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Hombuyer incentives web

Federal government releases details on homebuyer incentive programs unveiled in Budget 2019

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Federal government releases details on homebuyer incentive programs unveiled in Budget 2019

 

Hombuyer incentives web

The federal government has released the details of the first-time homebuyer incentive programs promised in March in the 2019 budget.

Beginning Sept. 2, 2019, the First-Time Home Buyer Incentive will help middle class families take their first steps towards homeownership by reducing monthly mortgage payments required for first-time homebuyers, without increasing the amount they need to save for a down payment. This program complements other measures taken in Budget 2019 to support first time homebuyers with their down payment such as increased RRSP withdrawal limit from $25,000 to $30,000 The government has allocated $1.25 billion over three years for the program. The incentive will be available to first-time homebuyers with qualified annual household incomes up to $120,000.

Budget 2019 also previewed the Shared Equity Mortgage Provider Fund, a five-year, $100-million lending fund to assist providers of shared equity mortgages to help eligible Canadians achieve affordable homeownership. This will support an alternative homeownership model targeted at first-time homebuyers, help attract new providers of shared equity mortgages and encourage additional housing supply. The fund will launch on July 31, 2019, and will be administered by CMHC.

 

ALSO READ: Budget 2019 comes up short

ALSO READ: How the Liberals missed the boat on affordable housing

“Through the National Housing Strategy, more middle-class Canadians – and people working hard to join it – will find safe, accessible and affordable homes,” says Jean-Yves Duclos, Minister of Families, Children and Social Development and Minister Responsible for CMHC.“Our proposed measures will reduce the monthly mortgage for your first home by up to $286. This will mean more money in the pockets of Canadians and will help up to an estimated 100,000 families across Canada.”

First-Time Homebuyer Incentive facts

  • Canada’s First-Time Home Buyer Incentive will help qualified first-time homebuyers purchase their first home as the incentive reduces their monthly mortgage payment, without increasing the amount that they must save for a down payment. The program will launch on Sept. 2, 2019, with the first closing on Nov. 1, 2019.
  • The incentive will allow eligible first-time homebuyers who have the minimum down payment for an insured mortgage with CMHC, Genworth or Canada Guaranty, to apply to finance a portion of their home purchase through a form of shared equity mortgage with the Government of Canada.
  • For the purchase of an existing home, an incentive amount of five per cent may be available. For the purchase of a newly constructed home, an incentive amount of five or 10 per cent may be available.
  • Doubling the incentive for purchasers of new homes encourages new housing supply.
  • No on-going repayments are required, the incentive is not interest bearing and the borrower can repay the incentive at any time without a pre-payment penalty.
  • The buyer must repay the incentive after 25 years, or if the property is sold.

 

These details confirm that the First-Time Home Buyer Incentive program will be an ownership stake in the property of qualified homebuyers, whereby the government will participate in appreciation of the property and – in the case of the property devaluing – depreciation as well.

“The key issue remains qualifying, and this program diminishes the amount that a first-time homebuyer can qualify for by about 15 to 20 per cent,” says James Laird, co-founder of Ratehub Inc. and president of CanWise Financial. “This is because the program limits the mortgage amount to four times the households’ income, whereas those not participating in the program can actually qualify for a mortgage that is 4.5 to 4.7 times their income. Household income for qualified homebuyers is also capped at $120,000.”

Those who would be attracted to the program would be Canadians who are trying to purchase at their maximum qualification, Laird adds. “However, because the program diminishes how much they can qualify for, it doesn’t serve the needs of the group it is targeted at. Canadians can get a larger loan by not participating in the program.”

 

Maximum affordability calculations

A household with $100,000 of income, putting a minimum down payment of five per cent, can currently qualify for a home valued at $479,888 with a $2,265 monthly mortgage payment.

The maximum purchase price for the same household, if they participate in the First-Time Home Buyer Incentive program, drops to $404,858 with a five-per-cent minimum down payment. The total mortgage amount would then be $400,000 (or four times their household income).

Source: Ratehub.ca 

 

Mortgage payment calculations

If the household took a five-pre-cent incentive from the government (for resales), their mortgage amount goes to $378,947, and monthly payment is now $1,810.
If the household took a 10-per-cent incentive from the government (for new homes) their mortgage amount goes to $357,894 and  monthly payment is now $1,710.

Source: Ratehub.ca 

For more details on the First-Time Home Buyer Incentive program, visit here.

 

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First-time homebuyers catch a break with slowing home price growth

First-time homebuyers catch a break with slowing home price growth

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First-time homebuyers catch a break with slowing home price growth

We have some good news and we have some bad news, prospective homebuyers in Canada.

