Excerpted from The Globe and Mail
September 26, 2012
Rising home values could hurt wallets
By RENATA D'ALIESIO
Some homeowners face higher property taxes
After a bruising recession temporarily dragged down real-estate prices in Ontario, homeowners have seen the assessed value of their homes jump 18 per cent on average since 2008 – the first increase to assessed values in four years and one that could mean higher property taxes for some Ontarians.
The increases in residential property values, determined by the Ontario Municipal Property Assessment Corp., vary widely across the province, from about nil in the beleaguered manufacturing belt of Windsor to 20 to 30 per cent in the Greater Toronto Area, Ottawa and Northern Ontario, which has experienced a resurgence in mining.
"It's basically stable or increasing all through Ontario. That's positive," said Larry Hummel, chief assessor for the Municipal Property Assessment Corp. (MPAC), which released an assessment update Tuesday.
But the rise in property values will mean higher property taxes for some homeowners, further squeezing their finances at a time when record-low interest rates could start rising, the real estate market has shown signs of cooling, and Canadians are grappling with record debt loads, at 152 per cent of their income.
How much higher property taxes will climb won't be known until the spring, when municipalities begin poring over their budgets and the new property assessments. The last time properties were assessed was in 2008, when a two-year government freeze on tax assessments was lifted.
The revised values are based on what a property would have sold for on Jan. 1, 2012. Increases will be spread evenly over four years. If a home's value has risen more than the average in a community or region, that owner's share of the overall property taxes will likely increase.
For instance, in York Region, north of Toronto, property values soared between 32 per cent in Markham compared with 19 per cent in King and 14 per cent in Georgina. (The average increase in York Region is 27 per cent.)
Overall, though, property values have not risen as rapidly as they did in the last assessment period, when they jumped an average of 20 per cent from 2005 to 2008, Mr. Hummel noted.
Waterfront properties in particular have not experienced the same surge in prices, rising only 12 per cent since 2008. Mr. Hummel points to several factors for the slowdown, including significant declines in water levels along some stretches of Georgian Bay and the Great Lakes and the lingering economic downturn in parts of Canada and the United States.
"American buyers have largely left the marketplace because of the high Canadian dollar," he said.
The cost of farmland, on the other hand, has soared, in part because of growing urban development, increased ethanol production, and droughts in the U.S., which have strained supplies of corn and grain and sent commodity prices soaring. In turn, the value of Ontario farm properties has increased an average of 34 per cent, prompting the Ontario Federation of Agriculture to recently issue a warning to farmers: Many may not like what they see, come property-tax time.
MPAC, which is funded and operated by the province's municipalities, has begun mailing out assessment notices to Ontario's nearly five million property owners. The assessments should be in all homeowners' hands by the end of November.
In the Toronto region, a property-tax hike could further strain affordability in what is already a high-priced real estate market. Some property hunters may have to shift their search to neighbourhoods and cities farther afield.
"This could have an affect on affordability," said Dianne Usher, a broker and divisional vice-president with Royal LePage Johnston & Daniel in Toronto. If several other affordability factors, such as a hike in interest rates, surface at the same time, Ms. Usher said: "It will push, for example, first-time buyers from 416 to 905. It will push 905 first-time buyers to 705, 519."
Wednesday, September 26, 2012
Thursday, September 20, 2012
5 Tips for Negotiating a Mortgage
Excerpted from The Toronto Star
Five Tips For Negotiating a Mortgage
Published on Thursday August 30, 2012
Leigh Doyle
Key advice for negotiating a mortgage? Know your goals, understand your credit score – and do your research.
When you’re buying your first house, negotiating for the mortgage can seem like the least fun and most complicated part of the process. But having no experience making one of life’s biggest purchases doesn’t mean you’re destined to pay the bank’s listed rate. Follow these five expert-approved tips to make you a better negotiator.
Know your long-term goals
Farhaneh Haque, director of Mortgage Advice for TD Canada Trust in Toronto says most first-time home buyers don’t realize the average person owns their first home for only three years. It’s important to think about where you might be in the next three to five years, she says. “Ask yourself: How long do you anticipate living in this property? Will your life change dramatically in the next few years? How stable is your income?” For example, if you know your employer wants to transfer you sometime in the next 18-months, a five-year, fixed-term mortgage isn’t the right fit for you. This step helps you identify what needs you might have so you know the characteristics to look for in a mortgage product.
