Justin da Rosa
Mortgage Broker News

These are the major storylines brokers will want to keep an eye on in 2017, according to one industry veteran.

All eyes on Trump
Those sick of seeing the President-elect’s shenanigans pop up in their news feeds won’t be treated to a reprieve anytime soon — and that includes mortgage brokers.

“It could be just the overall economy; what Trump does with NAFTA – is he going to intimidate companies that have dealt in Canada extensively and may want to set up additional operations in Canada to repatriate and come back to the US? He’s certainly showing that already with Mexico,” Robert Goodall, president and CEO of Atrium Mortgage Investment Corporation, told MortgageBrokerNews.ca when asked what the biggest industry story will be this year.

“We lenders with diverse portfolios in commercial and residential, the thing we worry about more is a macro event more than a micro event.”

Relief to Alberta
At least that’s the hope. Lenders have been scaling back their offerings in the hard-hit province, making it more difficult for brokers to find mortgage solutions for clients.

“In Alberta, we want to see the price of oil continue to strengthen,” Goodall said. “We haven’t been active there in the last 18 months but we’re hoping to dip our toe in (again) in 2017 but it will depend on whether … oil prices get to a point where the economy starts to recover.”

Interest rates
Many have predicted higher mortgage rates in the coming months and Goodall is no different.

“I think a small increase is likely in the stakes. That means bond yields will probably increase here even though the Bank of Canada has strongly indicated they’re not going to increase short-term rates, they can’t control long-term rates,” he said. “That will depend, in part, on what the US does. They’ve been clear they’re going to be raising rates. That means mortgage rates will move up a bit.

“I’m not expecting they will move up much. I’m expecting a half-point or something like that.”

An end to regulation (at least for now)?
Mortgage regulation was undoubtedly the hottest topic in 2016, with British Columbia’s government bid to crack down on foreign buyers and the federal government placing higher barriers in front of insured mortgage holders.

The worst, however, may be behind us.

“My guess is they’ve finished. I think BC is still trying to figure out the impact that the 15% (foreign sales tax) will have. I think the federal changes have been so late in the year that they’re going to wait and see the effect they will have,” Goodall said. “Most economists think it will have a material impact.”

Copyright © 2017 Key Media Pty Ltd

Steve Randall
REP

While the impact of foreign buyers of Canadian real estate is inconclusive, there are certainly many buyers from the Chinese mainland who choose Vancouver and Toronto among their favourite markets.

However, that could begin to change in 2017 as Beijing cracks down on the movement of wealth out of the country. The latest moves will extend the curbs imposed on Chinese companies to include individuals; these have long been in place but not enforced.

A former Morgan Stanley economist Andy Xie, told The Globe and Mail that he expects the tightening of the rules to be significant with the number of buyers of Canadian real estate expected to “drop sharply.”
 Copyright © 2017 Key Media Pty Ltd

72 per cent of notaries public say ?bank of mom and dad? funding bulk of first-time buyers? down payments

GLEN SCHAEFER
The Province

More first-time homebuyers in B.C. received financial assistance from their parents in 2016 than in previous years, an informal poll of the province’s notaries public suggests.

The notaries handle more than 60 per cent of B.C. real estate transactions, according to director Dan Boisvert of the Society of Notaries Public of B.C.

About 150 notaries took part in the year-end survey, and of those who took part, 72 per cent said first-time buyers typically got help from their parents to buy. A year earlier, 57 per cent of the notaries surveyed said first-timers typically got help.

“It’s our anecdotal comments on what we see in our offices,” said Boisvert, a Tsawwassen notary, who added that notaries don’t formally track where their clients get their down-payment money.

In his own practice, Boisvert said, the majority of first-timers he sees are getting some parental help.

“It’s a statement you often hear, even so much as ‘thank God for my parents,’ especially when they’re buying a half-million dollar, $600,000 home,” he said.

The notaries say most parental help comes in the form of financial gifts, but some parents are named on the property title or in promissory notes with the expectation of being paid back.

“What really happens with firsttime homebuyers is they save up money, they go and look at something and all of a sudden they get stuck in some kind of bidding war,” Boisvert said. “Or they get the deal all into place and as the numbers come in, they realize they haven’t got enough. Where do they go? Where does anybody in their 20s go when they need a quick 10 grand — the bank of mom and dad.”

