BC Forecast to Lead Nation in 2014 Home Sales: CREA

December 18th, 2014

BC set to post a 14.5 per cent annual increase in activity in 2014 – and it could keep going up, predicts Canadian Real Estate Association

Joannah Connolly
Other

The Canadian Real Estate Association (CREA) has updated its forecast for home sales activity via the Multiple Listing Service® (MLS®) Systems of Canadian real estate Boards and Associations for 2014 and 2015.

With mortgage rates remaining at historic lows since the summer, activity has remained stronger for longer than previously expected and has yet to show clear signs of fading.

As a result, the forecast for annual sales in 2014 and 2015 has been upwardly revised. Almost all of the upward revision to national activity in both years stems from the current strength and momentum of sales across most of British Columbia and much of Ontario, particularly in the Greater Golden Horseshoe region.

In British Columbia, historically low mortgage interest rates have helped fuel a broadly based increase in the number of homes changing hands this year, although activity has only recently risen above its 10-year average. In Ontario, strong demand has been met with a rise in listings, which in recent years had been in shorter supply. The recent momentum for sales in both cases has endured for longer than expected and has shown few signs of diminishing. These two provinces together account for more than half of national activity and are responsible for much of the upward revision to projected and forecast national sales.

Sales are now projected to reach 481,300 units in 2014, representing an annual increase of 5.1 per cent. While this places annual activity eight per cent below the record set in 2007, it marks the strongest annual sales since then.

It also places activity in 2014 slightly above, but still broadly in line with its 10-year average. Despite periods of monthly volatility since the recession of 2008-09, annual sales have held steady within a narrow range around its 10-year average. This stability contrasts sharply with the rapid growth in sales seen in the early 2000s prior to the recession.

British Columbia is projected to post the largest annual increase in activity (14.5 per cent) followed closely by Alberta (9.3 per cent). Demand in both of these provinces is currently running at multi-year highs. Annual activity in Ontario is also expected to come in 3.6 per cent above 2013 levels.

Sales in Saskatchewan (+1.8 per cent), Manitoba (+0.8 per cent), Quebec (-0.1 per cent), New Brunswick (-0.8 per cent), and Prince Edward Island (no change) are expected to hold near 2013 levels. Activity in Nova Scotia and in Newfoundland and Labrador is projected to decline this year by 3.9 per cent and 4.7 per cent respectively.

In 2015, Canadian exports, job growth and incomes are expected to improve with mortgage interest rates edging only slightly higher. These opposing factors should benefit sales activity in housing markets where demand has been softer and prices have remained more affordable. Sales in relatively less affordable housing markets are expected to be more sensitive to higher mortgage interest rates.

National activity is now forecast to reach 485,200 units in 2015, representing a year-over-year increase of 0.8 per cent. While sales nationally are still expected to peak this year and trend lower throughout 2015, they are not expected to return to weakened levels recorded in the first quarter of 2014.

Sales activity is forecast to grow fastest in Nova Scotia (+2.6 per cent), followed by New Brunswick (+2.9 per cent). Quebec (+1.2 per cent), Ontario (1.1 per cent), British Columbia (0.5 per cent), and Alberta (0.1 per cent) are forecast to see little change on an annual basis, reflecting a rising trend in 2014 mirrored by a softening trend in 2015.

There are a number of upside and downside risks to the forecast. In British Columbia and Ontario, activity is still expected to be held in check by eroding affordability for single family homes. However, with sales in British Columbia now only at average levels, they may climb further before rising interest rates begins to materially reduce affordability. Sales in Ontario may also remain stronger than expected should new listings continue to come onto the market at higher levels in places and in market segments where a lack of supply in recent years has led to pent-up demand.

Additionally, consumer confidence and job growth in the Prairies may come under downward pressure depending on how far oil and non-energy commodity prices decline and on how long they remain low.

Saskatchewan and Manitoba sales are forecast to post declines of seven-tenths of one per cent and nine-tenths of one per cent respectively in 2015. Both provinces are experiencing higher than normal levels of supply while sales have shown recent signs of moderating.

The national average price has evolved largely as expected since the spring, resulting in little change to CREA’s previous two forecasts.

The national average home price is now projected to rise by six per cent to $405,500 in 2014, with similar percentage price gains in British Columbia, Alberta, and Ontario. Saskatchewan and Manitoba are expected to post increases of close to three per cent. Newfoundland and Labrador and Prince Edward Island are forecast to see average home prices rise by a little over one per cent this year, while Quebec is forecast to see an increase of slightly below one per cent. Prices are forecast to recede by about half a per cent in New Brunswick and Nova Scotia.

The national average price is forecast to edge higher by 0.9 per cent in 2015 to $409,300. Alberta and Manitoba are forecast to post average price gains of almost two per cent in 2015, followed closely by Ontario at 1.3 per cent. Average prices in other provinces are forecast to remain stable, edging up by less than one percentage point.

