Giving Vancouverites priority on new homes is a fine idea, but only part of a much larger puzzle

 

There has long been rampant media speculation – and, in some cases, seeming proof – that at least some local real estate developers are marketing their Metro Vancouver projects overseas as a priority, leading them to be virtually sold out by the time locals can get their hands on the units.

 

Certainly it very often seems to be the case that only a handful of condos are still available for sale when it comes to the local sales centre opening day. And that leads to many, many frustrated buyers left out in the cold, and all competing with each other for other units, of which there are not nearly enough being built, or coming on the resale market.

 

So on the face of it, Vancouver Mayor Gregor Robertson’s proposal to implement a “locals first” policy and limit bulk-buying, modelled on this successful project in West Vancouver, would seem to be a good idea. Give Metro Vancouver residents first crack at all the new condos coming on stream, before non-residents are allowed to scoop up the remainder (if there are any left). Surely this will help with our housing supply and affordability issue?

 

Well… maybe a bit. It’s certainly a perfectly fine idea that can’t do any harm and might just help a few buyers get their hands on units they might not otherwise have access to. If I were voting in council next week when the proposal is tabled, I’d vote yes, and I would be surprised if this public-pleasing motion didn’t pass.

 

But I suspect the impact this new policy will have on our housing supply and affordability problems will be, sadly, minimal. The issue is multi-faceted.

 

First, we don’t really know how many new Metro Vancouver units are truly being marketed overseas first. Shouty media headlines about individual projects may have a lot of impact on the public perception on the topic, but that doesn’t prove that it is necessarily a widespread practice. Perhaps it is, but we have no real evidence of that. The Urban Development Institute claims that marketing overseas is relatively minimal, stating in response to the new proposal, “UDI members already sell the vast majority of multi-family housing units, over 90%, to local buyers, which is often a bank construction financing requirement.” That is to say, developers won’t get the money they need to build the project if they are taking on lots of presale contracts with overseas buyers, which are perceived by the banks as riskier than local buyers. Certainly, media reports about overseas marketing events don’t make it feel to the average local resident like this 90% figure can be accurate, but the UDI does collect huge amounts of data about buyers of new homes in the Lower Mainland from its members. If it is right, the new policy will help locals get their hands on only an additional 10% or so of units. Which is probably still worth it, but not dial-moving for affordability.

 

Second, even with all new units available to Metro Vancouverites, that doesn’t necessarily mean those homes will become more affordable, just because locals are no longer competing with non-local buyers. Even if you believe the UDI’s above figure is inaccurate, and the new “locals first” policy will release a much higher proportion of new units to local buyers, those homes will still be expensive. Land is still expensive, permitting and consultation processes are still time-consuming and expensive, construction costs are still expensive. To make projects profitable, developers will still charge the same high prices we’ve been seeing, knowing that if local buyers want the units, they will cough up – or if the project doesn’t sell to locals, non-local buyers will absorb the rest later. But in fact there’s also still a huge appetite for pricey condos even among local buyers, who very often have more money at their disposal than affordability reports imagine. That said, it’s possible that the easing of competition in the presale market will have a knock-on effect of taking some buyers out of the resale market, and improving supply there. So again, it might help a bit.

 

Thirdly, you’d have to also ban the practice of “insiders” getting first crack at local projects – people such as family and friends of the developers. It is often perceived that it must be overseas buyers who have snapped up units when there are not many left for locals. But on some projects, it has been suggested that particular groups of locals are getting in on the action first. So in addition to preventing bulk-buying, which the Mayor’s proposal also intends, perhaps it should also require that 100% of units are available for sale on the local public sales centre opening day.

 

But to really move the dial on affordability, there needs to be a much more massive influx of new housing for local buyers to get their hands on, and of much more widely varying and flexible home types. Dramatically increase supply with pervasive rezoning, dramatically cut permitting costs and times, flood the market with new homes and – even with the expensive land and construction costs – developers will have no choice but to be competitive with pricing. Perhaps add to that a requirement for income-linked non-market housing on every new project, or subsidize particular projects to offer all homes at below-market pricing like this one in Victoria. Build smaller units, less expensively finished units, units with lock-off suites to act as mortgage helpers. Get creative. Be radical. Stop drip-feeding supply and open the floodgates.

 

But sure, also give locals first pass on presale condos. It can’t hurt.

 

 

 

 

Source:http://www.rew.ca/news/will-mayor-s-locals-first-for-presale-units-plan-work-1.23062248

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Inventory at 10-year lows in most regions, pushing prices ever higher

 

 

The number of homes sold on the Multiple Listing Service® in BC in September rose nearly 10% year over year, and 5% from August, according to a report by the British Columbia Real Estate Association (BCREA) published October 12.

 

Because there was also an increase in sale prices, that lead September’s total sales dollar volume to rise by a

whopping 30.2% compared with the same month last year.

 

The average resale price of a home in the province last month was 18.5% higher than one year previously, at $693,774, which is up 2.3% in a single month since August’s average of $678,168.

 

 

 

The annual jump in homes exchanging hands across the province is largely driven by increased activity in the Lower Mainland, which has seen a recovery from the effects of the Metro Vancouver foreign buyer tax introduction last August. Of the larger markets, Greater Vancouver and the Fraser Valley posted the largest annual sales gains, both up around 25%, whereas Victoria saw the province’s biggest year-over-year slide in unit transactions, down 16.6%.

 

Some of the Interior and smaller markets also saw annual sales declines, although Kamloops and Chilliwack both had a strong showing, up 8.2% and 7.7% respectively.

 

The annual price rises seen by the different boards also varied, but did not necessarily mirror sales patterns. Nine out of the 11 BC boards reported year-over-year average price increases. Of the larger markets, where price changes are less volatile, the Fraser Valley and Greater Vancouver saw the biggest price gains, up 18.2% and 17.7% respectively. But Victoria, where sales dropped, posted an average price increase of 12.5%. Only the very small markets of BC Northern and Norther Lights saw minor annual average sale price declines.

 

Eight of the 11 boards posted year-over-year declines in the number of active listings in September, although Greater Vancouver was not one of them.

 

“Total active listings on the market continue to trend at 10-year lows in most BC regions, limiting unit sales and pushing home prices higher,” said Cameron Muir, BCREA chief economist.

 

“While the economic fundamentals support elevated housing demand, rising home prices are eroding affordability, particularly for first-time buyers.”

 

The BCREA report was issued on the same day as Royal LePage’s 2017 Q3 House Price Survey, which looks at quarterly price activity in Canada’s major urban markets. The report said that during the third quarter, the aggregate home price in Greater Vancouver rose year over year by a “modest, but healthy” 2.5% to $1,229,133.

 

However, when broken out by housing type, the brokerage found that the median price of a Greater Vancouver condo increased 17.6% year-over-year to $622,392. The median price of a bungalow had a much more reasonable increase, up 3.5% year-over-year to $1,422,458, but the median price of a standard two-storey home fell 1.1% to $1,532,849 in the same period.

 

 

 

 

Source: http://www.rew.ca/news/home-sales-prices-across-bc-rise-again-in-september-1.23062913

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The drop in interest rates has been so significant that the interest burden of servicing debt has declined as a share of income, despite growing household debt.

