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How can Doug Ford fix Toronto-area housing?

Posted on 20 June 2018 by admin

Premier-designate Doug Ford must make housing affordability a priority, say builders, realtors and urbanists.

“This really is a generational challenge. The challenge of the folks who are going to live in the GTA over the next 25 years is something that needs to be the central focus of the provincial government,” said David Wilkes, CEO of the Building Industry and Land Development Association (BILD).

He was among seven experts who told the Toronto Star how a new Ontario Progressive Conservative government could make housing more affordable and more available.

Also weighing in were: Cherise Burda, executive director of the Ryerson City Building Institute; Tim Hudak, CEO of the Ontario Real Estate Association; David Amborski, founding director of the Centre for Urban Research and Land Development at Ryerson; Ben Myers, president of Bullpen Research & Consulting; Jeff Parker, senior manager of policy for the Toronto Region Board of Trade, and Toronto councillor and housing advocate Ana Bailao.

Boost supply

Streamlining planning and zoning approvals would bring more housing on the market sooner, said Wilkes. Right now it can take up to 52 separate approvals to bring a home to market in this region, he said — layers of municipal and provincial regulation that “create a quagmire that dramatically slows down the pace of building new homes,” he said.

“Overregulation” can add up to six figures to the cost of a new home, said Hudak, citing a recent C.D. Howe Institute report.

He urged the new government to “focus on increasing the supply particularly for first-time homebuyers and people who want to downsize.”

Ontario should look at how other jurisdictions, such as British Columbia, consolidate their approval and planning documentation into a single form, said the Board of Trade’s Parker.

“They also allow registered (private) professionals — engineers and architects who already have responsibility for the planning act — to act as the authorities on signing off on these projects. There is still an important role for municipal planning departments: it’s double-checking this work. But it takes the burden off them and leaves them with the skilled professionals who are already licensed by the government to do their jobs,” he said.

The government has to get better at enforcing some of its existing rules and policies too, said Ryerson’s Amborski. Provincial policy requires municipalities maintain a three-year supply of builder-ready, serviced lots. They are supposed to report those numbers to Queen’s Park, but that requirement isn’t enforced, he said.

Cut the tax

Next to alcohol and tobacco, housing is probably the most taxed commodity in Ontario, said Hudak. The Ontario Real Estate Association is discouraging the province from allowing municipalities outside Toronto to levy their own land transfer tax. Toronto’s municipal land transfer doubles the provincial fee on home sales, adding $15,000 to the average cost of a home.

The government could also look at tax incentives to help seniors downsize, widening the supply of available homes for young families, said Hudak.

Eliminating the year-old foreign buyers’ tax, something Ford mused about on the campaign trail, probably wouldn’t have much effect, however, said market researcher Myers.

Taxes by all levels of government add 25 per cent to the cost of a new home, said Wilkes. “Within that 25 per cent there are taxes on tax.”

Rightsize housing

“Figure out how to build homes for people, not for investors,” Burda advised. “We’re building one-bedroom condos for investors and we’re building detached houses on the periphery. What we’re missing is midrise housing that is in our already urbanized suburban and urban neighbourhoods that are close to transit, schools, jobs and services. The reason we’re not building it is that it’s not as cost-competitive as building tall or building sprawl.”

“If we are going to speed up the approvals process, let’s target that type of development and make it easier, more cost-effective,” she said.

Go beyond downtown laneway housing and allow empty nesters to stratify their homes for rental or shared ownership, something British Columbia encourages, said Burda.

The region’s economic vitality depends on that “missing middle” housing, said Parker. The board of trade’s own survey of young professionals found that most want choice expanded beyond single-family homes and one-bedroom condos.

“We would like to see both the province and the city do more to make sure we’re enabling the townhouses, the duplexes, the larger condos, which will house the young families and really keep our young professionals — the talent and strength of our economy — in the GTA,” said Parker.

Updated zoning would assist in boosting that supply of missing middle homes, said Amborski. Zoning specifically for midrise and ensuring it can’t be amended to allow for higher densities would be especially useful. Re-zone excess industrial land for midrise and townhomes, he said.

Stick to your own backyard

There’s no reason to build on the Greenbelt, said Amborski. Even if the land wasn’t protected for agriculture and environmental reasons, it isn’t serviced for housing in the short-term, he said.

