Housing bubble fears spur Canada to weigh tighter mortgage rules

Bloomberg
Mortgage Broker News

Canada’s bank regulator is proposing tighter mortgage qualification rules to make it more difficult for home buyers to secure financing, a move aimed at cooling the nation’s booming real-estate market.

The Office of the Superintendent of Financial Institutions said it will setup a new benchmark interest rate used to determine whether people can qualify for uninsured mortgages. Home buyers will have to show they can afford a minimum rate of 5.25%. The current threshold, based on posted rates of Canada’s six largest lenders, is 4.79%.

“Sound residential mortgage underwriting is always important for the safety and stability of financial institutions,” Jeremy Rudin, head of the Ottawa-based agency, said in a statement. “Today it is more important than ever.”

The move comes amid a surge in housing prices that’s raising concern among policy makers and economists. Cheap mortgages and new remote-working conditions have spurred a frenzy of demand for more spacious homes, with house hunters bidding up prices across the country.

The Canadian Real Estate Association calculates prices are up 17% nationally over the past 12 months. Twelve major markets — or about one quarter of the total — have posted price gains of more than 30%.

Royal Bank of Canada Chief Executive Officer Dave McKay lauded the regulator’s move.

“I’m encouraged that that is an implementable, short-term policy that does withdraw some borrowers who are stretching themselves too much with low rates into too large of a house,” McKay said on BNN Bloomberg television.

The tighter qualification restrictions will reduce the buying power of households by about 4.5%, according to estimates by Derek Holt, an economist at Bank of Nova Scotia.

OSFI said housing market conditions “have the potential to put lenders at increased financial risk,” forcing regulators to take “proactive action.” The regulator said it will revisit the calibration of the qualifying rate at least once a year to ensure it remains appropriate. The plan is to implement the changes on June 1, after consultations.

In the meantime, it’s watching how banks handle the increased mortgage demand. “We are looking for heightened vigilance from lenders on collateral management, income verification, and debt servicing,” Rudin said at a news conference. “We will also be monitoring for institutions extending amortization periods and increasing debt servicing limits.”

The move impacts the uninsured mortgage space that is overseen by OSFI. The federal government is in charge of mortgage qualification for insured mortgages. There was no indication in the statement that the government planned to follow the move, and requests for comment from the finance department weren’t immediately returned.

One unintended consequence could be to temporarily accelerate the market as buyers rush in before the changes are implemented.

“We may well see an even hotter spring housing market as a consequence to OSFI’s move,” Holt said by email. “We’ll get more pulled-forward demand.”

Paul Taylor, head of Mortgage Professionals Canada, an industry group, said he’s skeptical the move will make much of a difference given high levels of investors entering the market who won’t be impacted.

“Even with these measures in place I don’t think you’re going to see the housing market really calm down,” Taylor said.

–With assistance from Shelly Hagan, Kevin Orland, Erik Hertzberg and Ari Altstedter.

 

Copyright © 2021 Key Media

Two new retail strata units in Victoria sell for $555 per square foot

William Wright Commercial
Western Investor

Adjacent units are on the ground level of the new Verve condominium project on Yates Street near Victoria’s downtown.

— William Wright Commercial, Vancouver

Property type: Retail strata

Location: 101 and 102 848 Yates Street, Victoria

Total size of units: 5,383 square feet

Zoning: CS1

Sale price (total): $2.99 million

Brokerage: William Wright Commercial, Vancouver

Brokers: Connor Braid and Harry Jones

 

© Copyright 2020 Western Investor

Two adjacent N. Burnaby commercial lots sell for $6.7 million

Goodman Commercial Inc.
Western Investor

Located in the Hastings Village area, the two lots total 10,296 square feet with development potential to 24,710 square feet, and both have rental income.

— Goodman Commercial Inc., Vancouver, for Western Investor

Property type: Commercial development site

Location: 4651 and 4663 Hastings Street, Burnaby, B.C.

