Archive for the ‘Canada mortgage news’ Category

Million-dollar homes the new norm in some Canadian cities

Thursday, March 5th, 2015

In cities such as Vancouver and Toronto, the average cost of a detached home will set you back more than seven figures. Meanwhile, the market in Alberta has seen sales and prices drop since the collapse of oil.

In January, Deutsche Bank AG warned that homes in Canada are overvalued by 63 per cent, and that homeowners are “in serious trouble” due to rising debt levels. But the Bank of Canada’s surprise decision to cut interest rates that same month, has given some Canadians incentive to keep buying property.

Toronto

In Toronto, skyrocketing real estate prices hit a new high on Wednesday with the average price of a detached house in the city surpassing $1 million.

The average cost of a detached home hit the seven-figure mark for the first time last month, according to numbers from the Toronto Real Estate Board. That price was up 8.9 per cent over last year and helped drive the overall average selling price of a Toronto home up to $596,163.

The Toronto real estate scene was a seller’s market in February, with more people buying homes and fewer people putting them up on the market. The number of homes sold went up by 11.3 per cent, despite there being 8.7 per cent fewer on the market when compared to February 2014.

“The detached (house) market has been especially tight, we are not seeing a lot of new supply come online, and certainly not a lot of listings,” said Jason Mercer, the director of market analysis at the TREB.

The average cost of a detached home in the city came in at $1,040,018 last month, while semi-detached homes went for an average of $702,305, up 4.9 per cent over last year.

The strong gains for Toronto’s detached and semi-detached markets were offset by a fall in sale prices for townhouses and condo apartments in the city. The average selling price of a townhouse fell by seven per cent, while condos sale prices dipped by 0.9 per cent.

Rising prices have pushed some prospective home buyers to eye property in the city’s suburbs, but they too have been affected by the housing boom.

Residential sale prices were up across the board in the Greater Toronto Area’s 905 area code regions. The average price of a semi-detached home surged by 11.6 per cent in the GTA, while fully detached went up 8.5 per cent, condos spiked 10.9 per cent and townhouses were up by eight per cent.

In the nearby Durham Region, the average price for a detached home is more than $467,000.

David Batori is a real estate agent who has been selling homes in the north end of the city for 25 years.

He says he has seen prices in area change drastically.

“When I started you couldn’t give a house away from $250,000 in some of these north Toronto neighbourhoods … so yes, I’m completely surprised,” he told CTV Toronto.

“Building lots are selling for north of a million dollars,” he added.

Vancouver

On the west coast, the housing market has seen record-breaking sales. The average price of a detached home in Vancouver reached almost $1.4 million last month. And last month, the city saw 3,000 properties change hands — a 60 per cent jump from January.

“There is a shortage of inventory, and also money is cheap right now – interest rates are fantastic,” said Charlie Real, a local real estate agent.

That can mean waiting as long as six months to get a winning bid on a home, as was the case for Vancouver native Neil McIver.

“We made bids on three different places, every one of them went above what the asking price was,” he said.

“I think it is a little bit irresponsible and a little bit crazy but that is the marketplace in Vancouver (that) you are dealing with,” he added.

Alberta

Meanwhile, sliding oil prices are responsible for a slowdown of the housing market in Western Canada.

Home sales have dropped by a third in Calgary, and the average price of a detached home has fallen four per cent to $462,000.

But some real estate analysts aren’t concerned by the recent dip in the province.

“The market has cooled down, (and) we are seeing fewer sales and listings come up,” said Felicia Mutheardy, a senior market analyst at the Canada Housing and Mortgage Corporation.

“The market is taking a step back and returning now to a more balanced terriroty,” she added.

Source: Josh Elliott and Michael Shulman, CTVNews.ca

Metro Vancouver homes push past the $1-million mark

Wednesday, March 4th, 2015

Strong demand in Metro Vancouver – Canada’s hottest real estate region – has pushed typical detached home prices past the $1-million mark, with February sales well above average.

Who is purchasing the homes, and how can they afford them? Offshore buyers are stepping up, as are people capitalizing on low interest rates and renting out suites, according to Ray Harris, president of the Real Estate Board of Greater Vancouver.

The benchmark price for a single family home in Metro Vancouver is now $1,026,300, up 9.7 per cent over February 2014, according to the real estate board.

