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
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