New federal program to help middle class families purchase a home

Steve Randall
Canadian Real Estate Wealth

A new federal program designed to help middle class families get on the housing ladder is being introduced while the previously announced Shared Equity Mortgage Provider Fund will launch next month.

The federal government has announced that the First-Time Home Buyer Incentive will reduce monthly mortgage payments for first-time buyers without increasing their down payment.

The incentive will allow eligible first-time homebuyers who have the minimum down payment for an insured mortgage with CMHC, Genworth or Canada Guaranty, to apply to finance a portion of their home purchase through a form of shared equity mortgage with the Government of Canada.

For existing homes, the incentive will be 5% while for new homes there will be a 5% or 10% option. The larger share available for new homes aims to boost housing supply.

The program will launch on September 2, 2019, with the first closing on November 1, 2019.

“The First Time Home-Buyer Incentive is designed to benefit those who need more assistance with housing costs, middle class Canadians. Thanks to mortgage payments that are more affordable, many families will have hundreds of dollars more each month in their pockets – money to spend on things like healthy food, sports activities for their kids, or even save for the future.” said Bill Morneau, Minister of Finance.

The government has clarified that:

• Doubling the incentive for purchasers of new homes encourages new housing supply.
• No on-going repayments are required, the incentive is not interest bearing, and the borrower can repay the incentive at any time without a pre-payment penalty.
• The government shares in the upside and downside of the change in the property value.
• The buyer must repay the incentive after 25 years, or if the property is sold.
• The incentive will be available to first-time homebuyers with qualified annual household incomes up to $120,000. At the same time, a participant’s insured mortgage and the incentive amount cannot be greater than four times the participant’s qualified annual household income.

without FTHBI	with FTHBI	without FTHBI	with FTHBI	without FTHBI	with FTHBI
House Price	$200,000	$200,000	$350,000	$350,000	$500,000	$500,000
Down Payment (5%)	$10,000	$10,000	$17,500	$17,500	$25,000	$25,000
FTHBI (10%)	NA	$20,000	NA	$35,000	NA	$50,000
Insured Mortgage	$190,000	$170,000	$332,500	$297,500	$475,000	$425,000
Insured Mortgage + Mortgage Insurance Premium	$197,600	$174,760	$345,800	$305,830	$494,000	$436,900
Monthly Payment*	$989	$875	$1,731	$1,531	$2,473	$2,187
Savings on Monthly Payment	$114		$200		$286
Savings on Yearly Payment	$1,372		$2401		$3,430

“Through the National Housing Strategy, more middle-class Canadians – and people working hard to join it – will find safe, accessible and affordable homes. Our proposed measures will reduce the monthly mortgage for your first home by up to $286. This will mean more money in the pockets of Canadians and will help up to an estimated 100,000 families across Canada,” added Jean-Yves Duclos, Minister of Families, Children and Social Development and Minister Responsible for Canada Mortgage and Housing Corporation.

Shared equity fund

As announced in Budget 2019, the government is also introducing the Shared Equity Mortgage Provider Fund, a five-year, $100-million lending fund to assist providers of shared equity mortgages to help eligible Canadians achieve affordable homeownership.

The fund will launch on July 31, 2019 and will be administered by CMHC. It will support an alternative homeownership model targeted at first-time homebuyers, help attract new providers of shared equity mortgages and encourage additional housing supply.

Copyright © 2019 Key Media Pty Ltd

Canadians in Hong Kong might flee for security reasons

Ephraim Vecina
Mortgage Broker News

Now on their second week, massive protests in Hong Kong continued to pressure its leaders to step down and revoke a contentious extradition bill – which might lead to a significant number of expats fleeing the territory for security reasons, an industry expert stated.

Since June 9, as much as two million Hong Kongers have taken to the streets in virulent opposition to the measure. The bill has controversially proposed a mechanism for ensuring that fugitives (and other targets like political opponents) in the territory face strict trial in the mainland.

Immigration lawyer Richard Kurland stated that many Canadians who stay and work in Hong Kong might decide to pack up and return to more stable environments back home. At present, approximately 300,000 Canadians reside in the former British Colony, according to figures from Global Affairs Canada.

But Kurland warned that many provinces, especially British Columbia, are unprepared to accommodate this influx.

“B.C.’s infrastructure is at risk with a sudden mass migration of Canadians or permanent residents living in Hong Kong,” he told Global News late last week. “Education, roads, hospitals, property prices would be immediately impacted.”

