Jamie Henry
Other

CMHC is to triple the charges it makes to some financial institutions. The fee increases will be for guaranteeing loans in the mortgage-backed securities market, which the agency operates under the National Housing Act. Some experts are predicting that the hike in fees will filter down to homebuyers with the likelihood of a few hundred dollars being added to the cost of a mortgage. The fee for mortgages with a five-year maturity will rise from 0.2 per cent to 0.6 per cent. The move could however benefit smaller lenders as for annual mortgage guarantees below $6 billion the new rate will be 0.3 per cent.
 
November turns cooler, even in the hottest markets
House prices were down by 0.3 per cent nationwide in November with cooler conditions even blowing through Calgary and Toronto. The latest Teranet-National Bank Home Price Index shows that eight of the 11 major Canadian markets saw prices easing and the national decline was the first for a year. The lowering prices range from 1.6 per cent in Halifax to 0.2 per cent in Calgary. Year-over-year prices of course are a different story; Calgary up 9.2 per cent; Toronto up 7.3 per cent; Hamilton up 7 per cent; Edmonton up 6.2 per cent; Vancouver up 5.9 per cent. The report notes that the slight decline in prices over a month does not detract from the markets where prices are still at near-record levels and the bank expects that it will only really change when interest rate rises put pressure on affordability.
 
CMHC sheds 215 jobs
The Canada Mortgage and Housing Corporation is cutting 215 jobs at its head office in Ottawa and regional offices. The roles have been declared surplus by the agency and will come from its mortgage loan and statistics teams, however there will be additional jobs in risk management and IT meaning only a small net loss. The changes are the result of restructuring designed to make the agency more efficient.
 
Scotiabank breaks from the pack with interest rate prediction
Most economists forecast that the first interest rate rise will be in the second half of 2015, possibly in the fall. However Scotiabank is sticking to its prediction that rates will stay lower for at least another year, with the first increase not happening until the beginning of 2016. In fact the bank’s economist Derek Holt says there could even be a cut in the rate next year. 

Copyright © 2014 Key Media Pty Ltd

Jennifer Paterson
Other

Historical predictions of an oversupplied housing market caused by a mass exodus of baby boomers from their residential homes have been debunked by a new study.

The report, Trends in Housing Occupancy Demand, which was published this week by Urban Futures, found that Canada will actually need another 4.5 million homes for incoming generations in the next 30 years, as baby boomers remain in their homes.

“The boomers, who are in their mid-50s to late-60s, are all still in their homes,” said Andrew Ramlo, executive director of Urban Futures. “There has been no necessity for the buster [generation] to replace them because they’re still clogging up the housing market, especially in family-style housing.”

Ramlo added that this phenomenon should not impact housing prices. “If we have a growing population and more people that need to be housed, it shouldn’t push down prices because supply will not start to exceed demand in that context,” he said.

But, aside from building another 4.5 million homes in the next three decades, how will the industry ease the baby boomers out of their residential properties to make room for the next generations? Ramlo suggested an increase in the supply of the alternative.

“If you want someone to downsize out of their single-family home, you have to give them an alternative in their community,” he added. “My parents, for example, didn’t have a great attachment to the bricks and mortar, but what they were attached to was the community.

“As long as supply and availability of alternatives to the single-family home start to get added into some of those communities, the prominence of downsizing will increase over time.”

And perhaps the pure value of many of these boomer-owned residential properties will push that generation to finally put their homes on the market.

“The best example here in Vancouver is Dunbar,” explained Ramlo. “Somebody who lives in Dunbar, and has done so for the last 20 or 30 years, is now sitting on a multi-million dollar property that they probably bought for maybe $30,000 or $40,000.

“The immense value that is embodied in that residential real estate gives a lot of people alternatives. That’s something that I think will drive some of the investment; people will free up some of the capital that is embodied in the residential real estate. From an investor’s perspective, that’s something else to consider.”

Copyright © 2014 Key Media Pty Ltd

Jennifer Paterson
Other

Wind turbines and their proximity to residential real estate has long been a matter of turbulent debate, but a new study has found that these turbines actually have very little impact on the value of nearby properties.

The results of the study, which was published in the Canadian Journal of Agricultural Economics, surprised its co-author Richard Vy. “You hear a lot of concern and resistance about the development of the wind energy industry,” he said.

“Given the level of concern that has been expressed, I thought we would find some evidence of negative impact. It surprised me that there was no significant impact on property values.”

