Archive for October, 2017

Stress Test – Government adds new qualifying requirements for uninsured mortgages

Thursday, October 26th, 2017

OSFI is reinforcing a strong and prudent regulatory regime for residential mortgage underwriting

other

Effective January 1, 2018, home buyers who don’t require mortgage insurance — those with a down payment of 20 per cent or more — must qualify for their mortgage at a higher rate

This new stress test won’t apply to people renewing their uninsured mortgage.

Canada’s Office of the Superintendent of Financial Institutions (OSFI) announced these rule changes today. Draft changes were released in the summer for public feedback. (The Canadian Real Estate Association submitted this response to the draft rules in August on behalf of REALTORS® across the country.)

Under the new rules, the minimum qualifying rate for uninsured mortgages will be the greater of the Bank of Canada’s five-year benchmark rate or the contractual mortgage rate plus two per cent.

OSFI will also require lenders to enhance their loan-to-value (LTV) limits and restrict certain lending arrangements designed to circumvent LTV limits.

These changes apply to all federally regulated financial institutions.

This is the seventh time since 2008 that the federal government has made mortgage policy changes.

Read the government’s full announcement here.

Economic analysis from the BC Real Estate Association (BCREA):

“The impact of the new stress test requirement will be to lower the purchasing power of households by up to 20 per cent. Like past tightening of mortgage regulations, we anticipate that the market impact will be sharp but temporary. In the past, we’ve seen home sales decline in the three to nine months following the implementation of tighter mortgage lending standards, with the severity of the impact fading within one year. However, these new regulations impact a larger pool of mortgages and so the impact could be more significant than in the past,” said Cameron Muir, BCREA chief economist

Bank of Canada keeps key rate on hold on souring NAFTA talks, high household debt levels

Thursday, October 26th, 2017

BoC keeps key rate on hold amid fears over strained NAFTA talks, rising debt

Jesse Snyder
The Vancouver Sun

The Bank of Canada’s decision on Wednesday to maintain its current overnight rate is led by fears over high household debts and souring negotiations around the North American Free Trade Agreement, both of which could restrict inflation growth and delay future rate hikes.

Interest rates were kept at 1 per cent, a move that was widely expected following rate hikes in July and September. The decision reinforced the more dovish tone adopted by the bank in recent months, running somewhat in contrast to Ottawa’s cheery budget update released Tuesday.

The bank said a “pronounced” drop in Canadian housing prices, stronger U.S. GDP growth, rising household debt levels and threats by U.S. president Donald Trump’s administration to shred NAFTA are looming risks to the Canadian economy.

Bank of Canada Governor Stephen Poloz said Wednesday he had met with several Canadian businesses that have considered investing outside of Canada over fears NAFTA talks could crumble.

In particular, he said many companies are weighing whether they should invest in the U.S. as a hedge against souring negotiations over the treaty; others are considering increasing offshore production capacity rather than exporting from Canada.

“Companies are investing less than they would without the uncertainty around NAFTA,” Poloz said.

In its Monetary Policy Report released Wednesday, the BoC said uncertainties over the Trump administration’s trade policies could cause investment to shrink 0.7 per cent in 2017 and 2018.

The bank’s rate decision comes as Canada, Mexico and the U.S. agreed to extend NAFTA talks to March 2018 after failing to complete negotiations within the year. Reports that the U.S. has tabled several hard-nose policies have caused rumblings that the treaty could be scrapped altogether.

While the bank said threats to terminate NAFTA were a risk to inflation, its rate decision did not account for uncertainty around negotiations.

“We simply don’t know enough about what might happen,” Poloz said.

It remains unclear how businesses would react if the treaty were terminated, he said, emphasizing that the Canada-U.S. exchange rate in recent years has often been much wider than the tariffs that would likely fall into place in the absence of the trade agreement.

The bank also warned rising Canadian household debt levels were a risk to the economy. Future rate hikes are expected to have an increasingly acute impact on Canadian families, the bank said, as household debts continue to rise.

