Real estate is making British Columbian families richer, according to Statistics Canada’s latest report on financial security, though that is not necessarily making them better off.

British Columbia saw the median family net worth, which measures total assets minus total debts, rise 128 per cent between 1999 and 2012 to $344,000 from $150,700 13 years previously — the highest among provinces in Canada compared with the national average of 78 per cent to $243,800 from $137,000 over the same time period.

“From a financial planning perspective, that (gain) is irrelevant,” said Ian Black, a registered financial planner and principal with Vancouver firm Macdonald Shymko & Co., “unless you’re looking to get out of the market and (move) to another jurisdiction to release some of that equity.”

Black said the difficulty, particularly in the Lower Mainland, is that even if homeowners sell to downsize, they will still be looking to buy in an already expensive market.

“You’ve got to live somewhere,” he added, and “that (increase in property value) isn’t going to generate any higher income.”

The report did not contain a demographic breakdown for B.C., but on a national basis found that the families with older income earners saw bigger gains in net worth than those where the top income earner was younger.

However, those family units have also accumulated more debt: a total of $1.34 trillion in 2012, up from $864.6 billion in 2005. Most of the debt — about $1 trillion — has been used to finance home purchases. All figures are in inflation-adjusted dollars.

“That is a very significant increase … after-tax disposable income has increased by 10 per cent across all income brackets,” said federal Employment Minister Jason Kenney.

However, the high prices are also a potential problem, according to economist Andrew Jackson of the Broadbent Institute, because prices are widely projected to moderate or even fall in the next few years.

“The big question is if and when we get a housing price correction, individuals will still be holding the debt and that is a cause for concern,” he said.

High prices are also a concern in B.C., particularly the Lower Mainland, because the rising value of real estate assets can come at the expense of other savings, said James Cripps, a chartered financial analyst and certified financial planner with Vancouver Financial Planning Consultants Inc.

“What I’m seeing, actually, is more of people taking on mortgages so big they’ve finally figured out they won’t pay them off in their lifetime,” Cripps said.

So they focus on paying down their mortgage so that they can eventually downsize without debt, “and they’re not saving in RRSPs or (tax-free savings accounts) as a result.”

“From a risk diversification point of view, it’s not a great thing, especially when you consider that affordability or real estate relative to median income is right off the charts,” Cripps said.

North Vancouver realtor Helen Grant said her clients looking to downsize base their decisions on “the margin,” meaning whether or not they are able to move to a smaller home and bank some money.

“They may have purchased their home for $200,000, they turn around and sell for $1 million, then they’re sitting in a market that’s already elevated, where do they put their money?” Grant said.

Many choose to “follow grandchildren” or move to slower-paced communities on the Sunshine Coast, Vancouver Island or Okanagan, she added.

To others, depending on age and circumstance, Grant says she advises to sell and rent, because they are unlikely to see the same gains in condominium price increases that they’ve experienced in single family homes.

The average single family home price rose 221 per cent between 1999 and 2012 in the region of Metro Vancouver covered by the Real Estate Board of Vancouver, compared with 148 per cent for the average condominium.

However, Cameron Muir, chief economist for the B.C. Real Estate Association, said Metro Vancouver condominium prices have seen almost no gains since 2010.

Source: Derrick Penner, Vancouver Sun

Canada’s luxury housing markets are booming. Like, ridiculously booming, at least in some places.

According to a recent RE/MAX report, luxury home sales in Toronto (defined as $1.5 million plus) jumped 18 per cent in 2013, while Vancouver saw luxury ($2 million plus) home sales jump 38 per cent and luxury condo sales jump 18 per cent.

But with average detached home prices approaching $900,000 in Toronto and $1 million in Vancouver, a $1.5-million house in Toronto or a $2-million house in Vancouver might not actually be “luxury” properties.

Sotheby’s International Realty, in a report earlier this year, hinted at what may be happening.

“As the average cost of a single family home in Canada rises, the gap between conventional housing costs and the [luxury] threshold grows closer,” the Sotheby’s report says.

So sales of luxury homes are being driven up, apparently, by the fact that prices of non-luxury homes are now entering “luxury” territory. Put another way, normal suburban homes are now selling at rich people’s prices. Put yet another way, middle class isn’t going to buy you much of a house going forward in the country’s most expensive markets.

But at the top end of the market, the houses really are “luxury” — and some of them are pretty over-the-top. Check out this list of the most expensive houses for sale in Canada, by province.

Source: The Huffington Post Canada

The five-year fixed mortgage at an advertised rate below three per cent has returned to Canada for the first time since last year.

Meridian Credit Union, the largest credit union in Ontario, announced this week it had lowered its benchmark five-year fixed-rate mortgage to 2.99 per cent.

According to market surveys carried out by RateSpy.com and Cannex.com, that is the lowest advertised rate for the popular mortgage term in Canada.

Meridian’s mortgage special is available just in Ontario, but it appears to have few other restrictions.

Earlier this month, MortgageBrokerNews.ca reported that two mortgage brokers — Verico Butler and Advent Mortgage Services — were also offering 2.99 per cent five-year fixed mortgages.

