Friday, April 27, 2018

Two Big Six banks hike benchmark rates

Two of Canada's biggest banks are raising their benchmark rates for five-year, fixed-rate mortgages.
TD says as of Wednesday it increased its posted rate for five-year fixed mortgages to 5.59 per cent from 5.14 per cent.
Mortgage planner and rate comparison website founder Robert McLister says the increase is ``unusual'' as the benchmark rate hasn't seen a jump of 45 basis points or more since March 2010.
TD spokeswoman Julie Bellissimo says a number of factors are considered when determining rates including the competitive landscape, the cost of lending and managing risk.
Meanwhile, Royal Bank spokesman AJ Goodman says the lender plans to raise its posted rate for a five-year fixed mortgage on Monday to 5.34 per cent compared with the 5.14 per cent currently posted.
McLister says the actual rates banks offer to borrowers are not seeing an increase, but notes the Bank of Canada uses the posted rates at the big banks to calculate the rate used in stress tests to determine whether homebuyers qualify for loans.

The Canadian Press

Tuesday, April 24, 2018

Vancouver turns vacancies into cash cow

VANCOUVER _ The city of Vancouver's new empty homes tax is expected to bring in $30 million in revenue in its first year.
Vancouver Mayor Gregor Robertson said $17 million has already been collected from owners of almost 8,500 properties that were determined to be vacant or under utilized for at least six months of the year.
``For those who didn't rent their empty property and chose to pay the empty homes tax, I just want to say thank you for contributing to Vancouver's affordable housing funding and making sure we can invest more in affordable housing,'' Robertson said at a news conference Monday. ``For those who did rent their empty homes, thank you very much for adding to the rental housing supply here in Vancouver. It's desperately needed.''
The tax is the first of its kind in Canada, requiring homeowners who do not live in or rent out their properties to pay a one per cent levy based on the assessed value of the home.
Robertson said the tax was intended to address the city's near-zero vacancy rate.
The most recent figure from the Canadian Mortgage and Housing Corporation puts the city's rental vacancy rate at 0.8 per cent, up slightly from the previous year, the mayor said.
It's unclear yet if the tax has increased the availability of rental accommodation, Robertson said, adding that the city is developing better data collection methods to monitor the impact of initiates like the tax more closely.
The city previously said about 60 per cent of properties affected by the tax are condominiums.
The tax on the properties where owners said their home was empty ranged from $1,500 to $250,000, Robertson said, noting the highest tax bill came from a $25-million home.
The funds will support the city's affordable housing initiatives and residents can provide feedback on exactly where the money should be spent.
Robertson said increasing capacity at homeless shelters or adding to the city's rent bank, which provides one-time interest-free loans to low-income residents in a financial crisis, are among the possible initiatives that could benefit.
The median tax due is just under $10,000 and Robertson said anyone who doesn't pay up will face fines and have the bill added to their property taxes next year.
``Those who are not playing ball here and who are skirting the system, we will get you,'' the mayor said.
Nearly 99 per cent of homeowners completed an empty homes tax declaration.
The tax cost the city $7.5 million to implement and annual operating costs for the first and subsequent years are pegged at $2.5 million.
Audits are underway and the city said just under 1,000 complaints or disputes have been filed that need to be addressed in the coming months.
Robertson said it will be up to city council to decide whether the tax is having the desired effect, and that will likely take a few years of data to determine.
``I would say at this point it looks like some signs of success,'' he said.

The Canadian Press

Thursday, April 19, 2018

Will Vancouver’s new Airbnb rules improve the city’s vacancy rate? This expert weighs in

Effective April 19, a new agreement between the City of Vancouver and Airbnb will officially allow Vancouverites to use their primary residences as short-term rentals as long as they have a business licence. Announced last week, the deal between the City and the global home-sharing website is the first of its kind in Canada. 
The new regulations are meant to free up long-term rentals in the city, which UBC professor of real estate finance Tom Davidoff says is a step in the right direction.
“We’ll probably see some movement away from short-term rental to long-term and that should help improve a very tight rental market,” Davidoff tells BuzzBuzzNews.
The new bylaw permits Vancouver residents to operate short-term rentals in their principal residence for stays of less than 30 days, as long as they have a business licence. As of April 19, the $49/year licence number must be included in all Airbnb postings, otherwise operators could be removed from the site and face daily fines of $1,000.
According to a City press release, there are currently 6,600 illegal short-term rentals in Vancouver. Under this new bylaw, the City estimates that at least 1,000 of those units will be returned to the rental market.
“Airbnb has decided to be cooperative both in withholding sales tax at the provincial level and now helping enforce short-term rental in Vancouver. They have a big market share, so that should be influential,” says Davidoff.
Airbnb will also provide a list of all Vancouver licences and associated addresses operating on its site on a quarterly basis, which the City will cross-reference to its licensing records.
Last November, city council began regulating short-term rentals by implementing mandatory business licences for any operators looking to list property on Airbnb. But per this new agreement, non-principal residences will not be permitted.
Since the City began cracking down on short-term rentals, Davidoff says it will likely lead to an improvement to the city’s record-low vacancy rate, which sits at 0.7 per cent.
“We’ve probably already seen quite a bit of impact because I think most people people like to play by the rules and the rules already forbade full-time Airbnb,” he says.
In the wake of these new rules, Davidoff adds there is a risk that some Vancouver hosts might decide to leave Airbnb in favour of another home-sharing platform, in order “to fly under the radar and disobey city rules.”
Although these regulations are not Davidoff’s ideal choice for addressing the city’s tight rental market, he applauds the City’s effort in tackling the issue.
“I think taxing short-term rentals at a high-rate might be preferable to banning them. But, I think you have to do something because unless you want the city to be a playground for the rich you’ve got to find a way to get housing for people who live and work here,” he says.
BuzzBuzzNews Canada