Household incomes and wages are also expected to rise in the near-term, but that trend could eventually expose more Canadians to costlier debts, particularly as consumer spending remains robust.

“This would provide a boost to economic activity, but it could further exacerbate the macro-economic and financial vulnerabilities associated with high household indebtedness,” the monetary report said.

Canadian household debt as a percentage of disposable income is among the highest in developed nations, according to data from the Organization for Economic Co-operation and Development (OECD).

Canada’s debt-to-disposable income was 175 per cent in 2015, the eighth highest in the group. Greece, the median country among OECD members in terms of debt-to-disposable income, was 119 per cent in 2015.

The BoC decision also cited overheated housing markets as a risk to growth, saying that a sharp fall in regional housing prices “could further weigh on consumption through negative wealth and collateral effects.”

Analysts at The Canadian Imperial Bank of Commerce said in a note that “Governor Poloz now appears to be back on the sidelines” as it awaits a rise in inflation and a firmer growth in wages.  

Douglas Porter, the chief economist at BMO Financial Group in Toronto, said in a note to clients that the bank “sounded considerably more cautious.” BMO now expects the BoC to hike rates next March, rather than January, and is forecasting a total of three hikes in 2018, down from an earlier estimate of four.

Poloz said that Canada appeared to be in a ‘sweet spot’ in which the economy was expanding, but that growth doesn’t appear to be accompanied by an equal rise in inflation. 

“There does not appear to be any immediate urgency to further increase interest rates, although this ‘sweet spot’ also clearly implies that the current low level of rates will become increasingly unneeded,” Porter said.

© 2017 Financial Post

Crimson at Cloverdale Village: Historical setting meets modern living

Thursday, October 26th, 2017

Development reflects old-world charm yet built according to 21st century standards

ROBIN BRUNET
The Province

The new Crimson at Cloverdale Village townhome project by RDG Management Ltd. is aptly being described as “small-town charm, modern living”; this also could apply to the historic Surrey village, which is currently enjoying a renaissance.

Settled in the late 1880s and long famous as the home for the Cloverdale Fairgrounds and rodeo, Cloverdale Village retains many of the heritage buildings constructed when the region was an agricultural hub — and one can easily stroll along its quaint Main Street and feel transported back to a quieter, kinder era.

Crimson reflects Cloverdale’s rural ambiance with 59 townhomes anchored by a clubhouse. The buildings are stately with steeply arched rooflines, and graced with elegant landscaping and white picket fences; at the same time, they are built according to 21st century standards, with energy efficiency and smart details.

Most of the homes have sideby-side garages, and the countrystyled kitchens are equipped with Whirlpool stainless steel appliances. “Creative DesignWorks Inc. was responsible for creating the interiors, which are large and bright and include old-fashioned touches such as a window over the kitchen sink,” says Melanie Themmen, sales manager at Fifth Avenue Real Estate Marketing Ltd. “Starting prices are in the low-to-mid $500,000s for the two-bedroom and flex units, and in the mid $600,000s for the three- and four-bedroom plus flex units.”

Crimson’s communal clubhouse features an entertainment lounge with kitchenette, a barbecue porch, and an outdoor play area for children.

While Crimson residents will find much to do and see in Cloverdale’s downtown zone, the larger neighbourhood is undergoing a facelift. Large pockets of what used to be retail surrounding Cloverdale’s core are being redeveloped for new commercial and residential purposes.

In short, Cloverdale is shaping up to be better than ever: a living slice of history that also provides convenience, whether it’s quick mass transit access to Vancouver and other Lower Mainland destinations, big brand shopping next door in Langley, or the tranquility of the sprawling farms and stables directly south.

While nearby neighbourhoods are enjoying steady growth, nothing comes close to the old-world charm in an authentic setting provided by Crimson — and as such, Themmen encourages interested parties to register today and take advantage of VIP prices.

