It?s only a matter of time before the real estate market goes digital

Neil Sharma
REP

Retail stores have been hard hit by online shopping, and according to one sales representative, it’s only a matter of time before real estate follows suit.

“The real estate market is driven by millennials,” said Gary Semeniuk of The York Region Eco Team with Keller Williams Realty. “Baby boomers are not really the movers and shakers. Millennials have taken over the market and what we’re finding through our experience in trying to penetrate the millennial market is they tend to be less responsive to physical real estate. They’re digitally motivated and they primarily want to deal with us through text.”

It’s precisely because of the outsized millennial market that Semeniuk is convinced the days of brick and mortar realty brokerages are becoming relics.

“We focus on a number of different niches, and one would be renters and landlords,” he said. “In one particular group we have just over 2,700 people, and the majority of the group are millennials trying to figure out how to buy into the market. I just need to speak to them on the phone to ask a few basic questions so that I can represent them, but the point is that I don’t need a brick and mortar office.”

The York Region Eco Team doesn’t even hand out paper advertisements—unless it’s to advertise a car show, among many other fun community outreach initiatives.

But the team’s online presence illuminates the ways in which traditional real estate is transforming. Semeniuk has known veteran agents with as many as three decades experience lose market share to the new class of sales agent who leverages technology instead of plastering their face on park benches.

“What we’re doing in our group is feature a number of different speakers during Facebook Live sessions,” said Semeniuk. “I have a paralegal lawyer who speaks once a month; I have a lender who speaks once a month; I have a financial planner who specializes in the millennial market and helps them figure out how they can afford their way into homeownership. I think it would be in the industry’s best interest to adapt because the old way is getting tougher and tougher.”

Copyright © 2018 Key Media Pty Ltd

Politicians from left and right at Victoria event say new tax is helping destroy province’s reputation as a place to do business

Richard Watts
Western Investor

The B.C. speculation tax will fail in its aim to improve housing supply and is helping destroy the province’s reputation as a place to do business, politicians from the left and right said Tuesday.

Mike Harcourt, New Democrat Party premier of B.C. from 1991 to 1996, and the more conservative-leaning Brad Wall, Saskatchewan premier from 2007 to earlier this year when he stepped down, were both critical of the new tax.

“There are some aspects of the speculation tax we need to have a second look at,” Harcourt said.

Wall said he knows people in Swift Current, Sask., who have purchased a second home in B.C. and are now feeling nervous.

“B.C. is starting to mean ‘bring cash’,” Wall said.

Both men were speaking at a gala-style luncheon event at the Roundhouse at Bayview Place, part of a new 2,000 unit development by Focus Equities, owned by developer Ken Mariash. Tickets were $35, with all proceeds going to the United Nations Association of Canada.

The luncheon event was billed as a forum with discussion about B.C. housing issues, taxes, affordability, upcoming trends and the speculation tax — billed as H.I.T. for Housing Insanity Tax.

The tax will be applied to the 2018 tax year and is meant to discourage the buy-up of housing by investors who subsequently leave homes empty. A homeowner can avoid the tax by living in or renting out the home for six months a year.

In response to the criticism from the event, B.C. Finance Minister Carole James said she thought it unfortunate the UN Association of Canada is associated with misinformation.

In an emailed statement, James said some people are “fearmongering” because they want to sell properties in B.C.’s urban centres to offshore millionaires.

“That is not the approach British Columbians want,” James said. “Rather, the speculation tax helps to ensure that people who live and work in B.C. can find a place to call home.”

But another event speaker, City of Victoria Mayor Lisa Helps, said she has met with municipal counterparts and they are now working on an alternative tax they hope to present to provincial politicians.

Helps said increasing the capital gains tax would be a better way of raising money from speculators. Such a tax would be collected when a property changes hands for an increase in price.

But she agreed housing is an issue that had to be addressed for the sake of all B.C.

“We are not going to continue to enjoy the prosperity we have now unless we crack this housing nut,” Helps said.

On the event’s panel of experts, Michael Ferreira, managing principal of Urban Analytics, illustrated the current lack of housing supply with two figures.

Ferreira said at the end of 2014, Vancouver had 2,100 unsold townhomes or condominiums. At the end of the first quarter of 2018, there were 89.