Wednesday, April 18, 2018

Bank of Canada Interest Rate Announcement - April 18, 2018

The Bank of Canada decided to leave the target for the overnight policy rate unchanged at 1.25 per cent this morning. In the statement accompanying the decision, the Bank noted that inflation is forecast to be slightly higher in 2018 than originally expected but will return to the Bank's 2 per cent target once the impact of higher gas prices and minimum wage increases dissipate.  While the mortgage stress test has been a contributor to weaker growth in the first quarter of 2018, the Bank expects the economy to be operating at above potential over the next three years, growing at an average rate of about 2 per cent.

Although the Bank held steady today, with inflation rising to the Bank's two per cent target and many Canadian firms operating at or near capacity, interest rates are very likely headed higher this year.  Headwinds from the trade sector have moderated, energy prices are higher and growth for the first quarter appears to be firming after a slow start. Given those trends, the Bank is likely to adjust its policy rate higher in coming months. That will translate to higher mortgage rates which, combined with the erosion of purchasing power from the mortgage stress test, will temper housing demand in 2018.


Friday, April 13, 2018

B20 has tightened demand but done little for supply in BC

Homes sales fell by almost a quarter in British Columbia last month but supply remained tight and prices increased.
Figures from the British Columbia Real Estate Association (BCREA) show that sales of 7,409 in March meant a 24.6% decrease from a year earlier while prices gained 5.3% to an average price of $726,930.
“More burdensome mortgage qualifications are having the predictable effect of swiftly curbing housing demand,” said Cameron Muir, BCREA Chief Economist. “You simply cannot pull as much as 20% of the purchasing power away from conventional mortgage borrowers and not create a downturn in consumer demand.”
Even with lower demand, supply of homes remains low across most of the province, with little change from a year ago and total inventory at or near a 12-year low.
Year-to-date, BC residential sales dollar volume was down 1.7 per cent to $13.9 billion, compared with the same period in 2017. Residential unit sales decreased 9.4 per cent to 18,927 units, while the average MLS® residential price was up 8.5 per cent to $732,243.

Tuesday, April 10, 2018

Vancouver home sales slow down, but prices remain inflamed

Metro Vancouver home sales over the first quarter of this year were the lowest in five years, but statistics from the Real Estate Board of Greater Vancouver also showed that prices remained high.
The board stated that home sales across the region in March tumbled 29.7% year-over-year, and are 23% below the 10-year March sales average.
Just over 2,500 homes changed hands last month, a drop of more than 1,000 compared to a year ago, although the board noted that March 2018 sales climbed 14% compared to February.
Listings of detached, attached, and apartment properties also declined by 6.6% last month compared to March 2017, marking the region’s lowest total of first-quarter new listings since 2013.
Real estate board data showed the number of sales compared to the number of active listings soared to 61.6% for condominiums in March, while the rate was 39.9% for townhomes, well above the 20% rate that has been estimated to tend to push prices upward
The composite benchmark price for all residential properties in Metro Vancouver stood at $1,084,000, a 16.1% increase over March 2017 and a 1.1% increase since February 2018.
REBGV president Phil Moore said that even with lower sales, prices will remain high as long as the selection of properties is slim.
“Last month was the quietest March for new home listings since 2009 and the total inventory, particularly in the condo and townhome segments, of homes for sale remains well below historical norms,” Moore stated in a news release, as quoted by The Canadian Press.
“High prices, new tax announcements, rising interest rates, and stricter mortgage requirements are among the factors affecting home buyer and seller activity today,” Moore added.
The benchmark price for detached properties was $1,608,500 last month, up 7.4% from March 2017 and up less than 0.5% over February 2018, as sales-to-active listings nudged the mark where the board said downward pressure on prices could occur.
With sales outstripping supply for condos and townhomes, the benchmark price for a condo was $693,500 in March, a 26.2% leap from March 2017 and a 1.6% bump compared to February 2018.
Benchmark prices for townhomes across Metro Vancouver reached $835,300 last month, a 2% increase over February and a hike of 17.7% from March 2017.
 Canadian Real Estate Wealth
by Ephraim Vecina