Tuesday, December 23, 2014

What can mortgage shoppers expect in 2015? Here are five predictions

1. More mortgage restrictions to come 
With Ottawa paring down its mortgage exposure, the Bank of Canada estimating up to 30 per cent overvaluation in Canada’s housing market,over-indebted consumers and average home prices incessantly breaking records, policy makers will restrict the mortgage market yet again. New limits on government-backed mortgage funding will make it more expensive for lenders to fund mortgages, or new underwriting rules will make it harder to qualify for a mortgage. Maybe both.2. Record discounts for variable mortgage rates 
Lenders’ funding costs should continue to improve for variable-rate mortgages in the next twelve months. As a result, we’ll see a small number of lenders and/or brokers advertising discounts better than prime minus one per cent before the end of 2015.
3. Brokers will break into three camps
Mortgage brokers will split into three camps in 2015: Full-service brokers who create detailed mortgage plans to support one’s financial goals, online mortgage brokers who provide less advice for a lower rate, and your run-of-the-mill everyday broker. That latter type will suffer job losses in 2015 as their rates and service offerings prove uncompetitive relative to other brokers, banks and credit unions.
4. A glut of private money Alternative mortgage lenders – such as mortgage investment corporations (MICs) – will grow flush with cash, as investors chase higher yields and as Ottawa’s stricter mortgage rules create opportunity for them. That abundance of capital will motivate sub-prime lenders to take more risk in search of higher returns. In turn, we’ll see some of them offer mortgages with only 10 or 15 per cent down, instead of the traditional 20 to 25 per cent equity The result: Credit-challenged consumers will have more lending options at lower interest rates.
5. Brokers will pitch you other stuff
Don’t be surprised if your mortgage broker offers you other financial products. Declining margins will motivate many brokers to diversify their revenue streams. They’ll take a page from banks’ playbooks and cross-sell you everything from GICs, to insurance, to credit cards, to RRSPs.
Robert McLister is a mortgage planner at intelliMortgage Inc. and founder ofRateSpy.com.

Monday, December 22, 2014

15 per cent house price drop possible, RBC chief says

Canadian housing prices could fall as much as 15 per cent should interest rates climb, which would be “healthy” for the country’s economy, Royal Bank of Canada Chief Executive Officer David McKay said.
“There could be some price correction, particularly in a rising rate environment,” McKay said Thursday in an interview at the bank’s Toronto headquarters. “I don’t see it to the extent that the Bank of Canada does, but I do think you could have a 10 to 15 per cent price correction.”
Canada’s central bank said Dec. 10 that housing prices are overvalued by as much as 30 per cent. Bank of Canada Governor Stephen Poloz warned this month that indebted households and high housing prices pose a risk to the financial system even as the country isn’t in a housing bubble.
Royal Bank and other large Canadian lenders have posted record profits in recent years as homeowners took advantage of the lowest mortgage rates in decades, fuelling housing prices and an expanding real estate market.
Bank of Canada’s policy interest rate has been at 1 per cent since September 2010. The central bank may start raising its overnight lending rate in the fourth quarter of 2015, according to a Bloomberg survey of economists.
“The catalyst is very low rates, ultra low rates, strong demand and lack of supply creation,” said McKay, who led the bank’s consumer-lending business before becoming CEO on Aug. 1. “Demand is there, supply’s not, and low interest rates stimulate price wars still.”
The borrowing has left Canadians with record levels of debt, prompting warnings from policy-makers and the central bank about overindebted consumers and elevated housing prices. Canada’s ratio of household debt to disposable income rose to a record between July and September.
“I do not believe it will end badly,” McKay said. “A slowing market is absolutely a healthy thing right now, so we’re not concerned.”

Thursday, December 18, 2014

Official letters confirm major tax increases in the offing for hundreds of businesses/ /Vancouver

