Bank of Canada, major lenders hike rates as economy roars

Interest rates are going up, again, as Canada's red-hot economy continues to defy expectations.
After a summer of surprisingly good economic news, the Bank of Canada raised its benchmark interest rate a quarter of a percentage point to 1 per cent – its second rate hike in less than two months and a prelude to higher borrowing costs for Canadians.
 "Recent economic data have been stronger than expected, supporting the bank's view that growth in Canada is becoming more broadly based and self-sustaining," the bank said in a generally upbeat overview of economic conditions. "The level of GDP is now higher than the bank had expected."
The Bank of Canada may not be done. Economists are already bracing for further hikes if the economy continues to show strength through the rest of the year.

But there are limits on how far and fast the Bank of Canada can get its benchmark rate back to a more normal level.

Rising interest rates will reverberate through the housing and consumer-lending markets, squeezing homeowners who have taken on record debt levels to buy homes and fuel spending.

The bank's next scheduled rate-setting is Oct. 25, when the bank is also due to release its quarterly forecast.

Source: The Globe and Mail 

Semi-annual Niagara Market Rport

Interest rates have finally increased: How that could affect your loans

After seven years of leaving its key interest steady or cutting it to near-historic lows, the Bank of Canada has finally increased its overnight rate by 0.25 percentage points to 0.75 per cent.

The overnight rate determines the rate at which banks lend money to each other on a regular basis. In practice, changes in the overnight rate get passed on to consumers through corresponding changes in interest rates on different financial products.

Here's how the increase in interest rates could filter down through the kinds of loans held by Canadians:

1. Mortgages

Canadians with variable-rate mortgages, also known as adjustable-rate mortgages, will immediately feel the increase in the overnight rate.
For homeowners who have locked in a fixed-rate mortgage, nothing will change until the fixed term ends and it's time to renew. Even before the Bank of Canada's move on Wednesday, some of Canada's big banks already started charging more for their five-year fixed-rate loans.
That said, it's possible that some fixed-rate mortgage holders who renew in the near future could actually lock in a new fixed-rate mortgage at a lower interest rate than they signed up for five years ago, according to Preet Banerjee, author of Stop Over-Thinking Your Money!.
Those borrowers "may actually still be renewing into a lower rate, because even though rates are going up, they're still lower than when a lot of people got their fixed-rate mortgage," Banerjee said.

2. Home equity lines of credit (HELOCs)

Canadians who use their homes as a source of cash by borrowing against their home equity could quickly owe more now that interest rates have risen, as those loans are frequently variable rate.
Read more about the impact of interest rates on HELOCs:

• Mortgages won't be only problem for many Canadians
• Home equity lines of credit: What you need to know

Source:  CBC News

New Real Estate Ontario Legislation

The Ontario government has passed its Budget Measures Act which brings in new laws to tackle housing affordability.
 

The measures include a 15 per cent non-resident speculation tax targeting certain foreign buyers in the Greater Golden Horseshoe, including corporations and trusts.
 

The tax applies to all residential properties bought in the region from April 21 2017 but there will be rebates for those who become permanent Canadian residents within 4 years of purchase, who work in Ontario for a continuous 12 month period following purchase, and for foreign students subject to conditions.
 

“Our government is working to make life more affordable for everyone in Ontario,” commented Charles Sousa, Ontario’s finance minister, following the passing of the act. “This legislation will help to address the recent price increases in our housing market.”
 

Source: http://www.whichmortgage.ca/article/ontario-passes-real-estate-legislation-226268.aspx 

6 Types of Commercial Real Estate Investments

Incorporating real estate into your portfolio is a smart move if you want to diversify and include some insulation against market volatility. Investing in commercial real estate can offer you the opportunity to realize some significant returns, but it’s best to know as much as possible about a property before investing in it. Here’s a quick rundown of how different property investments compare.

1. Land Investments

Investing in raw land can be extremely lucrative for an investor who understands the market. There are several ways to make money with land. If you own farmland, for example, you could allow local farmers to use the land to grow crops or raise livestock.

