| Monday, January 17, 2011 Changes to the Canadian Mortgage Rulesby RE/MAX Select Properties on Mon, Jan, 17, 2011 10:26 AM New federal rules have come into play as a result of government concern over rising consumer debt levels. Three new changes to Canada's mortgage rules are an attempt by Finance Minister, Jim Flaherty to create some “moderating” impact on the Canadian housing market.
These new federal rules will reduce the maximum amortization period to 30 years from 35 years for government-backed insured mortgages with loan-to-value ratios of more than 80 per cent.
Secondly, Ottawa will lower the maximum amount Canadians can borrow in refinancing their mortgages to 85 per cent from 90 per cent of the value of their homes.
Thirdly, Ottawa will withdraw government insurance backing on lines of credit secured by homes.
Though longer amortization periods reduce monthly payments, they greatly increase the amount of interest paid over the life of the mortgage and make it harder to build up equity.
The average Canadian resale home sold for $344,551 in December. Assuming a five-year mortgage at 4 per cent interest, and the minimum 5 per cent down payment of $17,227, a 35-year mortgage would have monthly payments of $1,441. Shorten the amortization period to 30 years, and the monthly payment increases to $1,555.
Mr. Flaherty said his concern is not Canada's mortgage default rate - which is less than 1 per cent. Rather his concern is those who are borrowing as much as possible.
"We're seeing people borrow to the max, and borrowing to the max at low interest rates," he said. "Most Canadians are not doing that."
He said the changes will not take effect immediately because of a requirement to give the industry 60 days notice before making policy changes of this nature.
He said past experience suggests there is no need to fear a rush on 35-year mortgages before the new rules take effect.
In addition to cutting mortgage terms, Ottawa is taking action to reduce the rapid rise in home equity lines of credit, or HELOCs. The government will do this by clamping down on the insurance that Canada Mortgage and Housing Corp. offers to the lines of credit.
Home-equity lines of credit and loans have surged in Canada, rising at almost twice the pace of mortgages over the past decade to account now for 12 per cent of overall household debt.
The third measure that will reduce how much Canadians can draw on their home equity. Last February the Finance Department announced that it would lower the maximum amount Canadians could withdraw in refinancing their mortgages to 90 per cent from 95 per cent of the value of their homes. It is now reducing that maximum to 85 per cent from 90 per cent. Thursday, August 19, 2010 Gazing into that Crystal Ballby RE/MAX Select Properties on Thu, Aug, 19, 2010 07:23 PM CMHC Housing Outlook Session: Forecast for Vancouver Housing Market
August 18, 2010
Presenter: Robin Adamache Senior Market Analyst for Vancouver Region
August 18,2010, Vancouver - Senior Market Analyst, Robin Adamache began her session by talking about the overall economy in BC. Real GDP up 2.7% in BC although what happens in the USA affects us directly in GDP, so predictions must be done with an eye on how conditions are in the States.
Lower mainland is looking forward to 29 Billion in major projects in the next year…including the New Surrey Hospital and the Evergreen Line. Job growth is at 2% vs. a decline last yr of half a percent. Good solid full time jobs are being created, Ms Adamache quipped that these were not “McJobs”.
Migration growth continues at the same pace as last year’s 58 thousand new migrants into Vancouver area. There will be approx 18 thousand new households in need of housing each year over the next few years if not longer.
The CMHC expects that there will be a gradual increase in interest rates next year. Robin made a point of reminding everyone that interest rates have been at a historic low for a sustained period of time. Any increases will be gradual, but they are expected.
Canada remains about 20 times lower than the US in mortgage defaults. In short, Vancouver has a stable economic environment. There are lots of people moving here and buying here. The question was asked, “Who is buying?” 6% of existing Vancouverites plan to buy. One third of buyers will be first time home buyers, while sixty percent are move-up buyers, and 25% are downsizing.
Despite all of this seeming good news, the reason it is not a crazy hot market is partly due to the changes in lending policies, and the rise in interest rates. The market is in the “balanced” range of 40 to 60% of the sales to listings ratio. Prices will rise next year at about the rate of inflation. There is an ample supply of listings in the West Side. Peak prices were reached earlier this year, but have dropped slightly since. The activity in house sales has shifted to the higher price ranges. 57% of the activity on the MLS has been in the 1.25 to 2.25 million dollar range. Downtown condo prices have dropped by around 3%. Coal harbour average condo price per sq ft is 852; False Creek = 805; West End = 605.
Price growth in 2010 will close out in the average range of 9 -11% due to the price growth and activity earlier in the year. Speculative activity is not an issue and is down according to statistics. Research shows that the speculators left the market in 2006 and have not been a factor since. While average mortgage carrying costs remain higher than average rents, the vacancy rate is at 1.7% in Vancouver.