Brokers are often able to get mortgage rates for their clients that are lower than what big lenders offer. But sometimes, super-cheap mortgages have severe restrictions on such things as rate holds and prepayment privileges.

Fixed mortgage rates have been creeping down in the last month at most lenders as Canadian bond yields have been falling. Fixed mortgage rates tend to track bond yields.

The yield on Canada’s five-year government bonds has fallen 33 basis points so far this year to 1.62 per cent.

Last year, some big banks attracted the ire of Finance Minister Jim Flaherty for aggressively pushing 2.99 per cent five-year mortgages. He was worried that cheap financing would stoke a housing market that some economists were calling overheated and overvalued.

Since credit unions are provincially regulated, Flaherty has no formal power to pressure Meridian over its current promotion.

Source: CBC News

Almost a quarter of Canadians say they are planning on using their homes as their primary source of income once they are out of the workforce, according to a survey from Sun Life Financial.

“It’s not something we would recommend per se, it is a bit of a surprise,” says Sadiq Adatia, chief investment officer of Sun Life Global Investments, about the retirement strategy being considered by 24% of Canadians. “People should be counting on their retirement savings and not really looking at their home. A home is something you can have and carry forward with you.”

Any retirement strategy involving accessing the equity of the home could mean selling it or at the very least getting a new mortgage on the property or a reverse mortgage.

Mr. Adatia thinks the downturn in the stock market in 2008 may have affected people’s retirement plans and has them turning to their homes to pick up the slack.

Rising home values have helped many Canadians approaching retirement feel like they have created a pretty big nest egg. The Canadian Real Estate Association said last month the average home in the country sold for $388,553 in January, a new high and a 9.5% increase from a year earlier.

On average, Canadians expect 10% of their retirement income to come from their home. Government pension plans on average are expected to supply 30% of retirement income, 27% is to come from personal savings, 23% from employer plans, 5% from inheritance and 6% from what is called other sources.

Even with their optimism over accessing their home equity, only 28% of Canadians expected to be retired by 66. Another 56% of Canadians expect to work past retirement age with 65% of those people saying they will need to.

“The average expected retirement age in Canada has hit its lowest level in four years – it’s 66 this year down from a high of age 69 in 2011,” said Kevin Dougherty, president of Sun Life Financial Canada. “With people living longer and more Canadians expecting to retire sooner, it’s important to look at what savings you will need to be fully prepared.”

Mr. Adatia thinks a retirement plan involving selling your home might work for people who bought a few years ago, it might not work for people buying today.

“I know my own parents bought their home 30 years ago and at an extremely dirt cheap price,” he said, adding the older people can afford to absorb a downtown in the market if it happens. “If you’re 40 and bought your home five years ago, you can’t afford that hit.”

Sun Life’s view on real estate is the market is inflated and there might be a significant decline in prices, making renting a viable option. The company says homes are selling for on average six times personal income, compared to a historical average of four times.

“Do you want to overextend yourself at the peak of the market?” said Mr. Adatia.

The survey was conducted by Ipsos Reid between Nov. 12 to Nov. 20 and is considered accurate to within two percentage points.

Source: Garry Marr, Financial Post

The fourth quarter of 2013 saw a slight improvement in housing affordability in Metro Vancouver, once again due to slight drops in interest rates at some banks, statistical analysis provided to The Vancouver Sun shows.

During the whole of 2013, affordability has become slightly worse for single family houses, particularly in the city of Vancouver and its inner suburbs. In the outer suburbs, affordability levels for all types of housing have remained consistent for the year.

“The numbers are showing that we’re not seeing huge swings up and down, we’re not seeing a bubble and a burst. It’s very stable,” said Anne McMullin, president and CEO of the Urban Development Institute. “Developers are coming up with creative ways to make their homes affordable to people who may not necessarily be able to get into the market.”

She said developers are responding to the stable market with innovative projects, such as a new project by Adera, known as “mingles,” which are condominiums designed for people who want to share a mortgage, but not a bathroom or a bedroom. The first of these projects, called Prodigy, will be launched this spring at the University of B.C.’s Wesbrook Village.

Construction will start this summer on BosaSPACE, homes that adapt with movable furniture built into the suite. For example, some homes have a floating TV panel that slides out of the way to open up a guest bed area, or a kitchen island that slides out to become a desk or a dining room table.

“I think we will see more and more innovation that allows people to live in a smaller place, with all of the amenities of a larger space,” McMullin said. “The designs are starting to change to address the issue of affordability.”

The other change that McMullin noted is the transformation of shopping malls from stores surrounded with large concrete parking lots into gathering places that include shopping, public spaces, restaurants, housing, office space and access to public transit.

New concrete condominiums in Vancouver are slightly more affordable than they were last year, due to an increase in the number of concrete condominiums available for sale, the data shows.

At the same time, new condominiums in the inner suburbs are slightly less affordable than they were a year ago.

Many of the major banks have dropped their best five-year fixed rates down to 3.69 per cent — the average five-year, fixed-rate interest rate from the largest banks for the purposes of this index is now at 3.67 per cent, down from last quarter’s 3.79 per cent.