Number of units: 12 (8 residential rentals, 3 commercial rentals)

Zoning: C-4A

Total building size: 11,169 square feet

Size of land: 10,296 square feet

Potential floor-space-ratio: 2.4 FSR (24,710 square feet)

Sale price (total): $6.75 million

Brokerage: Goodman Commercial Inc., Vancouver

Brokers: Mark Goodman and Cynthia Jagger

 

© Copyright 2020 Western Investor

Two adjacent N. Burnaby commercial lots sell for $6.7 million

Goodman Commercial Inc.
Western Investor

Hard core of work-from-homers won?t return to office

Wl Staff
Western Investor

 — More than half want to work only part time in the office. |CBRE

About one-third of Canadian professionals currently working from home due to the pandemic would quit and look for a new job if required to be in the office full time, according to a new survey by global staffing firm Robert Half.

More than half of all employees surveyed (51 per cent) said they prefer a hybrid work arrangement, where they can divide time between the office and another location. Professionals, however, also expressed the hesitations about working from home full time, citing loss of relationships with co-workers, fewer career advanced opportunities and decreased productivity.

In addition, workers may not be ready to return to the office, without some incentives to sweeten the welcome back.  Professionals surveyed said the top ways their company can support them include allowing greater freedom to set office hours, employer-paid commuting costs, a relaxed dress code and providing childcare.

“After more than a year of uncertainty and pandemic-induced remote work, there is a growing desire among some business leaders to return to business as usual, including welcoming employees back to the office once it is considered safe,” said David King, Canadian senior district president of Robert Half. “However, companies should be prepared for a potential disconnect between their ideal work structures and that of their employees.”

The online survey was developed by Robert Half and conducted by an independent research firm from March 9-16, 2021. It includes responses from more than 500 workers 18 years of age or older at companies in Canada.

 

 

© Copyright 2020 Western Investor

City of Coquitlam is offering zoned and serviced townhouse development opportunity

City of Coquitlam
Western Investor

 The City of Coquitlam’s City Lands Division is excited to announce the release to market of a fully zoned and serviced townhouse parcel with a size of 2.58 hectares (6.38 acres), with the intent that construction of townhomes begins as soon as possible.

Located at 1295 Rocklin Street in the Partington Creek Neighbourhood on Burke Mountain and just a five-minute walk to the future Burke Mountain Village, this offering is a unique opportunity in the region.

“We’ve pre-zoned and serviced the site, so it’s ready for development,” the City Land Division’s manager of development Curtis Scott says.

“It’s a great opportunity for developers to bring their vision to this site for homes for families.”

The townhouse development site is a 10-minute drive from Coquitlam City Centre, SkyTrain, and West Coast Express. It is adjacent to the 40-acre planned Fremont Park, more than 17 km of existing and future planned hiking and walking trails, and features bike friendly streets and multi-use pathways.

The Burke Mountain neighbourhood is full of amenities, with 180 acres of active parks, 23 acres of future planned parks, and an active mountain biking and hiking community. Education for all ages is accessible, with two elementary schools to the west of the site, an elementary school to the north under construction, and a future middle and secondary school in the planning stage.

The fully zoned (CAC’s paid) and serviced site is ready for a Development Permit Application.

“As quickly as a developer can get development plans together and submit them to the City for approval, the quicker they can start construction,” Scott says.

The City’s initial concept plan anticipates 117 units.

“The site offers great views and really elevates above developments to the south,” Scott says.

“Some units will have great views of the Fraser Valley. You’re really getting the best of both worlds. You can get your urban fix right up the street or head to the east and you’re in the forest.”

The site is at the centre of everything that makes Coquitlam’s Burke Mountains such a unique and rewarding place to live.

Once fully developed, Burke Mountain will be home to over 50,000 residents and surrounded by a thriving commercial district and plenty of community and recreational amenities.

There is lots of active construction happening in the area, building the community and serving the growing demand for family-oriented housing.

“It’s been great to see different developers on the mountain that bring diverse housing products to the area,” Scott says.

“It’s moving very quickly, and I think it’s one of those areas that creates homes that are in high demand. We’re in a market where there aren’t a lot of green field development opportunities. But Burke Mountain is one of them.”

A major selling feature of the townhouse parcel is its proximity to the future Burke Mountain Village, which will be the commercial and social hub of Burke Mountain in Northeast Coquitlam.

The 39-acre site is located east of Burke Mountain Creek and south of David Avenue.

The City of Coquitlam is the primary landowner of the Village lands, which is expected to house over 2,000 residential units (apartments and townhomes) and include 120,000 square feet of retail.