She also urges them to act before 2018 and the implementation of new provincial government mortgage regulations that will reduce the buying power of new homeowners. “Crimson is a development from RDG that can’t be replicated anywhere else,” she says. “It is unique, and the homes will sell fast — so I would suggest taking advantage when the rates are in your favour.”

For more information on Crimson and to register to become a VIP, please visit crimsoncloverdale.com

© 2017 Postmedia Network Inc.

Strata council should review all decisions

Thursday, October 26th, 2017

Manager, council at odds over contracts

Tony Gioventu
The Province

Dear Tony: 

 Our strata council is having a power struggle with our strata manager.  We have had the same manager for six years and have been pleased with her service, but we have discovered a number of contracts that the manager has signed where the terms and conditions of the contracts were different than what we approved. The council approved elevator service contracts and waste removal contracts at fixed prices for no longer than three years. Our strata decided to change waste removal contractors and find we are locked into a seven-year contract and we are spending money on legal advice to terminate the agreement. The manager told us it is normal for them to sign contracts on behalf of their clients, but if we don’t sign and approve our own contracts, how can we guarantee we are getting what we approve? 

Ryan A. Surrey

Dear Ryan: 

The strata manager/management company are the agents of the strata corporation. In an agency agreement, the manager/management company has the authority to act on behalf of the strata corporation under the terms of the agency agreement which is your written contract, and the instructions that are given to the strata manager by the strata council. 

There is no such condition as  “normal” in relationship to the strata manager signing contracts. That varies in every strata agreement. The instructions that your council give should constitute decisions that are recorded in your minutes in the same manner as any other decision of council. While a single council member, such as the president, may give directions to the manager, even those decisions are often not what the strata council had agreed to. The best solution is for your strata council to review all decisions, ratify them by majority vote at a council meeting, and record the decisions and the instructions in the minutes. 

Your strata council may also instruct your manager that all agreements and contracts must be reviewed and signed by the strata council.  It is very easy to overlook a change in a contract, and depending on the nature of the contract, a small amount of funds spent on legal advice before the contract is signed is in your strata corporation’s best interest. 

If your strata corporation has given an instruction to the strata manager, and they have acted contrary to that instruction that is a possible breach of their agency agreement and of the Real Estate Services Act, the Regulations and Rules of the Real Estate council.  Your strata council should start with a discussion with the strata manager and the broker of the company and if you have not reached a satisfactory solution contact the real estate council to file a complaint. For more information go to www.recbc.ca.    

© 2017 Postmedia Network Inc.

Green on Queensbury 707 – 747 East 3rd Street North Vancouver 164 condos and townhomes in 3 four storey buildings by Qualex-landmark

Thursday, October 26th, 2017

North Vancouver’s Green on Queensbury to take its place overlooking five acres of parkland

Mary Frances Hill
The Province

Green on Queensbury

What:164 one-, two- and three-bedroom condominiums and townhomes in three four-storey buildings overlooking five acres of parkland

Where: 707 — 747 East 3rd St., North Vancouver

Residence sizes and prices:  Remaining one-bedroom units, 775 — 795 sq. ft., from $620,000s; two-bedroom homes between 823 — 1,084 sq. ft., from $705,000s; two- and three-bedroom park-front townhomes from 1,008 — 1,546 sq. ft., from about $1 million

Developer and builder: Qualex-Landmark Northern Limited Partnership

Sales centre address: 50 Queensbury Ave., (corner of East 3rd Street and Queensbury Ave.)

Sales centre hours: noon — 5 p.m., Sat. — Thurs.

The vitality of urban life meets the calm of a verdant, lush landscape at Green on Queensbury, Qualex Landmark’s planned community in North Vancouver. The two worlds also inspired Cristina Oberti, principal of Oberti Design, to create interiors with materials that at once reflect the surrounding nature and embrace the contemporary tastes of city dwellers.“The interior suites are classic yet contemporary, they’re where the urban and the natural meet,” says Cristina Oberti. “It’s a place for those who value the outdoors as much as they do city life. We tried to incorporate this fusion of lifestyles into the design, where you find a lot of natural materials and earthy tones mixed in with sleek, contemporary lines. The suites are designed to be both cosy and cosmopolitan, modern yet organic.”

