CMHC shows slower housing starts in February

Neil Sharma
REP

Higher mortgage rates and a lurching economy conspired to slow the pace of housing starts in February, according to the Canada Mortgage and Housing Corporation.

Last month’s 173, 153 starts were a drastic reduction over January’s 206,809. In a report, a senior economist at TD Bank speculated that the mortgage stress test is the culprit.

“As a leading indicator of economic activity, February’s steep decline in housing starts may raise some eyebrows in Ottawa,” wrote Fotios Raptis. “Although housing starts seemed to be unscathed by the new B-20 regulations that took effect in January 2018, higher borrowing costs and tougher mortgage qualifying conditions may finally be taking a toll on new residential construction.”

There is already mounting pressure on Ottawa to consider revising B-20. The Toronto Real Estate Board has already called on the government to do so twice in the last month, and the Deputy Shadow Minister for Finance has doggedly pursued the Liberals to study B-20.

The Office of the Superintendent of Financial Institutions has also somewhat loosened its firm stance on B-20, which it introduced, but it is still very unlikely that it will completely annul stress testing mortgages altogether. Carolyn Rogers, OSFI’s assistant superintendent of the regulation sector, told Bloomberg that the government agency might review B-20 if market conditions change.

“OSFI monitors the environment on a continual basis and when we determine that adjustments to our standards and guidelines are warranted, we make them.”

The Canadian Real Estate Association, too, reported January homes sales are at their weakest since 2015. According to CIBC economist Royce Mendes, 2019 is going to be onerous for the construction industry.

“Residential investment was downright ugly in the fourth quarter, and the latest reading on housing starts only added to the bad news on Canadian homebuilding,” he wrote in a report.

“Prior to this reading, starts had seen a bit of a renaissance, rising back above 200,000 for four straight months. But the market has been contending with the effects of higher interest rates and stricter lending standards, and a pace of 200,000 looked unlikely for the year as a whole.”

Copyright © 2019 Key Media Pty Ltd

Davie and Nicola so named for the West End site where it will rise

Michael Bernard
The Vancouver Sun

Davie and Nicola

Project Address: 1485 Davie St., Vancouver

Project Scope:  A total of 128 one-to-three-bedroom units in a 21-storey highrise in the West End

Prices:  From $789,900

Developer: Vivigrand Developments

Architect: W. T. Leung Architect

Interior Designer:  Cristina Oberti Interior Design

Sales Centre: 1676 Robson St. (coming soon)

Centre hours:  By private appointment

Sales phone: 778-737-8666

Website:davieandnicola.com

The West End, with its proximity to English Bay, Stanley Park and the city’s financial and entertainment district, has been viewed by many as a neighbourhood offering the best of all worlds.

At the same time, the opportunities for buyers have been limited, especially in the last few years, notes Jonathan Cheung, senior project manager at Rennie Marketing Systems. That makes one of Rennie’s newest developments — the 128 units at a project called Davie and Nicola — especially attractive to both professionals and downsizers looking to locate themselves within reach of everything at a reasonable price.

“For the last year, there really has been nothing new for sale,” he said. “The last project was at Alberni on Robson and it was selling at the $3,000-a-square-foot-plus range. “We have been hovering around the $2,000-square-foot range.”

Cheung said the pull of those prices is readily evident with the number of people who have been registering at davieandnicola.com. People are drawn to its excellent location and views of the water and mountains and the fact that the project is situated in a pocket that is a bit removed from the hustle and bustle of the rest of the West End. “The whole idea is that you are close to work, where you eat and where you entertain, yet in a really nice neighbourhood,” he said.

At 21 storeys, it is also a desirable size, he said. “You are not living in a behemoth of a building where you are taking elevators all the time. It is a boutique tower that is a very human scale.”

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A bonus is that the concrete highrise will be located right across from the historic Gabriola Mansion, he said, which means the views are protected because nothing will be built on top of that site.