Know your credit score
Before you walk into your bank, check your credit score. It’s a critical factor in determining your mortgage amount. If it’s good, work to maintain that high level. “You want to demonstrate to the bank that you are a good customer,” says Haque. If it’s not so good, talk to your bank about strategies to improve the score, such as making regular on-time payments on your credit cards or paying down existing debt.
Be prepared
Once you have thought about your individual needs, do research before you go talk to your bank, says Christopher Molder, a mortgage blogger with SonofaBroker.com in Toronto. “Find out what the posted interest rate is and look up mortgage options at your bank,” he says. You want to be prepared so you can have a discussion about options and what the ideal mortgage is for you. If you know the rate your bank and the competitors are offering, you’ll be able to tell whether or not you’re getting a good deal. Haque recommends using online tools and calculators to get an idea of what you can afford.
Don’t focus on interest rates
Of course you want to score the lowest interest rate when negotiating, but Haque says focusing on the percentage is the biggest mistake first-time buyers make. “People often don’t know what else to look for,” she says. Remember, mortgages are a product and the interest rate is only one feature. Discuss the other features of the mortgage, such as the payback terms, if you can make lump-sum payments or pre-pay the mortgage and what the penalties are for breaking the terms.
“Having the lowest rate can come with certain costs, like a lack of flexibility,” says Molder, so make sure the mortgage you want matches your needs. It might cost you a little more, but could save you thousands in the long run by avoiding penalties or being able to make extra payments.
Shop around
Before you sign any papers, talk to other mortgage specialists and banks, says Molder. “A bank can only offer you the products they have, which might not be a fit for you,” he says. A broker can shop your mortgage around for you instead of you having to visit five banks individually.
Five Tips For Negotiating a Mortgage
Published on Thursday August 30, 2012
Leigh Doyle
Key advice for negotiating a mortgage? Know your goals, understand your credit score – and do your research.
When you’re buying your first house, negotiating for the mortgage can seem like the least fun and most complicated part of the process. But having no experience making one of life’s biggest purchases doesn’t mean you’re destined to pay the bank’s listed rate. Follow these five expert-approved tips to make you a better negotiator.
Know your long-term goals
Farhaneh Haque, director of Mortgage Advice for TD Canada Trust in Toronto says most first-time home buyers don’t realize the average person owns their first home for only three years. It’s important to think about where you might be in the next three to five years, she says. “Ask yourself: How long do you anticipate living in this property? Will your life change dramatically in the next few years? How stable is your income?” For example, if you know your employer wants to transfer you sometime in the next 18-months, a five-year, fixed-term mortgage isn’t the right fit for you. This step helps you identify what needs you might have so you know the characteristics to look for in a mortgage product.
Know your credit score
Before you walk into your bank, check your credit score. It’s a critical factor in determining your mortgage amount. If it’s good, work to maintain that high level. “You want to demonstrate to the bank that you are a good customer,” says Haque. If it’s not so good, talk to your bank about strategies to improve the score, such as making regular on-time payments on your credit cards or paying down existing debt.
Be prepared
Once you have thought about your individual needs, do research before you go talk to your bank, says Christopher Molder, a mortgage blogger with SonofaBroker.com in Toronto. “Find out what the posted interest rate is and look up mortgage options at your bank,” he says. You want to be prepared so you can have a discussion about options and what the ideal mortgage is for you. If you know the rate your bank and the competitors are offering, you’ll be able to tell whether or not you’re getting a good deal. Haque recommends using online tools and calculators to get an idea of what you can afford.
Don’t focus on interest rates
Of course you want to score the lowest interest rate when negotiating, but Haque says focusing on the percentage is the biggest mistake first-time buyers make. “People often don’t know what else to look for,” she says. Remember, mortgages are a product and the interest rate is only one feature. Discuss the other features of the mortgage, such as the payback terms, if you can make lump-sum payments or pre-pay the mortgage and what the penalties are for breaking the terms.
“Having the lowest rate can come with certain costs, like a lack of flexibility,” says Molder, so make sure the mortgage you want matches your needs. It might cost you a little more, but could save you thousands in the long run by avoiding penalties or being able to make extra payments.
Shop around
Before you sign any papers, talk to other mortgage specialists and banks, says Molder. “A bank can only offer you the products they have, which might not be a fit for you,” he says. A broker can shop your mortgage around for you instead of you having to visit five banks individually.
Tuesday, September 11, 2012
Rent-to-Own a Home: Beware the Risks
Excerpted from The Toronto Star- Moneyville
Rent-to-own a home: Beware the risks
By Krystal Yee
September 10, 2012
Last year , as I was buying my first home in Vancouver, I came across a handful of listings offering rent-to-own or lease options on homes.
