The central bank kept the benchmark at 1.5 per cent

Andy Blatchford
Canadian Real Estate Wealth

The Bank of Canada’s decision to leave its interest rate unchanged Wednesday could be just a brief pause that comes as it carefully follows the unpredictable twists in the country’s trade talks with the United States.

The central bank kept its benchmark at 1.5 per cent, but many experts predict another increase could arrive as early as next month.

In a statement Wednesday, the Bank of Canada said more hikes should be expected thanks to encouraging numbers for business investment, exports and evidence that households are adjusting to pricier borrowing costs.

The bank, however, also made a point of saying it’s closely watching the renegotiation of the North American Free Trade Agreement and other trade policy developments, which could have negative impacts on the Canadian economy. It’s particularly concerned with the potential implications for inflation.

Last week, U.S. President Donald Trump announced he had reached a bilateral trade agreement with Mexico that would replace the three-country NAFTA. He put pressure on Canada to join the U.S.-Mexico deal, but after fresh talks restarted last week Ottawa and Washington have so far been unable to reach an agreement.

Trump notified Congress last Friday of his intention to sign a trade agreement in 90 days with Mexico _ and Canada, if Ottawa decides to join them. If a deal can’t be reached, the president has also repeatedly threatened to impose punishing tariffs on Canadian auto imports.

Frances Donald, senior economist for Manulife Asset Management, said the Bank of Canada’s explicit mention of NAFTA in Wednesday’s statement suggests the negotiations have become even more important around the governing council’s table.

“They’re sending a message that everything looks as planned… What that says to me is that an October rate hike is still certainly in play,” Donald said about the

However, she said the NAFTA reference gives the Bank of Canada options to possibly stay on hold next month, particularly if trade talks _ and the outlooks for the economy and inflation _ deteriorate.

Governor Stephen Poloz, she added, has been “fairly agnostic” on the outlook for NAFTA. She said he’s pointed to potential negatives as well as positives, while the stressing everything is hypothetical until something is decided.

Benjamin Reitzes of BMO Capital Markets wrote in a note to clients that Wednesday’s statement makes it clear the NAFTA talks are biggest issue for markets and the Bank of Canada at the moment.

“There’s big time risk here, but most are still expecting a deal to get done,” Reitzes wrote as he referenced the apparent month-end deadline for NAFTA negotiations.

“Assuming all goes well with NAFTA (perhaps a big assumption) and the data over the next seven weeks, an October rate hike still looks like a reasonable expectation.”

Poloz has raised the rate four times since mid-2017 and his most-recent quarter-point increase came in July. The next rate announcement is scheduled for Oct. 24.

The Bank of Canada said Wednesday that the economy has seen improvements in business investment and exports despite persistent uncertainty about NAFTA and other trade policy developments.

“Recent data reinforce governing council’s assessment that higher interest rates will be warranted to achieve the inflation target,” the bank said as it explained the factors around its rate decision.

“We will continue to take a gradual approach, guided by incoming data. In particular, the bank continues to gauge the economy’s reaction to higher interest rates.”

The statement also pointed to other encouraging signs in Canada, including evidence the real estate market has begun to stabilize as households adjust to higher interest rates and new housing policies. Credit growth has moderated, the household debt-to-income ratio has started to move down and improvements in the job market and wages have helped support consumption, it said.

The bank can raise its overnight rate as a way to keep inflation from running too hot. Its target range for inflation is between one and three per cent.

Heading into Wednesday’s rate decision, analysts widely expected Poloz to hold off on moving the rate _ at least for now.

Last month, Poloz stressed the need to take a gradual approach to rate increases in times of uncertainty. He made the remarks during a panel appearance at the annual meeting of central bankers, academics and economists in Jackson Hole, Wyo. 

The Canadian Press

Copyright © 2018 Key Media Pty Ltd

In some areas, detached home prices may have fallen as much as 30 per cent

Daniel Tencer
other

Not long ago, it would have been hard to imagine a time when Vancouver’s real estate market was so quiet you could hear the crickets chirp. Yet here we are.

There’s no papering over the latest bad news from the region’s real estate board: Sales in August were down 36.6 per cent from the same month a year earlier, the region’s real estate board reported Wednesday, and prices are now falling in all housing categories.