In the otherwise all-white kitchen in the display space, Oberti has placed wine storage vertically within the cabinetry, clad in a light brown wood panelling that is a signature look throughout the home. The narrow shelving lures the eye upward to the ceiling, seeming to add height to the space. Oberti Design gives that brown panelling its star turn. The shade can be seen in the living room millwork, again in the large ensuite bathroom and in the bedroom headboard.

“The focal points of the display suite are the entertainment unit millwork and the master bedroom headboard design. They are the wow factors that grab the eye and that define and distinguish each space,” says Oberti.

The commitment to pairing natural and sophisticated materials continues in the bathroom, where it’s clear Oberti’s a fan of Bianco Carrara marble.
“[The marble’s] versatility and intrinsic, effortless beauty make it timeless and forever ‘now,’” she says. “Bianco Carrara can be used in so many ways. It provides both the perfect neutral backdrop and the sophisticated punch that brings a space to life.”

Throughout the suite itself, Oberti points out her team’s dedication to using height, angles, asymmetry in millwork and storage spaces, to help homeowners combat clutter. In the living room wall unit, for instance, “we have a combination of open and closed storage spaces in varying heights. The cabinets are assorted asymmetrically, making it a playful yet simultaneously functional and sophisticated design, perfect for displaying or storing things away.”

© 2017 Postmedia Network Inc.

Should We Follow New Zealand’s Foreign Buyer Ban?

Thursday, October 26th, 2017

Prime Minister-elect imposes blanket ban for non-resident buyers – but will it help curb runaway home prices?

Joannah Connolly
REW

New Zealand’s desirable capital, Wellington, saw home prices rise 18% between 2016 and 2017

New Zealand’s new Prime Minister-elect, Jacinda Ardern, has wasted no time in addressing that country’s soaring property prices.

Ardern – who seems to be taking over from Justin Trudeau as the global media’s latest, youngest, hippest nation leader du jour – announced October 24 that non-resident buyers will not be permitted to purchase existing homes anywhere in New Zealand (while also announcing a crackdown on immigration).

Just like in Metro Vancouver and Greater Toronto, New Zealand’s larger cities have seen a severe housing supply shortage and home prices have soared in the past decade, rising around 18% year over year in its capital, Wellington. Only a quarter of adults in New Zealand own their own home, compared with half in 1991, according to a Guardian report (and compared with 63.7% in Metro Vancouver and 66.5% in Toronto, according to Canada’s 2016 Census).

And, just like in BC’s provincial election, affordability, lack of supply and foreign ownership and speculation (particularly from China) were key issues in the country’s general election in September. So Ardern was duty-bound to make a big move once in office.

The policy is bound to be popular among New Zealanders, many of whom feel they have been pushed out of the housing market. But the question is, will the ban make a difference?

The Guardian report says, “Official statistics show that of the 48,603 property transfers registered by the government in the three months to June, just 3% were buyers with an overseas tax residency. The bulk of those were Chinese.”

This suggests that an outright ban would remove only 3% of New Zealand’s property buyers, which is hardly likely to make a huge difference to the market. (In Metro Vancouver, the official non-domestic buyer percentage was most recently pegged at around the same figure at 2.8%, but this is a dramatic drop from the 16.4% reported pre-foreign buyer tax.)

What might make more of a difference to New Zealand’s housing market – at least in the short term – is a “policy shock” just like the one seen in Metro Vancouver following last year’s introduction of the 15% overseas buyer tax. Which is to say that, rather than only overseas buyers pulling out of the market, the entire system freezes temporarily as locals and non-locals alike wait to see what effect the new policy will have on prices. This has the self-fulfilling effect of halting sales, and price growth, until people get used to the “new normal” and the system unfreezes, as it is bound to do. After all, people still have to buy and sell homes.

