable alpha in residential low-rise, high-rise, commercial and industrial market segments. https://fortressrealdevelopments.com
*SOURCE Building & Development Mortgages Canada Inc.
Mortgage Professionals Canada, the national mortgage industry association, is pleased that the government has listened to our members and has not made any new mortgage rule changes that could negatively impact them. We also support the significant investments made in Budget 2017 to create a national Housing Statistics Framework, which will greatly improve the quality of housing data in Canada. This is an important step that responds to our calls to assess the impact of the recent changes.
“We are pleased that the government has listened to our concerns and not introduced any additional measures that would negatively impact Canadian mortgage consumers” said Paul Taylor, President and CEO, Mortgage Professionals Canada. “We applaud the government for listening to our membership and taking steps to significantly improve the quality of housing data in Canada. This will help assess the impact that the recent changes have had on Canadian homebuyers.”
Mortgage Professionals Canada also supports the government’s efforts towards creating a resilient and competitive financial sector and looks forward to continuing to work with the government on ensuring financial stability, competition, and choice for Canadians. We will continue to work with government on the ongoing consultations on lender risk sharing and will continue to advocate for technical changes to the mortgage insurance and eligibility rules that were announced in 2016.
Mortgage Professionals Canada is the national mortgage industry association representing 11,500 individuals and 1,000 companies, including mortgage brokerages, lenders, insurers and industry service providers. The mortgage broker channel we represent, originates 33% of all mortgages in Canada and nearly 50% of mortgages for first-time homebuyers, representing approximately $80 billion dollars in annual economic activity. With this diverse and strong membership, we are uniquely positioned to speak to issues impacting all aspects of the mortgage origination process.
Bang for your buck varies significantly, as the location, size, home finishes and condition of a $1 million home range widely by region
According to Royal LePage, Canada’s leading real estate services provider, extreme variances in recent home price appreciation across Canada have contributed to vast differences in the types of properties a prospective homeowner can expect to buy with a $1 million budget. While the once-exclusive $1 million home has become the norm in certain markets, in others, it can purchase anything from an ultra-luxury abode to an entry-level residence.
A $1 million home’s location, size, proximity to amenities and current condition ranked as the top four factors that influenced its pricing, not unlike homes in other price ranges. However, together, these four characteristics varied considerably from region to region, with Canada’s two hottest markets – Toronto and Vancouver – offering smaller, more dated two-storey “starter” homes when compared to larger, luxurious mansions elsewhere. While the average number of bedrooms and bathrooms typically found in a $1 million dollar home did not differ by region as materially as the aforementioned four factors, there were noticeable differences between certain regions. In January, 2017, a $1 million home in the City of Vancouver had an average of 2.6 bedrooms and 2.1 bathrooms, while on Canada’s other coast, a $1 million home in Halifax had an average of 3.1 bedrooms and 3.8 bathrooms. Looking to Central Canada, $1 million secured an average of 3.4 bedrooms and 2.5 bathrooms in the City of Toronto, while purchasing a $1 million home in Winnipeg delivered the biggest bang for your buck, with an average of 4.1 bedrooms and 4.0 bathrooms.
In fact, of the seven cities studied across Canada – including Vancouver, Calgary, Saskatoon, Winnipeg, Toronto, Montreal and Halifax – Winnipeg provided the most living space overall, with $1 million fetching on average, a 3,505 sq. ft. luxury home in a desirable neighbourhood. During the same period, $1 million in Saskatoon secured the largest lot size of all regions, with an average of 65,838 sq. ft. In contrast, Vancouver offered prospective homebuyers the least amount of home for $1 million, with an average of 1,229 sq. ft. on a 3,134 sq. ft. lot.
“There are striking differences in the options available for those who are looking to purchase a $1 million two-storey home in Canada,” said Dianne Usher, senior vice president of Johnston and Daniel, a division of Royal LePage. “From an older starter home in Vancouver to a waterfront property with all of the bells and whistles in Halifax, the amount of value and space that prospective buyers receive is largely dependent on the characteristics of the market in which they are located.”
When looking at inventory levels and sales activity, $1 million properties and transactions have been more prevalent in highly sought-after markets where greater demand has pushed home values higher. As a result, this has led these regions to experience a weakening in the overall value received for $1 million when compared to other areas across the nation that are less constrained by supply and demand.
While smaller, regional markets have continued to maintain their value over the last decade, 10 years ago prospective homeowners in Canada’s largest metropolitan areas were able to purchase fully-renovated homes in desirable neighbourhoods with considerably more space for $1 million.
“What used to be considered a luxury price point is now the status quo in Canada’s two hottest markets,” added Usher. “Once carrying significant purchasing power, $1 million is now either below or on par with the price of an average two-storey home in Toronto and Greater Vancouver. Now, instead of a fully upgraded three bedroom, three bathroom two-storey property in prestigious neighbourhoods like Rosedale or West Vancouver, you’re getting a much smaller two or three bedroom, two bathroom property in need of renovation in a less sought-after location.”
“However, significant value can still be found in the suburbs or city-centres like Saskatoon and Montreal, where homes are more affordable, landing you substantially more home with better features as a result.”
The profile of a $1 million buyer was also found to vary by region, with developers and first-time buyers dominating the $1 million two-storey property segment in Canada’s largest metropolitan areas, while wealthy young to middle-aged professional couples with children acted as the predominant purchasers elsewhere.
Aggregate and regional $1 million two-storey home attributes
2,860 sq. ft.
26,684 sq. ft.
2,454 sq. ft.
23,226 sq. ft.
2,436 sq. ft.
22,624 sq. ft.
2,664 sq. ft.
16,429 sq. ft.
2,175 sq. ft.
8,402 sq. ft.
2,166 sq. ft.
8,149 sq. ft.
Greater Toronto Area
2,843 sq. ft.
17,170 sq. ft.
2,387 sq. ft.
8,336 sq. ft.
2,363 sq. ft.
8,168 sq. ft.
Greater Montreal Area
5,429 sq. ft.
12,756 sq. ft.
2,732 sq. ft.
13,058 sq. ft.
2,758 sq. ft.
13,040 sq. ft.
1,846 sq. ft.
4,798 sq. ft.
1,241 sq. ft.
3,134 sq. ft.
1,229 sq. ft.
3,134 sq. ft.
2,513 sq. ft.
6,897 sq. ft.
2,492 sq. ft.
7,129 sq. ft.
2,477 sq. ft.