“Buyers today have more listings to choose from and face less competition than we’ve seen in our market in recent years,” said Phil Moore, president of the Real Estate Board of Greater Vancouver, in a statement.

“With fewer buyers active in the market, benchmark prices across all three housing categories have declined for two consecutive months across the region,” he added.

But so far, the real estate board’s numbers show price declines have been mild. The benchmark cost of a detached home in Greater Vancouver sat at $1.561 million in August, down 3.1 per cent from a year earlier.

Thanks to strength earlier this year, condo prices are still higher than a year ago, up 10.3 per cent in a year to $695,500 in August. But prices have now turned negative, and are down 1.6 per cent since May.

A serious price crash?

But some real estate insiders in B.C. say there are segments of the market where things are considerably worse than the real estate board’s data suggest.

Realtor Ian Watt used independent figures from data-mining company SnapStats to determine that detached homes on Vancouver’s pricey west side have fallen by 26 per cent in the past year, to a median of $2.8 million, from $3.8 million a year ago.

In West Vancouver, detached house prices are down 30 per cent over the past year, to $2.5 million from a median of $3.6 million.

The seeming collapse in house prices at the top end of the market could be the “canary in the coal mine” warning of a broader correction, realtor Stuart Bonner told the Vancouver Sun earlier this month.

“Vancouver will never be affordable, but it will drop 25 per cent or more,” the Sun quoted Watt as saying.

Things are likely to get worse before they get any better. A key measure of the health of a housing market — the sales-to-active-listings ratio — indicates that Vancouver’s detached home market is now a “buyer’s market,” with fewer than 10 sales for every 100 active listings.

The townhouse and condo segments are headed there as well. There were fewer than 27 condo sales for every 100 condos listed in August, down from around 57 sales per 100 active listings at the start of the year. That represents a rapid slowdown in the condo market.

Affordability unchanged

Despite the declines in house prices, Vancouver’s market is not getting any more affordable, data from National Bank of Canada shows.

The bank’s latest affordability report found no change to the relative cost of homeownership in Vancouver in the second quarter of this year. Lower house prices were offset by higher mortgages rates. The city’s dubious distinction as the least affordable housing market in North America is likely secure for the moment.

For Canada as a whole, the cost of homeownership rose by 0.2 per cent in the second quarter, relative to earnings, led by a 1.8-per-cent jump in costs in Victoria and a 0.8-per-cent jump in Quebec City.

Copyright © 2018 TheHuffingtonPost.com, Inc

Airbnb deactivates more than 2,400 listings in Vancouver

Jessica Kerr
Western Investor

The number of short-term rentals in Vancouver is down by almost 50 per cent since the city’s regulations went into full effect Sept. 1.

When the city’s new short-term rental regulations went live in April there were about 6,600 listings in Vancouver. That number has dropped to 3,742 as of this week.

“This reduction is a reflection of more than 660 short-term rentals being delisted or converted to long-term rentals by residents responding to the regulations,” Kathryn Holm, the city’s chief licence inspector, said Wednesday afternoon.

However the vast majority, 2,482, were listings that were deactivated by Airbnb on Friday — the last day that short-term rental operators had to comply with the new regulations and include a business licence number in their listing.

In November, council voted to adopt the new bylaw allowing people to post their primary residence on short-term rental platforms, such as Airbnb. The regulations allow both homeowners and renters to list their primary residence — renters must have approval from a landlord while homeowners that are part of a strata must ensure that short-term rentals are allowed under the strata bylaws.

The week before the new regulations went into effect, the city and Airbnb, the largest short-term rental platform in the city, announced an agreement that the platform require hosts to include a business licence number in listings in its website. Since then Expedia, the second-largest platform in Vancouver, also agreed to add a field for hosts to include a business licence to listings on VRBO vacation rental. Together Airbnb and Expedia represent more than 90 per cent of the short-term rental listings in Vancouver.

The regulations went into effect April 19 and since then 2,630 short-term rental business licences have been issued, about 70 per cent of the current active listings.

“This is among the highest initial uptakes of any major city globally upon implementation of short-term rental regulations,” Holm said.

