Downsized condominium units are becoming increasingly popular option among Canada’s young buyers—an unavoidable development in a fiscal climate characterized by static income growth and ever-rising costs.
The Canada Mortgage and Housing Corp. recently stated that construction of single-detached homes fell in 2016, continuing a trend that has started in 2012 and accompanying increased demand that has led to overall higher costs in this housing type.
However, CMHC added that while condo starts might see a minor decline in 2017—mainly because of a smaller number of first-time buyers in the wake of tighter mortgage qualification rules—2018 will see a massive rebound in condo construction due to intensified demand for more affordable housing.
Baker Real Estate Inc. president and CEO Barbara Lawlor said that small condos are practically tailor-made for the outlook and the preferences of the millennial cohort, a generation that typically spends more time at the workplace rather than at home.
“Today's young people are used to a more minimal existence than their parents and grandparents, and new immigrants are used to compact apartment-style living,” Lawlor said, as quoted by YPNextHome.
David Wex of Urban Capital, which pioneered the “micro-condo” concept in Toronto a few years ago, noted that their offerings are a “direct response” to the fiscal pressures that have priced a significant portion of young Canadians out of the market.
“It's basically about redesigning the elements in our condos to make sure they are highly efficiently designed, in order to make small spaces work as best they can, allowing them to feel and function like larger spaces. The goal is to deliver super-efficient spaces at an affordable price.”
Source: http://www.canadianrealestatemagazine.ca/news/commentary-smallspace-living-increasingly-popular-among-the-youth-218943.aspx
Thursday, December 29, 2016
Thursday, December 15, 2016
Commentary: Fixed-rate borrowers will feel considerable pain
A larger proportion of Canadians hold fixed-rate mortgages, which will prove to be a major headache for them come renewal time as they might be asked to pay at a higher rate.
This is because the recent U.S. presidential elections have sent markets into a tailspin, which has mired the bond market (and fixed-rate products) into considerable uncertainty, CBC Newsreported.
“That boost in bond yields is a big factor in pushing up fixed mortgage rates in Canada, where big players like TD Bank and Royal Bank have each hiked some of their mortgage rates in the past few weeks,” CBC business senior writer and markets observer Peter Evans stated.
More importantly, if the U.S. Federal Reserve hikes rates while the Bank of Canada hold steady, the Canadian dollar would remain weak.
“At a minimum, the loonie is likely to remain close to its current level around 75 cents US,” TD economist Beata Caranci said.
“The last thing the Federal Reserve likely wants to do with its policy decision on Wednesday is to fan the flames of the bond and currency markets,” according to Derek Holt of Scotiabank.
In a recent study, Manulife Bank of Canada warned that over 16 per cent of Canadians will not be able to service existing debts if their current mortgage payments increase in any way (even if their main wage earners do not get laid off).
The results emphasized that more and more Canadians are finding themselves ill-equipped to handle emergencies and major financial policy shifts—not surprising in an era that has seen costs grow steadily amid stagnant incomes.
“The survey results [are] more reflective of monthly mortgage costs — which are a function of debt and interest rates,” Manulife Canada Chief Investment Strategist Philip Petursson wrote in the data release.
Source: http://www.canadianrealestatemagazine.ca/news/commentary-fixedrate-borrowers-will-feel-considerable-pain-218567.aspx
This is because the recent U.S. presidential elections have sent markets into a tailspin, which has mired the bond market (and fixed-rate products) into considerable uncertainty, CBC Newsreported.
“That boost in bond yields is a big factor in pushing up fixed mortgage rates in Canada, where big players like TD Bank and Royal Bank have each hiked some of their mortgage rates in the past few weeks,” CBC business senior writer and markets observer Peter Evans stated.
More importantly, if the U.S. Federal Reserve hikes rates while the Bank of Canada hold steady, the Canadian dollar would remain weak.
“At a minimum, the loonie is likely to remain close to its current level around 75 cents US,” TD economist Beata Caranci said.
“The last thing the Federal Reserve likely wants to do with its policy decision on Wednesday is to fan the flames of the bond and currency markets,” according to Derek Holt of Scotiabank.
In a recent study, Manulife Bank of Canada warned that over 16 per cent of Canadians will not be able to service existing debts if their current mortgage payments increase in any way (even if their main wage earners do not get laid off).
The results emphasized that more and more Canadians are finding themselves ill-equipped to handle emergencies and major financial policy shifts—not surprising in an era that has seen costs grow steadily amid stagnant incomes.
“The survey results [are] more reflective of monthly mortgage costs — which are a function of debt and interest rates,” Manulife Canada Chief Investment Strategist Philip Petursson wrote in the data release.