He also said he has seen rises and falls in the housing market. The current time, however, is made different by one thing — social media — and the platforms offer loud voices.

“And politicians tend to listen to those sometimes loud voices,” Ferreira said.

Wall said the overall brand of B.C. has already suffered even before the new tax.

He said the cancelling of the Northern Gateway pipeline and the troubles faced by Kinder Morgan have taken their tolls. B.C. should ask itself what effect on its brand the new tax will have.

“Does it send out the best message about the brand of this province?” Wall asked.

But Harcourt was more upbeat about the future.

He said the world’s population is expected to reach 10 billion by 2050, and that will force cities to react. He said at least $350 trillion in investment would be required worldwide.

“The opportunity for work and employment is huge,” Harcourt said. “It [housing] is not a crisis, it’s a condition and it’s going to be with us for a very long time,” he said.

Copyright © 2018 Western Investor

46-storey office tower coming to Toronto

Canadian Real Estate Wealth

Cadillac Fairview and the Investment Management Corporation of Ontario will build a 46-storey office tower in Toronto that will become the new home of the Ontario Teachers’ Pension Plan.

The commercial real estate company hopes to secure additional tenants before the $800-million building opens in the fall of 2022.

 

The building will be situated on the northeast corner of Front Street and Simcoe Street in downtown Toronto.

It will include 1.2 million square feet of office space, 12,290 square feet of retail and 339 parking stalls.

It is part of flurry of recent investments from Cadillac Fairview, including $1.5 billion in office projects and $25 million for the redevelopment of a former Sears location at CF Champlain mall in Moncton.

Since 2000, Cadillac Fairview has been wholly owned by the pension plan, which currently has a head office in North York. 

The Candadian Press

Copyright © 2018 Key Media Pty Ltd

Millennials being priced out of the real estate market

Ephraim Vecina
Mortgage Broker News

A potent cocktail of unabated real estate price increases, ever-tighter regulations, and stagnant income growth has thrust Canada’s hopeful millennial home owners into a situation that probably no previous generation had to contend with, according to market analysts.

“The fact is, there’s been a massive transformation in terms of how much more work young people have to do to get so much less,” University of British Columbia School of Population and Public Health professor Paul Kershaw told the Financial Post.

Kershaw – who also founded Generation Squeeze, a non-profit advocating for Canadian young adults’ right to home ownership – argued that even just a cursory glance at the income-to-home-price ratios of various generations will bear out his assertion that today’s millennials are bearing.

In 1976, which was when much of the baby boomers were reaching young adulthood, the average home price (adjusted for inflation) was $213,030, with the median full-time earnings for those aged 25 to 34 at $54,700 (representing a ratio of around 4-to-1).

In 2017, the average home price stood at $510,179, and medial full-time income for the same age bracket was $49,800 (ratio of nearly 10-to-1). This figure was even more drastic for the hottest markets, with Ontario seeing a 12-to-1 ratio, and Vancouver 14-to-1.

Even the rental market is no refuge for the millennial would-be home owner, as rents have also seen similarly dramatic increases. Data from industry observer Urbanation indicated that in Toronto, the average rent went up by almost 11% in Q1 2018 alone (up to $2,206).

“The traditional situation of young people working their way up, living with mom and dad or renting until they can save up and buy, in a lot of ways, has been completely altered,” according to Jim Clayton, professor at the Brookfield Centre in Real Estate and Infrastructure at York University, Toronto. “You’ve got to be a lot more disciplined and creative and, let’s face it, there’s a lot more inter-family wealth transfer going on.”

Copyright © 2018 Key Media

The International Monetary Fund sends warning

Ephraim Vecina
Mortgage Broker News

While the Canadian real estate market remains vigorous in large part due to robust market activity (especially in the higher-end segments), the International Monetary Fund has warned of potential headwinds that could affect housing values – and might even trigger a domino effect that would ultimately harm the national economy.

Noting that real estate prices are a “key domestic risk”, the IMF specifically cited mortgage rates, price expectations, and unemployment as crucial metrics to watch out for. In a new analysis, real estate information portal Better Dwelling stressed that together, these factors are indeed a dangerous cocktail of instability.

