Joanne Lee-Young
The Province

The Bank of Canada has held on to its overnight interest rate in part because it doesn’t want to inadvertently add fuel to the Vancouver housing market. 

It’s “right up there in terms of the leading reasons (the BOC is) extremely reluctant” to touch that benchmark, said Bank of Montreal chief economist Douglas Porter. “Unless there is a major economic shock, it’s going to sit on the sidelines because there is (already) a lot of buildup in household debt” in Vancouver, but also Toronto.

A few weeks ago, Porter described the overheated Vancouver housing market as being at a “four-alarm level.”

Now, he says, it’s “fire-breathing.”

“We’re running out of superlatives to describe it,” said Porter. “It’s nothing new. This is a slow-moving beast, but it’s a beast. Higher home prices in Vancouver are putting more pressure on household debt. Younger folks have to take on a boatload of debt in order to buy. It’s not a healthy situation.”

The Bank of Canada said prices in Vancouver are rising sharply because of strong demand due to population and job growth, but also because people are afraid of being left out in a fast-moving market.

On the ground, mortgage brokers are seeing a diverging of scenarios.

Vancouver-based Vida Mohammadian of TMG The Mortgage Group says people buying homes as investments in the “$1.5-million range with 30- to 50-per-cent down are not concerned about rates. They look more at prices and are feeling panicky that prices are going to go up before they get in.”

However, for first-time homebuyers looking at properties “in the $500,000 to $1 million” category, “we have to make sure that if there are any changes in the next five years that they can still afford to make their payments. It’s our responsibility to educate them. Most of my clients are professionals, doctors and engineers, and there are no issues because they have incomes. I also work with people with regular, ordinary jobs, making $40,000 to $50,000 (a year) and I have to make sure they are not at any risk.”

She’s been in the business for 18 years and said this past one has been one of the most exhausting. With bidders clamouring over homes with ever climbing prices, “it’s been very long hours, working until midnight, making sure people qualify so they can hand in subject-free offers. There’s lot of due diligence.”

Another mortgage broker, Surrey-based Luisa Hough of Xeva Mortgage, said in recent weeks, some would-be first-time buyers have been watching to see which way rates will go. “Some have been gifted down payments and they are able to afford a mortgage, but they are (still) facing multiple offer situations over asking prices and are unable to win the bids. If rates went down, there would be more fury with more people trying to get in.”

Last month, a BOC report predicted worst-case scenarios for heavily mortgaged homeowners. It said if home prices were to drop by 15 per cent, about one mortgage in eight — or about 600,000 mortgage holders — would go “underwater,” meaning the homeowner would owe more to the bank than what the property is worth.

And if home prices dropped by 25 per cent, nearly one in four mortgages — or more than one million mortgage holders — would head into this negative zone.

These most troubled of mortgages, said the bank, are held by some of the already most indebted households in Canada. It added that B.C. has a disproportionate share of these largest mortgages, which, in some cases, were outpacing annual household income by more than 450 per cent. These have been on the rise in B.C. with a third of mortgages taken in Vancouver last year categorized as being in the heavily indebted category.

This month, the country’s top financial services regulator spelled out tighter guidelines for mortgage underwriters. It said as risks intensify because of low interest rates, high levels of household debt and rapid increases in housing prices — particularly in Toronto and Vancouver — there is a need to look more closely at a range of factors, including how incomes are verified.

It’s not clear yet how missives like this will intersect with the segment of the mortgage market that is geared at wealthy clients buying higher-priced, luxury homes, where approvals are based on knowledge of a buyer’s wealth rather than his or her income. Last November, RBC scrapped its $1.25 million cap on loans to borrowers with no local credit history so as to be able to better service affluent newcomers to Canada who want to buy more expensive homes.

BMO’s Porter generally explained in a June note that “excess global savings sloshing around have driven many asset prices rocketing higher in recent years — bonds, commercial real estate, infrastructure, private equity, residential real estate in Manhattan and London — and now that wave has washed upon Canada’s biggest cities.”

Porter said measures to tighten borrowing standards in Canada “will simply crowd out the domestic buyer and leave the field wider open for foreign capital inflows. It’s also worth making a distinction here between landed immigrants and those simply seeking to park capital — the former are not of particular concern given the economic contributions they bring, but the latter (think vacant homes in tight markets, potential risk of capital flight, etc.) do deserve the attention of policymakers.”