Boisvert said that despite 2016’s rise in Lower Mainland property values, demand from first-time buyers has remained strong.

Realtor Dan Morrison, president of the Greater Vancouver Real Estate Board, said he had no hard statistics on parental help, but he knew firsthand about the bank of mom and dad.

“It’s certainly not a new thing, but it’s certainly been happening a lot more the past couple of years,” Morrison said. “Me, personally, I helped both of my sons buy in the last couple of years.”

Morrison said parents who own their own homes are helping their offspring now “rather than waiting 10, 20, 30 years from now when we leave it to them.”

© 2017 Postmedia Network Inc.

Some condo, townhome assessments leap by double digits

Joanne Lee-Young
The Province

Last month, B.C. Assessment warned owners of “typical” condos and townhomes that their latest assessed property values would increase in the range of 15 to 30 per cent. But for some, the rise captured at mid-2016, is even higher, mirroring trends of between 30 to 50 per cent in the detached home market. A few outliers posted blistering surges of almost 60 per cent.

Single-family home prices in Metro Vancouver had already been rising in double-digit percentages when, last January, there were the first signs of upward momentum in the condo market. Before this, condo prices had been flat or declining for years.

Now, B.C. Assessment is giving single examples of what it considers typical properties with much higher increases, even though these July 2016 snapshots are likely in flux as the market has since softened. These include a Lynn Valley townhouse, built in 1979, that posted a 38 per cent gain. It cited a townhouse in the Citadel area of Port Coquitlam, built in 1994, with a 34 per cent rise. In Port Moody’s Newport, a unit in a highrise, built in 2005, posted a 25 per cent rise and a downtown New Westminster townhome, built in 1993, went up by 36 per cent.

“This has been the talk of the town and I’ve been inundated with calls from residents concerned about the impact on property taxes and eligibility for the homeowners grant,” said Port Coquitlam councillor Brad West.

“The assessments highlight how detached the real estate market has become from the reality of most regular peoples’ lives. It’s clear to me that there must be a better way of assessing property values than a once-a-year calculation made at the very peak of the real estate market madness that occurred last year. It has produced a skewed valuation that looks good on paper, but is not real. It is an absolute necessity that the government raise the threshold on the homeowners grant.”

Mayor Richard Walton of the District of North Vancouver emphasized that while many assessments are up “dramatically in the 30 per cent range…the critical factor (for homeowners trying to figure out how an increase will impact their tax bill) is how each property increase compares with the average tax increase for the community.”

He added: “As such, I have no report from our tax department what the average increase is. I know that my home was assessed 33% higher and I am not at all pleased. Even at the peak last summer, it was not worth that much and I will be appealing.”

For multi-family units on Vancouver’s westside, B.C. Assessment cited a low-rise unit, built in 2002, with a 25 per cent gain and, on the east side, a highrise unit, built in 2003, with a 20 per cent gain. In Burnaby, it highlighted a Metrotown highrise unit, built in 1999, with a 19 per cent gain.

Postmedia took its own quick gauge, dipping into buildings and complexes to find several that exceed the ones highlighted by B.C. Assessment. At 1033 Marinaside in Yaletown, a lower unit posted a gain of 34 per cent. At 2088 Madison in Burnaby, near Brentwood Town Centre, an upper unit saw a 35 per cent rise. Buildings in areas where new zoning has sparked pricey sales and redevelopment activity, such as around Burrard Street in the West End, saw more extreme increases. A higher unit at 1330 Burrard Street saw a 60 per cent gain, while a lower unit posted a 48 per cent increase.

In the past, market analysts said that compared to single-family homes, there was a greater supply of condos and townhomes that are more affordable for a larger number of buyers and this was helping to keep a lid on prices. 

Said Michael Ferreira, managing principal at Urban Analytics: “It’s typical for the apartment/condo market to trail the detached market in terms of the amount of value increase. (There is) much more demand relative to supply in the detached market. You just need to look at the number of apartment/condo starts compared to detached starts … to illustrate that.”

“It’s “pretty crazy indeed. Amazing that people still suggest supply isn’t an issue in the market.”

In many of these areas, the fact there wasn’t any new development for several years allowed pent-up demand to be released when new product was put on the market.  Quick sales drove up prices, he said.