Source: http://www.canadianrealestatemagazine.ca/news/commentary-fixedrate-borrowers-will-feel-considerable-pain-218567.aspx
Monday, December 5, 2016
Tax implications of selling one’s home
For Canadians who are planning to release their homes to the highly competitive real estate market, they need to be aware of the tax implications of the recent regulatory changes implemented by the federal government.
In a piece for HuffPost Business Canada, contributor Caroline Battista noted that the new rules might impact Canadians who have unknowingly skipped on paying their principal residence taxes in the past, even though the changes primarily deal with non-resident investors.
“If you sold your principal residence in 2016, you now need to report this on the Schedule 3, Capital gains of the T1 Income tax and benefit return,” Battista wrote.
“The new rules require you to report the sale of a property you are designating as a principal residence on your tax return. This includes any sales as of January, 2016. So, if you sold a home earlier this year, you'll have to provide basic information including the year you bought the house, how much you sold it for and the house address information.”
Doing so has a significant effect on one’s taxes, Battista said.
“As long as you are designating your home as your principal residence for all the years you owned it, you don't have to pay tax on the profit of the sale, thanks to the principal residence exemption (PRE).”
“Just remember that you can only designate one property as your principal residence for a particular year. So if you own a home in the city and a cottage up north, only one of these can be considered your principal residence.”
And what about residents who are not able to fulfill these stipulations for one reason or another?
“If you can't designate the property as your principal residence for all the years you owned it, then you may need to pay tax on a portion of the sale. You will need to use form T2091 (IND), Designation of a property as a principal residence by an individual (other than personal trust) to determine how much tax you will have to pay.”
Source: http://www.canadianrealestatemagazine.ca/news/tax-implications-of-selling-ones-home-218025.aspx
In a piece for HuffPost Business Canada, contributor Caroline Battista noted that the new rules might impact Canadians who have unknowingly skipped on paying their principal residence taxes in the past, even though the changes primarily deal with non-resident investors.
“If you sold your principal residence in 2016, you now need to report this on the Schedule 3, Capital gains of the T1 Income tax and benefit return,” Battista wrote.
“The new rules require you to report the sale of a property you are designating as a principal residence on your tax return. This includes any sales as of January, 2016. So, if you sold a home earlier this year, you'll have to provide basic information including the year you bought the house, how much you sold it for and the house address information.”
Doing so has a significant effect on one’s taxes, Battista said.
“As long as you are designating your home as your principal residence for all the years you owned it, you don't have to pay tax on the profit of the sale, thanks to the principal residence exemption (PRE).”
“Just remember that you can only designate one property as your principal residence for a particular year. So if you own a home in the city and a cottage up north, only one of these can be considered your principal residence.”
And what about residents who are not able to fulfill these stipulations for one reason or another?
“If you can't designate the property as your principal residence for all the years you owned it, then you may need to pay tax on a portion of the sale. You will need to use form T2091 (IND), Designation of a property as a principal residence by an individual (other than personal trust) to determine how much tax you will have to pay.”
Source: http://www.canadianrealestatemagazine.ca/news/tax-implications-of-selling-ones-home-218025.aspx
Thursday, December 1, 2016
Banking regulator warns lenders not to become complacent about mortgages
Canada's banking regulator warned lenders Monday not to become complacent about the way they underwrite mortgages, reminding them that low interest rates and rising property values aren't guaranteed.
Jeremy Rudin of the Office of the Superintendent of Financial Institutions said prudent lending practices have never been more important because of the current economic environment.
``When house prices have been rising for several years and interest rates have remained at all-time lows, complacency can set in,'' the superintendent said in the text of a prepared speech for a meeting of mortgage professionals in Vancouver.
``Lenders might be led to believe that weak underwriting standards will be mitigated by ever-rising collateral values.''
Rudin's speech touched on advice the regulator issued earlier this year on the industry's practices, including verifying borrower income levels, managing higher-risk loans and ensuring adequate debt service ratios. He said the sound underwriting of mortgages relies on having reliable information about the borrower and the property that's being purchased.
He mentioned the Bank of Canada's concerns about increases in household borrowing and mortgage debt, in particular. Last summer, the central bank said the severity of the risks associated with a sharp correction in real estate prices in Vancouver and Toronto as well as from household financial stress have risen.
``A pronounced or prolonged economic downturn could well involve a meaningful housing price correction. This could translate into significant losses for lenders and insurers,'' said Rudin.
The superintendent's office supervises lenders that account for nearly 80 per cent of all Canadian mortgages.
He said too much emphasis should not be placed on collateral.
``Why? Because the value of the debt is fixed, but the value of the collateral is not,'' Rudin said.
``House prices in most Canadian markets have never been higher, supported by mortgage rates that have never been lower. In these circumstances, prudent lenders put less reliance on collateral values, not more.''
Earlier this month, the TD Bank (TSX:TD) and Royal Bank of Canada (TSX:RY) increased their fixed mortgage rates, the latest sign that Canada's big banks are hiking the costs of borrowing for homeowners.
