Vancouver home price gains still among world’s highest despite slowdown

Friday, January 6th, 2017

Metro Vancouver’s residential real estate story was a tale of two halves in 2016.

There were scorching sales leading into summer, a cooling off, and then a marked retreat after the province imposed a 15 per cent foreign buyers tax in August.

Many big-picture pundits say it will take another six months or more to fairly assess the impact of the tax. Others point to falling sales, and in some cases prices, as a small number of deals eke on.

Despite this, in 2016, Vancouver residential prices moved up 18 per cent, according to the Real Estate Board of Greater Vancouver’s composite benchmark price report released on Wednesday. Most of the gains were notched in the first half of the year, with the index moving back 2.2 per cent in the second half, according to the board’s report.

The number of sales — including detached houses, condos and townhomes — came in as the third-highest on record for Vancouver in 2016, falling 5.6 per cent from a record year in 2015.

Digging into the latest report, there are early signs of a bounce if you look at median prices. With so few listings, and as such, sales, some prefer to use this gauge, which means the “in the middle price” where half the homes sold went for above this mark and half for below as opposed to taking the average of only a handful of sales, where the result could be easily skewed by one very expensive or slumped sale.

For example, the median price for detached homes is steadying because it has been sitting in the $1.275 million to $1.3 million range for the last four months. Meanwhile, the median price for town homes, at $659,000, is now nearly at its June peak median price of $666,000. Condo median prices show an even stronger stride, hitting a new high of $495,000.

To put the slowdown into perspective, consider Knight Frank’s latest Prime Global Cities Index, which tracks the prices of the top five per cent of homes in metro areas of 35 cities around the world. Vancouver outstripped all other contenders in 2015 and in September 2016 it was still at the top, posting a 32 per cent change year-on-year.

Knight Frank’s Global Residential Cities Index — which more widely tracks “city house prices” in 150 locations — showed Vancouver was the highest ranking city outside of mainland China.

“Urbanization and rising household wealth are behind the surge in Chinese prices,” wrote Knight Frank researcher Kate Everett-Allen. “Vancouver, a longtime front-runner, slid down the rankings this quarter, from fifth to ninth position. This shift is not as a result of slowing prices, annual growth is much the same as in June, close to 24%, but due to the phenomenal ascent of the Chinese cities which have supplanted it.”

Overall, house prices increased in more than 75 per cent of the 150 cities surveyed, year-on-year, but only in 13 of them did the increase in prices exceed 20 per cent. Victoria, B.C. just missed being one of those cities on the list, coming in 15th on the list with an 18 per cent gain.

It’s an “interesting report. I really like the global comparison that it facilitates,” said Andrey Pavlov, who specializes in real estate finance at Simon Fraser University’s Beedie School of Business. However, he cautioned that: “First, the data is as of end of September, 2016. This was still very close to the peak, which occurred around June or July. Second, the report uses year-over-year increases, and all of the Vancouver increases occurred earlier in 2016, and some in 2015. With this in mind, the report captures historical trends, but does not really address the recent developments in our market.”

Source: Joanne Lee-Young at Postmedia
http://www.theprovince.com/business/real-estate/vancouver+home+price+gains+still+among+world+highest/12645598/story.html

How capital gains is affected in a falling real estate market

Friday, October 14th, 2016

When property prices are rising, even just a little, there is almost no better place to keep your money than invested in your own home.

Monthly real estate numbers released Friday show the price of the average Canadian home rose again in September, up almost 10 per cent in the past year. But if and when that trend reverses and prices turn flat or start to fall, the investment advantages of owning a home can take a dramatic turn for the worse. The reason is tax.

At various times in the past, different governments have decided that having citizens own their own homes was a good thing, worth encouraging with tax breaks.

In the U.S., the government decided the way to encourage and reward home ownership was to sweeten the pot by allowing buyers to deduct their interest costs from their taxable income.

That effectively means lower costs in the early stages of home ownership when interest costs are high. In fact, one U.S. home ownership strategy is to pay off a house very slowly, since the interest costs are subsidized by government.

In Canada, the federal government chose a different policy tool to accomplish a similar result.