Benchmark properties represent a typical residential home in a given market, and in Richmond, Burnaby, Vancouver and North Vancouver, single-family benchmark homes now exceed $1 million.

Several other Lower Mainland municipalities are creeping up to the million-dollar mark, including Port Moody at more than $900,000, and Coquitlam at more than $800,000.

Despite the hefty increases, the real estate board says buyer and seller activity was strong in February, with home sale and listing totals beating the region’s 10-year average for the month by 20 per cent.

“It’s an active and competitive marketplace today. Buyers are motivated and homes that are priced competitively are selling at a brisk pace,” Harris said.

He attributed the growth in sales to offshore buyers, Vancouver residents moving out of the core and record low interest rates. Buyers are now taking out larger mortgages and covering them by renting out suites in their houses, he said.

“How can people afford a million-dollar home? Well if they have an income of $3,200 from two suites, all of a sudden it’s more affordable,” he said. “You are going to see a lot more suites and sharing of the costs.”

Andrey Pavlov, a professor of finance at Simon Fraser University’s Beedie School of Business, sounded a cautionary note, describing the boom as “of great concern.”

“People are clearly using the (tiny) drop in interest rates to over-extend themselves even more,” he wrote in an email, adding that he saw the drop in interest rates and sharp decline of the dollar as “symptoms of a very weak Canadian economy.”

Residential property sales in the region reached 3,061 on the Multiple Listing Service — a 21 per cent increase over the same month last year and a 60 per cent increase over January 2014. The benchmark price for all Metro Vancouver residential properties rose to $649,700, 6.4 per cent above February 2014.

Even the recently stale condominium market is gaining traction, with recent price increases above the rate of inflation — something that hasn’t been seen for several years, said Cameron Muir, chief economist at the B.C. Real Estate Association.

Muir said home sales should continue to increase, though record sales levels are unlikely this year or next. The sales figures, while strong, were beating averages that had been depressed for a few years, he said.

“Sales will be above your longer-term averages. We’re kind of ratcheted up to another level that we haven’t seen in a number of years, and that’s being backed by some pretty solid economic fundamentals,” he said, including low interest rates, a strong economy and low gas prices that help to raise confidence.

New listings for detached, attached and apartment properties in the region totalled 5,425 in February, a 15.4 per cent increase compared to the 4,700 new listings reported in February 2014.

The sales-to-listings ratio was 25.7 per cent, the highest since March 2011, according to the board.

“Total homes for sale on the marketplace has really steadily declined … and as a result we’ve seen marketplace conditions go from buyer’s market conditions in 2012 to now cusping on that seller’s market territory in 2015,” Muir said.

Meanwhile, sales of all property types were up by 21 per cent in the Fraser Valley, according to the Fraser Valley Real Estate Board.

Board president Jorda Maisey said it was the busiest February since 2007, with 1,337 homes sold in the Fraser Valley — compared to 1,102 the year before. The number of new listings declined by four per cent.

The benchmark price of a single-family detached home in Abbotsford in February was $450,200, 3.9 per cent higher than in February 2014. The price of a townhouse was $228,600. The benchmark detached home price in Langley was $585,900 and it was $945,300 in White Rock-South Surrey.

Source: Tiffany Crawford and Matthew Robinson, Vancouver Sun

Toronto and Vancouver’s housing markets continue their upward surge

Wednesday, February 18th, 2015

Canada’s housing market has been cooling, led by Alberta, but Toronto and Vancouver are surging forward fuelled by lower borrowing costs.

Recent trends have seen a red-hot housing market in Alberta along with the big urban markets of Toronto and Vancouver driving the national-level overvaluation. However, Alberta is now driving the weakness in home sales with other metrics of the national housing market slowly following.

The Canadian Real Estate Association (CREA) reported on Tuesday, Feb. 17, national home sales falling 3.1 percent from December to January. This is the second month in a row sales have declined notably.

“The decline in national sales largely reflects weakened activity in Calgary and Edmonton,” said CREA’s chief economist Gregory Klump.

“If these two markets are removed from national totals, combined sales activity remained 1.9 percent above year-ago levels,” he added. Instead, compared to year-ago levels, national sales were down 2.0 percent for January.

The fall in the price of oil has seen Alberta’s housing market take a sharp turn south. Housing inventory has doubled in the last year in Calgary as a result of new listings rising 37 percent and sales falling 39 percent. Edmonton’s inventory in January 2015 is up 35 percent from December 2014.

