Steve Randall
Canadian Real Estate Wealth

The mortgage regulations implemented in the fourth quarter of 2016 have led to a large decrease in insurance-in-force at CMHC.

The agency released its annual report Wednesday which shows it provided mortgage loan insurance for 189,000 new units in 2017 up to the end of the third quarter, 63,500 of them in the third quarter.

Total insurance-in-force year-to-date was down $28 billion to $484 billion.

The typical CMHC-insured mortgage was for $260,577 with the borrower’s credit score of 752 and total debt service ratios of 36.6%. The overall arrears rate was 0.30%.

Additionally, the agency’s guarantees for its securitization programs totalled $113 billion; $82.8 billion for National Housing Act Mortgage-Backed Securities and $30.2 billion for Canada Mortgage Bonds.

CMHC delivered $467 million of net income (after tax) and approved a $290 million dividend for its sole shareholder, the federal government.

“CMHC continues to deliver results for Canadians. The Government, through CMHC, is making unprecedented investments to help Canadians in housing need as part of the National Housing Strategy. Commercially, we continue to manage our mortgage loan insurance and securitization operations in the best interests of long-term financial stability,” said Wojo Zielonka, Chief Financial Officer and Senior Vice-President, Capital Markets.

In a conference call Wednesday, Steve Mennill, CMHC’s senior vice-president of insurance said that the agency is confident that the level of mortgages insured by the CMHC in the third quarter is “the new normal.”

Copyright © 2017 Key Media Pty Ltd

Some newly completed condos are selling for less than the pre-sale price paid during construction

Frank O’Brien
Vancouver Courier

Vancouver developer and architect Michael Geller warns that land has been selling at such high prices that some condo developers — and new condo buyers — fear they won’t be able to profit on the final product.

“I am seeing land sales now in excess of $500 a [square] foot buildable in the city of Vancouver and these are not in any way special sites,” Geller said.

“This is alarming. For a new 800-square-foot condo you are approaching $480,000, just for land.”

City land values are now worth more than the construction costs of a residential tower, which Altus Group pegged at from $315 to $350 per square foot in a 2017 survey.

When all soft costs, such as design and landscaping, city fees, community amenity contributions, legal fees, marketing and commissions are piled on, Geller said a developer would need to sell new condos at well above $1,400 per square just to achieve bank financing, let alone a profit.

There are now 30,000 strata units under construction and a total of 120,000 in various stages of the pipeline across Metro Vancouver, according to industry estimates.

Yet prices for residential land — much of which already has a building on it — continue to soar.

For example, a Vancouver land assembly of four housing lots near Langara Golf Course was sold a year ago for $12 million and then quickly flipped for $13.2 million for a townhouse project.

That now looks like a bargain.

This month, HQ Commercial sold a 5,400-square-foot residential lot in Vancouver’s Marpole area for $3.8 million, or $704 per square foot.

A 30,000-square-foot strip mall on East Hastings, with just the potential of residential development, was recently bought for $712 per square foot.

“Currently the strongest multi-family market in the country, Vancouver is witnessing an unwavering insatiable investor appetite,” said James Blair, vice-president, multi-family for JLL Canada. But Blair suggests there could be a limit, something that we have heard before.

“We foresee that costs per door in certain regions will continue to go up, but not dramatically. We are already at very aggressive door costs.”

The question is whether the land costs that developers are willing to pay will match what future condo buyers are capable of buying.

Some buyers of newly completed condos are already re-selling their units for less than they paid at pre-sale during construction, Geller said, citing a new concrete tower in Burnaby’s Metrotown area as an example.

Meanwhile, the City of Vancouver is trying to put the brakes on runaway land speculation in an effort to lower prices. Its Housing Vancouver strategy, outlined Nov. 28 and which may come into force in 2018, is meant to “reduce over-inflated values for future development.”

“The effects of speculation have caused significant consequences for housing in Vancouver, and has hindered many of our attempts to build affordable rental housing as the high cost of land make projects unviable,” said Gil Kelley, Vancouver’s general manager, planning, urban design and sustainability.

Among its proposals, the city policy is considering making some neighbourhoods “rental-only zones” to calm residential land speculation, and said it is working with senior government in “implementing a speculation or flipping tax” on residential land sales.

