TARA PERKINS
Other

Sales of existing homes in the Greater Toronto Area nudged up 2.1 per cent in February compared with a year earlier, while prices continued to climb.

The latest data from the country’s most populous city, as well as other urban centres such as Calgary and Vancouver, suggest Canadian home sales fared better than some experts thought they would in February, and prices maintained their sturdy upward trajectory.

The average selling price on Toronto’s Multiple Listing Service last month was $553,193 – an increase of 8.6 per cent from a year earlier – the local real estate board said on Wednesday. The MLS Home Price Index, which seeks to create a more apples-to-apples comparison of prices over time by accounting for changes in the type and location of homes that are selling, was up 7.3 per cent.

“While the strong price growth experienced over the past year should prompt an improvement in the supply of listings, sellers’ market conditions will continue to prevail this year,” Jason Mercer, senior manager of market analysis at the Toronto Real Estate Board, said in a press release.

Canadian home prices are being watched closely, amid concern that they are overvalued. In an interview this week, Ed Devlin, the head of Canadian portfolio management at bond giant Pimco, said he expects to see prices start to dip later this year and then fall by 10 to 20 per cent in real terms over the next three to five years. He expects that mortgage rates will rise this year, and will be one of the catalysts for softer prices.

Deutsche Bank said in December that it thinks Canadian home prices are 60 per cent too high, and declared that it believes Canada is the most overvalued housing market in the world. Other observers, including Canadian bank economists and the Organization for Economic Co-operation and Development, see a much smaller degree of overvaluation but nonetheless agree that prices are too high.

In recent years, Finance Minister Jim Flaherty has been trying to take some steam out of the market to reduce the growth of house prices as well as the amount of mortgage debt that consumers are racking up. His actions precipitated a steep slump in house sales that began in the summer of 2012 and lasted through the spring of 2013. But the slump did not appear to have a major impact on prices.

Vancouver, the city that was hardest hit by the sales downturn and the least affordable market in the country, is now seeing record average selling prices for detached houses. On Tuesday, the city’s real estate board said the benchmark price for all types of residential properties rose 3.2 per cent from a year earlier, to $609,100 in February, as sales increased by 40.8 per cent.

Calgary’s real estate board said on Monday that the benchmark price of a single-family house was $482,800, up 9.1 per cent from a year earlier. Overall sales in the city rose 8.7 per cent from February 2013, and according to Bank of Montreal economists overall median prices in Calgary were up 7.6 per cent.

Real estate industry players in many major cities say that a lack of supply is buttressing prices.

“Consumers who are in the market for single family homes priced below $300,000 do not have many options, and when product does become available, it typically does not stay on the market for long,” Bill Kirk, the president of the Calgary Real Estate Board, stated in a press release.

The full national picture for February won’t be available until the Canadian Real Estate Board releases data later this month, but Bank of Montreal economist Sal Guatieri suggested in a research note that he thinks February’s market shows some momentum.

“February existing home sales in several major cities suggest the market is warming up after cooling a bit recently,” he wrote. “Wrapped up in a parka lined with cushy low interest rates, hardy Canadian home buyers have mostly shrugged at the chilly weather and high prices.” But Mr. Guatieri added in a note on Wednesday that home buyers “have yet to face the test of a meaningful climb in interest rates.”

© Copyright 2014 The Globe and Mail Inc

Other

Cutbacks by the provincial government have driven Victoria’s office vacancies to record levels and are adding to the glut of space in downtown Vancouver, commercial real estate agents and property managers confirm.

“The amount of vacant office space in Victoria is at an all-time high,” said Bob Law, an office specialist and broker with Colliers International in the capital city. “The increase can be directly traced to government downsizing.”

The provincial government accounts for 3.6 million square feet, or about 53% of Victoria’s office inventory, much of it in Class B buildings, but it has been reducing its footprint in recent years. An economic slowdown hasn’t helped in leasing up space the government is leaving behind.

An example, Law said, is a 26,000-square-foot space on Johnson Street that the province vacated when its lease expired last year. That space remains dark, helping to push the total vacant space in Greater Victoria to 793,000 square feet and the vacancy rate to a 16-year high.