7,004 sq. ft.
3,117 sq. ft.
6,250 sq. ft.
2,775 sq. ft.
71,767 sq. ft.
2,829 sq. ft.
65,838 sq. ft.
4,400 sq. ft.
23,850 sq. ft.
3,385 sq. ft.
13,501 sq. ft.
3,505 sq. ft.
13,453 sq. ft.
2,664 sq. ft.
5,669 sq. ft.
1,747 sq. ft.
3,744 sq. ft.
1,722 sq. ft.
3,731 sq. ft.
2,984 sq. ft.
3,986 sq. ft.
2,585 sq. ft.
5,361 sq. ft.
2,585 sq. ft.
5,361 sq. ft.
3,154 sq. ft.
23,144 sq. ft.
2,945 sq. ft.
55,582 sq. ft.
3,316 sq. ft.
43,521 sq. ft.
People armed with a million dollars in search of a waterfront mansion need not look any further than Halifax. With enough million-dollar inventory to satisfy demand, prospective buyers within the region are able to purchase a number of unique types of properties reflective of their tastes and desired lifestyle. In January 2017, the average $1 million two-storey home within the region had 3.1 bedrooms, 3.8 bathrooms, 3,316 sq. ft. of living area and a lot size of 43,521 sq. ft.
While homes tend to be much larger on the fringes of the city and offer prospective homeowners direct access to the water, buyers with seven-figure budgets can also tap into the heart of downtown to find stunning heritage homes. As with the rest of Atlantic Canada, properties in Halifax have maintained their affordability relative to other regions across the nation, landing purchasers just as much, if not more, property than what was previously available a decade ago.
“The value of a million-dollar property in Halifax continues to grow, both when compared to other cities across Canada and when compared to 10 years ago,” said Sandra Pike, team lead, Royal LePage Atlantic. “Recently, the region’s urban sprawl has enticed developers to expand into untapped regions of Halifax, giving prospective purchasers the option of buying brand new, fully upgraded homes with a substantial amount of space for $1 million.”
The tables found within this report represent averaged characteristics for two-storey properties that sold between $950,000 and $1,050,000 in 2007, 2016 and January 2017. Highlighted property listings were collected based on a uniform set of criteria, where listings in each region required a standard two-storey that is selling or has been sold in the last two months within 10 per cent of $1 million. To gain additional insight into regional market dynamics and property characteristics, interviews were conducted with Royal LePage real estate professionals in the featured cities.
About Royal LePage
Serving Canadians since 1913, Royal LePage is the country’s leading provider of services to real estate brokerages, with a network of over 17,000 real estate professionals in more than 600 locations nationwide. Royal LePage is the only Canadian real estate company to have its own charitable foundation, the Royal LePage Shelter Foundation, dedicated to supporting women’s and children’s shelters and educational programs aimed at ending domestic violence. Royal LePage is a Brookfield Real Estate Services Inc. company, a TSX-listed corporation trading under the symbol TSX:BRE.
Ryerson City Building Institute examines demand factors behind the unaffordable Toronto real estate market
A new policy paper released by the Ryerson City Building Institute examines demand factors behind the unaffordable Toronto real estate market.
The paper, titled “In High Demand: Addressing the demand factors behind Toronto’s housing affordability problem”, also finds that the case for supply-side reform is overstated and wouldn’t address the immediate challenges facing the Greater Toronto Area real estate market.
Among the paper’s findings:
High demand, both foreign and domestic and multi-property investment and speculation, are the primary drivers; low inventory is a result of this demand.
Although critics allege that there is weak supply, housing construction in Toronto has kept up with population growth, so demand factors beyond population growth are at play.
Active listings are at record lows, while new listings have remained steady, indicating that high demand is drawing down inventory.
While some analysts point to the Greenbelt as a major cause of rising prices, research shows geographic constraints don’t account for the price increases Toronto has experienced.
In a housing bubble, not even a substantial amount of new supply can meet speculative demand. In U.S. cities like Phoenix and Las Vegas, for example, prices continued to skyrocket despite elastic supply.
Careful demand strategies are needed to curtail or discourage speculation and shift market expectations.
“It’s clear from this analysis that demand factors are driving up prices in the GTA, “says Cherise Burda, Executive Director of the Ryerson City Building Institute. “The provincial government should carefully consider a range of solutions to address demand. Focusing on supply only will not solve the problem.” “A demand-oriented policy approach would help tackle the affordability problem in Toronto,” says author of the paper, Josh Gordon, assistant professor of public policy at Simon Fraser University (SFU). “Examples that may help homebuyers include a foreign-buyer tax as well as a progressive property surtax that can be offset by income taxes paid.”
Housing starts are now on pace to hit 204,669 units in Canada, whereas January saw them hitting 200,255 units, according to Canada Mortgage and Housing Corporation (CMHC). This trend measure is a six-month moving average of the monthly seasonally adjusted annual rates (SAAR) of housing starts.
“This winter has seen Canada’s national housing starts trend upward, supported mostly by increased construction of homes in Ontario,” said Bob Dugan, CMHC Chief Economist. “New single-detached home construction in Ontario is reaching levels not seen in the province since July 2008 – offsetting recent slowdowns in British Columbia.”
Condominium starts in the Montreal area increased considerably in February. The hike was mainly due to construction starting on some large real estate projects in the downtown Montreal-Griffintown sector. Activity on the new condominium market therefore remains strong in this zone, as these new units add to the nearly 3,000 units currently under construction.
Sherbrooke has seen a rebound in single-detached housing starts in recent months. Lower supply on the resale market and a favourable job market have stimulated demand for new homes. In 2016, employment in Sherbrooke continued to grow, and the year ended with net gains in full-time jobs among people aged 25-44. These factors should support housing demand in 2017.
In Toronto, low supply in the resale market resulted in demand spilling over into the new home market, particularly for low rise homes. Single-detached home starts were at their highest level for February in more than ten years. The total housing starts trend remained steady in February despite a drop in apartment starts.
St. Catharines saw February 2017 housing starts reach the highest level for any February since 1991. A third of starts were townhouses and two-thirds were new singles across the region. This comes on the heels of a strong year for St. Catharines starts, where demand has been driven in large part by the relative affordability of housing compared to neighbouring markets.
February saw total housing starts more than double in Winnipeg compared to the same period last year. New construction of multi-family units continued to drive total starts higher, with both purpose built rental and condominium units increasing year-over-year. Single-detached starts were also up by roughly 30% reflecting low inventories of completed and unsold new homes in 2016.
