Canadian home prices are likely about 10 percent overvalued given expectations for rising interest rates, TD Bank said in a report yesterday.

However, the bank also noted the overvaluation in markets such as Toronto, Vancouver, Montreal and Ottawa is likely more significant than in others across the country.

“These markets will likely feel the pinch from modestly higher interest rates over the next two years more so than others,” TD economist Diana Petramala wrote in the report.

She noted Montreal, Quebec City and Ottawa have been flooded with an overhang of inventory of unsold condos.

“Home prices weakened in the second half of 2013 as a result and we expect that softness to persist in 2014,” Petramala said. “Toronto is poised to follow their lead, as the number of new condos scheduled to be completed in 2014 and 2015 is elevated relative to history.”

The Canadian market and worries about a real estate bubble have been key concerns for policy-makers for several years. Recent indicators have suggested the market may be headed for a soft landing instead of a bubble bursting, but concerns have persisted.

“Our forecast is consistent with this imbalance unwinding gradually over the next few years through a combination of moderate income growth and a modest home price correction,” Petramala wrote.

“While 2014 is likely to see stable prices on average, prices are expected to edge down by two percent in 2015-16 as the over-building challenge increasingly weighs on the market and as borrowing costs grind higher.”

The Canadian Real Estate Association reported recently that sales through its multiple listings service totalled 457,893 homes for 2013, up eight-tenths of a per cent from 2012.

The national average price for homes sold in December was $389,119, up 10.4 per cent from the end of 2012. Excluding Greater Vancouver and the Toronto region, the year-over-year increase was 4.6 per cent.

The TD report noted that overvaluation can be measured in several different ways with vastly different results.

“The home price-to-rent ratio points to an over-valuation of 60 percent. However, this measure is skewed by rent controls. It is difficult to know whether prices are too high, or if its rents that are too low,” TD said.

Another indicator, the home price-to-income ratio suggested overvaluation as high as 30 percent, but TD said that depends on how income is defined and what is included.

“Our preferred index of assessing housing overvaluation is affordability, the percent of income an average household must devote to mortgage payments on an average priced home with a conventional mortgage,” the report said.

“While interest rates are not likely to return to their historical norms, the current low level of interest rates is also not sustainable. We expect a modest increase in interest rates.”

Source: Canadian Press

It’s the one room in the house where everyone gathers every day. As the most popular spot in every home, why not make your kitchen the most attractive and inviting room, too? Here are some hot trends in kitchen decor:

The showcase kitchen

Without a doubt, today’s kitchen is much more than a place to prepare food. With the continued emphasis on lifestyle and food, the kitchen is more of a draw than ever. Contemporary design capitalizes on this trend with lots of exciting elements to make the kitchen more of a living space.

Take lighting. Out are those little glass pendants suspended over an island. In are sizeable lighting fixtures that make a splash in the middle of the room. A good example is the drum pendant light fixture now taking center stage in kitchen design centers and magazines. Simply changing your main fixture to one that’s brighter and more prominent may be all it takes to give your kitchen a welcome makeover.

Specialty-focused

Kitchens continue to be focused on features like sustainability, cooking options and ease of use. Trends that favor energy savings are a key development. Touchless faucets save on water and energy-stingy appliances can trim electric bills.

Integrated appliances are another important development. Topping the lists are appliances integrated into the cabinetry, making your kitchen more livable with their furniture-like appearance. Drawer appliances are part of the same trend. Warming drawers have risen in popularity in the past few years, and refrigerated drawers to hold produce or drinks are finding their way into more kitchens. We could even see microwave and dishwashing drawers soon. Such appliances will become more popular due to their ease of use and accessibility.

Countertop shift

While granite and marble remain the standard-bearers, we’ll see more engineered countertops take hold, such as quartz and glass. These surfaces sport an attractive natural look, emphasize sustainability and are easy-care.

Despite granite’s reign as the ultimate countertop material, it’s not easy to keep looking good. The high polishes on granite mean stains, smears and cleaning marks from sponges show up easily. Matte and less-polished finishes will become more popular as homeowners weary of all that rubbing.