Instead of giving you a deduction for your payments, the Canadian tax department saves up the entire tax break for when you sell your family home. If during the years you own the property, the value increases, that gain is tax-free.

Earlier this month, Finance Minister Bill Morneau announced changes in the law to try to deny foreign buyers the tax break. Under the old rule, when you sold your principal residence you didn’t even have to mention it to the tax department.

Just as U.S. interest tax deductions affect how people buy and pay off their houses, the Canadian policy has its own consequences.

When property prices are on the way up, rising more than 20 per cent in a year as they have in Toronto and Vancouver, for tax purposes, there is almost no better place to keep your money.

In fact, a good tax strategy might be to buy a house with the biggest mortgage you can afford the payments on. The law can also make it a good strategy to up-size when you can afford it.

The math is clear. If you put down $100,000 on a million-dollar home, and get a $900,000 mortgage for the rest, you own 10 per cent of the house while the bank owns 90 per cent. But if that $1 million home goes up in value by 20 per cent, the bank doesn’t get a share of that increase — all of the capital gains are yours.

Sell, and you’ve just turned a $100,000 investment into $300,000, tax-free.

That’s also why there are so many contractors who buy a house and keep it for a year while they fix it up for resale. Not only do they get the standard capital gains that other sellers get, if they do a good job on the renovation, they get an added premium, and by claiming the house as a principal residence, all the money they earn is free of tax.

The capital gains tax also affects elderly homeowners. While house prices are rising, retired people, especially the well-heeled, have little reason to sell their houses and downsize. Capital gains on their houses are tax-free, but the income from the proceeds of selling a house that are invested outside tax shelters (such as retirement savings plans, tax-free savings accounts and registered retirement income funds) is fully taxable.

Canadian house prices have continued to increase over the very long term. With population continuing to rise strongly, that’s unlikely to change over the long term.

That means people who buy a house with the intent of raising a family will very likely be able to take advantage of the federal capital gains break on principal residences even if real estate goes off the boil for a few years.

As I’ve mentioned in the past, when my family came back to Canada at the end of the 1990s, we visited friends who told us their home had just climbed back to the value they had purchased it for 13 years before.

If you own a home, declining house prices are bad for your finances in any case. But the capital gains tax break makes it even worse.

For some potential homebuyers, the effect of a medium-term slide in property prices and its impact on the capital gains advantage could alter the calculus for thinking of a home as an investment.
In such a case, potential short-term buyers might be wiser to rent. Flippers will have to recalculate their profit margins. Up-sizing may lose its advantage. Retired people might be better off selling and investing the cash, because income taxed is better than no income at all.

And unlike other investments that can be claimed as a loss when they fall in value, a house cannot. In other words, capital gains on your principal residence are sheltered from tax. But so is a capital loss.

It’s hard to be sure to exactly what degree capital gains tax breaks affect people’s decision to use their principal residence as an investment. But it would seem that during a period of declining prices, that tax break would have the effect of further reducing demand for houses.

Source: Don Pittis, CBC News
http://www.cbc.ca/news/business/crea-house-prices-capital-gains-1.3801499

Canadian real estate prices forecast to see largest annual increase this century

Wednesday, July 13th, 2016

Housing price appreciation across the country will be more than it has been in the last 16 years, according to a new forecast from one of the country’s largest real estate companies.

Royal LePage, in a report out Wednesday, says economic uncertainty around the globe and low interest rates continue to fuel the Canadian existing-home market, adding that prices will rise by 12.4 per cent in 2016 from 2015 to an average of $563,000.

The real estate company predicts greater Vancouver will lead the way with prices rising 27 per cent this year to an average of $1.206 million, while greater Toronto prices will rise 14.9 per cent to and average of $718,000 during the period.

LePage says its previous forecasts didn’t account for an extended period of low mortgage rates which continue to fuel the housing market. Ratesupermarket.ca says the best fixed rate on a five-year mortgage is now 2.18 per cent, close to a record low.

“Our forecasting models, which pointed to a slowing housing market as the year progressed, included a modest increase in the cost of borrowing,” said Phil Soper, chief executive of LePage. “Economic and social disruptions have rocked the world once again, introducing new risks and making it very likely that the Bank of Canada will leave interest rates as-is for now. Few industries are as rate sensitive as real estate. We don’t see even a mild correction for either the Toronto or pistol-hot Vancouver markets in 2016.”

