Latest census results revealed that 30-year-old Canadians are less likely to own a home today than their baby boomer parents did at the same age, mirroring a modest but unmistakable decline in the national home ownership rate.
At age 30, 50.2% of millennials owned their homes, compared to 55% of baby boomers at the same age. Young adults today are more likely to live in apartments than their 1981 counterparts, are less likely to live in single-detached homes, and — as Statistics Canada found over the summer — more likely than ever before to still be living at home.
The figures should change the way Canada thinks about its real estate sector, according to Graham Haines, research and policy manager at the Ryerson City Building Institute in Toronto. Policy-makers have focused almost exclusively on policies to promote home ownership over the last 20-plus years, he said, pointing to tax policy and incentives.
“We have to start thinking about — if rent is going to start becoming a more important part of our real estate sector once again — how we make sure we’re building the right type of rental, rental where we need it and rental that’s affordable for the people who are going to be using it,” Haines said, as quoted by The Canadian Press.
In 2016, more than 9.5 million of the 14.1 million households captured in the census owned their homes, an ownership rate of 67.8% — down from 69% in 2011 after 20 steady years of baby boomers flooding the real estate market.
Since 2011, the census shows, the value of homes has steadily increased to a national average of $443,058, up from $345,182 in 2016 dollars. Vancouver had the highest prices in the country with the average home valued at over $1 million. Toronto was at $734,924 and Calgary at $527,216. Montreal came in at $366,974.
Overall, affordability remains an issue for almost a quarter of Canadian households, a figure that hasn’t changed much in a decade, with the pressure most acute in the hot housing markets of Toronto and Vancouver.
The federal Liberal government has promised to address affordability issues as part of an $11.2 billion, 11-year housing plan to be released in the coming weeks. It’s expected to have a heavy focus on building affordable units, with a new portable housing benefit that would be tied to individuals, rather than properties.
Source: http://www.canadianrealestatemagazine.ca/market-report/ab/home-ownership-seeing-gradual-decline-among-canadians--census-233110.aspx
Monday, October 30, 2017
Thursday, October 26, 2017
Why longer amortization may start trending
When the new tighter restrictions on mortgage lending come into effect in just over two months they could spark a new trend – longer amortizations.
With OSFI’s stress test requiring borrowers of uninsured mortgages to prove they can afford payments 2% above their contract rate, fewer people will qualify.
However, switching to a longer amortization period could help offset the restriction says Ratespy.com founder Rob McLister. He told the Financial Post that the lower payments from a 35-year period compared to 25 years could enable qualification but noted that interest rates would be higher.
OSFI responded that, while it has not included amortization as part of the updated B-20 Guideline, it would be “monitoring” regulated lenders as the new rules are implemented in January.
Mortgage lenders may choose not to try to circumvent the tighter rules fearing that the regulator may intensify scrutiny.
Meanwhile, comments from the chief executive of the Canadian Credit Union Association says the rule changes will hamper competition in the mortgage market.
Martha Durdin told the Globe and Mail that the stress test will make it harder for existing homeowners to shop around for a new deal as they may not qualify for a new mortgage.
Source: http://www.canadianrealestatemagazine.ca/market-update/why-longer-amortization-may-start-trending-232822.aspx
With OSFI’s stress test requiring borrowers of uninsured mortgages to prove they can afford payments 2% above their contract rate, fewer people will qualify.
However, switching to a longer amortization period could help offset the restriction says Ratespy.com founder Rob McLister. He told the Financial Post that the lower payments from a 35-year period compared to 25 years could enable qualification but noted that interest rates would be higher.
OSFI responded that, while it has not included amortization as part of the updated B-20 Guideline, it would be “monitoring” regulated lenders as the new rules are implemented in January.
Mortgage lenders may choose not to try to circumvent the tighter rules fearing that the regulator may intensify scrutiny.
Meanwhile, comments from the chief executive of the Canadian Credit Union Association says the rule changes will hamper competition in the mortgage market.
Martha Durdin told the Globe and Mail that the stress test will make it harder for existing homeowners to shop around for a new deal as they may not qualify for a new mortgage.