As of the end of 2013, overall office leasing in Greater Victoria was negative by more than 23,000 square feet and the vacancy rate has risen to 9.2%, Colliers reports. 

“[The province] is consolidating space. There is a lot of desk sharing,” Law said, adding, “From a taxpayer’s perspective, this is wonderful news.”

A provincial government communications officer said there was no official policy on reducing office space requirements, but the message is loud and clear in the real estate industry.

Vancouver property manager Warren Smithies, vice-president of Martello Property Services Inc., citing a contact in “upper levels” of the provincial government, said the province and its crown corporations have “recently been mandated to reduce their office footprints by as much as 35% to save taxpayer dollars and aid the government in achieving a balanced budget.”

Metro Vancouver’s office vacancy rate has increased to 8.4%, from 7.9% in the third quarter of 2013, which Colliers’ Vancouver office says is “caused by sublease spaces becoming vacant and government agencies consolidating space in downtown Vancouver.” This includes provincial and federal governments.

The Western Investor is part of the Business in Vancouver Media Group.

BRENT JANG
Other

The million-dollar club isn’t so exclusive in Greater Vancouver, where the average price for single-family detached houses sold has soared to a record high of more than $1.36-million.

Prices surged as total residential sales climbed to 2,530 last month for detached homes, condos and townhouses, up 40.8 per cent from volume of 1,797 properties changing hands in February, 2013, according to data released Tuesday by the Real Estate Board of Greater Vancouver.

Detached properties have soared in value, rising to an average of $1,361,023 last month, an increase of $139,986, or 11.4 per cent higher than $1,221,037 a year earlier and smashing the previous high of $1,287,213 in January of this year.

But the board cautions that average prices give a skewed picture of the market because sales of many high-end homes boost the figures to well above other transactions that are considered more typical.

The board prefers to focus on the benchmark index price, which strips out the most expensive properties. On that measure, detached index prices reached $932,900 last month, up 3.5 per cent from February, 2013. On Vancouver’s West Side, the detached index price jumped 7.2 per cent to more than $2.14-million.

Over all, the index price hit $609,100 for Greater Vancouver detached houses, condos and townhomes sold on the Multiple Listing Service last month, or a hike of 3.2 per cent over the past year.

Sales volume last month was slightly lower than the 10-year average in what is shaping up to be a balanced market for sales and active listings in 2014, said board president Sandra Wyant.

The B.C. Real Estate Association noted that Ottawa’s shutdown of the federal immigrant investor program last month could reduce sales volume for the most expensive detached homes.

Dan Scarrow, vice-president of corporate strategy at Macdonald Realty Ltd., said he doesn’t think prices will change dramatically over the next several months, as long as interest rates stay low. If there is any slide in the housing market, it will be slow because prices are “sticky on the downside” due to the lack of major economic setbacks such as a huge spike in unemployment to force people to sell, he said.

The attraction of Vancouver remains high, including for wealthy immigrants from China, Mr. Scarrow said.

Greater Vancouver includes the City of Vancouver, the municipalities of West Vancouver and North Vancouver, and also suburbs such as Burnaby, Richmond, Coquitlam, Port Coquitlam, Port Moody and New Westminster.

In the Fraser Valley, which includes the sprawling and less-expensive Vancouver suburb of Surrey, residential sales climbed to 1,102, up 20.7 per cent from February, 2013. The index price for detached homes reached $558,100, up 3.2 per cent from year earlier. Average prices for detached properties rose 9.7 per cent to $644,574 in the Fraser Valley.

The index price for detached houses, condos and townhouses was $428,100 in the Fraser Valley last month, or 1.3 per cent higher than in February, 2013. The average price for those three categories reached $519,082 last month, or a 10-per-cent hike from $471,767 a year earlier.

© Copyright 2014 The Globe and Mail Inc

Garry Marr
Other

Sales in Canada’s most expensive housing market were up sharply from a year ago and prices also continue to rise.

The Real Estate Board of Greater Vancouver said 2,530 homes were sold in February, a 40.8% increase from a year ago and a 43.8% increase from January. The board’s benchmark composite index reached $609,100 last month, a 3.2% increase from a year ago.