New and existing hosts had until Aug. 31 to obtain a licence and comply with the regulations, while the city went after operators that would clearly not meet the new rules — commercial operators with multiple listings or unsafe dwellings.

Holm said staff has investigated more than 2,650 short-term rental listings to date and since Sept. 1, 294 new addresses have been flagged for non-compliance and are subject to enforcement.

She added that the city built a “sophisticated data analytics system to address the complexity of tracking and managing” short-term rental listings and the city is tracking all platforms using third-party data scraping.

“This week, we are starting enforcement and targeting unlicensed or invalid licenced online listings,” Holm said.

Fines can run up to $1,000 per offence. Holm said that could mean up to $1,000 per day, per platform.

The city is encouraging residents to report the address and URL of suspected illegal short-term rentals through 311, online at vancouver.ca/short-term-rentals, or by submitting a report through the VanConnect app.

Since April, the city has received around 1,300 complaints from residents about illegal short-term rentals.

In a blog post published Sept. 1, Alex Dagg, Airbnb Canada’s director or public policy, said the platform currently has 4,798 active listings in Vancouver. More than 30 per cent are long-term rentals (30 days or more), traditional bed and breakfasts or boutique hotels and exempt from the city’s regulations, she said, and of the almost 2,500 listings that were removed, nearly 70 per cent had not been booked in the 12 months prior to the implementation of the regulations.

“Home sharing has come a long way in Vancouver, from being completely unregulated to now enjoying a framework that legitimizes and provides clarity for the thousands of families who rely on Airbnb every month,” Dagg wrote.

Copyright © 2018 Western Investor

Vancouver a tough market for first-time buyers

Steve Randall
REP

Canada’s potential first-time homebuyers saw no relief in the second quarter of 2018.

National Bank’s Affordability Monitor published Tuesday reveals a continued weakening of affordability, the 12th consecutive quarterly decline.

It shows that the monthly mortgage payment on a representative home as a percentage of income was up 0.2% after a 1.2% rise in Q1. The benchmark mortgage rate (5 year term) was up 0.14 points while median household income rose 0.9% (3.6% annualized).

The report, written by economists Matthieu Arseneau & Kyle Dahms, shows a slight reduction in home prices nationwide quarter-over-quarter (0.1%).

Affordability declined most in Victoria (1.5%), Quebec City (0.8%), Calgary Montreal (0.4%) and Calgary (0.2%) but improved slightly in Toronto and Winnipeg. Vancouver was unchanged.

Condo affordability worsened more than non-condo nationwide (0.7 points vs. 0.2 points).

“Painful environment” for new homebuyers

While home price growth has eased slightly in Toronto and Vancouver, they remain tough markets for first-time buyers.

“Both cities remain a painful environment for new homebuyers and this is unlikely to change in the short term as central banks remain in a tightening mode,” the report says.

A new homebuyer would need to save for 111 months at a saving rate of 10% to afford the down payment on the representative home ($897,747) in Toronto and would require a $160,577 income.

For a condo, this is cut to 45 months of saving for a $512,223 home and an income of $91,620.

In Vancouver, the representative home costs $1,334,406 which would require a $238,681 income. A buyer would need to save 10% for 410 months for their down payment.

For a condo in Vancouver, the income requirement is $115,556 for a $646,043 representative home. The down payment would take 61 months of saving at a rate of 10%.

Copyright © 2018 Key Media Pty Ltd

Viva Network a private mortgage exchange

Steve Randall
REP

Another disruptor has entered the mortgage space with a peer-to-peer lending platform which connects buyers with investors who want to fund their loan.

A Bermuda-based firm has launched the alternative mortgage lending platform which it claims is pioneering a new way to finance real estate.

Viva Network says its platform is the world’s first private mortgage exchange that is “setting a new standard in home lending that traditional financial institutions can’t match.”

Investors anywhere in the world can use the platform to invest in fractional shares of consumer mortgages with the borrower making repayments through the platform and the investor receiving their proportional share.

The platform leverages a globally connected community using tokenized debt securities using blockchain technology.

While it could be good news for investors, it would not be so for mortgage brokers and banks.

Viva Network says that tokenization improves significantly upon the traditional mortgage model.

“For instance, virtually anyone with a phone will be able to become a mortgage lender, harness the power of compound interest and grow their savings,” the firm’s information release states.

