Price difference in Genworth Canada survey may be explained by Vancouver’s high proportion of condos bought as entry point into the market

Joannah Connolly
Other

Despite being Canada’s most expensive real estate market in general, Vancouver was second to another major city in terms of how much first-time home buyers spend on a property, according to a recent survey by Genworth Canada.

First-time buyers in the city spent a median of $420,000 on their first home – sneaking in at $5,000 less than the $425,000 median price spent in Toronto.

However, the price difference may be offset by the fact that more first-timers in Vancouver were buying condos as their entry point into the market – 47 per cent, compared with 39 per cent in Toronto.

Across Canada as a whole, buyers paid a median of $293,000 on their first properties – the highest it has ever been. Here are the prices paid and down payments broken out across the country.

The survey also found that, across Canada:

• more than 80 per cent of respondents chose fixed-rate mortgages
• 73 per cent of respondents said mortgage brokers were important sources for mortgage information
• 80 per cent of respondents bought a resale home
• 20 per cent bought newly built or presale homes
• 55 per cent bought a single-family detached home – the largest proportion of all property types
• 17 per cent bought a condo – rising to 47 per cent in Vancouver, 40 per cent in Montreal and 39 per cent in Toronto.

© 2015 Real Estate Weekly

 

Jordan Maxwell
Other

Finance Minister Joe Oliver got the bad news on the economy as he met with private sector economists to discuss Canada’s outlook in advance of the April 21 budget, according to an article in the Toronto Star. Oliver said the government has no intention at the moment of moving to cool off the red-hot housing market. “We are closely monitoring the residential real estate market,” he said. “We’ll take action if necessary.” When asked about the move from a Toronto credit union that offered what may be the lowest mortgage rate ever — 1.49 per cent, Oliver said, “We understand and are watching the fact that consumer debt is high,” Oliver said. But he also pointed out that the credit picture has improved and “default rates are very low.”

 

Canada housing starts higher than expected Canada Mortgage and Housing Corp. says March was a stronger month for housing starts in most parts of the country. CMHC’s seasonally adjusted rate was 189,708 units last month, up from 151,238 in February. According to the Financial Post, most of the growth came from multiple-unit dwellings, especially in urban areas. Starts of multiple-unit dwellings such as condos and apartments was up 48.2 per cent, rising to 125,263 units on an annualized basis March.  Ontario, British Columbia, Quebec and the Prairies saw increases in urban housing construction, while the Atlantic region had a decline. CMHC chief economist Bob Dugan said the month-to-month comparison is only part of the story and the trend has moved lower since September “partly reflecting efforts to manage the level of completed but unsold units.”

 

Property sales stoke fears of money laundering in Van City  As affluent Chinese buyers – spurred by relaxed regulations and a lower Canadian dollar – flood into British Columbia’s real estate market, warnings are rising that some cash deals may contravene federal money laundering rules, according to an article in Business In Vancouver. A 2015 report from Colliers International, which looked at Chinese investments in real estate, estimated that $18 billion had flowed from China into real estate in other countries, up from $2.3 billion in 2010. “These [China] buyers are stepping up the capital chain and taking on complex and large-scale projects,” said Jon Ramscar, a senior vice-president with Jones Lang LaSalle, a Vancouver real estate brokerage that has worked with many offshore buyers. Asian buyers into B.C. are also expected to increase because China relaxed its offshore-investment regulations in 2014, relaxing constraints on citizens buying in other countries.“This is just the beginning for Vancouver,” said Tina Mak, president of Asian Real Estate Association of America, Vancouver chapter, and a Vancouver realtor with Coldwell Banker Westburn Realty. Read more here.

Copyright © 2015 Key Media Pty Ltd

Olivia D’Orazio
Other

A court decision coming last month could see some of your clients forfeit their rights as homeowners, making it less attractive for them to sell their property.

An appeal case brought before the Ontario Divisional Court in March was eventually lost when a homeowner (the appellant) learned that her claim against the homebuilder’s warranty became null and void once she sold the property.

“The Tribunal held that when the appellant sold her condominium on October 15, 2013, she lost standing to continue her appeal against Tarion,” the Tribunal wrote in its decision. “The Tribunal held that because of s.13(6), the appellant could not contract out of the statutory warranties through an assignment.”