 

With headlines about Canadian household debt hitting record levels and dire warnings from top policy-makers such as Bank of Canada governor Stephen Poloz, Canadians may think household debt is out of control.

 

The concerns, however, often fail to properly account for the other side of the balance sheet.

 

Yes, Canadian households have taken on more debt. But they’ve used this debt to finance assets – real estate and retirement savings, for example – that grow over time, causing their net worth to swell, also to unprecedented levels.

 

By the end of last year, household debt eclipsed $2 trillion, up from $357 billion in 1990. Two-thirds of this debt is for mortgages; the remaining third is split between consumer credit (29 per cent) and other loans (five per cent).

 

Despite the preoccupation with overheated real estate markets, the mortgage share of total household debt has remained stable. The $2-trillion-plus in household debt now equals approximately 170 per cent of household disposable income compared to just 90 per cent in 1990.

 

So does this mean Canadians are being irresponsible with debt?

No.

 

The growth in household debt has partly been a rational response to plummeting interest rates. The Bank of Canada rate has fallen dramatically from nearly 13 per cent in 1990 to 0.75 per cent at the end of last year. Not surprisingly, as the cost of borrowing has dropped, Canadian households have borrowed more.

 

The drop in interest rates has been so significant that the interest burden of servicing debt has declined as a share of income, despite growing household debt. Today, interest payments on household debt consume six per cent of disposable income compared to almost 11 per cent in 1990.

 

That brings us back to the other side of the balance sheet – household assets. While household debt has grown substantially over the past 26 years, households are borrowing to invest in appreciating assets such as real estate, pensions, financial investments and businesses. Canadian household assets rose from $2.2 trillion in 1990 to $12.3 trillion in 2016.

 

The significant investment in assets has meant that household net worth (total assets minus liabilities) surged from $1.8 trillion to $10.3 trillion, a record level, during the same 26-year period. As a share of gross domestic product, household net worth rose from 265 per cent to 498 per cent.

 

While government policy-makers fret over household debt, the irony is that unlike government, household net worth is positive and increasing over time.

 

Debt is a tool and the concern should only be about debt that’s not manageable given the economic circumstances of a given household. The greatest risks to management of household debt are:

• economic shocks that lead to job losses, which make it harder for people to service their debt;
• increases in interest rates that raise debt-servicing costs.

 

Even with any small forecast increases, interest rates remain low and the Canadian economy has performed adequately in terms of employment, with relatively low jobless rates.

 

While these macroeconomic factors are of concern, they should also be kept in context. Despite record high levels of household debt, there are also record high levels of net worth.

 

Livio Di Matteo is senior fellow at the Fraser Institute and author of the study Household Debt and Government Debt in Canada, available at www.fraserinstitute.org.

 

By Livio Di Matteo
Senior Fellow, The Fraser Institute

Troy Media

 

Source:http://canadianinvestor.com/2017/07/20/concerns-over-household-debt-in-canada-are-overblown/

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Vancouver is Canada's least affordable region for housing, according to new RBC data

 

Vancouver’s housing affordability won’t be tamed, according to new data from RBC.

 

The bank reports that it’s affordability measure for Vancouver climbed 2.6 percentage points in the second quarter of 2017 to retain its title as Canada’s most unaffordable market.

RBC’s affordability measure calculates the proportion of median pre-tax household income required to service the costs of mortgage payments, property taxes and utilities based on the average market price for a detached home or condo.

 

New data released Friday (September 29) pegs those costs at 80.7% of household income for the Vancouver market.

 

For detached homes the measure is at 114.6%. Condos come in at 46.2%.

 

Vancouver has the highest measures recorded in Canada among all categories.

 

“The rise in the second quarter reflected a tightening of demand-supply conditions. Home resales picked up following a year-long correction as the dampening effect of policy measures introduced last year to cool the market — which included a 15% tax on purchases by foreign nationals — waned,” RBC’s Housing Trends and Affordability Report stated.

“With demand-supply conditions back in favour of sellers, home prices resumed an upward trajectory this spring. This means that the window for a meaningful improvement in affordability in the Vancouver area likely has closed for now.”

 

Toronto follows Vancouver at 75.4%, while Victoria moved up 1.8 percentage points to 58.6%.

 

 

 

 

Source:https://www.biv.com/article/2017/9/relief-vancouver-housing-affordability-closed-now-/

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Bank of Canada won’t raise overnight rate again until 2018, predicts BCREA

 

Having raised the overnight rate twice, in July and earlier this month, the Bank of Canada will adopt a wait-and-see approach to its next interest rate hike, according to a Mortgage Rate Forecast reportpublished September 19 by the BC Real Estate Association (BCREA).

 

Having “surprised” Canada by turning “hawkish” with its sudden interest rate rises, the BCREA’s economists predicted, “We anticipate that the Bank of Canada will hold off on further rate increases this year and assess how higher rates are impacting the economic and inflation outlook.”

 

But the report added, “However, in the Bank’s recent communications, it has very clearly left the door open for more aggressive tightening should the current torrid pace of economic growth continue.”

 

The BCREA pointed out that the posted five-year qualifying rate has risen in response to the BoC’s first overnight rate hike. It said, “After the July interest rate hike, markets widely expected at least one additional rate increase in the fall, and so bond markets and lenders had already priced in the September increase by the time it occurred.”

 

It predicted that rising bond yields would result in further increases in the five-year posted rate and the average discounted five-year mortgage rate.

 

 

The report added that the rising posted five-year qualifying rate is “an interesting development, because it is the first increase in the posted rate since stricter qualifying rules for insured mortgages were imposed last fall.”

 

The BCREA concluded, “Our baseline forecast is for gradual rate increases over the next two years, with the Bank of Canada’s overnight rate ending 2018 at 1.5 per cent.”

 

 

Source:http://www.rew.ca/news/mortgage-rates-forecast-to-rise-again-next-year-1.22842979

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Flurry of new home listings follows Labour Day long weekend, finds latest #REWCAP analysis


There was a host of new listings on the Greater Vancouver Mulitple Listing Service® last week (September 4-10) as sellers jump-started the fall resale market.

More than 1,300 home sellers listed their properties on the MLS that week, which is nearly 72% more than listed the week before.

That bumped the current total inventory to 9,370 homes available for sale in the Real Estate Board of Greater Vancouver region, as of September 14 – still not high, but a considerable improvement from the past summer weeks.

 

 

That total listing count breaks down as 5,730 detached homes, 1,233 townhomes/duplexes/rowhomes and 2,407 condo-apartment units available across Greater Vancouver.

The median listing price of a detached home remained just under $2 million, now at $1,999,000 as of September 14.

Median list prices for townhomes (including duplexes, row homes etc) and condos both rose slightly, to $938K and $678K respectively.

