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Slower Market Leads to Fewer, Pricier, Mortgages
The pace of new mortgages in Canada slowed between April and June of 2017 finds TransUnion, as higher prices and fewer sales in the real estate market impact borrowers.
“Recent new regulations in Ontario appear to have had an impact on the volume of home sales and, consequently, mortgage demand,” says Matt Fabian, director of research and industry analysis at the credit rating agency. “So while the number of mortgages is increasing, it is doing so at a slower pace than last year.”
The report, which is issued quarterly and compiles data from TransUnion’s nation-wide credit file database, also finds that mortgages are getting more expensive and borrowers are owing more, in relation to rising home prices. The average mortgage holder owes a balance of $198,781, a 5-per-cent increase from last year.
“Home values continue to rise compared to the previous year, pushing overall mortgage debt levels up. However, we did observe an easing of this trend in the second quarter from the previous quarter,” says Fabian, referring to softer summer prices as a result of the Ontario Fair Housing Plan.
However, while Canadians may be taking on larger mortgages, they’re effectively paying them off, as serious delinquency levels – mortgages left unpaid for 60 days or more – dropped four basis points, to 0.56 per cent.
“Consumers have so far been able to manage their mortgage obligations despite the increase balance levels,” Fabian adds.
Vancouver Real Estate Hurting Local Film Industry
Historic homes and properties often used for film and TV locations are becoming a scarcity in Vancouver as rampant development tears them down for condos – and it’s posing a challenge for local film companies trying to shoot in the city, reports the Globe and Mail.
Detached character homes, which resemble the aesthetic of American architecture, are increasingly hard to find, especially in the groups needed for neighbourhood shots. However, it’s Vancouver’s empty homes epidemic – fueled by domestic and foreign speculation – that further exacerbates the issue.
“What I find most, I think, frustrating, is just empty homes. It’s hard to track down who owns them,” says Vancouver location manager Mary Jo Beirnes to the Globe’s Kerry Gold, adding that it’s a lost economic opportunity. “We often use a location awaiting redevelopment, maybe a ship yard or saw mill that is now defunct… that’s a great opportunity for the film industry to step in, and create an economic opportunity where it didn’t exist before. But when we see empty homes, we want to create a win-win situation, where at least some economic input can be reached.”
Related Read: Rent Our Your Home or Pay $10,000 per Day Says Vancouver Mayor
B.C. Realtors Warn Against More Mortgage Rules
The British Columbia Real Estate Association (BCREA) is warning the federal government that further tinkering with mortgage qualification rules could have severe consequences for already strapped home buyers.
In a letter to the Office of the Superintendent of Financial Institutions (OSFI), BCREA CEO Robert Laing said the fed’s B-20 proposal – which will require all mortgage borrowers to undergo a “stress test” and qualify at a rate of 4.84 per cent – will put too much pressure on a market that is already acclimatizing to considerable change. Currently, only borrowers paying less than 20 per cent down on their homes must qualify at the stress test rate.
“Introducing additional tightening measures while the housing market is still absorbing numerous changes over the last several years puts affordability at risk, could imbalance local markets across the country and has the potential to negatively impact the Canadian economy,” he writes.
“Homeownership is a key contributor to the country’s GDP and overall economic health. It also provides stability to communities and neighbourhoods and remains a cornerstone of many Canadians’ investment goals, allowing individuals and families to invest in an asset that can grow in value and generate financial security for their retirement.”
He adds that creating policies based on Canada’s two largest markets doesn’t accurately reflect conditions in the rest of the country, and that recent Bank of Canada hike will put even more pressure on buyers. BCREA’s formal recommendation is that the government “refrain from fundamental changes to the national housing system at a time of rising interest rates.”
Calgary Office Buildings Become Condos Under New Bylaw
In downtown Calgary, a city ravaged by the downturn in oil prices, there’s plenty of premium office space standing empty – in fact, commercial real estate in the core has a vacancy of a whopping 25 per cent. However, one developer is turning that empty space into bustling multi-family residential housing, thanks to a new bylaw.
Passed in June, it mandates that developers need only have a building permit, rather than a development permit, to repurpose space for residential purposes. Artis, one of the largest real estate investment trusts in Canada, is kicking things off with Sierra Place – formerly a 10-storey office building, it will be turned into 100 apartments, conveniently located near dining, retail and transit. A parcel of unused commercial land by Stampede Station is also on the commercial-to-condo makeover list.
Tougher Proposed Rules For Your Real Estate Agent
When the Ontario government unveiled its Fair Housing Plan in April, part of the measures included a review and rewrite of the code of ethics and rules that govern real estate professionals in the province. Now, the Ontario Real Estate Association is weighing in, releasing a list of proposals from its REBBA (Real Estate and Brokers Business Act) Task Force.
Among its recommendations is a call for harsher penalties, doubling the maximum fine to $50,000 for realtors who breach REBBA, and up to $100,000 for brokers. This is key as the Real Estate Council of Ontario (RECO) has been criticized in the past for being toothless regarding fining and disciplinary measures.
It also calls to empower RECO to order realtors who breach REBBA to pay back all or part of their profits from the deal in question (called disgorgement), subject the organization’s revenue to Auditor General of Ontario audits, implement an Ombudsman, and make it more transparent to freedom of information requests.
OREA is currently “re-inventing” itself as an industry watchdog after being stripped by RECO earlier this year of its status as education provider – as of July 2019, all realtor training will be provided instead by Humber College Institute of Technology and Advanced Learning, in partnership with NIIT Canada.
Rate Hike Hitting Canadians in the Wallet
The Bank of Canada, which sets the tone of borrowing affordability, mandated higher interest rates in July, hiking its own trend-setting rate from 0.5 per cent to 0.75. This had a direct impact on the Prime rate offered by consumer lenders, which has trickled down to mortgage and LoC borrowers with higher monthly payments – and it’s hitting a third of Canadians where it hurts.
A recent poll conducted by Forum Research of 1,150 Canadians finds 34 per cent feel the higher Prime rate is negatively affecting their finances while 22 per cent say it will have at least a somewhat negative effect, and 12 per cent say it will have an extremely negative effect. The poll also asked whether respondents felt Canada in general has become a more expensive country to live in over the past three years.
Says Forum Research President Dr. Lorne Bozinoff, “Almost three quarters think Canada has become more expensive over the last three years, and with more than a third thinking the interest rate hike by the Bank of Canada will have a negative effect on their personal finances, and the rumours of another hike to come may only worsen these concerns.”
Mortgage analysts strongly feel that there will be at least one more hike from the BoC to come in 2017, and potentially several more next year as improving economic conditions pave the way to tighter monetary policy.
Former Fighter Steps Out of Ring for Real Estate Career
Brian Stann, a popular American UFC commentator and former mixed martial arts fighter, has announced he’s stepping away from the broadcaster’s booth for a career in real estate.
He made the announcement via his social media channels, stating on Instagram that he’ll be attending Northwestern University in the fall for his MBA and taking on a leadership role at an upstart real estate firm.
Hopefully that fighting mentality will serve him well on many a tough offer night!
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