The data also shows that new home prices have remained relatively steady across the board, while both concrete and wood-frame condominium prices are down slightly for all areas, while townhouse and resale single family home prices increased slightly throughout the region.

The index defines “affordable” as the percentage of households living in a region with the income required to qualify for the mortgage needed to own the property. Typically, a bank wants to see no more than 32 per cent of income going to housing if it is to provide a mortgage.

In Vancouver’s suburbs, more than half of the population can afford to buy either a house, a townhouse or a condo and stay in the same community, the UDI/FortisBC Housing Affordability Index for the fourth quarter of 2013 shows.

The UDI/FortisBC Housing Affordability Index breaks Metro Vancouver into three areas: the city of Vancouver, Inner Metro (West Vancouver, North Vancouver, Burnaby, New Westminster, Richmond, South Delta, Coquitlam, Port Moody, Port Coquitlam) and Outer Metro (Surrey, Langley, North Delta, White Rock, Pitt Meadows and Maple Ridge).

In Vancouver proper, the minimum annual income required to purchase a new unit is $68,636 for a wood-frame condominium. For a single-family home, the minimum required annual income is $163,867.

For resale properties, the numbers are a bit more encouraging: the minimum required income for a resale property is $50,078, which would qualify a buyer for a wood-frame condo.

In Inner Metro, the minimum income required to buy a re-sale wood-frame condo is $37,716, while it is $108,130 for a single family home in the same area.

In Outer Metro, the minimum income required to buy a resale townhouse is just $28,263, while a family earning $64,655 could afford to purchase a detached home.

Source: Tracy Sherlock, Vancouver Sun

Real estate agents in Vancouver say property prices could take a hit, after Canada scrapped a program which allowed wealthy immigrants to fast-track the visa process.

The Immigrant Investor Program, launched in 1986, offered visas to business people with a net worth of at least $1.6 million who were willing to lend $800,000 to the Canadian government — for investment across Canada — for a term of five years.

By 2012, the scheme had to be temporarily frozen due to a huge backlog of applications from wealthy mainland Chinese hoping to come to B.C. Now, the government has announced it will end the program for good and scrap all 59,000 applications backlogged worldwide.

The decision came less than a week after the South China Morning Post published a series of exclusive investigative reports into the controversial scheme.

In West Vancouver, real estate agent Clarence Debelle is still receiving offers from mainland China for luxury property, but he’s concerned the end of the investor program will have an impact on the local economy and the high-end housing market.

“I deal directly with these people who bring a lot of wealth, who are creating lots of jobs for local Canadians — builders, trades, architects, realtors like myself,” said Debelle.

“Most of the buying is coming from Chinese immigrants who are wealthy, so if we make it difficult for them to come into this country, we have killed 80 to 90 per cent of the buying in West Vancouver.”

Immigration lawyer Richard Kurland agrees.

“When you suddenly stave off the intake of literally hundreds of millionaires in the Vancouver property market, prices can only go one way and that’s down,” said Kurland.

Others aren’t so sure. Even with the investor program frozen, housing prices continued to rise.

Tom Davidoff with UBC’s Sauder School of Business says the market is driven by other things like low interest rates and the local and global economies.

“Given that in the last couple of years, we haven’t seen the market cool off, it’s hard to believe that freezing the investor market is going to kill even the high-end in Vancouver,” said Davidoff.

The government has also announced the end of the Entrepreneur Program, a smaller scheme for business people who plan to own and manage a business in Canada.

However, wealthy investors can still come to Canada through the Start-up Visa Program, which encourages immigrant entrepreneurs to partner with private sector organizations to invest in local start-ups.

Source: CBC News

U.S. millionaires see real estate as the top alternative-asset class to own this year, according to Morgan Stanley.

About 77 percent of investors with at least $1 million in assets own real estate, according to a survey released today by the New York-based investment bank’s wealth-management unit. Direct ownership of residential and commercial properties was the No. 1 alternative-investment pick for 2014, with a third of millionaires surveyed saying they plan to buy this year. Twenty-three percent said they expect to invest in real estate investment trusts, the second-most popular choice.

Wealthy investors are turning to a rebounding real estate market as fixed-income yields remain historically low and equities surge. U.S. commercial-property values rose 8 percent in the 12 months ended Jan. 31, and have jumped 71 percent since hitting their post-recession bottom in 2009, research firm Green Street Advisors Inc. reported today. The S&P/Case-Shiller index of home prices in 20 cities is up 24 percent from its 2012 low.

“After a year where the Standard & Poor’s Index rose 30 percent, some millionaires are moving money out of traditional, long-term strategies and turning toward alternatives such as real estate and private equity,” said Gary Kaminsky, a vice chairman at Morgan Stanley Wealth Management in New York. “Sophisticated, high-net-worth investors are much more concerned about losses.”

Wealthy investors see stocks getting expensive and interest rates staying stable or even declining over the next couple of years, Kaminsky said in an interview at a conference for Tiger 21 investors last week in Scottsdale, Arizona. That’s why they are looking more closely at alternatives including real estate for returns and income, he said.

Source: Margaret Collins and David M. Levitt, Bloomberg

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