Multi-family home construction more than doubled in Edmonton last month from the same period last year. This was unexpected given the near record levels of complete and unsold apartments on the market. The Edmonton apartment inventory has been high since the start of 2016.
Housing starts in the Victoria CMA trended upwards in February. In particular, there was a surge in single-detached home starts in the West Shore municipalities. New construction has been supported by low inventories of homes for sale and strong migration to the region.
CMHC uses the trend measure as a complement to the monthly SAAR of housing starts to account for considerable swings in monthly estimates and obtain a more complete picture of Canada’s housing market. In some situations analyzing only SAAR data can be misleading, as they are largely driven by the multi-unit segment of the market which can vary significantly from one month to the next.
The standalone monthly SAAR of housing starts for all areas in Canada was 210,207 units in February, up from 208,934 units in January. The SAAR of urban starts increased by 0.9 per cent in February to 193,035 units. Multiple urban starts decreased by 4.7 per cent to 121,164 units in February, while single-detached urban starts increased by 12.1 per cent, to 71,871 units. Rural starts were estimated at a seasonally adjusted annual rate of 17,172 units.
As Canada’s authority on housing, CMHC contributes to the stability of the housing market and financial system, provides support for Canadians in housing need, and offers objective housing research and information to Canadian governments, consumers and the housing industry.
Population growth and a strong economy in the Greater Toronto and Hamilton Area (GTHA) have created a high demand housing market where housing supply is critically low and home prices are becoming out of reach for many families and first-time home buyers.
The Ontario Home Builders’ Association (OHBA) and the Ontario Real Estate Association (OREA) are urging the Provincial Government to create a housing experts task force to provide ideas for increasing housing supply in Ontario, thus alleviating the growing home affordability challenges facing Ontarians.
Off the top, here are four things the government can do to relieve the underlying housing supply crunch that threatens the dream of home ownership for young families and future generations:
1. Fix the “One Size Fits All” Growth Plan
Instead of a blanket provincial preference for high density, give municipalities more flexibility and create more choice in housing for growing families and empty nesters, such as family homes and townhomes.
2. Improve the Planning Approvals Process
With better alignment of municipal and provincial housing priorities, including the requirement for updated zoning around transit corridors, we can get new homes to the market quickly in exactly the places where we want them.
3. Address the “Missing Middle” of Housing Supply
There is huge opportunity to modernize outdated zoning laws and build the “missing middle” of housing supply in existing communities that are connected to transit and closer to jobs. This includes innovative solutions like laneway housing and multi-unit homes, such as townhouses, stacked flats or mid-rise buildings.
4. Target Infrastructure to Support New Housing Supply
The province should support new housing supply with targeted infrastructure investments to get more housing to the market for consumers.
The OHBA and OREA agree that sustainable, long-term solutions are necessary to get to the root of the affordability problem, and it starts with increasing housing supply. Together, they are appealing to the provincial government to take stock of the housing supply problem and work with real estate industry leaders to design solutions that will improve home affordability for all Ontarians.
“Ninety-five per cent of Ontario’s new housing supply is built by our industry, and new home prices reflect the market conditions affected by government policy, like municipal and provincial approvals. It only makes sense to bring together private sector expertise and government policy makers if we are serious about making home ownership more affordable.”
-Joe Vaccaro, Chief Executive Officer, OHBA
“The Canadian dream of home ownership is at risk in the GTA. This is the year for provincial and municipal governments to step up with solutions to ensure the dream of home ownership does not slip away from future generations. The housing supply issue is a real problem, but the solutions exist. We need the government to get real estate experts together on this issue, to hammer out a plan for putting more homes on the market and making home ownership more affordable for young families and first-time buyers.”
–Tim Hudak, Chief Executive Officer, OREA
OHBA is the voice of the land development, new housing and professional renovation industries in Ontario. OHBA represents over 4,000 member companies, organized through a network of 29 local associations across the province. www.ohba.ca
OREA represents 70,000 brokers and salespeople who are members of the 39 real estate boards throughout the province. OREA serves its REALTOR members through a wide variety of professional publications, educational programs, advocacy, and other services. www.OREA.com
Valerie Lam-Bentley Ontario Home Builders’ Association Valerie@ohba.ca 416.443.1545 x223
Jamie Hofing Ontario Real Estate Association JamieH@orea.com 416.445.9910 x341
Members of Mortgage Professionals Canada were pleased to have the opportunity to meet with dozens of Members of Parliament and senior government officials over the past two days. We discussed issues of housing affordability, availability and accessibility and the negative impacts that the recent mortgage insurance and eligibility are having on first-time homebuyers in Canada.
“I am extremely pleased that there is a real sense that Members of Parliament are listening to the concerns from our industry.” said Paul Taylor, President of Mortgage Professionals Canada. “This weeks advocacy efforts have gone a long way in educating Members of Parliament on the positive role that mortgage brokers play in the Canadian housing market and the negative impacts that recent changes are having on first-time homebuyers”.
Our membership is very concerned with the negative economic impacts that these changes are having on housing activity in Canada and the additional costs that are being placed on the Canadian middle class through higher rates and reduced purchasing power. Middle class Canadians are already paying thousands more over their mortgage term in interest payments and many first-time homebuyers are unable to qualify for a mortgage. This is hurting Canadian consumers and slowing the Canadian economy. This is why we are calling for some common-sense adjustments to the new rules that will help soften the impact of these changes on middle class Canadians. We are also asking the government to refrain from any further changes to the housing market for at least 18 months.
Mortgage Professionals Canada is the national voice of the mortgage industry, an association whose members include mortgage brokers, mortgage lenders, mortgage insurers and industry service providers. We represent over 11,500 individual members and over 1,000 businesses across Canada.
Who We Are:
Mortgage Professionals Canada is an industry association whose members include mortgage brokers, mortgage lenders, mortgage insurers and industry service providers. We have over 11,500 individual members and over 1,000 businesses across Canada.
The mortgage broker channel originates approximately 33% of all mortgages in Canada and approximately 50% of mortgages for first time home buyers. This represents approximately $80 billion dollars in economic activity.
What the Changes Are:
All insured mortgages now need to be qualified at either the Bank of Canada benchmark rate (currently 4.64%) or the contract rate offered on the homebuyer’s commitment, whichever is greater.