The study focused on Ontario’s Melancthon township, which saw 133 turbines put up between 2005 and 2008. The researchers from the University of Guelph analyzed more than 7,000 home and farm sales in the area, and found that at least 1,000 of these were sold more than once, some several times.

“This issue caught my attention because I had done some property value research,” added Vy. “I had some sales data for the Melanchton area, so I wanted to use that to see what impact there may be from the wind turbines, to see whether the sales data supported the concerns that had been expressed.”

In Ontario, the law doesn’t set a minimum lot size for housing a wind turbine, but every municipality has its own regulations. In Melanchton, a property has to be at least 50 acres, and the owners of the property are provided with a stipend.

Dave Launchbury, a local sales representative at iPro Realty, said the impact will be on the smaller, two-acre property that is adjacent to a larger lot with a wind turbine. “One guy is getting paid and the other guy is not getting paid,” he added. “A property with a turbine on it has more value. I know people here who were against wind turbines unless they could get them on their property.”

The results of the University of Guelph study are consistent with previously published studies, particularly in the U.S., which have used the same method to assess the issue, said Vy.

“The majority of studies that use this method, based on property sales, don’t seem to be picking up any significant impacts on property values,” he added.

But this methodology estimates an average impact across all affected properties, rather than estimating an impact on individual properties.  “Just because the results indicate no significant impact, that doesn’t mean there aren’t individual properties that have been impacted,” Vy explained. “All it means is, in general, the negative impacts aren’t occurring across all properties in close proximity to wind turbines.

“You certainly hear the concerns that are expressed and the stories about how people have to take a much lower price, but I just want to clarify that the results are not saying these scenarios are wrong, it just means there are a whole bunch of other properties in close proximity that aren’t experiencing the same drop in value.”

Copyright © 2014 Key Media Pty Ltd

Olivia D’Orazio
Other

While the Bank of Canada said it’s worried about a potentially overvalued housing market, the country is not about to host the kind of crash that plagued many cities in the United States.

 

In its biannual Financial System Review, the BoC said Canada’s housing market could be overvalued by 10 to 30 per cent, but said we’re not currently seeing the kind of spike in housing prices that preceded corrections in the early 1980s and early 1990s.

 

“Highly-indebted households would have [difficulty] servicing their debt if they were to face a sharp decline in their incomes or a sharp rise in interest rates,” said Governor Stephen Poloz in a press release.

“This situation raises the risk that a shock to the economy could trigger a correction in house prices. The probability of this risk materializing is low, but if it did occur, the effect on the economy would be severe.”

 

For now, the national economy – and by extension, the housing market – is benefiting from rising immigration and the continued strengthening of the U.S. economy. House prices are still rising, mainly due to still-low mortgage rates.

 

“The further decline in mortgage rates over 2014 has supported housing activity,” the BoC said in its report. “Sales of existing homes have picked up noticeably from the weather-related weakness at the beginning of the year and now exceed their 10-year average. Housing starts have been broadly in-line with demographic demand.

 

“None of those conditions is present today,” added Poloz. “The rise in house prices has been much more gradual and, in the context of a broadening recovery, the unwinding of household imbalances should be gradual as well. 

 

“That is why we continue to expect a soft landing in the housing market, but it is conditional on continued strengthening in the economy.”

Copyright © 2014 Key Media Pty Ltd

Selling Bahamas: what you need to know

Olivia D’Orazio
Other

It is a dream vacation for many Canadian agents – a trip to the Caribbean to help a client buy a $2 million home, but agents in those jurisdictions are sending out a reminder about the right – and the wrong – way to do it.

“[According to] the Bahamian law, only a Bahamian or a person with the right to work in The Bahamas is allowed to apply for a licence to sell real estate,” William Wong, a broker in Nassau, and a past president of the Bahamas Real Estate Association (BREA), tells REP. “If a Canadian marries a Bahamian and can get legal status and can work in the Bahamas, he or she can apply to take the licensing course to become an agent.”

That law, called the Real Estate Act, follows the same jurisdictional rules that prevent an agent in Toronto from selling a condo in Vancouver, for instance. Like a cross-provincial transaction, Canadian agents should to work closely with their Bahamian counterparts.

“We’re not opposed to working along with a non-Bahamian or a Canadian agent,” Wong says. “We’ll work with you and then pass a referral fee on to you. But anyone wanting to buy property from the Bahamas should use a local agent.”