First, the bad news: According to the latest Royal LePage House Price Survey, home price growth in many of Canada’s real estate markets is slowing. This means, if you’re looking to buy a home, its value may not grow as much as it has recently. The good news, however, is that this same slowing price growth presents a window of opportunity for first-time homebuyers to get while you can.

The price of a home in Canada increased just 2.7 per cent year-over-year to $621,575 in the first quarter of 2019, Royal LePage says, well below the long-term norm of approximately five per cent. When broken out by housing type, the median price of a two-storey home rose 2.6 per cent year-over-year to $729,553, while the median price of a bungalow rose 1.1 per cent to $513,497. Condominiums remained the fastest growing housing type, rising 5.4 per cent year-over-year to $447,260.

Looking ahead to the second quarter, Royal LePage expects national home prices to stay relatively flat throughout the 2019 spring market, with the national aggregate price of a home increasing just one per cent over the next three months. Meanwhile, the housing markets in several larger Canadian cities have shown noticeable signs of slowing, with nearly half of the regions in Royal LePage’s Quarterly Forecast anticipating quarter-over-quarter price declines.

But these are national numbers, and as we’ve written before, there really is no such thing as a Canadian housing market.

But more on this later.

Silver lining

Early in 2018, Canada experienced the most significant housing correction since the 2008 financial crisis. Markets showed signs of recovery late in the year, yet the figures for early 2019 suggest that the market has once again slowed.

We are expecting this to be a sluggish year overall in Canada’s residential real estate market, with the hangover from the 2018 market correction and weaker economic growth acting as a drag on home price appreciation, balanced by lower for longer interest rates,” says Phil Soper, president and CEO, Royal LePage. “There is a silver lining here. This slowdown gives buyers, and first-time buyers in particular, an opportunity to buy real estate in our country’s largest cities.”

In the federal budget tabled by Finance Minister Bill Morneau in March, the Canadian government announced three new or enhanced housing programs. The First-Time Home Buyer Incentive is a three-year, $1.25-billion shared equity mortgage program whereby  Canada Mortgage and Housing Corp. (CMHC) will co-invest up to five per cent of the purchase price of an existing home. Further, for the first time in a decade, there was an increase in the registered retirement savings plan withdrawal limits in the Home Buyers Plan. The increase, from $25,000 to $35,000, was the largest since the program’s inception in 1992. Finally, an additional $10 billion in financing over nine years was earmarked for the construction of purpose-built rental housing.

Real estate is local

Illustrating our point that real estate is local and not national, the GTA housing market is still showing healthy growth.

“The city of Toronto is still one of Canada’s fastest appreciating real estate markets,” says Soper. “Detached home prices are rising in line with inflation, but condominium prices are increasing at near double-digit levels as vertical living has become the primary new-build option in this growing, world-class city.”

Median home prices in Toronto rose 5.8 per cent year-over-year in the first quarter of 2019. Two-storey home prices and bungalow home prices rose 4.8 per cent and 2.5 per cent year-over-year, respectively, while condo prices rose 9.3 per cent year-over-year. The overall GTA’s aggregate home price rose 3.4 per cent over the same period.

Real estate values in Ontario’s Greater Golden Horseshoe region continued to appreciate at a brisk clip, as local economies grew and workers from the GTA looked to trade commuting time for lower house prices. Niagara-St. Catharines, Hamilton and Kitchener-Waterloo-Cambridge aggregate prices were up by 6.9 per cent, 6.3 per cent and 8.9 per cent, respectively.


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DESIGN/BUILD EXPERT: Crash Course to real estate royalty

Crash Course to real estate royalty

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Crash Course to real estate royalty

Homes in Canada are expensive. In the outlying GTA, the average price of a condo is over $600,000—a single detached home is approaching $1 million ($914,000 in October of 2018) and a staggering $1.31 million for the same product in Toronto proper. With the time and financial costs required to commute, which CMHC estimates at an average of between $400 and $800 per month—the perceived savings of living in a bedroom community and travelling into the core for work is seeming less of an ideal plan—especially when you factor in our weather and gridlock woes that are only worsening with intensification. One way to help bridge the gap, or help transition from condo living to a low-rise product, is to subsidize oneself by renting out a secondary suite within the building, or even outside of it, with the new option of laneway housing. In order to service the $311,000 to $386,000 of additional mortgage, you would hypothetically require to upgrade from a condo to a house, or to move from the suburbs into the city, you would need to add roughly $1,500 to $1,900 extra per month to cover it. No small amount, I know.

CAPTION: Before (Photography by Eurodale Development Inc.)