These deals as exactly as they sound – a homeowner rents to a tenant and the tenant has an option to buy the home for a predetermined price at the end of the lease.
On the surface, it seems like a mutually beneficial agreement for both parties - the homeowner has a deal to sell the house and the tenant can build their credit over time while saving up for the down payment.
However, Frank Petriglia, a real estate broker with RE/MAX Premier Inc. in Vaughan, believes that more often than not, a lease option agreement benefits the homeowner.
"The homeowner clearly comes out ahead in the rent-to-own scenario since they have very little on the hook," he says. "Since the selection of these types of units is slim, the homeowner can demand more money than the open market will be willing to pay. And my feeling is that it will stay this way regardless of market conditions."
In most rent-to-own scenarios, the tenant pays higher than normal rent, with a portion of the money going towards a down payment. The additional rent acts as something of a forced savings plan for the tenant, Petriglia says, adding that the option does give some people a way into the market, albeit at a slightly higher cost.
Tenants are also typically required to put down a deposit of about 5 per cent of the final sale price – which will be held by the homeowner as credit towards the price of the home at the end of the lease option.
Here's an example: A homeowner wants to sell for $200,000. The house typically rents for $1,000 a month. After a $10,000 deposit, a rent-to-own tenant might pay $1,300 a month in rent – with $300 of each payment as a credit towards the down payment. On a three-year lease, the tenant would have paid $10,800 towards the down payment. Add those credits to the initial deposit, and the renter will have $20,800 for a down payment.
This can be attractive for those who can afford to buy a home, but might not quality for a mortgage. This could be because of a weak credit score, or insufficient employment history. Their hope is that, by the end of the lease agreement, they will be able to qualify for a traditional mortgage from a bank.
Related: Lessons learned from a year as a home owner
The downside is that if a tenant decides to break the rent-to-own agreement, or decides the property is not suitable, they may lose their deposit, and depending on how the contract is written, may lose all the money that was put aside for the down payment, or they might receive a very small portion back.
Additionally, in some cases your agreement may be void if you are late on rent at any time – meaning not only do you get evicted, but you could also potentially lose tens of thousands of dollars.
Petriglia suggests that many people looking to enter into a lease agreement would be better off renting and waiting until they can qualify for a traditional mortgage instead.
“I would rather see a homeowner start an RRSP to save the down payment, take advantage of the tax credit, then cash it out for the down payment and replace the money within 15 years,” he suggests. “By taking this route, you’re still in control of your money.”
However, if you do decide to enter into a rent-to-own agreement, it is important to get a lawyer to review any contract, and explain the pros and cons before you sign on the dotted line.
“It could cost you tens of thousands of dollars for a mistake, but it costs $500 or less to have the contract reviewed up front.” Petriglia warns.
Related: Finally! A renter’s market for condos
Rent-to-own home ownership can be risky for those who don’t understand exactly what they are signing up for.
“A change in life circumstance – whether personally or financially – can have a huge impact on your ability to continue paying that rent premium or sticking to your rent-to-own lease obligations,” Petriglia says. “Should anything happen, the consequences can be devastating.”
Have you ever considered rent-to-own home ownership?
Krystal Yee lives in Vancouver and blogs at Give Me Back My Five Bucks and Frugal Wanderer. You can reach her on Twitter (@krystalatwork), or by e-mail at krystalatwork@gmail.com.
Rent-to-own a home: Beware the risks
By Krystal Yee
September 10, 2012
Last year , as I was buying my first home in Vancouver, I came across a handful of listings offering rent-to-own or lease options on homes.
These deals as exactly as they sound – a homeowner rents to a tenant and the tenant has an option to buy the home for a predetermined price at the end of the lease.
On the surface, it seems like a mutually beneficial agreement for both parties - the homeowner has a deal to sell the house and the tenant can build their credit over time while saving up for the down payment.
However, Frank Petriglia, a real estate broker with RE/MAX Premier Inc. in Vaughan, believes that more often than not, a lease option agreement benefits the homeowner.
"The homeowner clearly comes out ahead in the rent-to-own scenario since they have very little on the hook," he says. "Since the selection of these types of units is slim, the homeowner can demand more money than the open market will be willing to pay. And my feeling is that it will stay this way regardless of market conditions."
In most rent-to-own scenarios, the tenant pays higher than normal rent, with a portion of the money going towards a down payment. The additional rent acts as something of a forced savings plan for the tenant, Petriglia says, adding that the option does give some people a way into the market, albeit at a slightly higher cost.