As a result, CREA’s measure of inventory has risen to a 6.5 months’ supply, the highest since April 2013. The sales-to-new listings ratio fell to 49.7, which is the first time this ratio has been below 50 since December 2012. It’s still in balanced territory, but the trend is clear.

Prices tend to lag sales and this is evident in that Calgary still shows the largest year-over-year price increase for January, at 7.76 percent, with Greater Toronto (7.47 percent) and Greater Vancouver (5.53 percent) following. CREA notes that while year-over-year price gains in Calgary are shrinking, those in Toronto and Vancouver are picking up, however.

The Toronto Real Estate Board (TREB) released mid-month housing figures on Wednesday, Feb. 18, and reported a 14.9 percent increase in the number of sales for the first two weeks of February as compared to the same period last year.

“While home prices are higher compared to this time last year, borrowing costs are lower. Home buyers are still finding affordable options to meet their housing needs,” said TREB president Paul Etherington in the press release.

The average selling price in Toronto for the first half of February was $602,110 — a 10.3 percent year-over-year increase. The tight market conditions are approaching seller’s market territory, according to a Feb. 18 BMO special report on the housing market.

Vancouver’s home sales are up 8.7 percent from January 2014 and are nearly 15 percent higher than the 10-year sales average for January.

“While demand remains steady, we’re seeing fewer homes for sale at the moment,” said Ray Harris, president of the Real Estate Board of Greater Vancouver in a Feb. 3 press release. “This is creating greater competition amongst buyers.

Source: Rahul Vaidyanath, Epoch Times

Canadian banks on brink of mortgage price war

Wednesday, January 28th, 2015

Canada’s major banks are heading into a renewed mortgage price war in the wake of the Bank of Canada’s surprise decision to cut interest rates.

Mortgage brokers reported that Royal Bank of Canada dropped its five-year fixed rate for qualified borrowers to 2.84 per cent over the weekend. While smaller, non-bank lenders have started offering even cheaper rates, RBC’s rate cut is likely a record for a major bank, said Drew Donaldson, executive vice-president of Safebridge Financial Group. The bank also slashed its posted 10-year fixed rate to 3.84 per cent, the lowest nationally advertised rate in the country, said Robert McLister, founder of Ratespy.com.

RBC spokesman Wojtek Dabrowski said the bank continues to “review the impact of the Bank of Canada’s rate decision,” and that the company’s “individual product lines continue to make pricing adjustments in the regular course of business to ensure we provide competitive rates in the marketplace.”

Bank of Nova Scotia and National Bank of Canada have also cut fixed rates on broker-originated mortgages by 10 to 20 basis points in recent days. Toronto-Dominion Bank said it was dropping its posted 5-year fixed rate on Tuesday to 3.09 per cent, down from 3.29 per cent.

Mortgage officials said RBC was among the last of the major banks to introduce new rate specials.

“National Bank already offers competitive rates over the mortgage rate spectrum as we moved early over the past weeks,” bank spokesman Claude Breton said.

A battle in the mortgage market seemed inevitable given that Government of Canada bond yields have plummeted in recent weeks, falling 57 basis points in the past month to historic lows. Brokers had predicted that falling bond yields were almost certain to drive down the fixed-rate mortgage pricing ahead of the competitive spring housing market even as banks have largely kept their prime rates, which govern variable-rate mortgages along with other types of loans, unchanged. All the major banks will soon be forced to follow the Bank of Canada and cut their prime rates 25 basis points to 2.75 per cent, Mr. Donaldson said. “We expect more cuts to come from all lenders,” he said.

Even ahead of the Bank of Canada’s unexpected rate cut last week, the country’s major banks already seemed poised for a new round of rate cuts this year. Earlier this month, Bank of Montreal chief executive officer Bill Downe told an industry conference the bank was expecting to “again have a fresh offer that is appealing to customers” in the spring. The bank drew the ire of former finance minister Jim Flaherty in 2013 after it dropped its five-year fixed mortgage rate to 2.99 per cent in what Mr. Flaherty called a “race to the bottom.”

The renewed price war is raising concerns that the central bank’s rate cut will add fuel to the country’s overheated housing market even as Canadians struggle under the burden of rising household debt. Canadian Imperial Bank of Commerce deputy chief economist Benjamin Tal warned last week that falling mortgage rates could lead to “a monstrous spring in the real estate market.”

