Five months after buying one of Toronto’s new luxury hotel condominiums, Oliver Baumeister is girding for a glut of suites like his to hit the market as the biggest names in the hotel business open hundreds of units in Canada’s largest city.
Baumeister, himself a real estate agent, is in no rush to sell. When Toronto’s untested market for five-star condo living absorbs the surplus — say by 2016 — he intends to offload his sky-high unit for a tidy 20% profit, and look for his next Canadian real estate investment.
“A bunch of it will sit for a while and it will take time to sell,” said Baumeister, who has been buying Toronto condominiums with his brother for the past four years.
“But we bought it with the belief that the Toronto hotel condo market definitely has a future. When we sell, hopefully … we’ll see about a 20% profit.”
The model of ultra-fine condos attached to luxury hotels isn’t new — cities like Hong Kong and New York are full of them.
But Toronto, a relatively small city with no five-star hotel condominiums a year ago, is coming to the game late but with a vengeance.
By the end of this summer Toronto will have four such projects, as Four Seasons, Ritz Carlton, Trump and Shangri-La open massive towers in a city where a red-hot market for all types of housing has brought rising concern about a real estate bubble.
The granite-and-glass towers, including two of Canada’s tallest residential buildings, are opening in quick succession, adding hundreds of hotel rooms and more than a thousand condominiums just as Canadian housing hype hits a fever pitch.
Signs of success are mixed. None of the four projects, whose condos cost from just under $1-million to $28-million, has sold out, and the push by developers to sell their remaining units before a resale market kicks in has the feel of a ticking time bomb.
Source: Financial Post (Andrea Hopkins, Reuters)
Monday, May 14, 2012
Thursday, April 19, 2012
Canadian real estate market a tale of two cities
It’s a title Vancouver is more than happy to relinquish.
Canada’s hottest real estate market is finally cooling off, new sales figures show, much to the relief of those who have grown weary of talk of a West Coast property bubble.
At more than $761,000, the average cost of a Vancouver home is still higher than anywhere, but was 3.1 per cent lower in March than in the same month last year. Sales activity is slower, too, down 22.3 per cent through the first three months of 2012.
But the data from the Canadian Real Estate Association indicate that Toronto’s sizzling market is still gaining momentum, with average prices in the country’s largest city soaring more than 10 per cent last month, to about $504,000.
The diverging fortunes of the country’s two most important real-estate markets adds to the complexity of the policy decisions facing Finance Minister Jim Flaherty and Bank of Canada Governor Mark Carney. Both have issued repeated warnings about the high level of personal debt that Canadians are taking on to buy increasingly expensive houses.
But Mr. Flaherty has said he is reluctant to tighten the rules on mortgages again, believing that the market will correct itself, while Mr. Carney is unlikely to raise interest rates any time soon for fear of driving up the currency and hurting other parts of the Canadian economy.
Toronto and Vancouver together account for about one-quarter of all real estate activity in Canada.
The opposing directions of the two cities have resulted in a country-wide average price that’s edging lower, easing economists’ concerns of a U.S.-style crash. And should the trend continue, it may also ease the worries of officials in Ottawa.
“When it comes to housing, Toronto is not Canada, nor is Vancouver,” Douglas Porter, an economist in Toronto at BMO Nesbitt Burns, said in a report.
“For most cities, the market looks well balanced, and is broadly moderating on its own accord.”
Nationally, the average price of a home fell 0.5 per cent to $369,677 in March from last year while sales rose 1.6 per cent.
“The slight decline in the national average price points to a tug of war between Toronto and Vancouver,” Gregory Klump, chief economist for the Canadian Real Estate Association, said in a statement. “The decline in average price reflects the change in Vancouver’s sales mix, not housing price deflation.”
Despite the price drop, few in Vancouver are calling this a correction. The spring of 2011 saw a spike in sales of expensive luxury homes in Vancouver that is now skewing the data for 2012, some argue.
Real estate agent Steve Di Fruscia, who specializes in selling high-end homes, said the Vancouver market, particularly in pricey areas such West Vancouver, are in the midst of a “typical cooling-off period,” after the frenzied activity of a year ago
“We’re still on a very optimistic, greedy part of the year where people are trying to cash in on extra high prices, believing that we will have the same spring as we did last year and prices will continue to skyrocket another 10 to 15 per cent,” he said.
Mr. Di Fruscia markets his clients’ properties in both Canada and mainland China. Some have blamed Vancouver’s high prices on an influx of so-called “foreign” and “speculative” money from foreign investors. However, Mr. Di Fruscia said 95 per cent of his sales of Vancouver homes are to Chinese buyers who are immigrating to Canada as citizens or permanent residents.
