Home sales in October improved

Steve Randall
REP

October brought some positives for the new homes market in the Greater Toronto Area with sales and openings gaining.

A report from the Building Industry and Land Development Association (BILD) shows that there were 2,805 condominium apartments in low, medium and high-rise buildings, stacked townhouses and loft units sold in October (Altus Group data). Although down 44% from October 2017 the figure was only 1% below the ten-year average.

For single-family homes, there was no change from a year ago and sales were 64% below the 10-year average.

“The pickup in interest from builders and home buyers that started to emerge in the GTA new home market in September gained momentum in October,” said Patricia Arsenault, Altus Group’s Executive Vice President, Data Solutions. “October was the best month we’ve seen this year not only in terms of sales—for both single-family homes and condominium apartments—but also new project openings. And for both sales and new openings, the increases from last month were stronger than the typical seasonal pattern.”

Condo prices gain year-over-year The benchmark price of new homes in the GTA in October eased slightly month-over-month but for condo apartments there was a year-over-year gain of 14.5% to $775,537.

The benchmark for single-family homes was down 8.4% year-over-year to $1,115,824, although this can be explained by the smaller benchmark size of units available for sale.

David Wilkes, president and CEO of BILD says the market is returning to more typical activity levels, an encouraging sign.

“It’s clear that when we are able to bring on more supply and give new home buyers more product to choose from, they get excited and motivated about making that choice,” he said. “That’s why we are especially heartened by the new provincial government’s commitment to increasing housing supply through its Housing Supply Action Plan,” he said.

Copyright © 2018 Key Media Pty Ltd

Rental market only for the rich

Ephraim Vecina
Canadian Real Estate Wealth

Data from Urbanation indicated that Toronto condo rent rates increased by 7.6% on an annual basis to reach an average of $2,385 in Q3 2018, and by 17% for newly available purpose-built units.

Long considered a haven for the city’s affordability seekers, the rental market is becoming less friendly to all but the wealthiest families.

“We’ve reached a point now where given the amount of people, industries we’re attracting, we are already becoming terribly unaffordable for everyone,” University of Toronto professor Richard Florida told Bloomberg. “We’re at a crisis and we don’t even realize it: Our transit, traffic problem and housing problem are urgent matters.”

“Everyone’s getting priced out,” he added. “My students at the Rotman School of Management in the University of Toronto, who are going to be some of the most successful students in Canadian business, are now saying it’s doubtful they could ever afford a single-family home.”

A scarce supply of rental units is not helping matters, with Toronto’s apartment vacancy rate currently around 0.5%.

“Homelessness is growing, couch-surfing is growing and this will have a lot of pressure on families and on the city itself,” according to Alejandra Ruiz Vargas of the low-and-moderate-income advocacy group Association of Community Organizations for Reform Now Canada.

Not even a seemingly healthy number of housing starts is enough, as a recent study by Altus Group Ltd. reported that the pace of rental units entering the market is not enough to accommodate Toronto’s influx of 17,000 new renter households a year.

The condo completion rate has nearly reached a 5-year low of around 10,000 units. Also, only 11,620 new units across 60 purpose-built rental buildings were built since 2005.

Copyright © 2018 Key Media Pty Ltd

Median price is up 26.5 per cent from a year ago, nearly twice the increase of detached home prices

Joannah Connolly
Western Investor

Strong demand for condos in popular winter resorts is driving massive price gains in Whistler at nearly double the rate of detached homes, according to a report released November 28 by Royal LePage.

Despite an overall slowdown in home sales, the brokerage reported that the median price for a condo in Whistler increased by 26.5 per cent to $610,000 this year, compared with a year ago. This compares with prices for detached homes in the resort municipality, which increased by 14.5 per cent to a median price of $2.4 million.

The price increases in both categories are being driven by retirees and investors looking for a winter getaway, according to Royal LePage.

“More affordable properties are still seeing high demand, despite a slowing in overall activity,” said Pat Kelly, president and owner, Royal LePage Black Tusk. “The B.C. foreign buyer tax and speculation tax does not apply to Whistler, and as such there has been no drop in interest from international buyers. That being said, recreational properties in the area are primarily bought and sold by individuals who are local to the province, while international buyers only represent a small proportion of sales in Whistler.