© 2014 Real Estate Weekly

Industry criticizes wind turbine report

December 18th, 2014

Jennifer Paterson
Other

A recent study by the University of Guelph, which found wind turbines do not have an impact on nearby property values, might have earned a big sigh of relief from investors – but the study’s results have been strongly criticized by members of the real estate industry.

“I have had several deals fall apart in this area because, in the appraisal report, it has been mentioned that there are windmills visible or adjacent to the property and, once a lender gets wind of that (forgive the pun), they will not fund a mortgage,” said Angela Jenkins, a mortgage agent at Dominion Lending Centres, who lives and works in the Melancthon region, where the study was conducted.

“If a person cannot get financing due to windmills, then how can this be a positive thing?”

The study, which was published this month in the Canadian Journal of Agricultural Economics, analyzed more than 7,000 home and farm sales in the area, and found that at least 1,000 of these were sold more than once, some several times.

John Leonard Goodwin, who has been a real estate broker for more than 10 years in the Grand Bend, Ont. market, asserted that wind turbines absolutely do affect property values. “Turbines complicate your property enjoyment, period,” he said. “That alone spells depreciated value(s).

“Turbines should be in remote, unpopulated locations. To all the folks who have turbines on their property: Enjoy your $18,000 per turbine per year, because you will be giving most of the lease payments back (in much lower property value) when you sell.

“These monsters are very bad for Ontario,” he continued. “We all pay to subsidize the electricity they produce and they will also cause a significant loss of real estate value.”

Lynn Stein, a sales representative at Hartford and Stein Real Estate, lives and sells real estate in Prince Edward County, where a large-scale wind turbine project is slated to begin.

“The turbines that are proposed here are quite large,” she said. “The majority of the population here very clearly doesn’t want them.

“Put simply, if you were to buy your future home, given the choice, would you buy where you would have noise, shadow flicker, an industrial view, potential health issues caused by the turbines, and the possibility of a very difficult resale, or would you spend your money elsewhere?”

Copyright © 2014 Key Media Pty Ltd

What will be the long-term impact of oil price decline?

December 18th, 2014

Jennifer Paterson
Other

Investors hoping that dropping oil prices would give them a foothold in the Calgary housing market might not see the drop in prices they had hoped for.

Glenn Herring, a RE/MAX Realtor based in Calgary, said: “It’s my opinion that any correction in the market is going to affect properties in the $500,000-plus price range more than the properties in the up to $500,000 price range, which is the starter price range in Calgary.

“The reason I say this is that there are always first-time buyers and that makes this segment of the market more resilient to market corrections.”

The direct impact of falling oil prices on the Calgary housing market has yet to be felt, but the first quarter of 2015 will be an interesting one for investors.

Herring added: “The real estate market in Calgary has slowed down a little bit from its torrid pace, but whether that’s a direct correlation to the falling price of oil, or if the Calgary real estate market has felt the full effect of the falling price‎ of oil, is yet to be determined.”

The Calgary Real Estate Board has said stable conditions are expected, given forecasts for employment and migration, but asserted that estimates could change depending on the extent and duration of oil price declines.

Ann-Marie Lurie, CREB’s chief economist, added: “Concerns over the potential impact will influence consumer confidence. This is expected to cause supply and demand to ease in 2015, maintaining resale market balance and keeping prices relatively stable.”

However, a report recently published by RE/MAX, said that falling oil prices will impact Calgary’s real estate market in the coming year, causing home prices to slow to only three per cent; this, compared to a six per cent rise in average sale prices in 2014.

The report did stipulate, however, that, unless low oil prices remain for a prolonged period, home prices are unlikely to experience a significant decline.

Duane Ritter, a real estate agent at RE/MAX in Edmonton, said: “Like most markets right now, it really depends on how low the price goes, but mainly how long [it stays] at the lower prices.”

Copyright © 2014 Key Media Pty Ltd

Brokers sceptical over CMHC foreign ownership data

December 17th, 2014

Jamie Henry
Other

Brokers have been quick to react to new CMHC data on foreign ownership of condos. The report says that contrary to popular belief the figure for Toronto; where foreign investment is most prolific; is only 2.4 per cent; Vancouver 2.3 per cent; Calgary just 0.2 per cent. Most of the comments to Mortgage Broker News are dismissive of the figures with methodology in collecting the data being called into question. It’s the first time that CMHC has included insight into foreign ownership in its twice-yearly Rental Market Survey. 

In a first for CMHC, the Crown corporation has asked property managers to disclose the percentage of units owned by foreign investors as part of its Rental Market Survey.

