What The Real Estate Regulator Is Doing on Dubious Practices like Bidding Wars!

Excerpted from The Globe and Nail
Real estate regulator aims to crack down on dubious practices Add to ...

TAMSIN McMAHON - REAL ESTATE REPORTER

The Globe and Mail

Published Tuesday, Mar. 24 2015, 7:11 PM EDT
Last updated Wednesday, Mar. 25 2015, 1:21 PM EDT

With friends in the real estate industry, Jonathan James had long heard horror stories about heartbreak of bidding wars.

But it hit home a few weeks ago when Mr. James, a mobile software developer, found himself in a battle of his own with one other potential buyer for a house in Toronto. What’s more, the other offer came through the same agent who was selling the house.

 

The Globe survey saw overall price increases of about 8 per cent – but in Caribou Park they were up 58 per cent.

Mr. James ultimately won, but the process left him with lingering questions about whether there was really a second offer on the home. “My case probably was done fairly and with integrity, but I’m not sure,” he says.

“That’s a feeling that nobody should have walking away from a process like that.”

Regulators have sought to crack down on some of the industry’s shadier practices, such as fake bids from agents trying to drive up the selling price of their listing and agents who represent both buyers and sellers.

Hot markets for single-family homes in cities such as Toronto and Vancouver have sparked fierce bidding wars, with some properties seeing dozens of offers from buyers willing to pay well above the asking price.

In July, the provincial government is introducing new rules requiring selling agents to keep records on successful bids for six years and retain the details of unsuccessful bids on file for a year. It will also be illegal for agents to claim they have other bidders unless they’ve received formal offers in writing.

The changes will give the regulator more power to respond to consumer complaints about the bidding process by requiring agents to show proof of all written offers on a property. They will also crack down on phantom offers, something the council says is rare, but has generated tremendous public attention.

“The concern nowadays with the fairly hot market we’ve had for a number of years is that either people are not told they’re in competition and therefore can’t make an informed offer or perhaps they don’t know for sure how many people they’re in competition with,” said Bruce Matthews, deputy registrar of the Real Estate Council of Ontario, which regulates the province’s real estate agents.

Others are looking to go further. Having survived the real estate wars, Mr. James recently teamed up with his real estate agent, Adam Brind, software developer Herman Chan and mortgage broker Drew Donaldson to create Dealdocket, a mobile and web-based app that aims to bring more transparency to the bidding process.

“We got to a point where we got so frustrated and we thought something has to change,” says Mr. Donaldson, of Safebridge Financial Group. “There’s no transparency in the marketplace. People walk away frustrated not only that they didn’t win, but because they have no idea what actually happened.”

The group is aiming to tackle some of the more infuriating aspects of bidding wars. Much of the process is still done by fax, e-mail and in person. Selling agents often accept bids well past their stated deadline and often buyers can’t be sure exactly how many other offers there are on a property.

“Very often what happens is our clients go away from this process and they feel like they’ve had the wool pulled over their eyes,” Mr. Brind says. “It’s usually not the case, but they have no way of knowing that.”

Last year, he represented buyers who had offered just shy of $1-million for a property listed for $799,000. His clients ultimately lost the home by just $5,000 to buyers represented by an agent working in the same office as the seller’s real estate agent.

With Dealdocket, buyers can upload their offers directly to an encrypted site. Offers are time stamped and locked until after the bidding process is closed and buyers can go online to watch the bidding process unfold in real time. Bids from buyers represented by the selling agent get opened first, so that agents can’t give their clients an edge in the process.

Mr. Donaldson sees buyers shell-shocked by bidding wars almost daily. He also knows the feeling first-hand. Several years ago he bought a condo townhouse that had been on the market with no offers for nearly a month. The seller was a real estate agent. After submitting a bid he thought was fair, a competing offer suddenly emerged. Mr. Donaldson dug deep and upped his offer by $10,000.

“To this day I have no way of knowing if there ever was an actual offer on the property,” he says.

Banks Cut Key Mortgage Rate! Is This The Start Of A New Mortgage Rate War?

Excerpted from The Globe and Mail
Banks cut key mortgage rate amid fears of lofty housing market Add to ...

DAVID BERMAN - BANKING REPORTER

The Globe and Mail

Published Tuesday, Mar. 17 2015, 7:28 AM EDT
Last updated Tuesday, Mar. 17 2015, 3:00 PM EDT

 

Bank of Montreal has renewed the mortgage war among Canada’s banks, slashing the posted rate on its five-year fixed mortgage to 2.79 per cent from 2.99 per cent, even as Ottawa and the International Monetary Fund fret over the state of Canada’s overheating housing market.

Toronto-Dominion Bank quickly rushed to match BMO’s rate special, saying it will drop its five-year fixed mortgage rate from 3.09 per cent to 2.79 starting Wednesday.