CAPTION: After (Photography by Andrew Snow)

CAPTION: After (Photography by Andrew Snow)

Rent on the rise

Coincidentally, the average rental amount for a one-bedroom apartment in the city of Toronto has also been climbing, and now sits at $2,200 in the core, and $1,200 in the outer lying GTA. If you look at those numbers, they start to offset each other, in some instances, creating a cash-flow-positive position. This means, for a bit of legwork, creating or finding a home with a secondary suite could be your ticket to upgrading your living situation by either transitioning from a condo to a singlefamily home, or by reducing or eliminating your commute. Does the thought of becoming a landlady or landlord sound good to you? Read on.

Before you sign the lease

Secondary suites or dwellings are permitted As-of-Right via provincial legislation in Ontario. Every municipality has their own governing rules that you want to familiarize yourself with—here are some of the keys.

A permit is required to create one, and is only allowed in a building aged five years or older. If an existing unit, Municipal Licenses & Standards, Fire and Electrical Safety Authority must have signed off for it to be legal. Minimum ceiling height 6’5″ for at least 50 per cent of the area, with at least 97 sq.ft. of space per occupant, so the space doesn’t have to be huge.

Fire egress (to escape) and firefighter access (to enter to save you) are generally 3.8 sq.ft. and 1.0m clear respectively, with some fine print nuances that are important.

Fifteen to 30 minute fire separation and a Sound Transmission Rating minimum of 50 must be achieved for safety and privacy. Interconnected smoke alarms with the main dwelling unit are also a must for optimal safety and the lower separation. Sprinklers are the best, but carry a high upfront cost.

The unit must be smaller than the main dwelling, and if there is parking, the accessory dwelling must also have parking, except in the case of a laneway house, which negates all needs for parking at the property completely, other than for a pair of bicycles.

CAPTION: Before (Photography by Eurodale Development Inc.)

CAPTION: After (Photography by Andrew Snow)

Landlord training

Once you have a compliant unit, you then need to learn the ropes when it comes to being a landlord. First, advise your insurer in writing of the tenancy. Second, read the new Ontario standardized residential lease and develop your own set of individual lease terms to insert under section 15 to protect yourself and the property, and ultimately help govern the relationship. Spell out rules around guests, smoking, parking, access to and/or maintenance of the grounds,and utility splits, so it is clear and concise. Then, when selecting your tenants: Exercise caution. It’s one thing to rent a unit to a tenant, it can be altogether different to rent a space connected to your personal home to someone. Familiarize yourself with the laws and rights of the parties, which will rule your new business relationship. The website landlordselfhelp.com has great videos and podcasts that cover many potential hurdles you could face.

Know the rules

Thinking short-term rental such as Airbnb, VRBO, and the like? Not so fast! Many municipalities are working through by-law changes to restrict them, as in Toronto where the new bylaw is still under appeal, but can have large implications on the compliance and viability of your unit as a legal, short-term option. Setting up furnished, vacation-type rentals can be costly; therefore, you want to be sure you don’t get shut down if you are not fully compliant after having spent thousands of dollars on furniture, artwork, and supplies.

The payoff

Setting up a secondary suite has huge benefits to help pay down a mortgage. It also allows you to afford a better home, or a home in a better area, increase income, and pay increased dividends at the time of a sale. It can also be a lot of work, and as with anything, what you put into it, you will get out of it. The more seriously you take this business venture, the smoother it will run, and the better the yield will be for you in the end.

When planning your own secondary suite, remember there is real value in working with a professional to design and build the space. We recommend you start your search at the relevant professional associations to explore your options, including BILD & RenoMark—the home of the professional builder and renovator, to find the true industry professionals to help guide you to success.

Happy renting my Lady, my Lord.

Brendan Charters is Partner at Toronto Design-Build Firm Eurodale Developments Inc. – 2017 OHBA Renovator of the Year.

eurodale.ca

@eurodalehomes

(416) 782-5690


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2018 web

5 things we can learn from real estate in 2018

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5 things we can learn from real estate in 2018

2018 web

With much of 2018 in the rear-view mirror, It’s been quite the year for the housing market in the GTA and elsewhere in Ontario. From sales and price fluctuations to supply concerns to rising housing costs. As 2019 approaches, here are five things we can learn from real estate in 2018.

 

1 Get used to the affordability issue

Get used to affordability challenges, especially in the GTA. This oft-cited issue is not going away any time soon, despite lobbying from the likes of the Building Industry and Land Development Association (BILD) and the Toronto Real Estate Board (TREB).

Key economic fundamentals such as population and employment growth will continue to drive housing market demand. Over the next decade, almost 700,000 first-time buyers will target the GTA or Hamilton markets, according to a report from the Ontario Real Estate Association. Meanwhile, the supply of new homes is not yet being addressed, which contributes to rising prices.

With recent interest rate hikes and other changes, sales and prices in the GTA saw some moderation in 2018. But this will be short-lived, and a return to price growth is expected.

 

2 Increased government involvement – finally

Government lobbying by BILD and TREB seems to be paying off, in the sense that the Province is increasingly aware of the issues facing the industry – and buyers.

