The Economist ranked Canada most overvalued

Ephraim Vecina
Mortgage Broker News

A new global price analysis by The Economist ranked Canada as the 3rd most overvalued country in the world in terms of housing values, trailing just behind New Zealand and Australia.

The U.K.-based publication’s study measured the average housing price versus the median incomes of 22 major global markets, and found that Canadian real estate is valued 56% higher than it should be.

In particular, homes in Vancouver – the only Canadian city to appear in the overvaluation ranking – were priced 65% higher than they should be based on local incomes. The average housing price in the city increased by around 12.3% annually since 2011, and by 60.4% over a 5-year period.

Vancouver was ranked the 5th most overvalued metropolitan real estate market worldwide, coming just behind Hong Kong, Auckland, Paris, and Brussels.

Over the past few years, rising prices and increased inflows of foreign capital have established Vancouver’s real estate segment as a vital component of B.C.’s economy.

However, a recent FINTRAC report warned that B.C. properties are especially vulnerable to money laundering. The study found that approximately 88% of real estate entities in the province have “significant” and “very significant” deficiencies in their anti-money laundering controls.

FINTRAC cited risk assessment, client identification, record keeping, and reporting policies and procedures as specific areas of weakness. The agency said that it has been keeping a close eye on money laundering via real estate, as widespread property speculation has been blamed for the ballooning of Vancouver housing prices.

The agency warned that funds accumulated via these channels are used by criminal elements engaged in the fentanyl trade and other illicit operations.

Copyright © 2018 Key Media

Buyers have adjusted to qualification rules

Neil Sharma
Mortgage Broker News

Real estate sales in Canada are trending upward and it’s likely an indication that consumers have come to grips with B-20.

Canadian Real Estate Association sales statistics for July show  national home sales rose 1.9% over the previous month—and according to REMAX’s regional executive vice president, that means buyers have finally adjusted to stricter qualification rules.

“It certainly looks like consumers are slowly becoming accustomed to the B-20 mortgage qualification guidelines,” said Elton Ash. “It’s occurring a little later than we thought, and that seems to be the reason why inventory levels are dropping in the Toronto area.”

While a tough pill to swallow for many, Canadians are realizing that in order to become homeowners, they’ll have to settle for less house.

“What’s occurring is they’re readjusting their expectations,” he said. “In other words, where they may have qualified previously to purchase an $850,000 home, they’re now looking at a $750,000 home. It’s not that they’re seeking secondary financing—because the only lenders not bound by B-20 are credit unions and private lenders—it’s reducing their overall expectations of what they can afford in the type of home they’re looking for.”

The real estate market, it would appear, has finally balanced, and Ash expects that to last through the first quarter of 2019. He added that last year’s record sales volume and price increases were an anomaly that people should be cognizant about before making drawing comparisons.

“When you measure against a record-setting year on a year-over-year basis, what appears to be negative is actually positive,” said Ash. “The whole B-20 mortgage qualification stress test was brought in to slow the market, and that is certainly what’s occurring, and what we’re getting into is more traditional market situation where it’s balanced overall. The days on market for homes are stretching out to what they were, and multiple offer situations have disappeared across the board, although in Toronto proper they occur in certain situations.”

As Ron Butler of Butler Mortgage previously told MortgageBrokerNews.ca, the doom and gloom pervading discussions about Toronto real estate ignore a salient fact: After peaking, the market is returning to normalcy.

“It’s down from an all-time record unit of sales,” said Butler. “It’s down from the highest peak, so all that’s going to happen this year is it will look like the numbers in 2015. Sales are still happening; they’re just not happening at a record level like they were years ago.”

Copyright © 2018 Key Media

Affordable housing markets in BC

Ephraim Vecina
Canadian Real Estate Wealth

Despite exhibiting consistently inflamed price averages, B.C.’s housing market still offers some pockets of relative affordability that households can take advantage of, according to a new analysis by real estate portal Zoocasa.

Single-income households have no luck, however; no B.C. metropolitan market even comes close to the economist-recommended home-price-to-income ratio of 3. In Vancouver, an average home costs at least 32 times the income of a single-earning household, and 14 times that of two-or-more person households.

The Zoocasa study calculated the home-price-to-income ratios of the province’s major cities using data from Statistics Canada. A lower ratio means shorter time needed for paying off a home purchase.