About 30 per cent of the 128 homes will be in the one-bedroom and one-bedroom-and-den category, starting at 517 square feet, while two-bedroom and two-bedroom-and-den homes account for 63 per cent of the total, with space starting at 683 square feet. The remainder are the three-bedroom homes and the three townhouses. All homes have either a balcony or courtyard space averaging about 113 square feet.

Inside, Vivagrand Developments has paid homage to the tradition of luxury and quality in the West End, Cheung said. The homes are equipped with top-end appliances by Wolf and Sub-Zero that are complemented by cabinetry by Binova, a well-respected Italian manufacturer. The look is rounded out by quartz countertops with waterfall edges and marble backsplashes.

Kitchens will come with a Kohler stainless steel under-mount single sink and Kallista single-control pull-down faucet, and recessed pot lights and LED under-cabinet accent strip lighting. The Binova cabinetry has soft-close hardware, with convenient additions, such as cutlery organizers, non-slip liners and an under-sink recycling centre.

Buyers will have a choice of light or dark designs provided by Cristina Oberti Interior Design. There will be engineered hardwood flooring throughout with a ceiling height of eight-foot, six-inches in the main living area. Over-height solid core doors are seven feet high for added sound proofing. Windows will all be triple glazed for additional acoustic protection. All homes feature high-efficiency heating, with heat-recovery ventilation and air conditioning.

Bathrooms will be encased in marble with oversized tiles on the floor and walls and with an oversized shower in a frameless glass enclosure with marble mosaic-tiled base and linear drain. Plumbing fixtures, including the hand shower and ceiling mount head shower, are by Kohler in a chrome finish and the showers include a custom niche. Select homes will feature a deep soaker tub. Bathrooms will have in-floor heating by Nuheat with the thermostat controllable by a smart phone or the NEST system in the master suite.

The building’s amenities will include a well-appointed gym with cardio equipment, and a social gathering area, a landscaped and illuminated communal patio with barbecue, seating and dining areas and a hotel-inspired grand entry lobby and library lounge, and full concierge service. Parking below includes electric vehicle charging outlets in some parking stalls, and a secure and accessible bicycle storage room with bike lifts and electronic charging in select homes.

Occupancy: Late 2022

© 2019 Postmedia Network Inc.

An economist outlines what he says are four significantly harmful shortcomings of the stress testing

Josh Sherman
other

Economic researcher Will Dunning has a problem with the mortgage stress test the federal government imposed about a year ago.

Actually, he has four.

Last January, the Canadian government expanded its standard stress testing, which requires borrowers to qualify at a higher mortgage rate than they are signing on for. Before that, it only applied to insured mortgages. Mortgage insurance is needed if a homebuyer can’t muster a downpayment of 20 percent or more, so previously, those who could managed to sidestep stress testing.

Dunning, who describes himself online as an “iconoclastic economist” outlines what he says are four significantly harmful shortcomings of the stress testing.

1. The stress test ignores potential income growth

“The tests fail to consider the income growth that will occur by the time mortgages are renewed” — that’s Dunning’s first issue, as outlined in his latest study.

The point of the stress test is to makes sure borrowers are up to the task of making higher mortgage payments upon renewal, typically five years from signing on. So federally regulated lenders now need to make sure all borrowers can afford to pay the higher of the Bank of Canada’s qualifying rate or the contract rate plus two percentage points.

Problem is, this method ignores rising incomes. Borrowers’ ability to make interest payments in five years is based on incomes today. Dunning notes that over the past five years, incomes have grown a cumulative 11.6 percent on average.

2. It’s also bad for the economy

“They have negative consequences for the broader economy,” Dunning says, summing up his second issue.

BMO suggests that the pace of residential construction has been slowing down as a the mortgage stress test has taken a bite out of homebuying activity. In fact, Canadian home sales were down 4 percent in January on a year-over-year basis, according to the Canadian Real Estate Association, which chalked up at least some of the decline to the stress tests.

