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Penelope Graham
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Is it a good time to go with a variable mortgage rate? It’s the age-old question lingering on the minds of home buyers; variable options offer traditionally lower pricing, but are subject to any fluctuation of the Prime rate. However, the most recent Bank of Canada announcement has thrust the consideration back into the spotlight; abandoning their rising rate bias may indicate variable rates have gained a few more years of low-interest certainty.

In the announcement on October 23, the Bank maintained their Overnight Lending Rate, which sets Prime, at one per cent where it has been since September 2010. The monetary policy analysis points to slowing economic growth in Canada and on a global scale, spurred by recent economic and political setbacks in the U.S. As a result, the BoC has backed away from previous attempts to predict a timeline for a stronger economy, meaning current stimulus measures could remain in place until 2015 or 2016, and not end next year as previously anticipated.

As a result, variable mortgage rates may become a more viable possibility for buyers looking for a longer term rate commitment.

Fixed Rates Aren’t Filling The Gap

Low variable rates are made even sweeter by today’s stubbornly higher interest environment. As of today, there’s an 83 basis-point spread between the lowest five-year variable rate at 2.4 per cent, and the lowest five-year fixed at 3.23. While fixed rates dipped moderately at the beginning of the month, they rose again as the U.S. ticked closer to its October 17 debt default deadline. While yields have recovered to three-month lows since, lenders have yet to catch up with fixed rate discounts – after all, they say the banks take the elevator up when it comes to prices, and the stairs down.

The Pros and Cons Of Going Variable

With that spread, it’s tempting to go the Prime-based route. It’s a difference of $157 a month in payments (assuming the average Canadian home value at $368,000, five-year term, 25-year amortization and no CMHC mortgage default insurance—oh, and no change to Prime, of course!). However, determining whether variable is a fit involves more than your comfort with risk and your zeal for discounts.

Con: The Mortgage Qualifying Rate: This may come as a surprise for some first timers—it’s actually more difficult to successfully qualify for a variable rate mortgage. While the rate is lower, buyers’ financials will need to meet the criteria for the bank’s posted five-year rate to qualify. This is to protect buyers’ affordability should Prime rise. The qualifying rate also applies to buyers with fixed terms under five years, in case rates are higher when it comes time to renew.

The government implemented this rule in April 2010 as a response to the U.S. housing crisis unfolding at the time. There, many buyers of promotional subprime rate mortgages found themselves unable to afford their homes when their temporary rate discounts ended, contributing to the onslaught of the Great Recession. Canadian policy makers took heed, and built affordability safeguards right into the qualification process.

Pro: A Longer Low-Rate Outlook: The low interest rate environment is one of the few upsides to stagnant Canadian economic growth. The Bank of Canada cut its Overnight Lending Rate, which sets the tone for Prime and liquidity between banks, at one per cent following the recession in September 2010, to allow for continued spending in Canada and economic recovery. Economists expected our economy to reach capacity in 2014, signalling the end to recovery and the need for such stimulus measures—but that’s now been revised to be a few years down the road. As a result, low variable options will stick around for longer.

Con: It’s Unpredictable: Because variable rates are tied to currently underperforming economic conditions, we can expect them to stay low for a while—but this is also the exact reason they’re so unpredictable. Canada’s economic performance is dependent on a multitude of factors. We’re very closely linked to growth in the U.S., and new international developments, such as the recent CETA deal, may also contribute to a sunnier future outlook. The takeaway—the prognosis may be dour now, but it isn’t permanent.

Pro: You Can Always Flip To Fixed: A great feature of variable rates is their low commitment level. Should the Prime rate heat up unexpectedly, or should fixed rates suddenly take a dramatic tumble, variable borrowers can lock into the fixed term counterpart of their current rate.

© 2013 Real Estate Weekly

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With respect to their 8.9 acre site at 4750 Kingsway adjacent to Metropolis at Metrotown, Sears has submitted an application for redevelopment requesting a 7 tower mixed used development including retail and office components. 

The proposed development would include five residential towers and two officetowers with commercial space at grade. A new public plaza is also includedin the plans. 

According to the City of Burnaby Land Use Plan for Metrotown, the Sears site is currently zoned for “High Density Mixed Use and Commercial”.

Rise in Asian tourism to the province sparks Chinese demand for B.C. properties

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Naoibh O’Connor
Van. Courier

City of Vancouver staff have rejected a rezoning application for a six-storey mixed-use building on the Stong’s Market site.

Brian Jackson, the city’s manager of planning and development, recommended the proponent pull the application in light of opposition based on Dunbar’s community vision, which prescribes a four-storey limit on buildings.