The appellant originally complained of a heating issue to Tarion, which later sent a Tarion Warranty Services rep to inspect that unit and the eight others in the townhouse complex. It was then determined that duct modification needed to take place, beginning with a pilot project involving one unit.

However, the appellant installed a gas fireplace without Tarion’s approval, then submitted a claim to Tarion in an effort to recover the $17,000 cost of the fireplace. That claim was denied once Tarion discovered that the appellant sold the property.

The appellant decided to appeal the decision based on the fact that she had in place a collateral agreement with the purchaser of her property, which she believed enabled her to continue her claim against Tarion.

Read the full tribunal decision here

Copyright © 2015 Key Media Pty Ltd

Jennifer Paterson
Other

Housing starts in one province have increased by 83 per cent year-over-year, according to new figures.

In Ontario, the seasonally adjusted annual rates (SAAR) of urban starts were 4,485 in March 2015, a significant increase on the 2,456 urban starts in March 2014.

Across the country, the SAAR of urban starts also increased in British Columbia (23 per cent), the Prairies (28 per cent), Alberta (33 per cent) and Manitoba (four per cent), but down in all the Atlantic Provinces and in Quebec.

When comparing March to the previous month, total urban starts increase by 28.1 per cent in March to 177,459 units.

Multiple urban starts increased by 48.2 per cent to 125,263 units in March, while the single-detached urban starts segment decreased by 3.4 per cent to 52,196 units.

CMHC’s trend measure, which is a moving average of the monthly SAAR housing starts, showed that housing starts remained steady across Canada, with 179,016 units in March, compared to 180,236 in February.

“Despite recent month-to-month changes in the [seasonally adjusted annual rates], the trend in housing starts essentially held steady in March compared to February,” said Bob Dugan, chief economist at CMHC’s Market Analysis Centre.

“However, the trend in housing construction has moved lower since September 2014, partly reflecting efforts to manage the level of completed but unsold units.”

While CMHC doesn’t look at the value of this construction, new figures from Stats Can, released yesterday, showed that housing starts for multi-unit properties rose 20.7 per cent to $1.8 billion during February 2014, while construction intentions for single-family homes fell 9.6 per cent to $2.3 billion.

Copyright © 2015 Key Media Pty Ltd

Olivia D’Orazio
Other

Agents in one market say they’ve hit a winning formula that keeps FSBO competitors at bay, if not cutting them out altogether. But is the remedy worse than the disease?  

“In Vancouver, being a larger urban centre and with the demographics, (clients) don’t want to do a for-sale-by-owner,” says Brad Gannon, a sales rep in Vancouver. “There are very few FSBO organizations. “I have friends who live in places where total commissions are four, five, six per cent of the sale, so it might be a little bit different (there).”  

And, indeed, they are different. Of course, commissions are entirely negotiable so no standard exists, but the usual commission is between five and six per cent. In Canada’s Western cities, however, it’s more common for agents to take, say, a seven per cent commission on the first $100,000 of the sale, and a one or two per cent commission on the remaining amount.  

“I’m not sure whether it’s correlated or not, but I heard the average commission in Vancouver is one of the lowest in North America,” says Matt France, a Vancouver-based agent. “Is that because Ontario holds some of the information (closer) than we do? That could be possible.”  

The market in Vancouver, however, is significantly more expensive than in many other cities across the country, putting commission rates into perspective for some buyers and sellers (see below for a comparative chart).  

“The Realtor’s fees as a percentage don’t seem that outrageous to people,” Gannon says. “People don’t really see the services of a Realtor as just being access to data. It’s a salesperson, a mediator, a negotiator, the CMA from sold data. I don’t even think (the commission rate) enters people’s minds too much.”

