Homebuyers overestimate impact of foreign investors

Homeowners in Vancouver and Toronto believe that foreign investors are driving up home prices but that isn’t backed up by official figures.

A new Housing Market Insight from the CMHC shows that 68% of survey respondents in Vancouver and 48% in Toronto think foreign investors have a lot of influence on home prices in their cities.

However, official Statistics Canada data shows that total non-resident ownership is just 4.8% of homes in Vancouver and 3.4% in Toronto.

Vancouverites are more likely to believe that investors have more influence on home prices than supply restraints and demand-side factors.

Buyers are also spending more than planned in Canada’s two hottest housing markets; 48% of respondents in both cities said they had exceeded their budgets, twice as many as those who did so in Montreal.

"The survey allows us to better understand how home buying is influenced by attitudes and perceptions, giving rise to sustaining local narratives. As we can see, psychological drivers can be at odds with economic fundamental drivers," said Guillaume Neault, Senior Manager, Analytics, Canada Mortgage and Housing Corporation.

Source: https://www.canadianrealestatemagazine.ca/market-update/homebuyers-overestimate-impact-of-foreign-investors-244526.aspx

Rate hike in July? It’s all down to the data

The prospect of a rise in interest rates by the Bank of Canada in July remains but recent data releases suggest Governor Poloz may not be in a hurry to act.

An assessment by TD Economics senior economist Brian DePratto points to some disappointing data releases from last week and the potential for more uneasy reading ahead.

Wholesale trade was flat in the second quarter of 2018 and retail figures declined by more than economists had expected.

Then there was inflation data which showed no change from a year ago at 2.2% in May, again not what the market was expecting.

These figures come ahead of the latest GDP data this week and BoC governor Stephen Poloz’s speech Wednesday which will focus on monetary policy and is expected to be widely studied.

There will also be reports this week on household credit data and the Business Outlook Survey; plus of course the potential for further trade tensions to add risk to the economy.

So, will the BoC increase rates?

“Unless these risks are sufficiently reduced or Canada’s economy accelerates markedly, we expect the Bank to move its policy rate by only 50bps (i.e. two hikes) per year,” writes DePratto in his ‘Weekly Bottom Line’. “As it stands, July remains most opportune time to hike, but with inflation remaining tame it is hard to expect much urgency.

Source: https://www.canadianrealestatemagazine.ca/market-update/rate-hike-in-july-its-all-down-to-the-data-244361.aspx

Home sales set for stronger 6 months, rates to rise

The impact of the B-20 mortgage guidelines, especially the stress tests, have made a significant impact on Canada’s housing sales; but that may be about to change.

In a newly-published outlook for mortgage rates and the housing market, the chief economist of the British Columbia Real Estate Association says there’s a good chance things will start to improve soon.

“If the impact of the stress test evolves in a similar fashion to past macroprudential tightening, we expect that home sales and the wider Canadian economy will rebound in the second half of the year,” says Cameron Muir.

He adds that the outlook for the economy is 2.3% growth in GDP in 2018 and 2% in 2019 with inflation slightly above 2%.

What about mortgage rates?
The Bank of Canada is likely to continue to increase interest rates as the economy grows due to inflation at or near its target of 2%.

Mortgage rates are therefore likely to increase in the next year with the BoC expected to want to move the base rate from the current 1.25% to preferred long-run levels of 3-3.5%.

The outlook for mortgage rates is a 1-year posted rate of 3.80% by the end of 2018, rising to 4.64% a year later. The 5-year qualifying rate is forecast to reach 5.54% by the end of 2018, rising to 5.70% a year later; the 5-year discount rate’s forecast is 3.64% by the end of this year and 3.84% by the end of 2019.

Source: https://www.canadianrealestatemagazine.ca/market-update/home-sales-set-for-stronger-6-months-rates-to-rise-244207.aspx

Is Ontario in a price bust phase? Here’s what CMHC thinks

The current correction in sales in Ontario, particularly prevalent in the Greater Toronto Area, has raised concerns about the possibility of a price bust.

CMHC has looked at whether this is likely in its newly-published Housing Market Insight with an analysis of historical data to detect future price vulnerabilities in the province.

It says that a combination of overvaluation easing in Toronto, growing employment and income rates, a rise in household formations, and continued low-interest rates; make the possibility of a serious price correction quite low in Ontario.

