Measures such as mortgage stress test are “at cross purposes” with federal promises to support the middle class, asserts Mortgage Professionals of Canada

Joannah Connolly
Western Investor

Young and middle-class Canadians are being denied the opportunity of homeownership due to the rigorous mortgage stress test, according to a report released January 23 by Mortgage Professionals of Canada (MPC).

In its 2019 Annual State of the Residential Mortgage Market in Canada report, the group came down hard on federal mortgage regulation policies, saying that the stress test introduced in January 2018 was largely to blame for the current housing market slowdown. MPC argued that many buyers were now unable to get into homeownership at all, while others have had to buy a cheaper, less desirable home to qualify for a mortgage.

Paul Taylor, president and CEO of MPC, said the slowdown in key markets across the country is steeper than anticipated. “We are seeing downward trends and/or depressions in areas like the resale market, the outlook on employment in the housing construction sector, and a continued decline in rental vacancy rates,” stated Taylor. “Federal policy changes are disqualifying potential first-time homebuyers and creating immense pressures on the rental market which is in turn driving rental prices higher. It is a spiralling problem.”

Report author and MPC chief economist Will Dunning cited a comment made in the same annual report one year ago, which read, “By the time of the next federal election in October 2019, about 200,000 Canadian families will have encountered sharp personal disappointment as the direct result… (they will either have significantly reduced their housing expectations in order to obtain financing, or been entirely prevented from buying a home).”

The 2019 report added, “This is all unfolding substantially as we expected a year ago.”

Dunning argued that the federal government’s promise to help middle-class Canadians prosper was being undermined by the mortgage stress test and other market-tempering measures. He wrote, “Most fundamentally, Canadians, especially young, middle-class Canadians, will, in very large and growing numbers, be denied the opportunity to build their financial futures through home ownership. The current federal government came to power largely based on its promises to support the middle class. Its policies that constrain home buying are at cross-purposes to those promises.”

Renting vs owning

The report also cited a recent MPC analysis of the costs of renting versus homeownership in 266 cases of varying housing types and locations across Canada. The study found that homeownership was less expensive than renting over the course of a lifetime, making homeowners much more financially stable than renters in the long term.

“In terms of total monthly costs, renting costs less than owning. However, the monthly cost of homeownership includes large amounts of repayment of principal, which is a form of saving. Therefore, it is reasonable to net-out principal repayment from the cost of ownership. On this net-cost basis, the cost of ownership is lower than the cost of renting in 202 of the 266 cases (76 per cent). This is for the first year. Once the person is in the home, the monthly cost will increase more rapidly on a rental basis than for an owner-occupant, because the mortgage payment is fixed…  Over the course of a lifetime, ownership is much better financially than renting. Consequently, owners have much more ‘net wealth’ than renters in the same age groups and income brackets. It isn’t just that they have more housing wealth – the lower cost of homeownership has allowed them to save more in other forms.”

The report concluded, “The mortgage stress tests, by making it much more difficult for Canadians to become homeowners, are going to significantly impair their long-term financial well-being.”

Dunning added that there could be wider economic effects of a housing price correction. He wrote, “Constrained growth of house prices will dampen consumer confidence compared to what it would be otherwise, and this will gradually impair job creation across the economy.”

© Copyright 2019 Western Investor

Point2 Homes has revealed the home feature stats

Neil Sharma
REP

Ever wonder which home features most interest buyers? Well, Point2 Homes has crunched the numbers for you.

As one of Canada’s leading property search websites, Point2 Homes determined that pricing is buyers’ overriding concern during the home buying process. Listings under $100,000 receive 233% more leads and 45% more views than their more expensive counterparts. However, 70% of real estate sales representatives surveyed by Point2Homes say “charm pricing”—listing a home, for example, at $199,999 instead of $200,000—has no bearing on the number of leads they accrue.

Listing pictures are also very important, but post too few or too many and you’ll lose prospective buyers’ interest. Nine in 10 of them rely on the internet to research properties, meaning having listing pictures will generate zero interest.  The perfect balance, on the other hand, is six to 15 photos, even though agents like posting between 26 and 30 photos. Point2 Homes also found that listings with six to 10 pictures generate 52% more leads than listings with either one to five, or too many at 46 to 50.