2. Office Buildings

Office space is often in demand in cities big and small. If you live in a major metropolitan area, for instance, you could invest in a high-rise with multiple office units. If you live in a quieter town, you could opt for a medical office with a single tenant.

3. Retail Space

Investing in retail space is similar to investing in office space in terms of the way you can make money. One important thing to consider when investing in retail space is location. 

4. Storage Units

Storage units don’t exactly sound glamorous but there’s definitely money to be made with this kind of real estate investment. You don’t have to invest in a large market either.

5. Multifamily Housing

Multifamily housing is a complicated way of saying apartment buildings. Even though these are residences for the people who rent out the units, they still fall under the category of commercial property.

6. Industrial Property

Industrial property can mean lots of things – warehouses, manufacturing facilities, research facilities and the like.

Each type of commercial property has different risks and rewards. When you’re comparing properties, it’s a good idea to ask yourself some questions. How much income do you expect the property to generate? How long do you want to hold the investment? How hot is the market for this type of property? How much risk are you comfortable with?

The more research you do beforehand, the better your chances of succeeding as a commercial property investor.

Source:  https://ca.finance.yahoo.com/news/6-types-of-commercial-real-estate-investments-194654661.html

Top tips for real estate investors in 2017

Despite all the advice about not buying a residential property for income purposes, many still do. Rental markets are still tight in the hottest real estate markets, with vacancy rates still hovering in the mid-1% range. As such, buying property to rent out makes sense, as long as you have a large enough down payment to ensure that rent covers expenses.

For the best value, consider multi-unit rental properties—like duplexes, triplexes, and beyond. This type of rental stock is still far more favourable than single-unit rentals, such as condos, as you can spread out the risk of rental loss across multiple units. But it also means paying a premium on this type of income property. Not only do you compete against other investors, but also against families and first-time buyers who are trying to find a way into hot property markets. 

Also, consider markets that are located near university or hospital hubs but away from larger city centres. Quite often, these smaller college towns offer steady tenant stock, but not much long-term price appreciation. Just remember, as an investor, cash-flow must come first.

As in the past, anyone thinking of buying an investment property should first start with a financial plan and a budget. Then work the numbers. If you can’t withstand a loss—say the roof collapses or you need to hire a lawyer to legally evict a tenant—then you shouldn’t be buying an investment property.

Source: Money Sense 

Average price of Canadian home sold in October up 5.9% from year ago

October was another record month for Canadian real estate, even as the average price increased by a relatively modest 5.9 per cent.

Last month, Ottawa implemented new stress test rules for first-time buyers aimed at making sure they are capable of paying a higher interest rate on their mortgage than the one they have been offered. That change kicked in last month, and it's going to be a factor in the numbers over the long term, CREA said.

• New mortgage stress test rules kick in

Typically not a strong month for home sales, October 2016 was the strongest on record for the month, up more than two per cent from last year's strong level, with sales going up in about 60 per cent of Canada's housing markets.

Source:  CBC News

Refreshing your home this fall?

Great idea! Touching up paint marks or chips makes a real difference. In fact, I've just dome the same myself. I found a great tip for how to store felt over paint written by Danny Seo in the first issue of "Naturally".

"If you only need a little bit of left over paint to save for touch ups down the road try this upcycling idea: Use old plastic water bottles. Start with a clean, dry water bottle and lace a funnel on the top. Pour leftover paint into the bottle until it's about 95% full, remove the funnel and toss in about 6 glass marbles. Replace the cap tightly and secure it with a few strips of painters tape. When it's time to use the paint, shake it; the marbles will blend the paint, and you'll be good to go to till in any nicks or scratches."

Conditional Building Permits: A Very Useful Tool

There are many situations in which a developer may need to begin construction before a certain date, but cannot get their building permit in time. In Ontario that is usually because they cannot yet meet some very minor "applicable law" requirement that, according the Building Code Act, they must comply with in order to obtain the permit.