B.C.’s most affordable cities for housing are as follows:

Rank 1 – Prince George

• Single Income Ratio: 9
• Dual-Income Ratio: 4
• Average Price: $347,470

Rank 2 – Kamloops

• Single Income Ratio: 12
• Dual-Income Ratio: 4
• Average Price: $406,768

Rank 3 – Campbell River

• Single Income Ratio: 14
• Dual-Income Ratio: 6
• Average Price: $457,301

Rank 4 – Langford

• Single Income Ratio: 14
• Dual-Income Ratio: 6
• Average Price: $596,816

Rank 5 – Penticton

• Single Income Ratio: 15
• Dual-Income Ratio: 6
• Average Price: $439,957

Copyright © 2018 Key Media Pty Ltd

CREA says Toronto less affected by stress test

Steve Randall
Canadian Real Estate Wealth

National home sales improved in July with a 1.9% rise in sales compared to the previous month.

CREA says that although sales have been trending higher over the past three months now, they are still running below the levels seen a year earlier.

A major factor in this year’s weaker activity has been the B-20 mortgage guideline changes at the start of the year, specifically the introduction of mortgage stress tests.

“This year’s new stress-test on mortgage applicants continues to weigh on home sales but its effect may be starting to fade slightly in Toronto and nearby markets,” said CREA President Barb Sukkau. “The degree to which the stress-test continues to sideline home buyers varies depending on location, housing type and price range.”

Actual (not seasonally adjusted) activity was down 1.3% y-o-y. The result reflects fewer sales in major urban centres in British Columbia and an offsetting improvement in activity in the GTA.

New listings nationally dropped 1.2% to levels below the average for the past 8 years and the sales-to-new-listings ratio tightened to 55.9%.

There were 5.3 months of inventory on a national basis at the end of July 2018, down from 5.4 months in June and near the long-term average of 5.2 months.

Prices rise, first HPI acceleration since April 2017 CREA’s aggregate HPI increased 2.1% year-over-year in July, the first y-o-y growth in prices since April 2017.

The price rises were led by apartments, up 10.1%, with townhouses up 4.7% and single-family prices declining 0.7% for one storey and 1.5% for two storey homes.

“Improving national home sales activity in recent months obscures significant differences in regional trends for home sales and prices,” said Gregory Klump, CREA’s Chief Economist. “Regardless, rising interest rates and this year’s stress test on mortgage applicants will likely prove to be difficult hurdles to overcome for many would-be first time and move-up homebuyers, heading into the second half of the year and beyond.”

Copyright © 2018 Key Media Pty Ltd

North Vancouver condos designed to provide occupants with a sense of peace and privacy

Mary Frances Hill
The Vancouver Sun

Park West at Lions Gate

Where: Capilano Road and Marine Drive, North Vancouver

What: 258 one-, two- and three-bedroom condominium homes in two concrete towers of 19 storeys and 23 storeys

Residence sizes and prices: Ranging from 513 to 2,467 square feet; from the high $500s to over $6 million

Developer and builder: Keltic (Capilano) Development Ltd.

Sales centre: 1633 Capilano Road

Hours: By appointment only – 604-770-1336

At the Park West at Lions Gate new-home community in North Vancouver, the plans were designed to welcome residents with layouts that provide a sense of peace and privacy.

A well-designed home can be a sanctuary—a haven from the demands of work, commuting and public life.

Rafii Architects creates this sense of refuge at the Park West at Lions Gate community in North Vancouver, with plans designed to welcome residents with layouts that provide a sense of peace and privacy.

Simple configurations allowed the architects to offer entries that conceal the inside from view. Bedroom doors can be found through corridors inside, away from the view of anyone in the living space.

 “When entering many condominiums being built today, you open the door and the whole living space and kitchen is immediately in your view. That doesn’t offer much privacy from the hall, nor does the condominium feel as ‘house-like’ as it could,” says Lisa McDonald, sales director at Pacesetter Marketing, sales organizer for Park West at Lions Gate.

The spacious dedicated entry area also “really encourages a real sense of arrival,” she adds.

In the larger homes, which can measure up to 2,467 square feet, the bedroom areas are placed away from the view of the living spaces, a layout that offers privacy and appeals to families and homeowners who like to entertain, McDonald says.

Park West’s two concrete towers containing 258 homes and overlooking a pedestrian mall will be part of the town centre of Lions Gate Village and the first stage of a 10-year community plan. The surroundings will eventually be the site of condos and townhomes for some 2,500 people.

Insight Design Group Inc. worked on Park West’s interior specifications, while Cristina Oberti Interior Design Inc. designed the common areas, amenities and lobby of the buildings. McDonald also says the features and materials throughout the suites are made for long-term wear and tear, another appeal to family life.