Instead, the province should dedicate more surplus public land for housing, said Bailao, Toronto’s Housing Advocate. She cited the West Don Lands, where the province has required developers to build affordable units and rentals. “It’s important to step up and create more rental on public land and give some incentives to the city to create more rental,” she said.

Connect the dots

Align housing with transit and highways, say the experts. Myers recommends the province invest in the downtown relief line — a win-win that would spur development and move people.

Denser zoning around subways and GO stations would avoid the scenario along the Bloor-Danforth subway, which is dominated by lowrise housing, said Hudak.

The province also needs to take off “the straight-jacket of the growth plan,” he said.

“(It) is imposing targets for intensification development that aren’t necessarily in keeping with the character of those communities (outside of Toronto). They would like more of a mix of single-family homes in those areas and certainly there is the space for that. This will give consumers more choices,” said Hudak.

Re-think rent control

Roll back rent control, said Myers and Amborski. It is discouraging developers from building purpose-built rentals that Toronto desperately needs.

But Bailao says it’s more complicated than that. “We just can’t roll back rent control,” she said. But some fine-tuning might be possible, including allowing some flexibility for builders of purpose-built rentals in the first couple of years until they understand their cash flow.

“Other cities do have that flexibility in the first few years. But it is important that we protect our tenants and we work with our partners to have that rental available,” she said.

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Toronto-area home prices were down again in May

Posted on 06 June 2018 by admin

The competition among homebuyers is increasing in the Toronto region even though year-over-year prices fell 6.6 per cent on average to $805,320 last month, from $862,149 in May 2017.

The number of resale home transactions declined 22.2 per cent in the same period.

Still, there are indications that the competition to buy a home is on the rise, supporting higher prices in the second half of the year and into early 2019, said Jason Mercer, director of market analysis for the Toronto Real Estate Board (TREB).

 “Average selling prices were at or above average listing prices for all major home types in May,” he said in a press release.

New listings of homes were down 26.2 per cent year over year in May, said TREB. There were 19,022 new listings of resale homes in May compared to 25,764 in May 2017.

Seasonally adjusted figures show the average selling price was actually up 1.1 per cent in May compared to April.

Detached and semi-detached houses continued to see the steepest decline in sales compared to condos and townhouses.

The average detached house price fell 8.2 per cent in the Toronto region to $1.05 million, with the biggest drop in the communities surrounding Toronto, where there was a 9 per cent price drop compared to the same month last year. In the city of Toronto, detached house prices fell only 5.6 per cent.

The condo market continued to register an increase in prices, with the average unit costing $562,892, 5.7 per cent more than May last year. The city of Toronto saw the biggest condo price increase of 6.5 per cent, to an average cost of $602,804.

York Region is still suffering disproportionate price declines compared to the rest of the GTA. While the benchmark Home Price Index was down 5.4 per cent overall, the same indicator showed a 15.6 per cent drop in York. Detached house prices were down 17.5 per cent on the index.

Twenty-five per cent of respondents to an online Ipsos poll last month put housing affordability among their top two concerns in the upcoming provincial election. The poll that included 500 city of Toronto residents and 700 from 905-area communities also found that 35 per cent of respondents said their vote would take into account parties’ stances on housing.

Seventy-seven per cent of respondents supported reducing the provincial land transfer tax and 68 per cent wanted to see the tax repealed.

TREB and the Ontario Real Estate Association are lobbying provincial candidates against allowing municipalities outside the city of Toronto to levy their own land transfer taxes. Toronto got the power to issue its tax in 2008, essentially doubling the provincial levy for homebuyers moving in the city.

This year to date, the home price index shows the average price of a detached home has fallen 13.8 per cent in the Toronto region, while the average condo price is up 7 per cent.

The average GTA home price in 2017 was $822,622, including houses and condos.

TREB is also pushing for the province to increase the supply of housing in the Toronto area, particularly the type known as the “missing middle” — stacked townhouses and midrise apartments that can accommodate families and are more affordable than detached houses.

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Higher interest rates add to home buyer struggles

Posted on 30 May 2018 by admin

First-time home buyers already struggling with more stringent mortgage rules have been dealt another blow by an increase this week in the Bank of Canada’s five-year mortgage rate.

The move is also one more reason why the Toronto region’s soft spring real estate market could linger longer, according to some.

On Wednesday the Bank of Canada followed the country’s big banks and announced it was raising its 5.14 per cent benchmark mortgage rate to 5.34 per cent.

The central bank rate is different from the rates that banks offer consumers, but it’s used to assess mortgage applications.

