Here are 11 facts that illustrate the market?s slowdown

Kerrisa Wilson
other

Following the implementation of stricter mortgage rules in January 2018, Metro Vancouver home sales continued to soften in April, while listings increased.

A total of 2,579 homes changed hands in the region last month, down 27 per cent from the 3,553 sales recorded in April 2017, according to the latest data from the Real Estate Board of Greater Vancouver (REBGV), published today.

“Market conditions are changing. Home sales declined in our region last month to a 17-year April low and home sellers have become more active than we’ve seen in the past three years,” says Phil Moore, REBGV president, in a press release.

Last month’s sales total was 22.5 per cent below the 10-year April sales average.

According to Moore, the mortgage requirements, among other factors, have diminished home buyers’ purchasing power in Metro Vancouver.

Here are 11 facts that show how Metro Vancouver’s housing market continued to slow in April.

1. Although Metro Vancouver saw fewer home buyers in April, there were more home sellers in the market. A total of 5,820 properties (detached, attached and condo) were newly listed for sale in April — a roughly 19 per cent increase compared to the 4,907 homes listed a year ago.

2. In April, a total of 9,822 properties were listed for sale, up roughly 26 per cent compared to 7,813 units a year ago. “Home buyers have more breathing room this spring. They have more selection to choose from and less demand to compete against,” says Moore.

3. For all property types, the sales-to-active listings ratio for April 2018 was 26 per cent. REBGV says that downward pressure on prices generally occurs when the ratio falls below the 12 per cent mark for a prolonged period, while home prices often experience upward pressure when it exceeds 20 per cent over several months.

4. Broken down by property type, the ratio was 14 per cent for detached homes, 36 per cent for townhomes and roughly 47 per cent for condos.

5. Although overall sales declined year-over-year, the benchmark price for all homes in the region hit $1,092,000 in April, up 14 per cent from April 2017 and a 0.7 per cent increase compared to March 2018.

6. In the detached segment, a total of 807 homes sold in the region last month — a 33 per cent decline from the 1,211 detached sales recorded in April 2017.

7. The benchmark price of a detached home was $1,605,800 in April 2018, up 5 per cent from April 2017.

8. Condo sales totaled 1,308 in April 2018, a 24 per cent drop from 1,722 sales in April 2017.

9. As condo sales declined year-over-year, the benchmark price of a condo hit $701,000, up roughly 24 per cent from a year ago.

10. In the attached segment, a total of 464 units sold last month, down 25 per cent from the 620 sales in April 2017.

11. The benchmark price of an attached unit was $854,200 — a roughly 18 per cent increase from the same period last year.

© 2017 BuzzBuzzHome Corp

Rezoning for higher-density could mean windfall for 1,700 detached house owners

Frank O’Brien
Western Investor

More than 1,700 owners of detached housing lots in Vancouver’s Cambie Corridor could have their property rezoned for multi-family housing under the city’s Phase 3 Cambie Corridor approved by council this week.

For some owners, it could mean a windfall price in Vancouver’s slowing detached market, where west sales are down 34 per cent from a year ago.

Land assembly agents say there has been a lot of interest from local house owners and developers in the potential for higher-density zoning.

“There is a lot of traction,” said Jerry Lee, a land assembly and acquisition analyst with London Pacific, a real estate company experienced in land assemblies. Lee expects the action to heat up now that the Phase 3 plan has been approved.

The overall Cambie Corridor planning area covers West 16 Avenue to the Fraser River between Oak and Ontario streets. It’s about 1,000 hectares, more than twice the size of Stanley Park.

Phases 1 and 2, adopted in 2011, focused on Cambie Street and major connecting arterials, such as West 41 Avenue. Much of the subsequent strata development is widely considered

unaffordable for average Vancouverites. New strata units in the Cambie Corridor are selling for north of $1,300 per square foot, according to December survey by Urban Analytics.

Phase 3 addresses land use policy for areas off of the arterials, as well as the new municipal town centre around Oakridge mall. There are also nine unique sites within phase three – larger sites such as the King Edward mall at Oak Street and King Edward.

Existing single-detached housing in the area will be opened up for mid- and high-rise condominiums, townhouses and below-market rental apartments, according to a city release.

House owners in the Phase 3 Cambie corridor area could expect a “substantial lift” in land value should their property be part of an assembly for higher-density development, Lee said.