The Village will also be anchored by the future Northeast Community Centre, sizeable public plaza, and neighbourhood park.

“This development site is a unique opportunity across the region for a large acreage to bring development to, with access to amenities and views,” Scott says.

“This is a site that doesn’t come around very often.”

1295 Rocklin Street is available through Request for Offers (RFO) 21-040 and bids are due by June 9, 2021.To learn more, visit https://www.coquitlam.ca/landsales.

 

© Copyright 2020 Western Investor

Toronto home prices surge as debate rages

Ari Altstedter
Mortgage Broker News

 Toronto home values continued to swell in March, bringing annual average price gains to more than 20% and adding fuel to a raging debate about whether policy makers should try to cool the market.

New listings were up 57% from March 2020, when the onset of the pandemic temporarily caused a freeze in real estate activity. But the new supply was not able to keep up with demand spurred by low borrowing costs and demand for bigger homes, especially in the suburbs, a report from the Toronto Regional Real Estate Board said Tuesday.

Across the metropolitan area, the average price of all homes sold was CA$1.1 million during the month, up 21.6% from last March. Detached homes in the 905 area code, which surrounds the city’s core, sold for 31.4% more, an average of CA$1.32 million.

“The potential for double-digit price growth could continue without a meaningful increase in the supply of homes available for sale,” Jason Mercer, the Toronto real estate board’s chief market analyst, said in a news release. “This will become more apparent as population growth resumes over the next year.”

Cheap mortgages and new remote-working conditions have spurred a frenzy for more spacious homes, with house hunters bidding up prices in Canada’s largest cities and then looking further afield when they’re priced out. The resumption of more normal levels of immigration, which was slowed by the pandemic in 2020, is another source of demand.

The rapid price appreciation has spurred a debate among prominent economists at Canada’s largest banks over whether Prime Minister Justin Trudeau’s government or other policy makers should step in.

Canada, on Thursday, March 11, 2021. The buying, selling and building of homes in Canada takes up a larger share of the economy than it does in any other developed country in the world, according to the Bank of International Settlements, and also soaks up a larger share of investment capital than in any of Canada’s peers.

The chief economist of Bank of Nova Scotia, Canada’s third largest lender, said policy makers should not rush to act because price gains are being driven by a lack of homes for sale. Many sellers were sidelined by the pandemic last year, but that problem could take care of itself as the traditional spring selling season gets underway, Jean-Francois Perrault said in a report released Sunday.

That came after Toronto-Dominion Bank’s top executive, Bharat Masrani, told Bloomberg that governments should be cautious in taking action. Meanwhile, economists at Royal Bank of Canada and Bank of Montreal are calling for more urgent action to keep prices from becoming completely unaffordable for first-time buyers and head off the possibility of a destabilizing crash later.

Policy makers so far have not signalled plans to take action, but some have expressed concern. Canada Mortgage & Housing Corp., a federal agency that monitors the market, last month raised its assessment of Toronto’s vulnerability to a sudden drop in prices to high, citing the rapid climb in prices. There are five markets in Canada with that designation.

Toronto’s benchmark price index, a measure that takes into account the mix of types of properties sold, has posted a 10.8% gain in the first three months of 2021, the fastest period of appreciation the city has seen since early 2017. Back then, the Ontario government stepped in with a number of measures, including a tax on foreign buyers.

 

Copyright © 2021 Key Media

Platform that uses AI to flag construction mistakes raises $10 million

Kelsey Pudloski
Livabl

Mistakes happen, but when it comes to new construction, even minor blunders can cost builders untold amounts of time and money. Enter Avvir, a startup that uses laser scans and artificial intelligence to identify errors during the construction process. 

Last week, the company announced that it had raised $10 million in a round of funding led by Trust Ventures, a venture capital firm that counts Koch Industries among its investors. Avvir plans to use the money to add more employees and enhance its software.

Founded in 2017 by Raffi Holzer and Tira Odhner, Avvir asserts that its platform can locate problem areas within one-eighth inch of accuracy. The software compares Building Information Modeling (BIM), essentially a high-tech version of traditional blueprints, with laser scans to flag any discrepancies.