Inundating prospective buyers with too much listing information, while apparently counterintuitive, tends to repel them. Keep it brief—Point2 Homes says no more than 250 characters—because the average prospective buyer spends only 20% of their time on listings’ details. What this means for sales agents is that they only have one chance to grab a potential buyer’s attention—about two seconds without a listing photo, and 20 seconds with a single one.

Another way to reel in buyers is by focusing on listing type. Point2 Homes found that two-bedroom condos are the most popular searches among Canadians since most urban centres have begun intensifying. Three-bedroom properties get the most views but two-bedroom homes nevertheless produce 14% more leads. One and a half bathrooms are also favourable when it comes to buyer preference, as they generate the most number of views and leads, even though homes with a single bathroom are cheaper. Lastly, condos receive 16% more leads than houses.

Prospective buyers pay close attention to amenities, too. According to Point2 Homes, sales representatives have a propensity to think buyers aren’t attracted to homes with pools, however, those properties actually generate 46% more leads than homes without pools. Properties with views of water also get 18% more leads than properties without those views.

Copyright © 2019 Key Media Pty Ltd

Altus Group report states commercial real estate firms using property technology

Neil Sharma
Canadian Real Estate Wealth

According to a report from Altus Group, commercial real estate firms are beginning to adopt property technology platforms in ways that promise to change the industry in the near future.

The Altus Group CRE Innovation Report surveyed 400 commercial real estate executives at firms with assets under management totalling over $2 trillion, 41% of whom are already using automaton for benchmarking and performance analysis. Thirty-nine percent are using automation for scenario and sensitivity analysis and 36% are using it for budgeting and forecasting.

“Sixty-one percent of CRE [commercial real estate] executives around North America use some online lending platform, and 23% of them are using them in a pretty significant way,” said Ross Litkenhous, global head of business development for Altus Group.

“From a crowdfunding perspective, you’re giving a broad, wide array of investors the opportunity to invest in a piece of real estate, whereas in traditional commercial real estate, you have folks that syndicate money or are tied in with a high net worth individual. Everybody gets a percentage of a deal. From crowdfunding you’re going out to the masses and asking people to invest in a deal through some sort of online platform, which is not the way real estate has been traditionally done. It’s taking evolutionary leap.”

Some of the online lending firms are Lending Tree, Blend, and RealAtom; a couple of the online investment and crowdfunding companies are Cadre and Fundrise; and an online exchange company is Ten-X.

Litkenhous talks about the bell curve, in which innovators lead the way and are followed by early adopters; then the early majority, who are followed by the late majority; and finally they are tracked by laggards, who tend to be conservative in outlook and execution.

“My opinion is we’re between early adopters and the early majority phase,” he said. “What that means is it’s gotten enough mainstream coverage and enough folks who have trusted the technology enough to do deals, and they have seen the value. Now larger companies and larger players are saying it’s been out long enough that it’s time to adopt. In our survey, we saw 53% of our respondents said they were directly investing in one type of PropTech firm.”

The report further stated that the combination of new market entrants and technologies, as well as changing demographics, have created disruptive models within the commercial real estate industry. Moreover, many firms within the industry are investing heavily in property technology to the point that they will influence the industry’s future direction.

“This means significant opportunity for firms who rapidly embrace innovation and PropTech to streamline their systems and processes to reduce complexity. Staying on top of the disintermediating drivers will help ensure CRE executives are well-positioned to leverage the latest available technologies to their advantage,” read the report.

“The combination of new market entrants, new technologies and changing demographics have created disruptive models within CRE. This means significant opportunity for firms who rapidly embrace innovation and PropTech to streamline their systems and processes to reduce complexity. Staying on top of the disintermediating drivers will help ensure CRE executives are well-positioned to leverage the latest available technologies to their advantage.”

Copyright © 2019 Key Media Pty Ltd

“Speculators” were always going to hate the speculation tax

Les Leyne
Western Investor

Speculators” were always going to hate the speculation tax, that’s pretty much a given

What the provincial government has managed to do this week is annoy a good part of the vast majority of homeowners who would never be considered speculators.

As soon as a government starts playing the targeted tax game, it can count on a certain amount of “better them than me” passive support from those who aren’t targets.