Tenants are also typically required to put down a deposit of about 5 per cent of the final sale price – which will be held by the homeowner as credit towards the price of the home at the end of the lease option.
Here's an example: A homeowner wants to sell for $200,000. The house typically rents for $1,000 a month. After a $10,000 deposit, a rent-to-own tenant might pay $1,300 a month in rent – with $300 of each payment as a credit towards the down payment. On a three-year lease, the tenant would have paid $10,800 towards the down payment. Add those credits to the initial deposit, and the renter will have $20,800 for a down payment.
This can be attractive for those who can afford to buy a home, but might not quality for a mortgage. This could be because of a weak credit score, or insufficient employment history. Their hope is that, by the end of the lease agreement, they will be able to qualify for a traditional mortgage from a bank.
Related: Lessons learned from a year as a home owner
The downside is that if a tenant decides to break the rent-to-own agreement, or decides the property is not suitable, they may lose their deposit, and depending on how the contract is written, may lose all the money that was put aside for the down payment, or they might receive a very small portion back.
Additionally, in some cases your agreement may be void if you are late on rent at any time – meaning not only do you get evicted, but you could also potentially lose tens of thousands of dollars.
Petriglia suggests that many people looking to enter into a lease agreement would be better off renting and waiting until they can qualify for a traditional mortgage instead.
“I would rather see a homeowner start an RRSP to save the down payment, take advantage of the tax credit, then cash it out for the down payment and replace the money within 15 years,” he suggests. “By taking this route, you’re still in control of your money.”
However, if you do decide to enter into a rent-to-own agreement, it is important to get a lawyer to review any contract, and explain the pros and cons before you sign on the dotted line.
“It could cost you tens of thousands of dollars for a mistake, but it costs $500 or less to have the contract reviewed up front.” Petriglia warns.
Related: Finally! A renter’s market for condos
Rent-to-own home ownership can be risky for those who don’t understand exactly what they are signing up for.
“A change in life circumstance – whether personally or financially – can have a huge impact on your ability to continue paying that rent premium or sticking to your rent-to-own lease obligations,” Petriglia says. “Should anything happen, the consequences can be devastating.”
Have you ever considered rent-to-own home ownership?
Krystal Yee lives in Vancouver and blogs at Give Me Back My Five Bucks and Frugal Wanderer. You can reach her on Twitter (@krystalatwork), or by e-mail at krystalatwork@gmail.com.
Saturday, September 8, 2012
Real Estate Agent Must Be Paid $15,000, Court Rules
Excerpted from The Toronto Star
Real estate agent must be paid $15,000, court rules
September 07, 2012
Mark Weisleder
When you work with a real estate agent, you get many services. Just be sure to pay the fee.
An Ontario Court has ruled that you can’t get away with not paying commission when you sign an agreement with a real estate agent.
It means when you agree to pay an agent to find a home, it means that if you end up buying a home during the time period of your contract, you have to pay commission. You can’t change your mind later.
Bahareh Vali and her partner Hamid Sadri, were looking for a home to buy in North York in 2005. They started working with Shoreh Forjani, a real estate agent and over a period of two and a half months visited several properties.
Ms. Vali signed an agreement to pay Forjani 2.5 per cent in commission if she ended up buying a home through the agent. her partner did not sign the agreement.
The couple made offers on three properties and none were accepted. The last offer was $601,888 for a home on Otonabee Ave. in North York. The couple were particularly upset that this offer was not accepted, blamed Forjani and tried to cancel the agent agreement. Forjani refused to release them.
Independently, Sadri approached the agent who was selling the home on Otonabee and made a deal to buy it in his name, for $615,000. He didn’t tell Forjani who later found out and sued for the lost commission.
In a decision released April 16, 2010, Justice Grace, of the Ontario Superior Court, ordered Vali pay to Forjani $15,375 plus GST, a sum representing the commission of 2.5 per cent of the purchase price.
Forjani had emails proving she had introduced the couple to this property. As the judge said: “The efforts of Ms. Vali and Mr. Sadri to obtain the services of two real estate agents for the price of one cannot succeed.”
In other cases, buyers have agreed to pay their agent commission, and then changed their minds and bought the property through a company that they controlled instead. Same result. The agent sued for their commission and won.
Buying a home is not easy. Some of the advantages of using a real estate agent are that he or she will:
•Work exclusively on your behalf.
•Introduce you to experts who can assist you, such as lawyers, home inspectors, mortgage brokers and planners.