The company claims their mobile scanners can be used by anyone to examine 30,000 square feet per hour even if construction is ongoing. Once a problem has been identified, the construction team is able to take action and the BIM is updated automatically. Another useful feature is the topographic maps that are generated from the scans. These can be inspected after a concrete pour to determine whether slabs are level.

The software can also track the progress of a project, measuring it against the estimated schedule to “highlight where the timeline is off target” and readjust completion dates if necessary. Understanding what work has been completed helps subcontractors get paid in a timely manner, too, reducing delays from months to weeks.

New York-based Avvir is currently valued at $40 million and raised an additional $5 million in previous rounds of funding. In a recent interview with VentureBeat, CEO Raffi Holzer noted that Avvir has amassed roughly 12 customers and partners in the past year and expects its valuation to grow to $4.4 million by 2022.

 

© 2020 BuzzBuzzHome Corp.

How likely is a Canada housing crash?

Ephraim Vecina
Mortgage Broker News

Despite concerns surrounding overheated activity, a Canadian housing crash is unlikely unless there’s a spike in mortgage rates or a significant tightening of housing policy, according to a new report by Oxford Economics.

A housing bubble might be forming due to a pandemic-driven shift in buyer preferences, steadily depleting supply, and record-low mortgage rates, but this is ultimately unsustainable. On the contrary, the market’s probable trajectory is an eventual cooling, report co-authors Tony Stillo and Michael Davenport wrote.

“We then expect housing to increasingly reflect slowing underlying demographic fundamentals due to an ageing population that will experience slower growth,” the duo said. “We expect house price growth will slow to below the pace of household income growth for the rest of the decade. House prices should remain within household borrowing capacity despite a forecast of rising mortgage rates.”

Oxford Economics estimated that the nation’s senior population will almost double to nearly 12 million over the next three decades. This will make the elderly’s share of the Canadian population go up from one in five in 2020, to one in four by 2050.

Aside from an aging population, a decelerating trend in the number of new households will lead to a markedly cooler market over the long term.

“By 2050, the average private household will have 2.36 occupants compared with 2.43 people per household today,” Stillo and Davenport said. “Accordingly, we expect the rate of new household formation to steadily slow from its near-term 200,000 annual pace to 130,000 new households in 2050.”

 

Copyright © 2021 Key Media

Bank of Canada issues warning

Ari Altstedter
Mortgage Broker News

 The Bank of Canada is seeing “worrying” signs that some Canadians are taking on too much debt to buy into the nation’s hot housing market.

In an interview with the Financial Post, Governor Tiff Macklem said there is evidence that loan levels relative to home values are growing — an indication that some borrowers could be overextending. He also warned people have begun to make purchases based on the belief prices will continue rising.

“Canadians are stretching and that is worrying.” Macklem said. “If Canadians are basing their decisions on the kinds of price increases that we’ve seen recently are going to continue indefinitely, that would be a mistake. They’re not sustainable.”

At the same time, Macklem indicated the central bank can do little given interest rates need to stay low to support the recovery.

His comments come amid increasingly urgent calls from economists for policy makers to cool the market. Over the past week, the Bank of Montreal’s Robert Kavcic and Robert Hogue at Royal Bank of Canada have issued reports warning officials they need to take steps to break the psychology of expecting continued gains in real estate. The ultimate concern is that rapid price appreciation could be destabilizing.

Among policies being suggested are taxes targeting speculators like the one implemented in New Zealand this month, or an end to the longstanding and popular tax exemption for capital gains on primary residences. Another idea getting attention is the elimination of blind bidding for homes that some analysts say unnecessarily inflates prices.

Both Kavcic and Hogue also identified a lack of housing supply as a major driver of the recent run up in home values.

Prime Minister Justin Trudeau’s government plans to introduce a tax on foreign non-resident home owners. Finance Minister Chrystia Freeland said last week she is watching the market closely, without detailing any specific intent to take additional action.

Last week, Canada’s national housing agency added three more cities to its list of markets highly vulnerable to a sharp price drop, including Toronto. Canada Mortgage and Housing Corp. also said the recent broad-based price appreciation means overheating risks are now a national phenomenon, rather than isolated to a few major metropolitan areas.

 

Copyright © 2021 Key Media