The clear upward trend in mortgage rates is probably the main cause for concern, Better Dwelling stated. Probably the most notable example of recent such increases is the Bank of Canada’s decision to hike its average 5-year fixed rate to 5.34%, representing 15.08% year-over-year growth.

“That hike by itself reduces the maximum mortgages that can be borrowed by just over 7%. Not to mention the impact to the wallet of the nearly 50% of homeowners expected to renew their mortgages this year,” Better Dwelling stated.

A sudden, shocking adjustment in real estate prices also remains an ever-present possibility, according to the analysis. This is not helped by the fact that home prices nationwide have moved wildly (both upwards and downwards) since 2003, a clear departure from the previous decades.

“According to the US Reserve Bank of Dallas, real home prices in Canada are down 5.72% from the second quarter of 2017. People haven’t been paying too much attention to it due to the fact that prices were up 4.45% from the previous year. However, price declines stall demand, which feeds lower prices.”

And while unemployment levels are still hovering close to record lows, the situation might have planted the seeds of future weakness.

“Higher wages sound great, but at the phase of full-employment, it accelerates inflation. The acceleration of inflation has the counterintuitive effect of devaluing all wages. You make more, but you can buy less,” Better Dwelling cautioned. “Full employment is generally considered below 6% in Canada, and we’re at 5.8%. You should expect wages to pop, inflation to soar, and/or employment to jump higher. The move results in decreased profitability for businesses, often forcing them to look for ‘efficiencies’.”

Copyright © 2018 Key Media

Private lenders double their share of mortgages

Neil Sharma
Mortgage Broker News

Private lenders have doubled their share of Canadian mortgages since 2015.

A Better Dwelling report revealed that private lenders originated over $2bln last year and currently have about 7.87% of the national mortgage market. In fact, the private channel has enjoyed six straight quarters of market share growth.

Private lender Wasah Malik of King Lending Capital believes rising interest rates will reroute more borrowers towards the private channel, but noted that uncertainty has gripped the market this year.

“Interest rates rising will make private lending more popular among borrowers,” he said. “However, 2018 is a year where everything is slow. Banks won’t originate as much and privates won’t originate over $2bln like they did last year. Everybody is nervous this year, including lenders and borrowers, and everybody is playing with that fear, but I believe that in 2019 privates will originate a lot more money for lending.”

Stringent qualification from chartered banks may leave borrowers with few choices other than private lenders, but Malik reminds that the federal government has increased its immigration quota by a third and will now welcome 300,000 new arrivals annually.

“The population is growing. More folks are coming in and lenders are not willing to lend, so where are these folks going to go?”

Benjamin Sammut, a Mortgage Architects broker, doesn’t doubt private ogination growth will continue because there’s nary a sign that lender regulations will ease any time soon.

Sammut averages three private deals a month—more than he did before January 1—and says they fulfil an important need.

“We try to never use private money to put someone into a situation; we use it to get them out,” he said. “If they have spousal buyout, death in their family or they’ve fallen on hard times and lose a job—if anything like that happens and a person needs private financing, then we would offer a one- or two-year solution, but if someone has poor credit, poor income and doesn’t have financial wherewithal and they’re trying to buy their first house, then I wouldn’t even recommend they buy a house. We try to use as much A or Alt-A money as possible.”

Copyright © 2018 Key Media

Canadian real estate is a high-risk area for money laundering

Paul Pimentel
REM

With media reports and international policy-making bodies pointing to Canadian real estate as a high-risk area for money laundering, and the promise of increased enforcement by regulators, it may be time for real estate brokers to review their compliance programs to ensure they’re up to snuff.

Real estate brokers and developers are subject to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and, as such, are required to have compliance programs in place. As the sector has been subject to the act for more than a decade, it is likely that most brokers already have some form of compliance program in place.

The issue is whether these compliance programs meet the evolving requirements under the act – and there are many indications that they don’t. For example, between 2012 and 2016, FINTRAC, the agency charged with enforcing many of the provisions under the act, conducted 823 examinations of real estate companies and found that 60 per cent of those companies had “significant” or “very significant” deficiencies in their compliance programs.