Looking ahead, Kelly added, “In 2019, we expect further price appreciation, albeit at a slower pace than in previous years.”

Whistler’s condo price rise was among the steepest of all the Canadian ski resorts surveyed by Royal LePage, second only to the 30 per cent condo price jumps seen in Mont Tremblant, QC.

Phil Soper, president and CEO, Royal LePage, stated, “Canada boasts the world’s most spectacular winter experiences. The number of buyers shopping for a four-season recreational property, be they traveling a modest drive from the local metropolis or a jet-setting trip across the pond, is again on the rise, and recreational property values are rising as a result. This is particularly true in the mountainside condominium market as more and more investors seek the convenience of lock-and-leave living.”

Copyright © 2018 Western Investor

Presale deal is for 4,422-square-foot luxury home atop Customs House building on Government Street, to be complete in 2020

Carla Wilson Times Colonist
Western Investor

A Canadian couple has finalized a pre-sale deal for the $10.79 million penthouse in the Customs House building — smashing previous records for Victoria condominiums.

The high-end building is to be ready for occupation in early summer of 2020, developer Stan Sipos said Monday.

Consisting of 4,422 square feet on the seventh level and a roof deck spanning 1,990 square feet on the eighth level, the penthouse will feature three bedrooms and a den. It comes with views of Victoria Harbour, the B.C. legislature, the CPR Steamship Terminal building on Belleville Street and the Fairmont Empress hotel.

In 2014, musician David Foster’s penthouse condo in the Shoal Point condo development in James Bay sold for a record high of $5 million. It beat the $4.2 million sale price for another Shoal Point unit in 2007.

Another couple, from Canada’s east coast, has signed a pre-sale agreement to buy a sub-penthouse in Customs House for close to $7 million. And now, the latest buyer signed an unconditional, pre-completion sale for the penthouse at its listed price, Sipos said.

It is common for buyers to sign pre-sale agreements to reserve a unit at a specific price in a condo development. A certain percentage of pre-sales can be required by a financing institution before it releases funds for a development.

The $100-million-plus project is being built at the former Canada Customs building site at 816 Government St. and the next-door heritage building facing Wharf Street. The property is bordered by Government, Wharf and Courtney streets. Heritage facades are being saved and the interior has been gutted.

Sipos expects the project will breathe more vitality into Wharf Street.

There are nine units remaining of the 57 originally available. The bulk of the units are between $1.5 million and $3.5 million, Sipos said.

Project real estate agent Craig Anderson, of Vancouver’s Magnum Projects, said buyers are typically 55 to 64 years old, planning to live here full-time during retirement. At least half the buyers are from Victoria. Some Canadian buyers have been living far afield, in places such as Japan and Europe.

The project includes lower-level commercial and the desire is to find a high-end restaurant for that space, Anderson said.

Sipos said that although the real estate market “isn’t super hot right now,” pre-sales show that “Customs House is an extraordinarily special project.”

“The details and the architectural materials used I hope will really reflect what it is meant to be.”

It will be “iconic” when it complete, he said, likening it to a work of art. This has been a “very, very expensive project,” he said.

For example, it was not easy to find workers experienced in working in limestone to create elaborate details such as cornices. The thick windowsills are made of stone.

Features include 10- to 13-foot-high ceilings, heated bathroom floors, motorized roller-shade blinds, a concierge offering a full range of services, secured underground parking with cameras and a car-wash station. Units will be wired for smart-home automation.

Copyright © 2018 Western Investor

High home prices not a recipe for crash

Steve Randall
REP

High levels of household debt and the sky-high home prices in some Canadian markets have led some commentators to make comparisons with the US housing crash which sparked the global financial crisis of a decade ago.

But Chartered Professional Accountants Canada says that a Canadian housing crash is unlikely because conditions are not the same as in the US in 2008.

“Beyond prices and debt levels, Canada shares far fewer similarities with the US than you might think. This becomes very apparent when you look at just one measure; credit quality,” explains Francis Fong, CPA Canada’s Chief Economist and author of the study: The Real Story Behind Housing and Household Debt in Canada: Is There Really a Risk?

Fong highlights that the US housing market in 2008 suffered from lax regulation and the prevalence of subprime mortgages that many homeowners could simply not afford.