Buyers, you may not realize it, but you should thank BILD, TREB and other associations for that.

In late November, Ontario announced it was committing to a housing action plan “to help create more housing faster, give people more choice and bring down housing costs.”

Like anything involving government, though, this process will likely be slow moving – meaning, some of the challenges, namely increasing housing supply – will take time to be resolved.

But at least the issues are on the agenda.

One real example of this improved awareness is Ontario’s recent plan to change the 40-year-old apprenticeship system in the province – a move the home building industry says is a “game changer.”

It’s a game changer because the new one-to-one ratio, a significant change from the existing 3-to-1 ratio, will enable home builders and renovators to more easily hire and train new apprentices. Besides creating more job opportunities for trades workers, the move also helps builders and renovators operate their businesses

 

3 Fixing on interest rates

The Bank of Canada raised its overnight rate three times in 2018 – January, July and October – to where it sits now, 1.75 per cent.

Canada’s major banks, as is usually the case, responded by immediately raising their own rates.

Naturally, all of this has Canadians feeling a little uneasy.

The Conference Board of Canada’s latest Index of Consumer Confidence confirms that rising interest rates and weaker wage growth have started to take their toll on confidence. With interest charges squeezing Canadian wallets and weakening wage growth offering little reprieve, consumers have become hesitant to make major purchases and are less positive about the state of their finances.

In its latest rate announcement on Dec. 5, the Bank of Canada noted that global economic expansion is slowing, and the effects of the “oil price shock” are being monitored.

“We expect that the Bank will not move the overnight rate until the effects of the declining energy sector are known,”according to interest rate comparison website ratehub.ca. “However, the Bank makes it clear that they still plan on raising the key interest rate in 2019, likely more than once.”

This moderated stance might put downward pressure on fixed rate mortgages, however, so Canadians may see better fixed rates in the coming weeks, ratehub.ca says.

 

4 Real estate is more local than ever

It’s a simple point that escapes some consumers: Real estate is local, and in 2018, it became more local than ever.

What do we mean?

Well, the Canadian Real Estate Association (CREA), Canada Mortgage and Housing Corp. (CMHC) and other major real estate bodies are mandated to oversee the national market.

So, when CREA issues a release that says Canadian home sales are down by X per cent, or when CMHC reports the national vacancy rate is down for the second consecutive year – and major media report such headlines – people tend to worry.

It’s essential to remember, however, that when you buy a home, you don’t buy the national market. You buy one house, on one street, in one neighbourhood, in one city and region.

If you live in Ontario, why do you care that Alberta’s ongoing oil industry struggles are pulling sales and prices down in markets in that province? Or that prices in Vancouver are even less affordable than in Toronto?

Forget the national headlines. Drill down into what’s happening in your market.

And why is real estate more local then ever? Because…

 

5 Lessons from Oshawa

General Motors Canada’s November announcement that it was closing its Oshawa assembly plant sent shockwaves not just through the province but all of Canada. To be sure, the loss of at least 2,500 jobs – not to mention untold positions in related suppliers – in a community of 170,000, is going to hurt. Hurt whom, and how badly, are the only questions.

This development should serve as a stark reminder to us all – of how important it is for cities to develop diversified, modern economies. Overdependence on any one ge, singular industries leads to overexposure in the case of downturns or, in GM’s case, outright shutdowns. It hurts the local economy, which impacts employment and wage growth, which impacts the housing market.

Oshawa, thankfully in recent years, has been diversifying its economy and expanding in technology, education and other industries. It will help, but the impact of the GM closure will likely play out over many months, if not years.

These developments could push housing in Oshawa into a buyers’ market, and prospective buyers could benefit from more options and softening prices.

In new homes, builders remain undeterred, encouraged by the longer-term growth and development throughout the Durham Region. Still, some may offer incentives such as discounts or inclusions to entice qualified buyers.

 

RELATED READING

GTA moving into balanced market for 2019

GTA new home market gains further momentum in October

What the GM plant closure means for Oshawa’s economy and housing market

New home buying opportunities abound in Oshawa and Durham Region

Where are interest rates headed in 2019?

 

 

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THE INDUSTRY INSIDER: Affordability is a challenge

Affordability is a challenge: The prices of condos have been rising

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Affordability is a challenge: The prices of condos have been rising

The prices of condos, which used to offer homebuyers a more affordable choice, have been rising, reducing the advantage of this option.

Every fall, BILD invites experts on economics and housing to join us for breakfast and speak to our members about what the GTA housing market will look like in the coming year. This fall was no exception and I was heartened by much of what I heard about current and future trends from Patricia Arsenault of Altus Group and Dana Senagama of the Canada Mortgage and Housing Corporation (CMHC). I also saw we have much left to do around housing supply and affordability in our region.