Kurland added that immigration lawyers are bracing themselves for a flood of travel document applications, study/work permit requests, and permanent-resident card renewals.

Moreover, many of the expats will likely hail from the moneyed class, which is expected to have a knock-on effect upon Vancouver’s high-end housing market.

“While prices may be down, that market could see another spike up if those millionaires feel they need to protect their cash and exercise their rights to come home,” Kurland explained.

Copyright © 2019 Key Media

BCREA 2019 Second Quarter Housing Forecast

BCREA

The British Columbia Real Estate Association (BCREA) released its 2019 SecondQuarter Housing Forecast today.

Multiple Listing Service®(MLS®) residential sales in the province are forecast to decline 9per cent to 71,400 units this year, after recording 78,346residential sales in 2018. MLS®residential sales are forecast to increase 14per cent to 81,700 units in 2020. The 10-year average for MLS®residential sales in the province is 84,300 units.

“The shock to affordability from restrictive mortgage policies, especially the B20 stress test, will continue to limit housing demand in the province this year,”said Cameron Muir, BCREA Chief Economist.“However, a relatively strong economy and favourable demographics are likely creating pent-up demand in the housing market,”

The inventory of homes for sale has climbed out of a cyclical low, leading to balanced market conditions in many areas and buyer’s market conditions in some communities and across some products types. Current market conditions are expected to provide little upward pressure on home prices this year, with the average annual residential price forecast to remain essentially unchanged, albeit down 2 per cent to $697,000. Modest improvement in consumer demand is expected tounfold though 2020, pushing the average residential price up 4 per cent to $726,000.

To view the full BCREA Housing Forecast, Click here.

© BCREA

The Canada Mortgage and Housing Corporation?s First-Time Home Buyer Incentive falls short of helping those it is targeted toward

Josh Sherman
Livabl

The co-founder of a popular Canadian rate-comparison website says the Canada Mortgage and Housing Corporation’s First-Time Home Buyer Incentive falls short of helping those it is targeted toward to begin with.

“The key issue remains qualifying, and this program diminishes the amount that a first-time home buyer can qualify for by about 15–20 per cent,” explains James Laird of Ratehub.ca in a statement.

The shared-equity mortgage program, first announced this spring with the Liberals’ 2019 federal budget, comes into effect this September. It will see the federal government contribute up to 10 percent towards the cost of a home in exchange for an equivalent equity stake in the property.

But Laird says that limits to the program — the maximum mortgage is capped at four times a household’s income to a top limit of $120,000 — stand in the way of it helping those most likely to want to take advantage of it.

“[T]hose not participating in the program can actually qualify for a mortgage that is 4.5–4.7 times their income,” he explains.

Laird suggests would-be participants are those who want to buy at the maximum amount they can qualify for.

“However, because the program diminishes how much you can qualify for it doesn’t serve the needs of the group it is targeted at. Canadians can get a larger loan by not participating in the program,” Laird explains.

Comments from Laird follow today’s announcement from CMHC providing further details about the program.

CMHC confirmed that there is no interest on the incentive amount and that participants have 25 years to repay the incentive, or when the project is sold, whichever comes first.

The Crown corporation is establishing a $100-million fund to attract mortgage providers to participate in the program.

On a $500,000 home, the program can help a household up to $286 a month, or $3,430 annually.

“Thanks to mortgage payments that are more affordable, many families will have hundreds of dollars more each month in their pockets – money to spend on things like healthy food, sports activities for their kids, or even save for the future,” says Finance Minister Bill Morneau in a news release.

© 2019 BuzzBuzzHome Corp.

Farm families caught in housing limbo by tighter Agricultural Land Reserve rules

Randy Shore
The Vancouver Sun

The modular home they had bought to move onto the new family farm is in limbo after the deadline for second dwellings on farms passed before they could complete the land purchase.

Early last November, Brian was diagnosed with Parkinson’s Disease, necessitating a move from their three-level home. So the Fichters sold and pooled their resources with their daughter, Alanah Fuduric, and her husband Ryan, who are raising six children.

Now, all 10 of them are packed into one house.

Provincial Bill-52 eliminated a rule that allowed an “additional residence not necessary for farming if it was a manufactured home for immediate family or carriage house” on land in the Agricultural Land Reserve, according to the Ministry of Agriculture. The legislation included a suite of changes meant to discourage mega-homes on farmland with a goal of preserving as much land as possible for farming.