•Find you the property that best suits your needs.
•Negotiate the best price on your behalf.
•Protect your interests.
The lesson here is that if you think you can buy or sell a home on your own, without professional help, that’s fine. But you can’t take up an agent’s time and then cut them out at the last minute. Not only will you lose the benefit of their advice at the most critical part of the negotiations, you will end up probably having to pay them anyway.
Mark Weisleder is a Toronto real estate lawyer. Contact him at mark@markweisleder.com
Real estate agent must be paid $15,000, court rules
September 07, 2012
Mark Weisleder
When you work with a real estate agent, you get many services. Just be sure to pay the fee.
An Ontario Court has ruled that you can’t get away with not paying commission when you sign an agreement with a real estate agent.
It means when you agree to pay an agent to find a home, it means that if you end up buying a home during the time period of your contract, you have to pay commission. You can’t change your mind later.
Bahareh Vali and her partner Hamid Sadri, were looking for a home to buy in North York in 2005. They started working with Shoreh Forjani, a real estate agent and over a period of two and a half months visited several properties.
Ms. Vali signed an agreement to pay Forjani 2.5 per cent in commission if she ended up buying a home through the agent. her partner did not sign the agreement.
The couple made offers on three properties and none were accepted. The last offer was $601,888 for a home on Otonabee Ave. in North York. The couple were particularly upset that this offer was not accepted, blamed Forjani and tried to cancel the agent agreement. Forjani refused to release them.
Independently, Sadri approached the agent who was selling the home on Otonabee and made a deal to buy it in his name, for $615,000. He didn’t tell Forjani who later found out and sued for the lost commission.
In a decision released April 16, 2010, Justice Grace, of the Ontario Superior Court, ordered Vali pay to Forjani $15,375 plus GST, a sum representing the commission of 2.5 per cent of the purchase price.
Forjani had emails proving she had introduced the couple to this property. As the judge said: “The efforts of Ms. Vali and Mr. Sadri to obtain the services of two real estate agents for the price of one cannot succeed.”
In other cases, buyers have agreed to pay their agent commission, and then changed their minds and bought the property through a company that they controlled instead. Same result. The agent sued for their commission and won.
Buying a home is not easy. Some of the advantages of using a real estate agent are that he or she will:
•Work exclusively on your behalf.
•Introduce you to experts who can assist you, such as lawyers, home inspectors, mortgage brokers and planners.
•Find you the property that best suits your needs.
•Negotiate the best price on your behalf.
•Protect your interests.
The lesson here is that if you think you can buy or sell a home on your own, without professional help, that’s fine. But you can’t take up an agent’s time and then cut them out at the last minute. Not only will you lose the benefit of their advice at the most critical part of the negotiations, you will end up probably having to pay them anyway.
Mark Weisleder is a Toronto real estate lawyer. Contact him at mark@markweisleder.com
Friday, September 7, 2012
Cooling GTA Condo Market Sees Sales Drop 34%
Excerpted from The Toronto Star- Moneyville
Cooling GTA condo market sees sales drop 34%
September 06, 2012
Susan Pigg
GTA house prices surged 6.5 per cent in August, despite a 12.5 per cent downturn in sales.
Richard Buchan/THE CANADIAN PRESS
Toronto’s condo market is “flashing warnings” with a 34 per cent downturn in sales in August over a year earlier, despite record-high demand just a few months ago, market watchers say.
The quick and decisive downturn in demand for resale condos is the best evidence yet that the condo boom has been largely driven by cheap and relatively easy credit rather than demographics, says analyst Ben Rabidoux of M Hanson Advisors.
The combination of Ottawa’s tightened mortgage lending rules and the fact so many first-time buyers jumped into the condo market early because of historically low interest rates means the housing market is like to suffer from a “demand gap” that could drive condo sales, and prices, even lower well into 2013, says Rabidoux.
What’s likely to keep the overall Toronto housing market from going the way of Vancouver — where August sales were 40 per cent below decade averages — is the strength of the single family home across the GTA, he added.
The unrelenting demand for the Holy Grail of housing — a simple house in the midst of all those glass and steel condos — helped push up GTA house prices 6.5 per cent in August, despite a 12.5 per cent downturn in sales, according to Toronto Real Estate Board resale home figures released Thursday.
That compares to a 22 per cent decline in condo sales in the City of Toronto and 34 per cent in the highrise downtown core.
There was, however, no evidence of a mass sell-off of condos by investors and the numbers were skewed somewhat by the fact 2011 was a record year for new condo sales, market watchers note.