Portfolio (‘bulk’) insurance must now meet the same criteria as those that are high-ratio insured. This means that amortizations greater than 25 years, rental and investment properties, refinances, and homes with values greater than $1M can no longer be portfolio-insured.
The proposed ‘risk-sharing’ model for lenders to share in losses of insured mortgage claims.
New capital requirements as of January 1, 2017 that require mortgage insurers to increase the amount of capital they need to hold in reserve.
The increase announced by CMHC for insurance premiums that consumers pay on unconventional mortgages. In some loan-to-value categories, premiums will be increasing by more than a whole percentage point of the value of the mortgage, effective March 17, 2017. This is the third increase in three years.
Canadians elected the government on a mandate to grow the economy for the middle class. Support for middle class home ownership is an important way for to achieve middle class growth. In fact, the 2015 Liberal platform recognized this in committing to “considering all policy tools that could keep home ownership within reach for more Canadians” (Liberal Platform, 2015, page 7,8). We would like you to call on the government to honour that commitment instead of making home ownership more difficult and further out of reach for more middle class Canadians.
We are concerned with the negative economic impact that these changes are having on housing activity in Canada. We are also very concerned with the additional costs that these changes will place on the Canadian middle class by way of higher interest rates and reduced purchasing power. We have already seen banks increase their mortgage prime rates in part because of these changes, which will cost Canadians thousands more over the course of their mortgage term.
The reduction of portfolio mortgage insurance eligibility, in addition to the increase in premiums for this insurance due to OSFI’s recent increased requirements for capital adequacy is disproportionately affecting the competitive positioning of small and mid-sized lenders. These changes are reducing mortgage competition and affordability for Canadian homeowners and would-be homeowners.
Our membership has been vocal with their displeasure regarding the impacts that these changes are having, especially outside of the Toronto and Vancouver markets. There is a real and growing resentment that the activity in Toronto and Vancouver is negatively and unfairly impacting those in the rest of the country. We believe moving ahead with a risk sharing provision would be additional burden on the market and will further the divide between rural and urban Canada.
The Canadian economy has seen only modest growth in 2016, especially for the middle class, and the housing sector is one of the few strong performers that has been driving this growth. We are concerned that these changes will hurt the economy as the Bank of Canada noted that the new rules that are being imposed will reduce growth in the Canadian economy, which will hurt the middle class.
What We Are Asking the Government to Consider:
That in light of all of the changes that have been made recently and the uncertainty that the American election has brought that the government slow down and hit pause on the measures yet to be implemented, most specifically its proposed risk sharing provision. We believe it prudent for the government to take 12-18 months to examine and assess the impact of these changes.
That the government adjust the November 30th change to allow for refinances to be included in portfolio insurance. If 80% LTV is unpalatable, please consider reducing the threshold to 75% or 70% rather than removing these products eligibility altogether
That the government decouple the stress test rate from the posted Bank of Canada rate. Instead, set the stress test based on a market rate, either by looking at the Canadian ten-year bond yields or having the Bank of Canada set a rate that is independent of the average of the banks posted rates.
For the sake of ensuring competition is maintained in as fair a manner as possible, OSFI should require all mortgages to qualify at the stress test rate, not just insured mortgages.
Buying a home can be exciting, but it can also be a challenging and confusing experience. CMHC is providing guidance to Canadians who are considering buying a home with our updated Homebuying Step by Step guide, released today.
The interactive guide seeks to demystify the process of buying a home in Canada. It has been revised to better reflect the realities of today’s housing market by illustrating how to assess financial readiness, providing tools to help prospective homebuyers calculate how much they can afford, and incorporating information about next steps, whether these are to make a purchase or make budget changes.
Because the decision to buy a home is a personal one, it is difficult to offer advice that applies across the board. That is why the guide includes a complementary workbook to help potential homebuyers identify their specific housing needs and plan according to their budget, lifestyle, and goals.
Guiding principles that help determine how much you can afford to spend on housing without putting your financial health at risk
List of the upfront and ongoing costs of homeownership
How to prepare for a meeting with a lender or broker, including key documents to bring
Definitions of words to know when buying a home
Explanation of mortgage basics and tips for managing your mortgage
Tips for maintaining your home and protecting your investment
The complete guide is available for download on our website.
As Canada’s authority on housing, CMHC contributes to the stability of the housing market and financial system, provides support for Canadians in housing need and offers objective housing research and information to Canadian governments, consumers and the housing industry.
“Mortgage rules and evolving markets have Canadians who are looking to buy a home asking important questions and they want answers that are tailored to them. Our step by step guide helps home buyers get to those answers by walking them through the process of buying a home – from figuring out their needs, to knowing their mortgage options, to moving day.” Ina Wielinga, Knowledge Transfer Consultant, CMHC
“Choosing to buy a home can be exciting but also requires careful planning. CMHC’s Home Buying Step by Step guide gives Canadians the tools and information they need to make informed decisions that they can feel good about.” Claude Gautreau, Knowledge Transfer Consultant, CMHC
Ground-breaking results from Club Vita Canada reveal some DB pension plans are overestimating their liabilities
New research finds longevity for Canadian pensioners is lower than anticipated – which may actually be costing defined benefit (DB) plan sponsors.
Canadian male pensioners are living about 1.5 years less than expected from age 65, according to the latest data from Club Vita Canada Inc. – the first dedicated longevity analytics firm for Canadian pension plans and a subsidiary of Eckler Ltd. Female pensioners are living about half a year less than expected.
“Based on our data, some DB plans are overestimating how long their members are currently living and are therefore taking an overly conservative approach to funding their liabilities,” explains Ian Edelist, CEO of Club Vita Canada. “Correcting that overestimation could reduce actuarial reserves by as much as 6% – improving Canadian pension funds’ and their plan sponsors’ balance sheets just by using more accurate, granular and up-to-date longevity assumptions.”
The data comes from Club Vita Canada’s first annual and highly successful longevity study completed in 2016 – one of the largest, most rigorous research studies on the impact of longevity on defined benefit pension and post-retirement health plans.
The newly created “VitaBank” pool of longevity data (provided by Club Vita Canada members) spans a wide range of industries and geographic regions in both the public and private sectors. VitaBank is currently tracking more than 500,000 Canadian pensioners from over 40 pension plans. Unlike the most widely used study to set longevity expectations – the Canadian Pensioners’ Mortality (CPM) study, which relies on data up to 2008 – VitaBank includes fully cleaned and validated data up to 2014.