Despite citing the Brexit vote as increasing uncertainty in the market, LePage says foreign money tied to Europe will flow into Canadian commercial real estate as opposed to the residential market.

LePage’s own internal surveys do say foreign markets are impacting Toronto and Vancouver real estate, but the money is coming from beyond the European Union.

Its surveys of agents in the second quarter found 71 per cent in the GTA and 74 per cent in Greater Vancouver reported an increase in activity from foreign investors who were defined as having lived outside Canada for the last six months. LePage said 35 per cent of agents in the GTA and 37 per cent in Greater Vancouver believe foreign ownership accounts for less than 10 per cent of sales.

Government continues to consider measures to deal with the impact of foreign owners and the federal finance minister has promised to create a working group of provincial and municipal counterparts to consider the issue in Toronto and Vancouver. On Monday, British Columbia agreed to grant Vancouver the right to tax owners of vacant property — a move seen as being at least partially aimed at foreign investors.

Soper cautioned against government getting too involved in the housing market.

“We remain convinced that heavy-handed use of tax policy in an effort to artificially influence asset values in an open-market economy like ours is fraught with peril, particularly in a cyclical industry like housing.”

Still, he left no doubt his industry has some concerns about the fast-paced nature of the market and some of the impact it has on prices. Soper even issued a warning to speculators.

“At Royal LePage, we see residential real estate as a long-term investment supporting family life. A home is ill-suited as a buy-and-flip investment. People that engage in this kind of activity are inevitably burned when a market slows and the time it takes to sell the property increases substantially,” he said.

Source: Garry Marr, Financial Post
http://business.financialpost.com/personal-finance/mortgages-real-estate/canadian-real-estate-prices-to-see-largest-annual-increase-this-century-forecast-says

Average Metro Vancouver home price climbs 20% in January

Monday, February 22nd, 2016

Vancouver’s hot real estate market isn’t showing signs of slowing. January saw year-over-year growth of more than 20 per cent for the Metro region, according to the Canadian Real Estate Association.

That brings the average price of a home in Metro Vancouver to $775,300.

Thanks to hot markets in B.C. and Ontario, the national average home price grew a staggering 17 per cent to $470,297 – but without those two provinces, there would have been a decline of 0.3 per cent to $286,911.

“January 2016 picked up where 2015 left off, with single family homes in the GTA and Greater Vancouver in short supply amid strong demand standing in contrast to sidelined home buyers and ample supply in a number of Alberta housing markets,” said Gregory Klump, CREA’s Chief Economist in a statement.

“Tighter mortgage regulations that take effect in February may shrink the pool of prospective home buyers who qualify for mortgage financing and cause national sales activity to ease in the months ahead.”

New rules for mortgage rates took effect on Tuesday. Canadians are now required to put down a minimum of 5 per cent for the first $500,000 and 10 per cent for every dollar amount after that.

Two-storey single family homes posted the largest year-over-year gains nationally of nearly 10 per cent, followed by one-storey homes at 6.9 per cent, townhouses at 6.5 per cent and apartments at 5.2 per cent.

In stark contrast to Vancouver and Toronto’s housing markets, average home prices in Calgary saw a decline of three per cent year-over-year.

Nationally, the number of newly listed homes in January fell five per cent compared to December, and Canada’s largest housing markets such as Vancouver, Toronto, Montreal, Calgary, and Edmonton were to blame.

Source: Lauren Sundstrom, Vancity Buzz

Canada’s mortgage rules tightened to cool off red-hot Vancouver and Toronto markets

Friday, December 11th, 2015

The federal government is attempting to take some momentum out of the country’s most expensive — and frothiest — housing markets in Vancouver and Toronto, announcing Friday changes to mortgage lending rules that lift minimum down payment requirements on homes listed between $500,000 and one million dollars.

At a press conference in Ottawa, Finance Minister Bill Morneau said that as of Feb. 15, buyers purchasing homes in that price range will have to make a minimum down payment of 5 per cent on the first $500,000, and 10 per cent of the dollar value above that amount.