© 2016 Postmedia Network Inc

Erik Hertzberg
REP

May was the biggest month for Toronto new home prices in 27 years.

Prices in Canada’s largest metropolitan area rose 1.9 percent in May, and were up 6.4 percent from a year earlier. Nationally, home prices rose 0.7 percent in May, the largest monthly increase since 2007, Statistics Canada reported Thursday.

The data adds to evidence that Toronto’s housing market may be overvalued. Policy makers including Bank of Canada Governor Stephen Poloz have warned price gains there and in Vancouver are unsustainable.

Builders cited market conditions and the higher cost of land as reasons for the gains in Toronto, where new house prices have been rising for 16 consecutive months, Statistics Canada said.

New house prices in Vancouver also recorded large gains in May, rising 1.1 percent in the twelfth consecutive monthly gain. Prices in the west-coast city are up 5.1 percent from a year earlier.
Nationally, new home prices rose 2.7 percent from a year earlier, the largest increase since 2010.
Economists were expecting a national increase of 0.2 percent in May and 2.2 percent from a year earlier, according the median estimate in a Bloomberg survey.

Statistics Canada’s new home price index doesn’t include condominiums or apartments, which comprise about a third of the new real estate market.

Copyright © 2016 Key Media Pty Ltd

BCREA
other

The British Columbia Real Estate Association (BCREA) reports that a record 12,906 residential unit sales were recorded by the Multiple Listing Service® (MLS®) in June, up 14.3 per cent from the same month last year. Total sales dollar volume was $8.97 billion in June, up 25.7 per cent compared to the previous year. The average MLS® residential price in the province was up 10 per cent year-over-year, to $694,925.

“Robust housing demand in the Lower Mainland, Vancouver Island and the Okanagan drove sales growth in June,” said Brendon Ogmundson, BCREA Economist. “At the same time, the inventory of homes for sale continues to slide lower, creating very tight market conditions around the province.”

“The supply of resale homes is remarkably low across BC, but particularly so in Victoria and the Fraser Valley,” added Ogmundson. The sales-to-active listings ratio has eclipsed 60 per cent in both Victoria and the Fraser Valley, corresponding to less than two months of supply given current demand.

Year-to-date, BC residential sales dollar volume increased 53.2 per cent to $49.9 billion, when compared with the same period in 2015. Residential unit sales climbed by 30.6 per cent to 67,361 units, while the average MLS® residential price was up 17.3 per cent to $741,150.

Copyright ©2016 BCREA

Eight months after plans submitted, homeowner still waiting on permit

JOHN MACKIE
The Vancouver Sun

Dean Murray is mired in reno hell. And he hasn’t even begun to do renovations.

Murray bought a century-old character home at 2726 West 6th Ave. in Kitsilano last year. The interior had been split up into suites and was in rough shape, so he hired an architect and drew up plans to take the interior of the house down to the studs and restore it to a single family home.

He submitted the plans to the city on Oct. 29, 2015. Eight months later, he still doesn’t have a permit to begin construction.

Murray’s problem is that his initial application was for a “field review,” rather than a full development permit. The city inspector showed up Jan. 29 to do the field review, but determined there was much more work involved than would be covered in a field review.

He told Murray he would have to submit a whole new application, even though Murray had waited three months to get an inspection done.

Murray submitted a new plan on April 9, but amended his original plans to include dormers. The city didn’t get back to him until June 21, and on June 23 told him the addition of dormers would mean he had to apply to the board of variance, which would take another couple of months.

On June 24 Murray emailed the city saying he was withdrawing the plans for the dormer. But he’s still waiting for the city to send an inspector out to look at his home and plans.

Murray is so frustrated he recently put a sign up on his lawn about his plight, illustrated with a photo of Murray, his wife and their two small children.

It reads “Waiting for over nine months for the City of Vancouver to process a permit so we can move into our family home, which we don’t want to tear down or abandon, simply renovate on the interior!”

Murray is a lawyer and says he did a similar reno project when he was living in Toronto a few years ago.

“We did a renovation in Toronto, with exactly the same square footage in the house, same amount of floors, and it took us three weeks and about $1,800 (to get permits),” he said.

“This will cost us about $100,000 in city costs and outside consultants that they require, and about 18 months to two years (to get through the process).”

Vancouver councillor Raymond Louie said there’s more to the story than just getting a permit. Murray’s contractor had done demo work inside the house in anticipation of doing the reno, without a permit.