The most expensive home to be newly listed last week was a $12.89 million stone-and-glass mansion in the toney Chartwell neighbourhood of West Vancouver, with incredible views and a killer pool and terrace. The priciest new condo listing was a gorgeous Coal Harbour penthouse, also boasting a huge terrace, which came on the market September 5 for $7,688,000.

lavish Shaughnessy estate priced at $34.8 million remains the most expensive listing in the Greater Vancouver region. But it has now been usurped by this Toronto mansion as the priciest home currently for sale in all of Canada, which is asking just $200K more. 

 

 

Source: http://www.rew.ca/news/home-sellers-jump-start-fall-resale-market-1.22709899


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BCREA says the move limits choice and may not protect consumers as intended 

 

The BC government is set to ban the practice of limited dual agency, meaning home buyers and sellers will no longer have the option to choose one real estate agent to represents both parties in a single transaction, under strict new draft rules recommended by the Office of the Superintendent of Real Estate and announced September 7.

 

The move, which is intended to protect consumers from any conflicts of interests created by agents representing both parties in a transaction, may not have the desired affect and will also prevent many consumers working with their preferred agent, according to a response by the British Columbia Real Estate Association (BCREA).  

 

"Every day, REALTORS® help their clients understand real estate transactions, so they can make informed decisions," said BCREA president Jim Stewart. "Over my nearly 25-year career as a REALTOR®, many long-standing clients have developed trust with me, and now my clients have no choice but to start from the beginning and build new relationships. Trust is a crucial part of what is often the largest financial transcation in people's lives."

 

The BCREA pointed out that the ban significantly limits consumer choice, as buyers may have a relationship with the listing agent on a home they want to buy, and will have to use an alternative agent. The association said it was concerned that this scenario could even lead some buyers, who might not be able to work with the agent of their choice, to opt out of working with an agent altogether.

 

"Rather than working with licensees they don't know, we're concerned people may decide to complete real estate transactions without representation," said BCREA CEO Robert Laing. "That goes against the consumer protection mandate of the Superintendent of the Real Estate and Real Estate Council of BC."

 

The BCREA argued that the practice of limited dual agency is crucial in small towns, in which there are far fewer agents for consumers to choose from. It said that it was "pleased" to see the BC government has proposed an exemption for smaller communities, however.

 

 

 

 

Source:http://www.rew.ca/news/bc-to-ban-real-estate-agents-from-double-ending-1.22546811

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If 2018's annual rent increase goes into effect, renters could be paying up to $936 additionally per year

 

BC housing minister Selina Robinson is considering the possibility of altering the province-wide formula that sets the maximum amount landlords can increase rent by annually, the minister told media this week.

 

The current formula, part of the Residential Tenancy Act, allows landlords to increase rent by 2% plus inflation. With current inflation rates, the maximum rent increase would be 4% in 2018. If next year's rent hike goes into effect, the average rent for a one-bedroom apartment in Metro Vancouver, which is currently $1950, would increase by $936 annually. Robinson explained that the formula will be evaulated by her ministry as they work out ways to make renting less stressful across the province.

 

"[We are] having conversations right now," said Robinson in an interview. "We just saw [the 2018 increase] come out and I know that people are very, very concerned."

 

The province is looking into lowering the annual rent increase to only the rate of inflation, which would make the maximum rent increase 2% this year, or $468 annually on an apartment rented at $1950 monthly. 

 

During the provincial election in May, the NDP promised to help deal with the rental crunch by building 114,000 co-op and rental homes and by giving renters an annual home credit of $400. The party also promised to end the "fixed term lease" loophole, in which tenants are forced into one-year leases with higher than normal annual rent increases based on a minor technicality.

 

Robinson said that rent control is one of several aspects of the province's affordability problems.

 

"I'm looking for things we can deliver ASAP, because I know this is a crisis," she told The Vancouver Sun

 

 

Source: http://www.rew.ca/news/bc-housing-minister-considers-annual-rent-increase-cut-1.22277948

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Buying property stateside is intriguing, often affordable, and considerably warmer. That’s why each year, as cold weather sets in, Canadian retirees go the way of the loon; according to Stats Canada, Canadian residents took 20 million overnight trips to the U.S. in 2010.

I know, I know – Cape Cod is not the south… but the charming property prompted me to look into the possibility further. What does buying a property in the U.S. entail?

The Cross-Border Contrasts

A good place to start is the variances between mortgage rules stateside and back home.

“There are few key differences due to the regulatory requirements, laws, and practices which govern the mortgage industry in the US,” says Alain Forget, vice president of sales for RBC.

Timing is an increasingly important element. “The average is 45 days to apply and secure a mortgage in the US, compared with a few days in Canada,” says Forget. “The main reasons is the number of steps in the process, including application, income and asset documentation, credit report, appraisal, title, credit loan review and approval, closing documents”

Getting a mortgage in the US requires a fair bit more documentation than in Canada. RBC has broken it down here. Expect to divulge details from your passport, Canadian-held accounts, and all Canadian property tax statements in addition to the usual income verification paperwork.

Expect to Pay More for Your Mortgage

Forget also points out that costs in the US can be higher – 3 to 4 per cent overall – when you factor in third-party expenses and pro services like property appraisal and title insurance. “This varies per state, for example Florida averages 2.5 to 3 per cent,” he adds.

There are also some key differences for the interest you’ll pay on your mortgage. “US mortgages are compounded monthly versus semi-annually in Canada,” says Forget. “They may also be tax deductible in the US for US citizens and permanent residents.”

How to Apply

If you don’t mind a few long-distance charges, Canadians are able to apply for a mortgage remotely via phone or email. This is usually done through a bank that has operations south of the border.

“They don’t need to have an account with RBC Bank USA to apply for a mortgage,” says Forget. “However we strongly recommend having a US account to facilitate the funding of the loan and monthly payment as well as to facilitate the transfer of the down payment for the closing.”

You can also pre-qualify before you start the vacation house hunt to give you leverage in the event you get into a bidding war with other snowbirds. “The closing should be done in person in the US, usually at the office of the title company,” adds Forget. “This requires minimum traveling across the border.”

Getting a Competitive Rate

In addition to finding a bank with the capability to deliver the mortgage in the state and county where the property is, you’ll want a Canadian-friendly lender. “Most US banks will not lend to foreign nationals like Canadians – or if they do, they might charge a foreign national premium which can be 1.5 to 2 per cent over the standard mortgage rate,” he says.

Working with a Canadian bank with reach into the US often means you don’t need an American social security number to qualify. The key to finding a competitive rate is looking to open mortgages or ones with various term options, Forget adds.

File Under: Things You’re Apt to Forget

Like property ownership in Canada, you’re going to want to make sure you have an account set up to seamlessly transfer funds between Canada and the US to cover those monthly utility bills and property taxes.  

“It is also important to seek professional cross-border advice to understand the legal, tax and estate issues which affect Canadians owning US property, since a number of those issues are different between the two countries,” adds Forget.

See, nothing too daunting, right? Find a banking partner in Canada to help you navigate the legal and money stuff and the rest is all about the search.

 

If you're considering buying a property in the US, how do you get financing and what are the differences in mortgages between the two countries? Andrew Seale of RateSupermarket.ca offers first-hand advice.