There are no statistics on what, if any, impact foreign investors are having on the real estate market in Vancouver, Toronto nor the rest of Canada. Cameron Muir, chief economist of the B.C. Real Estate Association, suggested that in Vancouver, the number of foreign buyers are “much lower” than many people think, accounting for between 1 per cent and 3 per cent of the market.
In Toronto, a low supply of properties is leading to bidding wars that drove up the average price of Toronto homes to $504,117 in March. Toronto’s average home prices have set a new record high in every year since 2000 and 2012 should be no different.
“We’d love to have more inventory to sell because there’s no shortage of buyers looking for good inventory,” said Kevin Somers, the broker area manager for Royal LePage Real Estate Services Ltd. in central Toronto.
“As long as the basic economic indicators and interest-rate outlook remain positive, people will always need a place to live and would rather own than rent in most cases.”
Source: The Globe and Mail (ANDY HOFFMAN AND NICOLAS JOHNSON)
Canada’s hottest real estate market is finally cooling off, new sales figures show, much to the relief of those who have grown weary of talk of a West Coast property bubble.
At more than $761,000, the average cost of a Vancouver home is still higher than anywhere, but was 3.1 per cent lower in March than in the same month last year. Sales activity is slower, too, down 22.3 per cent through the first three months of 2012.
But the data from the Canadian Real Estate Association indicate that Toronto’s sizzling market is still gaining momentum, with average prices in the country’s largest city soaring more than 10 per cent last month, to about $504,000.
The diverging fortunes of the country’s two most important real-estate markets adds to the complexity of the policy decisions facing Finance Minister Jim Flaherty and Bank of Canada Governor Mark Carney. Both have issued repeated warnings about the high level of personal debt that Canadians are taking on to buy increasingly expensive houses.
But Mr. Flaherty has said he is reluctant to tighten the rules on mortgages again, believing that the market will correct itself, while Mr. Carney is unlikely to raise interest rates any time soon for fear of driving up the currency and hurting other parts of the Canadian economy.
Toronto and Vancouver together account for about one-quarter of all real estate activity in Canada.
The opposing directions of the two cities have resulted in a country-wide average price that’s edging lower, easing economists’ concerns of a U.S.-style crash. And should the trend continue, it may also ease the worries of officials in Ottawa.
“When it comes to housing, Toronto is not Canada, nor is Vancouver,” Douglas Porter, an economist in Toronto at BMO Nesbitt Burns, said in a report.
“For most cities, the market looks well balanced, and is broadly moderating on its own accord.”
Nationally, the average price of a home fell 0.5 per cent to $369,677 in March from last year while sales rose 1.6 per cent.
“The slight decline in the national average price points to a tug of war between Toronto and Vancouver,” Gregory Klump, chief economist for the Canadian Real Estate Association, said in a statement. “The decline in average price reflects the change in Vancouver’s sales mix, not housing price deflation.”
Despite the price drop, few in Vancouver are calling this a correction. The spring of 2011 saw a spike in sales of expensive luxury homes in Vancouver that is now skewing the data for 2012, some argue.
Real estate agent Steve Di Fruscia, who specializes in selling high-end homes, said the Vancouver market, particularly in pricey areas such West Vancouver, are in the midst of a “typical cooling-off period,” after the frenzied activity of a year ago
“We’re still on a very optimistic, greedy part of the year where people are trying to cash in on extra high prices, believing that we will have the same spring as we did last year and prices will continue to skyrocket another 10 to 15 per cent,” he said.
Mr. Di Fruscia markets his clients’ properties in both Canada and mainland China. Some have blamed Vancouver’s high prices on an influx of so-called “foreign” and “speculative” money from foreign investors. However, Mr. Di Fruscia said 95 per cent of his sales of Vancouver homes are to Chinese buyers who are immigrating to Canada as citizens or permanent residents.
There are no statistics on what, if any, impact foreign investors are having on the real estate market in Vancouver, Toronto nor the rest of Canada. Cameron Muir, chief economist of the B.C. Real Estate Association, suggested that in Vancouver, the number of foreign buyers are “much lower” than many people think, accounting for between 1 per cent and 3 per cent of the market.
In Toronto, a low supply of properties is leading to bidding wars that drove up the average price of Toronto homes to $504,117 in March. Toronto’s average home prices have set a new record high in every year since 2000 and 2012 should be no different.