There’s no doubt we have a lot to look forward to in the GTA. Economic conditions are expected to be solid in the short term, with the employment growth rate projected to be 1.8 per cent in 2019, according to Arsenault, who is Altus Group’s executive vice president, data solutions. More GTA households than last year are planning renovations of over $5,000 in the next year, and the percentage of GTA households that currently rent but plan to buy a home in the next year has rebounded after softening last summer, according to Altus Group’s survey.

But these survey results only indicate what homeowners and potential new homebuyers intend to do, not what they are ultimately able to do, and Arsenault noted that households may take longer to save for that first home in the face of new mortgage hurdles and housing affordability challenges. The prices of condo apartments, which used to offer potential homebuyers a more affordable choice than single-family homes, have been rising, reducing the advantage of this option. In September, the benchmark price of new condo apartments was $789,643 and the benchmark price of new single-family homes at $1,119,533.

Despite rapid price gains in both ownership and rental markets, the supply response has been weak or inelastic, said Senagama, who is CMHC’s manager of market analysis. That means our housing supply is not rising in response to increased demand for housing and the corresponding increase in the prices of homes, as the law of supply and demand would lead us to expect. In fact, Senagama showed that Toronto is one of the markets in Canada that are not at the risk of overbuilding.

I was not surprised to hear this. BILD has consistently delivered the same message. We have said that we are not building enough housing to accommodate the 115,000 new residents who are arriving in our region every year. We should be building 50,000 homes every year, and last year we only built 38,000. A big reason for this supply shortfall is the lengthy development process that housing projects face in the GTA, slowed down by outdated regulation and red tape.

We should be updating zoning bylaws and official plans and streamlining the list of conditions for municipal approvals, so that we can build the housing our growing region needs. Only then will potential homebuyers be able to afford to make their dream of owning a home a reality.

David Wilkes is president and CEO of BILD.

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Canada Outlook NEW

Canadian housing market to moderate in 2019 but growth to continue in Ontario and Toronto

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Canadian housing market to moderate in 2019 but growth to continue in Ontario and Toronto

Canada Outlook NEW

 

By Wayne Karl

Canada’s housing market should see a moderation in both housing starts and sales, while home prices are expected to reach levels that are more in line with economic fundamentals such as income, job and population growth. This forecast for 2019 and 2020 is drawn from the 2018 Housing Market Outlook from the Canada Mortgage and Housing Corp. (CMHC).

Source: CMHC Housing Market Outlook
Source: CMHC Housing Market Outlook

Nationally, CMHC’s outlook for 2019 projects total housing starts to edge down and range between 193,700 to 204,500, with the downward trend expected for both single and multi-unit starts. MLS sales are expected to be between 478,400 and 497,400 units annually while MLS prices should lie between $501,400 and $521,600.

“Our key takeaway from this year’s outlook is moderation in Canada’s housing markets for 2019 into 2020,” says Bob Dugan, chief economist, CMHC. “Housing starts are expected to decline from the higher levels we’ve seen recently. We expect resales in 2019 and 2020 to remain below recent peaks while prices should reach levels that are more in line with economic fundamentals such as income, job and populations growth.”

Ontario recovery

After dampened market activity in 2018, existing home sales and housing starts in Ontario, particularly in single-family homes, will post a partial recovery in 2019. Buyers are expected to re-enter the market on the strength of stronger than expected job growth and in-migration, before the downward trend in starts and sales resumes in 2020.

Source: CMHC Housing Market Outlook
Source: CMHC Housing Market Outlook

GTA growth

With balanced conditions prevailing in the GTA, CMHC expects moderate sales growth and home prices growing in line with inflation. The rising costs of homeownership will result in strong rental demand, while new supply will add some upward pressure on vacancy rates. Toronto buyers should see more housing choices as builders concentrate their efforts on new highrise projects.

OTHER REGIONAL HIGHLIGHTS

BRITISH COLUMBIA
Housing starts activity and MLS sales in BC should moderate, as economic and population growth slows while MLS average prices are expected to see a flatter growth profile through 2020.

Vancouver
Over the next two years, Metro Vancouver’s resale market will see lower sales, higher inventories of homes for sale and lower home prices compared with recent market highs. Through 2018, demand and home prices softened across all market segments and local geographies.

PRAIRIES
Buyers’ market conditions in Alberta and Saskatchewan should gradually shift to a balanced market with gradual improvement in economic and demographic fundamentals. Balanced market conditions in Manitoba are expected to continue.

Calgary
Various factors will push and pull the demand for housing in Calgary in 2019 and 2020. Calgary’s economy will experience stronger growth in population and employment. This will help support demand and lift sales in 2019 and 2020. However, the average MLS price will continue to face downward pressure but is expected to stabilize in 2019 and modestly rise in 2020.

