Calgary to receive $31 million federal cash for affordable homes

General Rachel Martin 23 Nov

The federal government is to invest $31 million to build state-of-the-art, affordable, and accessible rental apartments for middle class families in Calgary’s city centre.
The Kanas Corporation will build a new high-rise building with 121 units, most of them meeting the City of Calgary’s affordability guidelines with rental rates that will remain affordable for at least the next 10 years.
The building is conveniently located near schools, public transit, and public services, including Glenmore Park and, Rockyview General Hospital.
The design of the 15-storey building will achieve energy savings of 57% and a 100% reduction in greenhouse gas emissions below the requirements of the National Energy Code of Canada for Buildings 2015.
“Everyone deserves a safe and affordable place to call home,” said Prime Minster Justin Trudeau. “Today’s announcement will lead to over 120 new, affordable, and accessible apartments for families in Calgary’s city centre. This new building will provide people with housing where kids can learn and grow, and where families have the stability and opportunities they need to thrive in their community.”

– Steve Randall

Real Estate Confusion

General Rachel Martin 15 Nov

Real Estate Confusion

The housing market is up and down and getting more complex than ever. What’s a buyer or seller to do?

After losing out on a house in a bidding war in 2016, Sandi Hamilton and her husband watched housing prices in the Toronto neighbourhood where they were renting soar higher and higher.
“There was high competition. Investors were looking. You couldn’t put conditions on your offer and even houses that needed fixing up were going for crazy amounts,” says Hamilton, a stay-at-home mom.
In spring 2017, after a year of looking, they saw two small semi-detached homes on their street sell for $1.6 million. They decided to take a break. “It was getting so bad, it had to come down,” she says.
“With all the uncertainty over an unpredictable American government and policymakers instituting policy that has slowed the market, it is difficult to pick the right time to buy or sell.”
She was right: Prices started to soften soon after they stopped their search as the real estate market slowed across Canada. According to the Toronto Real Estate Board, house sales fell by 22 percent year-over-year in May while prices were down 6.6 percent. Across Canada, sales volumes fell by 16.2 percent in May, according to the Canadian Real Estate Association.
While prices rebounded in June, there’s still a lot of uncertainty as to where the market may be headed next. Stricter mortgage rules, foreign buyers’ taxes in B.C. and Ontario and rising interest rates have helped to cool the housing market and that’s caused people across the country to think twice about whether to buy or sell.
“With all the uncertainty over an unpredictable American government and policymakers instituting policy that has slowed the market, it is difficult to pick the right time to buy or sell,” says Phil Soper, CEO of Royal Lepage. “Buyers and sellers have both been on the sidelines.”
So what’s a buyer or seller to do?
Size up trends
Buyers and sellers, along with their agents, should be looking at local market trends as well as forecasts and think about where things might go next. According to a July 2018 report from Royal Lepage, those hoping to snag a deal in Toronto or Vancouver may be too late. “The market appears to have bottomed out,” says Soper, adding that some neighbourhoods will return to “uncomfortably high” prices by the fall. It’s not the same everywhere. He notes that prices in Edmonton and Regina continue to fall, while Halifax and Montreal continue to have strong markets. If you’re in a region where prices are on the uptick, now might be a good time to buy, before prices rise even further.
Think seasonal
If you need to buy a house, waiting until the market crashes, if it ever does, doesn’t make sense. However, there are times during the year where buyers can get a good deal and sellers can unload their homes for more. For the former, that’s during cold winters and hot summers, for the latter it’s the spring and fall, when people tend to be more ready for change. “The best time to buy is when others are not,” says Soper. Selection is more sparse in the winter and summer, but it’s still possible to find a great place at a cheaper price.
Sell because you want to
It can be tempting to think of real estate as the type of investment you can look to for high returns, but the double digit gains we’ve seen of late are a more recent phenomenon. “Typically real estate has been about a five percent return over time,” says Soper. The rapid gains have caused sellers to think more about making the most they can off their house but, he says, it’s better to sell when you need to, even if the price isn’t as high as you’d like. “Most people move when it works for their family,” says Soper.
Downsize dilemma
Downsizing used to mean selling your suburban home for a good price and then buying a less expensive condo, but that’s getting more difficult to do these days. Condo prices are still rising, while sales of suburban homes in larger urban centres have seen steep drops in the last year, says Soper. If your home dropped in price over last year, you could wait for those prices to go up before selling, but in terms of buying a condo, “Waiting is not going to make those prices any lower,” says Soper.
If you do want a condo, look in areas where land values are cheaper, such as in the suburbs and in smaller cities, says Soper. Developers are building more condos outside the downtown core, he says.
As for Hamilton, her wait for the perfect home continues. She’s seen prices come down, but they’re still higher than when they started looking two years ago and for the amount of money they would have to spend, she wants the purchase to be just right. “I would like to own a house,” she says, “but I don’t want to make an emotional decision about it.”