“We’d love to have more inventory to sell because there’s no shortage of buyers looking for good inventory,” said Kevin Somers, the broker area manager for Royal LePage Real Estate Services Ltd. in central Toronto.
“As long as the basic economic indicators and interest-rate outlook remain positive, people will always need a place to live and would rather own than rent in most cases.”
Source: The Globe and Mail (ANDY HOFFMAN AND NICOLAS JOHNSON)
Tuesday, March 27, 2012
Bidding wars spark complaints from homebuyers, says Real Estate Council of Ontario
The Real Estate Council of Ontario is feeling the heat from Toronto’s hot housing market with a surge in calls from potential homebuyers upset they’ve lost out — or won — high-stakes bidding wars.
About 30 per cent of the 15,000 inquiries the council has had in the last year are from house hunters overwhelmed by the multiple bids process, says Bruce Matthews, deputy registrar in charge of complaints for RECO, the regulatory body for Ontario’s 58,000 realtors.
What’s most worrisome is how many homebuyers have waived home inspections in a desperate bid to win the house of their dreams, only to end up with a nightmare of costly repairs and upgrades later, says Matthews.
The concerns and confusion around multiple offers, which have spiked across the GTA in the last six months in particular, are part of the reason the council is launching a new education campaign this week.
The ads on public transit and YouTube are meant to encourage house hunters to do their homework before making the biggest purchase of their lives — and look beyond whether the home is in the best neighbourhood or school district.
“We’ve had numerous circumstances brought to our attention where a buyer, even against the advice of their realtor, has waived home inspections or conditions around financing when they found out there were other offers on the property,” says Matthews.
“Unfortunately in bidding wars, reason and rational thought are often replaced by emotion and haste. We can’t legislate human behaviour, but we’re trying to put more of the emphasis on information and knowledge in advance (of going to open houses and putting in offers) to prevent these kind of situations.”
The council has seen some homebuyers walk away from hefty deposits, or end up in costly court cases, because they waived financing conditions to get a leg up in multiple bids. Some couldn’t close because they were rejected for financing or the bank felt they had paid too much, says Matthews.
Others found out too late that the house had knob and tube wiring or structural damage that would have been discovered in a home inspection.
Some of the calls have come from house hunters angry that they lost out to a lower bid.
“With the current supply and demand issue, a lot of power is with the seller,” says Matthews.
Sometimes a seller will choose a lower bid because the buyers can close at a specific time, have kids or don’t plan to raze the house: “We don’t regulate the buyers or sellers themselves,” says Matthews.
The council has a website and a host of information brochures meant to educate buyers, and sellers, about the ins and outs of bidding wars, the legal obligations when you sign a contract with a realtor, issues around mortgage fraud. It also has a complaints line and email address: 1-800-245-6910or complaints@reco.on.ca
The council also stresses safety and recommends that sellers put personal photos, valuables and medicines out of sight during open houses. The photos, for instance, can tip would-be thieves off to the fact you live alone or travel a lot.
Realtors are required to alert all potential bidders that multiple offers have been registered against a property. The council has had what Matthews calls “sour grapes” calls from house hunters who believe those numbers are being exaggerated to drive up emotions and house prices.
RECO has the power to investigate so-called “phantom bids” which are prohibited under the code of ethics in the Real Estate and Business Brokers Act which regulates realtors.
Even some realtors are becoming concerned at how high emotions are running in the Toronto market right now, fuelled by low interest rates that have no where to go but up. Last week ReMax reported that some 50 per cent of homes in the “coveted” $600,000 to $900,000 range in prime Toronto neighbourhoods have been selling over asking.
But bidding wars are also emerging in Winnipeg and a number of other resource-rich areas of Canada, it noted.
“We want people to really think about what they’re doing,” says Tom Wright, president and CEO of RECO. “Buying a house is the largest transaction most of us are ever likely to make and it stays with you for years.”
Source: Susan Pigg Business Reporter (Toronto Star)
About 30 per cent of the 15,000 inquiries the council has had in the last year are from house hunters overwhelmed by the multiple bids process, says Bruce Matthews, deputy registrar in charge of complaints for RECO, the regulatory body for Ontario’s 58,000 realtors.
What’s most worrisome is how many homebuyers have waived home inspections in a desperate bid to win the house of their dreams, only to end up with a nightmare of costly repairs and upgrades later, says Matthews.
The concerns and confusion around multiple offers, which have spiked across the GTA in the last six months in particular, are part of the reason the council is launching a new education campaign this week.