Morneau used the example of a $700,000 home, which will now require a minimum down payment of $45,000, or an increase of $10,000 above what the existing minimum of 5 per cent would require.

“By targeting higher priced homes, we’ll minimize the impact on first time buyers,” the minister said. “This protects all homeowners, including middle class Canadians whose biggest investment is in their homes.”

Benchmark home prices in Vancouver and Toronto have rocketed higher this year amid ultra-low borrowing rates and sustained interest from foreign buyers, experts say. Each city’s boom has led to market dynamics in those centres that are “not as stable as they should be,” Morneau said.

“The motivation of the [new] policy is clear,” Benjamin Tal, economist at CIBC Economics said. “The attempt is to slow down the only two markets that are really moving (Toronto and Vancouver). Those markets happen also to be the most expensive.”

How effective the new minimums will be in cooling off those markets isn’t clear — the finance minister said the change would affect “one percent or less” of borrowers.

Fears over a possible real estate bubble in the Vancouver and Toronto areas have risen significantly as prices have surged.

In November, benchmark prices in Vancouver surged 17.8 per cent as sales soared 40.1 per cent, the region’s real estate association said.

In slightly tamer Toronto, benchmark prices increased 10.3 per cent as sales climbed 14 per cent compared to November a year ago, making 2015 the most active year on record for the country’s biggest housing market (eclipsing 2007).

The Vancouver and Toronto markets have firmly decoupled from the rest of the country, where home prices are moving at a far slower rate of about 2.5 per cent, according to CREA, the national real estate board.

What’s fueling the torrid price gains remains a matter of fierce debate, but many suspect a wave of foreign cash is playing a key inflationary role. Rock bottom interest rates are also continuing to fuel domestic demand.

“An influx of foreign wealth is one driving force, but lower interest rates — and the witches’ spell of forever-low rates—are also stirring the pot,” Sal Guatieri, economist at BMO, said in a recent note.

Source: Jamie Sturgeon, Global News

Rate cut could add fire to Vancouver and Toronto housing markets

Monday, July 13th, 2015

Sales — and prices — have hit new records in both Toronto and Vancouver this year. A further interest rate cut by the Bank of Canada could further fuel flames in the country’s two biggest real estate markets which are once again showing signs of overheating, housing watchers say.

“It’s another log on the fire for the Toronto and Vancouver housing markets,” says economist Sal Guatieri, vice president of BMO Economic Research, who expects to see a cut next week in an attempt to kickstart lagging growth.

“It’s not the amount that matters — the reduction in borrowing costs will be quite minimal — it’s the message it sends to homeowners and potential buyers that rates are going lower rather than higher and will almost certainly stay low for quite some time. That just encourages more people into the market.”

Both of Canada’s priciest cities are already swamped with far more buyers than properties for sale.

Sales — and prices — have hit new records in both Toronto and Vancouver this year. The frenzy has been driven by low interest rates, an ongoing shortage of listings and a growing sense of panic, especially among first-time buyers, that if they don’t get in now, they will be locked out of the market forever, particularly the low-rise house market.

“We are becoming concerned again about the possibility of a housing bubble in Toronto and Vancouver because prices are rising so much faster than incomes and because interest rates are continuing to fall rather than go up,” says Guatieri.

“We were much more comfortable a year or two ago when both markets seemed to have cooled off a bit and prices were rising more moderately.”

Both Toronto and Vancouver set new sales records for the month of June.

Almost 12,000 houses and condos changed hands last month across the GTA, up 18.4 per cent from a year earlier. The average sale price of a detached house was $816,583 – and over $1 million in the City of Toronto – up 14.3 per cent year over year.

Greater Vancouver’s 4,375 sales were up 28.4 per cent for the same period. The average detached house was $1.45 million – and a staggering $2.39 million for a stand-alone house in the core City of Vancouver – up 20.2 per cent from June of last year.

Condo sales skyrocketed in both regions, up 22.4 across the GTA and 35.6 per cent across Greater Vancouver, year over year.

All that demand helped push up condo prices 6.3 per cent in the GTA, to an average of $390,894, and up 5.6 per cent in Greater Vancouver to $479,450.