Copyright © 2015 Key Media Pty Ltd

Olivia D’Orazio
Other

Increased construction intentions in some of Canada’s less populated provinces drove a boost to the value of building permits in February, Stats Can reports.   The value of residential building permits in February rose 1.5 per cent to $1.4 billion. That increase, which was led by gains in Quebec, British Columbia and Nova Scotia, follows an 8.1per cent drop in January.   Multi-unit properties, such as condos and townhomes, skyrocketed 20.7 per cent to $1.8 billion in value during the month. The increase in February, which was attributed to higher condo construction intentions in every province except Ontario, effectively ended a four-month decline in permit values.   At the municipal level, Vancouver, Halifax and the Kitchener-Cambridge-Waterloo (KCW) Region posted the strongest increases in condo construction intentions, while Toronto reported the largest decline in condo intentions.   Construction intentions for single family homes across the country, however, fell 9.6 per cent to $2.3 billion – a change in pace following two consecutive months of increases. Lower intentions for detached properties in Quebec, Alberta, British Columbia and Ontario drove that decline.   Still, the new housing price index (NHPI), which Stats Can also released today, reported a 0.2 per cent month-over-month increase during February. That follows a 0.1 per cent decline the previous month. The index measures the change in the selling prices of new residential homes, as agreed to by the contractor and buyer.   The combined NHPI increase in Toronto and Oshawa was 0.3 per cent in February, driving most of the growth to the national average. Stats Can said builders offset those price increases by offering promotional packages in an effort to boost low sales.   Halifax reported a 0.4 per cent increase to the index – the city’s largest increase since July 2013. Ottawa-Gatineau, meanwhile, posted no change to its price index, essentially stabilizing after five consecutive months of decline.

Copyright © 2015 Key Media Pty Ltd

 

Jordan Maxwell
Other

There is power in numbers and that’s translating into some landmark deals for sellers in the Vancouver real estate market — land assembly sales. According to Global News, as the city pro-actively rezones areas around the city’s main corridors allowing them to potentially be turned into higher occupancy buildings like town homes and condos, developers are quick to seize the opportunity. Realtors who recognized the potential in the market are getting to the homeowners first teaching them the potential power in selling as part of a package deal. “They find out if they’re doing land assembly, the value is amazingly higher than what the market value is,” says Michelle Yu of RE/MAX Real Estate Services. Yu is currently representing more than a dozen land assembly sales in Vancouver. She says the trend of land sales has been picking up over the past five years.

Copyright © 2015 Key Media Pty Ltd

Jamie Henry
Other

Toronto homes: gone in just 20 days

Homes are selling fast in Toronto, according to BMO economist Robert Kavcic. He says in a research note that last year’s average of 21 days, which was “already low,” has dropped again to 20 days. He contrasts this with the time taken to sell a home in Calgary, where the average has increased sharply, from 28 days a year ago to 40 now. On prices he notes that condos are increasing at a slower pace, but that detached houses are in high demand in Toronto; however “liquidity in Calgary has effectively dried up.”  

Who’s buying luxury homes? It may not be who you think

A new report that looks into who is buying the luxury homes in Canada’s biggest cities reveals some interesting insights. Sotheby’s International Realty Canada found that baby boomers, often expected to downsize in retirement, are frequently buying bigger, high-end homes. These wealthier boomers have worked hard, saved and built up equity in their existing homes and are often mortgage free. The boomers are most likely to be doing so in traditional neighbourhoods. The next age group down, Generation X, want to live in family homes close to the best schools; while Generation Y, the millennials, are seeking the cool, urban neighbourhoods with good “walkability.” While these are the findings from responses to the survey, there will of course be wide differences across Canada and especially across demographics.  

Winnipeg is a buyers’ market

New data from Realtors in Winnipeg shows that there are more MLS listings in the area now than at any time since 1995. In the first quarter of 2015 there were 5,499 listings, 37 per cent higher than the 10-year average. March listings were 26 per cent higher than a year earlier. David Mackenzie of Winnipeg Realtors said that it’s a great time for buyers with high listings and low interest and mortgage rates. He added: “Our mortgage brokers are telling us we have likely not seen rates as low as we have now since the 50s or 60s.” For sellers, though, there is greater competition, pushing down selling prices. The figures show that 70 per cent of houses and 71 per cent of condos are selling for below the listing price. Homes in the $250,000 to $299,999 range are attracting the most interest and are selling within an average of 28 days.  

Oliver seeks balanced-budget legislation

Finance minister Joe Oliver has tabled a bill to commit the federal government to a balanced budget, a move certain to become law with the Conservatives’ majority. Although most of the provinces have had similar laws since the 1990’s this is the first time for the federal administration. The budget will be allowed to fall into deficit in the event of recession, war or natural disaster. 

Copyright © 2015 Key Media Pty Ltd

TAMSIN McMAHON
Other

Canada’s luxury housing market is in the midst of a striking transfer of wealth, as baby boomers trade up for bigger houses while pouring huge sums into real estate for their children.