The Club Vita Canada study brings to the Canadian pension market leading-edge modelling techniques already used by the insurance industry and in other countries. Club Vita U.K. recently released similar results, noting 25 billion GB pounds could be wiped off the collective U.K. DB deficit by using more accurate longevity assumptions.
“Naturally, the ultimate cost of a pension plan will be determined by how long its members actually live. But assumptions made today really do matter for such long-duration commitments,” explains Douglas Anderson, founder of Club Vita in the U.K. “Club Vita’s data gives DB plan sponsors the tools they need to evaluate their willingness to maintain their longevity risk or offload that risk to insurers.”
Club Vita Canada Inc. was created by Eckler Ltd. It is an extension of Club Vita LLP, a longevity centre of excellence launched in the U.K. in 2008 by Hymans Robertson LLP. By pooling robust data from a wide range of pension plans, Club Vita provides its members with leading-edge longevity analytics helping them better measure and manage their retirement plan.
Eckler is a leading consulting and actuarial firm with offices across Canada and the Caribbean. Owned and operated by active Principals, the company has earned a reputation for service continuity and high professional standards. Our select group of advisers offers excellence in a wide range of areas, including financial services, pensions, benefits, communication, investment management, pension administration, change management and technology. Eckler Ltd. is a founding member of Abelica Global – an international alliance of independent actuarial and consulting firms operating in over 20 countries.
Established in 1921, today Hymans Robertson is one of the longest established independent consulting and actuarial firms in the UK. The firm offers a full range of services including the provision of actuarial, investment consultancy, administration and general consultancy services to the trustees and sponsors of defined benefit and defined contribution pension schemes, and an enterprise risk management practice advising banks and life insurers. Hymans Robertson is also a member of the Abelica Global network.
SOURCE Club Vita Canada Inc.
For further information: To find out more about how Club Vita Canada works or how to join, visit clubvita.ca or contact Ian Edelist at 416-696-3067 or email@example.com, or Richard Brown at 416-696-3016 or firstname.lastname@example.org. For media inquiries, please contact Nancy Peppard at 416-696-3081 or email@example.com.
SEIU Healthcare announces My65+, the first retirement plan designed for Canadians earning less than $50,000 per year
SEIU Healthcare announced the first retirement plan aimed at the needs of modest earning Canadians. The My65+ plan is designed to be low-fee, portable, and structured to preserve government benefits.
“We asked our members what their number one challenge was, and the resounding answer we heard was retirement security,” said Sharleen Stewart, President, SEIU Healthcare. ” At SEIU Healthcare, we firmly believe that everyone deserves to retire with dignity, including the millions of Canadians who we know stretch their dollars to go as far as possible, every single day.”
Starting July 1, 2017, My65+ will be open to SEIU Healthcare members and their family members.
Facts about My65+
Designed for working Canadians with no workplace pension earning less than $50,000 per year
Low, transparent fees
Portable – stays with the member from job to job and into retirement
Structured to preserve government benefits in retirement, allowing members to keep their Guaranteed Income Supplement
Open to SEIU Healthcare members and their families
Contributions can start as low as $25 a month
The plan can provide 3-4 times more retirement value for money than a typical RRSP
More information about My65+ can be found at my65plus.ca
“Retirement plans and products available today do not serve modest earning workers well,” said Stewart. “We have created My65+ to address the financial realities and concerns of our members and many other hardworking Canadians.”
ABOUT SEIU HEALTHCARE SEIU Healthcare represents more than 55,000 healthcare and community service workers across Ontario. The union’s members work in hospitals, home care, nursing and retirement homes, and community services throughout the province. SEIU Healthcare has a strong track record of improving wages, benefits and working conditions for healthcare workers, supporting the training and development needs of its members, and strengthening standards in the management and delivery of patient and client care. www.seiuhealthcare.ca
Supportive Third Party Statements
The Daily Bread Food Bank
“Mainstream RRSPs just don’t pass the logic test for people earning less than $50 thousand per year,” said Gail Nyberg, Executive Director of Daily Bread Food Bank in Toronto. “They need a savings plan that won’t end up costing them money in their most vulnerable time of life. SEIU’s plan allows them to hold on to all the retirement income they’re entitled to, and that makes so much sense.”
Aspen Institute Financial Security Program
“SEIU’s My65+ will provide an innovative, low-cost option for hard-working families to build private savings for retirement. It has the potential to serve as a much-needed model to expand coverage for low- and moderate-income workers across Canada, as well as in the U.S., where nearly one-half of private sector workers lack access to a retirement plan at work.” Jeremy Smith, Director at the Aspen Institute Financial Security Program
Canadian Centre for Policy Alternatives
“This plan is a concrete step forward that will help workers in precarious jobs save for their retirement. It has an innovative approach, using tax policy to benefit low-wage workers. It is tailored to increasing retirement security and incomes for low-wage workers who take care of vulnerable Ontarians.” Sheila Block, Senior Economist, Canadian Centre for Policy Alternatives
Background on My65+
Low fees. My65+’s costs are significantly lower than the costs of a retail mutual fund, and lower than even those of many large pension plans. Plan members pay 0.22% for investment costs and a flat fee of $7 per month for administration. Over a lifetime, this can save a typical SEIU member about $100,000 in fees when compared to the average Canadian mutual fund, with fees of 2.2%. My65+ discloses all fees to plan members, providing a higher level of transparency than what is required by regulation, so that members know exactly what they are paying.
Preserves government benefits. My65+ is registered as a Group Tax Free Savings Account (TFSA) with the Canada Revenue Agency. The TFSA has been identified by anti-poverty advocates and experts as the optimal regulatory category for Canadians with modest incomes to use for retirement savings. This is because withdrawals from a TFSA in retirement do not result in a reduction or “clawback” of Guaranteed Income Supplement (GIS) benefits, which approximately one third of Canadians rely on as part of their retirement income. By contrast, withdrawals from RRSPs and Registered Pension Plans result a reduction of GIS benefits of 50 cents on the dollar.
Portable. My65+ stays with the member from job to job and into retirement, allowing members to continue to benefit from the plan’s low fees and members-first approach as their life changes. The plan allows members to contribute directly from their bank account, or through payroll deduction from their employer, provided their employer is a participant in the plan. Unlike many employer-sponsored plans, My65+ also allows members to stay in the plan after they retire. Over time, SEIU Healthcare intends to explore adding simple options for members to convert their nest eggs into a steady stream of income, while maintaining some flexibility.