-By Claire Gagné / October 2018

New Rule Targets HELOC Holders Seeking a Second Mortgage

General Rachel Martin 15 Nov

The word is out on a little-known policy used to qualify anyone with a HELOC who is applying for additional financing.
Several of the Big Six banks have already adopted the policy, which requires applicants to prove they can afford the theoretical monthly HELOC payment based on the limit of that HELOC, rather than the amount that has actually been used, according to founder Rob McLister, who first reported the change.
TD Canada Trust, the largest provider of HELOCs in Canada, on Tuesday became the latest bank to quietly adopt the new qualification rule, joining RBC and at least one other major bank.
“Even though you might have a zero balance, the bank assumes you might use all of your available credit,” McLister wrote.
The change predominantly affects those seeking additional financing for a second home, a rental/investment property or a cottage.
For a typical borrower with a $200,000 HELOC limit, McLister says they will now need to prove they can afford a $1,202 monthly HELOC payment based on today’s rates. That, he adds, would drive a mortgage applicant’s Total Debt Service (TDS) ratio over 50%, well above the maximum HELOC TDS limit of 40–44%.”
The result: “A meaningful minority of Canada’s 3.1 million HELOC holders will no longer qualify for additional financing like they do today,” McLister told CMT. “That means many will have to restructure their HELOCs, incurring additional cost and losing financial flexibility. As always, tighter credit policies are great when the benefits—systemic risk reduction—are greater than the economic loss to consumers. The jury will be out on that for a while to come.”
Industry Reaction
James Laird, President of CanWise Financial, agrees that treating available credit as utilized credit is a “big deal.”
“Many of the rule changes over the past 10 years have made it really hard to buy a home beyond your primary residence,” he said. “This rule change is focused squarely on that. It has no effect on your owner-occupied residence, but will make it more difficult to purchase a second home or rental property. Many clients will be forced to choose between the security of having a credit facility should they require it, and purchasing that second property.”
Adding that while he does see logic in the policy, Laird says “this will be another hurdle for our industry.”
In its reply to the RateSpy story, TD explained that the debt service ratio change was made “to ensure prudent underwriting guidelines, and reflects concerns around consumers’ abilities to manage debt—particularly in a fluctuating rate environment.” It added, “…the impact (is) limited to a small number of customers that have an existing home equity line of credit and are applying for additional financing.”
Nick Douce, Vice President and Managing Broker of Paragon Mortgage Group, said they received an update from TD on Tuesday morning and that it was the first they had heard of the change.
“There is little industry consultation by the governing bodies on these rule-tightening issues today,” he said.
Douce added that while there is some sense to the change, he believes the impact will be more emotional than financial.
“Faced with ever-tightening regulation and controls by Big Brother (misguided or not) just discourages the population from even venturing into the idea of enriching their lives or financial position by borrowing to invest,” he said. “A few minor qualification tweaks along with the increase in rates over the past 18 months would have been enough to slow things down, especially as real estate is often cyclical in nature anyway.”
Dustan Woodhouse, a broker with DLC Mortgage Experts, added his voice to the feeling that increased regulation and policy changes have moved beyond what’s needed to adequately manage risk in the market.
“It’s overkill piled on top of overkill,” he said. “We are long past worrying about stability of the markets and deep into posturing to please regulators, pundits and politicians.”

The Growing Concern Over HELOCs

There had been signs that HELOCs were becoming the next financial product of concern for banks and regulators.
Speaking at the national mortgage conference in Montreal, Financial Consumer Agency of Canada (FCAC) Commissioner Lucie Tadesco raised concerns about increasingly risky consumer behaviour involving HELOCs.
She drew attention specifically to the fact that a quarter of HELOC holders in Canada are only paying the interest on their HELOCs most months.
“Interestingly, 62% of this group told us that they planned on paying off their HELOCs over five years. This seems overly optimistic, considering that the average HELOC balance is $70,000,” Tedesco said. “Typically, these consumers end up carrying debt for longer periods than they had initially anticipated. They might also slip into patterns of behaviour that trap them on a treadmill of debt”
Bank of Canada Governor Stephen Poloz had also raised concerns about HELOCs during a speech as early as December, when he said some Canadians are using them to dangerously stretch their borrowing limits.
Thanks to a combination of low interest rates, rising home prices and the aggressive marketing of secured lines of credit, HELOC balances reached $230 billion in 2017, up from just $35 billion in 2000 and $186 billion in 2010, according to OSFI figures.
Expect More Banks to Adopt this Policy
The consensus is that the remaining big banks, and others, will likely move to adopt this qualification policy over time.
“I think, by the end of this year or next year, given OSFI’s concern about HELOCs, I think we’re going to see most banks, if not all, do this, as well as lenders that get their funding from major banks,” McLister said.
Laird agreed, adding, “My experience with banks is they usually keep their policies fairly uniform, so I would expect Scotia and BMO to follow suit.”

-Steve Huebl