© 2017 Vancouver Courier

City council approves 10-year housing strategy after lengthy debate

Dan Fumano/Nick Eagland
The Vancouver Sun

After hearing from dozens of speakers throughout the day and following a lengthy — and at-times heated — debate, Vancouver city council voted late Wednesday to adopt a new major housing strategy.

The 10-year Housing Vancouver strategy, more than a year in the making, seeks to address everything from combating homelessness and revitalizing low-density neighbourhoods, to taming real estate speculation and increasing rental housing stock.

A three-year “plan” seeks to quickly implement some measures.

The strategy, released publicly last Thursday, was presented to council Tuesday, where Vancouver’s general manager of planning, Gil Kelley, told councillors the “bold” housing strategy marks part of a “major turning point in the city’s development.”

Only NPA councillors Melissa De Genova and Hector Bremner voted against it Wednesday.

Following Mayor Gregor Robertson’s introduction Wednesday of six amendments to the strategy, De Genova submitted a referral motion, calling for further consultation on an evening where more speakers were able to attend. She was supported by her fellow NPA councillors but her motion was voted down.

Robertson’s amendments included a call for council to support increasing the shelter portion of welfare rates and a $15 minimum wage, a “rights-based approach to housing,” and enhanced supports for renters through enhancing the mandate of the renter protection manager.

Upon the strategy being adopted, Robertson congratulated city staff members for their work on it.

“Housing Vancouver builds on measures the City is already taking that are the first of their kind in Canada — the empty homes tax, temporary modular housing for our most vulnerable residents, and regulating short-term rentals — and includes strategies that go after real estate speculation, offer more protection for renters and will transform single-family neighbourhoods across the city,” Robertson said in a release.

“This comprehensive approach will help us maintain Vancouver’s diversity and vibrancy, and create more affordable housing options for young people, growing families, seniors and our most vulnerable residents.”

The overall strategy includes, among other things, a target of creating 72,000 new homes for renters, families and vulnerable residents over the next 10 years.

That number of 72,000 new homes has been described by Kelley and city staff as “aggressive” and “ambitious,” but several speakers Wednesday questioned if that target is ambitious enough.

Paul Kershaw, a professor at the University of British Columbia, urged council to support the strategy, but asked: “Where does this 72,000 number come from?

“Where is the evidence in this strategy that that will be enough units to actually rein in prices?” asked Kershaw, the founder of Generation Squeeze, a national campaign advocating on behalf of people under age 40, many of whom have been priced out of Canada’s expensive urban housing markets.

Outside council chambers, Kershaw told Postmedia News he was encouraged that out of the first 30 speakers, almost all of them were in support of the plan.

“That’s an unusual degree of support, ” he said. “Is the plan perfect? No. Is it bold enough? Probably not. But is it better than what we had? There is no doubt about that.”

The housing strategy vote comes a little less than a year before the city’s next municipal election, in which housing is expected to be the dominant issue.

Robertson and his Vision Vancouver party, which has had a majority on council during all three of his terms as mayor, is seen to be vulnerable in next October’s general election, in part because of the Vision council candidate’s distant fifth-place finish in last month’s municipal byelection.

Last month’s byelection was won by NPA candidate Hector Bremner, whose campaign was largely focused around housing issues, particularly around increasing “the right supply” of housing for young working families, including densifying low-density neighbourhoods.

Bremner told council he wasn’t convinced the strategy addressed the issues on which he campaigned, including his pledge to put an end to “piecemeal zoning” in the city.

Vision Coun. Tim Stevenson said he was disappointed there wasn’t unanimous support for the strategy, calling NPA opposition to the staff-generated report “purely a political decision” rather than one that would benefit Vancouver residents.

Earlier in the day, Bremner said he’s been approached by people urging him to run for mayor in next year’s civic election, and he’s weighing his options and hasn’t yet ruled out that possibility.

“People are looking for new voices and approaches,” Bremner, 36, told Postmedia News. “I think we’ve had nearly 10 years of anticipation of change, but it never came. So what’s next for Vancouver? That’s what people are talking to me about.”