The city said the initial plans submitted by his architect estimated the reno costs would be $85,000, but when the inspector showed up for the field review, that inspector estimated the renos would be in the $400,000 range, which required a different permit.

Louie said city staff advised Murray against amending the initial plans to include the dormer, but he submitted that plan anyway. Even though Murray eventually withdrew it, “every time you apply for something different the clock starts anew,” which led to a longer delay.

Murray is baffled by Vancouver’s way of doing things compared to Toronto’s.

“The city’s public position is to encourage local buyers and avoid tearing down heritage homes, but unfortunately the regulations, red-tape and inefficiency of the permitting office results in the opposite effect,” he wrote in an email to councillor George Affleck.

“A local buyer, non-developer, cannot afford the standard wait in excess of eight months (though we are predicted to be closer to 18 months based on the current schedule) due to the carrying costs of maintaining a separate residence and stress on the family living in temporary residence.”

Louie said the rules are there to “make sure life safety is taken care of (and) that the form of development is OK, that the construction methodology meets compliance with the B.C. and Vancouver building code.”

Murray said it would have been easier to just tear down the house and build new.

“My contractor bought a home six weeks after us that he tore down,” he said. “And his (new) house will be move-in ready in about a month.”

The former head of the city’s heritage department said getting a permit for an older home can indeed be an “onerous” process, and should be overhauled.

“It’s a hard time to go through the process because the rules are not written for existing buildings, the rules are written for new buildings,” said Robert Lemon, who was head of the heritage department from 1991 to 1996.

“The city says it’s concerned about the loss of character buildings and heritage value in neighbourhoods, but every time someone tries to save one they run up against zoning, and the zoning was put in place after these buildings were built.

“So you can’t expect the existing building to have a level playing field as far as renovations, additions and conservation, because it’s always deemed ‘non-conforming.’

“It conformed when it was built, and it’s nonconforming now because the powers that be in the past have zoned the area in a certain away.”

In a heritage “dream world” Lemon said “the city’s zoning would allow to grandfather existing buildings and not subject them to the same rules as new buildings are expected to be built to.”

He also thinks the timeline between renovation and building new could be flipped.

“If the city is sincere about wanting to save character houses, they should make the guy building a new house take eight months to get their permit, not the guy trying to renovate a nice old house,” he said.

© 2016 Postmedia Network Inc.

Securities Commission says director must pay $187,875 in penalties

DAN FUMANO
The Vancouver Sun

A Metro Vancouver man who purported to operate a “rent-to-own” real estate company that helped people purchase homes actually committed an “egregious form of fraud,” the B.C. Securities Commission has found.

Rui “Roy” Figueiredo was the sole director of Pare Realty, a Surrey company that offered to provide short-term loans to renters to help them use the funds for down payments on home purchases, according to the BCSC.

But in reality, the commission wrote in its decision, “there was no real business.”

“Figueiredo forged signatures and falsified documents to perpetuate the fraud. Figueiredo represents the upper end of risk to our capital markets,” the BCSC panel wrote. The commission’s executive director submitted that Figueiredo’s “scheme involved multiple elements of deceit (including forgery, fabricated documents, misappropriation of funds and no actual rent to own business).”

Figueiredo and his corporation are ordered to pay penalties to the commission totalling $187,875. He is also permanently banned from becoming or acting as a director of any issuer or registrant.

Pare Realty was incorporated in 2010 and dissolved in November 2013, according to the commission, and Figueiredo was also a director of a numbered corporation, 0929870 B.C. Ltd., incorporated in 2012. The suspected fraud at the centre of the BCSC’s investigation began in October 2013 when Figueiredo told a past colleague he was starting a rent-to-own realty business and presented the man with an investment opportunity.

The investor was persuaded to advance a total of $81,000 through a series of transactions to Figueiredo’s numbered corporation, which was doing business as Pare Realty, even though some of the transactions took place after Pare had already ceased to legally exist, the commission wrote, adding “it is clear from reviewing these documents that Figueiredo was using PARE and 0929870 interchangeably.”

The investor believed he was advancing funds to Figueiredo’s company for loans to supposed home purchasers, and he received promissory notes offering “substantial rates of return and maturity dates of less than one year,” the BCSC wrote.

“Instead, it was all a sham,” the BCSC panel wrote. “There is no evidence that there ever was any real business carried on by the respondents.”