Shift to neutral

Wild colors are taking a back seat to the high-contrast black-and-white kitchens rising in popularity. The clean backdrop of black and white makes food and accent colors pop, and the look is timeless. Kitchens will also shift into quiet mode as the trend toward neutral colors continues in other parts of the house. Countertops and cabinets in similar color tones are also trending for their ability to look unified, neat and relaxing.

Source: Kathryn Weber, Tribune Content Agency

The $25,000 Ottawa allows you take out of your retirement fund to buy your first home sure doesn’t go as far as it used to.

Under the home buyers’ plan, Canadians can take $25,000 out of their registered retirement savings plan and pay it back over the next 15 years without incurring any penalty. For a couple that means $50,000.

But the dollar amount has been stuck at $25,000 since 1999 while house prices have continued to escalate. At $50,000, you’re barely making the minimum downpayment if you are buying a home in Vancouver with a mortgage backed by the government.

The Canadian Real Estate Association says the average price of a home will climb to $391,000 next year, meaning that $50,000 is less than 13% and not enough to avoid costly mortgage default insurance.

“I don’t know how effective the plan is now, so I’m not sure what would happen, if you increase the amount,” says Don Lawby, chief executive of Century 21 Canada.

It’s not just the amount. The tax-free savings account is now just as an effective savings vehicle. As of 2014, Canadians were allowed to contribute $31,000 and the amount increases every year. You can also withdraw money from a TFSA and put it an equal amount back later.

“I think you almost need a combination of the two plans together to fund that kind of investment,” said Mr. Lawby, about buying a house. “It depends on where you live in Canada.”

The home buyers’ plan was launched with a $20,000 withdrawal limit and it jumped to $25,000 in 2009.

One of the arguments against increasing the limit is it will encourage young Canadians to rob their retirement savings to buy a first home. Paying the money back over 15 years — there are significant penalties if you don’t — means you might not have the money to make current contributions.

Vince Gaetano, a principal of monstermortgage.ca, says the home buyers’ program is mostly being used by people as a tax loophole.

“This is the most popular time of the year to do it. They manipulate the system to deliver a tax return on the downpayment they will [already be] making on their purchase,” he says.

If you know you are buying your first home in the next 90 days, you make a $25,000 contribution or $50,000 for two people. That means a big refund in April. You then withdraw the $25,000 or $50,000 to pay for that initial home.

“Most people have the RRSP room. If you are buying a house by June and you have the downpayment in cash, you make the contribution to trigger the the refund,” said Mr. Gaetano, noting the $25,000 has to be in the plan for 90 days before you can take it out.

“You can garner $20,000 in refunds,” said Mr. Gaetano, pointing out it will depend on what your marginal tax rate is.

Source: Garry Marr, Financial Post

Canadians still looking to buy a vacation property in the United States have to look harder for deals today and saving money on exchange rates is more enticing than ever. Recovering prices and a weaker loonie have eaten into bargains south of the border.

The Canadian dollar touched its lowest level in six years against the greenback Thursday, adding some new urgency to buying U.S. property while making the people who bought at the bottom of the market look mighty smart.

In the past year, the dollar has lost 12%, an easy 12% gain for Canadians who bought U.S. property.

With the perfect storm of strong currency, low prices and better access to credit, in part due to the still lofty value of our Canadian homes, we have gotten used to some pretty great deals south of the border.

The purchasing power of Canadians had made us the No. 1 foreign buyer of U.S. residential property for the 12 months ending, March 2013. Canadians accounted for 23% of the US$68.2-billion of foreign purchases, according to the Washington-based National Association of Realtors.

The question now is whether the chance to buy cheap U.S. property has come and gone. New data released from the Washington-based national association shows the median price of existing homes was up 9.9% in December on a year-over-year basis, up from the 9% year-over-year pace in November.

And inventory levels finally seem to be shrinking as the U.S. homes available for sale hit 1.86 million units in December, a 9.3% drop from a year ago and the lowest absolute inventory since January 2013.

During the 2006 bubble peak, the U.S. national median price of an existing home reached $230,400. The median price was back up to $197,100 in 2013 but real estate is inherently local and the recovery has been greater in some markets than in others.