A conditional building permit can often get around this problem, even though many municipalities in Ontario use them so infrequently that they seem barely aware that they have the authority to issue them. Conditional building permits allow an applicant to proceed with construction even though all "applicable law" requirements necessary to obtain a building permit have not yet been met. Instead, there is only a much shorter and less onerous list of "applicable law" requirements that must be met. Even in larger municipalities conditional building permits are not always raised as an option to applicants, even if they could potentially benefit in reduced fees and commence their construction much sooner.

Some of the more common circumstances in which a conditional building permit can be useful include:

• Beating an upcoming development charge (or other fee) increase, typically payable upon issuance of the first above-grade building permit;
• Where a Record of Site Condition pursuant to the Environmental Protection Act has not yet been secured and is expected to delay issuance of the building permit significantly;
• Where a Committee of Adjustment has approved variances but the statutory Ontario Municipal Board appeal period has not yet expired.

The conditional building permit agreement that is required typically sets out the timelines within which the applicant must comply with the remainder of the "applicable law" requirements for a building permit, and deals with how and if the site must be restored should those requirements not be fulfilled.


Source:  http://www.mondaq.com/canada/x/364642/real+estate/Conditional+Building+Permits+A+Very+Useful+Tool

Home sales volume down 1.3% in July

The Canadian Real Estate Association says July marked the third consecutive month of fewer home sales. The number of transactions fell 1.3 per cent nationally between June and July, as more than half of all markets tracked showed declines in July. However, despite the drop in the number of sales, the national average price for a home sold in July was $480,743, up 9.9 per cent compared with a year ago.

Overall, the number of newly listed homes in Canada rose by 1.2 per cent in July compared to June, while the national sales-to-new listings ratio eased to 61.6 per cent in July. It was the second monthly decline.
CREA says a sales-to-new listings ratio between 40 and 60 per cent is generally consistent with balanced housing market conditions, with readings below and above this range indicating buyers’ and sellers’ markets, respectively.

Source: Financial Post 

Home sales down month-over-month

Although Canadian home sales started off the year at a torrid pace, the Canadian Real Estate Association says sales in the country's hottest markets are expected to slow in the second half in the face of high prices and a shortage of available properties.
Still, due to the strong start to the year, the association raised its full-year forecast for home sales to a record 536,400, an increase of 6.1 per cent. That compared with its March forecast calling for an increase of just one per cent to 511,400.
The new forecast came as CREA reported that home sales through its MLS system dropped 2.8 per cent month-over-month in May. But compared with a year ago, sales in May were up 9.6 per cent and stood 15.1 per cent above the 10-year average for the month.
The national sales-to-new-listings ratio climbed to 64.8 per cent in May, suggesting a seller's market and the highest reading since October 2009.
The national average price of a home sold in May was $509,460, up 13.2 per cent from a year ago.

Source:  CTV News

Disclosure Obligations in Residential Real Estate Transactions

What happens when the home you bought turns out to be not quite what you expected? Perhaps the roof leaks or there is a rodent infestation. Maybe the plumbing is faulty or the construction defective. What recourse does a purchaser have against the vendor?
The critical question is what disclosure obligations the vendor has when selling their property. As is often the case in legal matters, there are competing principles at play in determining who bears the loss for such defects. In many cases, a purchaser should retain an inspector to inspect the property and the failure to do so cannot shift blame to the vendor.
A competing principle is consumer protection. This means the court will intervene to prevent fraud and non-innocent misrepresentation where a purchaser has been lied to about a property’s condition. However, the court may also intervene where a vendor has failed to disclose material (meaning dangerous) latent defects about the property that they knew about or ought to have known about. A latent defect is one that is not discoverable by a purchaser through reasonable inspection and inquiry. But not every latent defect will result in a remedy against a vendor.  It must be a defect of “substance” that makes the property uninhabitable or dangerous.
Most residential sales involve the vendor providing a Property Disclosure Statement (PDS). A PDS is meant to identify any problems or concerns with the property, not to give detailed comments in answer to the questions posed.  A vendor need only say that they are or are not aware of problems.  When completing a PDS, a vendor must correctly and honestly disclose their current actual knowledge about the property, but that knowledge does not have to be correct.  The contents of a PDS are representations upon which a purchaser can rely.
If you are caught up in the residential real estate frenzy, remember that generally it is “buyer beware”. Before you close a purchase, properly inspect the property and, if necessary, retain professionals to help you.  As a purchaser, if you want a promise of fitness for the home you are going to buy, your safest bet is to negotiate express warranties by the vendor to that effect by the vendor.