Although Canada’s housing market is not immune to risks, the quality of credit – CMHC says 88% of borrowers had high credit quality in 2017 compared to just 3% low quality – makes a US-style crash unlikely.

Rise in unregulated lenders Fong’s report does point to a “sharp rise” in the use of unregulated mortgage lenders in Canada; this has been exacerbated by the tighter lending rules introduced at the start of 2018.

However, even with this increase Fong says that the impact of any failures by these lenders would be less far-reaching that those in the US during the last bust.

“The situation in Canada is likely not a bubble in imminent danger of deflation; in fact, housing prices may reflect the true value of living space in Canada and in some markets increased household debt may be the new price for real estate,” says Fong. “Our cities frequently are listed among the best places to live and work in the world and, compared to their peer cities abroad, they are not among the most expensive. We may simply be dealing with the law of supply and demand, so affordability could continue to be a challenge for the foreseeable future.”

Copyright © 2018 Key Media Pty Ltd

Money laundering rampant in BC real estate

Steve Randall
REP

Criminal networks could have used British Columbia’s real estate market for more than $1 billion of money laundering.

A secret police report, obtained by Global News, reveals that crime networks are linked to 10% of the 1,200 luxury real estate purchases in the Lower Mainland included in a police study in 2016.

These include a $17 million Shaughnessy mansion owned by a suspected importer of the potent drug Fentanyl.  

Of around 120 properties linked to crime, 95% are believed to have Chinese crime network origins.

Global News own analysis says that the crime networks may have laundered more than $5 billion in Vancouver-area homes since 2012.

The extent of the money laundering issue and the findings of the police study are discussed on the Simi Sara Show from 980 CKNW.

Copyright © 2018 Key Media Pty Ltd

Canada’s banks to expect good returns in Q4

Armina Ligaya
Mortgage Broker News

Canada’s biggest banks are expected to close out a strong financial year that was helped by interest rate hikes and favourable credit conditions with a “whimper” of a quarter.

The Bank of Nova Scotia is the first of its peers to report its earnings for the three months ended Oct. 31 on Tuesday, and the quarter is expected to provide a solid but quiet end to a year of strong growth and earnings “well above” estimates from 12 months ago, CIBC Capital Markets analyst Robert Sedran said.

“Ending the year with a whimper may be an overstatement given the still strong (year-over-year) growth we forecast, but we do see fewer positive catalysts this time than we have seen in earlier quarters,” he said in a recent note to clients.

Royal Bank of Canada reports its quarterly results on Wednesday, followed by the Canadian Imperial Bank of Commerce and Toronto-Dominion Bank on Thursday. The Bank of Montreal and the National Bank of Canada will deliver their results the following week on Dec. 4 and Dec. 5, respectively.

Analysts are expecting the country’s largest financial institutions to collectively deliver earnings per share growth as high as 12 per cent in the financial fourth quarter, year-over-year.

That would mark a steady close to a financial year whose initial outlook was clouded by concerns surrounding domestic mortgage demand amid new stricter lending rules and the negotiations of the North American Free Trade Agreement.

Canada’s housing market appears to now have adjusted to the regulations for uninsured mortgages that were implemented on Jan. 1. And in September, the United States and Canada were able to reach an agreement in principle called the U.S.-Mexico-Canada agreement.

Meanwhile, multiple Bank of Canada rate hikes this year have helped expand the banks’ net interest margins _ the difference between the money they earn on the loans they make and what they pay out to savers.

“After five BoC rate hikes over the past year, we anticipate margin expansion will continue to play out” in the latest quarter, said John Aiken, an analyst with Barclays in Toronto in a recent note to clients.

“And, with Canada’s economy staying positive, we anticipate lending volumes will edge higher to close out the year.”

Canadian loan growth remains strong, with solid commercial lending offsetting slowing personal lending, said Scott Chan, an analyst with Canaccord Genuity in a note to clients. However, U.S. capital markets saw a light quarter and the equity market selloff in October will have ripple effects for the banks’ asset management businesses, he added.

Still, credit conditions remain favourable and the banks with U.S. exposure will likely benefit from lower taxes, said Sohrab Movahedi, an analyst with BMO Capital Markets.