“Canadians like Florida, Arizona and to a degree California,” said Toronto-Dominion Bank deputy chief economist Beata Caranci, noting Florida is probably the top destination for Canadians and its price increases have not been as pronounced. “The fundamentals are still there in terms of attracting Canadians.”

While the dollar doesn’t look strong compared to where it was a few months ago, looking at it in historical context, it’s fall is not that dramatic.

“It’s still a good market in terms of affordability, it’s just eroding year by year and month by month,” said Ms. Caranci.

There’s no question buying a U.S. property has been top of mind to some of his clients, says David Kaufman, chief executive of Westcourt Capital Corp. which advises high net worth investors.

“It can be a good hedging strategy, and it’s a natural hedge. Many high net worth Canadians spend significant amounts of time in the U.S.,” says Mr. Kaufman. “If you’re going to spend 20% of your time and dollars in the U.S. every winter, you might as well.”

U.S. vacation homes are still mostly a luxury for many people. Unless you’re getting a lot of use out of the property, it’s likely cheaper to rent.

Source: Garry Marr, Financial Post

The Bank of Canada kept its benchmark interest rate steady at one per cent today, continuing its longest stretch of inaction on record.

Canada’s central bank last changed its target for the overnight rate in late 2010, when it was raised to its current level.The bank announces its latest policy decision on interest rates every six weeks, and the bank has now stood pat for 26 consecutive policy meetings.

In a statement accompanying Wednesday’s decision, the bank said it expects inflation to remain lower than previously anticipated for the next little while. It also said it expects a soft landing in the housing market.

The bank wasn’t expected to raise or lower rates on Wednesday, but watchers are closely parsing the statement to gauge which direction the bank is heading in — a rate hike to cool inflation, or a rate cut to stimulate the economy.

Wednesday’s statement suggests the bank is leaning toward the former.

The loonie plunged in the immediate aftermath of the news, shedding about a third of a cent to trade at 90.70 cents US.

Source: CBC News

While condo units are often used as primary homes, they can also be investments or vacation spots. This recent article by Marilyn Wilson in the Ottawa Citizen explores the uses for the extra condo, by which I mean a unit that is not your primary residence, but rather one that has a secondary function.

The Custom Condo

Many people move from larger homes to condos as a way of changing their lifestyles. Perhaps they intend to downsize or simply want to forgo shovelling snow. They may even want to travel more often and keep a condo to make this an easier feat.

Buyers shopping in new developments may choose to purchase two units and combine them to expand their square footage. This is a possible custom upgrade when purchasing a condo in a future development — like opting for granite over linoleum, but on a larger scale.

If you are looking at the penthouse, you can also find out if the developer can increase the size vertically in addition to horizontally by increasing your ceiling height. Such are the advantages of purchasing a pre-construction condo.

The Part-Time Condo

A lot of people choose to move or travel more after their children have left the roost. It’s a given that condo living can make travelling easier, as you may have a concierge to check on your unit and retrieve your mail. You will also not have to clear a front path in absentia. For these reasons, condo living is especially useful if you intend to spend winters in a warmer climate. It enables you to keep a low maintenance space where you can leave your things out and ready for your return.

Of course, someone in this situation can also purchase a time share; however, this necessities storing things when out of town, adding expense and hassle.

Another option is to purchase a room in a condo hotel suite. This means owning a hotel room that you yourself can use, usually for a limited time throughout the year. These are not usually offered as primary residences, but have the added advantage of hotel amenities, such as room service.

Keeping a part-time condo can also be especially useful if you plan on returning to a destination again and again. In a sense, it becomes your “cottage” or second dwelling. For example, I have clients who recently moved abroad but are interested in keeping a condo in Ottawa. This is simply because they know they will return often to visit friends here. This is also a popular choice for people who have children or grandchildren in another city.

When determining if you should purchase a condo as a second residence, consider the costs of hotels and — if you plan to rent a car or bring your own — public parking.

The Investment Condo

Perhaps you are interested in downsizing at a later date or simply want an investment with a monthly payout (through rental income). If so, then the investment condo may be a wise decision for you.

If you intend to move to a certain city but have not spent a ton of time living there as a local, you might consider purchasing a second home there rather than going all out with a pricey and disruptive move. To make a decision this big, you may want to spend time living as a local before you plan your move. Day-to-day life in any city is different from visiting as a tourist. To make this more equitable in the short term, you can rent out the unit by week (as a vacation rental) or with a long-term lease. Naturally, you can also do this with a condo unit closer to home.