Others argue that low rates may not be enough to kick start a housing market that had already begun to slow toward the end of this year as oil prices plunged. Even as they predicted that Canada’s central bank will cut interest rates a second time later this year, TD economists said Monday they expect Canada’s real estate market to fare poorly this year as cheap crude and sky-high house prices in major cities are making it difficult for new buyers to afford to jump into the market despite low mortgage rates. “The housing market is … projected to be a drag on growth, with changes in existing home sales and prices, as well as housing starts, forecast to tilt into negative territory,” the bank said.

Source: Tamsin McMahon, The Globe and Mail

Why the trend for owning a rental property is growing

Monday, January 26th, 2015

Derek Petridis, a 39-year-old chief financial officer at Shikatani Lacroix Design Inc. in Toronto, has loaded up on seven condominium rental properties over the past decade.

It may seem like he’s got an extreme bet on the housing sector, but a new survey shows he is far from alone, with about one in 20 Canadian households owning some type of rental property.

The study from Altus Group, which relies on research from the Financial Industry Research Monitor, considered highly accurate on a national basis, shows that among households earning more than $100,000, the rate on rental property ownership is about 10%.

Rental property ownership tends to be higher for households with residents under age 50, which the study’s authors think may be driven by basement apartments and flats that homeowners are using to pay down their mortgages.

Home ownership rates in Canada are among the highest in the world with the 2011 census from Statistics Canada showing the trend to own continuing to climb and reaching 69%.

The other strength of the market has been people like Mr. Petridis, who have seen the benefit of owning investment properties. A Canada Mortgage and Housing report? last year of the Toronto and Vancouver markets found about 17% of condominium owners were investors.

“I fretted over the first purchase for weeks, but then I just started going from there. Once you are over the first one you fall in love with the cash flow, the model,” said Mr. Petridis, who has cooled his heels on the sector a bit and not purchased a new unit since 2011.

Peter Norman, chief economist with Altus Group, said the quarterly FIRM survey didn’t break down rental property ownership versus people simply renting out a piece of their principal residence, but there is some older data from Statistics Canada that addresses both aspects.

Renting out secondary suites or basement apartments seem to grow in tough times, as people use them as a way to cover their home ownership costs. “When times are tough, more renters choose that [way to live] because it’s cheaper and more homeowners find they need to supplement their income,” Mr. Norman said. “It does come and go and acts like a pressure valve in the housing market.”

Lately the valve has been left open as the number of secondary suites grows slightly. The census found there were 330,000 in 1996, 310,000 in 2001, 370,000 in 2006 and 390,000 in 2011. Builders have even been constructing new homes with roughed-in apartment suites with separate entrances and kitchens, Mr. Norman said.

Don Campbell, a real estate expert and author, said he started by renting out a basement apartment so he could buy a larger home than he might have otherwise been able to afford, and eventually moved on to larger real estate investments that didn’t involve his principal residence.

“Once they figure they can get a yield on their investment, they do,” said Mr. Campbell, adding Canadians are looking to get better income than they might achieve elsewhere like the stock market.

He thinks the basement suites are probably a large driver of the trend toward owning rental property. “That just might be the only way some people can afford to live in the neighborhood they want to,” said Mr. Campbell.

Source: Garry Marr, Financial Post

Will the Bank of Canada’s interest rate cut make any difference to home buyers?

Wednesday, January 21st, 2015

Already ranked as one of the most unaffordable cities in the world, Vancouver’s heated real estate market could get a further push, after the Bank of Canada cut the overnight lending interest rate to 0.75 per cent.

The rate had been at one per cent since September 2010 and the cut shocked markets on Wednesday. It will likely result in lower interest rates for variable rate mortgages, lines of credit and other loans that float with prime rates.

“That should provide a nice little potential boost for the housing market, not just in Vancouver but the rest of British Columbia as well,” said Bryan Yu, senior economist with Central 1 Credit Union.

But it depends how lenders respond to the Bank of Canada’s surprise interest rate drop with changes to mortgage rates, said Yu.

He expects the rate cut will put “mild downward pressure” on fixed and variable mortgage rates, but not make big waves on the housing market.

“This doesn’t change our outlook for Vancouver’s housing market significantly,” said Yu.