As with any neighbourhood, a local agent brings a host of insider knowledge to the deal. A native Bahamian can recommend one of the country’s more than 700 islands best suiting your client’s tastes, and can point out the most exclusive areas – the islands are home to such Hollywood heavyweights as Shakira, Roger Waters, Eddie Murphy, Johnny Depp, Tyler Perry, Tim McGraw and Faith Hill, and David Copperfield, to name a few.

A Bahamian agent can also speak to some of the finer points of property ownership on the islands, and can ensure clients and agents alike don’t unwittingly break the law.

Wong’s comments follow a conflict between BREA and Nationwide Appraisal Services (NAS), a Canadian real estate valuation company. BREA said NAS’ status in The Bahamas is in violation of the Real Estate Act, since it’s not run by Bahamians or permanent residents of the county.

That issue saw NAS attempt to sign mortgage brokers and real estate agents in an effort to circumvent the law. Carla Sweeting, the president of BREA, told Tribune Business that the Canadian banks’ lack of knowledge about the Bahamian real estate industry would impact the housing market.

“We have said this to both banks [Royal Bank and Scotiabank],” Sweeting told Tribune Business. “You need to accept some responsibility for the foreclosure problems you are now facing, as you have incentivised mortgage officers who don’t know how to read appraisals.”

Wong says it’s best for Canadian agents to work closely with their Bahamian counterparts. In return, Canadians can expect a hefty referral fee – upwards of 25 per cent in some cases.

“We welcome dealing with American or Canadian agents,” Wong says. “If they have a client, the customer in Canada would be more comfortable dealing with their agent because they don’t know me. But that agent can call me and we can work together. There’s nothing stopping an agent in Canada from calling me and working around with me.”

On the local front, Wong says BREA has been working to educate the public about selling property to Canadians who aren’t working with agents licensed in the country. However, he says, you can always find someone willing to break the law if you look hard enough.

“We’ve had some unscrupulous agents coming here and selling property without a licence,” he says. “It’s getting a lot better now. If we do find [those agents], we have a word with them.”

In the end, Wong says he’s appealing to the human side of Canadian agents, urging them to cooperate with local laws.

“We’ll make sure they get taken care of, but let’s do it the right way,” he says. “You wouldn’t want us coming to Toronto or Vancouver, taking away your business. And besides, you know the lay of the land better than us, just like we know Bahamas better than you because we live here.”

Copyright © 2014 Key Media Pty Ltd

Joanna Weinstein
Other

People have turned to crowdfunding to raise money for everything from potato salad to personal submarines.  But one entrepreneur is banking on crowdfunding in a new market: real estate.

“We are the e-trade of real estate investing,” said William Skelley. Skelley co-founded start-up iFunding, a real estate crowdfunding platform connecting investors with developers.

Watch Skelley model his big idea to a “Power Pitch” panel with real estate broker Ryan Serhant of “Million Dollar Listing New York,” Dolly Lenz, real estate super broker, and Alicia Syrett, CEO of Pantegrion Capital. Will Skelly close the deal with this panel, or will they see his venture as a fixer upper?

The blueprint

Skelley used to run a boutique investment bank that endorsed commercial projects like hospitality properties and condos. He later joined Rose Park Advisors, a hedge fund, which invested in CircleUp.

“[CircleUp] is now the largest crowdfunding angel investing platform in the U.S., with a recent $7 million cash investment from Google and Union Square Ventures. I realized the same potential for innovation is applicable to real estate,” Skelley told CNBC.

Closing the deal

iFunding works as the link between real estate developers and investors. Accredited investors can use the platform for free and “shop” for real estate opportunities.

“Investors can contribute as little as $5,000 to participate in an investment property of their choice,” the founder told CNBC.

Investment opportunities on the platform include a single family home in Wisconsin, new developments in Texas and a high-rise development in Lower Manhattan.

The start-up even offers two investment options: lending money for a real estate project at a specific interest rate paid by the project’s developer, or purchasing equity in the real estate projects.

iFunding also offers users a mobile app available on iOS and Android devices, which the founders say is the first mobile app for real estate crowdfunding.

During the segment, Serhant asked, “What benchmarks or requirements does iFunding have for people who want to become investors.”

Skelley explained that accredited investors as defined by the SEC must make an income of $200,000 or more from the past two years, or have $1 million in liquid assets not including a primary residence.

According to the IbisWorld market research report, the global real estate market grew to $6 trillion as of November.

The real estate crowdfunding space is crowded. IFunding’s competitors include: Realty Mogul, Patch of Land, Fundrise, Real Crowd and Realtyshares.