The other issue, of course, is that it’s very easy to get around these kinds of bans. Overseas buyers who still want in on New Zealand real estate can find loopholes such as resident proxy buyers, New Zealand-based shell companies, and so on. So it’s reasonable to expect that a chunk of those 3% of banned buyers will still find a way.

Naturally, leaders and industry insiders in BC are watching New Zealand with interest, to see if it will “work” and whether we should follow suit. According to a Global BC report, BC Green Party leader Andrew Weaver said he approved of the policy and hoped BC will impose a similar ban. “It’s not about stopping people from owning homes who live here and pay taxes,” he said. “It’s about ensuring British Columbians can live in homes in British Columbia.”

But the same Global story also reports UBC Sauder School of Business adjunct professor Tom Davidoff as saying that he doubts the ban will be effective. “I tend to believe restrictions [and] bans are hard to enforce at times. We had it here in British Columbia even with the foreign buyer tax.”

My guess? I agree with Davidoff on this one. I think that, like Vancouver, and once any policy shock is out of the way, New Zealand’s desirability and convenient Pacific Rim location will mean that buyers will just keep on buying. If anything, Ardern’s immigration crackdown may have more of a long-term effect on the housing market, if population growth stalls and local demand softens.

In the meantime, the popular new Prime Minister-elect will earn some kudos from her adoring voters for “tackling” the housing issue. We’ll see…

© 2017 REW.ca

$17.8m ‘Opportunity to Renovate’ Listed in First Shaughnessy

Thursday, October 26th, 2017

Priciest new Greater Vancouver listing of last week is a grand, 1912-built fixer-upper on a large lot

Joannah Connolly
REW

This grand, 105-year-old mansion in Shaughnessy was listed October 22, 2017 for $17.8m ? Listing agent: Jeff Benner, Re/Max

A 7,200-plus-square-foot mansion in First Shaughnessy was Metro Vancouver’s highest-priced new real estate listing of October 16-22, REW’s weekly look at MLS® data reveals – and it seems the house needs some work.

The “opportunity to own and renovate” this grand house on a huge lot in the region’s fanciest neighbourhood will set you back $17.8 million before renovations.

If you’re hoping the listing will reveal how much work needs doing, you’re out of luck – all photos are of the imposing exterior and expansive grounds, although the description says the “modern kitchen and deluxe laundry room” are already renovated. The listing also describes the “potential for a pool, tennis court or private mini-golf” as the coveted land totals three-quarters of an acre.

The listing was the priciest of 933 homes to appear on the Greater Vancouver MLS® the week of October 16-22, which is a jump from the previous week’s 861 new listings.

That increase brings the total number of Greater Vancouver homes available for sale to 9,186 – slightly lower than the week before, suggesting total sales picked up somewhat week-to-week.

The median listing price of a detached home in the region rose by a mere $844 to $2,099,844, of the 5,648 single-family homes currently available for sale as of October 26.

Condo listing prices stayed at the same median as the previous week – $699,000 – but townhouses, row homes and other attached houses jumped by $20,000 in one week to their current $988K median list price.

© 2017 REW.ca

Vancouver downtown office vacancies at 4-year low

Thursday, October 26th, 2017

Steve Randall
REP

New figures reveal that the office inventory in Downtown Vancouver is at its lowest rate since the second quarter of 2013.

CBRE says that the vacancy rate in the third quarter of 2017 was just 5%, the second lowest in North America, and half of the rate at the start of 2016.

“The drop in Downtown Vancouver’s vacancy to near record lows, and the current lack of available space, has become the catalyst for speculative development by conservative investors like GWL Realty Advisors and the Healthcare of Ontario Pension Plan. This demonstrates their upmost confidence in the ongoing strength of the Vancouver office market,” says Norm Taylor, Executive Vice President for CBRE Vancouver.