The credit union’s recent B.C. housing outlook forecast the median detached house price would climb by four per cent in greater Vancouver — continuing to outpace growth in condo prices.

Vancouver mortgage broker Michelle Byman said if lenders cut their rates, a quarter point change won’t make a big difference.

“It will help people that are buying,” said Byman. “But I don’t think that’s going to fuel anything more than what’s already going on in the market.”

On a $100,000, 25-year mortgage, lowering the rate from 3 per cent to 2.75 per cent would only cut someone’s $473.23 monthly payment by $13, said Byman.

Even on a $500,000 mortgage, a quarter point drop would only mean paying $63 less per month, she said.

Byman said 2010 federal policy changes intended to turn down the heat on Canada’s housing market affect the buyers she deals with.

In particular, the government requirement that borrowers qualify for the posted rate for a fixed five-year mortgage — even if that’s higher than the rate they’ll pay — limits how far buyers can extend themselves, said Byman.

Source: Lisa Johnson, CBC News

Doesn’t look like interest rates will rise this year

Tuesday, January 20th, 2015

Bank of Canada Governor Stephen Poloz will remain in interest-rate hibernation for another year as plunging oil prices raise concerns the nation’s economic growth is in jeopardy, economists say.

Poloz, who delivers the central bank’s next rate decision tomorrow, will hold off raising borrowing costs until 2016, according to the median forecast in a Bloomberg monthly survey, which previously predicted the governor would lift rates later this year. Economists also cut two-year yield forecasts by the most on record.

The central bank hasn’t raised its benchmark interest rate since 2010 as it awaits an economic recovery that’s in danger of fading. Crude oil, Canada’s biggest export, is trading below $50 a barrel, from $107 in the summer. The slump is already crimping exports, weakening investment and playing havoc with prairie housing markets. The last thing the economy needs is higher interest rates.

“Markets are doing the dirty work for the Bank of Canada,” Emanuella Enenajor, senior Canada economist at Bank of America, said Jan. 15 by phone from New York. “We are still going to see the Bank of Canada holding on to their assertion that the recovery is proceeding, perhaps it’s just proceeding a bit slower than they thought.”

“They are definitely going to have to acknowledge that there is a large downside risk from falling oil prices,” in the new economic forecast, Enenajor said. Last week she pushed her rate-increase forecast to the third quarter of 2016 from the first quarter.

The Bank of Canada has kept its benchmark rate at 1 percent since September 2010, predating Poloz taking the governor job, and is the longest stretch since World War II.

Bets are increasing that Poloz will cut rates, rather than raise them, with swaps trading signaling about a one in three chance of a reduction to 0.75 percent by December.

Homes sales in the nation’s oil hub – Calgary – and Alberta’s largest city plummeted 24.6 percent in December from the previous month, the Canadian Real Estate Association said last week. That was the worst drop since the 2008 bankruptcy of Lehman Brothers Holdings Inc. sparked the global credit crunch.

Source (edited): Greg Quinn and Catarina Saraiva, Bloomberg News

How much are first-time homebuyers spending across Canada?

Friday, January 16th, 2015

First-time home buyers are spending more to get into homeownership while some are putting off the buying decision based on financial considerations, says a new report from BMO.

The average spent in Canada by first-time buyers is $316,100, up from $300,000 in 2013, according to the BMO 2014 First-Time Home Buyers Report, with only one of the country’s top four markets coming in under the national average.

In Montreal, first-timers spend an average of $237,900, in Toronto $408,300, in Calgary $363,400, with Vancouver having the highest average first-timer spend of $506,500.

Despite the increases in spend, the average downpayment remains unchanged from last year at $50,576 (16% of the average national spend).

BMO also reports 30% of first timers expect parents or family to assist in their purchase, a percentage that rises to 40% in Montreal and Vancouver.

The majority (61%) have made cutbacks to their lifestyle in order to save for their first home.

Six in 10 say their home-buying timeline has been delayed, with 39% citing rising real estate prices as the main reason.

“Among the many considerations for those trying to get a foot in the door of the real estate market for the first time, the most important of all is building a substantial downpayment,” says Laura Parsons, a mortgage expert with BMO Bank of Montreal. “Buying a home is one of the most important financial decisions one can make, and typically represents the largest form of savings for Canadian households. It’s crucial those planning to buy are well-prepared and have considered all options available to them.”

The rising prices in the major markets are forcing first-timers to reconsider their first choice of housing.