Source:  http://www.westerncanadabusinesslitigationblog.com/real-estate/1357/?utm_source=Mondaq&utm_medium=syndication&utm_campaign=View-Original

April home sales set record, Canadian Real Estate Association says

The number of homes sold in Canada last month hit a record as supply tightened. There were 57,669 homes sold nationwide over the Multiple Listing Service in April, a 10.3 per cent increase from the same month last year, according to the Canadian Real Estate Association .
The rise in sales came as the number of new homes put up for sale slipped 3.7 per cent from a year ago to 103,028. Compared with March, sales were up 3.1 per cent in April, while new listings declined 0.2 per cent.

The national average price for homes sold in April rose 13.1 per cent from a year ago to $508,097.
Excluding the greater Vancouver and greater Toronto markets, the average price was $369,222, up 8.7 per cent from April 2015.
The national sales-to-new listings ratio rose to 64.5 per cent in April, the ratio’s tightest reading since October 2009.


Source:  http://www.news1130.com/2016/05/16/april-home-sales-set-record-mark-canadian-real-estate-association-says/

How to use your RRSP to invest in real estate

As the Canadian real estate market continues to rise, some investors want to put their RRSP money to work in a real estate investment. While there are limitations, there are also several options available to investors.

Unfortunately, those looking to buy a rental property with their RRSPs are out of luck. Tax-free RRSP withdrawals of up to $25,000 can be taken under the Home Buyer’s Plan (HBP) to buy or build a qualifying primary residence to live in, but not for a rental property investment.

Real estate investment trusts (REITs) are RRSP-eligible investments that pool together income-generating real estate. Typically the pool includes residential, office, retail, industrial, self-storage, healthcare or hotel properties. REITs are a way for investors to invest indirectly in real estate that is managed by a professional team.

It is also possible to hold your own mortgage in your RRSP, effectively making you your own lender. Fees may be a couple thousand dollars on set-up and then a couple hundred dollars a year thereafter.
For conservative investors, it can be an enticing option because the mortgage rate used is the posted rate, which guarantees you a much higher fixed return than you could otherwise earn on a GIC or high-quality bond. That said, it means you are borrowing at a higher rate – albeit from yourself – than you could otherwise borrow from a bank.

One concern with holding your mortgage in your RRSP is that if you could otherwise borrow at a lower rate of interest and possibly invest at a higher rate of return in a balanced investment portfolio, you might be missing out twice. This is especially true at today’s low interest rates, in particular when you take into account the up-front and ongoing costs.

Anyone considering a real estate investment given the long run-up in Canadian real estate prices should consider their existing exposure to real estate, not only through their stocks and mutual funds, but also their primary residence.

Many Canadians have a high allocation to real estate already in their net worth without targeting real estate specifically in their RRSPs, so use proper asset allocation as the primary test to determine if you should be investing further in real estate in the first place.


Source:  Financial Post

Examining opportunities in the student housing market

The Canadian housing market and where it is headed has been the subject of heated debate among investors and Canadians in general for several years now. Among the countless stakeholders in this important issue are students of Canadian universities and colleges across the country. As of 2013, there were 950,000 full-time students enrolled in 82 of the largest educational institutions across Canada, a number that has since grown closer to one million. Obviously housing is an important factor in the decision-making process of students and one that is not taken lightly considering the cost. This holds particularly true for international students seeking an education in Canada. In fact, the international student market comprised approximately $8 billion in Canada as of 2014, factoring in both tuition and living expenses. This group accounts for approximately 10 per cent of full-time university students across the country.

Investors have taken notice of this high demand for affordable student housing. In the “university towns” of Waterloo, London and Guelph, private groups have long been interested in building and developing units for students. Students are often more willing to rent by the bed as opposed to entire units. This provides further income to property owners as they are able to generate more revenue from a single unit. It is not only private investors who have taken notice to this opportunity but also the universities and colleges themselves.