But for some political observers, even more noteworthy than Bremner’s byelection win last month was the second-place finish of Jean Swanson, a longtime anti-poverty advocate and activist.

Swanson, who ran as an independent in the byelection, appeared Wednesday as the 24th speaker before council. Swanson pointed out the city’s new housing strategy includes a proposed idea that sounded very similar to one of the main pledges from her byelection campaign: a surcharge on the city’s most expensive properties which she labelled the “mansion tax.”

“I’m delighted that you picked up on our idea of the mansion tax, which you called ‘applying differential property tax rates on residential properties,’ in planner-ese,” Swanson told council. “This is a fabulous way to get money and had lots of support from academia.”

The “mansion tax” idea would require collaboration with and action from senior levels of government, as would other measures proposed in the housing strategy, such as implementing a flipping tax, a speculation tax, or restrictions on property ownership by non-permanent residents.

After Swanson’s presentation, Postmedia News asked her how it felt for a social justice radical who spent decades battling the political establishment to see one of her own ideas actually included in the city’s new strategy. She replied: “It’ll feel good if they actually implement it.”

Swanson said her strong byelection results, particularly in areas of the city like Strathcona, Hastings Sunrise and the West End, sent a message that city hall needs to heed the situation of renters and lower-income Vancouverites.

© 2017 Postmedia Network Inc

Elenore on Fifth a standout in Mount Pleasant

Mary Frances Hill
The Province

Elenore on Fifth

What: 58 homes featuring steeped terraces that offer views of the North Shore mountains and downtown Vancouver

Where: 2106 Main St., Vancouver

Developer and builder: Chard Development Ltd.

Residence sizes and prices: One, two and three bedrooms, 476 – 1,635 square feet, starting from $650,000

Sales centre address: 2106 Main St.

Sales centre hours: noon — 5 p.m., Sat — Thurs

It takes creativity to stand out in a crowd. However, Proscenium Architecture and Interiors Inc. makes it look effortless with the use of bold contrasts in the display home at Elenore on Fifth, Chard Development’s condo community destined for Mount Pleasant.

At the display space, the designers dare to stray from the pack so devoted to neutral finishes and decor, in favour of bold contrasts to grab visitors’ attention.

Chard is attracting young professionals and creatives with the esthetic and practical design elements of a “clean contemporary, and refined” design, says Austin Lidstone, interior designer at Proscenium.

“Everything serves a purpose and the contrast and texture in the palettes add interest and a subtle sophistication,” Lidstone says.

The kitchen and bathroom each illustrate Lidstone’s point. The two very distinct shades appear in big bold blocks or sections, with a clean white food prep area overlooking the bold darkened oak cabinetry and island. It’s definitely an eye-catching interior scheme, but also acts as a mirror or a creative reference to the exterior architectural form, according to Proscenium principal Hugh Cochlin.

“The tower portion of the kitchen acts as an anchor and echoes the exterior massing – the anchoring of the brick and the mass of the podium,” he says.

“In contrast, the light solids (floating portions of the kitchen) relate to both the floating form of the residential tower portion of the building and the … transparency of the glass of the exterior expression. The textures and richness of the veneer is balanced by the light solids, which are then tied together with the subtlety of the countertop and backsplash and warmth of the flooring.”
Proscenium’s respectful approach to the relationship between indoors and outdoors continues on to Elenore and Fifth’s outdoor space, on private and common-use decks. When it comes to decor, colour palettes or style, there needn’t be a separation between indoor and outdoor, they insist.

They recommend creating niches of comfort on balconies and outdoor common spaces; considering Fifth at Main is on a gentle slope that continues past the busy Main and Broadway hub, that may allow homeowners an elevation in their homes, and a view.

“The outdoor space can be maximized through treating it as an extension of the interior space. Providing a variety of seating levels – casual lounge, dining, smaller conversation areas, shaded areas (partially covered via sunshades or other) – as well as outfitting the exterior with an outdoor kitchen, bar or prep area, can all add to maximizing the livability of the large outdoor room,” Lidstone says.

© 2017 Postmedia Network Inc.