“High prices in a few major cities, and the fact that prices are outrunning incomes in Toronto, are turning off some first-time buyers, while forcing others to go deeper into debt, tap their parents for hefty down payments and opt for a condo rather than a detached house,” says Sal Guatieri, senior economist, BMO Capital Markets.

While 60% of first-time buyers say they will set a budget and stick with it, 30% are prepared to go higher for the right home.

Parsons recommends first timers should set price boundaries before setting out on the home-buying journey.

“To help ensure first-time buyers don’t spend beyond their means, they need to be fully prepared to purchase the right house, at the right price. Getting pre-approved gives buyers the opportunity to consider multiple options, during a time-sensitive decision period,” she says.

Source: Myke Thomas, Calgary Sun

Is now the right time to buy a home?

Monday, January 12th, 2015

Buy a house. Don’t buy a house. Soft landing. Crash landing. As we start the new year, the question on everyone’s mind is: What can we expect from Canada’s housing market?

Once again, experts agree that housing affordability is stretched, historically low interest rates will rise, and housing prices will drop. Rewind 365 days and you could be reading a forecast for 2014. But this time the experts agree: prices really will fall and it’s got everything to do with the recovery of the global economy.

Now, if the global economy were a ballgame we wouldn’t be in the World Series. Oil prices are depressed and Europe is still struggling with its credit crunch. But things are slowly improving in the U.S. and within Canada, and the important teams are still in the game: our employment rate is stable, oil prices are not (yet) low enough to cause real concern, and exports have picked up as the value of our dollar has dropped. All this leads most economists to believe we’ll see slightly higher bond and mortgage rates and a nation-wide cooling of the housing market over the next couple of years.

Robert Hogue, senior economist with RBC Bank, says he believes the coming year will be “a moderating phase for the market with a soft landing in 2016.” Hogue predicts national home prices will actually rise 1% or maybe 1.5% in 2015, as buyers race to get in the market before mortgage rates increase, after which prices will fall later in the year. “It’s one of the reasons why 2014 was such a strong year.”

But he cautions home owners: “Canada’s real estate market really is a multi-headed beast. It’s essentially very strong in Toronto, Vancouver and Calgary, but it’s balanced or soft in the majority of other markets.” As such, he predicts we’ll see a cooling of the three biggest markets by the end of the year in response to small mortgage rate hikes starting mid-year.

Now, if the prime rate were to climb from its current 3% level to 5% or 6% over the next year or two, many Canadians could find themselves in deep trouble, says Hogue. But he isn’t sure we’ll see rates shooting up that fast any time soon. Until recently, analysts and policy makers considered 5% to be the neutral or natural interest rate. It was the rate that allowed full employment, a stable inflation rate, and a sustainable growing economy. But Hogue, along with economists from Morgan Stanley and analysts from the C.D. Howe Institute, believe that the “new neutral rate” has actually dropped.

The primary reason is the impact baby boomers continue to have on the national economy. As boomers continue to age and leave the workforce, Canada can expect a slowing of the labour market, which will depress productivity growth, limit the economy, and suppress potential inflation, explains Hogue. “If the new normal is markedly below what we’re used to, then we won’t see as much downward pressure on housing prices,” he says.

The impact of demographics doesn’t stop there. According to a new report by Benjamin Tal, deputy chief economist with CIBC, analysts have been seriously underestimating the number of new immigrants in Canada. New immigrants account for 70% of the country’s population growth and about half are between the ages of 25 and 44—the key demographic that leads to household formations. According to Tal the under-estimated increase in the number of home-buying immigrants in Canada will help to offset a slowing economy, created by the boomer generation. “Immigration, itself, won’t be able to change this trajectory, but it will help to offset it,” explains Tal.

But David Madani from Capital Economics isn’t convinced. “Every good economist knows that immigration always fluctuates and it’s never prevented a housing cycle in the past.” He’s also not convinced that builders are out of the weeds when it comes to supply and demand. While he agrees that absorption rates are close to historical long-term averages, he’s confident that the market will suffer. “There are too many one-bedroom condo units being built when demand shows a need for family accommodation.”