The bill passed on Nov. 27 and set a deadline of Feb. 22 for people to have all their permits and authorizations in place.

Farmers say the second dwelling change was not widely communicated.

“We wanted a farm to raise our children on, and a place where we could take care of my parents as they age,” said Alanah.

Cathy drives to Mission several times a week to look after her own father who has cancer and a mother who has dementia. With six children and a working farm, Alanah fears she would not be able to help her parents when the time comes unless they are close by.

“I feel guilty that (Cathy and Brian) gave up a paid-off home to downsize and help us purchase this farm, and now they are in a bedroom,” she said.

At first, everything appeared to be going to plan.

In November, they found the perfect spot, a property they could all share with plenty of room to place a second dwelling. They checked with the Township of Langley, which assured them a modular home would be no problem, said Cathy.

The five-acre property hasn’t been farmed in 10 years, but beef cattle and goats are arriving shortly. Cathy and Brian are putting in a garden and helping with the repairs to the paddock and barn so they can board horses.

In the process of buying the home and obtaining all the necessary permits, they missed the application deadline for a second dwelling by four days.

Worse, they weren’t even aware that the clock had been winding down.

In the three months after Bill-52 passed, the family consulted several times with township officials on their modular home installation to meet permit requirements due to arsenic in the water. At no time were they warned that a vital deadline was approaching, the Fichters say.

But when the water issue was finally resolved, they were told that new rules had just come into effect and their modular home would not be allowed.

“Our realtor didn’t know this was happening, and the seller’s realtor who is a farm specialist didn’t know it was happening,” said Cathy. “No one seemed to know this was coming.”

An appeal to the Agricultural Land Commission has not yet been resolved.

The Fuduric-Fichter family’s situation is hardly unique. A Facebook page started by Meghan McPherson called Changes to Bill 52 has swelled to 340 members, many of whom are caught up by the new regulation.

McPherson and her husband bought an small hobby farm in the Comox Valley two years ago with the intention of housing her in-laws in a carriage house suite and her widowed mother in a modular home. The regional district assured them that they would be compliant with local and provincial regulations.

The carriage house was built and McPherson began consulting with Island Health, the Ministry of Transportation, and B.C. Hydro about servicing the modular home. Again, no one — including the home builder — seemed to know that the Bill-52 deadline was fast approaching.

They didn’t find out about the rule change until six weeks after the deadline had passed, and by then her mother had already sold her home.

McPherson is seeking a systemic review of the implementation of the bill with the B.C. Ombudsperson.

“I’ve heard from MLAs and farmers on Vancouver Island, the Fraser Valley, the Okanagan, the Kootenays and every corner of B.C. about this,” said Liberal agriculture critic Ian Paton, who met with concerned farmers Friday in Courtenay.

“Three months isn’t close to enough time to get through all the applications, environmental assessments, inspections and permits,” he said. “To spring this on people was really poorly thought out. It should have been at least a year.”

Aging farmers are in a position now where they have to move off their farm to let the next generation take over, he said.

Manufactured home builders have been hit hard by the regulation, said Gord Rattray, executive director of the Manufactured Housing Association of B.C.

“We learned about this after it happened, and we weren’t consulted by the government,” he said. “Anywhere where there is ALR land there are orders cancelled, not proceeding or delayed.”

The regulation eliminates a source of affordable housing, especially on small two- or three-acre lots that are not viable for farming, he said.

The ministry is clear in its intention to preserve all farmland.

“With a growing population, climate change and ongoing land-use pressures, it has never been more important to ensure that the tiny percentage of land in B.C. that is best suited for agriculture is available and affordable for farmers and ranchers to produce the food that British Columbians need,” said a spokesman.

“Right now, people who live in the ALR and want to build additional homes on farmland to support their farming operations can do so with permission from their local government and the Agricultural Land Commission.”

© 2019 Postmedia Network Inc.

Millennials don?t want parking anymore

Neil Sharma
Canadian Real Estate Wealth

Constructing a below-grade parking spot in downtown Toronto can cost as much as $100,000—an exorbitant amount that contributes millennials’ affordability woes.