There are growing concerns, however, about the growing inventory of unsold condos across the GTA and units yet to come on stream via the so-called “assignment market” — units that were bought, in many cases by investors, in the pre-construction phase over that last two years, are close to being completed and could be dumped on the market as it cools.
Related: As real estate market softens how to reduce risk
The Canada Mortgage and Housing Corporation has asked Urbanation, which closely monitors the state of the GTA condo industry, to start tracking the size and impact of the assignment market. Their report should be ready by the fall.
Condo realtor Andrew la Fleur sees an up side in the downturn, although he acknowledges buyers are nervous and some are opting to rent longer and see what happens.
“I’m telling people that I think the next six months are going to be a great opportunity to buy. Things are slower. Prices are going to be down or flat. There is a good selection of units out there.
“I think we’ll see a lot of pent-up demand in the spring market from buyers waiting for a crash that just isn’t going to come unless there is some big economic downturn.”
The average price of a home in the GTA hit $479,095 last month, up from $450,323 a year earlier, according to monthly resale figures from the Toronto Real Estate Board released Thursday.
But most of that jump in prices was driven by single-family home sales in the City of Toronto (detached, semis and row houses) where demand remains so strong — and bully bids and bidding wars a virtually unavoidable fact of life — that price growth was up 15 per cent year over year, in part because of an increase in the sale of high-end homes.
The average price of a detached house in the 416 region hit $746,300, compared to $564,571 in the 905 regions.
The average price of a condo apartment was down four per cent in the City of Toronto, to $349,489 as the inventory of unsold units remains higher than usual. Condo prices were up, on average, about two per cent across the 905 regions to $275,150, according to the monthly TREB figures.
“While sales were down year-over-year in the GTA, so too were new listings. As a result, market conditions remained quite tight with substantial competition between buyers in the lowrise (single-family detached, semis and row houses) segment,” says Jason Mercer, senior manager of market analysis for TREB.
Some 6,418 homes changed hands across the GTA in August, down from 7,330 in August, 2011.
Cooling GTA condo market sees sales drop 34%
September 06, 2012
Susan Pigg
GTA house prices surged 6.5 per cent in August, despite a 12.5 per cent downturn in sales.
Richard Buchan/THE CANADIAN PRESS
Toronto’s condo market is “flashing warnings” with a 34 per cent downturn in sales in August over a year earlier, despite record-high demand just a few months ago, market watchers say.
The quick and decisive downturn in demand for resale condos is the best evidence yet that the condo boom has been largely driven by cheap and relatively easy credit rather than demographics, says analyst Ben Rabidoux of M Hanson Advisors.
The combination of Ottawa’s tightened mortgage lending rules and the fact so many first-time buyers jumped into the condo market early because of historically low interest rates means the housing market is like to suffer from a “demand gap” that could drive condo sales, and prices, even lower well into 2013, says Rabidoux.
What’s likely to keep the overall Toronto housing market from going the way of Vancouver — where August sales were 40 per cent below decade averages — is the strength of the single family home across the GTA, he added.
The unrelenting demand for the Holy Grail of housing — a simple house in the midst of all those glass and steel condos — helped push up GTA house prices 6.5 per cent in August, despite a 12.5 per cent downturn in sales, according to Toronto Real Estate Board resale home figures released Thursday.
That compares to a 22 per cent decline in condo sales in the City of Toronto and 34 per cent in the highrise downtown core.
There was, however, no evidence of a mass sell-off of condos by investors and the numbers were skewed somewhat by the fact 2011 was a record year for new condo sales, market watchers note.
There are growing concerns, however, about the growing inventory of unsold condos across the GTA and units yet to come on stream via the so-called “assignment market” — units that were bought, in many cases by investors, in the pre-construction phase over that last two years, are close to being completed and could be dumped on the market as it cools.
Related: As real estate market softens how to reduce risk
The Canada Mortgage and Housing Corporation has asked Urbanation, which closely monitors the state of the GTA condo industry, to start tracking the size and impact of the assignment market. Their report should be ready by the fall.
Condo realtor Andrew la Fleur sees an up side in the downturn, although he acknowledges buyers are nervous and some are opting to rent longer and see what happens.
“I’m telling people that I think the next six months are going to be a great opportunity to buy. Things are slower. Prices are going to be down or flat. There is a good selection of units out there.
“I think we’ll see a lot of pent-up demand in the spring market from buyers waiting for a crash that just isn’t going to come unless there is some big economic downturn.”