“The current home price correction in Ontario will likely not persist as it fails to resemble the more serious downturns observed in the past. While imbalances continue to persist, they are easing and fundamentals such as employment, growth in new households and slightly higher interest rates will support home prices,” says Ted Tsiakopoulos, Ontario Regional Economist, Canada Mortgage and Housing Corporation.

The most likely scenario
The CMHC report suggests several likely scenarios for the Ontario housing market ahead.

In 2018 and 2019, relatively low-interest rates and government spending hikes will continue to support real estate in the province.

However, the type of homes being sold will play a key role in the price changes in the market. Specifically, new single-family homes will make up a lower share of sales, will restrain overall home price appreciation especially in more expensive markets such as Toronto and Hamilton.

House prices will continue higher province-wide but at a pace more in line with inflation; although higher migration and job creation; means that the increase is expected to outperform CMHC’s Fall 2017 Housing Market Outlook.

Good news for first-time buyers
With more balanced markets, first-time buyers should have a better choice of homes to consider and more time to consider purchases as competition eases.

The report suggests that bidding wars will mean less urgency for potential home buyers to act but home sellers should expect their property to remain on the market longer.

Source: https://www.canadianrealestatemagazine.ca/market-update/is-ontario-in-a-price-bust-phase-heres-what-cmhc-thinks-243969.aspx

Toronto wants homeowners to go green

Owners of single-family homes in the City of Toronto will be encouraged to make their homes more energy efficient as the city partners with community groups to spur energy retrofits.

The initiative will provide homeowners with information about the programs and incentives available.

"Our homes and buildings are the largest source of local greenhouse gas emissions in Toronto so it's important for us to act," said Mayor John Tory. "I encourage all Toronto homeowners to take advantage of the programs and incentives offered by the City of Toronto, the Province and others to make their homes more efficient, comfortable and resilient.”

Homes and buildings generate about half of the local greenhouse gas emissions in Toronto today. The City's TransformTO Climate Action Strategy has identified that 100 per cent of all existing homes need to be 40 per cent more energy efficient by 2050.

The project, called Toronto’s Greenest Neighbourhoods, will run in three neighbourhoods initially and partner with community groups to engage and support residents directly in their communities.

Source: https://www.canadianrealestatemagazine.ca/market-update/toronto-wants-homeowners-to-go-green-243797.aspx

PCs win Ontario, promise to boost household income

The Progressive Conservative Party has won the Ontario provincial election and there may be some good news ahead for household budgets.

But while the party has made plenty of promises to cut taxes, reduce regulatory burdens, and help families; there has been less talk about the housing market.

That’s because new premier Doug Ford is a believer in market forces rather than government intervention.

“I believe in the market dictating. The market, no matter whether it’s the stock market or anything, it will always take care of itself—supply and demand,” he recently told the Globe and Mail.

Mr Ford has also mooted the idea of scrapping the 15% tax on foreign ownership, raising concerns of some including BMO chief economist Doug Porter.

“How that can possibly be a top priority, especially given very compelling evidence that said tax played a huge role in deflating the Toronto housing bubble in the past year, is a mystery,” Porter said.

Taxes to fall?
While there may or may not be government action on housing affordability, the PCs have promised to cut taxes; for corporates and small businesses, which will help real estate agents and mortgage brokers as well as many other small business owners; but also for households.

Reacting to the election result, CIBC economists Royce Mendes and Katherine Judge highlight the “tangible promises” made during the campaign including minimum wage earners to receive a tax credit for the full amount of their income taxes.

Individuals in the second income tax bracket could also see their tax bills fall by 20% and there are proposals for child-care tax reforms and lower taxes on gas and hydro bills.

Source: https://www.canadianrealestatemagazine.ca/market-update/pcs-win-ontario-promise-to-boost-household-income-243612.aspx

69% Of Torontonians Say Housing Issues Will Affect Their Vote

A majority of voters in the Greater Toronto Area say they want Ontario's next government to do away with the province's land transfer tax, according to a poll.

An online Ipsos Reid survey that was backed by the Toronto Real Estate Board (TREB) and unveiled on Monday said 77 per cent of GTA residents support reducing the tax, which is imposed on buyers across the province and ranges from 0.5 to 2.5 per cent depending on the home being bought. Meanwhile, 68 per cent of the 1,200 GTA residents polled between May 18 and 22 said they want the tax completely repealed and 69 per cent said where a party stands on housing affordability will influence how they vote on election day.