Summary
Economic conditions in the Vancouver CMA will be favourable for the housing market this year and next
Major projects worth approximately 28 Billion are proposed for the Lower Mainland area
As the economy gets traction, some of these proposed projects and some of the 4 Billion worth of project currently on hold will move forward
Vancouver’s job market is also expected to pick up as the economy improves over the next eighteen months
Population growth will add to housing demand, an estimated 40,000 people are expected to move to the Vancouver region each year, adding about 18,000new households in need of housing
It will be important to keep an eye on higher mortgage rates which may dampen homeownership demand, especially for those who are more sensitive to the impact of higher rates. Wednesday, July 14, 2010 Growth without a Bubbleby RE/MAX Select Properties on Wed, Jul, 14, 2010 02:39 PM While none of us can truly predict the future, except that octopus in Germany that predicted the World Cup winners consistantly, there are certain indicators that we can look to in making forecasts for the real estate market.
Vancouver is in the unique position in Canada of having a limited supply of land available for development, while at the same time having an ever growing demand from international, and interprovincial immigration.
Post-Olympics Vancouver has seen an embarassment of riches in the tourism industry. June and July are showing that the high end hotels in Greater Vancouver are at phenominal occupancy rates. These types of high end hotels provide the city with high end tourists, many of which are willing and able to own secondary homes internationally. The exposure to all that the Vancouver life-style has to offer is a great advertising vehicle to this market. This same prospective buying group is also being enticed into the city via the new convention centre, which is bringing in industry groups from around the world for professional gatherings.
Household growth in Vancouver is predicted to be 32 thousand per year while housing starts lag behind at an estimated 14 - 16 thousand per year. This scarcity of demand will continue to drive the Vancouver market. There has been a market adjustment recently, but this only slows down the upward price pressure and doesn't remove it. Vancouver is not in a bubble. The price growth will still be a healthy 8 to 9 % year to year increase.
The cost of construction in Vancouver is higher than in other Canadian markets. This is due partly to the demands of the terrain in the Greater Vancouver area. Issues related to earthquake proofing the buildings, soil density, bedrock, and elevation all play a part in making construction in Vancouver a costly venture. Added to the mix is the hard cost of land in Vancouver. Between the physical limitations, there are also economic restrictions and political restrictions that limit the supply of usable land for development.
The city of Surrey is poised to become the largest city in the Greater Vancouver area within the decade. Richmond, and the Tri-Cities are also growing quickly as mass transportation in and out of Vancouver improves.
The biggest challenge, and one of the most important moving forward, is the supply of affordable rental units in Greater Vancouver. The influence of foreign investors is very important in the development of a sustainable rental property supply. It is estimated that 32% of Vancouver residents are renters, and that number will increase as the need to replace the Baby Boomer workers builds over the next decade.
What all of this means to the real estate market is that the Vancouver area has all of the fundamentals to continue to grow over the foreseeable future. Certainly there will be bumps in the trajectory, but the lack of supply, coupled with the growing demand will continue to push prices and development. Wednesday, June 2, 2010 Peer Perspectiveby RE/MAX Select Properties on Wed, Jun, 2, 2010 01:49 PM The power of consumer confidence is often addressed in economic forecasts by the various charter banks and government agencies. For many the impact is not appreciated or realized...but make no mistake it is a powerful mass dynamic.
In their book, SWITCH, the Heath Brothers talk about the impact of "peer perspective" rather than "peer pressure". It seems that people will respond to any given dynamic based on what others around them are doing. In research it has been observed that an individual in a room with smoke coming through the vents will respond differently than one sitting with others in a room with smoke coming through the vents. The individual will immediately leave to look for assistance, while those sitting together will wait and see what the others do. That same response is often seen in an audience watching a film, or play. People will laugh or applaud based in part on what they see their peers doing.
Recently I succumbed to the power of peer perspective when a young paperboy came to my door. I didn't have any intention of signing up for paper delivery until he casually mentioned that "all of your neighbours are chosing the pre-payment plan via cheque". Before I realized what I was doing, I had my cheque book out.
Consumer confidence has the same power as peer perspective but on a larger scale. Mass media has used their influence in steering consumers. This was displayed recently in Canada when, despite the fact that we were not directly part of the American mortgage meltdown, the housing market dropped for a number of months. It was only after restoring the confidence of the consumer that the market came back in any signicant way.
The Bank of Canada recently signalled an upward move in the prime lending rate...and the Bank of Montreal responded by lowering their 5 yr mortgage rate. Both acting in different directions in an attempt to address the consumer in Canada. Like it or not, we work as a group...and part of our actions and responses are due to peer perspective. People see, people do... Tuesday, May 4, 2010 The View from the Roller Coasterby RE/MAX Select Properties on Tue, May, 4, 2010 11:45 AM I recently watched an interesting visualization of the median house price index for Greater Vancouver over the last 40 years. The animation places the viewer in the seat of a roller coaster as it climbs and drops relative to the housing market. Apart from being very entertaining to watch, it also clearly demonstrates how quickly the environment can change in the Greater Vancouver housing market.