The firm says that it is offering lower rates, greater transparency, and a streamlined process.

However, it is very early days for this kind of alternative, and wary homebuyers may take some persuading that this is the right approach for their mortgage.

For now though, Viva Network CEO Nick Thomson is confident.

“This platform is a proof-of-concept for Viva’s ground-breaking mortgage lending technology,” he says.

Copyright © 2018 Key Media Pty Ltd

What is going to happen to the Canadian economy

David Ford & the IWANTTOOWN Team
other

The Bank of Canada has another rate decision this week Wednesday to discuss the current economic outlook as well as make any announcements regarding their Prime lending rate. My most constant conversation with clients is always: “What’s happening with interest rates?”

I have been gauging my advice off the recent (or lack of) NAFTA discussions. We’ve all watched as protectionist policy President Donald Trump has made decisions for the betterment, in his mind, of the US and complete disregard for any past agreements with other countries. Mexico having an election this past July and voting in a new President has been good timing for their country as the motivated Obrador works to strengthen a very heated US/Mexico relationship. Unfortunately, it looks like Prime Minister Trudeau has been left out of the new conversations and Trump has repeatedly voiced he would gladly shred NAFTA because it has been a bad deal for the US. The common-sense voice in my head tells me that Trump is going to make as many side deals with Mexico as possible on trade and leave Canada to pick up the scraps. Mexico has much more room to gain by making trade deals here and there that would oust Canada’s current trade relationships with the US, of which we Canadians have been so heavily reliant. If I’m getting in the mind of “deal making” Trump – I’m thinking I can barter a hell of a lot more with Mexico, maximizing profits from trade obtaining as much as possible on sale and then move over to Canada with the leftovers.

I’m yet to see our current Canadian government, or even one’s past, expand trade relations out to the rest of the world to shop our steel, lumber and oil & gas. As of 2017 76.7% of our exports were shipped to the US and 99.1% of our crude oil is exported to the US. The TransCanada pipeline COULD have been a step in the right direction to fix this problem, opening our oil & gas exports to Asia or Europe but this stalled and sideways project now only amplifies (if I’m Trump) that we have no other options but to take what we can get. Why the Liberal’s decided to spend $4.5B buying this project and in to a failing industry is beyond me. I see Canada suffering short-term and long-term, but the government needs to get on with it and start exporting or shift focus entirely to the new age of energy.

Seeing above makes me very nervous for the Canadian economy and as a result would be shocked if Wednesday’s rate announcement was another move upward. In my opinion, if the above isn’t fixed we would sooner see Bank of Canada decrease Prime rates affecting Variable mortgages as they did in the oil & gas crises a few summers ago. Variable rate mortgages are still as low as 2.70% and range up to 3.45% depending on if the mortgage is insured, not insured, or a rental property. 5 Year Fixed rate mortgages start at 3.44% and climb up to 4.14% on the highest side. There are huge savings advantages in choosing Variable and accelerating your mortgage, this has been our constant strategy over the past decade and it’s worked out very well for our client base.

Halifax homeownership is affordable

Neil Sharma
Mortgage Broker News

Much has been said about languid markets in Toronto and Vancouver, however, Halifax is in the midst of a boom.

According to Clinton Wilkins of Centum Home Lenders Ltd. a major reason for that is the city’s affordable housing prices.

“Halifax is boom town,” he said. “Homeownership is obtainable and realistic here. On an average household income, you can buy a single-family detached home. There’s a lot of opportunity in Halifax, as well, because there’s a lot of positive migrations from other areas like Calgary and Toronto, and we’ve seen a good influx of new to Canada here on the East Coast.”

To say that housing prices in Halifax are favourable is an understatement.

“You can buy a nice single-family home in Halifax for the same price as a bachelor condo in Toronto,” continued Wilkins. “I would even venture to say that you can even buy a new construction single-family home for that price.”

That is a far cry Canada’s major metropolitan areas. While B-20 is intended to curtail rapid price growth in Toronto and Vancouver, it’s made owning a single-family detached home well-nigh impossible for many. Homebuyers in Canada’s largest city have instead flocked to the condo market.