Based on this information, it is clear that an opportunity presents itself in the rental housing market. Both domestic and international student numbers keep growing.

Source: http://www.remonline.com/examining-the-student-housing-market/

Mortgage rules requiring more than 5% down on Canadian homes over $500K

Starting this month you'll need to put upwards five per cent down on a home selling for more than $500,000 in Canada. The new mortgage rules, announced last December by Finance Minister Bill Morneau, dictate that buyers must put down 10 per cent down on the portion of the home's price above $500,0000. The move's intended to keep housing prices affordable for anyone wishing to enter some of Canada's hottest real estate markets.
Buyers can still put down five per cent for homes $500,000 and under. For example, if you want to buy a $750,000 home, you'll need to have a minimum down payment of $50,000, which is what you get when you add five per cent of $500,000 and 10 per cent of the remaining $250,000.

Homes that cost more than $1 million still require a 20 per cent down payment.

Source: CBC News http://www.cbc.ca/news/canada/toronto/toronto-new-mortgage-rules-1.3448550 

How virtual reality could better connect buyers with properties for sale

Canadian real estate could soon be donning headsets and touring upcoming condo developments in virtual reality by turning floor plans of new developments into 3D, immersive mockups that can be experienced in virtual reality, according to the founder of a Toronto-based technology firm. Potential buyers can now, from the comfort of their own home, view any floor plan that they want, with the finishes they want, and feel like they're actually inside that home.

Rather than building model suites, the building company uses technology to create virtual reality mockups of its upcoming development providing a significant cost saving for the company.

While the appeal of immersive tours for foreign buyers is obvious, REALTORS note that the technology has benefits for local home buyers, as well. For example, it can help a home-hunter narrow down his or her list of options, ultimately cutting down on the amount of time spent driving around town touring homes.

Source: CTV news

First-Time Home Buyers Take Financially Fit, Well-Informed Approach

First-time homebuyers are doing their homework and making responsible financial decisions entering Canada's housing market, according to a new study released by Genworth Canada.  The 2015 Genworth Canada – First-Time Homeownership Study shows that the typical first-time homebuyer is well-educated, employed, consulting with mortgage industry professionals and purchasing a home within financial reach.

Source: Genworth Canada

 

Is it time to sell your rental property? Or time to buy another?

According to Statistics Canada, 69 per cent of Canadians own homes, so most of us have reason to worry about the fate of the housing market.
One in 20 Canadians own rental real estate according to the Financial Industry Research Monitor. An Altus Group study shows that for households earning more than $100,000 per year, rental real estate ownership is twice that of the general population – about 10 per cent.
So the question is: buy or sell?

Buy

The supply and demand dynamics appear good on the surface for Canadian rental properties. Vacancy rates are below two per cent for cities like Toronto and Vancouver, according to CMHC. Rising real estate prices have likely helped to buoy demand for rentals, with price increases well in excess of the salary increases for average families in recent years. Some of those average families are now opting to rent instead of buy and that bodes well for landlords given that vacancies are often the biggest risk with a rental property.
Millennials are clearly helping to drive rental demand. Home ownership is unreasonable in many Canadian centres, so rental properties – particularly condos suitable for a single person or young couples – have got to benefit.

Sell 

The Bank of Canada has expressed concerns over potential real estate corrections in certain cities, specifically singling out Toronto. “The adverse impact of the oil price shock in Alberta and continued robust price growth in Toronto . . . suggest[s] a risk of a correction,” said the Bank.

Source:  Financial Post - Mortgages and Real Estate

Can Home Staging Really Win Over Buyers?

Home staging can influence buyers’ perceptions of a home and even motivate them to pay more, according to the National Association of REALTORS®’ 2015 Profile of Home Staging, a survey of more than 2,300 REALTORS® representing buyers and sellers.

   2015 Profile of Home Staging

Source: http://www.realtor.org/reports/2015-profile-of-home-staging