With the tech sector driving demand for Vancouver offices, the construction of 1.6 million square feet of new offices will certainly be welcome, but is below than the 5-year average.

“The fact that vacancy rates have halved in under two years is testament to the economic vitality of the city and the expansion of businesses here in Vancouver. While relief for tenants is on the horizon in terms of new buildings, in the short-term it means businesses seeking office space in Vancouver will see an upwards pressure on rents,” added Taylor.

Copyright © 2017 Key Media Pty Ltd

CRA analyzing nearly 3,000 condo flipping cases in Toronto

Thursday, October 26th, 2017

Ephraim Vecina
Mortgage Broker News

The Canada Revenue Agency is analyzing 2,810 transactions involving cases of pre-construction condominium flipping in Toronto to determine whether audits need to be carried out to find tax evaders.

In the Toronto area, audit work has picked up accelerated on what are called “assignment sales” or “shadow flipping”, in which a condo is purchased from a developer and sold to another buyer before the unit is completed.

“The profits from flipping real estate are generally considered to be fully taxable as business income,” CRA spokesperson Zoltan Csepregi told The Canadian Press via email. “The facts of each case determine whether such profits should be reported as business income or as a capital gain.”

Real estate deals in the Greater Toronto Area and Vancouver have been the subject of greater scrutiny, including audits.

“Over the years, CRA has made significant progress in using intelligence gathered through a variety of tools at its disposal as well as using experienced audit and investigations teams,” Csepregi noted. “New technologies and faster computers are helping us to more effectively access, integrate, and analyze this data, resulting in better business intelligence.”

The CRA’s interest in tax avoidance in real estate is likely related to affordability issues in Toronto and Vancouver over the last couple of years, according to Tsur Somerville, senior fellow at the UBC Centre of Urban Economics and Real Estate.

The average selling price of a condo in the Toronto area in the third quarter of this year rose 22.7% to $510,206 from $415,894 in the same quarter last year, according to figures released by the Toronto Real Estate Board earlier this week.

Meanwhile, per the latest data from the Real Estate Board of Greater Vancouver, the benchmark price of an apartment in Greater Vancouver last month was $635,800, up 21.7% from September 2016.

Some have drawn a connection between speculation in the condo market and rising prices, Somerville said. “When you’re sort of in a situation where for a lot of people affordability is a real crisis, the notion that somebody is making money off market conditions and then not paying their taxes, I think, is particularly acidic.”

As all levels of government face pressure to help housing affordability, Somerville said going after potential tax evaders is a political win.

“The only people who lose on this are people who are evading taxes that the rest of us have to pay,” he said. “No one is going to cry a river for folks who are avoiding their taxes on large gains.”

Copyright © 2017 Key Media

Interest rates held, economists react to dovish BoC

Thursday, October 26th, 2017

Steve Randall
Canadian Real Estate Wealth

The Bank of Canada held interest rates steady at 1% and signalled a cautious approach to future rate rises.

The bank is forecasting a continued rise in inflation, reaching 2% in the second half of 2018 and for the economy to grow at above-potential with 3.1% for this year, 2.1% for 2018 and 1.5% in 2019.

Slack in the labour market including wage growth means there could be greater potential, however the high value of the loonie is a hinderance for exports.

TD Economics senior economist Brian DePratto said that the economy is in something of a sweet spot for the BoC meaning that there is no immediate urgency for a further rise in interest rates but also that the low interest environment is no longer necessary.

CIBC’s Nick Exarhos said that the dovish tone of the BoC means that he still expects the next rise in interest rates to be in the spring of 2018.

The Conference Board of Canada’s Chief Economist Craig Alexander and Economist Alicia MacDonald said that the dovish tone was surprising.

“With the economy quickly absorbing its excess capacity and growth in labour productivity suggesting a forthcoming acceleration in wage gains, we continue to believe that three more interest rate increases may be warranted before the end of 2018,” they said.

Copyright © 2017 Key Media Pty Ltd