The ads on public transit and YouTube are meant to encourage house hunters to do their homework before making the biggest purchase of their lives — and look beyond whether the home is in the best neighbourhood or school district.
“We’ve had numerous circumstances brought to our attention where a buyer, even against the advice of their realtor, has waived home inspections or conditions around financing when they found out there were other offers on the property,” says Matthews.
“Unfortunately in bidding wars, reason and rational thought are often replaced by emotion and haste. We can’t legislate human behaviour, but we’re trying to put more of the emphasis on information and knowledge in advance (of going to open houses and putting in offers) to prevent these kind of situations.”
The council has seen some homebuyers walk away from hefty deposits, or end up in costly court cases, because they waived financing conditions to get a leg up in multiple bids. Some couldn’t close because they were rejected for financing or the bank felt they had paid too much, says Matthews.
Others found out too late that the house had knob and tube wiring or structural damage that would have been discovered in a home inspection.
Some of the calls have come from house hunters angry that they lost out to a lower bid.
“With the current supply and demand issue, a lot of power is with the seller,” says Matthews.
Sometimes a seller will choose a lower bid because the buyers can close at a specific time, have kids or don’t plan to raze the house: “We don’t regulate the buyers or sellers themselves,” says Matthews.
The council has a website and a host of information brochures meant to educate buyers, and sellers, about the ins and outs of bidding wars, the legal obligations when you sign a contract with a realtor, issues around mortgage fraud. It also has a complaints line and email address: 1-800-245-6910or complaints@reco.on.ca
The council also stresses safety and recommends that sellers put personal photos, valuables and medicines out of sight during open houses. The photos, for instance, can tip would-be thieves off to the fact you live alone or travel a lot.
Realtors are required to alert all potential bidders that multiple offers have been registered against a property. The council has had what Matthews calls “sour grapes” calls from house hunters who believe those numbers are being exaggerated to drive up emotions and house prices.
RECO has the power to investigate so-called “phantom bids” which are prohibited under the code of ethics in the Real Estate and Business Brokers Act which regulates realtors.
Even some realtors are becoming concerned at how high emotions are running in the Toronto market right now, fuelled by low interest rates that have no where to go but up. Last week ReMax reported that some 50 per cent of homes in the “coveted” $600,000 to $900,000 range in prime Toronto neighbourhoods have been selling over asking.
But bidding wars are also emerging in Winnipeg and a number of other resource-rich areas of Canada, it noted.
“We want people to really think about what they’re doing,” says Tom Wright, president and CEO of RECO. “Buying a house is the largest transaction most of us are ever likely to make and it stays with you for years.”
Source: Susan Pigg Business Reporter (Toronto Star)
Wednesday, March 21, 2012
GTA condo sales down 59 per cent in February
Condo sales declined 59 per cent across the GTA in February as builders sold remaining inventory from last year and geared up to launch new projects for spring.
That saw the sale of new single-family homes outpace highrise sales for the second month in a row, according to figures from RealNet Canada Inc. released Tuesday by the Building Industry and Land Development Assoc.
The sales figures also show that the GTA new housing market “is easing back into stability” after last year’s record pace of sales, said RealNet.
“Following a slow period in late-2011, the lowrise sector has once again stabilized and we are seeing steady activity, particularly in the 905 markets,” said BILD Acting President Joe Vaccaro in a statement Tuesday.
“On the highrise side, while it may appear that sales are down from last year, it actually reflects the typical February lag as existing units are purchased while new condominium projects prepare to launch in the City of Toronto later this year.”
But pricing is another matter.
While condo prices increased just two per cent in February over the same month a year ago, new home buyers were faced with a 10 per cent increase in prices, largely because of the delays in building approvals by municipalities and government-imposed development charges, Vaccaro noted.
Just 913 condos were sold across the GTA in February, down from 2,226 a year earlier. That compares to 1,666 new low rise properties sold last month, up 16.2 per cent from the 1,434 homes sold in February, 2011.
Source: Toronto Star (by Susan Pigg )
That saw the sale of new single-family homes outpace highrise sales for the second month in a row, according to figures from RealNet Canada Inc. released Tuesday by the Building Industry and Land Development Assoc.
The sales figures also show that the GTA new housing market “is easing back into stability” after last year’s record pace of sales, said RealNet.
“Following a slow period in late-2011, the lowrise sector has once again stabilized and we are seeing steady activity, particularly in the 905 markets,” said BILD Acting President Joe Vaccaro in a statement Tuesday.