Members first. Like a pension plan, My65+ has a fiduciary duty to serve the best interests of members. The plan will be overseen by a dedicated non-profit board comprised of a mix of SEIU representatives and external experts, and following best-in-class governance principles based on lessons learned from some of the world’s leading pension plans. This board’s sole purpose will be to deliver retirement security to plan members. Independent research shows that good governance and the presence of a fiduciary standard can make a significant difference in the retirement security of plan members.
Simplicity. Unlike many financial products, which can be complex, opaque, and overwhelming, My65+ is simple. Investment choice is limited to a suite of low-cost “target date” funds, which offer a diversified portfolio of high-quality equity and fixed-income investments that automatically adjust as the member ages. These funds are increasingly the default investment choice for many large defined-contribution plans in the US and Canada. My65+ will be administered using a digital, secure, self-serve approach that makes enrolling easy and allows members to make changes and receive communications online.
Open membership. Membership in My65+ is open to all SEIU Healthcare members and their family members, including spouses, children, and parents. As My65+ is rolled out, SEIU Healthcare will explore opportunities to make the plan available to a broader membership, so that more working people can benefit from its unique features.
Understanding Retirement Plans and Benefit Offerings Helps Employers and Employees Prepare for Changes
Retirement will look very different for millennials, baby boomers and others as the economy continues to change. The move towards Group Registered Retirement Savings Plans (RRSPs), coupled with the decline of employer-sponsored defined benefit pension plans, brings a new retirement reality for many employees. This changing environment was the impetus for the expansion of the Canada Pension Plan (CPP), a deal struck between the Federal and provincial governments in late 2016, to ensure a higher level of retirement security for Canadians in the future. Employers, including those that currently sponsor retirement plans, will have to ensure compliance with the governments’ plan to move ahead with CPP changes.
Employers will have to take stock of their internal retirement and benefit offerings to ensure they are operationally and financially equipped to make the proper changes needed. In evaluating an organization’s employee offerings, employers should equip their payroll, human resource and accounting staff with practical pension and benefit knowledge through the Canadian Payroll Association’s (CPA’s) Pensions & Benefitsseminar.
Employers will need to have the necessary changes programmed into their payroll systems well in advance to fulfil their legal responsibilities when the CPP expansion goes into effect in 2019. Employers should also anticipate that such changes may affect organizational policies, staff responsibilities and remuneration planning. The CPA offers its members payroll compliance resources, including the valuable e-Source legislative newsletter, Payroll InfoLine Q & A inquiry service (by phone and email), and a host of self-service web resources, to keep payroll, accounting and HR professionals up-to-date on regulatory and legislative changes impacting employers.
“With imminent changes to CPP, employers need to reassess their current retirement and benefit offerings for compliance, practicality, and financial preparedness,” says Steven Van Alstine, Vice President of Education at the CPA. “Employers and employees alike will be impacted by such changes. Employers should make sure their staff and their organization are equipped with comprehensive retirement planning knowledge for the future.”
Reviewing Your Full Offering of Benefits
Part of these preparations should also include an assessment of employer-sponsored benefits plans. Group health, disability and insurance plans should receive a thorough review to ensure that employees are receiving quality benefits without exorbitant costs to employers. Understanding the basics of such plans, how they are formed, and their tax and reporting considerations will help payroll, human resource and accounting staff to better support these functions within the organization and provide fundamental knowledge to help strike better deals at negotiation time. The CPA’s seminars offer comprehensive overviews of these areas; Pensions & Benefits focuses on the key elements used to apply, administer or support pension and benefits functions within the organization, while the Best Practices of Employee Group Benefits seminar focuses on proper management and negotiation of group benefits.
For more information about the CPA and the many benefits that membership provides, visit payroll.ca.
About the Canadian Payroll Association: Canada’s 1.5 million employers rely on payroll practitioners to ensure the timely and accurate annual payment of $928 billion in wages and taxable benefits, $313 billion in statutory remittances to the federal and provincial governments, and $177 billion in health and retirement benefits, while complying with more than 200 federal and provincial regulatory requirements. Since 1978, the Canadian Payroll Association has annually influenced the payroll compliance practices and processes of over 500,000 organizational payrolls. As the authoritative source of Canadian payroll compliance knowledge, the Canadian Payroll Association promotes payroll compliance through education and advocacy.
SOURCE Canadian Payroll Association
For further information: Alison Rutka, Communications Specialist, firstname.lastname@example.org, 416-487-3380 x 125
CIBC expects household credit outstanding to slow moderately in the coming years as growth in almost every credit vehicle is projected to soften relative to the performance seen over the past two years or so. Household Credit Growth in household credit in 2016 was very stable with outstanding rising by just over 5% on a year-over-year basis. On an inflation-adjusted basis, household credit is still rising by a full percentage point below its long-term average. That is, despite the drama in the housing market, the recent pace of credit growth in Canada is not rapid by any stretch of the imagination. And we expect that pace to slow in the coming years. Mortgage Debt Mortgage credit is currently rising at a year-over-year pace of close to 6%. We estimate that for 2016 the mortgage market accounted for just over 80% of growth in household credit. As for the stock of debt, mortgages now account for just under 72% of total household credit – the highest share in almost two decades. We estimate that new mortgage originations in Canada amounted to just over $405 billion in 2016, rising by 5.5% from 2015. As for 2017, we expect the pace of growth in mortgage originations to cool, reflecting factors such as reduced affordability due to tougher qualification criteria, increased share of less expensive (condo) units in total housing sales, marginally higher mortgage rates and slowing activity in centers such as Vancouver. Overall we expect mortgage debt outstanding to rise by an annual rate of around 5% in the coming two years. The rate of mortgage arrears has stabilized at around 0.30% – very close to the rate seen before the recession. The arrears rate in Atlantic Canada at close to 0.65% is the highest in the nation, followed by the Prairies and Alberta. The arrears rate in Ontario at 0.14% is by far the lowest in the nation.
Consumer Credit The pace of growth in consumer credit has been relatively stable with outstanding rising by 3.2% on a year-over-year basis. Credit card debt is now advancing at a 3.5% annual pace, roughly the same pace seen in the lines of credit portfolio. Delinquencies continue to behave well, stabilizing at around 1% for credit cards and, in fact, declining for lines of credit. The auto loan market has seen robust growth in recent years. Currently auto loans outstanding are rising at a year-over-year rate of 6.7%. Close to 70% of the estimated $155 billion market is controlled by banks. The average loan size in that space is around $19,000, up by 22% (inflation-adjusted) since 2009.
