Time to rethink the too-strict stress test, urges CIBC?s chief economist

Joannah Connolly
Western Investor

The federal government’s mortgage stress test has done its job and it’s now time to rethink the rules, according to a leading economist.

Benjamin Tal, chief economist at CIBC, published a report this week citing CIBC research findings that the B-20 stress test has been responsible for a $13-15 billion decline in new mortgage loan values since its January 2018 introduction. 

The stress test on new mortgage applications, launched by the Office of the Superintendent of Financial Institutions (OSFI), ensures home buyers are able to cover their payments at the Bank of Canada‘s five-year posted rate or two per cent above their actual mortgage rate, whichever is the higher.

The CIBC research found that “the vast majority of the decline in mortgage originations in 2018 was due to fewer borrowers (down by 4.9 per cent), as opposed to a smaller average mortgages. Overall, according to various sources, B-20 accounted for 50-60 per cent (or $13-$15 billion) of the overall decline in originations throughout 2018.”

Tal said that the stress test was likely needed at the time, but it doesn’t account for rising average incomes, increases in home equity over the course of a mortgage term, or the reduced risk of longer-term mortgages. He also said that it is partly to blame for the rise in alternative lending.

Tal wrote that it is time to “revisit” the test, particularly the rule that buyers must qualify at two per cent (200 basis points) above their contracted mortgage rate. He wrote, “The stress test imposed on the market was probably necessary, since there was a need to save some Canadian borrowers from themselves. But is 200 basis points the right number? At the end of the day, there is no real science behind that number. Let’s remember that the rule was introduced in an environment of an already slowing market, and that since then, the Bank of Canada has hiked rates by 75 basis points, and the five-year mortgage rate has risen by 35 basis points.”

The economist also assessed the new First Time Home Buyer Incentive that was announced by the Liberal Party as part of the 2019 Federal Budget. The program is set to offer interest-free loans to first-time buyers up to five per cent of the purchase value on a resale home, or 10 per cent on a new-build home, in a shared-equity scheme with Canada Mortgage and Housing Corporation.

Tal said he believed the program would only be used by a small percentage of people. He wrote, “We estimate that, fully utilized, this plan will impact only three per cent of borrowers and 0.12 per cent of mortgage origination dollars — not quite a game changer.”

Copyright © Western Investor

Victoria, Ottawa urged to revamp legislation, work with real estate industry

Jeremy Hainsworth
Western Investor

B.C.’s real estate sector Monday made five recommendations to Victoria and Ottawa aimed at helping protect the industry from unscrupulous operators involved in money laundering.

“We want a clean sector,” said B.C. Real Estate Association CEO Darlene Hyde. “It’s a complex crime from what we can see. No one seems to have a handle on it. We need to know a lot.”

“As an industry, we have come together to commit to shared best practices and make recommendations to government,” five sector groups said in a statement. “By aligning as an industry and working in collaboration with government, we can help facilitate an environment in which consumers are well-served and industry professionals can thrive.”

Earlier this month, B.C. Attorney General David Eby received a report from investigator and former RCMP deputy commissioner Peter German on money laundering in the B.C. real estate sector. The report is to be released publicly once cabinet reviews it, Eby said.

The extent of money laundering in real estate remains unknown, but anti-financial crime advocacy group Transparency International Canada suggests tens of billions of dollars of criminal proceeds could be washed in the Toronto and Vancouver markets annually.

The sector group said for public confidence to remain, there can be no illegal funds in the market. It is supportive of German’s work and is committed to upholding best practices to keep organized crime funds out of the market, it said.

“There’s so many players involved in real estate that you can’t take a siloed approach,” Hyde said. “It’s critical. It’s a very complex business this money-laundering crime.”

Attorney General David Eby and Minister of Finance Carole James said in a joint statement that industry involvement in develop best practices would help get dirty money out of the real estate market, help industry professionals improve their knowledge and regulatory compliance and protect consumers.

“As we review two reports to government on money laundering in real estate, we welcome this strong support from the real estate sector for our efforts to stop criminals from exploiting B.C.’s real estate market,” the statement said.