Of the $81,000 the investor forwarded to Figueiredo and his companies, $23,125 was returned, the panel wrote, adding that a “review of the banking records of the respondents makes clear that the remainder of the funds were simply taken by Figueiredo and spent on personal expenses unrelated to the rent to own business. There is no evidence that (the investor’s) funds were ever provided as loans to home buyers in connection with real estate purchases.”

In one case, the investor believed he was advancing funds to support a purported home purchase by a TV personality.

Investigators obtained an affidavit from the TV personality, in which the broadcaster stated he did not know Figueiredo or his companies, he did not borrow money through the program, and “his signature, purportedly on the promissory note given to (the investor), was not made by him.”

“The loan to the TV personality was clearly a sham and the signature on the promissory note given to (the investor) was a forgery,” the BCSC wrote.

Although Figueiredo had notice of the BCSC hearing, he did not attend, tender any evidence or provide any written submissions, the commission said.

A phone number listed for Pare Realty had been disconnected before Wednesday, and emails to addresses connected with Figueiredo were not answered.

© 2016 Postmedia Network Inc.

GARRY MARR
The Vancouver Sun

Most of the country’s housing markets heated up in June, according to new data that shows Toronto and Vancouver continue to heavily influence the national average, but aren’t alone in making gains.

While much of the house price acceleration conversation has been about Canada’s two most expensive cities for homes, the Teranet and National Bank of Canada House Price Index released Wednesday, showed strong price growth in nine out of 11 markets — growth being delivered by long-term mortgage rates that are closing in on two per cent.

“That’s the story. Except for Calgary and Edmonton, and we know the economy is struggling there, June was above historical norms,” said Matthieu Arseneau senior economist with National Bank.

Existing home prices across the country rose 2.3 per cent in June from May, aided by Vancouver and Toronto which recorded a 2.6 per cent and 3.3 per cent gains respectively. But other parts of the country are also beginning to show life.

In one month, Victoria was up 4.4 per cent, Halifax saw a 3.7 per cent gain and Ottawa-Gatineau rose 2.6 per cent. Quebec’s housing market is showing signs of price growth, slight as it was: Prices rose 1.7 per cent in Quebec City in June, compared to May, and Montreal was up one per cent during the same period.

“It’s tough to conclude with one month of data and it may be early to call but we are seeing a change,” says Arseneau, who credits the record low interest rates for long-term mortgages with stimulating the rest of the country.

The Bank of Canada did not move on its overnight lending rate Wednesday, effectively leaving floating rates the same, but as long-term bond yields continue to drop around the world so to have mortgage rates. Ratehub.ca says the lowest five-year mortgage is now 2.29 per cent, driven by five-year government of Canada bond yields that are around 0.5 per cent.

Phil Soper, chief executive of Royal LePage, says rates continue to boost housing in many parts of the country, but Toronto and Vancouver have so much more going on to drive their housing markets. The Teranet price index was up 23.4 per cent in Vancouver and 12.4 in Toronto in June compared to a year ago.

“I’d call Vancouver the least healthy housing market in Canada,” Soper said. “There are two main drivers that don’t exist (beyond Vancouver and Toronto). One is the accelerating economy, the employment and immigration. Those are economic conditions for strong consumer confidence. But you also have geographic and regulatory restrictions on supply you don’t have elsewhere.”

Soper is paying very close attention to Quebec.

“If you look at the last couple of releases from us, I’ve called out Quebec as a shining light in our outlook,” he said. “The Greater Montreal numbers aren’t amazing if you compare them to Vancouver, but at 3.5 per cent (LePage’s predicted annual price growth) it’s one of the strongest performances in Quebec in some time.”

Montreal’s relative strength seems to be coming without the benefit of foreign investors, which is said to be a major driver of the housing market in Toronto and even more so in Vancouver. A report from Canada Mortgage and Housing Corp. released Wednesday said those overseas investors are at low levels in Quebec’s largest city.

“The presence of foreign investors in the Montreal real estate market is relatively low and concentrated in the condominium segment, especially in the central areas of Montreal,” said Francis Cortellino, principal market analyst for Quebec urban centres with CMHC.

The Crown corporation says just 1.3 per cent of condominium owners in the Montreal census metropolitan area were foreign owners, though the number was 4.9 per cent in downtown Montreal.

Paul Ashworth, chief North America economist with Capital Economics, says the idea that foreign buyers are driving Toronto and Vancouver housing is “complete nonsense” and the annual gains in those cities are not justified.