That eroded somewhat this week, when the mechanics of collecting the levy were announced. The collection system presumes that everyone has to pay the tax. So everyone has to pursue an exemption to escape it.

As defined by the B.C. NDP government, the speculator label applies with certain exceptions to anyone who owns a home that is left vacant for all or most of a year.

They’re going to pay an additional annual tax of several thousand dollars on those homes, so the opposition from that camp was always assured. It was encouraged to some extent by real estate agents who naturally resent any government intrusion in the market aimed at curbing it.

There’s also a streak of philosophical opposition running in a segment of the population. The original framing of the tax portrayed it as aimed at foreigners. That brought objections from people concerned about how unfriendly it is to offshore investors, with particular historical emphasis on Chinese owners. There were also worries about how unneighbourly it is to fellow Canadians.

(The rate was later adjusted so that all Canadians are being dinged equally.)

Politically, a good chunk of B.C. Liberal voters oppose it, simply because it’s a new NDP tax.

But all that opposition was offset to some extent by a broad swath of people who were priced out of the housing market years ago, can never catch up to get in the game and actively resent those who “got lucky.”

Those whose circumstances allow them the luxury of owning a second home (it’s now officially a luxury) they can afford to keep vacant don’t exactly engender a wave of public sympathy for the plight they now find themselves in.

The plus side of the tax is the tens of millions in new revenue it will bring in. Thousands of families have bought into NDP promises to get real about the affordability crisis. They are counting on that to make a real difference in changing the punitive housing equation.

So the NDP was on reasonably safe ground when it started targeting speculators, knowing that 99 per cent of B.C. didn’t fit the label.

That ground isn’t as safe this week, after the realization dawned that the bounty on speculators is initially being put on all homeowners’ heads.

It’s easy enough to escape, if you don’t mind spending 20 minutes or so on an online form every year.

But the scale of the collection effort is annoying even the many people who will avoid it with ease. The government is mailing out 1.6 million notices to homeowners in order to winnow out about 32,000 who fit the speculator label.

The Finance Ministry is drift-net fishing for a relatively tiny school of one species. It’s odd that in 2019, with all the data and information-processing capabilities, a government has to blanket the applicable zones with tax notices.

You’d think the homeowner grant application that people routinely fill out on their property tax notices to certify residency would screen the majority of people. But apparently, that doesn’t identify vacancy. They had to take the most expensive, troublesome route possible to isolate and identify the speculators.

So now the fans of basic efficiency in government are aggrieved. Even if they don’t have to pay the tax, they’ll pay for the big complicated collection effort.

Copyright © Western Investor

Another B.C. civil forfeiture law suit has revealed allegations involving the illegal drug trade and real estate deals

Alan Campbell
Western Investor

A Richmond man connected to one of B.C.’s biggest ever money-laundering probes has been accused in a law suit of cleaning millions of dollars through local real estate deals.

 

Stephen Hai Peng Chen, also known as Hoy Pang Chan, is accused in the civil forfeiture suit, filed earlier this month, of using money derived from the illegal drug trade to buy and pay off properties in Richmond and Vancouver.

 

Chan, who used to live in Lansdowne Road, has yet to file a response to the law suit and the allegations contained within it have not been proven in court.

 

In the law suit, B.C.’s civil forfeiture office is trying to seize an East 5th Avenue house and West 42nd Street apartment, both in Vancouver, with an assessed combined value of $2.7 million.

 

It is also asking to seize more than $67,000 in cash. According to the court documents, Chan’s parents, Xiong Guang Chen and Jue Ming Chen, are named as owners of the properties in question.

 

Included in the law suit is references to how Chan laundered “…the proceeds from his drug trafficking activities (and), at times with his parents, purchased real property and registered mortgages against title to these properties.”

 

During an RCMP’s “E-Pirate” investigation in 2015, Chan was identified as one of the clients of an alleged illegal money services business in Richmond, called Silver International, which operated out of a business centre on Cooney Road.

 

According to a separate civil law suit, Silver International was allegedly laundering as much as $220 million a year for its clients.

 

Court documents say an analysis of ledgers seized at Silver International by the RCMP indicate Chan deposited $5.31 million and withdrew $2.27 million between June 1 and Oct. 1, 2015.

 

However, according to documents in the suit, an analysis of his tax returns, from 2006 to 2012, showed he had an average reported annual income of about $37,000.