“On the highrise side, while it may appear that sales are down from last year, it actually reflects the typical February lag as existing units are purchased while new condominium projects prepare to launch in the City of Toronto later this year.”
But pricing is another matter.
While condo prices increased just two per cent in February over the same month a year ago, new home buyers were faced with a 10 per cent increase in prices, largely because of the delays in building approvals by municipalities and government-imposed development charges, Vaccaro noted.
Just 913 condos were sold across the GTA in February, down from 2,226 a year earlier. That compares to 1,666 new low rise properties sold last month, up 16.2 per cent from the 1,434 homes sold in February, 2011.
Source: Toronto Star (by Susan Pigg )
Thursday, March 08, 2012
Bank of Montreal brings back 2.99 per cent., five-year mortgage
The Bank of Montreal has fired another shot across the bow of its housing market rivals by renewing its record-low 2.99 per cent rate on five-year mortgages.
The bank also said Wednesday it will offer a rate of 3.99 per cent on 10-year mortgages.
Both products come with a 25-year amortization period.
The offer takes effect Thursday for the five-year mortgage and Sunday for the 10-year. Both will be available until March 28, said Frank Techar, head of Canadian personal and commercial banking at the Bank of Montreal.
The special offers – a boon to heavily indebted home buyers – come amid worries that Canada’s real estate market is cooling, and that prices in big cities such as Toronto and Vancouver may be headed for a decline.
The deals also highlight increasing competitiveness among Canada’s big banks.
The 25-year amortization periods, which would leave some borrowers unable to qualify, are “good for Canadians and good for the stability of the Canadian housing market,” Techar said.
“We want to minimize interest rate risk for our customers and help them understand the benefits of paying their mortgage faster.”
The maximum amortization period on a mortgage is typically 30 years.
The products carry some restrictions. Customers can pre-pay and make lump sum payments as long as the total doesn’t exceed 10 per cent of the principal amount owed. Most mortgages let you make monthly and lump sum payments of as much as 20 per cent.
As well, you cannot refinance or switch your mortgage to another lender for the length of the term.
“We’re trying to reinforce the fact we want customers to have the benefit of the low rate but we also are catering to customers that want to live in their house and repay their mortgage as fast as possible,” Techar said.
Bank of Montreal was the first to offer the 2.99 per cent rate in January as a time-limited offer.
The reaction was fantastic, Techar said. “We saw an increase in volume almost immediately and it continued for the whole two-week period.”
It was later matched by Toronto-Dominion Bank and Royal Bank of Canada, though both banks ended the promotion early, citing changing conditions in the bond market, making it more expensive for banks to fund these loans.
Source: By Madhavi Acharya-Tom Yew (moneyville.ca)
The bank also said Wednesday it will offer a rate of 3.99 per cent on 10-year mortgages.
Both products come with a 25-year amortization period.
The offer takes effect Thursday for the five-year mortgage and Sunday for the 10-year. Both will be available until March 28, said Frank Techar, head of Canadian personal and commercial banking at the Bank of Montreal.
The special offers – a boon to heavily indebted home buyers – come amid worries that Canada’s real estate market is cooling, and that prices in big cities such as Toronto and Vancouver may be headed for a decline.
The deals also highlight increasing competitiveness among Canada’s big banks.
The 25-year amortization periods, which would leave some borrowers unable to qualify, are “good for Canadians and good for the stability of the Canadian housing market,” Techar said.
“We want to minimize interest rate risk for our customers and help them understand the benefits of paying their mortgage faster.”
The maximum amortization period on a mortgage is typically 30 years.
The products carry some restrictions. Customers can pre-pay and make lump sum payments as long as the total doesn’t exceed 10 per cent of the principal amount owed. Most mortgages let you make monthly and lump sum payments of as much as 20 per cent.
As well, you cannot refinance or switch your mortgage to another lender for the length of the term.
“We’re trying to reinforce the fact we want customers to have the benefit of the low rate but we also are catering to customers that want to live in their house and repay their mortgage as fast as possible,” Techar said.
Bank of Montreal was the first to offer the 2.99 per cent rate in January as a time-limited offer.
The reaction was fantastic, Techar said. “We saw an increase in volume almost immediately and it continued for the whole two-week period.”
It was later matched by Toronto-Dominion Bank and Royal Bank of Canada, though both banks ended the promotion early, citing changing conditions in the bond market, making it more expensive for banks to fund these loans.
Source: By Madhavi Acharya-Tom Yew (moneyville.ca)
Wednesday, February 01, 2012
Mortgage lending tightens for self-employed, immigrants
It’s going to be tougher for the self employed, new immigrants and higher-risk borrowers to get a mortgage as concerns continue to mount over the state of Canada’s housing market.