Penalties for non-compliance are significant – companies can be subject to administrative penalties of up to $500,000 per violation. For example, in April 2016, FINTRAC fined Manulife Bank $1.15 million for reporting violations under the act. That said, the act has been largely unenforced since 2016, after the Federal Court of Appeal ruled that the way FINTRAC calculates fines is opaque and requires more transparency. FINTRAC essentially stopped issuing administrative monetary penalties until it completed a review of its penalty program. That review is scheduled to be completed by summer 2018, so more penalties may be on the way.

In the meantime, FINTRAC has increased audits of real estate companies. During the last two years, it conducted 343 real estate audits across the country, a significant increase from the number of annual examinations conducted between 2012 and 2016.

Given the context, it may be a prudent for brokers to review their compliance programs to ensure they are up to date and comply with the act. What follows is a review of the five basic compliance program requirements based on FINTRAC guidelines and some of the pitfalls brokers may face in implementation.

1. Compliance officer:

The first requirement of a compliance program is the appointment of an appropriate compliance officer, who is responsible for implementing the compliance program, including the necessary policies and procedures, ongoing training, risk assessment and effectiveness review. The challenge here is appointing an appropriate person. This is not a role for junior administrative staff. The compliance officer must have the authority and access to resources to effectively implement the program and make changes to it as necessary. In the case of a small business, the compliance officer could be a senior manager, or owner or operator of the business. In a larger business, it should be someone at a senior level who has direct access to senior management and the board of directors.

2. Compliance policies and procedures:

Compliance policies and procedures must be written and accessible to the intended audience. They must be frequently reviewed and always kept up to date in line with any material changes, such as changes to the act, newly identified non-compliance issues, the addition of new products or services or as a result of the required effectiveness review of the compliance program.

Compliance policies and procedures must describe the compliance program, including your risk assessment and mitigation measures, training program and procedures for reviewing the effectiveness of the program. Policies and procedures should also, among other things, detail “know your client” requirements (how you verify client identification), and the special measures that are implemented when high-risk transactions or clients are identified.

They must also cover your transaction reporting requirements, including suspicious transaction reports, terrorist property reports and large cash transaction reports, among others.

Suspicious transaction reporting is a particular area in which the real estate sector may be deficient. For example, FINTRAC estimates that five million real estate purchase and sale transactions took place between 2003 and 2013, yet they only received 127 suspicious transaction reports from real estate brokers, agents or developers.

CREA has made template policies and procedures available to brokers to help them meet this requirement. It is important to keep in mind that these must still be adapted for the specific brokerage. Each brokerage is different and the CREA templates must be customized to reflect the context of each individual brokerage.

3. Risk assessment:

The third basic compliance program requirement is an analysis of risks and vulnerabilities that could expose the business to money laundering activities. In conducting this assessment, risks associated with clients, business relationships, activity patterns and geographic locations, among other things, must be considered. The risk assessment should document the risks considered and the mitigation measures introduced to address factors that are high risk. They should be repeated every two years in conjunction with the required effectiveness review of the compliance program. The risk assessment and implementation of enhanced measures to mitigate high risks is perhaps one of the most challenging aspects of a compliance program. CREA has template risk assessment documents that can be drawn upon for this purpose. In addition, last year, FINTRAC released a real estate-specific workbook to assist brokers in conducting this risk assessment.

4. Ongoing training program:

A compliance program must include ongoing training, which must be in writing. The training program must detail who must be trained, what type of training is required and the topics covered, how training is provided and how often training is needed. It must document whether the training has taken place. The training itself, however, does not need to be in writing. The program should cover, among other things, money laundering concepts, your compliance policies and procedures, how to detect and prevent money laundering, reporting requirements, “know your client” and record keeping obligations.

5. Effectiveness review:

At least every two years, a broker must review the effectiveness of the compliance program. This review should address whether the policies and procedures, risk assessment and training program are effective and comply with the relevant legislative and regulatory requirements. The review should be conducted by someone who is not directly involved in the compliance program, such as the compliance officer. Though not required, a third party with adequate knowledge of the broker’s obligations under the act and its regulations would be an ideal candidate to conduct the review. Finally, the results of the review must be reported in writing to a senior officer in the organization within 30 days after the completion of the review.

© 2017 REM Real Estate Magazine

Zillow partnering with Century 21

Neil Sharma
REP

Zillow, the American real estate database giant, is finally coming to Canada.

Long rumoured but with sparse details, Zillow’s entry into the Canadian market will come by way of Century 21, which will have its listings featured prominently to Americans.

