Fourth Quarter Housing Market Trends Seal 2017 as ‘the Year of the Condo’

According to the Royal LePage House Price Survey, Canada’s residential real estate market saw strong, but slowing year-over-year price growth in the fourth quarter of 2017. While year-over-year aggregate appreciation remained high in the Greater Toronto Area (GTA) and Greater Vancouver, two-storey and bungalow home values softened in the GTA, slightly declining on a quarter-over-quarter basis. Meanwhile, in both Greater Vancouver and the GTA, condominium prices continued to outpace all other property types, primarily due to growing affordability constraints within these markets.
The Royal LePage National House Price Composite, compiled from proprietary property data in 53 of the nation’s largest real estate markets, showed that the price of a home in Canada increased 10.8 per cent year-over-year to $626,042 in the fourth quarter of 2017. When broken out by housing type, the median price of a two-storey home rose 11.1 per cent year-over-year to $741,924, and the median price of a bungalow climbed 7.1 per cent to $522,963.
During the same period, the median price of a condominium appreciated faster than any other housing type studied, rising 14.3 per cent to $420,823 on a year-over-year basis. This trend was predominantly driven by the significant price gains witnessed in many of the country’s largest condominium markets. In the GTA, the median price of a condominium increased 19.5 per cent year-over-year to $476,421, while in the City of Toronto, the segment saw a similar gain of 19.6 per cent year-over-year to $515,578. In Greater Vancouver, condominiums also followed a similar price trajectory during the quarter, rising 20.2 per cent to $651,885, while the median price of a condominium unit in the City of Vancouver rose 18.7 per cent to $775,806. Many suburban markets across the GTA and Lower Mainland of British Columbia posted strong year-over-year condominium price gains of 20 per cent or more as well, with the segment appreciating at a faster rate than detached homes, which had previously led the charge.
“To prospective homeowners in our largest cities, condominiums represent the last bastion of affordability,” said Phil Soper, president and CEO, Royal LePage. “This is especially true for first-time buyers whose purchasing power has been reduced by tightening mortgage regulations.” Click here for more.
https://www.royallepage.ca/en/realestate/news/fourth-quarter-housing-market-trends-seal-2017-as-the-year-of-the-condo/

Time for a mortgage review

The start of a new year almost always inspires individuals to commit to resolutions that will improve the quality of life. And in the spirit of the new year, new you mantra, a mortgage review reminder is aptly timed.
Many mortgage holders underestimate the value of proactively reviewing their finances and in particular their mortgages. Yet just like annual health checkups, annual mortgage reviews are every bit as important as reviews can sometimes result in hundreds or even thousands of dollars in savings. They also are very useful when trying to determine if the mortgage plan still fits one’s circumstances.
Reviewing a mortgage allows the holder to look at several factors that include reviewing the mortgage term, the monthly payments and even the insurance coverage on the loan. The review can include looking at individual credit and the value of your home. As a mortgage broker, I can discuss the impacts on your long term finances if we create a plan that that could potentially include making increased monthly payments or contributing a lump sum.
With the new year underway and Canadians’ buying power being impacted due to new stress test rules that came into effect as of January 1, home owners and buyers need to seek the advice of a licensed mortgage professionals, such as myself. I can expedite the review process with a simple check of current rates and fees for a refinance and the terms of the current loan.
Contact me today to start the conversation and ultimately find the best mortgage for your needs.