Banks have been gaining market share because of stronger organic growth and the acquisition of firms in the space. The banks’ portfolios are currently rising by more than 7% on a year-over-year basis while non-banks have seen their growth stagnate. The auto delinquency rate among banks is close to 1.2%, roughly in line with the rate seen among non-banks. We expect growth in auto loans to moderate in the coming years reflecting some softness in auto sales following a record breaking 2016. As well, after a dramatic decline during the recession, leasing activity has been on the rebound and currently accounts for close to 9% of transactions. We expect auto loans to advance by 4% in 2017.
Harcourts was selected from a world-wide category to be the first real estate company to be featured across Apple’s global web network, with a case study showing how they have used Apple’s iOS technology to transform their business is an example of the progressive approach Harcourts take to the client experience in real estate.
Harcourts Canada, a New Zealand-based real estate company is hoping to start a new trend in Metro Vancouver house sales by introducing auction-style property bidding.
“We see auctions as a really strong thing going forward,” said Hayden Duncan, CEO of Harcourts Canada.
In recognition of their innovation and use of the iPad and iPhone to enhance client experience and drive greater efficiency for their business, Apple has produced a video and business case study about Harcourts’ work – an accolade reserved only for companies developing the most cutting edge business solutions using Apple technology.
Harcourts is the first and only real estate group world-wide, to be selected by Apple for this recognition.
Harcourts CEO Hayden Duncan, says the custom suite of apps developed by Harcourts, has transformed the way they do business and is excited about the benefits they will bring to the Canadian market as the brand opens its first office here this month.
By nature real estate is a mobile business. Realtors are on the road, meeting clients, inspecting properties and showing houses. The apps save our Realtors hundreds of hours per year by streamlining tasks and they help us deliver a great client experience.
“Take e-Campaign for iPad, for example. From the comfort of your living room, a Realtor can help you build your ideal marketing campaign; visually showcasing the complete range of marketing options available, and booking everything into an online calendar so you know exactly what to expect every step of the way.
Information is all stored digitally so there’s no need for paper forms or folders or for data re-entry back at the office, which means we can deliver a timely, professional, and consistent level of service.
The i-pad has also allowed us to enhance home security for property viewings and communicate quickly and effectively with buyers interested in more information to help make the buying process much easier. ” says Mr Duncan.
Harcourts is an international real estate business founded 129 years ago in New Zealand. The company has more than 7,200 Realtors, 790 Brokerages in ten countries.
According to statistics released today by The Canadian Real Estate Association (CREA), national home sales were down slightly in January 2017 on a month-over-month basis.
National home sales declined 1.3% from December 2016 to January 2017.
Actual (not seasonally adjusted) activity in January was up 1.9% from a year earlier.
The number of newly listed homes dropped 6.7% from December 2016 to January 2017.
The MLS Home Price Index (HPI) in January was up 15.0% year-over-year (y-o-y).
The national average sale price was little changed (+0.2%) y-o-y in January.
Home sales over Canadian MLS Systems edged down by 1.3% month-over-month in January 2017, putting them at the second lowest monthly level since the fall of 2015 and only slightly above levels recorded last November when recently tightened mortgage regulations came into effect.
Sales activity was down from the previous month in about half of all local markets, led by three of Canada’s largest urban centres: the Greater Toronto Area (GTA), Greater Vancouver and Montreal.
Actual (not seasonally adjusted) sales activity was up 1.9% compared to the same month last year. While sales were up from year-ago levels in about two-thirds of all local housing markets including in the GTA, Calgary, Edmonton, London and St Thomas, and Montreal, they were down significantly in the Lower Mainland of British Columbia.
“Canadian homebuyers face some challenges this year, including new mortgage rules that make it harder to qualify for a mortgage and regulatory changes that will push up mortgage financing costs,” said CREA President Cliff Iverson. “It will take some time to gauge the extent to which these challenges will weigh on home buyers in different housing markets across Canada. All real estate is local, and realtors remain your best source for information about sales and listings where you live or might like to in the future.”
“The shortage of homes available for sale has become more severe in some cities, particularly in and around Toronto and in parts of BC,” said Gregory Klump, CREA’s Chief Economist. “Unless sales activity drops dramatically, the outlook for home prices remains strong in places that face a continuing supply shortage.”
The number of newly listed homes dropped 6.7% in January 2017, the second consecutive monthly decline. New listings were down in about two-thirds of all local markets, led by the GTA and environs across Vancouver Island.
With the monthly decline in new listings surpassing the decline in sales, the national sales-to-new listings ratio jumped to 67.7% in January compared to 64.0% in December and 60.2% in November.
A sales-to-new listings ratio between 40 and 60 is generally consistent with balanced housing market conditions, with readings below and above this range indicating buyers’ and sellers’ markets respectively.
The ratio was above 60% in about half of all local housing markets in January, the vast majority of which are located in British Columbia, in and around the GTA and across southwestern Ontario. A monthly decline in newly listed homes further tightened housing markets that were already in sellers’ market territory.
The number of months of inventory is another important measure of the balance between housing supply and demand. It represents how long it would take to completely liquidate current inventories at the current rate of sales activity.
There were 4.6 months of inventory on a national basis at the end of January 2017 – unchanged from December 2016 and a six-year low for the measure.
The imbalance between limited housing supply and robust demand in Ontario’s Greater Golden Horseshoe region is without precedent (the region includes the GTA, Hamilton-Burlington, Oakville-Milton, Guelph, Kitchener-Waterloo, Cambridge, Brantford, the Niagara Region, Barrie and nearby cottage country). The number of months of inventory in January 2017 stood at or below one month in the GTA, Hamilton-Burlington, Oakville-Milton, Kitchener-Waterloo, Cambridge, Brantford and Guelph.
The MLS Home Price Index (MLS HPI) now includes Oakville-Milton and Guelph, and has been historically revised to ensure that all aggregate measures remain comparable.
The Aggregate Composite MLS HPI rose by 15.0% y-o-y in January 2017. This was up slightly from December’s gain, reflecting an acceleration in apartment and townhouse/row unit price increases.
Prices for two-storey single family homes posted the strongest year-over-year gains (+16.8%), followed closely by townhouse/row units (+15.8%), one-storey single family homes (+14.4%) and apartment units (+13.3%).
While benchmark home prices were up from year-ago levels in 10 of 13 housing markets tracked by the MLS HPI, price trends continued to vary widely by location.