“For Toronto, a lot of people were barely qualifying prior to the rule changes, so the rule changes aren’t having their intended impact. They were looking to slow the inflation of prices in Toronto and B.C., and unit transactions are way down in both markets. It will take a while for the prices to go down because it’s still an issue of supply and demand. There was way too much demand before and it artificially raised the price.” 

It isn’t likely that prices will go down in either of Canada’s two major housing markets—at least not any time soon, and probably not without economic deceleration.

In Halifax, on the other hand, the average home stays on the market for 90 days, signifying a normal, healthy market. How long will that continue?

“I think the action will continue into this year and into 2019, for sure, pending other major changes,” said Wilkins. “If the Bank of Canada stays steady with the rate, that will help us. One issue in Halifax is we’re having a bit of a supply issue. For a long time, it was a buyer’s market and the shift is now to a seller’s market, and sellers haven’t caught up with the demand. There’s not enough supply.”

When Wilkins started in the industry 12 years ago, he recalls seeing a single crane in the sky. Today, he estimates there are about 20. The country’s major housing markets hog all the headlines, but if Halifax is any indication, expect to start seeing smaller, vibrant markets shine.

Copyright © 2018 Key Media

Lenders would have direct access to an applicant?s tax data for the first time in Canada

Frank O’Brien
Western Investor

Canada Mortgage and Housing Corp. (CMHC) is considering calling in the Canada Revenue Agency (CRA) to battle an increase in mortgage fraud.

The campaign is either overkill or inevitable, according to mortgage industry sources.

The focus of the oversight is income verification of mortgage applicants, which the federal housing agency fears is a growing problem.

According to a CMHC statement, “the industry’s current detection tools have not kept pace with the increasing sophistication of the threat we face.”

In an emailed response, CMHC stated “there is no timeline in place for the co-operation with Canada Revenue Agency on income verification,” but industry sources expect it could roll out as early as October 1.

CMHC is Canada’s largest mortgage insurer. In the first half of this year, it insured 107,000 homes.

According to a 2017 Equifax study, mortgage fraud has increased 53 per cent since 2013, though it did not indicate the number of fraud cases. A survey by the debt-rating firm also found that 13 per cent of Canadians would be comfortable fudging a mortgage application.

With the tighter mortgage restrictions today, it could be more tempting for mortgage applicants to lie, including inflating their income. For years, some banks required only a signed stated income form, which was especially popular with the self-employed and contract workers who often lacked conventional payment stubs.

Lenders accept CRA statements of income that can be printed from the CRA website and, some say, are easy to alter. Currently, the CRA is not allowed to provide a taxpayer’s information to a third party, even with the taxpayer’s permission.

Under the CMHC proposal, income would be verified by giving lenders direct access to CRA data on a potential borrower’s income.

But not everyone is on board with the idea. Some critics of the plan note that Canada’s mortgage delinquency rate has fallen to near-record lows, even as housing prices have risen and mortgage fraud is feared.

In a report earlier this year, Equifax found that British Columbia mortgage holders had the lowest mortgage delinquency rate (0.08 per cent) in Canada, despite having the country’s highest home prices, and default rates across the country are near record lows.

CMHC said its arrears rate on insured mortgages fell to 0.27 per cent in 2018’s first half, down from 0.29 per cent a year earlier. Equifax also found that Canadian homeowners have “good” credit ratings.

Rena Malkah, owner of CYR Funding of Thornhill, Ontario, a mortgage broker for 44 years, argues that income verification is an issue best left to underwriters.

“Their job is to verify the claims. If they can’t, they should be fired and replaced by someone who can,” she told Canadian Mortgage Trends.

Malkah argues that credit rating is more important than income verification. “If someone has a high credit rating, it shouldn’t matter what their income is. If they fight and scrap for under-the-table money to pay their bills on time, then it should be of no interest to the [mortgage insurer] where the money came from.”

But some Metro Vancouver mortgage brokers believe CRA involvement is inevitable.

“Mortgage fraud is right up there near the top of the list of things to crack down on,” said Port Moody-based Peter Kinch, vice-president, mortgage agent and investment adviser with Vine Group, part of the Mortgage Alliance Group.

“In the United States, one of the online lenders can access your tax returns as soon as you fill out a mobile app. This allows them to grant a mortgage approval in seconds.