 

The law suit details how, on the same day a police seized $2 million at Silver International – Oct. 15, 2015 – police also seized $60,010 in cash found in a bag hidden in a clothes dryer in Chan’s Lansdowne Road home.

 

Chan was arrested the next day in his car and almost $4,000 he had on him was seized.

 

The law suit claims, in August 2015, that Chan bought a Richmond home on Katsura Street – near Garden City Road and Westminster Highway – with mortgage financing and $84,000 in cash, before selling the property two months later.

 

Other details of how Chan allegedly moved money around included the obtaining of a $1.35 million bank credit line, with his parents, on the East 5th Avenue home and then using the credit and nearly $370,000 in cash to buy the West 42nd property.

 

Chan was nabbed in a separate 2015 RCMP investigation in Kelowna — dubbed E-NAOS — on allegations of drug trafficking.

 

Tarsem Singh Jawanda, who pled guilty to drug trafficking as a result of the investigation, met with Chan to pick up bags and boxes containing kilograms of the synthetic drug MDMA for sale, according to court documents.

 

Afterwards, Jawanda would meet Chan to pay him money for the drugs received from undercover officers, say the court filings.

 

Chan has been charged in the E-NAOS investigation with drug trafficking and that case is still before the courts, according to the court documents.

 

Chan has a criminal record dating back to 1990 that includes convictions for assault with a weapon; assault causing bodily harm; possession of property obtained by crime; making, having or dealing in instruments of counterfeiting; and extortion. 

 

– With files from the Vancouver Sun

Copyright © Western Investor

The cooldown of Vancouver’s housing market is affecting condo sales

Ephraim Vecina
Mortgage Broker News

The precipitous cooldown of the Vancouver housing market is markedly affecting the condo segment, according to data from the Real Estate Board of Greater Vancouver.

This is especially apparent when one considers that the benchmark condo price in the region fell by 6.4% in the 6-month period ending December, reaching $664,100. This also represented a 0.6% annual decline, the lowest rate of growth since September 2013.

Breaking down by locale, Vancouver East had a benchmark condo price of $538,000 in December, falling by 1.4% year-over-year. Vancouver West posted a $738,700 benchmark, down by 2.9% annually. Sales haven’t emerged unscathed, either. REBGV numbers indicated that last month suffered a 47.95% decline from December 2017, Better Dwelling reported.

Greater Vancouver’s condo inventory also fell 30% year-over-year in December, along with a 61% month-over-month decline.

Copyright © 2019 Key Media

Park George?s second phase in Surrey, BC, builds on success of previous launch

other

With the first phase of Park George, one of Surrey’s most anticipated new condo and townhome communities, nearly sold out, Concord Pacific is soon launching Phase II.

“Park George Phase II is all about expansion. It’s an expanding location with built-in technology and additional space to expand your lifestyle,” says Grant Murray, Concord Pacific’s senior vice president of sales.

Phase II represents a major landmark for Concord Pacific and Surrey’s fast-growing City Centre: it is the final component of Concord Pacific’s master-planned Park Place community.

Take advantage of the last opportunity to call a new suite at Park George home by registering at parkgeorge.com.

Those who do will have the chance to find themselves owning a home in the province’s fastest-growing city. In fact, Surrey is expected to overtake Vancouver proper as BC’s biggest city in the next decade or so. So far, 18,000 businesses are headquartered in Surrey, and that number grows by 3,000 annually.

And it would be difficult to find a more well-connected development than Park George Phase II. The towers are just steps from the King George SkyTrain station, and access to a number of bus routes is a mere five minutes away.

The two-tower Park George development is set to rise amid a city centre that is receiving $11 billion in improvements and investment.

Phase II will reach a height of 36 storeys, affording residents striking mountain views from suites that are outfitted with cutting-edge smart-home technology. Every residence at Park George has a smart thermostat, and NFC technology allows for keyless entry.

Staying connected in the building won’t be a problem as there is wifi in the common area and amenity spaces. Not only that, but EV parking will allow owners of electric cars to charge up at home.

A variety of floorplans, including one-, two- and three-bedroom suites, provide room for families, first-time homebuyers and empty nesters alike.