In the Fraser Valley and Greater Vancouver, prices have receded from their peaks posted in August 2016. That said, home prices in these regions nonetheless remain well above year-ago levels (+24.9% and +15.6% respectively).
Meanwhile, benchmark prices continue to climb in Victoria and elsewhere on Vancouver Island together with Greater Toronto, Oakville-Milton and Guelph. Year-over-year price gains in these five markets ranged from about 18% to 26% in January.
By comparison, home prices were down 2.9% y-o-y in Calgary and by 1.0% y-o-y in Saskatoon. Prices in these two markets now stand 5.9% and 4.3% below their respective peaks reached in 2015.
Home prices were up modestly from year-ago levels in Regina (+3.8%), Ottawa (+3.7%) and Greater Montreal (+3.1%). In Greater Moncton, home prices for the market overall held steady (-0.2%), reflecting an increase in townhouse row units prices (5.8%) that was offset by a decline in prices for one-storey single family homes (-1.0%).
The MLS Home Price Index (MLS HPI) provides the best way of gauging price trends because average price trends are prone to being strongly distorted by changes in the mix of sales activity from one month to the next.
The actual (not seasonally adjusted) national average price for homes sold in January 2017 was $470,253, almost unchanged (+0.2%) from where it stood one year earlier.
The national average price continues to be pulled upward by sales activity in Greater Vancouver and Greater Toronto, which remain two of Canada’s tightest, most active and expensive housing markets.
That said, Greater Vancouver’s share of national sales activity has diminished considerably over the past year, giving it less upward influence on the national average price. The average price is reduced by almost $120,000 to $351,998 if Greater Vancouver and Greater Toronto sales are excluded from calculations.
PLEASE NOTE: The information contained in this news release combines both major market and national sales information from MLS Systems from the previous month.
CREA cautions that average price information can be useful in establishing trends over time, but does not indicate actual prices in centres comprised of widely divergent neighbourhoods or account for price differential between geographic areas. Statistical information contained in this report includes all housing types.
MLS Systems are co-operative marketing systems used only by Canada’s real estate Boards to ensure maximum exposure of properties listed for sale.
The Canadian Real Estate Association (CREA) is one of Canada’s largest single-industry trade associations, representing more than 120,000 realtors working through some 90 real estate Boards and Associations.
The Trump Administration represents a risk to international economic conditions and global sovereign credit fundamentals, Fitch Ratings says. US policy predictability has diminished, with established international communication channels and relationship norms being set aside and raising the prospect of sudden, unanticipated changes in US policies with potential global implications.
The primary risks to sovereign credits include the possibility of disruptive changes to trade relations, diminished international capital flows, limits on migration that affect remittances and confrontational exchanges between policymakers that contribute to heightened or prolonged currency and other financial market volatility. The materialisation of these risks would provide an unfavourable backdrop for economic growth, putting pressure on public finances that may have rating implications for some sovereigns. Increases in the cost or reductions in the availability of external financing, particularly if accompanied by currency depreciation, could also affect ratings.
In assessing the global sovereign credit implications of policies enacted by the new US Administration, Fitch will focus on changes in growth trajectories, public finance positions and balance of payments performances, with particular emphasis on medium-term export prospects and possible pressures on external liquidity and sustainable funding. US positions on some countries may change quickly, at least initially, but any potential rating adjustments will depend on consequent changes to sovereign credit fundamentals, which will almost certainly be slower to materialise.
Elements of President Trump’s economic agenda would be positive for growth, including the long-overdue boost to US infrastructure investment, the focus on reducing the regulatory burden and the possibility of tax cuts and reforms, assuming cuts don’t lead to proportionate increases in the government deficit and debt. One interpretation of current events is that, after an early flurry of disruptive change to establish a fundamental reorientation of policy direction and intent, the Administration will settle in, embracing a consistent business- and trade-friendly framework that leverages these aspects of its economic programme, with favourable international spill-overs.
In Fitch’s view, the present balance of risks points toward a less benign global outcome. The Administration has abandoned the Trans-Pacific Partnership, confirmed a pending renegotiation of the North American Free Trade Agreement, rebuked US companies that invest abroad, while threatening financial penalties for companies that do so, and accused a number of countries of manipulating exchange rates to the US’s disadvantage. The full impact of these initiatives will not be known for some time, and will depend on iterative exchanges among multiple parties and unforeseen additional developments. In short, a lot can change, but the aggressive tone of some Administration rhetoric does not portend an easy period of negotiation ahead, nor does it suggest there is much scope for compromise.
Sovereigns most at risk from adverse changes to their credit fundamentals are those with close economic and financial ties with the US that come under scrutiny due to either existing financial imbalances or perceptions of unfair frameworks or practices that govern their bilateral relations. Canada, China, Germany, Japan and Mexico have been identified explicitly by the Administration as having trade arrangements or exchange rate policies that warrant attention, but the list is unlikely to end there. Our revision of the Outlook on Mexico’s ‘BBB+’ sovereign rating to Negative in December partly reflected increased economic uncertainty and asset price volatility following the US election.
The integrative aspects of global supply chains, particularly in manufactured goods, means actions taken by the US that limit trade flows with one country will have cascading effects on others. Regional value chains are especially well developed in East Asia, focused on China, and Central Europe, focused on Germany.
Tighter immigration controls and possible deportations could have meaningful effects on remittance flows, as the US has the world’s largest immigrant population. World Bank data confirm that the US and Mexico share the world’s top migration corridor and have the largest bilateral remittance flows. Relative to GDP, remittances are even larger for Honduras, El Salvador, Guatemala and Nicaragua, all of which receive most inflows from the US.
Countries hosting US direct investment, at least part of which has financed export industries focused back on the US, are at risk of being singled out for punitive trade measures. The list of these countries is potentially long, since US-based entities account for nearly one-quarter of the stock of global foreign direct investment. Countries with the highest stock of US investment in manufacturing are Canada, the UK, Netherlands, Mexico, Germany, China and Brazil.
Contact: James McCormack Managing Director, Sovereigns +44 20 3530 1286 Fitch Ratings Ltd 30 North Colonnade London E14 5GN
Charles Seville Senior Director, Sovereigns +1 212 908 0277
Mark Brown Senior Analyst Fitch Wire +44 20 3530 1588
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The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article can be accessed at www.fitchratings.com. All opinions expressed are those of Fitch Ratings.