The sector groups made five recommendations to the federal and provincial governments: 

• Only verified funds coming through Canadian financial institutions should be accepted for transactions;
• Anti-money-laundering procedures should be mandatory for real estate professionals, and transactions should be subject to reporting requirements administered by the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) to ensure those professionals recognize and report suspicious transactions;
• Ottawa should amend the Proceeds of Crime (Money Laundering) and Terrorist Financing Act to make FINTRAC intelligence available to regulatory authorities, including the BC Securities Commission and the Financial Institutions Commission. All agencies should share information, such as the provincial assignment registry, and create a comprehensive, efficient enforcement regime;
• Governments and agencies, including FINTRAC, should work with real estate professionals to develop compliance resources and test policy ideas
• FINTRAC should implement a framework to identify and report trends regularly and in language consistent and understandable to professionals, the public and media.

The real estate organizations involved are the British Columbia Real Estate Association, the Appraisal Institute of Canada – BC Association, BC Notaries Association, Canadian Mortgage Brokers Association – British Columbia, and the Real Estate Board of Greater Vancouver.

Copyright © Western Investor

Economists believe BoC will leave rate as is

Steve Randall
Canadian Real Estate Wealth

The Bank of Canada will announce its April interest rate decision next week but a survey shows little expectation that it will make a change.

Nine out of 10 economists including those from TD, Laurentian, the Conference Board of Canada and University of Manitoba – expect that the BoC will leave rates unchanged at 1.75%.

“All combined, the global slowdown and specific factors weighing down on Canadians households and the oil sector are justifying to keep the overnight rate at current level,” said Sebasiten Lavoie, chief economist at Laurentian Bank Securities.

However, the poll by Finder.com found that Atif Kubursi of Economic Research Ltd. and McMaster University, is predicting a rate cut, citing “sluggish growth and poor export performance.”

While the others are ruling out a cut in April, four now believe Governor Poloz could announce one in July and longer term we could see a 1.15% rate within the current cycle.

Recession fears While a rate hold and cut will be good news for the housing market, the underlying reasons for economists making their predictions is more concerning.

Canada is either somewhat or very likely to go into recession in the next 12 months, according to half of the panellists.

“Uncertainty remains elevated, and recent trends (January notwithstanding) have been quite weak – domestic demand contracted over the latter half of 2018. Retail sales remain soft, as do housing markets,” said Brian DePratto, senior economist at TD Economics.

The panel expects the CMHC First Home Buyers Incentive to have either marginal or little to no impact on housing affordability but they believe that property prices will stabilise by the end of the year. Montreal house prices are expected to increase the most

Copyright © 2019 Key Media Pty Ltd

Amenity spaces will enhance community at The Oaks

ROBIN BRUNET
The Province

West Coquitlam has been described as a growing hub of culture and outdoor recreation, an ideal place for families to put down roots and for people to connect with each other. It’s this sense of interaction that has inspired Strand to develop The Oaks as a unique offering to the neighbourhood – and a distinctive addition to Greater Vancouver’s busy housing market.

While the high-quality features and the affordable prices of The Oaks’ one-, two-, and three-bedroom homes are attracting the attention of first-time buyers and young families alike, arguably the most exciting aspect of this project is that Strand is delivering The Oaks as a community within the city, thanks to 28,000 square feet of private indoor and outdoor amenities. “That includes over half an acre of green, family-friendly outdoor space, including private gardens, two courtyards, children’s play areas, an outdoor barbecue area and walking paths,” says Mike Mackay, president of Strand.

The sense of a community within the city is enhanced by the fact that the outdoor space is nestled within what will ultimately be three six-storey condominium buildings, making it both a protective haven for children and respite for adults, as well as a lush architectural feature for homeowners gazing out their windows.

Equally impressive is the sheer volume and usefulness of amenities Strand has included inside The Oaks. All homeowners have access to a 2,700-square-foot living room with elegantly designed comfortable space, including a cosy lounge, a children’s playroom and a reservable dining space with kitchen (ideal for hosting private events and special occasions).

A games room is a space for relaxation and recreation, with pool and foosball on hand, while a fitness studio provides all the luxuries of a modern, fully outfitted training facility.

That’s only part of The Oaks’ offerings. There’s also a spin studio with on-demand digital training sessions, an indoor kids’ play area, a theatre and flexible workspaces for those who need to concentrate or collaborate from home. “Every amenity space Strand has created has been with the intention of promoting human interaction while maximizing utility,” says Mackay. “We want homeowners to meet each other and foster a lasting sense of community together and for families to grow in a safe place.”