“I don’t think you’ve ever had nearly as much help from one generation to the next in buying homes,” said Ross McCredie, CEO of Sotheby’s International Realty Canada, which issued a new report examining the finances and buying habits of different generations of buyers in the “luxury” market, which generally refers to the higher end of real estate markets across Canada.

Among the more surprising generational trends is that far from downsizing to smaller condos as they age, wealthy boomers are increasingly looking to upsize into luxury homes, often because they still have adult children living at home. Empty-nesters are more likely to “right-size” into bungalows and condos that are only slightly smaller than their previous home.

In many cases, boomers are taking on debt to buy luxury homes, despite the fact that the typical boomers buying in Canada’s high-end market earn an average of $500,000 and can easily afford to pay cash. Often they’re looking to take advantage of low interest rates to invest their home equity in vacation homes, investment properties or the stock market.

More often than not, that money is flowing to their children in the form of large down payments for luxury homes. For many boomers, Mr. McCredie says, the down payment is a form of succession planning, as many see the housing market as a safe and tax-free way to transfer wealth to their kids.

Thanks to comparatively lower incomes and fewer savings than other generations, young luxury buyers are “overwhelmingly” relying on outside support for a down payment, the report said.

The money isn’t always a gift. In many cases, parents might be paying $200,000 to $300,000 toward a $1-million home for their children, but are doing it in the form of loans and mortgages and are putting liens on the property as to keep their children from squandering their real estate wealth or losing their home in a break-up.

That generational wealth transfer is helping to drive a wedge in the first-time home buyers market. Wealthy Generation Y buyers, those under age 35, typically pay twice as much for their homes as the average first-time buyer. They can spend as much as 15 times their household income on a home purchase, thanks to help from mom and dad.

That gap is most dramatic in Calgary, where the typical first-time buyer spends $363,400 on a property. Young luxury buyers in the city are willing to spend anywhere from $800,000 to $1.5-million even though their incomes are modest compared to luxury buyers in other Canadian cities: averaging just $50,000 to $100,000. The typical luxury home for a young Calgary buyer is a 2,000-square-foot, four bedroom, three bathroom townhouse or duplex, even though most are young single men or childless couples.

Despite a helping hand from family, roughly 85 per cent of young buyers also take out a mortgage. That number was as high as 95 per cent in Toronto, where Gen Y buyers earned an average of $80,000 to $250,000 and bought homes worth $800,000 to $2-million.

Largely left out of the generational wealth transfer are buyers from Generation X, age 34 to 54, of whom just 35 per cent received help from family to afford a home, the report said.

Many Gen X buyers had parents who had lived through the twin real estate busts of the early 1980s and 1990s, when interest rates soared to double digits. They are much less willing or able to help their kids get into the housing market.

“I really think Gen X is very aware of that,” Mr. McCredie said. “Gen Y has never seen anything other than cheap money.”

Having lived through a soaring real estate market, many boomers are now worried their children will miss out on rising prices if they don’t get into the market while they’re young. “Those are the people who are literally saying to their kids: It’s important to participate in the real estate market, because if you don’t you’ll never be in this marketplace.”

© Copyright 2015 The Globe and Mail Inc.

Jordan Maxwell
Other

Canada’s luxury housing market is in the midst of a striking transfer of wealth, as baby boomers trade up for bigger houses while pouring huge sums into real estate for their children. “I don’t think you’ve ever had nearly as much help from one generation to the next in buying homes,” said Ross McCredie, CEO of Sotheby’s International Realty Canada, which issued a new report examining the finances and buying habits of different generations of buyers in the “luxury” market, which generally refers to the higher end of real estate markets across Canada. According to the Globe and Mail, wealthy boomers are increasingly looking to upsize into luxury homes, often because they still have adult children living at home. Empty-nesters are more likely to “right-size” into bungalows and condos that are only slightly smaller than their previous home. In many cases, boomers are taking on debt to buy luxury homes, despite the fact that the typical boomers buying in Canada’s high-end market earn an average of $500,000 and can easily afford to pay cash. Often they’re looking to take advantage of low interest rates to invest their home equity in vacation homes, investment properties or the stock market.

Copyright © 2015 Key Media Pty Ltd