Since Jan. 1, home buyers with a 20 per cent downpayment have had to qualify at the central bank’s five-year rate or at 2 percentage points higher than the mortgage rate being offered by their bank.

That alone has diminished buying power by 16.5 per cent, according to a recent report by Royal LePage.

Higher fixed rate mortgages alone won’t be enough to cause a dramatic drop in activity, but it will reinforce the trend to longer commutes for more affordable homes and add demand to the already hot condo market, said Sotheby’s CEO Brad Henderson.

“We’re coming off a historic period where interest rates have been so low that homebuyers have enjoyed the ability to borrow vast amounts of money not only for home purchasers but their lifestyles,” he said.

“It’s just another small number of people who aren’t going to qualify for the mortgage they had hoped for and have to now explore some alternatives,” said Cynthia Holmes, chair of the real estate management department at the Ryerson’s Ted Rogers School of Management.

Those alternatives could include waiting longer to buy or turning to other lenders such as private companies or credit unions, which are provincially rather than federally regulated and therefore not bound to apply the stress test.

 “That has no broad impact on the housing market, but it has an impact on our financial system,” said Holmes.

If interest rates rise this year, she added, it makes the stress test qualification more onerous and so the amount people qualify for will get smaller.

It will also impact consumers looking to renew their mortgages. Those home owners don’t have to qualify under the new stress tests if they stay with the same bank. But if they decide to shop around for a lower rate with another institution, they could have to qualify again with the stress tests, as well as higher rates, Holmes said.

“That means some people are holding a mortgage and they wouldn’t actually qualify for the mortgage they already have,” said Holmes.

The rate hike comes in a year when 47 per cent of all existing mortgages will be renewed, according to CIBC Capital Markets.

According to online financial hub, Ratehub Inc., the rate hike, coupled with the stress test, would mean a $9,000 difference on what a buyer can afford if that consumer has a $90,000 income and a 10 per cent downpayment amortized over 25 years. That’s a $469,785 home at a rate of 3.09 per cent, versus a $460,852 home at the new qualifying rate of 5.34 per cent.

“It is hard to get people qualified,” said Sandra Barnes of Dominion Lending Centres.

“Qualifying at the benchmark rate and if you’ve got less than 20 per cent down, you have a 25-year amortization — that combination has really affected the first-time home buyer and their buying power,” said Barnes. If a home buyer has 20 per cent down and they qualify at the benchmark, lenders can use a 30-year amortization.

Mortgage broker Samantha Brookes of Mortgages of Canada says she’s already seeing clients struggling under new higher rates as they try to renew their loans.

“A lot of people are literally on the brink of losing their home or having to sell,” she said, adding that she has advised some to consider the latter option because they have re-financed their homes to the point where they have no equity remaining.

“People have been using their homes as ATMs over the last few years because the market has been going up so quickly,” she said.

He says the cooling effect of higher interest rates on housing sales is undeniable and further possible rate increases will add to the malaise. But this year’s dramatically reduced sales statistics look worse than they are on a year-over-year basis because sales and prices rose so high so fast in early 2017.

TD Bank was the first of the big five lenders to raise its five-year posted rate from 5.14 per cent to 5.59 per cent. It was followed by RBC, CIBC, national Bank of Canada, Bank of Montreal and Bank of Nova Scotia, which posted smaller rises.


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Real estate association says it won’t target individual candidates in pre-election campaign

Posted on 23 May 2018 by admin

The Ontario Real Estate Association (OREA) says it has no plans to back away from its campaign promoting home ownership to parties and candidates in the upcoming provincial election.

But OREA won’t be moving ahead with billboards supporting or criticizing individual political candidates, a spokesperson said Monday.

That clarification comes in the wake of reports of industry squabbling between OREA and the Toronto Real Estate Board (TREB). On Sunday, The Canadian Press reported that TREB president Tim Syrianos sent OREA a letter telling it to step back from a “misguided and ill-advised” campaign that could negatively affect Toronto-area realtors by highlighting the home affordability challenges in the region, which has had a slow start in some areas this year.

The campaign called “Keep the Dream Alive” urges politicians to help make home ownership affordable to millennials. “Rising home prices have pushed home ownership out of reach,” says the material on the association’s website.

Syrianos also suggested that endorsing or undermining certain politicians violated OREA’s mission to promote policies rather than people.