Last January’s surprise Bank of Canada rate cut to .75 per cent has been a contributing factor to those escalating sales and prices, says Penelope Graham, editor and spokesperson with mortgage comparison site RateSupermarket.ca.

A cut to .5 per cent, as is expected, would see the five-year fixed rate dip below the current low of 2.39 per cent and further boost the illusion of affordability, she said.

“There are more people now entering the market with just five per cent down, because that’s all they can afford. There is a real sense of urgency in the bigger markets to get in now, before it’s too late, and get in with what you have,” says Graham.

“That’s potentially putting people in a really vulnerable position in terms of their debt levels.”

Toronto realtor David Fleming says he’s seeing a surge in demand even for condos — especially under $400,000 — and younger buyers than ever, backed by low interest rates and help from their real-estate rich baby boomer parents who want only the best for their children.

“I’ve seen a serious culture change. Young buyers used to be 26 or 27 years old. They’d graduated university, worked for a few years and lived at home then rented and bought. Now buyers are cutting out those middle steps.”

He’s seeing first-time buyers as young as 22 determined to own rather than rent. And he’s hearing from people who stepped to the sidelines three or four years ago, thinking the much-talked-about bubble was about to burst.

Instead, they’ve watched prices climb further out of reach: Back in June of 2012, the average sale price of houses and condos combined across the GTA was $508,622. This June, the average sale price was $639,184.

Where the average sale price of a condo in the sought-after City of Toronto was $364,597 in June of 2012, last month’s average was $418,599.

That was up seven per cent just over June of last year as bidding wars and bully bids — long the hallmark of the highly competitive low-rise house market — have pushed up prices for well-located, unique or larger condos seen as sound investments and house alternatives for the longer term.

“That’s a testament to the froth in the house market,” says BMO economist Guatieri.

“So many people are now priced out, they have no other alternative than to get into the condo market, and that’s pushing up prices, even though there is ample supply.”

Apart from the oil-impacted markets of Alberta, Saskatchewan, Newfoundland and Labrador, Canadian house prices are holding up well and consumer confidence appears to be strong, even in the midst of growing talk about a possible recession.

“None of my clients are talking about the Big R word,” says Toronto-based mortgage broker Jake Abramowicz.

“They’re confident that rates will stay low for a very long time now and that the market — both condos and houses — will not correct anytime soon.”

Source: Susan Pigg, Toronto Star

Could an interest-rate hike cool B.C.’s real estate market?

Wednesday, June 10th, 2015

If the Conference Board is correct in its latest prediction, things could become interesting in B.C. next spring. Not “good” interesting. “Scary” interesting.

“We believe the Bank of Canada will begin raising (interest) rates in March 2016,” a new report from the Ottawa-based economic think-tank says, predicting slow and gradual rate increases thereafter.

The bank will be pressured to act in response to “inflation pressures (which) will begin to brew early next year.”

Clearly such a scenario could hit hardest in B.C. where home buyers have taken on big mortgages to deal with stratospheric property prices and where a low interest rate environment has added kindling to a red-hot housing market.

British Columbians are second only to Albertans in the average per capita consumer and mortgage debts they are carrying.

Could an interest-rate hike in March act as a bucket of cold water on consumer and real estate activity?

Could it finally slow down the bidding wars that have been driving property prices higher in a fiercely competitive market?

For those with both mortgages and large debt loads, the effect of any interest-rate increase will be “unambiguously negative,” says Blair Mantin, vice-president of bankruptcy trustee Sands & Associates.

Mortgage payments take priority in people’s budgets, he says, and so, “we might also see increased needs to restructure unsecured debts,” such as credit-card balances.

Mantin believes interest-rate hikes would trigger “a deflationary impact on house prices in the Lower Mainland.”

The only way that would not occur is if incomes were to rise in tandem. But that is unlikely because “when interest rates are increased to control inflation, the economy often cools and any upward pressure on wages would be relieved.”

The real estate and finance industries are highly influential in the Vancouver region. Yet the Conference Board does not forecast any slowdown here in either the housing or retail sectors.