Source: http://www.canadianrealestatemagazine.ca/news/banking-regulator-warns-lenders-not-to-become-complacent-about-mortgages-217791.aspx
Monday, November 28, 2016
Low down payments are ultimately detrimental to first-time buyers - CMHC head
The head of the Canada Mortgage and Housing Corp. (CMHC) said that contrary to the popular conception of providing greater access to residential properties, low down payments are ultimately harming first-time buyers.
“Politicians are tempted to help first-time homebuyers enter the market, but low down payments may be part of the problem, adding to affordability pressures and macro-economic vulnerabilities,” CMHC president Evan Siddall said, as quoted by BuzzBuzzNews.
In a recent speech at the Bank of England’s offices in London, Siddall argued that regulators should begin considering increases to the minimum down payment to counteract the grave risk introduced to Canada’s housing sector by the massive increases in borrowing and demand—both precipitated by record-low interest rates.
Siddall added that regulators should look into implementing income-based limits on the loan sizes that debtors could qualify for. Such a measure would complement the stricter stress test recently introduced by Finance Minister Bill Morneau (which measures a borrower’s ability to service a mortgage on a 4.64 per cent 5-year fixed rate) and last year’s raise on the minimum down payment of a home worth over $500,000 to 10 per cent.
“We expect that these macro-prudential policy changes will moderate demand for housing in Canada's housing markets, limiting price increases and making houses more affordable,” Siddall said.
Source: http://www.canadianrealestatemagazine.ca/news/low-down-payments-are-ultimately-detrimental-to-firsttime-buyers--cmhc-head-217730.aspx
“Politicians are tempted to help first-time homebuyers enter the market, but low down payments may be part of the problem, adding to affordability pressures and macro-economic vulnerabilities,” CMHC president Evan Siddall said, as quoted by BuzzBuzzNews.
In a recent speech at the Bank of England’s offices in London, Siddall argued that regulators should begin considering increases to the minimum down payment to counteract the grave risk introduced to Canada’s housing sector by the massive increases in borrowing and demand—both precipitated by record-low interest rates.
Siddall added that regulators should look into implementing income-based limits on the loan sizes that debtors could qualify for. Such a measure would complement the stricter stress test recently introduced by Finance Minister Bill Morneau (which measures a borrower’s ability to service a mortgage on a 4.64 per cent 5-year fixed rate) and last year’s raise on the minimum down payment of a home worth over $500,000 to 10 per cent.
“We expect that these macro-prudential policy changes will moderate demand for housing in Canada's housing markets, limiting price increases and making houses more affordable,” Siddall said.
Source: http://www.canadianrealestatemagazine.ca/news/low-down-payments-are-ultimately-detrimental-to-firsttime-buyers--cmhc-head-217730.aspx
Thursday, November 24, 2016
Freeze mortgage rules until impact is known says Canada Guaranty boss
Recently introduced mortgage regulations should be assessed to see how they are working before any more are introduced, the CEO of mortgage insurer Canada Guaranty says.
Speaking to the Globe and Mail, Andrew Charles said that first-time buyers are already struggling to become homeowners and are not the reason for price gains in hot markets such as Toronto and Vancouver.
“Regulatory changes over the last few years have made the first-time home buyer a very modest player in the overall Canadian housing market,” he said.
Just last week, the CEO at CMHC Evan Siddall said that there could be a rise in minimum downpayments to further curb price appreciation and financial risk but Charles said such measures would impact the wrong buyers and hurt smaller markets.
He further warned that further changes could have dire consequences for Vancouver, which has already seen activity easing and could be tipped into a sharper correction.
Source: http://www.canadianrealestatemagazine.ca/market-update/freeze-mortgage-rules-until-impact-is-known-says-canada-guaranty-boss-217467.aspx
Speaking to the Globe and Mail, Andrew Charles said that first-time buyers are already struggling to become homeowners and are not the reason for price gains in hot markets such as Toronto and Vancouver.
“Regulatory changes over the last few years have made the first-time home buyer a very modest player in the overall Canadian housing market,” he said.
Just last week, the CEO at CMHC Evan Siddall said that there could be a rise in minimum downpayments to further curb price appreciation and financial risk but Charles said such measures would impact the wrong buyers and hurt smaller markets.
He further warned that further changes could have dire consequences for Vancouver, which has already seen activity easing and could be tipped into a sharper correction.
Source: http://www.canadianrealestatemagazine.ca/market-update/freeze-mortgage-rules-until-impact-is-known-says-canada-guaranty-boss-217467.aspx
Monday, November 21, 2016
Regulators should explore boosting minimum down payment on homes: CMHC
The head of Canada's federal housing agency says regulators should explore the possibility of raising the minimum down payment required on a home as a way of easing affordability and reducing risk to the financial system.