Targeted billboard advertising was only “one element of an election plan” OREA circulated to its board, of which Syrianos is a member, said Matthew Thornton, association vice-president of public affairs.

“Our board decided not to move forward with the program. It was a pilot initiative they were considering, and upon further review they decided not to move forward,” he said.

That decision was made before Syrianos’s letter leaked to the press, he said.

In it, the Toronto board president warned OREA against trying “to supplant TREB and overtake our expertise and well-respected voice.”

Syrianos also objected to OREA’s plan to use an “Ontario Realtor Party” as part of its campaign. The Ontario Realtor Party is the profession’s voice promoting the dream of home ownership and protecting the real estate profession, according to the association’s website.

TREB refused Monday to comment on the letter. It referred to a previous joint statement with OREA saying that “the letter is not reflective of the long-standing and positive relationship between OREA and TREB who jointly remain committed to helping create a new generation of homeowners.”

OREA represents 39 Ontario real estate boards, but about 50,000 of its 70,000 members belong to the Toronto board.

Thornton stressed that political campaigns aren’t new to OREA. He said the association successfully lobbied the province against allowing municipalities outside Toronto to levy their own land transfer tax.

The “Keep the Dream Live” campaign will move into a second phase in September through November, he said.

“It’s an opportunity for us to continue to promote this message that young people are struggling to afford a home, and policy-makers need to take this issue seriously,” said Thornton.

OREA CEO Tim Hudak is the former leader of the Ontario Progressive Conservative party. Last year, OREA lost its main function and key revenue source as the training provider for new realtors in the province, and it announced it would rebrand itself as the voice of the real estate industry and an advocate for home ownership.

The internal strife is typical of industry associations that have different tentacles or sometimes local, provincial and national arms, said James McKeller at the Brookfield Centre in Real Estate & Infrastructure at York University’s Schulich School of Business.

“It’s hard to figure out the motives of both of these organizations. They pretend they’re representing the public, but they’ve never given any evidence of that in the past,” he said.

Meantime, Bosley real estate agent David Fleming said he would be happier if TREB represented the interests of active agents, rather than the 50,000, who are licensed to practice, many of whom help transact one or fewer sales each year. But the board is dependent on its large membership for revenue.

Meantime, he said, OREA is “trying to figure out what is our purpose and they don’t even really know.”


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TD Bank discounts 5-year variable mortgage rate as competition heats up

Posted on 17 May 2018 by admin

TD Bank is joining a rival bank in offering a highly discounted variable mortgage rate as competition among Canada’s biggest lenders heats up.

The Toronto-based bank said Tuesday it’s lowering its five-year variable closed rate to 2.45 per cent, or 1.15 per cent lower than its TD Mortgage Prime rate, until May 31.

TD’s special rate follows last week’s move by the Bank of Montreal, which discounted its variable mortgage rate to 2.45 per cent until the end of May.

Canada’s lenders often offer special spring mortgage rates as home-buying activity picks up, but Robert McLister — founder of rate comparison website — said last week that BMO’s special discounted variable rate was the biggest widely advertised discount ever by a Big Six Canadian bank.

TD’s discounted rate on Tuesday brings its variable mortgage rate offer in line with BMO’s.

TD spokesperson Julie Bellissimo says its special five-year variable rate applies to new and renewed mortgages, as well as the variable rate term portion of certain TD home equity lines of credit.

“We are confident this is a strong offer for new and renewing customers, while ensuring we remain competitive in a changing environment,” Bellissimo said in an emailed statement.

The moves come amid slowing mortgage growth. The Canadian Real Estate Association said Tuesday that national home sales volume sank to the lowest level in more than five years in April, falling by 13.9 per cent from the same month last year. The national average sale price decreased by 11.3 per cent year-over-year.

Home sales have slowed due to various factors, including measures introduced the Ontario and B.C. governments to cool the housing market, such as taxes on non-resident buyers.

Other headwinds for mortgage growth include higher interest rates and a new financial stress test that makes it more difficult for would-be homebuyers to qualify with federally regulated lenders, such as the banks.

As of Jan. 1, buyers who don’t need mortgage insurance must prove they can make payments at a qualifying rate of the greater of two percentage points higher than the contractual mortgage rate or the central bank’s five-year benchmark rate. An existing stress test also stipulates that homebuyers with less than a 20 per cent down payment seeking an insured mortgage must qualify at the central bank’s benchmark five-year mortgage rate.