Bank of Canada has released its assessment of the financial system

Steve Randall
Canadian Real Estate Wealth

The Bank of Canada has released its latest assessment of the financial system and has once again highlighted risk from mortgages.

While the overall tone of the report is positive – “Our financial system continues to be resilient, and is being bolstered by stronger growth and job creation, but we need to continue to watch financial vulnerabilities closely,” said Governor Stephen S. Poloz – mortgages are a notable worry.

The governor said that there has been a shift in mortgage activity with an improvement in the quality of new high-ratio mortgages (downpayment less than 20%) but an apparent rise in low-ratio loans being issued to highly indebted households.

The BoC says that the tighter lending rules which come into force in just over a month are expected to mitigate that risk over time.

The bank also expects the policy measures taken to cool the housing markets in the Greater Toronto Area and Greater Vancouver Area should begin to ease activity, noting that price increases are continuing to be driven by the growing economy and tight supply of homes.

Copyright © 2017 Key Media Pty Ltd

Ephraim Vecina
Canadian Real Estate Wealth

The Liberals’ latest plan to fix the Canadian housing market’s problems might prove to be a valiant but ultimately futile attempt, according to veteran markets analyst Don Pittis.

Writing for CBC News, Pittis noted that despite the noble intentions, the newly introduced plan should not be expected to serve as the panacea that its proponents are hoping it to be.

“While the new government strategy makes a welcome political gesture toward solving problems created by the high cost of housing, there is evidence that the problem is bigger, more complicated and more intractable than any government can handle, even with this latest decade-long multi-billion-dollar plan,” Pittis wrote.

“The criticisms [of the plan] could be grouped into four general categories. It wasn’t enough. It was too late. It didn’t do the right things. And it didn’t help the right people,” Pittis explained. “All those critiques may be fair. But what no one, including the federal government, was going to admit was that solving the housing crisis is simply impossible.”

Also, while some quarters are proposing that the government keep its hands off entirely and let the free market regulate itself, “voters don’t like the idea of some Canadian families living in cardboard boxes and others in mansions. And the government knows it.”

In a bitter irony, a solution will come in the form of a sudden crash that will come about once the property bubble bursts – and by then, “the complaint that federal spending plan is too late will become a virtue.”

At the moment, the best choice that Canadians can go for is a brutal realism that eschews previous generations’ ideas of the perfect home.

“Canada is going through a difficult transition that others have gone through before. There is no longer room for every family to have its suburban picket fence,” Pittis concluded.

Copyright © 2017 Key Media Pty Ltd

Neil Sharma
Canadian Real Estate Wealth

Renters in Canada’s two largest markets will still be fighting over scraps next year.

The CMHC Rental Market Report on the country’s rental markets revealed Ontario and British Columbia have dangerously low vacancy rates, and that’s being exacerbated by low turnover, which itself is largely a consequence of unaffordability.

The vacancy rate in Ontario decreased to 1.6% in autumn of this year from 2.1% during the same period last year, and the average rent is now $1,140, up 3.8%.

However, the vacancy rate in Toronto was 1.3% last year, and it’s fallen to 1%.

Jim Murphy, president of the Federation of Rental-Housing Providers of Ontario (FRPO), says Ontario has its lowest vacancy rate since 2000, and that the provincial government needs to act fast.

“We’re seeing declining vacancies due to a number of factors,” he said. “We have a strong economy, we have an affordability issue—which is that people cannot afford to own, preferably single-family homes—and we have a growing population. We’ve had significant increases, for example, in immigration levels. All these things are contributing to desire for supply, and we need more supply.”

FRPO found there’s an annual shortage of 6,250 units in Ontario, and Murphy would like to see the province provide certainty to investors, and one way that can be done, he says, is by allowing a rolling exemption from rent control.

“The issue is people are renting longer,” said Murphy. “Some people want to rent because of the lifestyle—they don’t necessarily want to own—but more people are staying, which is why the turnover rate is lower, because they can’t afford to own a home. That’s a problem.”

Investors usually thrive in economically vital markets, where growing demand vastly outpaces supply.

The CMHC report mentioned that declining vacancy rates in recent years has spurred investor activity, as they look to take advantage of supply constraints by charging higher rents.

The situation in Vancouver isn’t any better.        