 

 

 

Source:http://www.rew.ca/news/getting-a-us-mortgage-as-a-canadian-1.1634525

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Buyers and sellers alike need to understand “fear of loss” psychology in home purchases


Whether you are thinking of buying or selling a home, understanding the current market is crucial. You need to know if you’re in a buyers’ market or a sellers’ market because that’s going to affect how your property is marketed and how much money you’re going to get for your home. If you understand the market, that will tell you what your home is worth and what you can expect if you’re a seller. If you’re a buyer, it is going to tell you what the appropriately priced offer on the property would be.

Using the market on the Sunshine Coast right now as an example, we are in a seller’s market. In a seller’s market, you’re much better off listing your property at a price that is going to attract as many potential buyers as possible and try to create an environment where they have a “fear of loss” motivation; you should aim to capitalize on that and end up in a situation where you have multiple offers.

Fear of Loss Motivation

Here’s an example of “fear of loss” motivation – also colloquially known as FOMO, Fear of Missing Out.

Let’s say you’re looking at a newspaper ad because you’re shopping for a black Dodge Dakota. You look at 15 of them – they all have similar mileage, and they’re all around the same price.

If you are the person trying to sell a Dodge Dakota in that environment, the best thing to do is to position your Dodge Dakota to look the best and price it 5% cheaper than all the other ones. Then all the buyers will want to come have a look. Everyone will look at your price and then make offers because they don’t want to miss this opportunity to get this amazing deal.

It’s the same with houses. Even though you may think that your house is unique, and beautifully decorated, with all sorts of redeeming features, the reality is that when people are initially looking at the information available on the Internet, they typically don’t know any of that. They will call up their buyer’s agent and ask to see the home based on the first impression they’ve had from the photos.

Your listing agent has to make sure when they list your property that they have a good understanding of the market value of the house, and then position it in a way where it’s going to get the most exposure and the most interest as possible. Then what needs to happen, in this market, is the listing agent needs to maximize exposure.

This is what I do. I say we’re not going to accept any offers until “this date,” and I give two to three weeks for everyone who is potentially interested in it to come and see it.

Price it Right

A lot of people make the mistake of pricing their home too high, thinking it gives them room to negotiate. For example, if a house is worth $500,000 and they price it at $550,000 because they think they can negotiate and end up with $500,000. That’s the worst thing you can do because that’s going to put people off.

The average buyer is not a professional real estate agent, and they’re the ones deciding which properties they want to see based on their online research.

If you don’t make your home appear to be a really good deal, you’re going to lose a lot of potential buyers. When they come see your home, then they can find out that it’s got lovely decoration, it’s a great neighbourhood, it’s close to a school, and all the other great features. But until they come and physically see the home, it won’t really be on their list, so you can miss a lot of people. If their search parameters are set at prices under $500,000, your house won’t even show up at all.

Understanding and Expertise

You’re much better off understanding the market, understanding how people buy, and understanding the psychology of buyers and sellers. It’s very important. As a seller, it can make you tens of thousands of dollars, if not hundreds of thousands of dollars, in a market like Vancouver.

As a buyer, understanding this can save you the same kind of money. Right now, there are a lot of buyers in our local market using Vancouver agents, paying tens of thousands of dollars too much because the agent they’re working with doesn’t understand the local market. They’re coming from a market in Vancouver where sellers are selling for $2 million, and then buying a place on the Sunshine Coast for $600,000. They think they’re getting a great deal. If they were using a local agent who knew the market, they would probably get the same home for $550,000. But they don’t and $50,000, compounded annually at 3% is a huge amount of money. A local agent who knows the market and is working as a full-time agent in the thick of things can save you, or gain you, thousands of dollars.

 

 

 

Source:http://www.rew.ca/news/getting-the-best-deal-in-a-sellers-market-1.21205857


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It’s no small secret that the Vancouver housing market is a tough one to break into. Among millennials and young families alike, the idea of buying property within the city limits is a daunting one. However, for would-be homebuyers in the Lower Mainland, there are a few simple tricks that can make the market a lot friendlier.

1. Look outside Vancouver proper

You know what they say: location, location, location! The attractiveness of the area you buy in contributes to a fair chunk of a home’s asking price. Rather than look at popular areas in the city that are going to come with higher costs, consider your options outside of Vancouver proper. While the median sale price in downtown Vancouver in the first half of 2017 was $749,500 (and all but one of those attached units), in Coquitlam it was $675,750 (mostly attached), in New Westminster it was $502,000 (also mostly attached). In Surrey North and Central, the median sale price was only $551,000, with more than 40% of those detached homes. It’s clear that for those who can set up house outside of the city, there are huge savings to be had.

2. Buy in a walkable, up-and-coming location

Consider buying a home in an up-and-coming neighbourhood and avoid excessive listing prices. With projects in walkable neighbourhoods such as Brentwood, Metrotown, Surrey Central and Port Moody, these areas could yield real estate gems. And with so many amenities at your fingertips, you’ll save on things like transit, vehicle costs and more.

3. Give up the parking spot

Another way to keep your costs low is to search out places without designated parking. Houses, townhouses and apartments without parking spots will nearly always have lower listing prices than their counterparts with driveways or underground spaces, which can easily cost an extra $50K. To keep things convenient, look for listings in walkable areas and that are close to transit corridors and handy car-sharing options.

4. Buy smaller

Forgoing a little space can save you a lot. Think carefully about how much room your family really needs before you commit to a larger home with a higher price tag. For instance, while you always imagined yourself in a fully detached home, you may find that a large townhouse fits the bill. And if you’re a first-time buyer entering the market, try a small one-bedroom or even a studio to get your foot on the property ladder. Assess your needs carefully before committing to square footage.

5. Buy larger and share – or become a landlord

On the opposite end of the size spectrum, look for places that would allow you to create additional suites to subsidize your mortgage. Having tenants does come with additional responsibilities, but multiple families living in a home makes it more affordable for all parties. Alternatively, you may want to apply for a Vancity Mixer mortgage and share your first purchase with family members or friends.This mortgage offers competitive rates plus the legal and insurance support you need to protect everyone’s best interests.

6. Purchase a fixer-upper

An oldie but a goodie, this nugget of wisdom still holds true. Buying a home with a few more cracks will help you save huge on asking price, whether you plan to renovate through contractors or put in the elbow grease yourself to build up that “sweat equity.”

7. Put gifts towards a down payment

Saving for a down payment is tough. One way to create savings is to put monetary gifts towards your down payment. With that goal in mind, ask friends and relatives for cash gifts if possible. Many couples even ask for cash wedding presents rather than items from a registry, with the intention of putting the proceeds towards a new home.

8. Take advantage of available resources

When you’re actively looking to buy a home, knowledge is power. Look to available resources like Vancity’s first time home buyer’s hub, which has tools to help you build your down payment, calculate how large of a mortgage you can afford and explore mortgage options. Planning ahead with expert advice will save you plenty of headaches down the road.

Breaking into the housing market is difficult, but it’s far from impossible. With careful planning and allowances for location and size where they can be made, home buyers on a budget can find the perfect place to call their own.