Non-Resident ownership of condo apartments remains low and stable: CMHC

The share of condominium apartments owned by non-residents remains low in the 17 Canadian Census Metropolitan Areas (CMAs) surveyed, with the majority reporting shares of less than 1%. Non-resident ownership shares remained stable in Vancouver and Toronto, while Montreal saw an increase.
Toronto, Vancouver, Montréal, Halifax, Victoria and Gatineau have non-resident ownership shares above 1% of the condominium apartment stock.
Montréal saw an increase in the share of non-resident ownership of condominium apartments, rising from 1.1% in 2016 to 1.7% in 2017.
“The share of condominium apartment owned by non-residents remained low and stable in Canada. The lack of growth in Toronto and Vancouver, combined with the increases in Montréal, indicate the possibility of a shift from these centres after the introduction of foreign buyers’ taxes in Ontario and British Columbia. Other factors attracting demand to Montréal include lower housing prices and a relatively strong economy. It should be noted that foreign ownership is just one of the factors influencing Canada’s housing markets. Other important factors include housing and land supply constraints as well as the economic and demographic fundamentals that drive housing demand,” says Bob Dugan, Chief Economist, CMHC.

Construction intentions for multi-family dwellings in Montréal continue to climb

In October, the value of permits for both single-family and multi-family dwellings increased in the CMAs of Montréal and Toronto. However, in the Vancouver CMA, both residential components fell, offsetting the gains in September.
Municipalities in the CMA of Montréal issued $538.1 million in permits for multi-family dwellings in October, higher than in Toronto ($409.2 million) and Vancouver ($330.6 million). In regards to single-family homes, Toronto registered $451.3 million in permits, followed by Vancouver ($148.1 million) and Montréal ($122.4 million).
The Montréal CMA issued permits approving the construction of 2,956 new units, stemming mainly from multi-family dwellings (2,720). October marked the fifth consecutive month where the number of units approved for multi-family dwellings exceeded 2,000. Vancouver approved the construction of 1,860 new units for multi-family homes, while Toronto (1,691) approved fewer despite having a higher value for the component.

Housing Market Digest by Will Dunning, Economist for Mortgage Professionals Canada

The Office of the Superintendent of Financial Institutions (“OSFI”) now requires that all residential mortgages by federally-regulated lenders must be “stress-tested”, at two percentage points above the contract interest rate (or the 5- year posted rate, if that is higher). In combination with the requirements for mortgage insurance, about 90% of all new mortgages will be tested.
This can be expected to reduce housing activity by 10-15%. It is on top of the impact from recent rises for mortgage interest rates (another 5-10% drop in activity). The combined 15-25% drop in housing activity will affect the broader economy.
In two years, employment could be 150,000-250,000 lower than it would otherwise be. There is a risk that house prices will fall. In a modern economy, a sustained drop in house prices is one of the most dangerous things that can happen: as happened in the US a decade ago, falling house prices can turn into widespread economic decline.
Resale activity recovered a bit more in September, to 492,900, due to partial rebounds in BC and Ontario. Activity is flat in most other areas.
CREA’s House Price Index was flat in September. The year-over-year change is now 10.7% (down from the peak of 19.7% that was seen in April).
The sales-to-new-listings ratio (“SNLR”) was 55.7% in September, slightly above the balanced market threshold of 51%. This indicator points to an outlook for stable prices (at worst). But, as noted, OSFI’s stress test policy creates a risk of falling prices.
We should, in general, expect that resale activity will trend upwards over time, because the population is growing and the housing inventory is expanding. Therefore, it is useful to look at sales on a per capita basis. Recent activity is below the long-term average.

Employment increased by 35,000 in October

In October, employment rose for youth aged 15 to 24, while it was little changed for the core-aged population of 25- to- 54 year-olds, and for people 55 and older. The largest employment increase was in Quebec, followed by Alberta, Manitoba, Newfoundland and Labrador, and New Brunswick. At the same time, there was a decline in Saskatchewan.
Employment rose in several industries, led by "other services;" construction; information, culture and recreation; and agriculture. Employment declined in wholesale and retail trade.
The number of private sector employees increased in October, while public sector employment and self-employment were little changed.