The average price of a home in the GTA hit $479,095 last month, up from $450,323 a year earlier, according to monthly resale figures from the Toronto Real Estate Board released Thursday.
But most of that jump in prices was driven by single-family home sales in the City of Toronto (detached, semis and row houses) where demand remains so strong — and bully bids and bidding wars a virtually unavoidable fact of life — that price growth was up 15 per cent year over year, in part because of an increase in the sale of high-end homes.
The average price of a detached house in the 416 region hit $746,300, compared to $564,571 in the 905 regions.
The average price of a condo apartment was down four per cent in the City of Toronto, to $349,489 as the inventory of unsold units remains higher than usual. Condo prices were up, on average, about two per cent across the 905 regions to $275,150, according to the monthly TREB figures.
“While sales were down year-over-year in the GTA, so too were new listings. As a result, market conditions remained quite tight with substantial competition between buyers in the lowrise (single-family detached, semis and row houses) segment,” says Jason Mercer, senior manager of market analysis for TREB.
Some 6,418 homes changed hands across the GTA in August, down from 7,330 in August, 2011.
Doors Shutting on First-time Home Buyers
Excerpted from The Globe and Mail
September 6, 2012
Doors shutting on first-time home buyers
By TARA PERKINS
Sales in Toronto and Vancouver slow as a result of Ottawa cutting maximum length of loans to 25 years
The Toronto and Vancouver housing markets have cooled rapidly in the wake of Ottawa's latest bid to stop a bubble, with many first-time buyers knocked out of the running.
Finance Minister Jim Flaherty put the July 9 changes into effect to curb growing mortgage debt levels and take some steam out of house prices. Among other things, the new rules cut the maximum length of insured mortgages to 25 years from 30.
The changes have sparked a debate in Canada. Some industry players and economists worry that the impact will be so widespread and long-lasting that they want Mr. Flaherty to consider rolling some of them back. But with prices that some still deem overvalued and new fears over consumer debt, others say the changes aren't enough and must be followed by a hike in rates.
Among the latter is Toronto-Dominion Bank chief economist Craig Alexander, who estimates that national home prices are 10 to 15 per cent too high.
He released a report on Thursday predicting the July changes will shave three percentage points off of prices and five points off of sales by next year.
"Our models suggest that had the government not tightened lending mortgage rules between 2008 and 2011, the Canadian household debt-to-income ratio would have reached 160 per cent this year – the level that households in the U.S. and U.K reached before sending their economies and housing markets into a tailspin," Mr. Alexander wrote.
While debt burdens are lower than they would have been, they're still at troubling levels. Moody's Analytics said in a separate report that economic headwinds will increasingly cause consumers to struggle with their debt loads over the next few years.
And although the mortgage insurance rule changes have curbed house sales and debt levels somewhat, the impact on prices has been relatively fleeting, Mr. Alexander said. Without rate increases, consumers still have a strong incentive to take out large mortgages, fuelling overvalued prices, he argues.
The impact of the changes is predominantly being felt by first-time home buyers because they are typically the ones who require mortgage insurance. Insurance is mandatory in Canada for borrowers who have a down payment of less than 20 per cent, which has traditionally been about 35 to 40 per cent of the market.
Brian Hurley, the CEO of Genworth Canada, the second-largest mortgage insurer, said business slowed in August as a result of the rule changes. He would like Ottawa to revisit the rules later this year, and consider reversing some of the changes.
"These are pretty dramatic changes, and I think they're getting close to the tipping point," he said in a recent interview. "We see really qualified first-time home buyers with very high credit scores now not meeting the bar because they can't afford a 25-year amortization. These people should be getting a home."
Eric Lascelles, chief economist at RBC Global Asset Management, approves of most of the rule changes, but said there is a risk that they are being overdone to compensate for ultra-low mortgage rates.
"I wonder if the drop from 30 to 25 years amortization might be regretted in a decade when interest rates have normalized and 25-year-olds are being told they cannot make mortgage payments past the age of 50, even though they expect to work until 65," he said in an e-mail.
Traditionally, the banks have applied mortgage insurance rule changes to all mortgages – even those with large down payments that don't require insurance. But that hasn't been the case this time, Mr. Alexander said.
"The banks are basically not applying the 25-year limit to the non-high-ratio mortgages," he said in an interview. "That's one of the reasons why the mortgage insurance rule changes had a more muted impact on the market, because really the segment that's being significantly hit is the first-time buyers."