Demand on the part of investors for low-cost rental properties has helped shrink the size of the average condo unit. For The Globe and Mai

The big banks had slashed their mortgage rates in January, soon after the Bank of Canada unexpectedly lowered its key rate in an effort to provide stimulus to the economy. Those cuts took posted rates as low as 2.84 per cent.

However, this latest move from BMO follows the central bank’s decision last week to hold its key rate unchanged and is likely a pre-emptive strike against other big banks, as well as a strike against smaller lenders who have been undercutting the banks with cutthroat rates of their own.

The continuing battle for mortgages comes at a delicate time for Canada’s housing market though. Debt-to-income levels have surged above 163 per cent, suggesting household finances are becoming stretched.

Some markets look particularly lofty: In Toronto, the average price for a detached home rose above $1-million in February, up 9 per cent from last year.

The IMF has taken notice, warning Ottawa that efforts to tighten mortgage lending standards have not gone far enough, with home prices now overvalued by as much as 20 per cent.

Within Canada, there are also concerns. The Bank of Canada mused recently that home prices could be as much as 30 per cent overvalued, and the government has previously issued warnings of its own.

Yet top executives at the big banks routinely characterize the country’s housing market as healthy, arguing that there is a relatively even balance between the supply of housing and demand among consumers. They also note that their lending standards are solid.

“We feel good about the Canadian housing market,” Royal Bank of Canada CEO David McKay told a New York audience last week.

Finance Minister Joe Oliver’s office declined to comment on the banks’ rate cuts.

Canada’s top financial regulator doesn't sound concerned about the potential impact of lower mortgage rates on the financial system.

“At OSFI, we constantly reinforce that it is the banks themselves that determine the risks they want to assume, risks they must subsequently measure, monitor and manage,” said Jeremy Rudin, Superintendent of Financial Institutions, in a prepared speech to the International Finance Club of Montreal.

In an interview, he added that OSFI’s role is to make sure the banks can measure those risks and manage them, and have enough capital to absorb any potential shocks without affecting their operations and services.

Housing Starts Fall Sharply to Lowest Level Since 2009

Excerpted from The Globe and Mail
Housing starts fall sharply to lowest level since 2009 Add to ...

TAMSIN MCMAHON - REAL ESTATE REPORTER

The Globe and Mail

Published Monday, Mar. 09 2015, 8:37 AM EDT
Last updated Monday, Mar. 09 2015, 11:25 AM EDT

Housing starts plummeted in February to the lowest level since 2009, driven by fewer new condo and multi-residential projects as builders grappled with rising levels of unsold inventory.

Construction of new housing units fell 16 per cent in February to an annualized 156,276, down from 187,025 in January, Canada Mortgage and Housing Corporation said Monday.

Demand on the part of investors for low-cost rental properties has helped shrink the size of the average condo unit. For The Globe and Mail

It was the lowest level of building activity since July, 2009, said Royal Bank of Canada economist Laura Cooper. Starts fell in eight of 10 provinces, driven by a 25-per-cent drop in construction of new urban multi-residential units, which fell to 86,2014 from 115,123 in January.

Slower construction activity was needed to help developers deal with rising levels of unsold condo units in cities across the country, the housing agency said.

“The declining trend in multiple starts is helping to gradually erode the inventory of completed and unsold units, which is high compared to historical levels," CMHC chief economist Bob Dugan said in a statement.

While record cold temperatures and snowfall last month likely played a role in slowing new construction, many of the warning sights were already there at the start of the year. Developers reported receiving 7.5 per cent fewer building permits in January compared to December, a precursor to housing starts. Home sales also slid in the first months of the year in many markets amid economic uncertainty of lower oil prices.

"We are not entirely surprised to see such a weak number in February given the extremely cold weather, drop in permits and what appeared to us as a questionable boost to starts in the previous month," wrote Toronto-Dominion Bank senior strategist Mazen Issa.

But February's plunge was much deeper than many analysts had expected given that surging housing markets in Toronto and Vancouver were thought to be helping to offset weaknesses elsewhere.

Instead, housing starts fell just 1 per cent February in Alberta and rose slightly in Saskatchewan compared a month earlier, while falling in all markets east of the Prairies.

New home construction fell 53 per cent in Quebec and 35 per cent in Ontario compared to a year earlier, defying expectations that lower interest rates and cheaper gas prices would boost markets outside of oil-dependent Western provinces. Condo construction fell by more than 50 per cent in Toronto, after a near-record wave of completions in February.

Analysts said it was only a matter of time, however, before weaker oil prices put a dent in new home construction in Alberta.

"The oil price shock has yet to fully show up in these data," Bank of Montreal senior economist Robert Kavcic said in a note. "But if recent trends in the resale market are any guide, starts in the oil-producing provinces will be heading lower through 2015."