 

 

 

 

 

Source:http://www.rew.ca/news/8-creative-hacks-for-buying-a-bc-home-on-a-budget-1.21601735

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There’s a better solution for the rental crisis than telling people what they can do with their homes, says agent Leo Wilk

 

 

The City of Vancouver is proposing (and we all know what that means) some new regulations on owners of real estate who use their residences or investments as income-generators on AirBnB or other vacation rental websites. Of course, this is yet another cash grab and they have claimed this will free up to 1,000 rentals in Vancouver.

 

The current rules are that zoning regulations do not allow short-term rentals under 30 days unless you are a licensed bed and breakfast. However, we all know people do not listen to the rules, and who is to blame them? I get it if you want to make everyone who uses property they own as am AirBnB have a licence – fair enough. But you cannot keep telling people what to do with their homes they own. Many people work very hard to afford a home in this city and then are told by the city what they can or cannot do. For me, that just does not make sense. 

 

I know so many people who have a home worth a couple million who do not want a long-term tenant but need to AirBnB every now and then to help out. The City, along with many people, think that anyone who owns a home over a million is insanely rich. But those people work very hard to afford their homes and want to enjoy it without someone living below them.

 

On top of that, there are many horrible renters out there and they are protected by the Residential Tenancy Act, which makes people not want to do long-term rentals. Ever had a hoarder in your rental? Makes short-term or AirBnB look even more attractive. But once that lease is signed it is a free-for-all, according to the Act. 

 

To give you the quick lowdown, the proposed new rules are as such:

 

Owners and renters (although the owner probably would not allow a renter) would be allowed to rent part or all of their principal residence on a nightly basis, if they have a business licence. To get a short-term rental business licence you would need to prove it is your principal residence by submitting your property title or a tenancy agreement along with photo ID and recent government or utility mail. Laneway homes, secondary suites, investment units and second homes will not be allowed to be rented out short-term. The City will audit licence applications to prevent fraud – and I am sure this process will be done very fast, just like our building permits! Licensed operators would need to post their licence number in all online advertising. People operating rentals without a business licence will face fines and legal action – which of course equals money to the City.

 

Here is my quick solution.

 

If the City wants to free up long-term rentals, why don't they change the regulations on strata corporations who have rental restrictions? Make it so that you cannot restrict the amount of rentals allowed in buildings. This would literally solve the rental crisis overnight and thousands and thousands of rental condos would come to market.

 

On the flip side of that solution, however, I do think it would mean fewer condos for sale, because now all these people who are forced to sell when they need to upsize, downsize, move out of town, etc., can hold their properties and rent them out. 

 

 

 

 

Source: http://www.rew.ca/news/city-s-new-airbnb-rules-are-a-step-too-far-1.21225143

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For new investors, it’s easy to get overwhelmed by facts, figures, formulas, and different investment calculations. And, although many people are aware of condo investing terms, they have trouble defining them or deploying them properly.

 

Our goal today is to demystify the most important condo investing terms that you need to know. This will not only make you a better investor, but it will help you impress your boss at the next company meeting.

 

Although there are many different types of real estate investing, the fact is that there are several key terms that every condo investor should know.

 

Lucky for you, we’ve compiled them here in a handy list. Think you know them all? Keep reading and see!

Key Condo Investing Terms #1 – Return on Investment (ROI)

ROI, or return on investment, is an important formula to gauge how an investment performs. It’s a simple, quick calculation – easily done on a napkin – that lets you know how profitable an investment is.

 

The formula looks like this: ROI = (gain from investment – cost of investment) / cost of investment

 

For example, after four years you decide to sell the downtown Toronto condo you invested in. You bought it for $350,000 four years ago with a 20% down payment, or $70,000. It appreciated at an annual rate of 5.82%, which is the compounded annual growth in Toronto over the past 30 years. So that means your condo is now worth $440,127.

 

Let’s assume you sell it for $440,000 and have a remaining mortgage balance of $250,000. Your gain on investment is therefore, $190,000.

 

You also had expenses, including closing costs and upgrades, totaling $20,000. So your cost of investment is your down payment plus expenses, for a total of $90,000.

 

Now, let’s put these numbers into the formula:

  • ROI = (190,000 – 90,000) / 90,000
  • ROI = 100,000 / 90,000
  • ROI = 1.11
  • ROI = 111%

Over four years, your return on investment is 111%. That’s not bad! Some investors set a standard ROI they aim for and won’t buy anything that yields less than that.

Key Condo Investing Terms #2 – Pre-Construction Appreciation

One of the many reasons real estate is a great investment vehicle is long-term property appreciation. But, condos have a second opportunity for appreciation, through the wonders of pre-construction appreciation.

 

When you buy a condo before it’s constructed, you are paying today’s prices for a condo that won’t be constructed for several years. That means when your condo is move-in ready and you actually buy it (take out a mortgage), it’s already appreciated.

 

We won’t get into greater detail about the merits of pre-construction condos just now, as we have a lot more juicy stuff about this to share with you in the weeks to come.

Key Condo Investing Terms #3 – Net Operating Income (NOI)

NOI, or net operating income, like ROI, is a great tool for calculating how profitable your properties will be. Although it may sound a little technical, the formula is actually quite easy:

 

NOI = Revenue – Expenses

 

This is an annual calculation and assumes you own a property free and clear. Expenses include all your operating expenses such as taxes, insurance, utilities, maintenance, etc.

 

Imagine you bought a property that produces $21,600 per year in rent ($1,900 per month). Your monthly expenses include the following: property taxes at $200, condo fees at $150, and insurance is $50. This is $400 a month, or $4,800 yearly.

 

That would mean that your NOI = 21,600 – 4,800 = $16,800. Calculating the NOI is an easy way to compare properties and maximize your cash flow.

Key Condo Investing Terms #4 – Capitalization Rate (Cap Rate)

Now that you know how to calculate the NOI, we can move on to something a little more complicated. The cap rate is another way of calculating the rate of return on your investment properties.

 

Although this formula is expressed as a percentage, many investors use only the number when referring to a cap rate. For instance, “the condo one of my clients just sold had a 5 cap!”

 

Here’s how it works: Cap Rate = NOI / Current Market Value

So let’s use the NOI we calculated earlier – $16,800 NOI. And, let’s assume a $350,000 market value of your condo investment.

 

So, your cap rate = $16,800 / $350,000 = 0.048

 

Expressed as a percentage, your capitalization rate is 4.8%, or a respectable 4 cap! This calculation is a great way to compare investment opportunities.

Key Condo Investing Terms #5 – Refinancing

Refinancing is a crucial part of all real estate investing, and can save you thousands of dollars per year. Like most other investing concepts, refinancing seems a little scary if you’re not familiar with it, but it is a very straight-forward process.

 

Refinancing is simply negotiating a presumably better interest rate and/or terms for your property. It is usually done for one of two reasons: either to get a better interest rate, or to free up capital for your next investment. And the beautiful freeing up capital for your next investment, is that you can pull it out free of capitals gains by refinancing. Capital gains aren’t actually realized until the property is sold, whether that is in 1 year or 100 years.

 

We’ll be going deeper into detail about the power of refinancing next week. In the meantime, consider talking to a mortgage broker to see if your properties are worth refinancing.