“Many of us think there’s room for several to become leaders,” Skelley told CNBC. He also said he believes iFunding’s emphasis on equity is unique.

According to the founder, the iFunding platform has raised almost $30 million for 27 real estate projects from Brooklyn, New York, to Austin, Texas.

Skelley and his co-founder, Sohin Shah, forecast $500,000 in revenue by the end of 2014, and project to be profitable by the end of 2015.

The founders bootstrapped the start-up with $600,000. And before seeking venture capital the start-up is crowdfunding an additional $2 million via crowdfunder.com. Its fundraising began in early December and in three days, it raised over $1 million.

Headquartered in midtown Manhattan, iFunding has 12 employees with around 5,000 accredited investors signed up to date.

Lower oil prices could contribute to a downturn in the market

Other

A realty analyst is urging caution to Calgarians who are thinking about putting their homes on the market.

Ross Kay said after an unprecedented 42 months of expansion, a number of factors are leading to a downturn.

“It’s only natural. A market does not expand forever,” he said.

Ross said the market is already shifting and it might be wise for homeowners to hold off listing their properties. He said the numbers show many people who have bought a new home have not been able to sell their old one.

The Calgary Real Estate Board says housing inventory has been trending upwards in the past few months but it’s still too early to interpret the data for December.

Any time oil prices fall there are other adjustments on the economy, said ATB Financial chief economist Todd Hirsch.

“There could well be individuals in Calgary in 2015 who find themselves with a house valued at less than what they paid for,” he said.

But Century 21 realtor Miranda Moser is cautioning clients not to worry too much.

“It’s still too early to tell what is going to go on,” she said. “It’s still busy, we’re still getting a ton of people from other provinces moving in. I’ve had three referrals from two other provinces just within the last week.”

Copyright © CBC 2014

Jennifer Paterson
Other

Investors and real estate professionals are increasingly using small, commercial drones for marketing, but they will never replace the due diligence needed to acquire a property, say experts.

“It’s just an additional tool to help calm the nerves,” said Kyle Pulis, president of Pulis Investments. “An investor should still drive or fly out to the property to look it over and have a qualified home inspector to ensure everything is functioning properly.

“It does, however, allow you to see and judge the property a lot better from home, eliminating the disappointment of travelling all the way out there to see something much different than you expected.”

Paul Rouillard, president of Flatprice.ca, purchased a small drone four months ago. He uses it to show properties to potential investors and to help investors show their properties to potential tenants.

“A lot of the time tenants are moving around; they’re more mobile than purchasers,” he added. “A lot of tenants come in from Toronto or London or Chatham – to them, it’s more of a spontaneous decision, rather than the calculated decision of an investor. When they see something like this, it gives them the Wow-factor right away.”

Pulis also recognizes the use of small drones is ideal for out-of-town investors. “It can give the investor a terrific perspective of the property and neighbourhood without having to leave their home,” he said.

“Up until now, Google Earth would have been their only other resource for viewing the property from afar. The problem with Google Earth is that the pictures are often dated and when you try to zoom in, the image becomes very grainy. So having a drone pass over the property and neighbourhood is an excellent way to look everything over.”

But Rouillard warns potential purchasers that even these small drones can be very pricey. At their most basic, a small drone will cost around $1,000, but that price doesn’t include any of the video or battery sets.

“If you’re doing what I’m doing, it starts getting pricey,” he added. “You can get some really cheap models, but you’re not going to be able to get good quality production out of it. You also need software, which is not cheap, and a good quality computer that’s going to run the video editing software.

“Anyone can go out and buy this thing, fly it around and have fun, but once you have the footage, what are you going to do with it?”

Copyright © 2014 Key Media Pty Ltd

Jennifer Feinberg
Other

It’s been a stellar year so far in Chilliwack real estate sales.

“It’s actually been very very good,” said Jake Siemens, president of the Chilliwack and District Real Estate Board.

There are still a few more weeks left of 2014, but already there are clear signs the local market is bouncing back.

“We’ve seen about a 20 per cent increase in sales roughly, month over month, from 2013,” Siemens said.

It’s not so much that individual house prices are going up, but rather that more Chilliwack properties have been selling.

“This is the first year that we’ve seen some recovery. It bodes well for 2015.”

Siemens has been in the business a long time, celebrating 28 years in January. The steady rise in 2014 real estate transactions in Chilliwack started to be seen in early spring, starting in February.