Dunning estimates that Canada will lose 90,000 to 100,000 jobs when the labour market fully adjusts to the slowdown in starts.

3. Ditto for long-term best interests of Canadians

“They prevent Canadians from pursuing their long-term best interests,” says Dunning as his third strike against the current test. After all, a mortgage is really “forced savings,” he says. Sure, in the short term a roughly 60-percent portion of mortgage payments are going towards interest, and initially renting is usually the cheaper option.

But that changes over time. “Rents increase; for home ownership, the largest element of costs (the mortgage payment) is fixed (usually for the first five years). The total monthly cost of renting will rise more quickly than the cost of owning.”

4. Housing supply problems are going to intensify

Back to that slowdown in housing construction. Job losses aren’t the only negative consequence of less home construction taking place. “Suppressed production of new housing will worsen the shortages that have developed,” Dunning warns.

Dunning says construction needs to speed up, not slow down, to meet demand. The country’s population has been increasing at a rate of 1.25 percent annually for the past three years, above the long-run average of 1.1 percent.

“Long-term, the stress tests will add to the pressures that Canadians are already experiencing in the housing market.”

© 2019 BuzzBuzzHome Corp

World cities hit by sliding home prices

Joannah Connolly
Western Investor

It’s easy to think of Greater Victoria and Metro Vancouver real estate prices as being particularly hard-hit in the past couple of years, by a combination of provincial taxation measures and the federal stress test. But a report published this week by The Economist Group shows that, in global terms, B.C.’s major cities are far from alone in seeing recent declines in home prices.

Examining eight of the world’s prime urban real estate markets – Auckland, Berlin, Hong Kong, London, Manhattan, San Francisco, Sydney and Vancouver – the UK-based economics magazine and research group found that almost all of the cities have seen home prices drop in recent years.

The study charted price increases in the eight cities since 2009, using an index that measures comparative price growth with 2009 as the base.

Vancouver has seen a more recent decline, echoing activity in Hong Kong, where prices have grown considerably more than Vancouver since 2009.

The report said, “Prices started falling in August [2018] in Hong Kong and have dropped by nine per cent since. Developers there were spooked when their bids for a vacant parcel of land in the world’s most expensive neighbourhood — aptly called ‘The Peak’ — failed to meet the government’s reserve price in October.”

The Economist reported than prices in Manhattan fell by 4.3 per cent last year and that 60 per cent of home listed at $1 million or more in 2018 failed to sell. In Sydney, prime prices have slipped by 16 per cent since 2017.

In London, home prices have fallen by 20 per cent from their 2014 peak, according to international realty group Savills. The Economist said that Brexit “has not helped,” but that Lucian Cook, head of research at Savills, said there were also “broader reasons for the slowdown [in London prices]: falling cross-border capital flows; government policy; the cost of money; and increased supply.”

Of the eight cities examined, only Berlin and San Francisco have yet to see home prices decrease.

The report authors wrote that concurrent prices drops across prime cities are no coincidence, as global housing markets are now intrinsically interlinked.

“The International Monetary Fund (IMF) observes that house-price movements have become increasingly correlated across the world, and that the link is greater between big cities than between countries. That is because housing is becoming a more global asset class rather than a purely local one. The prevailing winds of the international marketplace affect prime residential property much as they do shares and bonds. The IMF notes that international correlation increases at the time of severe recessions and can help predict the risk of a downturn.”

Copyright © Western Investor

Find all of your lifestyle essentials and more at 27North in North Vancouver, BC

other

Embrace all the unique lifestyle essentials the North Shore has to offer in North Vancouver’s newest townhome and condo collection, 27North, set to begin selling soon.