The tighter lending rules are making it harder for homebuyers to qualify for uninsured mortgages, and shrinking the pool of qualified buyers for higher-priced homes, CREA’s chief economist Gregory Klump said in April.

Meanwhile, Canada’s largest lenders all raised their benchmark posted five-year fixed mortgage rates in recent weeks as government bond yields increased, signalling a rise in borrowing costs.

In turn, the central bank’s five year benchmark qualifying rate — which is calculated using the posted rates at the Big Six banks — increased last week to 5.34 per cent. This qualifying rate is used in stress tests for both insured and uninsured mortgages, and an increase means that the bar is now even higher for borrowers to qualify.

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Toronto home prices are steadying, amid dramatic year-over-year declines

Posted on 09 May 2018 by admin

Despite a 12 per cent April decline, the Toronto Real Estate Board predicts moderate increases ahead.

Toronto area housing statistics continue to look dramatically lower than the steeply rising figures of early last year. But there are signs that the market is flattening.

The average home or condo sold for 12.4 per cent less year over year in April with all types of resale houses and condos averaging $804,584 across the region.

But preliminary seasonally adjusted prices from the Toronto Real Estate Board (TREB) show prices down only 0.2 per cent from March with 1.6 per cent fewer sales month over month, about the same as February to March, a much gentler drop than the start of the year.

The number of homes that actually sold in April — 7,792 — was down 32.1 per cent from last year.

The decline in both sales and prices was greatest among detached houses, which sold for about $1.03 million on average, down 14.4 per cent from a year ago. The number of house sales dropped 38.4 per cent.

Condo sales saw a moderate 3.2 per cent price increase compared to last year, to an average of $559,343, with the number of units sold dropping 26 per cent.

The average cost for all houses and condos this year to date, including semi-detached and townhomes, was $779,400 in April, compared to $886,923 a year ago.

York Region continues to see the biggest year-over-year price declines in the Toronto area, while city of Toronto home values held steady, according to the real estate board’s Home Price Index.

Jason Mercer, TREB director of market analysis, says the dramatic year-over-year differences “mask the fact that market conditions should support moderate increases in home prices as we move through the second half of the year, particularly for condominium apartments and higher density lowrise home types.”

Condos and townhouses have become the predominant starter homes in the Toronto region because of their relative affordability.

Meanwhile, high-end homes in the $2-million-plus range accounted for only 5.5 per cent of detached house sales this year compared to 10 per cent in April 2017.

“The year-over-year change in the overall average selling price has been impacted by both changes in market conditions as well as changes in the type and price point of homes being purchased,” said a TREB release.

It urged provincial parties to make housing a priority in the June election. The board is pushing for tax relief for buyers, particularly the provincial land transfer tax and the municipal land transfer fee unique to Toronto.

“We believe that any attempt to increase the Toronto land transfer tax should require approval from the provincial government given the significance of Toronto’s economy to the province, and the connections between the Toronto real estate market and that of the broader GTA,” said TREB president Tim Syrianos in the release.

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Millenials rank affordable housing among top concerns for upcoming provincial election, real estate study says

Posted on 02 May 2018 by admin

A historically high number of young adults still live with their parents but want to own a home, says the Ontario Real Estate Association.

A provincial party that offers hope for overcoming the high cost of housing will have an edge with a generation of highly educated millennials looking for a way out of their parents’ basements and into the housing market, says the Ontario Real Estate Association (OREA).

At a time when nearly half the people aged 25 to 34 are living with their parents, 91 per cent of millennials still believe that owning a home is a smart financial investment. But nearly 70 per cent of those in that age bracket said they agree or somewhat agree that buying a home in their neighbourhood is unaffordable, according to OREA research published Monday.

It released Nanos telephone poll results to put home ownership on the June 7 provincial election agenda, said CEO Tim Hudak, the former head of the Ontario Progressive Conservative party. The association that represents about 70,000 members, including real estate agents, has suggested tax relief for first-time buyers, increasing the supply of starter homes and building more “missing middle homes,” midrise apartments, stacked and traditional town homes, as ways to make home ownership more accessible.

“Millennials still want to be homeowners just like previous generations. There are a lot of pundits and so-called experts who say that’s a dated concept. In fact, just the opposite. An overwhelming number of millennials want to get into home ownership,” he said.

About 70 per cent of the 2,098 respondents — including 503 aged 20 to 35 — said the government needs to do more to help young people buy homes.