CIBC’s wholesale mortgage arm, FirstLine, quietly announced Tuesday that it will no longer accept new applications from “stated income” homebuyers who can’t prove they have the annual net income to qualify for home loans.
FirstLine also set a $1 million cap on what it will lend for a home purchase.
The major change in policy, which is bound to pique the interest of other major lenders, came on the same day it was revealed that the Canada Mortgage and Housing Corp. could be forced to cut back on the mortgages it insures.
The moves are seen as among the clearest indications yet that Canada’s hot housing market and record levels of household debt are a concern far beyond just the Ottawa offices of Finance Minister Jim Flaherty and Bank of Canada Governor Mark Carney.
That’s despite a Bank of Montreal report this week that says Canada’s housing market is more balloon than bubble and more likely to deflate than pop.
“The signs are there that everyone is worried, with the exception of BMO. It’s not like there is just one person saying there is a problem with the housing market,” said Jason Friesen, a mortgage consultant with the Callum Ross Team.
“It’s impossible to know, given all the doom and gloom in the rest of the world, what will happen over the next three months or the next six months, but lending institutions are looking for ways to protect themselves.”
The CIBC was unable to comment last night on the changes, other than to say FirstLine’s decision “reflects the normal course of business.”
But that, coupled with CMHC’s predicament, is sure to raise concerns.
CMHC has traditionally backstopped loans, especially to first-time homebuyers who can’t raise the traditional 20 per cent downpayment for a home.
But the housing corporation has recently received “an unexpected level of requests for large amounts of CMHC portfolio insurance” that has pushed it close to the $600-billion cap on insurance set by the federal government.
Those requests have come from financial institutions looking for, in essence, taxpayer backing on pools of previously uninsured low-ratio mortgages.
While a CMHC spokesperson insisted this “does not affect the availability of CMHC’s mortgage insurance for qualified home buyers and will not impact the cost of buying a home,” the federal housing company may inevitably be forced to take a harder look at who it insures down the road, housing experts say.
That’s led to speculation that CMHC, too, could back away from self-employed home buyers who often need insurance to get a mortgage.
CMHC declined to comment on those suggestions Tuesday, other than to say “CMHC continues to manage its mortgage loan insurance business in accordance with the $600 billion insurance in force limit.”
FirstLine’s announcement is “a pretty substantial change in thinking” from the second-biggest mortgage lender in the country, said Friesen.
The question is whether other institutional lenders will follow suit.
CMHC’s situation is equally worrisome in that the federal limit could see a tightening of lending conditions that leads to a cooling of a market many housing experts consider “overheated.”
As of Sept. 30, CMHC had insured $541 billion in loans, up from $501 billion a year earlier. Just three years ago, CMHC was insuring $450 billion in loans and asked Ottawa for approval for the $600 billion cap.
The increase in insurance-backed loans is not only evidence that increased prices are pushing houses further out of reach of many homebuyers, but that people are still so keen to get into the market, they’re willing to pay for mortgage default insurance, said TD Bank economist Sonya Gulati.
Maintaining the cap could have a dampening effect on demand for housing, but would be “an indirect way of making it tougher to get a mortgage,” she said.
Ottawa has raised concerns about record levels of household debt, fuelled by high-spending baby boomers and historically low interest rates.
But restricting CMHC “is a bit trickier,” said Gulati, than having Ottawa tighten up mortgage rules yet again by insisting on higher downpayments and shorter amortization periods.
Source: By Susan Pigg (Toronto Star)
CIBC’s wholesale mortgage arm, FirstLine, quietly announced Tuesday that it will no longer accept new applications from “stated income” homebuyers who can’t prove they have the annual net income to qualify for home loans.
FirstLine also set a $1 million cap on what it will lend for a home purchase.
The major change in policy, which is bound to pique the interest of other major lenders, came on the same day it was revealed that the Canada Mortgage and Housing Corp. could be forced to cut back on the mortgages it insures.
The moves are seen as among the clearest indications yet that Canada’s hot housing market and record levels of household debt are a concern far beyond just the Ottawa offices of Finance Minister Jim Flaherty and Bank of Canada Governor Mark Carney.
That’s despite a Bank of Montreal report this week that says Canada’s housing market is more balloon than bubble and more likely to deflate than pop.
“The signs are there that everyone is worried, with the exception of BMO. It’s not like there is just one person saying there is a problem with the housing market,” said Jason Friesen, a mortgage consultant with the Callum Ross Team.