The current benchmark price for a single-detached house in the Cambie area is approximately $3.5 million, according to the Real Estate Board of Greater Vancouver. In December 2017, however, a condo developer paid $8.5 million for a “teardown” 66-year-old three-bedroom house on an 8,760-square-foot lot at West 35 Avenue at Cambie Street as part of a land assembly.

This suggests that a substantial incentive would be required to convince developers to provide rental apartments at below market rents.

“The [Phase 3] plan allows for additional height and density for projects providing new below-market rental units in strategic areas of the plan, such as high density areas in the Oakridge Municipal Town Centre, unique sites, Oakridge apartment area and local shopping areas,” according to City of Vancouver spokeswoman Nancy Eng.

Under the City’s Rental 100 program that provides incentives to rental developers, affordable rent is defined as $1,760 for a one-bedroom apartment and $2,505 for a two-bedroom unit.

© Copyright 2017 Western Investor

Numbers now negligible after blip in February real estate sales to foreign buyers

other

More foreign buyers jumped into the Coquitlam housing market in February in anticipation of the provincial government’s hike to property transfer taxes, government figures show.

The provincial government has released details of real estate transactions and how much was paid in property transfer tax from January through the end of March, 2018, and the numbers show foreign involved transactions increased to 46 in February from 13 in January while the total number of real estate transactions was 208 in February and 278 in January.

Then in March, after the property transfer tax was raised for foreign buyers to 20% from 15%, the number dropped to below five and was not recorded, according to the 2018 property tax data. However, property sales in the city remained relatively strong at 197 real estate transitions that month.

The sales to foreign buyers were all residential properties with a total value of $8.3 million in January, rising to $20.5 million in February.

Average home values for property sales to foreign buyers were $636,384 in January and $446,314 in February.

In 2017, after the B.C Liberal government implemented a 15% foreign buyers tax in 2016, foreign buyers were a small part of Coquitlam real estate deals.

May, 2017, for example, was the most robust month for foreign buyer real estate deals at 22 out of a total of 474 sales that month. That year the value of properties sold to foreign buyers ranged from a low of $565,462 in January to a high of $1.8 million in February.

So far this year there have been no real estate sales to foreign buyers or the number of sales to foreign buyers was below five in Port Coquitlam, Port Moody, Anmore and Belcarra, according to the most recent property transfer tax data.

Glacier Community Media © Copyright ® 2018

Regulatory success

Erik Hertzberg
REP

Canada’s mortgage growth has fallen to the lowest in nearly two decades as interest rates rise and after new mortgage rules took effect at the start of the year.

Total residential mortgage credit grew just 0.3 percent on average over the last three months, the slowest since 2001, Bank of Canada data show. That’s down from 0.47 percent at the end of 2017, and about half the average 0.57 percent pace over the past twenty years. Outstanding residential mortgage loans in Canada now total C$1.53 trillion ($1.19 trillion), the data show.

Borrowing costs are rising for the first time in almost a decade, and recent rule changes are making it tougher to get a mortgage. Just how sensitive consumers — and the economy — will be to higher rates has become a key question for policy makers, with Canadians now holding a record C$1.70 in debt for every dollar of disposable income.

Dominique Lapointe, an economist at the University of Ottawa’s Institute of Fiscal Studies and Democracy sees slowing credit growth as a potential headwind for Canada’s economy, at least in the short run. “In the near term, it’s bad for growth. In the longer-run, when it leads to deleveraging, it’s good for financial stability. What matters is the speed of deceleration, or contraction, in credit,” Lapointe said in an email.

Bank of Canada governor Stephen Poloz will be speaking later this afternoon on the subject of household indebtedness. 

Copyright Bloomberg News

Copyright © 2018 Key Media Pty Ltd

The country?s biggest banks raising key borrowing rates

Chris Fournier
Canadian Real Estate Wealth

The indefatigable ability of Canadians to shoulder an ever increasing mountain of debt is being tested.

The country’s biggest banks began raising key borrowing rates last week, just as the busy season for residential real estate gets underway. In addition, the mortgage market looks set for a particularly heavy year of renewals in an environment where debt-servicing costs are already rising at the fastest pace in a decade.

How well Canadian households can weather the squeeze has become one of the biggest questions for policy makers and will determine whether the economy is headed for a mild, or sharp, slowdown. Bank of Canad Governor Stephen Poloz will address the topic in a speech on Tuesday.