Following market trends is only accurate in the past tense. One cannot truly understand the direction the market will take until the change is in motion. Presently in Vancouver there seems to be a shift occurring. Reviewing the MLS statistics, and the RE/MAX numbers it appears that the listing inventory is rising faster than the housing demand. Listings are up, but sales seem to be slowing down. This is happening despite the fact that the charter banks have warned that they will be raising their interest rates by summer.
The fear that house prices have risen beyond what the market will bear may be slowing down the buying frenzy of the last few years. The price of a condo in Vancouver is reaching the unaffordability level for the average citizen. The price of properties in this wonderful city have reached a level more than ten times the average wage of a Vancouverite. Those who caught the roller coaster at the bottom of the climb have done very well over the last 7 years in this market.
Once the HST effect has flowed through the local economy, the question of affordability will come into a clearer focus. Vancouver has always been higher priced than its neigbouring provinces because of it's desirability as a location. The recent olympics have proven to be a magnet for some international tech companies as well as those well-heeled enough to own properties internationally.
The desire to own property on Canada's west coast might be slamming against the reality that those without a seat on the roller coaster could be in for a long wait to buy a ticket. Tuesday, April 27, 2010 Signs of the Timesby RE/MAX Select Properties on Tue, Apr, 27, 2010 12:25 PM Spring is the traditional busy season for real estate in Greater Vancouver, as in most of the Western World. This year is no exception. The signs are out in full force across the region. From Richmond to Coquitlam and through the West Side, the signs are popping up like the leaves are filling the trees.
There has been much speculation regarding what this "post-olympic" market will look like. For the most part it is turning into a typical Vancouver Spring Market. There are a few clouds in the horizon that need to be watched carefully...
The change in bank lending policies came into effect on April 19th. This may have an impact on Investors and first time home buyers, requiring them to have more "in-hand" cash before seeking financing. Although this may create some slowing of the market, it is not enough of a deterrent to impact heavily on demand.
The coming HST is of concern to many. It will impact on the amount of commission that a Seller will pay. Prior to the HST Sellers only had to pay the GST, as there was no provincial component in commissions earned. Now the sales tax becomes a blended entity with the service tax, it will create a 7 % increase in the amount due to the Brokerage on closing.The increase in listings thus far does not suggest that some are looking to beat the tax by selling prior to July. If the listings numbers continue to outpace seasonal norms into the late spring and early summer, then it could be argued that consumers are realizing the savings that will occur with a sale prior to July.
The rise of the Canadian dollar may help to slow down out-of-country speculative buyers, but it has been argued that these types of buyers are a small minority of the buying market.
Some concerns have been expressed regarding the potential increases in interest rates projected for the summer. The Bank of Canada may be looking to increase the rates, but with the relatively low inflation numbers being posted, the Bank may reconsider the increase. An increase in rates may do more harm than good for the Canadian economy, which seems to be moving along very well at this point.
The RE/MAX signs out in the yards across Greater Vancouver are a sign of the times. Inventory is outpacing Buying at this point...but demand doesn't seem to have wained at all.
Monday, April 5, 2010 Einsteins Last Wordsby RE/MAX Select Properties on Mon, Apr, 5, 2010 11:35 AM Albert Einstein died in 1955, having seen his concepts create a new world of understanding during his life. His passing was at a time when the cold war between the Soviets and the Americans was at a point of escalating. Much of the worry of that year, and the decades that followed were with the growing number of nuclear weapons that both super powers were amassing. The creation of the weapon that could effectively wipe out much of life on our planet was due in part to the theories that Einstein had developed.
Albert Einstein was not only a radical thinker, but he also was an amazingly creative communicator. Although his ideas are beyond the understanding of most of us, he was able to demonstrate his ideas using common speak. His description of the speed of light was done by referencing a moving train, while his explanation of gravity and time was done by the mental picture of an elevator.
The context of communication is so very critical. When looking at something as simple as market trend data in Vancouver, the numbers can be skewed to reflect the researcher's bias, or to amplify opposing opinions. Our age is quickly moving forward in the means that we communicate ideas and opinions. Today Twitter is evolving weekly to address the quick fix communication needs of social media. To some the world view has transformed into a series of games...spurred on by a generation that has grown up with video games and virtual reality. Looking for a home in Kerrisdale becomes an extention of gaming and social media in method and mindset.
The language of the landscape is changing, and as Einstein once said, "We can't solve problems by using the same thinking we used when we created them". The notion of communicating value and service is becoming increasingly difficult in a culture and marketplace where information can be accessed quickly and effectively. The answer to meeting the communication demands in the real estate marketplace is not to continue to use the same thinking of even two years ago. REALTORS(r) must find new ways to communicate service and value to the new consumer.