Nestled along Northlands Golf Course, 27North delivers 27 contemporary homes across three storeys of modern architecture at the corner of Parkgate Avenue and Mount Seymour Parkway. Conceived and built in collaboration by Intergulf Development Group and Tatla Developments, with a handpicked team of local architects, engineers and interior designers, 27North was created by a project team committed to building quality family homes that anchor communities for generations to come.

Each of 27North’s one-, two- and three-level homes, ranging from 894 to 1,724 square feet, is intelligently curated to provide comfortable and spacious family living. With interiors designed by award-winning Area 3 Design, each home evokes a relaxed, West-coast lifestyle with elegant natural finishes and neural tones, offering a blank canvas awaiting a homeowner’s personal touches. Future residents will experience comfort in every step across the lush wool carpets, feel the warmth from the modern electric fireplaces, and bask in the abundance of light from the expanse of windows in every home. Pricing starts from $869,900.

Enjoy the convenience of direct home access from the private parking garage, along with ample visitor parking and bicycle storage facilities. Take in spectacular views at any time from the patios on the front, rear and rooftops of 27North homes — one of the many distinct features that makes this project so unique. Lush, tree-lined streets within steps of parks, trails, mountains and rivers surround 27North, making your backyard an outdoor playground.

Lifestyle essentials like grocery stores, schools, restaurants and a community recreation center are all part of your walkable neighbourhood. Parkgate Village Shopping Mall and over 38 of its stores and services are a six-minute walk away. If you’re going farther afield, access to the Upper Levels Highway is quick and easy, and offers a simple commute to downtown Vancouver, Maplewood and Burnaby.

With sales scheduled to start soon, interested buyers are encouraged to register online.

27North Project: 27 townhomes Where: 3490 Mount Seymour Parkway, North Vancouver  Developer: Intergulf Development Group and Tatla Developments Architect: Stuart howard Architects Interior Designer: Area 3 Designs Marketer: MillerWark Real Estate Website:  liveat27north.com Phone:  604-987-5441

© 2019 BuzzBuzzHome Corp.

Second-tier cities targeted by Chinese buyers

Ephraim Vecina
Canadian Real Estate Wealth

Real estate markets in Quebec, Alberta, and Nova Scotia are becoming increasingly popular among Chinese property buyers and investors, according to a new analysis by Juwai.com.

“The Chinese buyer boom in Montreal began earlier and is larger than in other second-tier cities. However, some smaller markets saw bigger Chinese buyer booms on a relative basis during 2018,” Juwai.com CEO and Director Carrie Law said.

All in all, Chinese-home buying intentions across Canada went up by 8% annually in 2018, with recovery in the second half of the year making up for a noticeable slowdown in the first six months.

“Buyer demand was unevenly distributed throughout the year. The year began with buyer enquiries plummeting for two consecutive quarters. During the first quarter, enquiries fell 23.8% compared with the same quarter in 2017. In the second quarter, enquiries fell 20.2% compared with the second quarter of 2017,” Law explained.

“In the second half, demand reversed as Chinese buyer enquiries returned to growth levels. Buyer enquiries climbed 43.6% during the third quarter and by 45.1% in the fourth quarter, compared with the same periods during the prior year.”

Chinese inquiries for residential purchases in Montreal grew by 35.7% year-over-year. Calgary and Halifax had considerably greater increases of 234.4% and 394.0%, respectively.

“Until 2017, only a relative handful of buyers from mainland China [were] aware of Calgary and Halifax, and many fewer purchased property in them,” Law stated.

“That is changing, as Chinese buyers seek more affordable homes and to avoid high foreign buyer taxes. The property industry in these cities is also increasingly making efforts to market to buyers from China. They are successfully marketing local real estate in terms of affordability, lifestyle, and educational institutions.”

In stark contrast, Chinese inquiries in Toronto noticeably fell by 10.3% annually in 2018, while Vancouver had a 2.8% loss.

“With steep foreign buyer taxes and high prices in Vancouver and Toronto, we have seen an increasing number of Chinese buyers shift to other cities in Canada,” Law said.