“The economy has never been as levered as it currently is, and the economy is far more interest sensitive than it has been in the past, to a degree that we don’t have certainty over how each interest rate hike is going to affect Canadian consumers,” Frances Donald, senior economist at Manulife Asset Management, said by phone from Toronto. “All we know is it’s going to be painful, but how painful isn’t quite clear.”

The heavy debt burden is one of the reasons the central bank has been reluctant to raise reluctant to raise borrowing costs further, after hiking interest rates three times between July and January. Given the nation’s debt load — as of February, households had a record C$2.1 trillion ($1.6 trillion) of mortgage and non-mortgage debt — Poloz estimates the economy is 50 percent more sensitive to rate hikes than in the past.

Here’s what households are up against:

Mortgage Season

Canada is entering its busy season for real estate, with purchases concentrated in the April to July window. Some 47 percent of existing mortgages need to be refinanced this year versus 25 percent to 35 percent typically, according to Ian Pollick, head of North American rates strategy at Canadian Imperial Bank of Commerce in Toronto.

At the same time, the country’s biggest banks are raising key mortgage rates. Toronto-Dominion kicked it off Thursday, hoisting its five-year fixed mortgage rate 45 basis points to 5.59 percent. Royal Bank followed with its own hikes Friday.

New mortgage stress tests are pushing some borrowers from the big banks to alternative lenders charging higher rates.

“That’s an unfortunate outcome of the stress test,” Will Dunning, an economic consultant who specializes in the housing market, said by phone from Toronto. “In that sense, the stress test is not reducing risk. It’s increasing risk.”

Cost of Debt

The vise is tightening. According to Statistics Canada, total payments on debt made by Canadian households rose 6.7 percent in the fourth quarter from a year earlier, and the interest-paid component climbed 9.2 percent. Those were the biggest gains since the financial crisis. A moving average of quarter-over-quarter changes shows a similar pattern, with the 1.62 percent increase in the latest period the fastest since 2008.

Debt payments now represent about 14 percent of household disposable income, the highest share in three years. Donald expects the debt-service ratio to continue moving higher over the coming quarters.

“The world spends a lot of time talking about the level of Canadian debt being extremely elevated, but what matters most is not the level of debt that Canadians hold, but the cost of carrying that debt,” the Manulife economist said. “Canadians are going to start to feel the pinch.”

Cracks Appearing

There are already signs of strain. The roll rate — the percentage of credit card users who “roll” from early stage delinquencies to 60-89 day delinquencies — reached the highest since 2008 for one credit card program, while delinquencies for another were above the 10-year average, according to Royal Bank of Canada credit analyst Vivek Selot.

While the level of mortgage arrears is still low by historical standards, a rising debt service ratio could signal that’s about to change.

Retail Sales

Canada’s economy led the Group of Seven in growth last year, mostly because of the willingness of the country’s consumers to spend money. But growth is expected to slow this year. Gross domestic product unexpectedly shrank in January. Data for February is due Tuesday.

The nation’s retailers have already had a tough few months. Retail sales in February were still 1.8 percent below 2017 peak levels. In volume terms, the input used to calculate gross domestic product data, first-quarter retail sales probably posted the biggest quarterly drop since the 2008-09 recession.

The low unemployment rate and decent economic growth will help the economy withstand higher rates, though risks are increasing.

“You have some capacity in the economy to absorb this, but the fact that rates are going up isn’t positive for consumers, because it’s making credit more expensive,” Bloomberg Intelligence analyst Paul Gulberg said Friday by phone. “That’s the but.” 

Copyright Bloomberg News

Copyright © 2018 Key Media Pty Ltd

Statistics Canada said Tuesday real gross domestic product grew 0.4 per cent in February

REP

The Canadian economy, which contracted to start the year, bounced back in February, led by gains in the mining and oil and gas extraction sector.

Statistics Canada said Tuesday real gross domestic product grew 0.4 per cent in February after a slight pullback of 0.1 per cent in January.

The mining and oil and gas extraction sector gained 2.4 per cent for the month as production in the oil and gas sector began returning to normal after a number of issues in January including unscheduled maintenance shutdowns.

Economists had expected an overall increase of 0.3 per cent in February, according to Thomson Reuters.