One of my friends knows she and her husband will ultimately retire to Toronto. They are from there and one of their children is now enrolled at the University of Toronto. As a result, they decided to forgo paying monthly rent for their son by instead purchasing their dream condo now and having him live there.

Their son is therefore living in a well-built condo in a safe neighbourhood, and his parents have a place to stay when they visit. For this family, purchasing their condo was a way of investing in their future.

Whether your condo is your primary residence or a second home, it can bring you into an easier, more convenient way of living or travelling. Map out the condo scene in Canada and beyond using these creative ways of incorporating the condo lifestyle into your life.

Metro Vancouver house prices will increase by an average of 4.4 per cent this year to $801,000, according to the latest Royal LePage house price survey.

But Vancouver real estate experts suggested Thursday the forecast might be slightly optimistic.

“I’m expecting price increases in the one-to-two-per-cent range,” B.C. Real Estate Association chief economist Cameron Muir said in an interview. “Market conditions are fairly balanced now, which suggests fairly limited upward pressure on prices.

“I really don’t expect to see sales levels reach the point where prices are going to accelerate in any significant way.”

Sandra Wyant, president of the Real Estate Board of Greater Vancouver, noted most Vancouverarea housing prices increased by about two per cent last year – with the benchmark price for a detached home climbing 2.5 per cent to $927,000 while townhouse prices increased by 1.2 per cent to $456,100. Condominium prices rose by two per cent to $367,800.

“If we have pent-up demand this year, (Royal LePage) may very well be correct,” she said, noting the price-increase forecast is higher than other surveys. “It depends on how buyers are affected by certain events, such as interest rates and job growth.”

Royal LePage said confidence crept back into the Vancouver real estate market last year and it expects that momentum to carry over into 2014. The firm predicts total Metro Vancouver housing sales to increase from 28,700 in 2013 to 30,000 this year.

Royal LePage president Phil Soper said the national housing market emerged from a year-long correctional cycle of slow sales volumes last year.

“In the absence of some calamitous event or material increase in mortgage financing costs, we expect this positive momentum to characterize 2014,” he said in a statement.

Soper said talk of a “soft landing” for Canada’s real estate market this year is misguided.

“We expect no landing, no slowdown and no correction in the near-term,” he said. “Conditions are ripe for as strong a market as we saw in the post-recessionary rebound of the last decade.”

Muir noted the value of Metro Vancouver detached homes rose higher than other housing types last year and he expects that trend to continue in 2014.

“Condo prices have been quite flat while the price of single detached homes has accelerated, particularly in some of the tonier markets,” he said. “Eighty per cent of housing starts today are multi-family units so single detached homes will garner an increasing premium over time.”

Muir expects mortgage rates will remain “relatively unchanged” this year, with five-year rates increasing by about half a percentage point by the end of the year.

He said the U.S. economy could pose a risk to that forecast if it grows faster than expected this year, which could fuel inflation concerns and put more upward pressure on interest rates.

Wyant said job growth will play a big role in B.C. real estate values this year, noting the northern B.C. real estate market continues to perform well due to strong employment trends.

The Royal LePage survey said Calgary will have the highest house-price increases in Canada this year, with the average price increasing 5.1 per cent to $461,000. Vancouver’s 4.4-per-cent increase to $801,000 was second while Toronto came in third, with prices there expected to climb by 3.9 per cent this year to $545,000.

Across Canada, the average price is expected to increase by 3.7 per cent to $396,500.

Source: Bruce Constantineau, Vancouver Sun

What’s hot – and not – in housing for 2014? Below is a look at some of the trends, including what colours and accessories the best homes will be sporting this year.

Colour

Purple is the colour of the year for 2014. Unless it’s blue. Or maybe yellow.

Radiant orchid is the big one, says the international colour authority Pantone Color Institute. It’s showing up everywhere from wallpaper to accessories. The institute touts purple as inducing creativity, confidence and other good things.

It complements olive, deeper hunter greens, turquoise, teal, light yellows, grey and other colours, the institute says.