“So far we’re on track not necessarily for a record year but probably close,” he said.

The local real estate market was exceptionally strong back in 2006 and 2007, before succumbing to global financial crisis conditions in 2008, when markets were crashing everywhere.

“We saw record sales in 2006-07 and we’re hoping to beat those numbers.”

Chilliwack‘s big advantage is still affordability and decent interest rates. A median price for a single family home in Chilliwack is about $350,000, compared to $450,000 up to $480,000 in Abbotsford.

“Prices are considerably lower here. And as prices go up, that gap seems to widen,” Siemens said.

One of the driving factors is that Chilliwack buyers tend to get a little more property with their real estate deals, and the fact that one-quarter of sales are coming from out of town realtors.

“That means agents are coming out here to show because it’s affordable for their clients and that makes it worth the drive,” he added.

Online listings and the technology that drives it are big factors as well.

“It’s made business a little easier and we’ve seen more new construction this year.”

©  2014  Copyright   Black Press, Inc.

B.C. new home buyers feel weight of heavy rebar tariff

JUSTINE HUNTER, ADRIAN MORROW
Other

The cost of a trade dispute between steel producers in Central Canada and their offshore competitors is being felt by new home buyers in Metro Vancouver’s already super-heated condominium market.

Neil Chrystal, president and CEO of Polygon Homes, only learned about the international scrap over alleged dumping of reinforcing steel rods – known as rebar – when he saw a significant spike in construction material costs about two months ago. He discovered that an interim duty has been applied to Canadian imports of steel rebar from China, South Korea and Turkey. U.S. rebar imports are not targeted in this trade dispute.

The result is that each of Polygon’s newest two-bedroom condo units selling now in Burnaby and Richmond cost at least $5,000 more. Those kinds of cost increases are being felt across the province’s construction industry.

“I think buyers are already stretching to get into their first home and when you add a cost like this, it’s one more roadblock in the way of home ownership,” Mr. Chrystal said in an interview Monday. “This is one more needless tax on first-time home buyers.”

And, if a trade tribunal in Ottawa rules in favour of the country’s steel producers – primarily in Ontario and Quebec – the cost of construction will jump even higher in B.C. early next year. The industry says those three countries are dumping their product in Canada at a discount. The B.C. government is applying for an exemption, saying it will be the hardest hit by the duty because it relies almost entirely on imports from the U.S. and Asia.

B.C. Premier Christy Clark raised the matter on Monday in a meeting with Ontario Premier Kathleen Wynne. Ontario government sources said the two did not reach any accord, and the Canadian International Trade Tribunal hearing is set to convene on Dec. 15.

In an editorial board meeting earlier in the day with The Globe and Mail, Ms. Clark said the rebar duty is one of the top trade irritants between the two provinces right now.

“I understand Ontario has some issues, but we cannot allow them to affect British Columbia, because Ontario cannot supply British Columbia. So raising the price in Ontario for Canada is only going to mean that we buy more expensive rebar from the United States,” she said Monday.

“It poses a real economic threat in British Columbia,” Ms. Clark added. “On the one hand, there’s no benefit for Ontario. On the other, I would argue it creates a problem for Ontario and all of the rest of Canada that depends on a successful British Columbia economy to contribute to Confederation.”

The B.C. government, prodded by its construction industry, has raised the alarm in Ottawa about what it says are the unintended consequences of the rebar tariff. The province fears that the rising costs could drive away investment just as a series of major projects, particularly around liquefied natural gas, are approaching final investment decisions.

Those fears are already being realized in the residential construction sector. Polygon is now selling two-bedroom condo homes in Burnaby starting at $460,000 – units that were built after the cost of rebar imports jumped due to the interim duty. The Independent Contractors and Business Association of B.C. (ICBA) estimates that if the full duty sought by Canadian steel producers is imposed – a decision is expected in January – the cost of a two-bedroom condo unit could rise by $10,000.

That is especially bad news for new home buyers in Vancouver, where housing prices are headed for a record high this year in what is already considered Canada’s most expensive property market.

“It feels like Western Canada – B.C., anyway – is getting screwed by Central Canada,” said Philip Hochstein, president of the ICBA.

Reinforcing steel is a major component in concrete construction, but B.C. has no rebar production. The ICBA estimates that 60 per cent of the rebar used in B.C. comes from the U.S., where prices are still significantly cheaper than Canadian rebar due to high transportation costs.

© Copyright 2014 The Globe and Mail Inc