The Ipsos poll comes as the GTA grapples with increasing demand for affordable housing in the wake of last year's frenzied pace that caused home prices to soar. On Monday, TREB numbers for May were released, revealing that last year's moves by Ontario's Liberal government to tax vacant properties and non-residents purchasing homes within the province have cooled the market, but many are still hesitating to wade into it.

While all of the parties have rolled out platforms with measures aimed at addressing housing problems, none have directly taken aim at the provincial land transfer tax, which TREB has long lobbied against. Instead, the NDP has promised a crackdown on housing speculators and an overhaul of the government's zoning regulations, the Conservatives say they will increase the supply of affordable housing and the Liberals are vowing to work with developers, municipalities and other stakeholders to enable small-scale residential intensification that would allow homeowners to build multi-unit projects on their land.

In their last monthly housing numbers report before the election, TREB said GTA home sales in May were down by 22.2 per cent compared with the same month last year.

While the number of sales was down year-over-year to 7,834 units, the annual rate of decline was less than reported in February, March and April, when sales were down by more than 30 per cent, the board added.

It found the average selling price for all home types combined fell 6.6 per cent to $805,320, new listings declined by 26 per cent year-over-year to 19,002 and the seasonally-adjusted month-over-month sales slipped 0.4 per cent lower than the previous month.

BMO Capital Markets economist Benjamin Reitzes took TREB's release to be "not quite a positive report'' because the MLS Home Price Index was down 5.4 per cent year-over-year, a larger fall than the prior month's 5.2 per cent drop.

However, Reitzes said stabilizing the market after last year — what some consider a market peak, before the Ontario government brought in a package of measures to cool the market — is key, especially if the Bank of Canada is going to raise its benchmark interest rate again in July.

The Toronto board's May numbers brought a few bright spots for sellers. On a seasonally adjusted basis, the average selling price was up 1.1 per cent compared to the previous month of April.

Jason Mercer, TREB's director of market analysis, said market conditions are becoming tighter in the GTA and this will provide support for home prices through the second half of 2018 and into 2019.

"There are emerging indicators pointing toward increased competition between buyers, which generally leads to stronger price growth,'' Mercer said in a statement.

"In the City of Toronto, for example, average selling prices were at or above average listing prices for all major home types in May.''

Metro Vancouver is seeing similar pricing conditions. The region's real estate board said Monday that its benchmark price for condos was up 20 per cent to $701,700 when compared with last May and townhomes jumped 16 per cent to $859,500 over the same period.

The board also said the composite benchmark price for all residential properties in Metro Vancouver was $1,094,000, an 11.5 per cent increase over May 2017, but that home sales plunged by 35.1 per cent from the same month last year, putting the measure 19.3 per cent below the 10-year average for the month.

However, the 2,833 homes that changed hands across the region that month still represent a 10 per cent increase in transactions since April.

The polling industry's professional body, the Marketing Research and Intelligence Association, says online surveys cannot be assigned a margin of error because they do not randomly sample the population.

Source: https://www.huffingtonpost.ca/2018/06/04/toronto-home-sales-may-treb_a_23450397/?utm_hp_ref=ca-real-estate

OREA, TREB join forces against proposed "tax grab"

A new municipal land transfer tax would add around $15,000 to the cost of an average priced home in the York region of Ontario – and that is exactly what politicians want according to real estate bodies.

The Ontario Real Estate Association (OREA) and Toronto Real Estate Board (TREB) say that officials are demanding the new powers from the provincial government, which could set a dangerous precedent for housing affordability.

The two bodies have joined forces to urge MPP candidates to vote against another tax on the region’s homebuyers, which they say does nothing to address the supply issues.

“It’s no secret that municipalities across Ontario have been asking the provincial government for new taxing powers,” said Tim Syrianos, President of TREB. “York Region home buyers are already charged a provincial land transfer tax, so by adding a municipal tax, the Region will double the tax burden on local families. If local councillors get their way, home buyers will be forced to pay $15,000 more in land transfer taxes on the average priced home in York Region.”

The City of Toronto implemented the MLTT in 2008 and in 2015 Realtors and residents urged policymakers not to expand the tax to other parts of the province.

“We’ve been down this road before, with municipalities asking for new taxing powers and the provincial government considering their requests,” said David Reid, President of OREA. “Each time, Realtors have stood up for young families and opposed a tax. Home buyers need relief, not new taxes.”

Source: https://www.canadianrealestatemagazine.ca/market-update/orea-treb-join-forces-against-proposed-tax-grab-243311.aspx