Toronto takes next step to increase affordable housing

The City of Toronto approved a signature initiative of Mayor John Tory which will increase the supply of affordable homes in the city.

The council’s decision to adopt the Housing Now initiative means it will increase the supply of new affordable rental housing within mixed-income communities by making municipally-owned properties available to non-profit and private organizations.

"Housing Now will fast track new housing developments at 11 surplus city properties to create 10,000 new residential units,” said Mayor John Tory. “I'm proud that City Council has taken swift and bold action on housing today to get shovels in the ground as quickly as possible. This is a direct and significant response to the issue Torontonians place at the top of their lists – affordable housing – and it is a common sense initiative we can take now with our city-owned land."

The 10,000 homes will include 3,700 affordable rental units which must have average rents of no more than 80% of Toronto’s average market rent.

The City says this will benefit families with incomes of between $21,000 and $52,000 per year.

The sites for development will be close to employment areas and transit hubs and developers will need to create complete communities including schools, childcare, community centers, and parks.

Financial incentives
Housing Now will provide up to $280 million in financial incentives in support of the 3,700 affordable homes including relief from development charges, building permit fees, planning application fees and parkland dedication fees as well as property taxes for the 99-year term during which the rents will remain affordable.

“Housing Now brings forward new City resources to work in partnership with the private, non-profit and co-op sectors to build new rental and affordable housing for all Torontonians. It will achieve the highest possible public benefits while providing the deepest amount of affordability without waiting for funding from other levels of governments."
said Deputy Mayor Ana Bailão, Planning and Housing Committee Chair.

A new Housing Secretariat will facilitate the planning and development of the sites and, oversee the public market offering process.

Source: https://www.canadianrealestatemagazine.ca/market-update/toronto-takes-next-step-to-increase-affordable-housing-253847.aspx

Canada’s real estate risk offset by stronger financial standards

The potential risk from high levels of mortgage borrowing has been cited in a new study on financial system risk.

The Credit Suisse Research Institute’s (CSRI) comprehensive study assesses the potential risks arising from the surge in global debt over recent years.

It says that the US has seen a deleveraging of households since the financial crisis and its toxic mortgage debt which financed overpriced real estate.

Canada, along with Australia, Sweden, and Switzerland, are highlighted for overpriced real estate and high levels of mortgage borrowing driven by low interest rates.

However, although the report says these markets are vulnerable to setbacks, “financing structures have generally become less risky in both private as well as commercial real estate, limiting systemic risks.”

General optimism
The study’s general finding is that differences in the evolution of debt are very significant, with the strongest rise in debt concentrated in a relatively small number of countries and sectors.

These include government debt in China, and risks in corporate debt markets, but overall stability is viewed optimistically due to reduced leverage in the global banking system.

Source: https://www.canadianrealestatemagazine.ca/market-update/canadas-real-estate-risk-offset-by-stronger-financial-standards-253673.aspx

MPC calls out feds negative impact on housing market

The association that represents more than 11,000 Canadian mortgage professionals says that Ottawa’s policies have harmed the housing market.

In its annual State of the Mortgage Market report, Mortgage Professionals Canada says that the federal government’s efforts to cool rising home prices and demand has created cascading consequences and pressures.

"We are seeing downward trends and/or depressions in areas like the resale market, the outlook on employment in the housing construction sector, and a continued decline in rental vacancy rates," said Paul Taylor, President and CEO of Mortgage Professionals Canada. "Federal policy changes are disqualifying potential first-time homebuyers and creating immense pressures on the rental market which is in turn driving rental prices higher. It is a spiralling problem."

Taylor says that MPC continues to support the aim of ensuring that mortgage borrowers are able to make future payments but he says changes to the existing rules should be made.

"Our report illustrates that a more reasonable stress test level and lending restriction reforms are now needed to strike a better balance for borrowers and policymakers, improving housing affordability and Canada's economy," he said.

Improper levers
The report, available in full at mortgageproscan.ca, highlights that when improper levers are used, the housing market continues to be depressed, leading to wider impacts.