“What we’ve been hearing from our developer members is millennials can’t afford parking on top of the price of a condo unit and they don’t want parking anymore,” said Residential and Civil Construction Alliance of Ontario (RCCAO) Executive Director Andy Manahan. “In some buildings, we’re building too much underground parking.”

An RCCAO-commissioned report—How Parking Regulations Need to Evolve for High-Rise Buildings—released by the Ryerson Urban Analytics Institute noted that the City of Toronto hasn’t updated its parking standards in 33 years and, furthermore, determined millennial-aged downtown dwellers often forego vehicular ownership in favour of bicycles and ride hailing services like Uber and Lyft.

But the price of the superfluous parking spot is still passed onto the consumer—and, in the case of millennials, it can be the difference between homeownership and renting.

In addition to affordability troubles, the report also says that below-grade parking garages impede Toronto’s stormwater management capacity.

“The mandate for the construction of underground parking structures has exacerbated Toronto’s stormwater problems through a somewhat complex interplay with groundwater,” read the report. “Supplying underground parking to serve high-rise buildings means the construction of up to six levels of underground parking, where groundwater is often encountered. The proliferation of tall buildings with hundreds of suites necessitates deep multi-level underground parking structures then increases the likelihood of encountering groundwater or hydrostatic pressure on buildings, as well as on the surrounding geology, decreasing the ground’s geological capacity to hold additional water from precipitation.”

Above-grade parking garages are also easier to repurpose for other uses, as well. With the imminent rise of autonomous vehicles, vehicular ownership will become even scarcer in Toronto than it is today. Manahan says that not only are cyclists becoming increasingly ubiquitous in the city, institutional investors are reticent about constructing a “white elephant.”

“If major REITs in the U.S. are required to provide parking as part of a development, they will ensure it’s designed so that ti could be repurposed in the future because they don’t want to get stuck with a white elephant,” he said. “A lot of concrete goes into a parking structure and they don’t want to get stuck with the cost, so they look at how to make it more flexible for future uses.”

Copyright © 2019 Key Media Pty Ltd

CREA Reverses Glum Forecast as Sales Improve

Penelope Graham
other

National real estate sales continued to improve in May, inching closer to the historical norm. That’s put upward pressure on home prices and has also prompted the Canadian Real Estate Association (CREA) to positively update its forecast for the remainder of this year and next.

Sales rose 1.9% last month from April levels, and 6.7% from the same time in 2018; that’s the highest sales activity since January 2018, and an 8.9% improvement from the six-year low that plagued the national market in February. The May numbers also mark the largest year-over-year sales gain since the summer of 2016 and have effectively returned activity to the 10-year average for the month. Two thirds of all markets saw an uptick in sales, with the lion’s share in demand for Greater Toronto real estate listings, which accounted for more than half.

The supply of new homes for sale also shrank slightly, with -1.2% fewer new listings brought to market compared to the month before. Combined with increased sales, that’s nudged market conditions closer to seller-friendly territory, and heated the average national home price by 1.8% to $508,000. 

However, the Home Price Index, which measures the overall value of homes sold, fell for the 5^thstraight month, down -0.6% from May 2018. This could indicate a greater proportion of more affordable homes sold, such as condos, as higher-priced single-family homes remain out of financial reach for buyers in Canada’s hottest markets. Dramatic declines in sales and prices in British Columbia markets also pulled the HPI down by the most in a decade.

CREA Reverses Glum Forecast as Sales Improve

CREA expects this uptick in sales to continue well into 2020, and has reversed its previous forecast for a -1.6% decline this year to an increase of 1.2%, which would total 463,000 homes changing hands. That will rise by an additional 4.4% in 2020. The average national home price, however, will dip slightly this year by -0.6% before increasing again by 0.9% to $490,000 next year. 

While an uptick in sales is encouraging, CREA is quick to point out that improvements are uneven across the country, with a growing gap in price trends between Eastern and Western Canada; it expects price pain to continue in British Columbia, Alberta, and Saskatchewan, while heating in Ontario, Quebec, and the Maritime provinces.

Stress Test Continues to Quell Markets

As it has over the last year, CREA continues to pin the stressors in these declining markets on the nationally-mandated mortgage stress test, which requires mortgage borrowers to qualify for a mortgage rate roughly 2 per cent higher than the one they’ll actually receive from their bank. That’s chopped purchasing power and is being especially felt in markets where employment and migration aren’t helping to prop up real estate demand. 