 

The above list of condo investing terms is by no means comprehensive. But, these five terms are some of the most important you need to know as a condo investor.

 

If you’re consistently putting these concepts into practice, you’ll be in a much better position to analyze and evaluate your existing and future condo investments – which, in turn, means more money in your pocket.

 

 

 

 

 Source: http://connectassetmanagement.com/condo-investing-terms/

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Average sale price increases in every real estate board in the province in June


Sales may be down from last year’s record-breaking activity, but that doesn’t mean home prices across the province are falling, according to the latest figures from the British Columbia Real Estate Association (BCREA) released July 13.

 

The BCREA reported that 11,671 BC homes were sold on the Multiple Listing Service® (MLS®) in June, a fall of 9.6% from June last year, and down 5.9% compared with May’s surge.

 

However, the average MLS® sale price in BC was $725,778, up 4.4% from the same month last year, and rising on an annual basis in every one of the 11 BC real estate board areas.

 

“Although home sales remain well off the record pace set last year, demand is still quite robust," said Brendon Ogmundson, BCREA economist. "That demand is supported by a strong provincial economy and vigorous job growth.”

 

He added, “Supply remains a challenge, which means most areas are seeing tight market conditions and significant upward pressure on prices.”

 

The number of total active listings across the province was down 6.2% to 29,651 units compared with June 2016.

 

Chilliwack was the board to see the highest annual price growth, up 18.3% year over year, followed by Kootenay, Victoria and Vancouver Island. Greater Vancouver saw the lowest average price increase of the 11 BC boards, a rise of 2.7% since last June.

 

Sales activity painted a different picture – revealing that it is largely supply, rather than sales volumes, that dictates price points. Along with Greater Vancouver, where sales were down around 12% in June year over year, Chilliwack saw an 11% annual sales decrease. In both Vancouver Island and Victoria, where prices are climbing robustly, year-over-year transactions declined 13-14%.





Source:http://www.rew.ca/news/bc-real-estate-prices-keep-climbing-on-low-supply-1.21118621

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With much speculation that interest rates can only – and surely must – go up, local mortgage expert and broker coach Dustan Woodhouse is asked on a daily basis whether he expects this to happen any time soon.

 

His answer? It’s the same reply he’s been giving clients for years, as the same question emerges in every hot spring market. And that answer is: probably not – but you have little to fear even if rates do rise.

 

Woodhouse, a mortgage broker with Dominion Lending Centres, told a recent edition of the Real Estate Therapist show on Roundhouse Radio, “It’s not about the interest rate, that shouldn’t concern you – it’s about the effect that interest rate rise will have on the payment you make on your mortgage.”

 

Woodhouse pointed out that about half of Metro Vancouver home owners do not have any mortgage outstanding – “that’s our parents and grandparents” – and the average mortgage balance held on the remaining 50% of homes is around $400,000.

 

He added that the majority of home owners won’t be affected by an interest rate rise, as 80%-plus of mortgage payers are on a five-year fixed rate. Those who locked their rate in three or four years ago will have locked in at a higher rate than today’s, so they likely won’t see a payment rise when they renew in a year or two. And those who have more recently begun their five-year term have plenty of time to pay down the principal at the lower rates and mitigate any payment shock in four or five years’ time.

 

Even those who are currently on a variable rate might not see any payment increase either, says Woodhouse. Many lenders’ variable-rate mortgages don’t increase payments with a rise in interest rates, they just change the composition of what the mortgage holder is paying back – a little more interest, a little less principal.

Dollarizing the “Payment Shock”

The remaining small fraction of adjustable-rate mortgage payers, who will see payments go up with an interest rate increase, can also rest assured that it might cost much less that they might imagine, said Woodhouse.

 

“Let’s dollarize that ‘payment shock.’ A quarter-point interest rate movement represents $13 per month, per $100,000 mortgage, for the average mortgage holder. So that’s $52 bucks a month extra on the average $400,000 mortgage balance.

 

“That does not equate to a housing collapse. That is not blood in the streets... A quarter-, half-, even a three-quarter point rise in interest rates would have any significant impact on the housing market. In fact, it might rush more people into the market, as they think ‘Oh no, rates are going up, we need to get in now.’”

 

However, Woodhouse was quick to point out that he doesn’t think that interest rates will go up any time soon. He said that considering the federal government is pumping $23 billion into the economy, it wouldn’t make any sense to also increase interest rates, which would slow economic growth.

 

“They have one foot down hard on the gas pedal to rev up the economy, so to have another branch of the government, the Bank of Canada, raising interest rates – that’s like the other foot being put on the brake pedal.”

 

 

 

 

 

 

source:http://www.rew.ca/news/why-you-shouldn-t-fear-an-interest-rate-bump-1.20789226

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Vancouver housing market "ain't seen nothing yet"

 

 

The Vancouver real estate market, far from reaching its peak in terms of unaffordability and lack of housing, is merely “dancing on the edges of a massive problem,” according to one leading development marketer.

Speaking to a packed audience at the Urban Development Institute luncheon on new home marketing at the Fairmont Hotel Vancouver June 8, Cameron McNeill of MLA Canada added, “We ain’t seen nothing yet.”

The panel of well-known development marketing bosses, which also included Scott Brown of Fifth Avenue Real Estate Marketing and Daryl Simpson of Bosa Properties, discussed how blistering demand and a trickling supply of new housing is affecting the affordability of homes in the region.

Event moderator and UDI chair Jon Stovell of Reliance Properties asked the panel whether onerous building permit requirements and slow processing times were affecting home prices – to which the reply was unanimously “yes, absolutely, 100%.”

 

Cameron McNeill said that the Metro Vancouver region is expected to grow by 250,000 people in next five years, and that it currently takes around six years to get a highrise residential project from conception to occupancy – “if it all goes well”. He said, “And that’s maybe 300 units. The city is 300,000 people bigger by that point.” However, McNeill's comments do not jive with Metro Vancouver's projections for population growth, which would estimate an additional 180,000 people over the next six years.

 

McNeill added, “We’re dancing on the edges of a massive, massive problem. And it’s not going to change. I just came back from Hong Kong and everybody I spoke to said to me, ‘That’s nothing.’ We ain’t seen nothing yet. This is just the tip of the iceberg for Vancouver.”

 

Daryl Simpson pointed out that population growth numbers, and therefore housing demand, would likely be even higher than projected, as projections are based solely on permanent residents and citizens. “One thing they rarely look at student visas and multiple-entry visas. There were 67,000 student visas in BC last year. And you have to think, if they’re flying to BC to study, these are students with means, maybe wealthy families. In 2016, there were 315,000 multiple entry visas – they last 10 years and allow people to fly back and forth. So you need to layer those on top of the permanent residents and citizen population growth.”

 

Scott Brown said, “You can’t fix demand. And if this is a housing crisis as the media says, where is the multi-stakeholder group figuring out how to speed up supply? If we were going to war we sure as hell would be working out how to arm up quickly. But we spend more time working out how to break things apart than how to fix things. We need to work together. We’re trying, but putting one project a time on the market, there’s so much demand, prices just keep escalating.”