“The finishes at Park West have been chosen to strike a balance between luxury and practicality, longevity and beauty,” she says.

Large-format porcelain tiles in the bathroom mimic the look of marble, although they’re easier to maintain than natural stone. “From plumbing to floors, we have been careful to choose finishes that will wear well.”

The adjustable kitchen island has movable cabinets that allow for leg room, another feature that sets these interiors apart from so many in the market, she says.

That’s a feature McDonald is particularly impressed with: the cabinets in the base of the island can adjust to allow for seating all around the island or be locked in position when homeowners need to grab their stored items.

“It is also great if you want to prep food sitting down or if someone in a wheelchair is using the island.”

© 2018 Postmedia Network Inc.

New Zealand government has imposed a ban on non-resident buyers

Joannah Connolly
Western Investor

New Zealand’s Prime Minister, Jacinda Ardern, is fulfilling her early promise to tackle the country’s soaring property prices.

Ardern – who seems to be taking over from Justin Trudeau as the global media’s latest, youngest, hippest nation leader du jour – promised last fall after her election that non-resident buyers would not be permitted to purchase existing homes anywhere in New Zealand (while also announcing a crackdown on immigration). It has just been confirmed, on August 14, that this policy will go ahead.

Just like in Canada, New Zealand’s larger cities have seen a severe housing supply shortage and home prices have soared in the past decade, rising around 18 per cent year over year in its capital, Wellington. The largest city, Auckland, was recently named by The Economist as the world’s second most overvalued city for real estate, with New Zealand the world’s most overvalued country. Only a quarter of adults in New Zealand own their own home, compared with half in 1991, according to an August 15 Guardian report (and compared with 63.7 per cent in Metro Vancouver and 66.5 per cent in Toronto, according to Canada’s 2016 Census).

And, just like in B.C.’s provincial election, affordability, lack of supply and foreign ownership and speculation (particularly from China) were key issues in the country’s general election last September. So Ardern was duty-bound to make a big move once in office.

The policy is bound to be popular among New Zealanders, many of whom feel they have been pushed out of the housing market. But the question is, will the ban make a difference?

The Guardian report says, “According to the latest figures from statistics New Zealand, 3.3 per cent of homes sold in the last quarter were to foreigners, with the bulk of the buyers Chinese, followed by Australians.”

This suggests that an outright ban would remove only three per cent of New Zealand’s property buyers, which is hardly likely to make a huge difference to the overall market.

Potential policy shock

What might make more of a difference to New Zealand’s housing market – at least in the short term – is a “policy shock” just like the one seen in Metro Vancouver following 2016’s introduction of the 15 per cent overseas buyer tax. Which is to say that, rather than only overseas buyers pulling out of the market, the entire system freezes temporarily as locals and non-locals alike wait to see what effect the new policy will have on prices. This has the self-fulfilling effect of halting sales, and price growth, until people get used to the “new normal” and the system unfreezes, as it is bound to do. After all, people still have to buy and sell homes.

It’s also worth noting that overseas buyers will still be able to buy New Zealand presale homes off-plan, as the government doesn’t want to halt construction of new homes, with supply already so limited. What’s more, the ban doesn’t apply to residents of either Australia (which make up the second-largest group of New Zealand’s overseas buyers) or Singapore.

Exemptions aside, it’s disconcertingly easy to get around these kinds of bans. Overseas buyers who still want in on New Zealand resale real estate can find loopholes such as using resident proxy buyers, New Zealand-based shell companies, and so on.

So it’s reasonable to expect that a large proportion of those three per cent of overseas buyers will still find a way to invest, whether it’s by reallocating their funds to presale real estate, or to commercial real estate, or simply by being exempt.

Could B.C. follow suit?

Naturally, leaders and industry insiders in B.C. are watching New Zealand with interest, to see if it will “work” in terms of making homes more affordable. According to a Global BC report published when the New Zealand ban was proposed in fall 2017, Green Party leader Andrew Weaver said he admired the policy and hoped B.C. would impose a similar ban. “It’s not about stopping people from owning homes who live here and pay taxes,” he said. “It’s about ensuring British Columbians can live in homes in British Columbia.”