However, this abundance of amenities would mean little if it wasn’t matched by livable units developed with an equally high degree of care and thoughtfulness. Strand retained Ste. Marie, which is renowned for its work in the restaurant sector, to bring The Oaks’ homes to life.

Mackay says: “The floor plans of the one-, two-, and three-bedroom homes maximize space with high ceilings and plenty of natural light and have been designed with the utmost attention to detail throughout, from the quartz countertops in the kitchen and the frameless shower doors in the bathrooms, to the USB outlets conveniently located by the master beds.” As for the design of the three buildings themselves, they are West Coast contemporary, distinctly modern and very appealing.

All of these elements are entirely in keeping with Strand’s approach to residential development. “Strand brings a global sensibility and elegance to every project it undertakes,” says Mackay. “We are a local Vancouver based company with over 40 years of experience developing homes in Greater Vancouver and over 23,000 homes across North America. Every project we deliver is underpinned by a commitment to quality and timeless design, which have been major differentiators for our company over the course of its history.”

The other distinct advantage of The Oaks is its location: homeowners are only a 10-minute walk away from the Burquitlam SkyTrain Station (which in turn brings commuters to downtown Vancouver in less than 40 minutes), minutes to the shopping/dining destination of Lougheed Town Centre, and nearby schools for all ages (including Miller Park Elementary School and Banting Middle School) as well as the Simon Fraser University Burnaby campus.

Port Moody is easily accessed from The Oaks by car or SkyTrain and provides a host of family activities at Rocky Point Park, including swimming, biking, wildlife viewing, and kayaking/paddle boarding. (Rocky Point is also a place with plenty of free events, like RibFest and Golden Spike Days.)

Mackay concludes: “The Oaks is unique in its creation of a sense of community within a greater urban space, and West Coquitlam is the ideal neighbourhood for growing families to experience this.”

The Oaks’ presentation centre is now open and Mackay urges prospective buyers to visit the two-bedroom display home at the presentation centre, which is located at 730 Clarke Road, Coquitlam (open daily from noon until 5 p.m. Closed Fridays, or by appointment). Website: www.owntheoaks.com

© 2019 Postmedia Network Inc.

Wesgroup?s MODE to take its place in an expanding Vancouver neighbourhood

Kathleen Freimond
The Province

MODE

What: a 25-storeys building with 257 homes

Where: 3438 Sawmill Crescent, Vancouver

Residence size and prices: One bedroom 562 to 775 square feet; two bedroom 789 to 1391 square feet; three bedroom 1,059 to 1,537 square feet; Starting at $499,900

Developer: Wesgroup Properties

Sales centre: 3202 Riverwalk Avenue, Vancouver

Hours: Open daily 11 a.m. to 4 p.m.

Telephone: 604-879-8830

The 25-storey building is part of the second phase of the 130-acre master-planned community between Kerr Street and Boundary Road in southeast Vancouver.

MODE, Wesgroup Properties’ new tower in Vancouver’s River District, will evoke the neighbourhood’s rich heritage by featuring industrial-inspired materials in the architectural design and incorporating historic artifacts – reminders of the sawmills that once dominated the area – in the building’s elegant lobby.

The 25-storey building is part of the second phase of the 130-acre master-planned community between Kerr Street and Boundary Road in southeast Vancouver.

When complete, the River District will include 250,000 square feet of retail space, 25 acres of green space and approximately 7,000 residences.

Brad Jones, Wesgroup’s vice-president of development, notes that the first phase — the western neighbourhood — is almost complete and the town centre area in the middle of the site, which includes residential development and most of the retail space, is now the focus.

While design guidelines apply to all buildings in the River District, Jones says Wesgroup has been deliberate about recalling the industrial heritage of the site through the use of materials like board-form concrete and incorporating the look of weathered, rusted steel in the buildings it has developed.

 “For MODE, we’ve taken it a step further,” he says. “The mills had old beehive-shaped steel burners on the site and they weathered to a beautiful patina – that patina will be reflected in the fins on the podium façade.”

The entrance to the building will be marked by salvaged V-rollers once used in the sawmills, while a daytime concierge will greet visitors and accept packages in the lobby with its backlit metal panels and detailed millwork.

While architectural design features may recall the past, MODE is attracting a lot of attention for its 9,000 square feet of modern-era amenities and sophisticated interior design, Jones says.