QUEBEC
Housing starts and sales of existing homes will both be sustained, however, slower economic growth and rising borrowing costs will moderate activity through 2020. Starts will continue to be dominated by the apartment market segment, while demand for resale single-detached homes will remain relatively strong.

Montreal
In 2018 and 2019, rental housing demand will increase slightly faster than supply in Montreal, which will put some downward pressure on the vacancy rate. Demand will be supported by rising net migration over the forecast horizon.

ATLANTIC CANADA
The Atlantic region will see sustained activity, notably in Nova Scotia, where existing home sales and average prices should trend higher while rental demand will drive growth in apartment construction.

RELATED READING

7 factors that will affect GTA housing in 2019 – and 5 reasons to consider buying NOW

 

 

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Mortgage Rates web

Interest rate hikes may not cost you as much as you think

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Interest rate hikes may not cost you as much as you think

Mortgage Rates web

By Wayne Karl

When the Bank of Canada announced an interest rate hike  on Oct. 24 – and within hours all of Canada’s major banks followed suit in hiking their prime lending rates – consumers largely groaned.

All of CIBC, TD Canada Trust, Scotiabank, RBC Royal Bank and BMO Bank of Montreal almost immediately issued virtually the same statement, word for word: “(Insert bank name here) announced that it has increased its prime lending rate by 25 basis points from 3.70 per cent to 3.95 per cent, effective Oct. 25, 2018.”

Yes, the numbers, too, are identical.

BoC had already raised its influential overnight rate target three times since July 2017, to 1.5 per cent from 0.75 per cent, and now this most recent hike to 1.75 per cent, while hinting that further increases are likely.

For mortgage holders, though, the increases may not cost you as much as you fear.

Fixed rates

The majority of Canadian mortgage holders are on fixed-rate products, which is why a more moderate pace of rate increases likely won’t impact the market significantly, according to Canada Mortgage and Housing Corp. (CMHC).

Nearly half of existing mortgages in Canada will come up for renewal in 2018, according to a data release from CIBC Capital Markets. However, despite having to renew their mortgage in a rising interest rate environment, a borrower with a five-year mortgage rate may be able to get a better deal on their mortgage renewal today than when they entered the housing market five years ago.

According to calculations from mortgage rate comparison website  Ratehub.ca:

The best five-year fixed rate in September 2013 was 3.29 per cent. With that rate, a borrower with a $400,000 mortgage amortized over 25 years would have had a monthly mortgage payment of $1,953 over the last five years.

If that same borrower renewed their mortgage at today’s best five-year fixed rate of 3.19 per cent, their monthly mortgage payment would decrease by $17 per month to $1,936.

“Canadians who require a new mortgage in coming months should lock in a fixed rate as soon as possible,” says James Laird, co-founder of Ratehub Inc. and president of CanWise Financial. “This includes those who are purchasing a home, and homeowners whose mortgage is coming up for renewal.

“Remember that, on average, mortgage providers will offer their existing customers a discount of 0.25 per cent off their posted rate on a renewal. However, there may be more competitive rates out there. Be sure to shop around online or use a mortgage broker to negotiate the best rate for your renewal.”

Laird says borrowers should begin shopping around 120 days in advance of their renewal date in order to negotiate a competitive mortgage rate.

A rising interest rate environment could put downward pressure on home prices, he says, but upward pressure will come from predicted economic growth, lack of housing supply, immigration and first-time homebuyers.

Variable rates

“Borrowers should expect variable rates to perfectly correlate with Bank of Canada rate increases,” Laird says. “Variable rate mortgage holders should also be prepared for several increases to their interest rate in coming months and, with general interest rates in Canada on the rise, fixed rates will rise as well. However, those currently in fixed rates have nothing to worry about until their next mortgage renewal date.”

RELATED READING

7 factors that will affect GTA housing in 2019 – and 5 reasons to consider buying NOW

 

 

 

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CMHC CMA

Toronto and Hamilton highlight evidence of overvaluation, CMHC says

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Toronto and Hamilton highlight evidence of overvaluation, CMHC says

CMHC CMA

One day after the Bank of Canada raised its overnight lending rate – and hinted at further increases in the near term – the Canadian housing market got another sobering reminder this week: the latest Housing Market Assessment (HMA) from Canada Mortgage and Housing Corp. (CMHC).

CMHA warns that Canada’s overall housing market remains highly vulnerable, though conditions of overvaluation are easing as a whole.

The quarterly report acts as an “early warning system” for the country’s housing markets – an important tool supporting financial and housing market stability.

In Ontario, Toronto and Hamilton home prices are moving closer to levels supported by housing market fundamentals such as income, mortgage rates and population. Still, these markets continue to exhibit a high degree of overall vulnerability.