To owners of storefront businesses in older, ripe-for-redevelopment buildings in neighbourhoods throughout Vancouver — Mount Pleasant, Marpole, Fairview, Kerrisdale, Dunbar and more — warmest wishes for a happy Christmas.
You deserve a good season, and you’ll need it. Because odds are January won’t start well, at least, not when it comes to the “prosperous” part of the traditional new year’s greeting. You’re about to be hammered by the taxman.
Formal notices of new assessment values for properties in the city won’t be in the mail until the new year, but letters warning of extreme increases for land zoned for mixed commercial/residential use were sent recently to commercial property owners in several neighbourhoods. Most businesses don’t own their premises — they lease under terms that make them responsible for property taxes — and there is no way to know how many building owners have already shared these letters with their tenants. But the tenants will find out soon enough they will be kicked in the teeth when the 2015 property tax bills arrive next summer.
How hard a kick? This depends on both location and the zoning that applies. But the hundreds of letters sent to the owners of properties in more than a dozen commercial/residential neighbourhoods forecast land assessment increases ranging from a low of about 15 per cent in the King Edward area of Cambie and in some parts of Mount Pleasant, to a high of well over 30 per cent along other parts of Cambie and Mount Pleasant. Most other neighbourhood business districts are looking at increases in the 20- to 30-per-cent range.
These numbers foretell huge increases in most tenants’ property tax bills, although perhaps not quite so huge as appears at a glance.
Paul Sullivan of the consulting firm Burgess Cawley Sullivan notes the over-all value of Vancouver’s business property assessments, including the many companies that don’t have storefronts, is about 10 per cent. This is one of three factors that will determine the size of next summer’s property tax bills.
The level of city spending (likely to rise by a bit more than inflation, although this won’t be settled until spring) and the total number of businesses in the city (likely to be static, as it has been for years) also matter. But a big factor is how individual property values change in relation to the average. With this year’s average about 10 per cent, a 30-per-cent assessment increase translates into a 20-per-cent rise in 2015’s property tax bill.
Sullivan’s back-of-the-envelope calculation suggests an annual tax hike for a typical business in one of these hotspots to be about $16,000. For low-margin retailers, which many of these businesses are, this means they must sell an extra $320,000 worth of goods for the year — almost $1,000 a day — just to pay this increase.
The city’s only policy to mitigate this hotspot problem — land averaging — will delay some of this hit by spreading it over three years.
But averaging doesn’t fix anything — it merely means businesses are pushed to the wall slowly, rather than abruptly. And averaging — whether today’s three-year policy, or a five-year version the city is considering — ironically creates another major inequity.

Friday, December 12, 2014

Housing Market Ends Year in Balanced Conditions

Vancouver, BC – December 12, 2014. The British Columbia Real Estate Association (BCREA)
reports that a total of 5,972 residential unit sales were recorded by the Multiple Listing Service®
(MLS®) in November, up 8.8 per cent from November 2013. Total sales dollar volume was $3.4
illion, an increase of 12.1 per cent compared to a year ago. The average MLS® residential price
in the province rose to $574,694, up 3.1 per cent from the same month last year.

“BC home sales were robust in November,” said Cameron Muir, BCREA Chief Economist. “Improving economic conditions, strong consumer confidence and persistently low mortgage interest rates are providing a solid foundation for elevated consumer demand."
“Market conditions have improved province wide, with most regional markets now in the mid to high range of a balanced market,” added Muir.
Year-to-date, BC residential sales dollar volume was up 22.1 per cent to $44.8 billion, compared to the same period last year. Residential unit sales were up 15.3 per cent to 78,973 units, while the average MLS® residential price was up 6.0 per cent at $567,292.

Thursday, December 11, 2014

B.C. new home buyers feel weight of heavy rebar tariff

The cost of a trade dispute between steel producers in Central Canada and their offshore competitors is being felt by new home buyers in Metro Vancouver’s already super-heated condominium market.
Neil Chrystal, president and CEO of Polygon Homes, only learned about the international scrap over alleged dumping of reinforcing steel rods – known as rebar – when he saw a significant spike in construction material costs about two months ago. He discovered that an interim duty has been applied to Canadian imports of steel rebar from China, South Korea and Turkey. U.S. rebar imports are not targeted in this trade dispute.The result is that each of Polygon’s newest two-bedroom condo units selling now in Burnaby and Richmond cost at least $5,000 more. Those kinds of cost increases are being felt across the province’s construction industry.
“I think buyers are already stretching to get into their first home and when you add a cost like this, it’s one more roadblock in the way of home ownership,” Mr. Chrystal said in an interview Monday. “This is one more needless tax on first-time home buyers.”
And, if a trade tribunal in Ottawa rules in favour of the country’s steel producers – primarily in Ontario and Quebec – the cost of construction will jump even higher in B.C. early next year. The industry says those three countries are dumping their product in Canada at a discount. The B.C. government is applying for an exemption, saying it will be the hardest hit by the duty because it relies almost entirely on imports from the U.S. and Asia.
B.C. Premier Christy Clark raised the matter on Monday in a meeting with Ontario Premier Kathleen Wynne. Ontario government sources said the two did not reach any accord, and the Canadian International Trade Tribunal hearing is set to convene on Dec. 15.
In an editorial board meeting earlier in the day with The Globe and Mail, Ms. Clark said the rebar duty is one of the top trade irritants between the two provinces right now.
“I understand Ontario has some issues, but we cannot allow them to affect British Columbia, because Ontario cannot supply British Columbia. So raising the price in Ontario for Canada is only going to mean that we buy more expensive rebar from the United States,” she said Monday.
“It poses a real economic threat in British Columbia,” Ms. Clark added. “On the one hand, there’s no benefit for Ontario. On the other, I would argue it creates a problem for Ontario and all of the rest of Canada that depends on a successful British Columbia economy to contribute to Confederation.”
The B.C. government, prodded by its construction industry, has raised the alarm in Ottawa about what it says are the unintended consequences of the rebar tariff. The province fears that the rising costs could drive away investment just as a series of major projects, particularly around liquefied natural gas, are approaching final investment decisions.
Those fears are already being realized in the residential construction sector. Polygon is now selling two-bedroom condo homes in Burnaby starting at $460,000 – units that were built after the cost of rebar imports jumped due to the interim duty. The Independent Contractors and Business Association of B.C. (ICBA) estimates that if the full duty sought by Canadian steel producers is imposed – a decision is expected in January – the cost of a two-bedroom condo unit could rise by $10,000.
That is especially bad news for new home buyers in Vancouver, where housing prices are headed for a record high this year in what is already considered Canada’s most expensive property market.
“It feels like Western Canada – B.C., anyway – is getting screwed by Central Canada,” said Philip Hochstein, president of the ICBA.
Reinforcing steel is a major component in concrete construction, but B.C. has no rebar production. The ICBA estimates that 60 per cent of the rebar used in B.C. comes from the U.S., where prices are still significantly cheaper than Canadian rebar due to high transportation costs.