Source: http://www.canadianrealestatemagazine.ca/market-update/why-longer-amortization-may-start-trending-232822.aspx
Thursday, August 31, 2017
National Bank reports 8% growth in net income
Another of the big banks has seen third quarter profits rise, confirming the trend across the group.
National Bank of Canada says its net income was up 8% year-over-year to $518 million, a $40 million rise. The first 9 months of 2017 saw profits rise to $1.499 billion from $949 million in the same period of 2016.
“For the third quarter of 2017, the Bank posted excellent results owing to solid performance across all its business segments,” said Louis Vachon, President and Chief Executive Officer of National Bank. “Sustained revenue growth and cost control also contributed to this performance.”
Residential mortgages contributed to the sustained growth for National’s personal lending business which was up 5% year-over-year. Overall the personal and commercial banking division gained 21% to $240 million.
Source: http://www.canadianrealestatemagazine.ca/market-update/national-bank-reports-8-growth-in-net-income-230185.aspx
National Bank of Canada says its net income was up 8% year-over-year to $518 million, a $40 million rise. The first 9 months of 2017 saw profits rise to $1.499 billion from $949 million in the same period of 2016.
“For the third quarter of 2017, the Bank posted excellent results owing to solid performance across all its business segments,” said Louis Vachon, President and Chief Executive Officer of National Bank. “Sustained revenue growth and cost control also contributed to this performance.”
Residential mortgages contributed to the sustained growth for National’s personal lending business which was up 5% year-over-year. Overall the personal and commercial banking division gained 21% to $240 million.
Source: http://www.canadianrealestatemagazine.ca/market-update/national-bank-reports-8-growth-in-net-income-230185.aspx
Monday, August 28, 2017
Housing bubble has already burst says BMO’s Porter
Not everyone agrees that Toronto has been in a housing bubble but BMO’s chief economist is in no doubt.
“By any traditional definition, we were in the grips of a full-on bubble earlier this year,” Doug Porter told CBC’s Metro Morning on Friday. He backed that up with stats on house prices rising 40% in around 15 months, a situation last seen in the late 1980s which was widely accepted as a bubble.
Porter continued that the Ontario government’s measures to cool the market helped burst the bubble.
Although prices remain elevated in the GTA, there has been a 13% drop in four months and Porter expects softening to continue with a “full-blown buyer’s market ahead.”
He believes that further interest rate rises will continue to affect affordability even as prices ease, with first-time buyers still facing challenges to homeownership.
Source: http://www.canadianrealestatemagazine.ca/market-update/housing-bubble-has-already-burst-says-bmos-porter-230002.aspx
“By any traditional definition, we were in the grips of a full-on bubble earlier this year,” Doug Porter told CBC’s Metro Morning on Friday. He backed that up with stats on house prices rising 40% in around 15 months, a situation last seen in the late 1980s which was widely accepted as a bubble.
Porter continued that the Ontario government’s measures to cool the market helped burst the bubble.
Although prices remain elevated in the GTA, there has been a 13% drop in four months and Porter expects softening to continue with a “full-blown buyer’s market ahead.”
He believes that further interest rate rises will continue to affect affordability even as prices ease, with first-time buyers still facing challenges to homeownership.
Source: http://www.canadianrealestatemagazine.ca/market-update/housing-bubble-has-already-burst-says-bmos-porter-230002.aspx
Thursday, August 24, 2017
How the rising loonie affects real estate
As a mortgage broker I have been asked very frequently in the last couple of months how I think the rising loonie (Canadian dollar) that has reached 80 cents vis-a-vis the US dollar (USD) will affect the real estate market in Toronto.
Well, the 10 percent rise in the loonie since May technically means that the economy is robust and that some of that positivity should rub off on real estate and send prices rising if one was only looking at locals buying for personal use.
However, since April property sales and prices in the Toronto region have fallen, mainly due to the 16 point plan implemented by the Ontario government in April to cool sales and prices by clamping down on international buyers and local speculators.
The rise of the loonie, even if it reaches 83.33 cents to the USD in the short term as predicted by the topnotch Paris based firm Day by Day SAS , will have a limited uplifting effect on the real estate market in Toronto.