Among the millennials, housing affordability ranked close to the environment in terms of community concerns — 81 per cent, compared to 83.1 per cent. Jobs and the economy was a close third with about 79 per cent among those polled.

Healthcare, hydro prices and property taxes were all ranked between 73 and 78 per cent as top concerns among millennials. The quality of schools, traffic and transit were all lower among the issues polled as concerns.

But the results were very similar to those of the overall group.

“We want all three parties to speak to this in the election campaign,” said Hudak.

“We will give credit that the (Premier Kathleen) Wynne government did double the land transfer tax rebate for 2017. It has made some commitments on increasing housing supply and choice. Our goal is ‘let’s press this a bit farther with all three political parties,’ ” he said.

OREA’s poll shows that Toronto’s municipal land transfer tax — it is the only city in Ontario to impose its own in addition to the provincial land transfer tax and adds about $10,500 to the cost of a $700,000 home — remains unpopular. About 70 per cent of respondents said they were opposed to the tax.

Asked about the kind of government home ownership assistance that would have the most impact on how they voted, assistance with making their home energy efficient was the top consideration for 62 per cent of respondents. Fifty-three per cent said a first-time buyer exemption to land transfer tax would be most persuasive and 50 per cent said a commitment to building public transit in their community would be likely to sway them.

When it came to which party they would vote for, the Progressive Conservatives led in the OREA poll with slightly less support, 38 per cent, from millennials compared to 44 per cent of other voters. The Liberal party came second with 30 per cent, followed by the NDP, which had 21 per cent overall but 25 per cent support among the millennials polled.

PC leader Doug Ford was the preferred provincial party leader, named by 32 per cent of those polled, followed by the NDP’s Andrea Horwath with 21 per cent and Premier Kathleen Wynne with 17 per cent.

“The Ontario PCs currently enjoy an 11-point lead,” said OREA. “But a swing of one in 20 voters from PCs to Liberals could make it a horse race.”

About 57 per cent of millennials voted in the last federal election in 2015, according to Elections Canada. That higher-than-usual turnout could have been due to the appeal of a relatively young prime ministerial candidate in Justin Trudeau, said Hudak.

The poll results were released the same day that a video surfaced showing that Ford promised developers that he would open up the protected farmland and environmentally sensitive areas around Toronto, known as the Greenbelt, to home construction.

The polling was conducted between April 3 and 22. Results are considered accurate within 2.1 percentage points 19 times out of 20. The results on millennials are considered accurate within 4.4 percentage points 19 times out of 20.

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Canadian home sales dropped 22.7% in March, national average price down 10.4%: CREA

Posted on 26 April 2018 by admin

The Canadian Real Estate Association said the level of sales activity marked a four-year low for the month of March and was seven per cent below the 10-year average. Still, national home sales were up from the previous month by 1.3 per cent, according to CREA’s latest statistics.

The most-affordable segments of Canada’s housing market are seeing the biggest price hikes as recent changes to mortgage regulations fuel demand for lower-priced homes such as condominiums, according to the country’s real estate industry organization.

The tighter mortgage lending rules, which make it harder for home buyers to qualify for uninsured mortgages, are also shrinking the pool of qualified buyers for higher-priced homes, said Gregory Klump, chief economist of the Canadian Real Estate Association.

“Given their limited supply, the shift of demand into lower price segments is causing those sale prices to climb,” he said in a statement as the association released its latest figures for the month of March. “As a result, ‘affordably priced’ homes are becoming less affordable while mortgage financing for higher priced homes remains out of reach of many aspiring move-up home buyers.”

Home sales across the country have dropped in the wake of several government policy measures, including a stress test for home buyers with a down payment of more than 20 per cent, that were implemented to cool the country’s hot housing market. Last March, national home sales activity had reached an all-time record for that month, according to CREA.

The number of Canadian homes sold in March plunged 23 per cent and the national average price was down 10 per cent from the same month last year amid double-digit plunges in most housing markets across the country, according to the latest monthly sales data released Friday.

CREA said Friday the level of sales activity marked a four-year low for the month of March and was seven per cent below the 10-year average. Still, national home sales were up from the previous month by 1.3 per cent, according to CREA’s latest statistics.

Sales prices are slipping too, with the national average price for all types of residential property down to about $491,000, down 10.4 per cent from March of last year — with the Vancouver and Toronto markets causing most of the drag.