“I, of course, only recommend to council, so if [the applicant wishes] to pursue, they could still go to council with our negative recommendation and then it would be council that would formally turn them down, but I have recommended that they withdraw their application,” Jackson told the Courier Thursday morning.

Henriquez Partners Architects filed the rezoning application with the city on behalf of the landowner Harwood Group.

The site in question includes properties from 4508 to 4560 on Dunbar Street and 3581 West 30th Avenue – the current locations for Stong’s, McDermott’s Body Shop and two parking lots.

The rezoning proposal provided space for the grocery store to move back in after the project was completed.

It also envisioned two smaller commercial spaces alongside Stong’s on the first level, while levels two to six would have featured 72 residential units. On the West 30th avenue parking lot, the proposal was for 11 three-storey townhouses. A public plaza was to be located on the northeast corner of Dunbar and West 30^th.

Jackson said the application proposed a change to the zoning. He said the change was a privilege and not a right.

“And with that comes our responsibility to look at the local policies, the local vision, citywide policies, as well as the vision that has been created for Dunbar,” he explained. “When we looked at all that, they weren’t submitting an application for affordable housing, which would have allowed [for consideration of a] a six-storey building in that location. They weren’t submitting an application for a rental building, which could have been considered for a six-storey building. It was a market condo building on top of Stong’s and therefore, there isn’t any current city council policy basis to consider a six-storey building in commercial areas on major arterials right now.”

Last March, the city rejected a rezoning application by Pacific Arbour Communities to build a six-storey seniors facility just south of Stong’s based on concerns about affordability.

In an Aug. 14 Courier story, Norman Huth, a senior architect with Henriquez Partners Architects, confirmed financial viability was a key reason for the six-storey proposal for the Stong’s site.

Jackson said the fate of the grocery store is a concern.

“That was a dilemma for us. I’ve always said that it was a dilemma both for this one and for the seniors [facility],” he said. “I hope it’s not a Pyrrhic victory – that we get a shorter building, but the community loses Stong’s. So we’re hoping the applicant can still make a financial deal to keep Stong’s in the community, but the idea right now is we cannot support it as a six-storey building.”

Jackson added that the City of Vancouver believes in complete communities and grocery stores are a part of that notion, but the city’s legal mechanisms would not be able to ensure Stong’s would remain in the base of the proposed building.

The city received more than 300 emails and comments after the open house about the proposal, about 80 per cent of which were negative. The 20 per cent in favour were either concerned about keeping Stong’s in Dunbar or they didn’t understand the fuss about an extra two storeys.

Jackson said he told the applicant verbally about the staff recommendation late last week, and in a formal letter yesterday. The city advised Jane Ingman-Baker, chair of the Dunbar Vision Implementation Committee in a letter dated Oct. 23.

Jackson said the applicant is looking at its options.

He doesn’t think the city’s decision sends a message to other developers.

“I don’t think it sends a citywide message. I think that in this particular case that if you’re proposing a development, which is not in accordance with current city policy, we either have to be directed to create a citywide policy to support a change in use or density or height in a particular area or there has to be a significant amount of public support for a change to the policy to be considered through a specific development application where there’s a significant community benefit or where there’s affordable housing, rental housing or achievement of one of the other citywide goals,” Jackson said

Neither Ingman-Baker, nor Henriquez Partners Architects could be reached by the Courier’s deadline.

© Copyright 2013

For homebuyers ready for a lifestyle cange

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Gillian Lunde
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If you’re finding it hard to secure a mortgage, you’re not alone. Ottawa’s tougher rules on lending have hit home, particularly with young, first-time buyers, self-employed buyers, real estate investors and buyers who have made pre-construction purchases.

Changes to mortgage rules

The federal government has changed mortgage requirements four times since 2008. Lenders have taken these new rules to heart, preventing many buyers from qualifying for a government-backed insured mortgage. Home buyers with less than a 20 per cent down payment require this insurance, usually supplied by the CMHC.

The biggest change was announced by finance minister Jim Flaherty in July, 2012 and it affects the length of the amortization period—the time it takes to pay off a mortgage in full. (This is not the same as a mortgage term, which is the length of time a mortgage agreement is in effect.)

“Historically, amortization periods were available for up to 35 years,” says Fraser Valley RE/MAX Treeland Realtor Kevin Horn. “The biggest change, made in 2012, was to reduce this to 25 years or less for government-backed mortgages.”

With a shorter time to pay the mortgage in full, buyers save thousands of dollars over the long run. On the other hand, they must make higher payments. These cut down a family’s ability to pay for other immediate necessities.

“It closes certain people out of the market,” says Horn, “but the upside is that it’s also averting too much household debt and a possible crash in the housing market, which is what happened in the United States. Today, you have to demonstrate to your lender that you can support the mortgage with your job or any other sources of income you may have.”