Evan Siddall, president and CEO of Canada Mortgage and Housing Corp., says that although politicians are tempted to help first-time buyers, low down payments fuel demand and lead to higher housing costs.
Siddall says that ends up hurting the first-time buyers that the government wanted to help.
Last year, Ottawa raised the minimum down payment on the portion of a home worth over $500,000 to 10 per cent.
Siddall said in a speech at the Bank of England's offices in London that increasing the minimum down payment even further could help offset the effects of rock-bottom interest rates, which have encouraged borrowers to take on excessive mortgage debt.
He added that regulators should also explore the possibility of imposing a loan-to-income limit as Ireland, the U.K. and a few others have done.
Source: http://www.canadianrealestatemagazine.ca/news/regulators-should-explore-boosting-minimum-down-payment-on-homes-cmhc-217374.aspx
Evan Siddall, president and CEO of Canada Mortgage and Housing Corp., says that although politicians are tempted to help first-time buyers, low down payments fuel demand and lead to higher housing costs.
Siddall says that ends up hurting the first-time buyers that the government wanted to help.
Last year, Ottawa raised the minimum down payment on the portion of a home worth over $500,000 to 10 per cent.
Siddall said in a speech at the Bank of England's offices in London that increasing the minimum down payment even further could help offset the effects of rock-bottom interest rates, which have encouraged borrowers to take on excessive mortgage debt.
He added that regulators should also explore the possibility of imposing a loan-to-income limit as Ireland, the U.K. and a few others have done.
Source: http://www.canadianrealestatemagazine.ca/news/regulators-should-explore-boosting-minimum-down-payment-on-homes-cmhc-217374.aspx
Thursday, October 20, 2016
Overlooked market sees full year of monthly price gains
Greater Moncton has seen over 12 months of year-over-year price gains, with its September MLS Home Price Index coming in at +4.2% year-over-year.
This, despite the average price decreasing 7.9% year-over-year. The Moncton Real Estate Board argues the average price doesn’t provide the most accurate picture of market performance.
“While the use of average price information can be useful in establishing trends when applied over a period of time, i.e. six months or longer, the Greater Moncton Realtors du Grand Moncton cautions that an average price does not indicate the actual value of any particular property,” it said.
Another home price index, Royal LePage’s Composite saw aggregate prices in Moncton increasing 1.5% year-over-year.
Sales, meanwhile, were up 7.9% year-over-year last month.
“The year-to-date sales figure continues to reflect conditions that are now five months in the rear-view mirror, and it masks how strong activity has become, most notably September sales setting a new all-time record for that month,” Trent Wilkins, president of the Greater Moncton Realtors du Grand Moncton, said. “With activity up and supply trending lower, the market is currently in better balance than it has been in years, and that is showing up in the MLS HPI data.”
With the country’s investors traditionally focusing on markets in Alberta, British Columbia, and Ontario, it may seem like out-of-the-box thinking to consider smaller markets.
But with new mortgage rules that are expected to impact larger markets more than their smaller counterparts, it may be time for speculators to look outside the three major provinces to see what deals can be had.
Even if Atlantic Canada fails to entice you, Moncton’s recent performance is a small reminder that small markets may contain some gems.
Source: http://www.canadianrealestatemagazine.ca/news/overlooked-market-sees-full-year-of-monthly-price-gains-215737.aspx
This, despite the average price decreasing 7.9% year-over-year. The Moncton Real Estate Board argues the average price doesn’t provide the most accurate picture of market performance.
“While the use of average price information can be useful in establishing trends when applied over a period of time, i.e. six months or longer, the Greater Moncton Realtors du Grand Moncton cautions that an average price does not indicate the actual value of any particular property,” it said.
Another home price index, Royal LePage’s Composite saw aggregate prices in Moncton increasing 1.5% year-over-year.
Sales, meanwhile, were up 7.9% year-over-year last month.
“The year-to-date sales figure continues to reflect conditions that are now five months in the rear-view mirror, and it masks how strong activity has become, most notably September sales setting a new all-time record for that month,” Trent Wilkins, president of the Greater Moncton Realtors du Grand Moncton, said. “With activity up and supply trending lower, the market is currently in better balance than it has been in years, and that is showing up in the MLS HPI data.”
With the country’s investors traditionally focusing on markets in Alberta, British Columbia, and Ontario, it may seem like out-of-the-box thinking to consider smaller markets.
But with new mortgage rules that are expected to impact larger markets more than their smaller counterparts, it may be time for speculators to look outside the three major provinces to see what deals can be had.
Even if Atlantic Canada fails to entice you, Moncton’s recent performance is a small reminder that small markets may contain some gems.
Source: http://www.canadianrealestatemagazine.ca/news/overlooked-market-sees-full-year-of-monthly-price-gains-215737.aspx
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