Canadian home sales edge up again in October

According to statistics released by The Canadian Real Estate Association (CREA), national home sales posted a modest monthly increase in October but remain below levels recorded one year ago.
“Newly introduced mortgage regulations mean that starting January 1st, all home buyers applying for a new mortgage will need to pass a stress test to qualify for mortgage financing,” said CREA President Andrew Peck. “This will likely influence some home buyers to purchase before the stress test comes into effect, especially in Canada’s pricier housing markets. A professional REALTOR® is your best source for information and guidance in negotiations to purchase or sell a home during these changing times.”
Home sales via Canadian MLS® Systems edged up 0.9% in October 2017 on the heels of monthly increases in August and September, but remained almost 11% below the record set in March.
“National sales momentum is positive heading toward year-end,” said Gregory Klump, CREA’s Chief Economist. “It remains to be seen whether that momentum can continue once the recently announced stress test takes effect beginning on New Year’s day. The stress test is designed to curtail growth in mortgage debt. If it works as intended, Canadian economic growth may slow by more than currently expected.”

Tips to take charge of your finances and live within your means

(NC) Are you stressed about money? Being in control of your spending is one way of reducing stress in your life.
According to Statistics Canada, most of us are burdened with high levels of household debt. Simply put, too many people are spending more than they earn. They are saving less and not saving enough for retirement. At the same time, people are living longer.
Living within your means is not always easy, especially when money is tight, but it is the best way to avoid excessive debt. A heavy debt load makes you vulnerable if you lose your job, have unexpected expenses or interest rates go up on your loans.
Here is how you can start:
Make a budget. Having a budget that lays out sources of income and monthly expenses can help you commit to a spending plan.
Know the difference between your wants and needs. Put your needs first; your wants can wait.
Choose your credit card wisely. Pay off the balance in full each month so you can build a good credit history and avoid high interest charges.
Think ahead to retirement. Canadians are living to an average age of 86. If you retire at 65, that could mean you are living off savings for 21 years or more. Start saving as soon as you can.
Find more tips from the Financial Consumer Agency of Canada online at canada.ca/it-pays-to-know.
www.newscanada.com

Bank of Canada maintains overnight rate target at 1 per cent

The Bank of Canada today maintained its target for the overnight rate at 1 per cent. The Bank Rate is correspondingly 1 1/4 per cent and the deposit rate is 3/4 per cent.
Inflation has picked up in recent months, as anticipated in the Bank’s July Monetary Policy Report (MPR), reflecting stronger economic activity and higher gasoline prices. Measures of core inflation have edged up, in line with a narrowing output gap and the diminishing effects of lower food prices. The Bank projects inflation will rise to 2 per cent in the second half of 2018. This is a little later than anticipated in July because of the recent strength in the Canadian dollar. The Bank is also mindful that global structural factors could be weighing on inflation in Canada and other advanced economies.
The global and Canadian economies are progressing as outlined in the July MPR. Economic activity continues to strengthen and broaden across countries. The Bank still expects global growth to average around 3 1/2 per cent over 2017-19. However, this outlook remains subject to substantial uncertainty about geopolitical developments and fiscal and trade policies, notably the renegotiation of the North American Free Trade Agreement.

OSFI tightens mortgage rules

The Office of the Superintendent of Financial Institutions Canada (OSFI) published the final version of Guideline B-20 − Residential Mortgage Underwriting Practices and Procedures. The revised Guideline, which comes into effect on January 1, 2018, applies to all federally regulated financial institutions.
The changes to Guideline B-20 reinforce OSFI’s expectation that federally regulated mortgage lenders remain vigilant in their mortgage underwriting practices. The final Guideline focuses on the minimum qualifying rate for uninsured mortgages, expectations around loan-to-value (LTV) frameworks and limits, and restrictions to transactions designed to circumvent those LTV limits.
OSFI is setting a new minimum qualifying rate, or “stress test,” for uninsured mortgages.

OSFI is requiring lenders to enhance their loan-to-value (LTV) measurement and limits so they will be dynamic and responsive to risk.

OSFI is placing restrictions on certain lending arrangements that are designed, or appear designed to circumvent LTV limits.

To find out how this will affect you, please contact me at anytime.