“This isn’t the only factor, but when you combine it with the arrival of new buyers in the market and a ‘fear of missing out’ mentality among buyers, you can see why prices have risen so considerably.”

© 2017 Postmedia Network Inc.

Ephraim Vecina
Canadian Real Estate Wealth

While price increases and sales numbers will continue to command much attention in 2017, industry professionals and analysts agreed that the mismatch between existing supply and growing demand will be the main source of consumer anxiety this year.
 
Royal Lepage Terrequity Realty broker of record April Williams projected a lower number of both new homes and resale listings.
 
“I don’t see a lot of people making lateral moves. With the closing costs and the cost of homes it doesn’t make sense,” Williams told the Vancouver Metro.
 
“I think we’re going to see a lot more people that are either up-sizing or down-sizing, which is going to keep the amount of listings low next year — which could create higher prices and more bidding wars.”
 
Bryan Tuckey of the Building Industry and Land Development Association (BILD) warned that new housing supply will continue to shrink. He noted that only around 2,300 low-rise homes were available in the market as of October, a far cry from the 4,000 in January 2016.
 
Jason Mercer, director of market analysis for the Toronto Real Estate Board (TREB), agreed that resales will remain very low in 2017. He added that the resulting price increases will compel a significant number of would-be buyers to consider other housing options—most notably, condominium living.
 
Matthew Slutsky of BuzzBuzzHome stated that the long-running affordability crisis and the inter-generational lifestyle shift have led to the increased popularity of condo units among millennials and young families.
 
“One of the beautiful things about a condo is that all the amenities can act as your living place,” Slutsky observed, adding that the 29 launches and 131 projected completions this year will foment greater transaction volume in this segment.

Copyright © 2017 Key Media Pty Ltd

Ephraim Vecina
REP

 

The sustained weakness of the loonie-greenback exchange rate might prove most helpful for the Canadian housing sector in 2017, according to an analyst.
 
Vestcap Investment Management senior portfolio manager Lyle Stein argued that the low Canadian dollar could magnetize a greater inbound volume of foreign this year.
 
“When your dollar is low you become on sale and smart investors with all this liquidity that is coming out of the bond market and looking for a home, why not own a home in Toronto, a home in Vancouver or a home in Ottawa as an alternative asset — and that is what we are seeing,” Stein said in a recent interview with BNN.
 
However, gnawing fears of a housing crash in the near future might prove harmful to the already struggling loonie.
 
“When you look at the Canadian economy I was stunned that seven per cent of the economy is related to housing and housing-related activity and it has been like that for the past seven or eight years; if that starts to slow we are losing one of the key growth drivers in our economy and I think that is also coming into the fray,” Stein explained.
 
In particular, a dire warning from Royal LePage—which predicted major double-digit decreases in Vancouver home prices this year—emphasized the crucial role that recent government interventions are having on this vital pillar of the economy.
 
The B.C. government imposed its 15 per cent foreign buyers’ tax in mid-2016. Combined with far-reaching revisions to federal mortgage rules late last year, a growing number of observers and industry professionals are voicing out concerns that the Canadian residential real estate sector is poised for a significant fall.
 
“We are putting a lot of responsibility on a very narrow sector and that to me is the bigger problem,” Stein concluded.
 
“Twenty years ago we were talking about a low loonie and how great it was for manufacturing. We actually had a manufacturing economy back then and we do not have that today [and] what replaced manufacturing, particularly in Ontario, has been the strength in our housing market. If we lose strength… we could really pull the rug out from under the only pillar that is working in Ontario right now.”

Copyright © 2017 Key Media Pty Ltd

‘Bank of mom and dad’

GLEN SCHAEFER
The Vancouver Sun

More B.C. first-time home buyers got financial assistance from their parents in 2016 than in previous years, according to an informal poll of the province’s notaries public.

The notaries handle more than 60 per cent of B.C. real estate transactions, according to Society of Notaries Public of B.C. director Dan Boisvert. About 150 notaries took part in the year-end survey, and of those who took part, 72 per cent said first-time buyers “typically” got help from their parents to buy. A year earlier, 57 per cent of the notaries surveyed said first-timers typically got help.