 

Simpson added, “Look at the 450 acres in False Creek Flats, with 1,400 residential units in total earmarked for that area. That’s three homes per acre. That’s insane. Ask Ryan Holmes of Hootsuite what he needs, it’s not 450 acres of industrial land, its proximate residential units [so employees can afford to live in Vancouver close to work]. Ask Amazon, they’ll say the same thing. Go to Seattle, there are more residential units being built by Vancouver developers – Bosa, Westbank, Onni – right across the street from the Amazon HQ than will be built in the whole of the False Creek Flats.”

 

 

 

 

 

 

 

 

Source: http://www.rew.ca/news/vancouver-housing-market-ain-t-seen-nothing-yet-1.20508243

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If you have home equity, there's a neat method to use it to make investments and write off the mortgage interest. Jorge and Alisa Aragon explain how

 

 

For US homeowners, mortgage interest is automatically tax deductible, but for Canadians, the write-off is not so straightforward. However, there is a way for you to deduct your mortgage interest while increasing your wealth, an approach known as the “Smith Manoeuvre”.

In order to make your mortgage interest tax deductible, homeowners must be able to prove that the money is being reinvested and is not being used for personal expenses.

A properly structured mortgage-centric tax strategy has several key elements – the most important of which is a multi-component, mortgage or home equity line of credit (HELOC). You will need a readvanceable or line-of-credit mortgage that lets you continuously extract equity as you pay your mortgage down.

Every time you make a payment and reduce your principal, you then immediately extract that equity and add it to your investment account. Since you have been able to deduct your mortgage interest, at the end of the year you will generate a tax refund that you can use to make a lump-sum payment on your mortgage –which makes even more funds available for investment.

It’s best to have a single collateral charge with at least two components – usually a fixed-term mortgage and an open line of credit – that can track and report interest independently. This is absolutely essential under Canada Revenue Agency (CRA) rules and guidelines. In addition, for the interest payment to be tax deductible on any money borrowed for investment purposes, it must have a reasonable expectation to be able to produce an income.

Second, the strategy must employ conservative leverage-investment techniques – which is why a financial advisor must be involved in order to comply with federal regulations. The financial advisor should be a Certified Financial Planner (CFP) who is experienced in leveraged investing and able to actively monitor a homeowner’s portfolio on an ongoing basis.

Homeowners who opt for a tax-deductible mortgage interest plan make their monthly or bi-monthly mortgage payments the same way they would when making any type of mortgage payment. The payments go towards reducing the principal amount of the mortgage, creating equity; which is subsequently available to be borrowed on the line of credit. From there, the equity available in the line of credit must then be transferred to an investment account, which can be done automatically by your Certified Financial Planner.

Essentially, the homeowner is borrowing from the paid portion of the mortgage for reinvestment purposes.

On average, a typical 25-year mortgage can become fully tax deductible in 22.5 years.

The Ideal Client

Ideal borrowers for an advanced mortgage and tax strategy are typically professionals or other high-income earners who have a conventional mortgage, and have at least 20 per cent of the cost of the home to put towards a down payment, or who have built up substantial equity.

As high-income earners, their total debt-servicing ratio will be quite low and they will have excellent credit (680+ Beacon scores). These borrowers are financially sophisticated homeowners that are keenly interested in establishing a secure financial future and comfortable retirement. They also have good investment knowledge.

The Risks

The financial benefits of tax-deductible mortgage interest are indisputable and justify the risks to the right borrower. That said, a problem can arise if a homeowner spends the funds as opposed to reinvesting them. As well, any tax refunds should be used to pay down the mortgage as quickly as possible – thus making as much of the interest payment as possible tax deductible.

The short-term financial risk is liquidity (sometimes referred to as cash flow risk). Cash flow risk addresses the possibility that interest rates will sharply drive up the cost of borrowing at the same time as markets falter, resulting in a negative client monthly cash flow for a brief period of time.

This short-term risk is typically only prevalent in the first two to four years because, after this period of time, the homeowner has stockpiled enough equity through annual tax refunds that other liquidity options exist and the risk is fully mitigated.

Liquidity risk varies widely based on the balance sheet strength of the homeowner. Highly qualified homeowners are easy to manage as these borrowers have no difficulty meeting the short-term cash flow demand should the need arise.

Combining this tax deductible mortgage with a sound investment strategy can significantly increase your net worth over the long term. Talk to a mortgage expert for a free analysis of how the Smith Manoeuvre can work for you.

 

 

 

 

 

 

 

 

Source: http://www.rew.ca/news/how-to-make-your-mortgage-tax-deductible-and-increase-your-net-worth-1.1744201?utm_source=REW+Realtor+News&utm_campaign=87e6967bc2-REW_Agent_News_Monday_05_22_2017&utm_medium=email&utm_term=0_38b446cae6-87e6967bc2-96024289

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If you are buying a condo or any other strata property, it’s essential that you fully understand how strata corporations work. You may decide that you want to be on the council or you may decide to take more of a back seat. Either way, you need understand the system and processes in place to ensure your building is being well managed and your investment is protected.

 

Strata Corporation as Local Government


The Strata Property Act works like the Canadian constitution in how it divides powers, obligations and rights between owners and strata councils. In fact, it creates a structure that often mirrors our provincial and federal governments.

 

The owners in a strata corporation can be viewed as the legislative branch of government. General meetings are like legislative sessions, but instead of representing the interests of constituents, each owner represents the interests of their strata lot. The owners in a strata corporation control the budget and generally need to approve capital and unexpected expenditures and any significant changes by three-quarters or unanimous vote.

 

The strata council is the executive branch of the strata corporation. Strata councils manage day-to-day affairs, spend money approved by the owners and enter into agreements on behalf of the strata corporation. Strata councils also set the agenda for most general meetings, determine whether owners have breached bylaws and rules and hear rental restriction hardship exemption applications.

 

Like most government bodies, strata corporations are set up to be self-policing. If owners don’t like how their building is being run, they can elect a new strata council. When strata councils or owners fail to meet their legal obligations under the Strata Property Act and the bylaws, they can call on the courts to protect their rights or require another party to fulfill their obligations.

 

Access to Information


Under the Strata Property Act and regulations, strata corporations must maintain a comprehensive set of records. Owners may inspect or request copies of these records and strata corporations must produce the records, subject to some limitations, within one or two weeks.

 

Voting and Holding Office


Generally, every owner has the right to vote at a general meeting and stand for strata council, subject to a single exception. The Strata Property Act permits a strata corporation to pass a bylaw restricting an owner’s right to vote or stand for council if the strata corporation is entitled to file a lien against the owner’s strata lot.

 

Only certain kind of debt are subject to a strata lien and a strata corporation must deliver a special demand for payment at least two weeks before denying an owner the right to vote or stand for council. Outstanding fines cannot be used to prevent an owner from voting or holding office.

 

Calling Meetings and Setting the Agenda


While a strata council can call a general meeting at any time, the Strata Property Act allows owners to call a special general meeting or require that a strata corporation include one or more resolutions on a meeting if owners representing at least 20% of the votes sign a petition requesting that one or more resolutions be put to the owners.