Already prices in Toronto have toppled by 15% and more from their highs in April of this year. This has not escaped the foreign buyers’ attentions who have to pay a 15% tax if they wish to buy property in the Greater Golden Horseshoe(GGH) area- this means Toronto and the surrounding southern Ontario region. However, most of these buyers usually have their money in USD accounts, so they will enter the market only when prices drop another 10% so as to bring the Toronto prices in line with what they were in April in USD terms. As this happens negative sentiment will lead the downward spiral to overshoot and prices might fall even further than expected.
Also the Bank of Canada recently raised the prime rate prompting higher variable mortgage rates. Besides this, the Canada 5 year bond yield has gone up by a meteoric 80% rise since May! 5 year fixed mortgages, which are dependent on this 5 year rate have shot up quite substantially as well to the 3% region or higher from 2.5%. This also will affect the property prices and should send them reeling as new buyers grapple with the notion of higher monthly payments.
So this potent combination of the 16 point plan of April, higher interest rates and yields has in the short term tamed the Toronto real estate market that had seen a runaway increase which by March of this year had reached over 37% from last year. Though prices have fallen since, the year on year rise is still in the double digits. The rise of the loonie is overshadowed by the aforementioned developments.
For the time being the sellers’ market in Toronto has turned into a buyers’ market with homes selling at more or less the listing prices without any bidding wars, which is a good sign for local buyers, but they need more respite. Prices need to go down a bit more.
But will this last? The long term outlook – 9 months or more- is that the loonie will ease which will jack up prices as foreign buyers and local speculators jump in. However should interest rates rise, which seems to be the scenario currently, the lower loonie will have to vie with higher interest rates which will act as a headwind and stabilize prices followed by single digit increases rather than the double digit ones of the past two years.
In short, for the time being, the rising (or declining) loonie cannot contend with government regulation nor interest rates and yields. Its power to decide the direction of the real estate market is very limited at this point.
Source: http://www.canadianrealestatemagazine.ca/news/how-the-rising-loonie-affects-real-estate-228975.aspx
Well, the 10 percent rise in the loonie since May technically means that the economy is robust and that some of that positivity should rub off on real estate and send prices rising if one was only looking at locals buying for personal use.
However, since April property sales and prices in the Toronto region have fallen, mainly due to the 16 point plan implemented by the Ontario government in April to cool sales and prices by clamping down on international buyers and local speculators.
The rise of the loonie, even if it reaches 83.33 cents to the USD in the short term as predicted by the topnotch Paris based firm Day by Day SAS , will have a limited uplifting effect on the real estate market in Toronto.
Already prices in Toronto have toppled by 15% and more from their highs in April of this year. This has not escaped the foreign buyers’ attentions who have to pay a 15% tax if they wish to buy property in the Greater Golden Horseshoe(GGH) area- this means Toronto and the surrounding southern Ontario region. However, most of these buyers usually have their money in USD accounts, so they will enter the market only when prices drop another 10% so as to bring the Toronto prices in line with what they were in April in USD terms. As this happens negative sentiment will lead the downward spiral to overshoot and prices might fall even further than expected.
Also the Bank of Canada recently raised the prime rate prompting higher variable mortgage rates. Besides this, the Canada 5 year bond yield has gone up by a meteoric 80% rise since May! 5 year fixed mortgages, which are dependent on this 5 year rate have shot up quite substantially as well to the 3% region or higher from 2.5%. This also will affect the property prices and should send them reeling as new buyers grapple with the notion of higher monthly payments.
So this potent combination of the 16 point plan of April, higher interest rates and yields has in the short term tamed the Toronto real estate market that had seen a runaway increase which by March of this year had reached over 37% from last year. Though prices have fallen since, the year on year rise is still in the double digits. The rise of the loonie is overshadowed by the aforementioned developments.
For the time being the sellers’ market in Toronto has turned into a buyers’ market with homes selling at more or less the listing prices without any bidding wars, which is a good sign for local buyers, but they need more respite. Prices need to go down a bit more.
But will this last? The long term outlook – 9 months or more- is that the loonie will ease which will jack up prices as foreign buyers and local speculators jump in. However should interest rates rise, which seems to be the scenario currently, the lower loonie will have to vie with higher interest rates which will act as a headwind and stabilize prices followed by single digit increases rather than the double digit ones of the past two years.