Marcel Greaux, managing partner at Garrison Hill Developments, Zillow’s inclusion of Canadian real estate is good news for a city like Toronto, where the real estate market has experienced much turbulence this year.

I think that’s a good thing,” he said, “because it’s opening up more available property data and information for investors, especially internationally. The more eyeballs, the more robust the market stays for us. I think it’s a good safety net for us with people coming in with different currencies when our buying power slows. If we’re going into a correction, it will give us a softer land. More information, more data, which is where the internet is taking us, is a good thing. It helps people make decisions and keeps the market open.”

Zillow attracts about 175 million viewers to its sites and apps every month.

In a statement, Zillow’s Vancouver-based Chief Industry Development Officer Errol Samuelson extoled the platform’s expansion to include Canadian content.

“We know U.S. buyers are interested in purchasing Canadian real estate, so we’re excited to offer the millions of buyers already coming to Zillow for their home search an easy way to see homes for sale in Canada and connect with an agent to help navigate the sale,” Samuelson said in a release.

Although primarily known as a real estate database, the Toronto Star’s Tess Kalinowski describes Zillow primarily as a media company that cleverly sells advertising next to featured real estate listings. However, it is also experimenting with different revenue generators.

“But Zillow has been testing a program called Instant Offers in Phoenix, Las Vegas and Orlando where Zillow connects home sellers with potential investor buyers or an agent to help sell their home,” Kalinowski wrote in the Star. “The idea is to provide consumers with convenience and help them confirm their selling price and timing in the market.”

Copyright © 2018 Key Media Pty Ltd

CMHC reports housing starts down in May

Steve Randall
Canadian Real Estate Wealth

Canadian housing starts declined in May as overall multi-family construction in urban areas weakened.

CMHC’s 6-month moving average shows 216,362 starts in May compared to 225,481 in April.

“In May, the national trend in housing starts declined following several months of stability,” said Bob Dugan, CMHC’s chief economist. “This reflects a decline in multi-unit urban starts in May that leaves them close to their 10-year average following several months of historically elevated levels.”

The figures show a divergence in construction trends in the two hottest markets.

Vancouver saw continued growth in multi-family, which led overall gains. Multifamily starts increased 9% in the past year.

Toronto, by contrast, saw fewer overall starts and this was notable in the multifamily sector. CMHC says that the CMA’s stronger supply of existing units and higher mortgage costs are key factors.

Langford saw strong gains for condo starts in Metro Victoria and the metro as a whole has seen increased building activity especially in rental units.

Multifamily has also led to a rise in overall starts for Saskatoon while it was single-family homes that increased most in Brantford due to more affordable home prices than nearby Hamilton.

Although multiple units led construction in some markets, nationally they declined 16.4% in the standalone monthly figure (seasonally adjusted annual rate) to 119,811 units while single-family units increased 2% to 58,390. Overall, the monthly figure was down 11.1% to 178,201.

Copyright © 2018 Key Media Pty Ltd

Spectacular outlooks will be on offer at British Pacific Properties? Courtenay in West Vancouver

Kathleen Freimond
The Vancouver Sun

Project: Courtenay

Project address: 3101 Burfield Place

Project city: West Vancouver

Developer: British Pacific Properties

Architect: Ramsay Worden Architects

Interior designer: Insight Design Group

Project size: 39 residences

Bedrooms: one-bedroom; two-bedroom; two-bedroom and flex; three-bedroom; three-bedroom and flex

Unit size: 700 to 3,700 square feet

Price: Two bedrooms from $1,325,000

Construction: Fall 2018

Sales centre: 2989 Cypress Bowl Lane, West Vancouver

Sales centre hours: Monday —Thursday 10 a.m. — 2 p.m.; Saturday and Sunday noon — 5 p.m.; Closed Friday

Phone: 604-925-8002

Website: www.britishproperties.com/courtenay

While British Pacific Properties has built large single-family homes for much of its 87-year history, the Courtenay is a departure from that tradition as the company moves into the multi-family development sector to address the call for housing diversity and the protection of green space in the area.

Courtenay, a seven-storey mid-rise development, will be built in the Mulgrave Park neighbourhood of West Vancouver, one of six areas identified in the 2008 Rogers Creek Area Development Plan. At the time, community input identified the need for a diversity of housing in the area, while also protecting green space.

