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Coping with Coronavirus

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Coping with Coronavirus

As we roll into April, there’s one story dominating all the headlines – Coronavirus. At the time of writing this, construction workers and tradespeople have been deemed “essential” employees so most of us are still on the job.

A number of industry associations have put out valuable information on how to operate a construction business during these unprecedented times. The CHBA, for example, posted a list of tips on their website on how to maintain social distancing on the jobsite, including staggering shifts and lunch breaks so there are less people congregating together, and ensuring that everyone uses gloves when they can and is not sharing tools.

Others are taking a proactive approach to customer service. Several plumbing service companies have posted free online tutorials to help their customers tackle minor repairs on their own. If you don’t already do it, provide your clients with routine maintenance schedules for DIYable tasks they can tackle in their homes, such as changing furnace filters, cleaning the eaves, and testing their smoke and CO detectors. People laid off or working from home are going to need things to do, and will appreciate any advice that you can provide.

As we collectively work out how to deal with this unprecedented healthcare crisis, there’s also the looming economic impact of millions of Canadians being laid off. Unfortunately, the slowdown will mean many small businesses will need to start shutting down. Don’t wait until the last minute to let your employees know. If your orders and supply chains are starting to dry up, let people know in advance. And, if you do need to lay people off, help them apply for the government assistance available to them.

When we do get back to work, expect to see demand surge for hands-free and voice-activated products, and non-porous materials that inhibit the transfer of bacteria. Technology will also play a huge part. Virtual showrooms will be used to show off everything from the latest home products to selling actual homes.

Obviously, with a print publication it’s hard to stay on top of the latest developments. Please consider signing up for our monthly e-newsletter and visit our website for the latest news and links to valuable information.

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Detached home sales and prices roar back to life in first half of 2019 – ReMax

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Detached home sales and prices roar back to life in first half of 2019 – ReMax

The bounce-back in single-detached home sales is contributing to an uptick in average price, with more than 50 per cent of neighbourhoods in the Greater Toronto Area reporting an increase in detached housing values the first half of 2019, according to a new report from Re/Max of Ontario-Atlantic Canada.

Re/Max examined trends and developments in 65 Toronto Real Estate Board (TREB) districts, finding that detached home sales were up in almost 88 per cent of markets, while prices were up in 51 per cent of markets between January and June 2019, compared to the same period one year ago. The 905 area saw the greatest increase in homebuying activity, with all 30 areas reporting rising detached home sales, and 43 per cent of 905 communities experiencing price appreciation. Meanwhile, in the 416, just 20 of the 35 districts experienced an uptick in sales, while detached home prices increased in 57 per cent of neighbourhoods.

“Detached housing is finally back on track, with year-to-date sales almost 17 per cent ahead of last year’s levels, signaling a return to more normal levels of home-buying activity,” says Christopher Alexander, executive vice-president and regional director, ReMax of Ontario-Atlantic Canada. “Market share is also climbing, with detached homes now representing 45.7 per cent of all home sales in the Greater Toronto Area, up from 43.1 per cent one year ago.”

While improving affordability is the catalyst in the uptick in detached home sales, Re/Max says location is equally important, as first-time and trade-up buyers move to secure prime real estate before values are on the move again.

Top 5 detached home markets in 416 by price growth, first half of 2019

Neighbourhoods

Average price

% increase

1. (E01)
North Riverdale
South Riverdale
Blake-Jones
Greenwood-Coxwell

$1.38M

15.2

2. (C01)
Trinity-Bellwoods
Palmerston-Little Italy
Niagara
Little Portugal
Kensington-Chinatown
Dufferin Grove

$1.95M

12.8

3. (C11)
Leaside
Thorncliffe Park

$2.19M

11.2

4. (E04)
Dorset Park
Wexford-Maryvale
Clairlea-Birchmount
Ionview
Kennedy Park

$836,585

7.8

5. (W02)
Junction
High Park North
Runnymede-Bloor,
West Village
Lambton-Baby Point
Dovercourt-Wallace
Emerson-Junction

$1.41M

7.1

Source: Re/Max of Ontario-Atlantic Canada; E01, C01, C11, E04, W02
are TREB market districts (trebhome.com)

Top 5 detached home markets in 905 by price growth first half of 2019

Neighbourhoods Average price % increase
1. Uxbridge
2. Milton
3. Halton Hills
4. Brampton
5. Ajax
$895,490
$903,359
$842,864
$835,435
$728,923
6
4.3
3.6
2.8
2.5

Source: Re/Max of Ontario-Atlantic Canada

Despite strong demand in these hot-pocket areas, approximately 45 per cent of districts within the 416 are in a technical buyers’ market, with a good selection of homes listed for sale. ReMax says select neighbourhoods north of Bloor offered greater flexibility in terms of negotiation – this is especially true when average price topped $2 million – while market conditions were tightest south of Bloor Street.

“Heated demand clearly exists for single-detached housing south of Bloor Street, but there are pockets throughout the 416 that are scorching hot,” says Alexander. “The Oakwood-Vaughan area in C03, where homes can still be had for just over the $1-million price point, is one of those neighbourhoods, while C10, comprised of Sherwood Park, Mount Pleasant West, Mount Pleasant East, is another. The Junction Area, High Park North, and Runnymede-Bloor West Village (W02) in the west end, and Leslieville (E01) and the Beach (E02) in the east, are also highly sought-after, with proximity to transportation and vibrant shopping avenues the common denominators drawing younger buyers.”

