Housing collapse unlikely say Canada’s accountants

High levels of household debt and the sky-high home prices in some Canadian markets have led some commentators to make comparisons with the US housing crash which sparked the global financial crisis of a decade ago.

But Chartered Professional Accountants Canada says that a Canadian housing crash is unlikely because conditions are not the same as in the US in 2008.

"Beyond prices and debt levels, Canada shares far fewer similarities with the US than you might think. This becomes very apparent when you look at just one measure; credit quality," explains Francis Fong, CPA Canada's Chief Economist and author of the study: The Real Story Behind Housing and Household Debt in Canada: Is There Really a Risk?

Fong highlights that the US housing market in 2008 suffered from lax regulation and the prevalence of subprime mortgages that many homeowners could simply not afford.

Although Canada’s housing market is not immune to risks, the quality of credit – CMHC says 88% of borrowers had high credit quality in 2017 compared to just 3% low quality – makes a US-style crash unlikely.

Rise in unregulated lenders
Fong’s report does point to a “sharp rise” in the use of unregulated mortgage lenders in Canada; this has been exacerbated by the tighter lending rules introduced at the start of 2018.

However, even with this increase Fong says that the impact of any failures by these lenders would be less far-reaching that those in the US during the last bust.

"The situation in Canada is likely not a bubble in imminent danger of deflation; in fact, housing prices may reflect the true value of living space in Canada and in some markets increased household debt may be the new price for real estate," says Fong. "Our cities frequently are listed among the best places to live and work in the world and, compared to their peer cities abroad, they are not among the most expensive. We may simply be dealing with the law of supply and demand, so affordability could continue to be a challenge for the foreseeable future."

Source: https://www.canadianrealestatemagazine.ca/market-update/housing-collapse-unlikely-say-canadas-accountants-251132.aspx

The main reason Canadian homeowners refinance

The main reason that 15% of Canadian homeowners refinanced their homes was to consolidate debt.

That’s according to the CMHC Mortgage Consumer Survey which shows that debt consolidation outranked home improvements and that one-third of refinancers say that their debt, including their mortgage, is higher than expected.

That said, 69% say they are comfortable with their current level of mortgage debt and 63% said that, if they run into financial problems, they have other assets they can tap to meet their needs.

The survey also showed that 68% were satisfied with their broker and 79% were satisfied with their lender but would have liked to receive more information from their mortgage professionals about mortgage or purchase fees, types of mortgages, closing costs and interest rates.

Refinancer facts
The CMC survey revealed the following insights about refinancers:

• 24% are Generation Xers (35 – 44 years old) and 35% are baby boomers (55+ years old)
• 54% are married
• 61% are employed full time, 7% are self-employed and 17% are retired
• Refinancers, along with repeat buyers, represent the highest proportion of self-employed mortgage consumers
• 72% own a single-detached home
• 23% have a household income of $60,000 – $90,000

Source: https://www.canadianrealestatemagazine.ca/market-update/the-main-reason-canadian-homeowners-refinance-250813.aspx

FCT says new appraisals solution will streamline lending

Ontario-based FCT has launched a new real estate appraisal solution which it says will streamline the lending process and make it more efficient.

Flex Appraisal provides access to centralized data on properties, enabling appraisers to fully analyze and complete transactions within hours; bringing together valuation technology and qualified appraisers for a more accurate and speedy result.

"The conventional real estate appraisal landscape presents many challenges, including cost, decentralized data, long turnaround times and legal liability," said Michael LeBlanc, CEO of FCT. "Our solution seeks to remedy all of these concerns and provide an improved experience for Canadian lenders. With Flex Appraisals delivered in less than 4 hours, lenders can build and retain more business."

Upon initial evaluation, the solution utilizes the relevant data points available on a property to provide an expert market value estimate. The data is then presented to an appraiser in a standardized report format for analysis and Property Valuation Indemnity Insurance eligibility.

"The introduction of Flex Appraisal demonstrates FCT's commitment to creating innovative real estate solutions that modernize the Canadian real estate landscape. Appraisals that once took days or weeks to complete can now be delivered within seconds or hours. This lessens the need for potential homeowners to shop around for quicker appraisals, allowing real estate professionals to close faster, and provide greater peace of mind and an improved customer experience." added LeBlanc.

Source: https://www.canadianrealestatemagazine.ca/market-update/fct-says-new-appraisals-solution-will-streamline-lending-250647.aspx

Real Estate Mentoring Knowing how to effectively analyze an investment opportunity

Following strategies and systems that have been proven to succeed is a safe way of creating a robust real estate portfolio. Whether an investor is pursuing buy, fix and flip deals or they’re looking to become long-term landlords, there is a set of processes to learn and follow.

“If you don’t follow a proven system, you are going in blind,” says Nam Ratna of Go Get It Real Estate. “A lot of people purchase a property without even determining properly what the after repair value is by studying comparables and properly budgeting for repairs. It’s a grave mistake and something that costs investors a lot of money.”