Which is good, since Sico earlier this year earmarked yellow as a dominant colour, while blue continues to be high on the Color Marketing Group’s favourites list.

“We’re seeing blue in a lot of new fabrics,” says Catherine Pulcine of Decorating Den Interiors in Ottawa. “It’s tending to cobalt blue, which ties into orchid. We’ve been seeing pretty vibrant colours over the past few years.”

Hello, walls

Once the stuff of Grandma’s house, wallpaper has made a big comeback in recent years, whether for an accent wall in a powder or dining room or cosily surrounding you in a bedroom.

Geometric patterns and radiant orchid, sometimes in tandem, are among wallpaper trends.

Wallpaper “adds panache to a space, but you have to ask yourself if it’s something you’re going to get tired of,” Pulcine says. It’s an important question: The stuff can get pricey and isn’t always easy to remove.

Wallpaper, mouldings and wall tiles all add texture, says Suzanne Dimma, editor-in-chief of House & Home magazine. “It gives so much more character and an architectural feel than just the drywall you get in a builder house.”

So-called statement walls, including those with handpainted murals, number among the magazine’s top 10 trends for 2014. Also on the list: painting trim and walls the same bold colour to eliminate contrast and increase the sense of spaciousness.

Recipes for a trendy kitchen Dramatic and sophisticated, black countertops in granite and quartz are zipping up the kitchen hit parade, according to the online real estate information service Zillow. Marble and light-grey counters in the same room provide contrast.

Also hot, Zillow says: open shelves, glass-fronted cabinetry and dark colours such as copper and deep red (because they make rooms feel smaller, such colours work best as accents).

“Glass (in doors) is popular, but what’s very trendy is frosted glass,” designer Dominique Girard says. “Most people don’t want to display everything.”

She says high-gloss cabinetry in PVC and other manufactured materials as well as sleek, linear lines – discreet cabinet door handles are becoming de rigueur – are also trending.

“The biggest trend is larger refrigerators. Samsung supports the fresh food craze with its

T9000 model ($4,200): it has two fridge and two freezer doors, but one freezer compartment converts to a refrigerator on demand.

Stainless steel remains No. 1 in finishes, but Businessweek.com reports that appliance makers are softening that with lessaustere designs, matte finishes, rounded edges and furniturelike handles.

Furnishings and accessories

We’re increasingly viewing furniture as an investment rather than disposable fashion items, Dimma says. If there’s a trend at all, it’s toward traditional or modern classic styles that will work for years.

Pulcine says the industrial look is fading. “People like to add warmth to their space, particularly for us who have to deal with winter.” That warmth is showing up, for example, in rustic items such as tables with barnboard tops and black or grey-black iron bases.

Some accessories are taking their hint from what Dimma calls the Woodstock Revival. Sears’s spring 2014 home collection, for example, includes owl lanterns that look like they’re made of macramé, as well as cheery, folk-art inspired cushions and table napkins. Boomers should totally relate.

To that list, those in the know add sculptural light fixtures, animal prints such as crocodile and zebra, and furnishings and accessories inspired by classical Greece and Rome.

Other top trenders

Watch for hot new tiles in bathrooms and elsewhere. They include patterned floor tiles in keeping with the geometric patterns emblazoning everything from fabrics to wall hangings.

Persian rugs: “Hot, hot, hot!” House & Home’s Dimma says.

Fancified basements with curved bulkheads, mini brew pubs, luxurious home theatres.

Outside, look for resortstyle backyards inspired by Canadians’ love of winter jaunts to Mexico and Cuba, landscape designer Welwyn Wong says. We’ll be capturing a bit of that southern paradise feel by surrounding our pools with lush island plantings, little bridges and rock outcroppings, she says.

Source: Patrick Langston, The Ottawa Citizen

Repeated warnings of an overheated market failed to deter home buyers in Canada’s largest cities in 2013, with the number of Toronto home sales up two per cent over the previous year, Vancouver sales were up 14 per cent and Calgary sales rose 11 per cent.

Homes in the Greater Toronto Area continued their robust rise in price, up 5.2 per cent to an average price of $523,036 in December, compared to $497,130 in 2012, the Toronto Real Estate Board reports.