Excluding Canada’s two most expensive real estate markets, the national average price would be $383,000 — a decline of two per cent from March 2017.

But a closer look at the different housing segments reveals a mixed landscape, with lower-priced homes showing the largest gains.

Apartment units posted the largest year-on-year price gains in March, up 17.8 per cent, followed by townhouse/row units at 9.4 per cent. One-storey single family homes saw price gains in March of just 1.3 per cent, and two-storey single family home prices were down two per cent from a year ago, CREA says.

“The housing market continues to adjust to stricter mortgage rules, recent Bank of Canada rate hikes and some provincial policy moves,” said BMO Capital Markets’ senior economist Robert Kavcic in a research note Friday. “While we’re seeing some signs of stability, the adjustment likely has some time yet to go.”

As of Jan. 1, home buyers with a down payment larger than 20 per cent seeking a mortgage from a federally regulated lender are now subject to a financial stress test. These borrowers now have to prove that they can service their uninsured mortgage at a qualifying rate of the greater of the contractual mortgage rate plus two percentage points or the five-year benchmark rate published by the Bank of Canada.

The new policy reduces the maximum amount buyers will be able to borrow to buy a home. An existing stress test already requires those with insured mortgages to qualify at the Bank of Canada benchmark five-year mortgage rule.

In turn, home sales activity was pulled forward to the end of 2017 as homebuyers tried to lock in a mortgage before the new rules took effect.

Sales in the first quarter slid to their lowest quarterly level since the first three months of 2014.

March marked the third consecutive double-digit decline compared with the same month last year, when prices in the Greater Toronto Area soared to record highs.

CREA said activity was below year-ago levels in more than 80 per cent of all local markets, in all major urban centres except for Montreal and Ottawa, with the vast majority of year-over-year declines well into double digits.

Phil Soper, chief executive of real estate company Royal LePage, said the new stress test for uninsured mortgages introduced by the Office of the Superintendent of Financial Institutions has “interrupted” the flow of move-up home buyers looking to upgrade from their entry level home or move to a more desirable location.

“That cycle has been interrupted with the OSFI stress test, because it impacts the ability to move up,” he said. “The question is, is it temporary, or will it actually take demand out of the market permanently? I believe it’s temporary.”

Markets are likely to remain under pressure from recent changes to mortgage lending guidelines, higher mortgage rates, and provincial regulations in some regions, TD’s senior economist Michael Dolega said in a research note Friday.

“However, lower-priced markets where affordability is good should generally outperform in the current environment.”

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Tight supply drives up new house prices and condo values in February: Report

Posted on 28 March 2018 by admin

Fewer than 20 per cent of new single-family homes priced under $750,000

There is little relief so far this year for first-time buyers in the Toronto region looking to purchase a new construction home.

The overall limited supply of newly built and pre-construction homes is particularly severe in the single-family category — detached, semi-detached and townhouses — priced for first-time buyers, according to the home building industry.

That shortage is continuing to send first-time buyers into the condo market where the benchmark price of a condo rose 39.5 per cent year over year in February, compared to a 12.8 per cent price rise for single-family homes.

The ongoing supply squeeze helped drive up single-family home prices to $1.22 million on average year over year last month, said David Wilkes, president and CEO of the Building and Land Development Association (BILD) in a press release Thursday.

Condo apartments and stacked townhouses, which had an average selling price of $729,735 in February, continue to dominate the new housing market, accounting for nearly 1,900 of the 2,159 new homes sold, said BILD.

The number of new home sales continues to be low. The number of single-family homes that sold in February — 264 — was down 82 per cent year-over-year, 79 per cent below the 10-year average.

Condo sales also dropped 50 per cent compared to February 2017, but remained 17 per cent above the 10-year average number of sales.

Of the 12,896 new homes on the market at the end of February, 9,285 were condos. But supply for all types of homes is below what the industry considers a healthy level. There are about four months’ worth of inventory on the market, says BILD. Ideally there should be about nine to 12 months’.

Although there are more single-family homes on the market compared to last year, historically, the inventory is still low, said Patricia Arsenault, executive vice-president of Altus Group, which compiles the building industry statistics.

“There is a dearth of new single-family product that is affordable to a broader range of buyers,” she said. “Fewer than one in five single-family homes available to purchase at the end of February were priced below $750,000.”

The high price of traditional low-rise houses is a key driver in the more moderately priced condo sector on both the new construction and re-sale home sectors.