As well as teaching investors strategies for analyzing properties, a leading mentorship program will also prepare people for all of the issues that come into play that are often forgotten, such as permits, behind the wall issues, contractor issues, and project management blunder stories.

“A lot of it boils down to the price they bought it for, which is why your purchase price is where you make all of your money,” Ratna says. “If you understand the need to purchase 60 – 70 % below the market value to make a profit, you can generally make a solid return on an investment property. Back in the day, you could cut corners, put up a bad place up for sale and people would buy it. You cannot do that anymore if you want to be in business for a long period of time.”

Learning modern marketing skills is another area that leading mentorships programs help investors. With most of the bargains only available before a property hits MLS, investors needs to be able to get in front of people before opportunities hit the market.

“Consistency with marketing is crucial. 80% of transactions happen between the fifth and twelfth contact but very low percentage of people even make the second phone call or send out the second letter,” Ratna says. “You need to be able to track and analyze what you are doing and then continually adjust.”

Source: https://www.canadianrealestatemagazine.ca/infocus/real-estate-mentoring/knowing-how-to-effectively-analyze-an-investment-opportunity-250174.aspx

Are your rental apartment buildings safe?

A new advertising campaign is urging renters in Toronto to ensure their landlords comply with RentSafeTO.

The program requires rental apartment owners to comply with building operation and maintenance standards. It was launched in 2007 and applies to all rental apartment buildings with three or more stories and 10 or more units.

Landlords that don’t comply can face orders and court charges which can result in substantial fines.

The new campaign, launched by the City of Toronto, is urging residents to speak to the RentSafeTO team on 311 if they have any issues. It reflects the top 3 complaints that the RentSafeTO officers hear about: pests, broken elevators and leaky ceilings.

"Ultimately we are striving to help ensure that tenants have a safe, secure and decent place to live, as well as protect and preserve the rental housing stock in the city. Our goal with this ad campaign is to remind residents to call the RentSafeTO team if they need support to have problems addressed," said Mark Sraga, Director of Investigation Services in Municipal Licensing and Standards. "Our message is simple: The RentSafeTO team is the next step after your landlord, and we are here to help."

Renters that live in buildings not covered by the program are urged to speak to their landlords but the City will still investigate if issues are reported.

Source: https://www.canadianrealestatemagazine.ca/market-update/are-your-rental-apartment-buildings-safe-250403.aspx

Canadians should get slighter bigger pay checks next year

Paychecks for non-unionized Canadian workers should grow slightly more in 2019 than they did this year.

A new report from the Conference Board of Canada forecasts an average 2.6% year-over-year increase in wages next year, up from 2.4% in 2018.

Those working in the food, beverage, and tobacco products industry should lead the wage increases with a 3% gain, with oil, gas, and technology industry workers not far behind at 2.9%.

However, those in the health sector will see a well-below-average rise in their paycheck at just 1.6% year-over-year.

“Over the past few years, we have seen wage increases among the lowest they have been in the past two decades. We are now seeing an improvement and compensation planners are looking to offer increases in 2019 that remain ahead of inflation,” said Allison Cowan, Director, Total Rewards, HR and Labour Relations Research, The Conference Board of Canada.

Provincial gains
Of the provinces, Saskatchewan will lead with an average wage rise of 2.9%, followed by Quebec (2.7%), BC, Alberta, and the Atlantic Provinces (2.6%), Ontario (2.5%), and Manitoba (2.3%).

The Compensation Planning Report 2019 also reveals that the professions in highest demand continue to be IT specialists, skilled trades, management, and engineering. Sales and marketing now round out the top five with the demand for accounting/finance specialists decreasing.

Source: https://www.canadianrealestatemagazine.ca/market-update/canadians-should-get-slighter-bigger-pay-checks-next-year-250084.aspx

Canadians are feeling more confident in the economy, real estate

Confidence in the economy has risen since the new trade agreement with the US and Mexico was agreed.

The weekly Bloomberg/Nanos Canadian Confidence Index hit 59.02 this week, rising from 55.20 four weeks ago and closing in on the 2018 high of 61.91 on January 5. There was an improvement in both sub-indexes. The one covering job security and personal finances was up less than 1 point but the one covering expectations for the economy and real estate prices was up by almost 5 points compared to 4 weeks ago.

“Consumer confidence is up in all regions of the country compared to four weeks ago,” said Nanos Research, Chief Data Scientist, Nik Nanos.

Confidence in the future strength of the Canadian economy stood at 12.47% before the USMCA deal while currently, it stands at 21.02.

Homeowners’ confidence gained this week compared to last week while renters confidence slipped.

Source: https://www.canadianrealestatemagazine.ca/market-update/canadians-are-feeling-more-confident-in-the-economy-real-estate-250040.aspx