Another change made by the federal government affects refinancing – which is what you do when you renew your mortgage. Lenders no longer offer refinancing to home owners who still owe more than 80 per cent of the value of their property.

Who is affected most?

The current rules are affecting anyone who has a down payment of only 5-to-20 per cent. For one thing, they must qualify for their mortgage at the posted 5-year fixed rate, which is probably higher than what they will actually be paying if they get a variable rate or a shorter-term rate.

But other factors add up to make young, first-time buyers a greater risk in the eyes of lenders.

“It’s tough for first-time buyers who tend to be young people,” said Horn. “They often don’t have high incomes, large down payments or a long employment history. The cost of living is up across the board and many young people are living paycheque to paycheque.”

Horn acknowledges that many of these first-time buyers are seeking homes in the Fraser Valley as it is more affordable than other parts of Metro Vancouver. Sales in the Fraser Valley declined a couple of months after the new rules were introduced, and only started to recover this July.

Self-employed buyers are another vulnerable group, because they have to prove that they have the ongoing income to pay. Lenders require a great deal of paperwork before they will consider self-employed mortgage applicants.

The stricter lending rules have also taken a toll on pre-construction buyers: people who purchased homes before they were built. There have been many stories of buyers who qualified for mortgages before July 2012 and made down payments during pre-construction periods. However, with the buildings now completing, some home buyers are finding they no longer qualify for mortgages.

While he has not worked with clients in this situation, Horn feels for them. “When they come to actually pay for their homes, the guidelines have changed and all of a sudden they can’t find a lender. In some cases they are forced to sell and likely at a lower price than what they initially purchased for.”

Investors have also been feeling the pinch of tougher mortgage rules. Because they may have mortgages on more than one property at a time, investors often make minimum payments on their mortgages. If an investor still owes more than 80 per cent of the value of the home – a perfectly legitimate business practice up until April, 2011 – this can cause problems at refinancing time.

There are whispers that Canada’s banking regulator, the Office of the Superintendent of Financial Institutions or OSFI, is looking to tighten mortgage rules even further based on concerns that consumers are taking on too much debt and house prices have gone up too much. Banks are still able to sell uninsured 30-year mortgages to home buyers with down payments of 20 per cent or more. OSFI could, if it so chooses, change the rules regarding uninsured portions of mortgages. Mortgage professionals are urging the bank watchdog to leave this rule alone.

Words of advice

Horn is not alone in believing this is still a good time to buy. Interest rates continue to be at close to record low levels and the housing market appears to be back on track following the recession. Sales in the Fraser Valley, he notes, have increased quite a bit lately.

Still, he cautioned, “Save as much money as you can for your down payment and eliminate as much debt as you possibly can on your taxes and your credit cards. When you do find a home you want to purchase, make sure you’re not overextending yourself. Rising interest rates can make it very difficult to make payments if you’re living close to debt. And, there are several extra costs when purchasing real estate like the Property Transfer Tax. You need to make sure you’re aware of all the costs and have a true understanding of what you’re taking on. In the end, I think the best advice to anyone out there is to discuss their options with a mortgage broker.”

© 2013 Real Estate Weekly

Online retailer has leased space for up to 1,000 staff in new high-tech building

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Online retailing giant Amazon appears to have plans for a massive office expansion in Vancouver, according to some industry insiders.

The Seattle-based tech giant already has an office here and has posted 90 new jobs in Vancouver, including managers, software engineers and research scientists.

Then on Tuesday Colliers, the real estate company in charge of finding tenants for the new Telus Garden building in downtown Vancouver, confirmed Amazon has leased 91,000 square feet there, with the possibility more, for a total of 156,000.

Depending on how the cubicles are jammed in, that could accommodate up to 1,000 employees, they estimate.

Amazon hasn’t commented on its plans, but the company’s job site says it “anticipates growing quickly” in Vancouver.

As vague as that may sound, the news it did elicit a flurry of enthusiastic tweets on social media, including one from Mayor Gregor Robertson who wrote, “Stay tuned.”

Talent in demand

Bill Tam, the president of the B.C. Technology Industry Association, says Amazon has already been hiring up local developers.           

“We’ve already seen them grow from maybe a couple dozen people to several hundred. They’ve chosen to kind of tap into the talent pools that exist here in Vancouver, and are probably looking to make this a mainstay for their operation.”

But he says it can create a problem for the city’s home-grown firms.

“We’ve got our own local companies like HootSuite, Vision Critical, many companies that are really growing very quickly, and I think what we’re seeing is pressure points, around the availability of talent and the availability for these companies to scale in the manner that they’d like.”