Condos cost $814 per sq. ft. on average in Feburary, compared to $652 per sq. ft. a year ago and $802 per sq. ft. in January. The average size of a condo was 896 sq. ft.

BILD, which blames regulation for limiting the supply of new homes on the market, wants the issue on the upcoming provincial and civic election agendas.

“We encounter excessive red tape, out-of-date zoning, and lack of developable land service with critical infrastructure,” said Wilkes.

The most single-family homes sold in the Toronto area last month were in Halton, which accounted for 117 of the total 264 sales. There were only three in the City of Toronto.

Toronto remains the king of condos with 973 of the 1,895 sales, while York Region had 748 condo sales.

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Canadian home sales drop 6.5% in February — lowest in nearly 5 years: CREA

Posted on 21 March 2018 by admin

 “The drop off in sales activity following the record-breaking peak late last year confirms that many homebuyers” raced to purchase before new mortgage rules came into effect, CREA’s chief economist said.

Canada’s housing market saw another so-called payback sales drop in February, when the national average home price slumped by five per cent from a year ago, after a surge in sales late last year from homebuyers looking to purchase ahead of this year’s new mortgage rules.

The latest monthly figures from the Canadian Real Estate Association showed that sales volume was down 16.9 per cent in February compared with a year ago, and down 6.5 per cent compared with January.

February’s home sales decline marked the second consecutive month-over-month decline and the lowest reading in nearly five years, the national association said.

 “The drop off in sales activity following the record-breaking peak late last year confirms that many homebuyers moved purchase decisions forward late last year before tighter mortgage rules took effect in January,” said Gregory Klump, CREA’s chief economist in a statement Thursday.

The federal banking regulator’s tougher rules, which took effect Jan. 1, now require a stress test to be applied even to borrowers with more than 20 per cent down payment.

To qualify for federally regulated mortgages, borrowers must be able to afford interest rates that are two percentage points above the contracted rate or the Bank of Canada’s five-year benchmark rate, whichever is higher.

The stricter residential mortgage lending regulations introduced by the Office of the Superintendent of Financial Institutions were aimed at reducing risk in the market amid high housing prices.

CREA’s latest monthly statistics show that home sales were down in February in almost three quarters of all local housing markets tracked by the national association.

The widespread pattern was yet another indication that recent regulatory changes, and not local market conditions, were behind softer sales activity in early 2018, said RBC economist Josh Nye.

“The roller coaster ride that was Canada’s housing market in 2017 has continued this year with resales posting another sizeable decline in February,” he said in a research note.

The number of homes sold nationally hit a record high in December.

But homebuying activity has also since been dampened by the Bank of Canada’s move in January to hike interest rates to 1.25 per cent. The quarter-point increase was the central bank’s third since last summer, after hikes in July and September.

“While the give-back related to the pull-forward in activity experienced late last year, as buyers rushed to close deals prior to the updated B20 rules, appears to have been largely complete in January, the softness in sales nonetheless persisted this month,” said TD economists Michael Dolega and Rishi Sondhi in a research note.

“We believe that much of it has to do with lingering uncertainty, with additional regulations introduced in the B.C. budget adding further tensions, along with B20 impacts and rising rates.”

In February, the B.C. government unveiled additional measures in its budget to tackle the housing market, including raising its foreign buyers tax and expanding it to areas outside of Vancouver, while bringing in a new levy on speculators.

The national average house price for homes sold in February 2018 was just over $494,000, down five per cent from a year earlier. But excluding Toronto and Vancouver, the country’s most active and most expensive markets, the national average price was just under $382,000, up 3.3 per cent from $369,728 a year ago.

The number of newly listed homes in February increased by 8.1 per cent, following a plunge of more than 20 per cent in the month prior. However, new listings across the country in February were still 6.4 per cent below the 10-year monthly average and 14.6 per cent below the peak reached in December 2017. New home listings in February were also below the levels recorded every month last year except January 2017.

TD’s Dolega and Sondhi point to these listings as some of the “modestly encouraging details” in the latest CREA report.

“New listings also perked up a little during the month, suggesting rising confidence on the part of sellers after recent B-20-related volatility,” they wrote.

The TD economists expect sales activity to stabilize sometime in mid-2018.

“We look for prices to drop, on average, this year, though balanced-market conditions across much of the country should mitigate the magnitude of the decline,” they wrote.

“We expect conditions to improve next year, with price growth returning to the market alongside a rise in transaction activity.”


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