So what’s a regular home buyer to do? The best advice is prepare for the worst, but if you’re ready to jump in and you can afford it, waiting for prices to fall might not be the best idea. Ted Rechtshaffen, president and CEO at TriDelta Financial, advises against trying to time the market in general. “It’s not about prices or the mortgage rate, it’s whether you can truly afford to own the home.” This means calculating whether or not you could still afford your monthly payments even if mortgage rates increased to 4% or 5% a few years from now. It also means deciding whether or not you can stomach a housing price drop. While many economists are predicting a 10% drop, the correction could be as great as 30% in some Canadian markets.

Of course, your home is more then equity and capital. It’s the place you spend time with friends and family, and the place you build memories. “Life and lifestyle is just as important,” says Rechtshaffen, so as long as you can afford your payments, “don’t be too concerned about the correction.”

Source: Romana King, MoneySense

What is predicted for Canada’s housing market in 2015?

Tuesday, December 23rd, 2014

There were no double-digit price gains in the country’s hottest real estate markets this year. Instead, Calgary, Toronto and Vancouver saw prices increase between 5% and 7%, according to each city’s real estate board.

And as Sal Guatieri predicted, interest rates held steady.

But that will change in 2015, says the senior economist at BMO Capital Markets. Rates will go up, but slowly.

“We don’t expect the Bank of Canada to begin raising rates until October 2015,” says Guatieri. “The overnight lending rate, currently at 1%, likely won’t reach a more neutral level of 3.3% for another three years. Longer-term mortgage rates will also rise gradually.”

As a result, home prices and sales will stabilize next year. “The ‘Hot 3 cities’ should see much slower price appreciation next year, while most other regions will see modest price gains,” he says, adding Toronto and Vancouver could even see prices decline in the next three years.

Nationally, the average home will cost $404,800 by year-end. That figure will rise to $410,600 in 2015, and $417,300 in 2016, notes MLS.

Meanwhile, about 189,500 housing starts are expected, according to CMHC. This is in line with 2014, which should see 189,000 units by year-end.

“[There will be] a slight moderation in multi-unit starts during 2015, which will be offset by an increase in single-detached starts,” says Bob Dugan, chief economist for CMHC. “Looking ahead to 2016, expectations are for total starts to moderate, as builders focus on reducing their inventories.”

So where’s the opportunity for real estate investors?

Guatieri warns about investing in detached property in Vancouver or Toronto, “as lofty valuations suggest the returns will be low and prices are at risk of falling when interest rates rise.” Condos and townhouses will offer better value.

Also, keep an eye on demographics and economic activity. “Housing markets are much weaker in eastern Canada due to [slower growth], older populations and weaker economies than in Ontario and western Canada. Cities such as Calgary [and] Montreal, which attract a relatively larger share of the one-quarter million international migrants to Canada will see stronger housing markets.”

Regional breakdown

Toronto

Sales are expected to increase, before moderating in 2016, notes Dana Senagama, CMHC’s senior market analyst for the Greater Toronto Area.

“An increasing desire among millennial and baby boomer populations to live an urban life will also fuel higher demand for condominium apartments over the next two years,” she says.

Guatieri adds steady buying from immigrants and echo boomers will support the market, cushioning any price declines.

Montreal

Montreal will see support from international migrants, says Guatieri, so there’ll be “steady sales activity and modestly rising prices in coming years.”

Kevin Hughes, CMHC regional economist for Quebec, adds, “A gradual pick up in Quebec’s economic growth over the next two years will provide some stimulus to housing demand. During this period, resale markets will tighten somewhat, which will help sustain housing starts. However, despite an edging up of demand, the expected supply levels will keep price growth below the 2% mark.”

Calgary

The market should remain healthy, predicts Guatieri, but will see slower sales and price appreciation. That’s due to the recent decline in oil prices, which will likely dampen investment in the energy sector and slow job growth. “We expect oil prices to firm next year, but an unexpected further decline would undercut Calgary’s housing market more severely.”

Meanwhile, the province saw regional price gains of 4.7% this year to $399,000, notes CMHC. The average price will continue to rise, but at a slower pace to $407,800 in 2015, and $417,500 in 2016.

Vancouver

“Housing demand will be supported by employment and population growth, but tempered by gradually rising mortgage interest rates,” says Carol Frketich, CMHC’s B.C. regional economist.

In B.C., existing MLS home sales are forecast to total 79,200 units in 2015, and 79,300 units in 2016. The average home price is forecast at $566,300 in 2015, and $573,000 in 2016.

Source: Suzanne Sharma, Advisor.ca


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