CMHC said its six-month moving average of housing starts fell for its fifth straight month in February, though it mirrored a similar sharp decline in average starts in February of last year.

Average Cost Of A Detached Home In Toronto Tops $1-million

Excerpted from The Globe and Mail
Average cost of a detached Toronto home tops $1-million Add to ...

Staff

The Globe and Mail

Published Wednesday, Mar. 04 2015, 9:02 AM EST
Last updated Wednesday, Mar. 04 2015, 10:44 AM EST

Toronto has joined the $1-million club.

The average cost of a detached home topped that mark in Feburary, hitting $1,040,018, the Toronto Real Estate Board said Wednesday.

That marked the first time above $1-million, and an increase of almost 9 per cent from a year earlier, and came as the group reported another surge in both sales and prices last month. 

 

Demand on the part of investors for low-cost rental properties has helped shrink the size of the average condo unit. For The Globe and Mail.

Sales surged 11.3 per cent to 6,338 from a year earlier, while the average price rose 7.8 per cent to $596,163.

The number of active listings tumbled by 8.7 per cent, which means that “market conditions became tighter, leading to more competition between buyers,” the group said.

Translated, that means bidding wars.

“Even with the record low temperatures last month, we still saw an increase in the number of people purchasing homes in the GTA,” said TREB president Paul Etherington.”

Fortunes are changing across Canada amid the oil slump.

In Calgary, for example, home sales plunged 34 per cent in February from a year earlier.

The tally for January and February in Calgary puts sales “just a shade above the level of activity seen in the same period during the financial crisis in 2009,” said senior economist Robert Kavcic of BMO Nesbitt Burns.

“While growth in new listings has cooled to 9 per cent year over year, the months’ supply continued to rise to a 3 1/2-year high,” he added.

“That has pulled the average transaction price down 4.2 per cent in the past year, partly reflecting the fact that $1-million-plus sales have cratered at twice the rate of sub-$1-million properties.”

Then there’s Vancouver, where sales surged more than 20 per cent in February, and the benchmark price, rather than the average, rose 6.7 per cent to a three-year high, said Mr. Kavcic.

Toronto Condo Market Booming Again

Excerpted from The Globe and Mail

Toronto’s condo market has rebounded with builders putting the finishing touches on nearly 10,400 new units in January. (MARK BLINCH/REUTERS)

Toronto condo market booming again Add to ...

TAMSIN McMAHON

TORONTO — The Globe and Mail

Published Sunday, Mar. 01 2015, 7:03 PM EST
Last updated Monday, Mar. 02 2015, 6:57 AM EST

 

After years of slow growth, Toronto’s condo market has come roaring back to life.

Builders were putting the finishing touches on nearly 10,400 new condo units in January, eight times more than the monthly average over the past decade, Bank of Montreal senior economist Sal Guatieri said in a report last week. 

Demand on the part of investors for low-cost rental properties has helpedshrink the size of the average condo unit. For The Globe and Mail

  The Globe and Mail

The vast majority of the new condo units have already been sold. Still, the influx of new units has helped push the number of unabsorbed condos – those that have been built but not sold – to a 21-year high.

It is a dramatic rise for a city whose condo market has been at the centre of concerns among federal regulators and international organizations such as Deutsche Bank about rising levels of household debt in Canada.

The latest wave of Toronto condo completions and sales could mark a new upswing after a lull in the market. Sales hit a four-and-a-half year low last fall, while new condo completions had been falling for the past 18 months.

Much of the new supply is the echo of a building boom that began in early 2012, when developers started construction in more than 37,000 new condo units in the city, well above the long-term average of 25,000 units a year.

But the January condo boom also reflects the fact that banks and other lenders are returning to the market, now convinced the city’s condo sector isn’t poised for collapse.

Under pressure in the past from federal regulators, such as former Bank of Canada governor Mark Carney and former finance minister Jim Flaherty, lenders had largely retreated from Toronto’s condo market, working only with well-known developers and often requiring a high number of presales before they would agree to finance construction.

But officials in Ottawa have grown quiet and banks are now eager to fill holes in their loan portfolios, several lenders told a commercial real estate conference last week.

“It’s a very competitive market out there,” Frank Margani, executive vice-president of strategy and development at Fortress Real Developments, told the RealCapital forum. “Portfolios are down and everybody is scrambling to get their piece of the action.’”

Lenders are now willing to finance as much as 75 per cent of the value of a project, up from 70 per cent in recent years, said Chris Milne, vice-president of real estate banking at the Bank of Nova Scotia.

Some have also eased up on their presale requirements, typically asking that developers have buyers for at least 65 per cent of their units, confident that builders will eventually find buyers for unsold units.

“There’s very little walk-away in the market,” Mr. Milne said. “We’re very different from the U.S. People sign with their name.”