“It’s impossible to know, given all the doom and gloom in the rest of the world, what will happen over the next three months or the next six months, but lending institutions are looking for ways to protect themselves.”
The CIBC was unable to comment last night on the changes, other than to say FirstLine’s decision “reflects the normal course of business.”
But that, coupled with CMHC’s predicament, is sure to raise concerns.
CMHC has traditionally backstopped loans, especially to first-time homebuyers who can’t raise the traditional 20 per cent downpayment for a home.
But the housing corporation has recently received “an unexpected level of requests for large amounts of CMHC portfolio insurance” that has pushed it close to the $600-billion cap on insurance set by the federal government.
Those requests have come from financial institutions looking for, in essence, taxpayer backing on pools of previously uninsured low-ratio mortgages.
While a CMHC spokesperson insisted this “does not affect the availability of CMHC’s mortgage insurance for qualified home buyers and will not impact the cost of buying a home,” the federal housing company may inevitably be forced to take a harder look at who it insures down the road, housing experts say.
That’s led to speculation that CMHC, too, could back away from self-employed home buyers who often need insurance to get a mortgage.
CMHC declined to comment on those suggestions Tuesday, other than to say “CMHC continues to manage its mortgage loan insurance business in accordance with the $600 billion insurance in force limit.”
FirstLine’s announcement is “a pretty substantial change in thinking” from the second-biggest mortgage lender in the country, said Friesen.
The question is whether other institutional lenders will follow suit.
CMHC’s situation is equally worrisome in that the federal limit could see a tightening of lending conditions that leads to a cooling of a market many housing experts consider “overheated.”
As of Sept. 30, CMHC had insured $541 billion in loans, up from $501 billion a year earlier. Just three years ago, CMHC was insuring $450 billion in loans and asked Ottawa for approval for the $600 billion cap.
The increase in insurance-backed loans is not only evidence that increased prices are pushing houses further out of reach of many homebuyers, but that people are still so keen to get into the market, they’re willing to pay for mortgage default insurance, said TD Bank economist Sonya Gulati.
Maintaining the cap could have a dampening effect on demand for housing, but would be “an indirect way of making it tougher to get a mortgage,” she said.
Ottawa has raised concerns about record levels of household debt, fuelled by high-spending baby boomers and historically low interest rates.
But restricting CMHC “is a bit trickier,” said Gulati, than having Ottawa tighten up mortgage rules yet again by insisting on higher downpayments and shorter amortization periods.
Source: By Susan Pigg (Toronto Star)
Monday, January 16, 2012
Home prices to rise again in 2012, but more slowly than last year: LePage
Canadian home prices will continue to go up in 2012, although at a slower pace than they did last year, according to one of the country’s largest real-estate sales organizations.
Royal LePage, which franchises brokerages across the country, predicted Thursday that the national average price for resale homes will increase this year by 2.8 per cent by the end of 2012.
It said the national average price for a standard two-storey home was $375,427 in the fourth quarter of 2011, up 4.2 per cent from 2010.
“Widespread calls for a major real estate correction in 2012 simply can’t be justified. The industry has significant momentum entering the year, and buoyed by the stimulative effect of very low interest rates, we expect the market to continue to expand — albeit at a slower pace,” said Phil Soper, the president and CEO of Royal LePage Real Estate Services.
National averages don’t tell the whole story, however, since there are wide variations depending on the type of home and location.
In Vancouver, a standard two-storey home had an average price of $1.1 million in the fourth quarter of 2012, up 10.9 per cent from a year ago. By contrast, two-storey homes in Atlantic Canada had an average price of $200,000 or less in several cities where increases were fairly flat compared with a year ago.
In Toronto, which is usually the country’s second-most expensive real-estate market after Vancouver, Royal LePage found strong price gains for most housing types in the fourth quarter — due to a lack of available properties and steady demand.
The Royal LePage forecast came as the Statistics Canada reported the price of new homes rose again in November, led by gains in Toronto and Montreal.
The government agency’s new housing price index rose 0.3 per cent in November, after a 0.2 per cent increase in October. On an annual basis, the index was 2.5 per cent higher in November compared with November 2010.
The largest year-over-year price increases in reported by Statistics Canada were in Toronto and Oshawa, Ont., where they were up 6.2 per cent.
In 2012, Royal LePage expects that real estate values in Toronto will increase 2.6 per cent compared to 2011 — slightly slower than the national growth rate.