“We have a favourable outlook for retail sales and the housing market in B.C. next year,” said Marie-Christine Bernard, the board’s associate director of provincial forecasting, “because even though interest rates start to gradually move up at the beginning of the year, we have strong economic growth boosting labour demand and household disposable income.”

Certainly, for now, says the report, “the housing markets, both new and resale, remain in good shape.

“The resale market in Vancouver is the hottest in Canada, with solid demand and price increases so far this year.”

The report forecasts an increase in housing starts next year.

Retail sales in B.C. are projected to increase 9.2 per cent this year, against an average increase of 2.6 per cent nationally. An anticipated increase of 4.5 per cent in 2016 will keep the province in first place in retail sales growth.

The report, outlining its predictions for all the provinces, singles out B.C. as “the (economic) leader,” the only province that will see GDP growth of more than three per cent in 2015, at 3.1 per cent, followed by 2.7 per cent growth in 2016.

Only Manitoba is expected to surpass B.C. in economic growth next year, with a 2.8-per-cent increase in GDP.

With oil prices low, the two provinces have supplanted Alberta and Saskatchewan as Western Canada’s economic kingpins.

At present, B.C.’s jobless rate is 5.8 per cent, which is pretty close to full employment, usually measured at 5.5 per cent.

The unemployment rate in 2016 is forecast to decrease to 5.7 per cent, which would be lower than that of Alberta, at 5.8 per cent.

B.C.’s per capita household income, at $38,890, will exceed the national average of $37,588 next year, and will be second highest in the country, behind Alberta.

Two points of uncertainty cited by the Conference Board were job creation in B.C. and the future of an LNG industry.

Source: Barbara Yaffe, Vancouver Sun

Average home price of affluent Canadians tops $1.5-million

Monday, May 25th, 2015

Affluent Canadians are sitting on an average value of $1.5-million for their homes, a recent poll indicates. That compares with an average price of $448,862 for homes sold in April, according to the latest figures from the Canadian Real Estate Association.

Excluding the red-hot markets for the greater Toronto and Vancouver, the average figure in April was $339,893.

Indeed, the poll published Monday by the Bank of Montreal puts the average value of an affluent homeowner’s primary residence in Vancouver at $4-million and at $1.8-million in Toronto.

High-net-worth Canadians are those with investible assets of $1-million or more, the BMO report says.

The poll also indicates that 95 per cent of affluent Canadians own their residence, as opposed to renting, and that 58 per cent state they have paid off their mortgage.

Among those carrying a mortgage, the average amount they have left to pay is $176,000, the poll shows.

“There have been substantial wealth increases in the last decade, decade-and-a-half, partly as a result of the rise in real estate values,” said David Macdonald, senior economist at the Canadian Centre for Policy Alternatives.

“If you owned a house that was paid off in 2002, then this is very good news for you. Those folks who managed to do that are going to be relatively well off,” he said. These homeowners will tend to be older, he added.

But people in their 20s, 30s and 40s who just got into the housing market or are at the halfway point of paying down their mortgage are carrying high debt levels, Mr. Macdonald said.

“My real concern isn’t so much ‘can they carry it today?,’ but 10 years from now as the cost of carrying debt rises.”

Among other findings of the BMO survey:

* 36 per cent of high-net-worth Canadians own a second or additional property
* Of those with a second or additional property, 40 per cent own two or more extra properties
* The top reason for owning a second property is to have vacation time, 47 per cent said
* Among those with an additional property, 80 per cent own one in Canada, 27 per cent in the United States and 11 per cent in Europe
* The average value of a high-net-worth primary residence in Quebec is $678,600, compared with $719,500 in Alberta

The survey results are from an online poll conducted by Pollara between Oct. 15 and Oct. 28, 2014, using a sample of 306 Canadians 18 or over who have at least $1-million in investable assets (excluding employers’ retirement plans, insurance products or their home).

Source: Bertrand Marotte, The Globe and Mail

Metro Vancouver housing affordability continues to slip-slide away

Friday, May 1st, 2015

Metro Vancouver housing affordability continues to slide. Housing affordability in Metro Vancouver continued to slide in the first quarter, making it even more difficult for Vancouverites to own a home the country’s least affordable region, according to the latest Desjardins Affordability Index released Wednesday.