While B.C.’s vacancy rate is unchanged this year, holding steady at a paltry 1.3%, it’s lower in the province’s most populous city.

David Hutniak, CEO of LandlordBC, an industry association representing rental housing providers, says a balanced market has a 3% vacancy rate, but because of supply constraints it’s less than 1%.

“The Vancouver vacancy rate was 0.7% last year and it’s 0.9% this year for the primary market,” said Hutniak. “The persistence of that vacancy rate is a challenge. The turnover rate is hard to get accurate numbers on, but when we talk to larger providers of purpose-built, they’re seeing low turnover rates, and that’s because the supply is challenged. Even people living in rentals, if they wish to move into something newer or bigger, they’re realizing that there’s just not a lot of choice out there and they’re hanging in for longer periods of time.”

This year’ rent increase in Vancouver was 6.2%—and that isn’t even getting into what Hutniak thinks is the crux of the issue in Vancouver’s purpose-built rental market.

“There’s an emerging pipeline, but that product is high end,” he continued. “They’re being built with condo quality, with a fairly broad range of amenities, so the starting price of units is on the higher end of the scale. All supply is good because we have so little purpose-built here, but by the same token, we’re always advocates of finding more moderated market rentals.”

Copyright © 2017 Key Media Pty Ltd

Justin da Rosa
Canadian Real Estate Wealth

Ontario is encouraging developers to build purpose-built rental housing by offering millions in rebates.

The province is offering rebates for development charges on new, purpose built rental housing, it announced Wednesday.

“We believe everyone deserves a place they can call home. Building more rental housing not only helps individuals and families find places to live, it creates strong, vibrant communities,” Peter Milczyn, Minister of Housing and Minister Responsible for the Poverty Reduction Strategy, said.

The rebates are meant to encourage construction in the rental market.

The province will rebate up to $125 million in development charges over five years for purpose-built rental developments in areas with low vacancy rates and high proportion of renters.

According to the Ministry of Housing, only 6% of housing built over the last two decades was aimed at the rental market.

“Providing rebates for development charges for new purpose-built rental housing is one of 16 comprehensive measures under Ontario’s Fair Housing Plan to bring stability to the real estate market, protect renters and homeowners’ investments, increase housing supply, and help more people find a home that fits their budget,” the province said in a release.

Copyright © 2017 Key Media Pty Ltd

Tougher mortgage environment creating ?headwinds? that could further reduce buying activity and dampen price rises, says BCREA

Joannah Connolly
REW

Rising interest rates and a tough mortgage stress test will combine to reduce home sales in the province next year, according to a forecast issued November 28 by the BC Real Estate Association (BCREA).

The association predicts that, following BC home sales falling by 8.8% in 2017 compared with last year, resale transactions will decline a further 10.4% in 2018, to around 91,700 units sold across the whole year.

BCREA pointed out that the 10-year average for home sales in the province is 84,700 units a year, and said that “strong economic and demographic fundamentals are supporting elevated housing demand.”

However, it added that there were two key factors that will bring home sales down to between 2014 and 2015 levels.

“Housing demand across the province will face increasing headwinds in 2018,” said Cameron Muir, BCREA’s chief economist. “A rising interest rate environment combined with more stringent mortgage stress tests will reduce household purchasing power and erode housing affordability. Given the rapid rise in home prices over the past few years, the effect of these factors will likely be magnified.”

Home prices across BC are not expected to decline next year, but average price rises will be less steep than they were in in 2015 and 2016’s hot markets. Residential resale prices in BC are forecast to be 3.1% higher this year than last year, at an average of $712,300, and to rise a further 4.6% to $745,300 in 2018.

However, the BCREA’s price-rise predictions for next year vary considerably across the province, with Greater Vancouver’s average home prices expected to rise 5.5% in 2018, but Victoria’s just 1.4%.

The BCREA pointed to the near-decade low of housing inventory as a key driver in recent price increases. The report said, “The imbalance between supply and demand has been largely responsible for rapidly rising home prices.”

But it added, “The combination of weakening consumer demand and a surge in new home completions next year is expected to induce more balanced market conditions, producing less upward pressure on home prices.”

© 2017 REW.ca