After a slow start to 2013, GTA housing sales picked up in the second half of the year. Total sales for 2013 were 87,111, compared to 85,496 transactions in 2012.

Even the condo market showed gains, with the average price in Toronto rising 7.6 per cent to $367,376 compared to December 2012, while detached homes prices rose by nearly 19 per cent to $864,351.

Although December sales tend to be slow, new listings were down almost four per cent in December, which helped fuel frantic bidding wars in some Toronto neighbourhoods close to the downtown and transit lines.

For Metro Vancouver, total sales of detached, attached and apartment properties in 2013 reached 28,524, a 14 per cent increase from the 25,032 sales recorded in 2012.

But the number of residential properties listed for sale on the MLS declined 6.2 per cent in 2013 to 54,742, part of a trend in major cities as baby boomers hold onto their properties.

The average house price in the Greater Vancouver area was $603,400.

The price of a detached single family home rose 2.5 per cent to $927,000, while condo prices were up 1.8 per cent for the year to $367,800.

“It was a year of stability for the Greater Vancouver housing market,” said Sandra Wyant, Real Estate Board of Greater Vancouver president. “Balanced conditions allowed home prices in the region to remain steady, with just a modest increase over the last 12 months.”

In Calgary, 16,302 single family homes changed hands, an eight per cent increase, and 4,007 condos were sold, a 14 per cent rise.

The benchmark price for a single-family home was $472,200 in December, an 8.6 per cent increase from the previous year.

“Two consecutive years of elevated levels of net migration, combined with an improving job outlook and confidence surrounding long-term economic prospects, supported the demand growth,” said Ann-Marie Lurie, chief economist for the Calgary Real Estate Board.

How strong the housing market remains in 2014 depends on interest rates.

Finance Minister Jim Flaherty warned in an interview Sunday that Canada will face global pressure to raise rates in 2014 as the U.S. Federal Reserve pulls back on its stimulus efforts and the U.S. economy rebounds.

The Toronto Real Estate Board predicts price growth will continue to exceed inflation in 2014, largely because demand for low-rise houses continues to far outstrip supply.

“The seller’s market conditions that drove price growth in the second half of 2013 will remain in place in many parts of the GTA,” said TREB senior manager of market analysis Jason Mercer.

“Some neighbourhoods, especially those characterized by low-rise house types like singles, semis and townhomes, will continue to have less than two months of inventory.”

In Calgary, both prices and numbers of sales are expected to rise in 2014, the Calgary real estate board said, but the increases are not likely to be as steep as in 2013.

Source: CBC News

The changes aren’t big but for the second year single-family homeowners in Vancouver will see the west-side, east-side differential in their property values narrow with west-side homes losing a bit of ground and east side values rising, according to BC Assessment Authority data released this morning.

From the BC Assessment’s perspective, the picture is one of stability, according to Charmesh Sisodraker, deputy assessor for the Vancouver Sea to Sky region with most property owners seeing modest changes of plus or minus five per cent.

For Vancouver’s west side, BC Assessment pulled example assessments to demonstrate the trend showing a house on a 50-foot lot valued at $1.61 million for 2014, compared with $1.62 and a house on a 33-foot lot assessed at $1.25 million for 2014, down marginally from $1.26 million.

By contrast, the trend example for the east side was a single-family home on a 33-foot lot valued at $1.13 million compared with $1.08 million in 2013.

Condominium apartments on both sides of Vancouver saw their assessments slip. A two-bedroom downtown apartment saw its 2014 assessment slide to $543,000 in 2014 from $567,000 in 2013, a two-bedroom east-side apartment dropped to $364,000 in 2014 from $383,000 in 2013 and a west-side two-bedroom declined to $571,000 in 2014 from $599,000 in 2013.

BC Assessment valuations are estimates of a property’s market value as of July 1, and physical condition as of Oct. 31, with results released publicly in early January to be used by municipalities for setting property taxes.

In Metro Vancouver, the City of Vancouver saw the total value of all of its properties rise to $254.5 billion for 2014, including $3.1 billion of new construction and subdivisions, compared with $248.9 billion in 2013.

Homeowners can compare their assessment to their neighbours online.

Source: Derrick Penner, Vancouver Sun