The building has a large entertaining space, which includes an indoor kitchen and dining space that opens to an outdoor terrace; a work hub with two boardrooms, individual booths and meeting spaces; a theatre room with a large-screen projector and surround sound; games lounge with pool table; fitness facility with access to an outdoor hot tub; a workshop and bike repair room and dog-wash station.

Erin Kenwood, Wesgroup’s vice-president of interior design, says that while she expects the common spaces to be popular, residents will find a serene and calm ambience in their homes.

Buyers can choose from two schemes – light or dark – both with a grey palette.

The display unit at the sales centre showcases the dark scheme. The kitchen features a grey marble-look quartz countertop on the island, perimeter cabinets and the slab backsplash. The dual-tone cabinetry has flat-panel high-gloss grey doors and drawer fronts while the island, the oven and microwave tower, and the panels that integrate the Blomberg refrigerator/freezer are a warm wood-look laminate.

The ensuite has a black matte towel rod that gives the space a timeless custom look. A frameless glass shower enclosure with a built-in niche, LED lighting under the large mirror and medicine cabinet and over-sized white porcelain wall tiles contribute to the spa-like look, Kenwood says.

© 2019 Postmedia Network Inc.

Proposed twin 38-storey Alberni Towers would house 455 units in revised concept

Joanne Lee-Young
The Province

Owners of the much-watched White Spot restaurant property in the West End across from Coal Harbour are proposing to build two high-end condo towers, according to a rezoning application filed with the City of Vancouver.

The proposed twin 38-storey Alberni Towers would house 455 condo units and total 433,657-sq.-ft. of floor space.

In late 2017, Carnival Group International, a Chinese company known for building a giant resort in Qingdao on China’s east coast, partnered with Vancouver’s ASPAC Developments to buy two-thirds of the block on West Georgia where it heads from downtown toward Stanley Park.

The $245-million pricetag made it the largest property transaction in the region that year.

With planned zoning for just under 398,000-sq.-ft. of residential space, the sale had an expensive figure of $615 per build-able square foot, and expectations that any condos would be priced accordingly.

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It is not known how Hong Kong-listed Carnival and ASPAC split the investment.

The transaction occurred off the radar of the major commercial real estate players and was brokered instead by a residential real estate agent and a real estate consultant, both based in West Vancouver.

It was months later that a slew of speculation and vacancy taxes and an increase in the foreign buyers tax that would drag on sales and prices for the high-end and presale condo market were introduced.

The White Spot property had been owned by Shato Holdings, which was founded by Peter Toigo and is now run by his sons. Shato had preliminary designs for two towers of 33 and 39 storeys and some 350 condos, but never went through a rezoning process.

Now, the Carnival and ASPAC partnership has hired Connecticut-based Pelli Clarke Pelli Architects to come up with a revised concept. The American firm is known for some skyline-defining buildings, including the Petronas Towers in Kuala Lumpur, the International Finance Centre in Hong Kong, and World Financial Centre in New York.

Pelli’s design includes more than 100 additional condo and townhome units than envisioned by Shato’s plans. It calls for 200 in each 38-storey tower and then 55 in a four-storey “podium” that connects the two. The application is aiming for an increase in total floor area to 433,657 sq. ft.

Vancouver-based ASPAC vice-president Gary Wong, who is listed as a director of the B.C.-registered company on the property’s land title, did not return several calls by Postmedia.

Vancouver-based Gwyn Vose of architecture firm IBI Group is the applicant contact listed on the rezoning application. He referred calls to Vancouver-based Barry Savage of Savage Development Management, who is working with ASPAC.

On its website, Carnival Group International describes its Vancouver property alongside its resort, luxury condo and villa real estate projects in Qingdao, Chengdu (in China’s southwestern Sichuan province), Beijing and Hong Kong.

© 2019 Postmedia Network Inc.

Consumers need to develop an effective selection process in the lead up to hiring a buying agent

Kara Kuryllowicz
REW

REW talked to experienced agents to identify the most important questions consumers should ask to ensure the agent they select will have a positive impact on their buying experience and ultimately their final purchasing decision.

“Listen carefully and ask follow-up questions to find out what they’ll do, how they’ll do it and if they delivered on their promises to other customers,” says Bryan Velve, RE/MAX Crest Realty, an agent with 30+ years in the Vancouver area. “Agents are the kings and queens of the job interview and they know how to morph to appeal to a prospect.”