The report, which compares housing prices with income in metropolitan areas outside Atlantic Canada, shows the average property sale in Metro Vancouver is nearly $850,000, twice as high as the combined average home price ($424,000) of the other Canadian cities cited in the report.

The report only includes data from 18 metropolitan areas in Canada and excludes Atlantic Canada because Desjardins only collects information in markets where it conducts business.

That puts the average sale in Metro Vancouver 10 times higher than the average household income of around $86,000 a year.

Toronto, which is the second least affordable market, had significantly higher average salaries than Vancouver at $92,000 per household, and lower average housing prices of nearly $560,000.

Housing remains very affordable in Calgary, where the average household income is nearly $120,000 and the average cost of housing is around $445,000.

“It shows that people from Vancouver don’t have the income necessary to buy a home. Maybe the investors market is more important in Vancouver, especially for condos, and that looks like a factor,” said Hélène Bégin, Desjardins’ chief economist. “It would be really hard to buy a home without help from your family or someone else.”

Despite Vancouver’s continuous slide into an affordability crunch over the last three years, Vancouver’s resale market is growing, and is up two per cent since the start of the year and 12.9 per cent from the previous quarter, according to the index.

Vancouver’s affordability has the lowest index level in the country at nearly 70, while the index level for Canada is 117. That level indicates that Canadians on average have a salary around 17 per cent higher than the salary needed to buy a home at the average price, said Bégin.

In Quebec, the income is nearly 40 per cent higher (index level 156.5) than needed to buy a home at the average price of $275,000, according to the index. The DAI is calculated by determining the ratio between the average household disposable income and the income needed to obtain a mortgage on an average-priced home, or qualifying income. Qualifying income is calculated based on the cost of owning a home, including mortgage payments, property taxes and utility costs.

Nationally, the index shows households’ financial capacity to buy a home stayed close to the historical average, although affordability has declined since the start of the year.

Source: Tiffany Crawford, Vancouver Sun

Over 40% of first-time home buyers in Canada need their parents’ help

Thursday, April 23rd, 2015

BMO’s 2015 Home Buying Report found that 42 per cent of first-time buyers told an online survey that they expected their parents or relatives to help pay for their first home. A Bank of Montreal report suggests first-time home buyers are increasingly turning to the “Bank of Mom and Dad.”

BMO’s 2015 Home Buying Report found that 42 per cent of first-time buyers told an online survey that they expected their parents or relatives to help pay for their first home.

That’s up 12 per cent from last year’s report.

The bank also said 40 per cent of the first-time buyers said they couldn’t afford a home without financial help from family.

The study found the first-timers were anticipating a downpayment of about $59,413 on average and had a budget of $312,700 for the purchase — slightly less than last year’s average price of $316,100.

The bank also found that 42 per cent of current home-owners surveyed said they were looking for family help with the purchase. Their average budget was $473,000 and their average downpayment was $123,214.

The BMO report is based on online interviews with a random sample of 2,007 people aged 18 years or more between Feb. 24 and March 5.

The polling industry’s professional body, the Marketing Research and Intelligence Association, says online surveys cannot be assigned a margin of error as they are not a random sample and therefore are not necessarily representative of the whole population.

Prices in Canada have been rising since 2009, resisting regulators’ efforts to cool the market by restricting credit. In Toronto and Vancouver, values have surged as much as 56 per cent in six years. Now as the European Central Bank’s bond buying helps drive down rates to near-record lows in Canada, the housing market is poised to ascend even higher.

Re/Max, the country’s largest residential real estate agency, raised its forecast for home price growth to 3 per cent from 2.5 per cent last week because transactions and values were so high in the first three months of this year. In March, housing sales rallied 4.1 per cent, the most in 10 months.

Toronto home sales increased 11 per cent to more than 8,000 transactions in March over the prior year, according to the Canadian Real Estate Association. Prices in the country’s most populous city jumped 10 per cent to about $601,500.

In Vancouver, Canada’s most expensive home market, sales soared 53 per cent and the average cost to buy a home rose 11 per cent to $870,000.

Source: Canadian Press with files from Bloomberg


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