“Earnings fundamentals of the group remain generally intact for the foreseeable future with a benign credit environment, focus on efficiency improvements, and central bank rate increases helping offset moderating economic growth outlook in Canada,” he said.

Despite the favourable conditions, Canadian bank stocks have been languishing and market sentiment has been tepid amid a weaker stock market overall.

On a forward price-to-earnings ratio basis _ meaning a current stock’s price relative to its predicted earnings per share _ the Canadian banks are trading at 9.6 times, below the 20-year average of 11.1 times, Aiken said.

“While bank valuations have been caught in the broader market downdraft, we believe that investors are concerned that the domestic operating environment remains challenged, underscored by a slower loan growth and an economic cycle likely in the late innings,” he said.

However, the banks’ fairly diversified businesses to weather a slowdown, steady mid-single digit earnings growth and solid dividend yield “offers compelling counterpoints to fend off the bears,” he added.

Perhaps more important than the actual earnings churned out this quarter are the signals from bank executives about what they expect in the year ahead, analysts say.

One theme that will be closely watched is mortgage market trends, after the revised underwriting guidelines drove home loan growth down to its lowest level in decades, said Gabriel Dechaine, an analyst the National Bank of Canada.

Mortgage originations in the first half of the latest financial year were inflated by home loans that were locked in before the revised rules for uninsured home loans took effect on Jan. 1. Any guidance on the likelihood of zero or possibly negative mortgage growth in the coming year is something to watch for, Dechaine said.

Also key will be commentary on signs that Canadian homebuyers are turning to lenders who are not subject to the new underwriting guidelines, which involve implementing a stress test to gauge whether borrowers would be able to service their mortgage if interest rates go up.

A recent Teranet report that showed that nine per cent of mortgage originations in the Greater Toronto Area during the second quarter went to “private lenders”, up from six per cent the prior year, Dechaine noted.

“We are curious to hear what banks think of clear signs that shadow banking in Canada is getting bigger.” 

The Canadian Press

Copyright © 2018 Key Media

Bank of Canada to expand assets

Steve Randall
Canadian Real Estate Wealth

The Bank of Canada is planning to buy mortgage-backed securities for the first time following a periodic review of its balance sheet management.

The bank wants to expand the securities it holds to offset its liabilities (largely bank notes in circulation and Government of Canada deposits).

The bank is now expanding the assets it acquires outright to include the purchase of federal government guaranteed-debt securities issued by federal Crown corporations.

This will include a small portion of debt backed by the CMHC and purchases will be conducted in the primary market, likely in the remaining weeks of 2018 or early in 2019.

“The Bank plans to allocate a small portion of its balance sheet for acquiring federal government guaranteed securities by purchasing Canada Mortgage Bonds,” the BoC statement says.

It added that it “will continue to adhere to its principles of neutrality, prudence and transparency and conduct its transactions in a manner that limits market distortions and minimizes impact on market prices.”

It says this will have no implication on monetary policy or financial stability of the bank.

Copyright © 2018 Key Media Pty Ltd

In a blind bid all offers are presented separately

Ross Wilson
REM

Legal and ethical protocol dictates that during a bidding war, buyers are deliberately kept unaware of the terms of competing offers. To ensure a blind bid, all offers are typically presented separately in one session, and in the same order as they were registered with the listing brokerage. Each buyer agent is given a brief private opportunity to argue the merits of their client’s offer.

To help develop a feel for each buyer’s intention and position, a smart listing agent will take advantage of these moments by asking questions of each agent (who often inadvertently disclose too much) regarding their client’s offer. The length of each presentation will obviously depend on the quantity and complexity of the offers. Afterward, each agent is asked to leave a copy with the listing agent for later comparison during a private consultation with the seller. This continues, usually with all agents (and sometimes the buyers) waiting elsewhere in the home or outside, until all bids have been presented.

With a copy of each offer spread before them, the seller and their agent compare the pros and cons of all bids. Sometimes, the seller may reject the least acceptable and work with only the best few, or they may simply accept the best one. If the irrevocable dates permit, they might counter one while holding all others in abeyance. If that counter-offer is accepted, the show is over. However, if it’s rejected, the seller may repeat the procedure with the next best offer until an APS is executed.