Source: CMHC Housing Market Assessment
Source: CMHC Housing Market Assessment

Toronto continues to show moderate evidence of overheating and price acceleration, and strong evidence of overvaluation, CMHC says. On the plus side, there is weak evidence of overbuilding, as the number of completed and unsold units is at a historic low.

Hamilton CMHC
Source: CMHC Housing Market Assessment

In Hamilton, moderate evidence of overheating exists, due to a high sales-to-new listings ratio in eight of the last 12 quarters. Price growth has persisted over the last 12 quarters, contributing to moderate evidence of price acceleration. Overvaluation in Hamilton has decreased on average, but moderate evidence remains since house prices are considerably higher than levels supported by economic fundamentals, CMHC says.

OTHER MARKET HIGHLIGHTS

  • Evidence of overbuilding remains high in Edmonton, Calgary, Saskatoon and Regina, so those markets continue to receive a moderate degree of vulnerability in the overall assessment.
  • A low degree of overall vulnerability is sustained for Ottawa, Quebec City, Moncton, Halifax and St. John’s where house prices continue to follow the path of fundamentals.
  • Montreal’s resale market is close to overheating, creating significant upward pressure on prices as a result of a sharp tightening between supply and demand.
  • In Winnipeg, evidence of overbuilding as well as the degree of overall vulnerability changed from low to moderate, reflecting increases in the inventory of newly completed but unsold units.

 

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GTA 2019

7 factors that will affect GTA housing in 2019 – and 5 reasons to consider buying NOW

Latest News


7 factors that will affect GTA housing in 2019 – and 5 reasons to consider buying NOW

GTA 2019

By Wayne Karl

GTA homebuyers, we have some good news and some bad news.

First, the good news: You live in one of the most desirable areas and housing markets in Canada – maybe even the world.

The bad news? That affordability challenge we’re all facing.

“The affordability issue is not going away,” PricewaterhouseCoopers says plainly, in its Emerging Trends in Real Estate 2019 report.

Why? See point number one.

“Potential homebuyers will need to alter their expectations and possibly delay entry into homeownership,” Dana Senagama, manager, market analysis for Canada Mortgage and Housing Corp. (CMHC), told Homes Publishing.

Not exactly the most hopeful outlook for those – especially first-timers – looking to buy a home in and around the GTA.

But it’s not all bad. Let’s look at what’s going on in the market, and what would-be buyers can do to help their cause.

1 Return to price growth

Following the introduction of the Ontario Fair Housing Plan in April 2017, recent interest rate hikes and other changes, sales and prices in the GTA have seen some moderation.

But the slowing will be short-lived, Senagama says. Key economic fundamentals such as population and employment growth will continue to drive housing market demand, but the supply of new homes is not being addressed. The result? A return to price growth.

“CMHC is working on data gaps like supply with many industry stakeholders and partners,” she says. “Currently, we are participating in a working group with the province of Ontario to find solutions and best practices.”

PwC says the region is feeling the effects of demographic shifts. Millennials have begun to compete with Baby Boomers for real estate, and over the next decade, almost 700,000 first-time buyers will target the GTA or Hamilton markets, according to a May 2018 report from the Ontario Real Estate Association.

2 Risk of overvaluation

Senagama cautions, however, that the Toronto market is still showing signs of overvaluation.

“This happens when house price growth is surpassing the population and income growth. So, despite some of the moderation you’re seeing, we’re still calling for a high degree of vulnerability in Toronto in the foreseeable future.”

3 Inelastic supply

The GTA housing market is characterized by inelastic supply. “Supply is slow to respond to any change in price, and we’re seeing that time and time again,” she says.

Recent research from CMHC and Altus Group, in fact, shows that of the lowrise new home projects that were started in 2016 and 2017, it took 15 years for those developments to go from the initial land purchase to product hitting the market.

Supply response
Source: CMHC

 

“We have a problem, in terms of supply.”

With very limited new home supply hitting the market, once buyers get used to temporary shocks to the system brought on by policy issues and rising interest rates, they return to buying homes, which in turn drives up prices.

4 Condo demand

With lowrise home prices enjoying spectacular growth in recent years, there was a compositional shift in demand toward less expensive product – namely condos – particular among first-time buyers.

But now, with price growth even in this category – with average condo prices rising 8.4 per cent year-over-year to $552,269 in the third quarter this year – and pre-construction units in the $700,000 range…

“These are not price points for first-time buyers,” Senagama says, “so we’re still looking at very high prices across the GTA.”

5 Mortgage rates

The Bank of Canada has already raised its influential overnight rate target three times since July 2017, to 1.5 per cent from 0.75 per cent. Experts expect at least one more increase this year, possibly as early as the next rate announcement on Oct. 24.