“It’s our anecdotal comments on what we see in our offices,” said Boisvert, a Tsawwassen notary, adding that notaries don’t formally track where their clients get their down-payment money.

In his own practice, Boisvert said, the majority of first-timers he sees are getting some parental help.

“It’s a statement you often hear, even so much as ‘thank God for my parents,’ especially when they’re buying a half-million dollar, $600,000 home.”

The notaries say most parental help comes in the form of gifts, but some parents are named on the property title or in promissory notes with the expectation of being paid back.

“What really happens with first-time home buyers is they save up money, they go and look at something and all of a sudden they get stuck in some kind of bidding war,” Boisvert said. “Or they get the deal all into place and as the numbers come in they realize they haven’t got enough. Where do they go? Where does anybody in their 20s go when they need a quick 10 grand? The bank of mom and dad.”

Boisvert said that despite 2016’s rise in Lower Mainland property values, demand from first-time buyers has remained strong.

Realtor Dan Morrison, president of the Greater Vancouver Real Estate Board, said he had no hard statistics on parental help, but he knew first-hand about the bank of mom and dad.

“It’s certainly not a new thing, but it’s certainly been happening a lot more the past couple of years,” Morrison said. “Me, personally, I helped both of my sons buy in the last couple of years.”

Morrison said parents who own their own homes are helping their offspring now “rather than waiting 10, 20, 30 years from now when we leave it to them.”

© 2017 Postmedia Network Inc.

Ephraim Vecina
Mortgage Broker News

Amid crucial political developments worldwide and the passage of federal measures intended to improve affordability, 2016 has proven to be a year of flux for the Canadian housing sector, as was most starkly illustrated by the latest information from the CREA.
 
In an analysis by the Better Dwelling blog, the national average price of Canadian composite homes saw a 14.4 per cent rise over the past year, up to $581,400. This represented the fastest pace of price growth in the previous 10 years, almost reaching the 2006 heights of 14.43 per cent.
 
A major contributor to this development is the sustained performance of the country’s two hottest real estate markets, the CREA data revealed. Last year, the Vancouver composite home price average broke through the $908,300 level, while Toronto’s reached $689,100.
 
Meanwhile, Calgary continued to suffer from Alberta’s sluggish economy (especially in the wake of the recent oil price crashes and the Fort McMurray conflagration last year), with prices in the city declining by an average of 3.97 per cent.
 
Moncton exhibited the lowest average costs by the end of last year, increasing only up to $163,400.

Copyright © 2017 Key Media Pty Ltd

Ephraim Vecina
Mortgage Broker News

If 2016 was the year that made it harder for hopeful home owners who were looking to secure mortgages for their purchases, an industry veteran warned that things are about to get even more difficult for first-time buyers this year.
 
In a recent contribution for The Globe and Mail, RateSpy.com founder and intelliMortgage planner Robert McLister noted that the recent changes to the federal rules governing mortgages might discourage a significant number of would-be buyers.
 
In particular, the requirement to test the capability of insured borrowers to service payments at the posted 5-year fixed rate of 4.64 per cent will cause around one-fifth of new buyers to abort their home purchase plans in their desired cities.
 
A leading driver for this would be low-ratio borrowers (i.e., those with at least 20 per cent equity) having to pay higher interest in 2017.
 
“The reason: less rate competition. Bank competitors, who must insure all their mortgages, have been castrated by government rules that ban insurance on refinances, amortizations over 25 years, single-family rental financing and higher-value properties,” McLister explained.
 
“Worse yet, effective Jan. 1, 2017, Ottawa’s mortgage police will jack up insurers’ capital requirements. That’ll make low-ratio mortgages significantly more expensive for most bank challengers, pushing their rates higher.”
 
High-ratio borrowers won’t get out of the year unscathed, too.
 
“Lenders who securitize their mortgages (resell them to investors) often have the lowest mortgage rates. But going forward, Ottawa’s rule changes will make securitization prohibitively expensive in many cases. Some non-bank lenders could lose up to one-half of their business as a result.”
 
“To mitigate lost revenue, lenders will boost discounts on mortgages that the government still happily insures – those with less than 20-per-cent equity. That means mortgages with the highest loss potential will receive even lower rates in 2017.”

Copyright © 2017 Key Media Pty Ltd