1) How many years have you worked as an agent?
REW’s expert agents concur, experience is crucial but note a less experienced, hungry agent with a deep commitment to acquiring knowledge and staying current will work just as hard.

2) What did you do before you became an agent?
Previous careers can also provide relevant insights and approaches to financing, negotiating, construction and more, so find out what they did before launching their real estate careers.  This is especially important for new agents.

3) How will I benefit if I hire you as my agent?
“Ask open-ended questions that can’t be answered yes or no,” says Julie Hughes, who runs Hughes Workman, Keller Williams, Toronto, with partner Doug Workman.

4) How do you find listings?
Agents that rely exclusively on automated alerts could do far more. “I leverage my long-term connections to find out if a colleague is about to list a property that fits my client,” says Velve.

5) How can you help me get pre-qualified?
Agents know that up to 95% of buyers aren’t pre-qualified and that in certain neighborhoods, they’ll lose out on every single offer as a result. “Can they introduce you to mortgage brokers they’ve vetted and individuals they’ve done business with over the years?” says Sandra Pate, Johnston & Daniel, Royal Lepage, Toronto.

6) What type of experience do you have in neighborhoods X, Y and Z?
What can you tell me about Toronto’s Leslieville or Vancouver’s Kitsilano that’s not common knowledge? Ideally, your buying agent knows that neighbourhood because they’ve bought, sold and walked through homes in the area.

7) How many homes in the $XX price range have you bought for clients?
“If you’re buying a multimillion-dollar home, you need an agent that is comfortable in that niche,” says Velve.  Conversely, they need to know what’s considered the norm and acceptable in a lower-end home.

8) Do you specialize in a particular type of dwelling?
In major centres, such as Toronto and Vancouver, agents may focus exclusively on condos, where buyers need to consider everything from maintenance fees to short-term rental and smoking regulations.

9) How do you evaluate comparables?
Agents look at recently sold properties that are similar to the home you want to buy. “To develop truly accurate comparables, agents really need to know the neighbourhood and its homes, particularly in downtown neighbourhoods where cookie-cutter homes are the exception,” says Pate.  Homes with three-bedrooms, two-bathrooms, a finished basement and parking can be surprisingly unique beyond those basics.  

10) How do you pre-screen and inspect listings on my behalf?
Agents that continue to attend agent open houses and engage in one-on-one conversations with the listing agents can save buyers time and help manage their purchasing experience. “You simply can’t see it all on a computer screen because no one photographs or posts the ugly parts or the horrible views,” says Pate. “Virtually every property will look better in pictures and online than in real life.”

11) How many listings will we see together?
Velve always sees several homes with buyers to identify the unexpected attractions and turnoffs. “Buyers typically need to see several homes to figure out what actually matters to them in real life,” says Velve. “I need to be there to point out and discuss both the positive and the negative.”  

12) How do you approach an offer?
In downtown Toronto and Vancouver, where demand tends to be high and supply short, agents must structure offers to their specific markets.

13) How will you negotiate on my behalf?
Beyond price, closing dates can be negotiated to accommodate sellers if buyers can stay with friends, family or find a short-term rental. What other factors will they consider during negotiations? “Be flexible and get creative to get the home you want,” says Pate.

Review the questions, create a list and be prepared to take detailed notes before you start the 13-question interview process that will help lead you to the agent that will help you find and win the home that meets your most vital criteria.

© 2019 REW. A Division of Glacier Media

Two 38-storey towers could replace the West Georgia White Spot and adjacent lot

Western Investor

Two 38-storey towers could replace the West Georgia White Spot, and a gravel lot beside it, which is currently being used as a dog park.

A four-storey podium would connect the two towers on the site located from 1608 to 1616 West Georgia at Cardero Street.

IBI Group filed the rezoning application for the property. Pelli Clarke Pelli Architects and PFS Studio land architects are also involved.

The property sold for a reported $245 million in 2017.

The buildings, each measuring 385 feet, would feature 455 strata residential units — 200 in each of the towers and another 55 in the podium.

The application is being considered under the West End Community Plan and the Rezoning Policy for the West End.

An open house for the project is on May 23.

Several other towers are proposed for that stretch of West Georgia, including a 33-storey residential building proposed for 1698 West Georgia at Bidwell Street, which used to be home to a Chevron gas station, and a 49-storey tower proposed for 1450 West Georgia at Nicola Street.

Copyright © Western Investo