Jim Murphy, the CEO of the Canadian Association of Accredited Mortgage Professionals, said that while Mr. Alexander's prediction that the changes will dent sales by five percentage points could be correct, the impact on the insured portion of the market appears to be more like 15 per cent. "It's having a bigger impact on first-time buyers," he said.
On Thursday, the Toronto Real Estate Board said sales of existing homes in the country's most populous city fell almost 12.5 per cent in August from a year ago. But the average price rose by almost 6.5 per cent, to $479,095.
One day earlier, Vancouver's real estate board said August sales were the second-lowest level for that month since 1998, while the average price of a home in the Greater Vancouver Area was down 0.5 per cent from a year ago.
September 6, 2012
Doors shutting on first-time home buyers
By TARA PERKINS
Sales in Toronto and Vancouver slow as a result of Ottawa cutting maximum length of loans to 25 years
The Toronto and Vancouver housing markets have cooled rapidly in the wake of Ottawa's latest bid to stop a bubble, with many first-time buyers knocked out of the running.
Finance Minister Jim Flaherty put the July 9 changes into effect to curb growing mortgage debt levels and take some steam out of house prices. Among other things, the new rules cut the maximum length of insured mortgages to 25 years from 30.
The changes have sparked a debate in Canada. Some industry players and economists worry that the impact will be so widespread and long-lasting that they want Mr. Flaherty to consider rolling some of them back. But with prices that some still deem overvalued and new fears over consumer debt, others say the changes aren't enough and must be followed by a hike in rates.
Among the latter is Toronto-Dominion Bank chief economist Craig Alexander, who estimates that national home prices are 10 to 15 per cent too high.
He released a report on Thursday predicting the July changes will shave three percentage points off of prices and five points off of sales by next year.
"Our models suggest that had the government not tightened lending mortgage rules between 2008 and 2011, the Canadian household debt-to-income ratio would have reached 160 per cent this year – the level that households in the U.S. and U.K reached before sending their economies and housing markets into a tailspin," Mr. Alexander wrote.
While debt burdens are lower than they would have been, they're still at troubling levels. Moody's Analytics said in a separate report that economic headwinds will increasingly cause consumers to struggle with their debt loads over the next few years.
And although the mortgage insurance rule changes have curbed house sales and debt levels somewhat, the impact on prices has been relatively fleeting, Mr. Alexander said. Without rate increases, consumers still have a strong incentive to take out large mortgages, fuelling overvalued prices, he argues.
The impact of the changes is predominantly being felt by first-time home buyers because they are typically the ones who require mortgage insurance. Insurance is mandatory in Canada for borrowers who have a down payment of less than 20 per cent, which has traditionally been about 35 to 40 per cent of the market.
Brian Hurley, the CEO of Genworth Canada, the second-largest mortgage insurer, said business slowed in August as a result of the rule changes. He would like Ottawa to revisit the rules later this year, and consider reversing some of the changes.
"These are pretty dramatic changes, and I think they're getting close to the tipping point," he said in a recent interview. "We see really qualified first-time home buyers with very high credit scores now not meeting the bar because they can't afford a 25-year amortization. These people should be getting a home."
Eric Lascelles, chief economist at RBC Global Asset Management, approves of most of the rule changes, but said there is a risk that they are being overdone to compensate for ultra-low mortgage rates.
"I wonder if the drop from 30 to 25 years amortization might be regretted in a decade when interest rates have normalized and 25-year-olds are being told they cannot make mortgage payments past the age of 50, even though they expect to work until 65," he said in an e-mail.
Traditionally, the banks have applied mortgage insurance rule changes to all mortgages – even those with large down payments that don't require insurance. But that hasn't been the case this time, Mr. Alexander said.
"The banks are basically not applying the 25-year limit to the non-high-ratio mortgages," he said in an interview. "That's one of the reasons why the mortgage insurance rule changes had a more muted impact on the market, because really the segment that's being significantly hit is the first-time buyers."
Jim Murphy, the CEO of the Canadian Association of Accredited Mortgage Professionals, said that while Mr. Alexander's prediction that the changes will dent sales by five percentage points could be correct, the impact on the insured portion of the market appears to be more like 15 per cent. "It's having a bigger impact on first-time buyers," he said.
On Thursday, the Toronto Real Estate Board said sales of existing homes in the country's most populous city fell almost 12.5 per cent in August from a year ago. But the average price rose by almost 6.5 per cent, to $479,095.
One day earlier, Vancouver's real estate board said August sales were the second-lowest level for that month since 1998, while the average price of a home in the Greater Vancouver Area was down 0.5 per cent from a year ago.
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