In total, Park George Phase II residents can expect access to more than 110,000 square feet of amenity space — indoors and out.

A co-working lounge that’s opened 24/7 with meeting rooms and a video-conference room, sports lounge as well as a swimming pool are among the indoor amenities. In addition to another swimming pool outside, there is tennis court, kids playground and outdoor hot tub theatre.

© 2019 BuzzBuzzHome Corp.

Victoria Real Estate Board forecasts moderation in the market

Steve Randall
Canadian Real Estate Wealth

There were 4,273 housing starts in the Victoria market in 2018 but that level is not expected to be repeated in 2019.

The Victoria Real Estate Board’s Crystal Ball Housing Forecast says that there are signs of moderation in the market, despite all the elements needed for a healthy housing market – strong economy, low unemployment, still-low interest rates.

Listings historically have averaged 2,757 but in December there were 1,988. This was 46.3% more than a year earlier and VREB says the market is moving towards more balanced conditions.

Sales in 2018 totaled 7,150, down from 8,994 in 2017. That 25% reduction is attributed to a large degree to the impact of mortgage stress tests effectively cutting buying power by 20%.

VREB says that the effects are hardest on young buyers and almost half of the housing starts were rentals to accommodate those would-be buyers who were priced out of the market.

Prices were up 3.2% year-over-year in December to a benchmark $858,600.

The board expects that there will be a spike in housing supply as new construction projects are completed while sales continue to decline amid affordability concerns and lower levels of immigration.

Copyright © 2019 Key Media Pty Ltd

Juwai.com launches its Retirement and Lifestyle Channel

Steve Randall
Canadian Real Estate Wealth

The leading property listings website for Chinese consumers has added a new channel focused on those who want to retire abroad.

Juwai.com, which reaches more than 3 million Chinese consumers each month has launched its Retirement and Lifestyle Channel to provide information and real estate listings for retirement properties and communities internationally.

“The countries that are most popular for Chinese retirees are the US, Canada, and Australia,” explains Juwai.com CEO and Director Carrie Law. “Most older Chinese want to live near their children and grandchildren, and these are the countries with the largest Chinese immigrant populations.”

As well as family, Law says that Chinese seniors are drawn to those countries that have affordability, good medical care, and an attractive lifestyle.

The site’s new channel’s popular articles include news of a Canadian proposal to curtail birthright citizenship, and a listing for a 5-bedroom oceanfront mansion in the California city of Newport Beach.

Big markets for big spenders
Law says the market for Chinese retirees is vast.

“Within 11 years, there will be 340 million Chinese aged 60 or above. That’s more than the present population of the entire United States. We know that most people begin planning and investing for retirement in their 40s and 50s,” she says.

Across all demographics and property type, Juwai.com estimates that Chinese buyers spent U$123.9 billion on global real estate.

These 10 countries are the best for retirement. Is yours part of the list? 

1 Panama

2 Costa Rica

3 Mexico

4 Ecuador

5 Malaysia

6 Colombia

7 Portugal

8 Peru

9 Thailand

10 Spain

Copyright © 2019 Key Media Pty Ltd

RBC cuts 5-year fixed mortgage rate

Duffie Osental
Mortgage Broker News

The Royal Bank of Canada (RBC) announced that they were lowering the interest rate of their five-year fixed-term mortgage offering.

According to CBC News, Canada’s largest bank brought down their five-year rate to 3.74% from 3.89%, representing a cut of 0.15%. RBC lowered interest rates in the wake of Canada’s bond yield falling to 1.75%.

RateSpy.com founder Rob McLister told CBC News that, though subtle, the move is likely to prompt similar actions by other major Canadian banks in the coming days, and it’s actually overdue based on what’s happening in the bond market.

“When people see materially better rates from non-banks online, it puts more pressure on the Big 6 to act,” McLister told CBC News.

Calculating a sample mortgage of $400,000, James Laird, president of mortgage brokerage Canwise Financial, told CBC News that at the old five-year fixed rate of 3.89%, homeowners would pay about $2,080 a month. At the new rate, that monthly mortgage payment would drop to $2,048, saving $32 a month.

“RBC is the largest mortgage lender in Canada, so whenever they move their mortgage rates, we can expect that the other four banks will follow suit,” Laird told CBC News.

Copyright © 2019 Key Media