But the same 2017 Global story also reported UBC Sauder School of Business professor Tom Davidoff as saying that he doubts the ban will be effective. “I tend to believe restrictions [and] bans are hard to enforce at times. We had it here in British Columbia even with the foreign buyer tax.” And in January this year, B.C. NDP Premier John Horgan poured cold water on the idea of imposing a similar ban in B.C., instead widening and increasing the foreign buyer tax.

My guess as to whether the New Zealand ban will help with housing affordability? I agree with Davidoff on this one. I think that, like in Vancouver, and once any potential policy shock is out of the way, New Zealand’s desirability and convenient Pacific Rim location will mean that buyers will just keep on buying. If anything, Ardern’s immigration crackdown may have more of a long-term effect on the housing market, if population growth stalls and local demand softens.

In the meantime, the popular young Prime Minister will earn some kudos from her adoring voters for addressing the housing crisis. We’ll see…

Copyright © 2018 Western Investor

Reconfigured development partnership hopes to begin construction of waterfront park by late summer 2019

Jennifer Thuncher
Western Investor

To the naked eye, not a lot has happened down at the Squamish oceanfront lands since it was bought back in February of 2016, but behind the scenes, the Newport Beach development is abuzz.

Probably the biggest change is that Squamish developer Michael Hutchison of Bethel Lands Corp. is no longer involved in developing the 59 acres of former industrial land, plus 44 adjacent acres of submerged water lots.

“Matthews Southwest, operating as Squamish Cornerstone Developments, and the Squamish Nation are equal partners on their developments in Squamish,” said John Matthews, principal of Matthews Southwest. The change occurred in January of this year, he said.

Khelsilem (Dustin Rivers), spokesperson for the Squamish Nation, said the band was proud of the current collaboration.

“This is a monumental project that will not only revitalize the downtown of Squamish by adding more park space, better access to the water and additional employment lands but also bring meaningful employment opportunities to our members and others,” he said. The District of Squamish originally sold the oceanfront lands on Feb. 3, 2016 to Newport Beach Developments Limited Partnership, a partnership between Bethel Lands Corp. and Matthews Southwest. The deal included $15 million in cash, plus construction of the oceanfront park estimated at $10 million, a wind sports beach, two non-motorized boat launch areas, a sailing centre, a waterfront public walkway on the perimeter, a lands’ end monument, community open space, pedestrian and greenway areas, and a public art contribution of $150,000.

“We couldn’t be happier with the site,” Matthews said late last week from his office, which overlooks the Mamquam Blind Channel.

“Squamish is a town that has always embraced the ocean, but in the past it has always been for these industrial reasons — and that is still a major component of the town — but now there is this entire subsection that embraces the ocean in an entirely different way and we don’t acknowledge that as a town right now with any of our access points. So, having the ability to transform this piece… into maybe the epicentre of the town at the end is something pretty special. We want to make sure we are taking our time with it and doing it right and where it ends up, is it embraces what the town has become.”

n terms of the oceanfront timeliness, Matthews said he is hopeful the waterfront park will be under construction by the end of next summer, in 2019.

The detailed designs for the park, which are being influenced by recently completed public consultation, will soon be presented to the public.

“We still have to go through the Department of Fisheries and Oceans, the Ministry of the Environment, before we can get our approvals to start construction,” he said.

There likely won’t be a waterpark, as some have hoped.

“I definitely think a waterpark is needed in Squamish, but we were thinking that using a ton of space on the oceanfront park for the waterpark… since you are by the water, you’ve got nature’s waterpark, right there,” he said. “We don’t think it is the best use of the space there.”

The goal is that simultaneously, while the park is under construction, so too will be other aspects of the development, such as housing.

“They go hand in hand, in our mind,” Matthews said. “Obviously we can’t have any occupancy of residential buildings until the park is completed, but we would like them to come together.”

One of the original conditions of the oceanfront deal was that people not live on the site until the park is complete.

There is currently the design for an office building on the site and the company is looking for suitable tenants.

That office building will be under construction as soon as those tenants are signed on, Matthews said.

The planned education campus will likely be a conglomerate of schools, with several partnerships.

“We’ve been having lots of various discussions that are getting pulled together as we speak,” he said.

The new road at the oceanfront is almost complete, and is slated to be pulled all the way through the site next spring, he said. 

The new Main Road replaces the Galbraith Road alignment.

The Carbon Engineering plant will be moved within the property, because it is right where the road will go.

Currently, materials — such as rocks — are being stockpiled on the site.

Environmental work also continues on parts of the property.

“For a while there we had to take crabs out of the ocean every two years and check their levels of mercury and just monitor it, so you can ensure that everything has been mitigated,” Matthews said. The oceanfront was previously home to a chemical plant.