Top performers in terms of unit sales were markets offering single-detached homes at less than the $1-million price point. Scarborough’s L’Amoreaux, Tam O’Shanter-Sullivan, Steeles neighbourhood (E05) saw the most significant upswing in terms of percentage increase in sales, with the number of homes sold up 76.2 per cent to 148 units.

“With recovery well underway in the detached housing segment, the residential real estate market is starting to fire on all cylinders,” says Alexander. “The possibility of more relaxed mortgage rules down the road – in conjunction with today’s low interest rate environment – may serve to spark up the GTA housing market yet again.”

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How the Liberals missed the boat on affordable housing

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How the Liberals missed the boat on affordable housing

Now that we’ve had a couple months to digest the most recent federal budget, we can now safely say Ottawa missed the boat on affordable housing.

Indeed, the Liberals had a golden opportunity to make some simple tweaks to the mortgage system in Canada that would have allowed more first-time buyers to get into the housing market and assist second-time buyers to move up, without major changes to the policies implemented over the last two years to cool the market. Industry groups across the country including the Canadian Home Builders’ Association, Ontario Home Builders’ Association, various real estate associations, boards of trade, lenders and housing advocates, have all beseeched the government to take some steps to ease up on the various stress tests and mortgage restrictions. Most of these requests were embodied in a list of recommendations from the Chair of the Federal Liberal Housing Affordability Caucus, Francesco Sorbara. Sadly, only one of the many recommendations was implemented.

Little impact

Instead, the Liberals decided to use taxpayer money to the tune of up to $1.25 billion to assist first-time buyers to purchase homes by advancing up to 10 per cent of the purchase price of new homes and a five per cent of the price of resale homes in conjunction with a CMHC-insured policy. Incomes were capped at $120,000 annually, and the loan portion cannot exceed four times annual income. Effectively, the program by its very capping of the loan portion, excluded major centres such as Vancouver and Toronto, which have suffered significant declines in both sales and prices over two years. Much criticism has already been levelled against the proposed program as having little impact on increasing housing affordability.

There is no question that these proposals will assist first-time buyers of homes in less expensive areas with the biggest beneficiaries being places like Montreal and western provinces. However, the government will have t0 advance significant sums of taxpayer monies by way of repayable loans plus significant cost to administer the program.

This is not to say there isn’t some merit to this program. However, there are many private, non-profit institutions such as Trillium and Options for Homes which offer similar second mortgage loans and share in the equity upside with purchasers. The government has not totally revealed how the sharing will work, but has indicated that there would be no interest costs during the term of the loan.

On the other hand, the recommendations of the Liberal Housing Affordability Caucus would not cost the government a single dime, and would have allowed a broader section of the marketplace, including those in Vancouver and Toronto, to gain access to housing markets which have now been closed to them because of the new and tightened mortgage rules.

Some of these proposals included:

  1.  Exempting mortgage renewals from the stress test. Currently, institutions, whether those refinancing existing loans with the same borrower or new institutions, are
    applying the new stress test to existing loans. This can put a homeowner in danger of having to pay down his loan in order to qualify even though he has been fully complied with all of the obligations;
  2. Extending the amortization period for blended payment mortgages from 25 years to 30 years. Although this seems like a small adjustment, it would lower overall carrying costs for buyers and materially expand the number of eligible purchasers for financing. Again, 30-year amortization is fairly standard in most countries and in Canada it was raised to 35 years at the height of the financial crisis in 2009;
  3. Modify the current stress test. Requiring purchasers to be able to carry a mortgage which is two per cent above the quoted rate or meet the posted five-year rate (which is usually higher than the real five-year rate) has done enough damage, particularly in the Toronto and Vancouver housing markets, but more so, has impacted on other markets that were not overheated. Some minor adjustments would have made a big difference. The suggestion was to have a declining rate stress test such that the percentage over the proposed mortgage rate (now two per cent) would decline the longer the term of the mortgage that was being obtained. For five- or seven-year mortgages, purchasers are locked in and protected from having to face significant interest rate increases for many years and did not need such a stringent stress test to protect them from increased rates.
  4. Increase the Home Buyers’ Plan which allows purchasers to borrow from their RRSPs. This proposal was in fact partially implemented with the limit of $25,000 being increased to $35,000; and
  5. Increase the GST/HST rebate thresholds of $400,000 to reflect today’s current marketplaces, as proposed by the Canadian Home Builders’ Association. When GST came out in 1991, the level of $400,000 was supposed to be adjusted periodically for inflation. There has not been one adjustment since 1991 and there is no recognition of variations between regions of average prices. Again, this recommendation was ignored.

Markets on ice

In reality, the Liberals were looking for flashy, vote getting, news catching type of proposals that would show that the government is putting its money behind first-time buyers. Making adjustments to the stress test and amortization period really isn’t sexy, but would have had a far greater beneficial impact with no cost to the government. The Liberals have responded to this criticism that the prior changes in the stress test are doing their job in cooling the markets and should not be changed at this time. In fact, many markets have not only cooled, but have been put on ice – such as the lowrise market in GTA for instance.

Leor Margulies is a partner at Robins Appleby LLP and a member of the board of directors of BILD.

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