"While the government has been focused on borrowers and interest rates, the reduction of activity in the housing market and extremely low rental vacancy rates will impact not only costs to first-time homebuyers and all renters, but also impact employment and the overall economy," explained Will Dunning, Chief Economist for Mortgage Professionals Canada and author of the report. "As a result of these policies, the economy will be weaker than it needs to be."

Source: https://www.canadianrealestatemagazine.ca/market-update/mpc-calls-out-feds-negative-impact-on-housing-market-253331.aspx

Canadian rents are rising by double-digits says Padmapper

It’s becoming harder for Canadian renters to make ends meet as rents in many markets surge.

Of 24 cities analyzed by Padmapper, 17 saw double-digit growth in rents year-over-year in December for one and two bedroom properties.

Month-over-month there was growth for rents in 8 cities, 7 dropped, and 9 were flat. St Catharines saw the largest rise (5.3%) while Halifax and Regina saw the largest decline (5.5%).

Padmapper’s research shows that the median rent for a 1-bedroom apartment in December was $2,260 with Vancouver at $2,130, and Burnaby at $1,570.

Vancouver to open renters office
With rents set to continue their upward journey in many markets, Vancouver has announced the first step in its plan to open a new renters office.

The city has hired its first staff member and set up a Renters Enquiry Line on 604-673-8291.

The newly-hired Renter Advocacy and Support Services Officer will work to coordinate staff to improve City services for renters; collaborate with and support external community-based renter serving organizations and work with rental advocates to support renters impacted by renovation and redevelopment.

“We understand the extreme pressure renters in Vancouver face, which is why we are taking action to add immediate supports for renters at the City,” said Sandra Singh, General Manager of Arts, Culture and Community Services. “The majority of households in Vancouver rent. A Renters Office helps us ensure these households have a place at the City to access timely information and receive support in exercising their tenancy rights under Provincial and City policies.”

Source: https://www.canadianrealestatemagazine.ca/market-update/canadian-rents-are-rising-by-doubledigits-says-padmapper-253001.aspx

Canada’s home prices recovering from "significant correction"

Canada’s home prices increased 4% year-over-year in the fourth quarter of 2018, a sign of the market recovering from “the most significant housing correction” since the financial crisis.

That’s the conclusion of a report from Royal LePage which shows that the median price of a home in Canada rose to $631,223.

For a two-storey home, the median rose 3.9% to $745,007, while the median price of a bungalow climbed 1.5% to $516,950. Condos remained the property type with the sharpest rise in prices nationwide rising 7.2% year-over-year to $447,915.

"The invisible hand that guides our complex economy hit the real estate reset button in 2018 and that is a good thing," said Phil Soper, president, and CEO, Royal LePage. "Major market home price inflation through much of the decade had led to dangerous overheating in our most populous regions. Government regulatory intervention and rising interest rates, when combined with property price overshooting, triggered the correctional cycle we find ourselves working through today."

The report shows that secondary markets gained in Q4 2018 as buyers looked to more affordable options.

Of the regions studied in the Royal LePage National House Price Composite, Windsor and Kingston saw the highest appreciation rates in Ontario, rising 14.7% and 13.8% year-over-year, respectively.

Meanwhile, regions including Ottawa, Kitchener/Waterloo/Cambridge, and London saw strong aggregate price gains of 9.3%, 9.0%, and 8.9% respectively.

How is 2019 looking?
Last week’s decision by the BoC to hold interest rates steady at 1.75% and its reduced economic growth forecast (1.7% in 2019 rather than 2.1%) has prompted some economists to reset their forecasts.

But Soper says that the underlying economics should support growth for Canada’s housing market in the year ahead.

“House prices and home sales volumes were soft and slow last year; expect modestly better results in 2019,” he said.

One bright spot, he added is there are better conditions for first-time buyers.

This is due to easing prices, growing employment, and mortgage rates that are 40% lower for a 5-year FRM than they were a decade ago (3.5% now vs. 5.9% according to the Canadian Association of Accredited Mortgage Professionals).