“Home buyer demand picked up in February, which is consistent with typical seasonal patterns in our housing market,” said Sandra Wyant, president of REBGV, in statement. “We typically see home buyers become more active in and around the spring months.”

February sales were close to the 10-year average for the month, while new listings were down 2.8% from a year ago and 12.1% from January, 2014.

There were 13,412 homes listed for sale in Greater Vancouver last month, a 9.3% decline from a year ago but a 6.4% increase from January.

Meanwhile in Calgary, the local board said that sales growth slowed in February from January but the total amount of activity was still up 8.68% from a year ago.

“Demand growth in the single family sector has been restricted by the availability of product,” says Ann-Marie Lurie, chief economist with the Calgary Real Estate Board, in a release. “New listings in this sector fell for the second consecutive month, causing further tightening in an already undersupplied market.”

The unadjusted single family benchmark price reached $482,800 in Calgary last month, a 1.28% increase from January and 9.1% jump from a year ago.

© 2014 National Post

Garry Marr
Other

Consumers facing record housing prices are probably increasingly tempted to go with a floating rate mortgage and all the risks that come with an interest rate linked to prime.

The qualifying rate is based on an average of the six big banks’ posted rate for a five-year closed mortgage. Declining bond yields have lowered that qualifying rate to 4.99%.

The decline may not sound like much but Rob McLister, editor of Canadian Mortgage Trends, says it means a consumer with a $300,000 home and 5% down needs 2% less income than they did just a few months ago.

Ottawa changed the rules about four years ago to tilt the playing field in favour of locking in your mortgage. When you lock in your mortgage for a term of five years or longer, you are able to use the rate on your contract for determining how much you can borrow. Go variable and you must use qualifying rate which is still almost 50% higher.

“There has been talk of changing it, speculation that the [Office of the Superintendent of Financial Institutions] will mandate the banks use the qualifying rate for five years terms and longer,” said Mr. McLister, noting nothing has happened yet.

The federal government tends to like the idea of consumers locking in their mortgages because it offers protection from a sudden jolt in the prime rate — even as the Bank of Canada looks poised to go a record five years without moving its overnight lending rate.

Consumers are probably lured more by deals than anything else and the past year saw well-advertised rate wars over five-year fixed rate mortgages with the rate dropping to 2.99% for the term.

The Canadian Association of Accredited Mortgage Professionals said in a recent study that 82% of purchasers in 2013 went with a fixed rate product. The tide clearly turned last year because CAAMP says 67% of  consumers with a mortgage are in fixed. The percentages are climbing for locking in.

Mr. McLister says the general rule is when the gap between the five-year fixed and variables reaches 100 basis points or one percentage point, people start to shift to a floating rate.

“You’re talking about somebody who lent money at 21%,” said Laura Parsons, a Calgary-based mortgage specialist with Bank of Montreal, about the difference in rates. “We don’t know what a good interest rate is anymore, we really don’t.”

Ms. Parsons says fixed remains as popular as ever because the rate is still very low by historical perspectives. She suggests if you do pick a variable mortgage, take the savings compared to fixed rate and apply it to the principle.

“You set your payment higher in case the interest rate does change,” says Ms. Parsons.

There is a fair bit of money to be saved, as long as the variable rate is at 2.35%. Consider a $500,000 mortgage with a 25-year amortization.

Based on monthly payments, you pay $54,333.66 in interest over the five years of your mortgage at 2.35%. Raise that rate to 3.09% and the interest comes to $71,472.09. That savings could be pumped back into your mortgage, lowering the principle owed and further reducing interest costs.

Jim Murphy, chief executive of CAAMP, says the easier qualification and low rate might push a few people back into variable but a fixed rate of 3% is tempting to lock down.

“You look at the news and it just seems the Bank of Canada is unlikely to raise rates,” said Mr. Murphy, who doesn’t think overnight rates will go up this year or possibly next year.

“That’s a year where you can have these rates,” he says, referring to savings from a variable rate product.

With house prices still at all-time highs, it’s easy to see why consumers would be tempted by the savings.

© 2014 National Post

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