“All the signs are very positive, everything has been trending down and so now we are talking with the Ministry of Environment about how do we move forward past that.”

The site is being raised three metres with clean soil.

“I think people have been scratching their heads and thinking, ‘Why aren’t people doing anything on the oceanfront?’ Fair enough, but behind the scenes we have been working, very, very hard at getting the right park put together, while making sure we have everything else aligned so we can move in a methodical and strategic manner to-make sure that not one thing is way ahead of anything else.”

The public access that the company has kept on the oceanfront will continue at least until construction of the park begins, Matthews said, adding he’s hopeful some form of access will still be possible during construction, but that will depend on what is underway at the time on the rest of the property.

“We are going to have to take a look at the safety side of it,” he said. “Our goal is to maintain access for as long as we can, as much as we can. We know how important that is to the community.” 

Long term, Matthews — who is originally from Ontario, but was raised in Texas — said there is a hope of the company being involved in developing light rail through the Sea-to-Sky Corridor.

“When we got up here we were looking at transportation as a way to facilitate development,” he said. “Twenty-first century development is going to require unique solutions… to moving people to and from centres.”

The company is already working on a high-speed light rail project between Houston and Dallas.

The proposal for the Sea to Sky Corridor is in the very preliminary stages.

“We have been working with the province, and the federal government and the District as far as, can we get a study to analyze the feasibility of this both economically and engineering-wise,” Matthews said.

For more on the oceanfront, go to www.newportbeachsquamish.ca/

To find out more about Matthews Southwest go to www.matthewssouthwest.com/. For more on the Cheekye development go to www.cheekeyedevelopments.ca/

Copyright © 2018 Western Investor

Global index rates Canada as third most overvalued country for home prices

Joannah Connolly
Western Investor

Metro Vancouver real estate is valued at 65 per cent higher than it should be, based on local incomes, according to a new global house price index by The Economist.

The U.K.-based financial publication’s research team found that the region’s home prices have risen by more than 60 per cent over the past five years.

In terms of real estate value versus median household incomes, The Economist reported that Metro Vancouver was the fifth most overvalued of 22 major global cities studied, after Hong Kong, Auckland in New Zealand, Paris, and Brussels in Belgium.

Vancouver is followed by London, UK and Sydney, Australia, both of which were deemed overvalued by 50 per cent or above.

On a country-by-country basis, Canada was deemed the third most overvalued country in the world for real estate prices, at 56 per cent overvalued, after New Zealand and Australia.

New Zealand’s standing in the global index comes as the New Zealand government confirmed August 14 that it will introduce a previously proposed ban on foreign buyers purchasing New Zealand resale real estate. Overseas purchasers will still be able to buy new presale homes, and Australian and Singaporean buyers are exempt from the ban.

Copyright © 2018 Western Investor

Mortgage with new lenders down in Vancouver

Steve Randall
REP

There was a slight decline in the volume of new mortgage loans in 2017 according to an analysis of consumer credit data from CMHC.

The corporation says that it looked at new mortgages originated for new owners, repeat buyers, refinances, multiple mortgage holders, and renewals with a new lender. Renewals with an existing lender are not included as they can’t be detected as new due to the non-changing open dates.

The analysis shows that in 2017 there were 959,074 new mortgages, down 6.5% decline from 2016.

There was an increase in multiple mortgage holders, from 13.6% in 2016 to 15.1% in 2017 and in repeat buyers (9.6% up from 9.5%), but the other categories all declined:

• New owners – 40.3% (from 39.7%)
• Refinances – 21% (from 21.4%)
• Renewal with new lender – 14% (from 15.9%)

The largest decreases were in renewals with a new lender (down 17.6%) and refinances (down 8.3%).

Vancouver, Toronto post largest declines While new mortgage rules introduced in 2016 affected the volume of new mortgages in 2017, the two largest housing markets were further impacted by taxes designed to cool speculation.

CMHC says mortgage originations were lower following the introduction of the taxes.

Renewals with a new lender were sharply lower in the two cities: down 33.3% in Vancouver and 25.7% in Toronto.

Repeat buyers also fell in the two markets, by 21.7% for Vancouver and 17% for Toronto, while seeing relatively little change elsewhere in Canada. This could suggest affordability was the reason in the two hottest markets.

In Calgary and Edmonton, overall activity eased due to the economic challenges in the energy sector.

Copyright © 2018 Key Media Pty Ltd