“The rebound in February GDP is encouraging even as oil drove a good chunk of the gain, as growth was pretty broad based,” Benjamin Reitzes, Canadian rates and macro strategist at BMO Capital Markets, wrote in a report.

“For the Bank of Canada, this report likely doesn’t change much, but reinforces the theme that the economy is in decent shape and can continue to move slowly but surely higher.”

Overall, 15 of the 20 industrial sectors tracked saw growth.

Goods-producing industries grew 1.2 per cent as manufacturing and construction rose in addition to the rebound in mining and oil and gas extraction.

The manufacturing sector rose 1.0 per cent in February, while the construction sector gained 0.7 per cent.

Meanwhile, the services-producing side edged up 0.1 per cent, hurt by a 0.5 decline in wholesale trade and weakness in the real estate and rental and leasing sector which was affected by mortgage rule changes at the start of the year including stress tests for uninsured mortgages.

The real estate and rental and leasing sector fell 0.2 per cent in February after a 0.5 per cent decline in January, the first back-to-back contractions since the summer of 2010.

The output of offices of real estate agents and brokers fell 7.9 per cent in February after a 12.9 per cent drop in January. 

The Canadian Press

Copyright © 2018 Key Media Pty Ltd

Jet setters drive price escalation

Neil Sharma
Mortgage Broker News

Whistler’s benchmark housing prices in the detached and townhome categories have surpassed Vancouver’s, and the reason could be Vail Ski Resort’s Epic Pass.

“They took over Whistler Blackcomb this past year, and of the things that did was open up a market for us that we never used to have—they have the Epic Pass, which allows clients to ski at many different resorts, and it opened up the New York buyers,” said Karen Garrett, broker and co-owner of DLC Sea to Sky Mortgage Team (2017). “They never came to Whistler Blackcomb, but on the Epic Pass they can. It’s a different echelon of buyer; you’re still seeing very deep pockets but they’re just coming from other places, or they’re more wealthy clients buying into Whistler.”

According to Bloomberg News, a detached house in Whistler costs $1.67mln—4% more than it does in Vancouver—and the Whistler Housing Authority says a third of businesses were incapable of finding enough staff last year because of the exorbitant cost of living.

“There’s a lot more time on the waiting list to get into affordable housing,” said Garrett. “The Resort Municipality of Whistler and the Whistler Housing Authority are working to build more affordable housing. They have a team now working to crack down on the expensive, illegal rentals. It’s a struggle for sure.”

Unaffordability typically results in exodus. However, Garrett says people aren’t leaving Whistler because it’s unaffordable. Instead, they’re cashing out and moving to the Lower Mainland.

“People are leaving to live in cheaper places, but they’re cashing out at a hefty gain and going to live in places like Vancouver Island or other places on the Lower Mainland for cheaper,” she said. “I don’t think they’re leaving because they can’t afford to live here. They’re leaving because they can afford to live somewhere else cheaper. They’re leaving because now they realize they’re sitting on a very good nest egg and it can go so much further somewhere else.”

Michelle Ellis, a Verico Paragon Mortgage Group broker, says low supply, not non-resident buyers, is the culprit for rising housing prices in Whistler and neighbouring Squamish, where she is based.

“The majority of buyers are not foreign,” she said. “They’re locals or from other parts of B.C. and Alberta, perhaps buying second residences, but there aren’t that many non-resident buyers anymore. It’s one of the best places in the world to live.”

Still, Garrett has noticed a conspicuous difference in residents.

“I’ve met more New Yorkers here than I’ve ever met before, and I would attribute that to the Epic Pass.”

Copyright © 2018 Key Media

CIBC increases five-year fixed-rate mortgage rate

Canadian Real Estate Wealth

The Canadian Imperial Bank of Commerce says it will raise its five-year fixed-rate mortgage rate Tuesday by 15 basis points.

Spokesman Tom Wallis says in an email that the rate will change from 4.99 per cent to 5.14 per cent.

Wallis says seven-year and 10-year fixed-rate mortgage rates will also rise 15 basis points, whereas one- and two-year rates will go up 10 basis points.

The Royal Bank of Canada and Toronto Dominion Bank announced last week that they would raise their benchmark mortgage rates.

The increases come as government bond yields rise. Fixed-rate mortgages tend to move with government bond yields of a similar term, reflecting the change in borrowing costs. 

The Canadian Press

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