“By collecting density into nodes and going vertical in the Rodgers Creek Plan, we’ve been able to preserve over 55 per cent of the land area as protected green space,” BPP president Geoff Croll says.

The shift to multi-family developments also enables the company to meet the demand for a range of housing options and Courtenay will be suitable for downsizers, empty nesters and younger families, says Croll, adding that with the increase in the price of housing, people want smaller, more affordable homes.

“The Courtenay is the first time we have been able to embrace a diversity of housing where we have homes ranging from 700 to 3,700 square feet in one building,” he says. “It’s exciting for us to be able to offer smaller and more price-point-conscious homes in the British Properties.”

Courtenay is designed to complement the steep, challenging site, Croll says.

“It is hinged in the middle to follow the topography. We decided to design a building that fit the topography and a rocky outcrop in the middle of the site will be a focal point. We wanted to celebrate the natural features, like the granite outcrops.”

The architecture of the 39-unit mid-rise to be built at 3101 Burfield Place is a modern interpretation of West Coast Modern architecture.

“West Vancouver was a birthing place for the West Coast Modern architecture movement with Arthur Erickson, Ron Thom and others who designed a lot of these homes in the British Properties that were being built in the ’50s and ’60s, so [Ramsay Worden Architects] went back to those cues to give it a West Coast Modern flavour, but using modern materials and including modern amenities and features,” he says.

The presentation centre also shows the stunning views of Vancouver and, in the distance, Vancouver Island.

However, it’s not only the views to the south that are spectacular. “Units at higher level go front-to-back and windows open onto the forest backdrop; those views are also very important,” he adds.

One of the development’s other advantages is the access to the outdoors. A three-kilometre paved path is being built, plus there is an existing five-kilometre trail network in the area, sure to be popular with runners and hikers and those taking their dogs for walks.

Inside, Katrina Podmore, associate with Insight Design Group, has taken inspiration from the natural surroundings and focused on simple lines and the careful selection of finishes to enhance the West Coast esthetic.

Buyers can choose from the two interior design palettes, Oak and Walnut. Many finishes, like the bathroom floor and wall tiles, are the same for both options with the choice of a wide-plank engineered hardwood floor differentiating the schemes. The Oak scheme is on show in the presentation centre at 2989 Cypress Bowl Lane in West Vancouver.

The good-sized kitchen island with its white cabinets, quartz countertop and waterfall edges contrasts against the perimeter cabinetry finished with a horizontal-grain wood veneer. The marble-look porcelain slab backsplash combines practical and design elements.

“When you’re preparing and cooking food, it’s important to be able to easily clean [the backsplash] and the continuous surface of the porcelain slabs also makes the whole space feel open,” Podmore says.

The major appliances are all by Miele, including the integrated refrigerator and freezer, an induction cooktop, wall oven, microwave and dishwasher. In the island, the undermount stainless steel sink is complemented by the eye-catching Blanco faucet with pulldown spray, while a Marvel wine fridge is conveniently placed for entertaining.

Two pantry cupboards, one with pullout shelves and one with half-moon Lazy Susan shelving, maximize the space.

“All the dead corners are utilized. Often, if you have deep cabinets, you never know what is at the back; this way, you have access to everything in the space, it’s much more efficient.”

The bathroom vignette at the presentation centre shows a main ensuite bathroom with 24-by-24-inch dark marble-look porcelain floor tiles and 24-by-12-inch white tiles in the shower, reflecting the trend to oversized tiles.

A free-standing wall-mounted Acritek tub, shower with a frameless glass enclosure, and the floating vanity – with double sinks – add to the spacious ambience of the room. The linen cupboard (not in all units) provides storage space and a clothes hamper.

Amenities at Courtenay include terraces, a fitness studio, a party room with food prep facilities, a workshop, a bike wash and maintenance area, a dog-wash station and a guest suite.

All units have at least one parking space and there will also be an electric car-share program for residents.

Croll says energy efficiency and performance are priories and solar panels on the roof and on a signature solar mast will make it the largest photovoltaic installation in West Vancouver when completed.

“We want the building to produce a good amount of its own electricity,” he says.

© 2018 Postmedia Network Inc.