When countering, it’s critical to be ever mindful of irrevocable dates and times. If a seller counter-offer is verbally rejected by a buyer, but the seller’s written irrevocable time and date haven’t strictly expired, that buyer could change their mind prior to the technical expiry of the seller’s offer and accept the counter-offer. Assuming a verbal report of its rejection to be binding, if the seller proceeds to deliver another fully executed counter-offer to a second buyer while the first counter remains officially valid, and the second buyer accepts it, the seller has risked contractually committing to two separate buyers. Be very careful – this is really easy to do. And you may pay the price for your negligence, maybe a big one.

Nevertheless, sellers often elect to return all offers untouched to the respective buyer agents, thereby allowing each buyer a chance to improve their bid. In this event, the listing agent should forewarn their seller of the possibility of some or all of the offers being withdrawn. When the remaining offers are re-registered, the entire process begins anew in the order of their return. After a brief private consultation with the listing agent, the seller usually chooses one.

When given the chance to enhance the terms of their offer, if a buyer is unable or prefers not to increase the price, they should re-submit anyway. One never knows; some or all of the other buyers may feel the same way and refuse to alter their offer terms or even withdraw from the competition. It would be a shame to lose a bid because your buyer gave up, especially since it costs nothing to persevere. Instead of quitting, consider other ways to improve their offer. Removing conditions, adjusting the closing date to comply with a seller’s preference, excluding chattels, eliminating seller requirements or increasing the deposit might do the trick. Usually, though, it comes down to conditions and price.

When a buyer unwisely shuns all competitions, they miss out on the possibility of acquiring an obviously desirable home. It’s like not buying a lottery ticket; you can’t win without playing the game. Rather than be frightened or intimidated, they should proactively commit to a maximum realistically affordable price – in advance – that’s not ridiculously over what you collectively agree is fair market value, and faithfully stick to it. Don’t budge.

During a competition, if offer prices soar into the stratosphere and well over your buyer’s previously determined maximum, encourage them to resist the temptation to join the frenzy. Bidding wars can be emotionally challenging and exceedingly expensive. If they lack sufficient financial clout or the stamina to continue, and/or prefer to avoid paying top dollar, tell them to walk away. There’ll be another property somewhere sometime that they’ll love just as much and maybe more.

In the final of this three-column series, I opine on the controversial topic of what has become known as the infamous bully offer.

© 2017 REM Real Estate Magazine

Vancouver housing market?s recovery to take longer

Josh Sherman
other

The Vancouver housing market’s recovery is likely going to take longer than Toronto’s despite both being triggered by the same event, says an economic-research firm with a reputation for being somewhat of an outlier.

“After the stabilisation of the Toronto housing market this year, it’s tempting to think that the deterioration in the Vancouver market will end in a soft landing,” writes Stephen Brown, senior Canada economist for Capital Economics, in a Canada Economics Update published today.

“But Vancouver housing is more overvalued, and there are clear signs of excess supply coming to the market in the next couple of years,” Brown adds.

Capital Economics says 42,000 homes are under construction in Vancouver, whereas in much larger Toronto there are 71,000 units in the works. This means contractors in Vancouver are building 1.2 units for each newcomer to the city this year, versus 0.5 in Toronto.

But supply is only one of several factors Capital Economics looked at. Also under the microscope were the causes of the downturns, possible overvaluation of homes in each city, and demand — or lack thereof.

While Capital Economics credits stricter federal lending regulations, introduced at the beginning of the year, with spurring housing downturns in Toronto and Vancouver, Brown suggests the latter is more overvalued and has weaker demand-side factors.

In terms of overvaluation, one metric Capital Economics looked at was the ratio of home prices to median household incomes. In Vancouver, house prices were more than 12 times the median household income, above Toronto’s nine times.

Meantime, population growth, considered a fundamental contributor to housing demand, is slower in Vancouver than in Toronto. As of October, Vancouver’s population was growing at a rate of 1.6 percent annually, compared to Toronto’s more rapid rate of 2.5 percent.

“The upshot of all this is that there are numerous reasons to think that Vancouver house prices are more vulnerable to a correction than those in Toronto,” Brown notes, suggesting home prices could drop by 5 percent in 2019.

© 2018 BuzzBuzzHome Corp