Fitch warns of “unsustainable” levels of household debt including mortgages

Credit rating agency Fitch has warned that Canada’s banks are at risk due to “unsustainable” levels of consumer debt. Although the firm says that the banks have good earnings and balance sheets it’s outlook for next year comes with caution due to the expected rise in interest rates and the effect that will have on consumers’ ability to service debts although banks will be largely protected from defaults on home loans due to CMHC cover. Fitch says that there is overvaluation in housing in Vancouver and Greater Toronto in particular and this sentiment was shared in a report by Moody’s. Fitch also issued warnings about the housing market back in June saying that it estimated a 20 per cent overvaluation. 

Good News for Stratas: Civil Resolution Tribunal Update

It's been under development for some time, and now the Civil Resolution Tribunal (CRT) is really starting to take shape. The CRT is a long-awaited voluntary mechanism to resolve many strata and small claims disputes.
The CRT is scheduled to launch in 2015, and will be available 24/7 online. High-level descriptions of the process and the tools that will be available are offered on the new CRT website, which debuted in November: www.civilresolutionbc.ca.
Shannon Salter was appointed as Chair of the CRT earlier this year. She is specifically qualified for this position, with her experience as a commissioner of the Financial Institutions Commission, vice president of the British Columbia Council of Administrative Tribunals and vice chair of the Workers' Compensation Appeal Tribunal.
While the CRT will be able to handle many strata disputes, matters that affect land or that deal with significant issues in a strata complex will be outside of the CRT's mandate. The Civil Resolution Tribunal will be able to address disputes such as:
  • non-payment of monthly strata fees or fines,
  • unfair actions by the strata corporation or by people owning more than half of the strata lots in a complex,
  • unfair, arbitrary or non-enforcement of strata bylaws (such as noise, pets, parking, rentals),
  • issues of financial responsibility for repairs and the choice of bids for services,
  • irregularities in the conduct of meetings, voting, minutes or other matters,
  • interpretation of the legislation, regulations or bylaws, and
  • issues regarding the common property.
BCREA has supported alternative dispute resolution since 2010, and congratulated the provincial government in 2012 when the legislation was passed. The Association believes the CRT will provide strata owners and renters with an affordable way to settle disagreements and help improve compliance with the Strata Property Act.

Monday, December 8, 2014

Canadian Housing Starts - December 8, 2014
New home construction in Canada rose 6.6 per cent in November to 195,620 units at a seasonally adjusted annual rate (SAAR).  The six-month trend in Canadian housing starts of 195,792 units SAAR was relatively unchanged and sits slightly in excess of Canadian household growth. 

Housing starts in BC urban centers increased 26.7 per cent on a monthly basis to 29,565 units SAAR.  On a year-over-year basis, housing starts were 10 per cent higher compared to November 2013. Single-detached starts were up 11 per cent while multiple units were up 10 per cent compared to this time last year. Year-to-date, total BC housing starts are 6 per cent higher than 2013. 

Looking at census metropolitan areas (CMA) in BC, total starts in the Vancouver CMA bounced back from a large decline in October, rising 10 per cent year-over-year on broad strength in both single detached and multiple starts. Year-to-date, Vancouver housing starts are up 3 per cent. In the Victoria CMA, new home construction fell 15 per cent year-over-year due to weaker starts of both single detached and multiple units. Year-to-date, housing starts in Victoria are down 16 per cent. Total housing starts in the Kelowna CMA were up 45 per cent year-over-year in November due to a large increase in starts of multiple units.  Year-to-date, housing starts in the Kelowna CMA are up 34 per cent . Housing starts in the Abbotsford-Mission CMA posted another steep decline in November, down 44 per cent year-over-year.  Year-to-date, new home construction in the Abbotsford-Mission CMA is down 28 per cent.