 

Where a demand is made under section 43 of the Strata Property Act, astrata corporation must call a special general meeting within four weeks and place the requested resolutions at the top of the meeting agenda. Where a demand is made under section 46 of the Strata Property Act, a strata corporation must include the requested resolutions in the agenda for the next general meeting.

 

Directing and Restricting Council


Owners have the power to direct a strata council to take certain action or restrict a strata council’s authority by passing a majority resolution under section 27 of the Strata Property Act.

 

Good Governance Protects Your Investment


In my law practice, I encourage strata corporations and owners to adopt good governance practices in order to strengthen their communities. Strata corporations and owners that obtain timely and knowledgeable legal advice are often able to avoid or minimize conflict and reduce liability while building healthy communities and a better return on their investment.

 

For additional information on this and other strata property topics, visit my free online strata law guide at www.stratalaw.ca. Finally, always remember that this article provides general reference information, not legal advice. If you have a legal problem, speak with a strata lawyer.

 

Source: REW.ca

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After weathering the recession better than many other countries, and leading the G7 economies through much of the recovery, Canada’s economy suddenly looks at risk, prompting an unexpected rate cut on Wednesday. Citing threats to Canada’s financial stability from the oil price shock, Bank of Canada Governor Stephen Poloz cut its key rate by 25 basis points to 0.75 per cent. Here are some of the winners and losers from the surprise move.

Winners

Homeowners

 

The most commonly cited catalyst for a correction in Canadian home values has been the possibility of rising interest rates, and the pressure that would put on the finances of marginal borrowers. Higher borrowing rates can reduce housing demand and put downward pressure on prices. The rate cut, which supports the continuation of ultra-low mortgage rates, at least pushes the likelihood of a large group of overextended borrowers running into trouble further out into the future.

 

Exporters/manufacturers


In an unlikely reversal of fortunes, the deterioration of the oil patch has translated into a sudden rise in the prospects of Canada’s manufacturing base. Lower energy prices help reduce production costs, while a falling loonie makes the country’s products more competitive on the global market. The Bank of Canada’s policy announcement further weakens the Canadian dollar, giving Canada’s exporters and manufacturers greater opportunities to sell into a resurgent U.S. economy.

 

 

 

Canadian stocks

  

Accommodative rate policy, or an extended period of low rates, has proven a boon for Canadian stocks and a windfall for many of those exposed to equities. The reduction in policy rates will further encourage risk-taking by Canadian investors, while low bond yields will keep investors searching for income in the stock market’s dividend payers. With valuations over the last six months being squeezed by the oil bust, the rate cut will provide a needed lift to Canadian stock investors. By the close of trading on Wednesday, The S&P/TSX composite index gained 1.8 per cent..

 

Canadian banks


The post-recession era has seen Canada’s biggest banks benefit from the willingness of Canadians to take on debt, primarily to buy property. Some analysts warned of risks to the banks if rates were to rise and usher in a phase of household deleveraging. The rate cut earns the banks some breathing room on that front, and lowers the risk of Canadian borrowers defaulting on their mortgages.

 

 


Losers

 

 Loonie

 

The rate cut automatically weakened the dollar further, and added another negative influence to the loonie’s slide. Canada’s high level of exposure to resources, combined with promising economic indicators out of the U.S., had already pushed the Canadian currency to a five-year low against the U.S. dollar. The loonie plunged more than 2 cents to a low of 80.70 cents (U.S.) on the news, and economists now see the dollar falling to as low as 77 cents.

 

 

Importers

 

The flipside of a weak loonie is that it makes goods purchased from other countries more expensive. Higher costs could also ultimately prompt Canadian retailers to raise prices in order to protect profit margins.

 

Canadian travellers

 

With each loonie capable of buying fewer U.S. dollars, the cost of travelling outside of Canada’s borders is getting more expensive. Similarly, cross-border Canadian shoppers will find their money doesn’t go quite as far south of the border.

 

Fixed-rate mortgage borrowers

  

A rate cut represents a signal to borrow and spend, and is for the most part friendly to debtors, except for those who chose to lock into fixed-rate mortgages. . Depending on the length of the term remaining on their mortgage contracts, they could miss out on the savings to debt-servicing costs if Canadian lenders decide to lower their mortgage rates.

 

Canadian banks


While lower rates could boost household borrowing, the margin, or profit, on each loan will fall. Even though the Bank of Canada cut its overnight rate by 25 basis points, allowing banks to borrow for 25 basis points cheaper, longer-term bond yields have plummeted by much more than that in the past year – and these yields determine the rates that banks charge their clients. Five-year mortgages, for instance, are priced off the 5-year Government of Canada bond, and its yield has fallen 86 basis points since September.

 

 

Source: The Globe and Mail, Tim Shufelt

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In order to prepare for winter, there are a number of beneficial tasks that you can carry out to ensure that you have a safe and comfortable winter.

 

Furnace/boiler tune-up, replace filters: Before you experience an issue with the furnace or boiler, it is best t to call in a heating contractor to service the equipment. They will clean it out, test it for safety and replace all filters as needed. While you are at it, have the water heater inspected as well.

 

Clean gutters: If you live in a location with heavy vegetation, it is a good idea to have your gutters and drains cleaned often, while checking for leaks. Overflowing and or leaking gutters can cause moisture damage to the home, so be sure to have them properly maintained.

 

Shut off exterior hose bibs: Find out where all of your exterior hose bibs are located, turn them off and drain all the water before it gets too cold. Exposed, pressurized water can freeze and cause leaks.

 

Test your smoke detectors and replace all expired ones: I recommend checking your smoke detectors at last every six months. If they are six years or older, they are 50 per cent less effective, so replace then if you need to. Also, all smoke detectors should be interconnected and hard-wired so they can be heard on all levels of the home. An electrician can help with this if you are not comfortable with your electrical system.

 

Have the roof inspected: Although it is much safer in the summer, a good winter roof inspection by a licensed roofing contractor or inspector should be considered, especially if it has not been done recently.

 

Have the attic inspected and add weather stripping to the hatch: In my opinion, the winter is the ideal time to check the attic, especially when it is raining. You can look for leaks, evidence of pests, insulation levels and ventilation. To reduce your heating costs have a proper weather strip applied on the attic hatch.

 

Caulk windows and doors, add weather stripping: Although summer is the ideal time to do this task, you’ll be able to check for drafts much easier in the winter. Take a trip to the hardware store to purchase the right type of caulking for your needs. Any damaged weather stripping can be applied to exterior doors.

 

Remove all items and vegetation from the home: All plants growing or storage items against the home should be removed to prevent moisture issues. This is an easy way to maintain the exterior, while preventing damage. In addition, remove snow from the foundation wall and clean all exterior vents.

 

Repair minor interior items: Why not take the time to repair those miscellaneous items that have been in the back of your mind all year? Loose door handles, trim, handrails, cupboards, bathroom and kitchen caulking, etc, can all be done in the winter.

 

Of course, many of these tasks can be done before winter, yet it is better late than never.

 

Source: REW.ca, Sean Moss - registered home inspector

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