In short, for the time being, the rising (or declining) loonie cannot contend with government regulation nor interest rates and yields. Its power to decide the direction of the real estate market is very limited at this point.
Source: http://www.canadianrealestatemagazine.ca/news/how-the-rising-loonie-affects-real-estate-228975.aspx
Thursday, August 17, 2017
Homebuyers willing to sacrifice indoor space for outdoors
Outdoor living is becoming increasingly popular and a new poll shows that homebuyers are willing to have less indoor space if that means more room outside.
Having a larger buffer between their home and their neighbours’ properties is a key factor in the trade-off for 46% of millennials and 53% of other demographics.
The poll by homebuilder Taylor Morrison, which sold its Canadian operations to Mattamy Homes in 2014, also reveals that women are more likely than men to want a feature-rich outdoor space (62% vs. 51%) rather than a larger interior floor space.
Asked how they would spend $10k-$15k to improve their new home, outdoor living enhancements such as outdoor living rooms and tiles that match those used indoor topped the list. That marks a shift away from higher spending on kitchen interiors.
Source: http://www.canadianrealestatemagazine.ca/market-update/homebuyers-willing-to-sacrifice-indoor-space-for-outdoors-229575.aspx
Having a larger buffer between their home and their neighbours’ properties is a key factor in the trade-off for 46% of millennials and 53% of other demographics.
The poll by homebuilder Taylor Morrison, which sold its Canadian operations to Mattamy Homes in 2014, also reveals that women are more likely than men to want a feature-rich outdoor space (62% vs. 51%) rather than a larger interior floor space.
Asked how they would spend $10k-$15k to improve their new home, outdoor living enhancements such as outdoor living rooms and tiles that match those used indoor topped the list. That marks a shift away from higher spending on kitchen interiors.
Source: http://www.canadianrealestatemagazine.ca/market-update/homebuyers-willing-to-sacrifice-indoor-space-for-outdoors-229575.aspx
Thursday, August 10, 2017
Housing starts rise for 7th consecutive month
The six-month trend for housing starts was higher in July, the 7th consecutive month of gains and rising to 217,550 from 215,175 in June.
“British Columbia and Alberta were the main contributors to the higher trend in housing starts, said Bob Dugan, CMHC’s chief economist. “While BC’s construction coincides with near-record low completed and unsold units in the past few months, Alberta’s inventory of new unsold homes is ramping up, highlighting the need for managing inventories.”
The CMHC figures show that housing start were lower in Toronto with apartments and single-family homes mainly responsible while there were strong increases for semi-detached and town homes. This suggests a shift towards more affordable housing types.
Vancouver starts were up slightly, especially in Burnaby, New Westminster and Coquitlam and mostly driven by apartments and townhomes. Homes under construction in the region remain at record highs.
Calgary and Ottawa also saw increased starts and there were strong gains for Gatineau, London (reaching a new record for July) and Nova Scotia.
The standalone monthly SAAR of housing starts for all areas in Canada was 222,324 units in July, up from 212,948 units in June.
Source: http://www.canadianrealestatemagazine.ca/market-update/housing-starts-rise-for-7th-consecutive-month-229283.aspx
“British Columbia and Alberta were the main contributors to the higher trend in housing starts, said Bob Dugan, CMHC’s chief economist. “While BC’s construction coincides with near-record low completed and unsold units in the past few months, Alberta’s inventory of new unsold homes is ramping up, highlighting the need for managing inventories.”
The CMHC figures show that housing start were lower in Toronto with apartments and single-family homes mainly responsible while there were strong increases for semi-detached and town homes. This suggests a shift towards more affordable housing types.
Vancouver starts were up slightly, especially in Burnaby, New Westminster and Coquitlam and mostly driven by apartments and townhomes. Homes under construction in the region remain at record highs.
Calgary and Ottawa also saw increased starts and there were strong gains for Gatineau, London (reaching a new record for July) and Nova Scotia.
The standalone monthly SAAR of housing starts for all areas in Canada was 222,324 units in July, up from 212,948 units in June.
Source: http://www.canadianrealestatemagazine.ca/market-update/housing-starts-rise-for-7th-consecutive-month-229283.aspx
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