In the fourth quarter, the average price for detached bungalows rose 7.2 per cent from a year earlier to $532,137; prices for standard two-storey homes rose 4.2 per cent to $629,188 and standard condos rose 3.4 per cent to $347,659.
Some economists have said housing prices in certain Canadian markets, including the Toronto area, may be too high to be sustainable and are due for a correction. However, LePage said housing prices have been high in Toronto because demand has outstripped supply.
“Inventory has been a challenge for Toronto’s potential buyers throughout 2011 and this restricted supply has put upward pressure on prices,” said Gino Romanese, senior vice-president for Royal LePage Real Estate Services Ltd.
“Standard condominiums in the resale market saw a more modest increase due to a healthier supply that was created by newer units coming online. However, demand for older units has increased as they are generally larger in size and preferable to (people downsizing from houses) who are used to more space.”
In Victoria and Saint John, N.B., house prices were flat or slightly down in the fourth quarter, compared with the same period of 2010.
In Saint John, detached bungalows fell 2.2 per cent year-over-year to $179,946, while standard two-storey properties slipped 0.3 per cent to $298,076. Condos were the exception, with average prices climbing 16.1 per cent year-over-year to $159,370, although LePage said those increases weren’t typical.
In Victoria, standard two-storey homes were unchanged, with prices remaining at $480,000 while detached bungalows slipped 0.8 per cent to $486,000 and condos dropping 1.1 per cent to $282,000.
Source: The Canadian Press
Royal LePage, which franchises brokerages across the country, predicted Thursday that the national average price for resale homes will increase this year by 2.8 per cent by the end of 2012.
It said the national average price for a standard two-storey home was $375,427 in the fourth quarter of 2011, up 4.2 per cent from 2010.
“Widespread calls for a major real estate correction in 2012 simply can’t be justified. The industry has significant momentum entering the year, and buoyed by the stimulative effect of very low interest rates, we expect the market to continue to expand — albeit at a slower pace,” said Phil Soper, the president and CEO of Royal LePage Real Estate Services.
National averages don’t tell the whole story, however, since there are wide variations depending on the type of home and location.
In Vancouver, a standard two-storey home had an average price of $1.1 million in the fourth quarter of 2012, up 10.9 per cent from a year ago. By contrast, two-storey homes in Atlantic Canada had an average price of $200,000 or less in several cities where increases were fairly flat compared with a year ago.
In Toronto, which is usually the country’s second-most expensive real-estate market after Vancouver, Royal LePage found strong price gains for most housing types in the fourth quarter — due to a lack of available properties and steady demand.
The Royal LePage forecast came as the Statistics Canada reported the price of new homes rose again in November, led by gains in Toronto and Montreal.
The government agency’s new housing price index rose 0.3 per cent in November, after a 0.2 per cent increase in October. On an annual basis, the index was 2.5 per cent higher in November compared with November 2010.
The largest year-over-year price increases in reported by Statistics Canada were in Toronto and Oshawa, Ont., where they were up 6.2 per cent.
In 2012, Royal LePage expects that real estate values in Toronto will increase 2.6 per cent compared to 2011 — slightly slower than the national growth rate.
In the fourth quarter, the average price for detached bungalows rose 7.2 per cent from a year earlier to $532,137; prices for standard two-storey homes rose 4.2 per cent to $629,188 and standard condos rose 3.4 per cent to $347,659.
Some economists have said housing prices in certain Canadian markets, including the Toronto area, may be too high to be sustainable and are due for a correction. However, LePage said housing prices have been high in Toronto because demand has outstripped supply.
“Inventory has been a challenge for Toronto’s potential buyers throughout 2011 and this restricted supply has put upward pressure on prices,” said Gino Romanese, senior vice-president for Royal LePage Real Estate Services Ltd.
“Standard condominiums in the resale market saw a more modest increase due to a healthier supply that was created by newer units coming online. However, demand for older units has increased as they are generally larger in size and preferable to (people downsizing from houses) who are used to more space.”
In Victoria and Saint John, N.B., house prices were flat or slightly down in the fourth quarter, compared with the same period of 2010.
In Saint John, detached bungalows fell 2.2 per cent year-over-year to $179,946, while standard two-storey properties slipped 0.3 per cent to $298,076. Condos were the exception, with average prices climbing 16.1 per cent year-over-year to $159,370, although LePage said those increases weren’t typical.
In Victoria, standard two-storey homes were unchanged, with prices remaining at $480,000 while detached bungalows slipped 0.8 per cent to $486,000 and condos dropping 1.1 per cent to $282,000.
Source: The Canadian Press
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