"Employment is high, rates are low, and home prices are essentially flat. 2019 is shaping up to be a year of rare opportunities," Soper said.

Tight supply
However, tight inventory remains a challenge for many Canadian housing markets and Soper says policymakers must not take their eyes off the ball on this.

"In down markets, construction tends to slow, exasperating our housing shortage problems. From there it is simple supply and demand; if we don't build more homes, we risk another housing crisis and a return to runaway prices in our major markets," he warned.

Source: https://www.canadianrealestatemagazine.ca/market-update/canadas-home-prices-recovering-from-significant-correction-252816.aspx

Despite concerns there could be 2 rate rises in 2019

The Bank of Canada’s decision to hold interest rates at 1.75% was not unexpected; neither is its tone on the road ahead.

Governor Stephen Poloz reiterated the central bank’s position that rates will need to rise to a more neutral range to keep inflation in check, but with some economic concerns remaining it seems likely that this will be a gradual process.

Growth for the Canadian economy was downgraded in the BoC’s report Wednesday, from the 2.1% forecast for 2019 it released in October, to 1.7%.

The three things that are key for future rate decisions are consumer spending, the oil market, and… the housing market.

“Consumption spending and housing investment have been weaker than expected as housing markets adjust to municipal and provincial measures, changes to mortgage guidelines, and higher interest rates. Household spending will be dampened further by slow growth in oil-producing provinces. The Bank will continue to monitor these adjustments,” the BoC said in a statement.

Next rate rises
There were some bright spots in the policy statement though, with non-energy investment and exports looking solid; and most of the economy operating close to capacity.

The Conference Board of Canada says that if economic growth hits expectations, there could be two interest rate hikes this year.

“Expecting the slowdown to be temporary, the Bank noted that many parts of the economy are doing well and that interest rates will need to increase to a neutral range. This supports our view that further interest rate increases are in store this year,” said Alicia Macdonald, Principal Economist, The Conference Board of Canada.

However Helmut Pastrick, chief economist at Central 1 Credit Union says that rate rises will be seen “within the next two years” but is less optimistic than the BoC on future growth.

Looking to 2020, the BoC is calling for growth to rise to 2.1% but Patrick believes it will be 1.7%, the current BoC expectation for 2019.

“The bottom line is that rate will remain low and below the neutral range into the foreseeable future,” he says.

Source: https://www.canadianrealestatemagazine.ca/market-update/despite-concerns-there-could-be-2-rate-rises-in-2019-252699.aspx

1 in 4 Canadians wants to cut their debts in 2019

With interest rates rising, many Canadians are prioritizing paying down their debts in 2019 according to a CIBC poll.

The survey found that 29% of respondents increased their debt load in 2018. This increase was due to day-to-day items (for 34%), purchasing a new vehicle (24%) and paying for a home repair or renovation (20%).

 More than 1 in 4 (26%) said that that paying down debt is their number one financial priority, followed by keeping up with bills and getting by (14%), growing wealth (12%), saving for a vacation (7%), and saving for retirement (6%).

"Debt weighs heavily on Canadians, so it's no surprise that Canadians continue to put debt concerns at the top of their list of priorities each year," says Jamie Golombek, Managing Director, CIBC Financial Planning and Advice.

Top sources of Canadians’ debt are: credit card (45%), mortgage (31%), car loan (23%), line of credit (22%), and personal loan (11%). 28% say they have no debt.

Better to pay down debt than save
sTwo-in-five Canadians worry that they're forsaking their savings by focusing too much on their debt, but the vast majority (84%) still believe that it's better to pay down debt than build savings.

"There's rarely enough money to do everything, so it's critical to make the most of the money you earn by prioritizing both sides of your balance sheet – not debt or savings, but both," adds Golombek. "It boils down to tradeoffs and balancing your priorities both now and down the road. The idea of being debt-free may help you sleep better at night now, but it may cost you more in the long run when you consider the missed savings and tax-sheltered growth." 

Source: https://www.canadianrealestatemagazine.ca/market-update/1-in-4-canadians-wants-to-cut-their-debts-in-2019-252389.aspx