“It only makes sense that CMHC should be able to do the same thing up here. I can definitely see that happening, and it would definitely cut down on mortgage fraud when it comes to income verification.”

As of June 30, CMHC’s insured mortgages totalled $463 billion, and the agency held $13.5 billion in capital available to cover any defaults.

© Copyright 2018 Western Investor

City extends thanks to residents, businesses, and government partners for their support for much-needed rapid transit extension

other

Following the federal and provincial government’s official announcement of full funding for the Broadway Subway, the City of Vancouver extends its thanks to residents, businesses, and government partners for their continued support of the project.

The extension of rapid transit along the Broadway Corridor is the top priority of the City of Vancouver’s Transportation 2040 plan, and is the single most significant investment that could be made to support economic growth in the City and throughout the region.

7,190 new jobs

“As one of the largest infrastructure investments in BC’s history, the Broadway Subway will provide a huge boost to Metro Vancouver’s economy and liveability,” said Mayor Gregor Robertson. “The Broadway Subway will create 7,190 jobs— plus an estimated 5,120 indirect jobs—and improve regional access to the second largest employment centre in BC. This enormous investment in Metro Vancouver’s transportation network has been a long time coming and will significantly reduce traffic congestion, cut commute times along the Broadway Corridor by half and further enhance our city’s economic competitiveness.”

Construction begins in 2020

Construction for the Broadway Subway will begin in 2020 and is expected to be complete by 2025. Once complete, the Broadway Subway will bring fast, frequent and reliable SkyTrain service to one of the busiest destinations in the region. 

On opening day, the Broadway Subway will be able to carry more than three times the current capacity of the 99 B-Line bus service. Travel time between VCC-Clark and Arbutus will take 10 minutes, and a passenger embarking at Lafarge Lake-Douglas Station will arrive at Arbutus in 46 minutes — one train, no transfers, no traffic congestion.

A benefit to everyone throughout Metro Vancouver

Enhancing transit capacity along the Broadway Corridor was first identified as a regional need almost 30 years ago. Since that time, the corridor has grown into the second-largest employment centre in the province, with the busiest bus route in Canada and the United States.

Residents and businesses have been patiently waiting for this rapid transit line, which is critically needed not only for the residents and businesses of the City of Vancouver, but for the benefit of everyone throughout Metro Vancouver.

The Broadway Subway will be delivered by the Government of BC,  in partnership with the Government of Canada, TransLink and the City of Vancouver. The Province, as the owner of the existing SkyTrain system, will carry TransLink’s work forward in delivering the Broadway Subway project. Upon completion, it will be fully integrated into the regional transportation network and operated by TransLink.

Learn more about Broadway Subway and opportunities to get involved

© 2018 City of Vancouver

New Coast Realty will not face discipline

Steve Randall
REP

A two-year investigation into allegations of misconduct by the owner of a Vancouver-area real estate brokerage has ended without disciplinary action.

The Real Estate Council of BC says that there was “insufficient evidence” to warrant disciplinary action against New Coast Realty following an investigation into allegations that the training provided by the owner and practices at the brokerage put consumers at risk.

However, since 2016, the RECBC has issued 10 fines and 5 suspensions against individuals licensed, or formerly licensed, at the brokerage.

The brokerage was also reprimanded and ordered to pay a discipline penalty of $7,500.00 to RECBC in connection to an earlier, pre-2016 audit.

The investigation was overseen by Len Doust, Q.C., a pre-eminent lawyer in BC with over 50 years of practice in criminal and administrative law. He advised RECBC whether there was evidence to support charges of professional misconduct against the brokerage.

“Many of these allegations were based on a tape recording made at a training session that was provided to a newspaper reporter by an unidentified person,” the RECBC statement reads.

During the course of its investigation, the council reviewed and analyzed translations and interpretations of the tape recording, including the explanations provided by the brokerage for the comments in the tape and sought to find out who had recorded the training session.

Several conditions were placed on New Coast Realty and these were reviewed by the council.

Although the RECBC expects further action to be taken against individual licensees it cannot give further details of this, or of prior investigations that did not end in disciplinary action due to the privacy provisions of the Real Estate Act.

Copyright © 2018 Key Media Pty Ltd