A more moderate pace of rate increases could impact the market, but not significantly since the majority of mortgage holders are on fixed-rate mortgages, CMHC research shows.

6 Rental market

Any discussion about affordability needs to include the rental market, Senagama says. “Much like the ownership segment, supply is a huge constraint in the Toronto rental market.”

Rental

With the average vacancy rate in the GTA 1.1 per cent, and 0.7 per cent for condo rentals, rental rate increases are picking up steam. “Because we have a supply problem. And because we don’t have enough supply of the purpose-built rental units, the gap has been filled in by the condo market.”

About 33 per cent of all condos in Toronto are being rented out by investors, according to CMHC. This results in renters paying a much higher premium to rent a condo versus a purpose-built apartment – on average 50 per cent more, for a two-bedroom unit.

“We talk about affordability, and this raises so many other concerns, especially in a market that is supply-strapped,” Senagama says.

7 Catch 22

investors are buying into the condo market to rent out their units, taking advantage of the tight rental market. But first-time buyers – who typically aren’t equity-rich or wealthy – have to compete for available condo product, which again drives up prices.

 

 

5 REASONS TO BUY A HOME NOW (OR AS SOON AS YOU CAN)

1 Affordability

More supply of new homes is a big part of the solution. But despite ongoing lobbying from the housing industry, and apparent increasing awareness of new elected municipal leaders, this problem won’t be solved overnight. It will take time. Lots of it. In the meantime, as PricewaterhouseCoopers says: The affordability issue is not going away. It might even get worse before it gets better.

2 Market moderation waning

With little relief on the supply side expected, price growth will continue to be strong, even if somewhat muted compared to the double-digit increases seen over the last few years. In short, the longer buyers wait, the more it could cost you.

3 Interest rates

Experts expect at least one more increase this year, possibly as early as the next rate announcement on Oct. 24. To protect yourself against a more moderate pace of rate increases, consider a fixed-rate mortgage product.

4 Pent-up demand

Buyers believe prices are going to increase, but not to the same degree we’ve seen in recent years. This will lead to pent-up demand, which when released over the next year, will contribute to increasing buying activity and rising prices. So, if you’re able to buy before then, you could beat the rush.

5 Rental market

If you’re a Millennial planning to move out of home and into the rental market, consider this: Toronto is the most expensive Canadian rental market, with average rates for one-bedroom units at slightly more than $1,900 per month (up 2.8 per cent from August to September); $2,374 for two-bedrooms (up 7.1 per cent). Try saving up for a down payment at those rates; maybe staying at home a little longer isn’t so bad after all.

Wayne Karl is Senior Digital Editor at Homes Publishing. wayne.karl@homesmag.com 

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Mortgage

Home prices and affordability still a concern – CMHC Mortgage Consumer Survey

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Home prices and affordability still a concern – CMHC Mortgage Consumer Survey

Mortgage

Rising home prices and affordability continue to weigh on prospective homebuyers, according to Canada Mortgage Housing Corp., in its 2018 Mortgage Consumer Survey.

Indeed, for first-time buyers, price and affordability are the most important factors they consider when buying a home – more than type of neighbourhood, proximity to work and overall condition of the home.

While decreasing steadily for four consecutive surveys, more than one-third (37 per cent) of homebuyers continue to feel concern or uncertainty when buying a home. “Concerns related to affordability top the list with more than 50 per cent of concerned buyers worrying about paying too much for their home while nearly one-third worry about rising interest rates and mortgage qualification,” the survey says.

Other survey highlights include:

  • Eighty-five per cent of first-time buyers spent the most they could afford on their home purchase.  However, a majority (76 per cent) are confident that they will be able to meet their future mortgage payment obligations.
  • Sixty per cent of first-time buyers and 69 per cent of repeat buyers indicated that, if they were to run into some financial trouble, they would have sufficient assets (such as investments and other property) to supplement their needs.
  • About 50 per cent of homebuyers agreed they would feel comfortable using more technology to arrange their next mortgage transaction. However, the majority agree it is important to meet face-to-face with their mortgage professional when negotiating and finalizing their mortgage.
  • Slightly more than half (52 per cent) of homebuyers were aware of the latest mortgage qualification rules. About one in five first-time buyers indicated the rules impacted their purchase decision with most opting to decrease non-essential expenses, purchase a less expensive home or use savings to increase their down payment.
  • Consumers continue to show confidence in their homebuying and mortgage decisions, with 80 per cent believing that homeownership remains a good long-term financial investment and 66 per cent believing the value of their home will increase in the next 12 months.
  • More than one in five (22 per cent) first-time buyers were newcomers to Canada and almost 50 per cent were millennials (aged of 25 to 34), down from 60 per cent in 2017.

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