That’s led to supply and demand imbalances in depressed markets, and should prompt a second look from policy makers, says Gregory Klump, CREA’s chief economist.

“The mortgage stress test continues to present challenges for home buyers in housing markets where they have plenty of homes to choose from but are forced by the test to save up for a bigger down payment,” he stated. “Hopefully the stress test can be fine tuned to enable home buyers to qualify for mortgage financing sooner without causing prices to shoot up.”

Edging Towards a Sellers’ Market

Overall, the national housing market became a little more heated for buyers, as demand outweighed the supply of new homes in several markets. The national sales-to-new-listings ratio – a metric used to measure the level of competition in a market – clocked in at 57.4%, up from 55.7% last month. CREA defines a ratio between 40 – 60% to be a balanced market, with below and above that range indicating buyers’ and sellers’ markets, respectively. While the May market edged closer to sellers’ conditions, it remains balanced as a whole, with three quarters of all markets remaining in balanced territory. However, buying conditions are a bit tighter than usual, above the long-term average of 53.5%.

Months of inventory, which reflects the total amount of time required to completely sell off all available homes for sale, was 5.1 in May, down from 5.3 in April, and 5.6 in February. However, the supply of inventory was spread unevenly across the country with a glut of available homes in the prairie provinces as well as in Newfoundland and Labrador, and less than usual in Ontario and the Maritimes.

Home Prices by Region

British Columbia: The Greater Vancouver MLS and Fraser Valley markets continue to absorb large declines with prices falling -8.9% and -5.9%. The Okanagan also saw a more moderate price decrease of -0.7%, though they rose by 1% in Victoria and 4.7% elsewhere on Vancouver Island. 

Ontario: May home prices rose in every market except Barrie and District, which declined by -6.1%. Otherwise, they were up 5.7% in Guelph, 5.4% in the Niagara Region, 3.4% in Hamilton-Burlington, 3.4% in Oakville-Milton, 3.1% in the GTA, and up 8% in Ottawa.

Prairies: Supply remains well above sales levels in Canada’s bread basket, which continued to push prices lower in May. They fell -4.3% in Calgary, -3.6% in Edmonton, -3.9% in Regina, and -1.3% in Saskatoon. This will continue to be the case until supply and demand re-stabilize says CREA, as these markets sit on a surplus of inventory and suffer from weaker purchasing power.

Eastern Canada: Montreal continues to boom, with healthy demand pushing prices up by 6%. Greater Moncton also saw an improvement of 2% over the course of the month.

© 2015-2017 Zoocasa Realty Inc.,

Investors in Vancouver offices see greatest growth

Steve Randall
REP

Investors in prime offices in Vancouver are seeing the greatest rent growth across major global markets.

A report from CBRE shows that over the past two years rents have gained 31%, beating growth in London, Tokyo, and New York combined. Vancouver is the only city to make the top 10 in CBRE’s Global Prime Office Occupancy Costs report for the past 2 years.

“It comes as no surprise that the cost of renting office space in Vancouver is climbing so quickly. We’ve got a powerful combination of strong tenant demand, limited available space and new supply that is still years out,” said Norm Taylor, Managing Director for CBRE Vancouver. “The ongoing challenge for occupiers is to secure quality space that meets the increasingly exacting demands of the workforce, while also controlling costs.”

Although Toronto’s downtown market has posted the lowest vacancy rate in North America over recent years, rent growth for prime offices there was a more modest 13.3% over the past 2 years.

Tighter supply

CBRE says Toronto’s smaller rise in rents can be attributed to it being farther along in its development cycle, with nearly 3.5 million sq. ft. of new downtown office supply slated for delivery within the next year.

By comparison, Vancouver has a lower level of near-term delivery which is pressuring rents. With CBRE expecting that Vancouver will see its vacancy rate tighten to the lowest in North America for the second quarter of 2019, this trend is set to continue.

“While Vancouver’s had Canada’s greatest office occupancy cost increase,” noted Taylor, “the city is only the 66th most expensive market globally, with rents 1/6th of those in Hong Kong, the world’s most expensive office market, and 1/4 of those in London, the world’s second-most expensive market.”

What tenants want

CBRE says that the current trend for prime office tenants remains focused on high-quality space in markets with robust infrastructure and social amenities.

This is vital given the competition for talent with prime workspaces giving companies a cultural advantage in hiring.

Copyright © 2019 Key Media Pty Ltd