“There is also almost no hard evidence that foreign buyers are the cause. The surge in Canadian household debt makes it very clear that this is a domestically generated mania,” he said. “With interest rates at record lows, lenders have been more than willing to extend mortgage amortization periods and to push the loan-to-income ratio on those loans up to unprecedented levels.”

Those rates don’t appear to be heading down anytime soon, according to Alyssa Furtado, chief executive of ratehub.ca. “There hasn’t been much movement on fixed rates, they’ve been low for some time,” she said. “The fact they haven’t moved has fuelled home prices.”

© 2016 National Post

Erik Hertzberg
Canadian Real Estate Wealth

May was the biggest month for Toronto new home prices in 27 years.

Prices in Canada’s largest metropolitan area rose 1.9 percent in May, and were up 6.4 percent from a year earlier. Nationally, home prices rose 0.7 percent in May, the largest monthly increase since 2007, Statistics Canada reported Thursday.

The data adds to evidence that Toronto’s housing market may be overvalued. Policy makers including Bank of Canada Governor Stephen Poloz have warned price gains there and in Vancouver are unsustainable.

Builders cited market conditions and the higher cost of land as reasons for the gains in Toronto, where new house prices have been rising for 16 consecutive months, Statistics Canada said.

New house prices in Vancouver also recorded large gains in May, rising 1.1 percent in the twelfth consecutive monthly gain. Prices in the west-coast city are up 5.1 percent from a year earlier.
Nationally, new home prices rose 2.7 percent from a year earlier, the largest increase since 2010.
Economists were expecting a national increase of 0.2 percent in May and 2.2 percent from a year earlier, according the median estimate in a Bloomberg survey.

Statistics Canada’s new home price index doesn’t include condominiums or apartments, which comprise about a third of the new real estate market.

Copyright © 2016 Key Media Pty Ltd

other

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You’ll have the rare opportunity to connect with & learn directly from high level executives of popular China’s e-commerce companies, such as Alibaba, Baidu, JD.com and many more. (Take advantage of Early Bird Ticket discount now. See below)

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Justin da Rosa
Canadian Real Estate Wealth

The Canada Mortgage and Housing Corporation released information on foreign ownership in Montréal in a bid to address “data gaps.”

Foreigners own 1.3% of homes in Montreal and 4.9% in downtown Montréal, according to the CMHC’s latest Housing Market Insight Report which focused exclusively on foreign investment rates in the Quebec city.

“The presence of foreign investors in the Montréal real estate market is relatively low and concentrated in the condominium segment, especially in the central sectors of the Montréal area,” Francis Cortellino principal, market analysis at CMHC said. “These results, presented at a round table on foreign investment organized by CMHC, were corroborated by several industry players.”

The Crown Corporation surveyed condo managers in the greater Montréal area, asking them to provide the number of units in their buildings owned by foreigners.

And while additional foreign ownership statistics will certainly be welcomed by industry players, even the CMHC acknowledges potential issues with this specific data.

“The data provided by the respondents could be approximate in some cases. The presence of foreign owners could therefore be overestimated or underestimated,” CMHC said in the report. “Some respondents had a register with the addresses where condominium owners could be reached. Such registers could help determine the number of owners with an address outside of Canada, in other words, foreign owners.”

The CMHC noted foreign owners could use a local address for correspondence.

This latest report follows previously released data on foreign ownership in Toronto and Vancouver.

To view the latest report in its entirety, click here.

Copyright © 2016 Key Media Pty Ltd

Katia Dmitrieva
Mortgage Broker News

Home prices across Canada are set to jump this year as interest rates are kept  near record lows by economic uncertainty from the U.K. referendum to leave the European Union, according to brokerage Royal LePage.

The average house price will rise 12.4 percent from 2015 to C$563,000 ($434,000), the highest year-over-year forecast from a real estate firm since at least 2000, Royal LePage reported Wednesday. With turmoil from June’s Brexit decision filtering into Canada’s economy, homebuyers can expect  mortgage rates to stay low and steady demand to continue to push prices higher, said Phil Soper, the brokerage’s chief executive officer.

“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,” Soper said in the report.
Price gains will be led by Toronto and Vancouver, the country’s hottest housing markets. The average price of a Vancouver property — including condominiums, two-story homes and bungalows — will surge 27 percent from last year to C$1.2 million, according to Royal LePage. Prices in Toronto are forecast to climb 14.9 percent to C$718,000. The only major city set to cool is Edmonton, sliding 1 percent to C$376,700.

Copyright © 2016 Key Media Pty Ltd