Copyright © 2019 Key Media Pty Ltd

REBGV stats show prices down

Ephraim Vecina
Canadian Real Estate Wealth

The Vancouver residential market’s prices, sales, and supply all suffered notable annual declines in February, according to the latest numbers from the Real Estate Board of Greater Vancouver.

Benchmark prices across all housing types decreased by 6.1% year-over-year in February, down to $1,016,600.

Single-detached properties experienced the greatest fall at 9.7%, reaching an average of $1,443,100. Condominium prices had a more modest 4% drop to $660,300, and townhomes by 3.3% to end up at $789,300.

Housing sales volume had a massive 32.8% annual shrinkage last month, settling down at levels 42.5% lower than the 10-year sales average for February, BNN Bloomberg reported.

Detached homes had 28% fewer sales in February compared to the same time last year, while apartment activity slowed down by almost 36% during that time frame. Meanwhile, the townhome sector had a nearly 31% decrease.

The number of new homes that entered the market fell by 7.8% year-over-year, with the sales-to-active listings ratio ending up at 12.8%.

The Conference Board of Canada warned in its recent market outlook that the Vancouver housing sector’s sluggishness will be a major factor in the province’s economy, although fortunately not to the pint of recession.

B.C.’s real GDP growth is predicted to contract from 2.6% in 2018 to 2.5% this year, and further down to 2.4% in 2020 “despite ongoing megaprojects in the energy sector.”

These figures are markedly lower than the 3.2% growth average that B.C. enjoyed from 2014 to 2017 – a boom period that stemmed from sustained high demand for real estate.

This hunger significantly dialled down after the introduction of much stricter mortgage qualification rules at the beginning of 2018, the Board stated.

Copyright © 2019 Key Media Pty Ltd

February saw only 98 detached homes sell

Josh Sherman
other

The detached home segment of Vancouver’s housing market has been walloped as sales for this home type in the first two months of the year sunk to the lowest levels since 1990.

A mere 98 detached homes were sold in Vancouver proper this February, notes Vancouver realtor Steve Saretsky in a blog post.

“The price correction in Vancouver’s detached housing market has been a slow bleed, it has been nearly three years since prices peaked out in the spring of 2016,” says Saretsky, the founder of Vancity Condo Guide.

Owners of detached homes have been refusing to lower prices despite market forces putting downward pressure on price expectations. “There are economic/housing studies which illustrate sales volumes peak two full years before prices start to fall, and Vancouver seems to be a real life example of this psychological phenomenon in which sellers stubbornly anchor to peak prices,” he writes.

Benchmark selling prices were down in both of the geographic Vancouver submarkets that the local real estate board tracks. In Vancouver East, the benchmark price of a detached home was $1,412,900, down 9.5 percent annually. In Vancouver West, the benchmark price fell 13.5 percent to $3,029,200.

Benchmark prices are said to more accurately reflect real market trends because they are based on price changes between typical properties in a given area based on elements such as square footage and the number of rooms in a home. Price extremes at either end are removed.

A separate note from BMO suggests prices won’t be on the road to recovery in the months ahead. “And so the adjustment to higher interest rates, OSFI rules and past provincial government measures continues…” concludes BMO Senior Economist Robert Kavcic, noting detached home prices in Greater Vancouver were down almost 10 percent on a year-over-year basis.

In addition to factors Kavcic outlines, it appears demand from foreign homebuyers, who were said to be more active in the higher-end detached segment in Vancouver, has evaporated. Juwai.com, a real estate portal that lets Chinese homebuyers search for international properties, says it is receiving fewer enquiries from Mainland China concerning Vancouver properties.

While market activity is expected to pick up this month, Saretsky suggests it’s no cause for celebration. “That is a normal seasonal uptrend and unfortunately is likely nothing to get too excited about,” he says.

© 2019 BuzzBuzzHome Corp