The context of the information is important, and although information is freely and readily available, it must be interpreted properly and effectively in order to best serve the constituents. As Albert observed, "Sometimes one pays the most for the things one gets for nothing."
The hidden costs are often greater than the sticker price. This is why having effective communication is so critical. Understanding the information is more important than having access to the information,
Nothing reflects the need to communicate properly in the right context than Albert Einstein's last words. Before he passed away, he felt the need to share some final thoughts. The only person in the room was the attending nurse. She heard the final words of the greatest thinker in history. Unfortunately, he spoke them in German, a language the nurse did not understand. Thursday, March 25, 2010 The Real Story Between CREA and the Competition Bureauby RE/MAX Select Properties on Thu, Mar, 25, 2010 06:23 PM For some inexplicable reason, the Competition Bureau has been on a witch hunt against the Canadian Real Estate Association for some time now. It may be that someone thought that this highly effective and progressive industry was an easy target. Certainly with the right spin, and with the media on side, it is easy to create an unsympathetic picture based on old charicatures of REALTORS(r).
It is unfortunate that they are attacking one of the truest free market sectors in the Canadian economy. The Real Estate Industry is one of the most competitive industries in North America. Each Brokerage competes aggressively with it's rivals because remuneration is based on performance. Even within an office, the agents compete against each other for Listings and Buyers. Despite this, the Competition Bureau is smearing CREA and it's almost 100,000 members. The media has been allowed to create untrue pictures of what the issues are surrounding the Competition Bureau's concerns.
Meanwhile, the Bureau does not acknowledge the important changes that CREA has made to address those concerns. Changes that the Bureau itself had recommended.
Wednesday, March 17, 2010 Unit Sales Down 13.3% in BC in Februaryby RE/MAX Select Properties on Wed, Mar, 17, 2010 12:10 PM The Canadian Real estate Association (CREA) posted recent statistics showing the change between January and February of this year. A total of 42,799 homes were traded last month, down 1.5% from January, as a gains in Toronto were offset by a decline in units sold in Vancouver.
The Winter Olympics were cited as a possible factor in lower sales in the province last month. Unit sales were down 13.3 %. Compared to Ontario's growth of 3.3% during the same period.
Continuing low interest rates could further prompt home resales this spring ahead of new mortgage rules set to take effect in April. The introduction of the harmonized sales tax will also add to the buying mood of the consumer this spring, as buyers seek to purchase before the tax change takes effect.
The average Canadian house price in February rose by 18.2 % from last year.
Currently the most affordable Canadian city for housing is Thunder Bay, Ontario with a February average house price of $142,280, up 23.6 % from a year ago.
The most unaffordable Canadian city for housing continues to be Vancouver, BC with a February average house price of $658,984. That is also an increase in price from a year ago of 22.4%
Most experts agree that the Canadian housing market will be moving to a more balanced market in the fall, while the spring will continue to heat up to answer demand. Friday, March 5, 2010 Hang Onto Your Seatbeats!by RE/MAX Select Properties on Fri, Mar, 5, 2010 11:42 AM The indications all point to a very active market for this fall in Vancouver. Following the excitement and energy of a successful hosting of the 2010 Olympic games, Vancouver is poised to experience a gold medal spring in terms of the real estate market in the lower mainland.
Several factors point to continued growth in development, sales activity, and price. Firstly, the market fundamental of supply and demand has never been stronger on the demand side. Vancouver is desirable as a world class city with it's amazing urban amenities. The city is in a natural setting that is second to none in the world. It is nestled between mountains and sea. The incredible landscape also provides for a mild temperature, something unusual for a Canadian city. The forests are lush, with moss and ferns under the canopy of giant spruce and cedar trees. Vancouver is a mountain metropolis surrounded by a rainforest. Following the exposure the area received during the games, inquiries from around the globe have increased, signalling continued demand for Vancouver real estate.
The price of land will continue to climb as long as there is more demand than available supply. Despite the fact that Vancouver is already categorized as "severely unaffordable" in comparision studies between average wage and average house price, the allure of living in this amazing city continues to drive the market.
In order to continue to keep up with the demand, developers seek out new locations for high density housing. Projects are fanning further and further away from the core of Greater Vancouver, ahead of mass transit infrastructure projects. This activity on the development side brings employment and opportunity, which continues to feed the demand for housing.
Sales activity remains strong as baby boomers seek to use the sale of their homes to leverage their retirement plans. Many long time Vancouverites are benefiting from the surge in prices and demand for property in Great Vancouver. This demand has created many new millionaires, who can now consider selling and retiring by downsizing and cashing in on their new found equity.
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