“CMHC recognizes that there is demand to fill information gaps with respect to Canada’s housing markets. To address this need CMHC has, for the first time, asked property managers to provide information on the total number of condominium apartment units owned by people whose permanent residence is outside of Canada as part of its survey,” CMHC said in a release. “The condominium foreign investment information was collected in 11 Census Metropolitan Areas (CMA) in Canada. They include: Vancouver, Victoria, Calgary, Edmonton, Regina, Saskatoon, Winnipeg, Toronto, Ottawa, Montréal and Québec.”

The results of the additional question reveal that foreign investment accounts for 1.1 per cent in Victoria, 2.3 per cent in Vancouver, 0.2 per cent in Calgary, 0.1 per cent in Edmonton, 0.3 per cent in Saskatoon, 0.1 per cent in Regina, 0.1 per cent in Winnipeg, 2.4 per cent in Toronto, 0.7 per cent in Ottawa, and 1.5 per cent in Montreal.

Unsurprisingly, Toronto and Vancouver report the highest percentage of foreign investment.

Determining the breakdown of foreign investment has been a priority for CMHC this year. This past summer, the Crown corporation attempted to determine the percentage of condos in Canada that are owned by domestic investors, while also admitting it was unsure what percentage are owned by foreign investors.

In an interview with the Financial Post at the time, CMHC president Evan Siddall admitted they didn’t have the proper data to determine what percentage of condos are owned by foreign investors but that “right now, based on what we know … we don’t think the level of foreign ownership in Canadian housing markets is excessive.”

According to this recently released data, Siddall was correct in his inkling that foreign investment accounted for a low percentage of condo ownership.

However, some industry players believe the numbers may be much higher. One of Toronto’s most prolific developers, Brad Lamb, told the CBC in August that he estimates foreign investors make up about 50 per cent of the ownership of condos in Ontario’s capital city.

Copyright © 2014 Key Media Pty Ltd

Crowdfunding: What’s in it for investors?

December 17th, 2014

Jordan Maxwell
Other

As many U.S. investors cash in on real estate opportunities through crowdfunding, Canadian investors are also taking advantage of the alternative financing option here at home.

Tim McKillican, president of Open Avenue, one of Canada’s first real estate crowdfunding platforms, said: “We’re seeing more investors getting involved in crowdfunding real estate deals and we’re expecting that the Ontario Securities Commission (OSC) will make regulations to allow casual investors to participate in deals in Q1 of 2015.

Crowdfunding enables the casual investor to get involved in real estate in a way they’re comfortable, so they don’t need to do it all on their own.

“Investors don’t have to deal with midnight phone calls or debt financing, and they can partner with an experienced [developer] to manage the property.”

Crowdfunding has grown dramatically over the past few years. According to figures from the National Crowdfunding Association of Canada (NCFA), $1.5 billion was raised globally in 2011 and more than $5 billion was raised in 2013.

Crowdfunding real estate has also been a hot-button topic in the U.S. with the launch of a new iFunding program, which allows investors to make equity investments in real estate.

Currently, throughout most of Canada, crowdfunding for real estate opportunities is only open to accredited investors, meaning investors must own financial assets (excluding real estate) worth at least $1 million, have net assets of at least $5 million, or have a net income of more than $200,000 in the last two years.

Partnering with someone requires due diligence and a certain level of trust, so Open Avenue provides investors with real-time updates, including rental incomes and up-to-date expenses.

McKillican hopes that the company will be able to attract real estate agents and work with them to draw additional investors. “We can leverage that transparency to bring the investment to investors,” he said. “You can connect in real-time to the property and its performance.”

However, Derik Rehou, a mortgage broker at The Mortgage Centre, is skeptical about crowdfunding because it will demand a strong regulator action from the OSC to protect investors. However, he did acknowledge that investors and others are looking for new, creative ways to finance real estate.

“The available pool of investors is smaller [in Canada than it is in the U.S.],” he said. “The same regulators that held Canada back from the sub-prime mortgage crisis will be very diligent in overseeing any open-market investment plan of this type.

“That said, [this is] a changing marketplace and traditional financing, through banks, is no longer the only option for people looking to buy property as an investment. If it develops into a trend that forces banks to lower interest rates and conditions for mortgages to average people, that would be a great development.”

Copyright © 2014 Key Media Pty Ltd

Commercial real estate sales plunge 16%

December 17th, 2014

The Lower Mainland’s high-flying commercial real estate market came down to earth with a thud in the third quarter of 2014, dropping…

Frank O’Brien
Other

The Lower Mainland’s high-flying commercial real estate market came down to earth with a thud in the third quarter of 2014, dropping 30.4% in total dollar volume from a year earlier and posting the lowest three-month sales volume since the start of 2013.

The total dollar volume in the third quarter was $1.2 billion, while the 404 commercial real estate sales was down 16% when compared with the third quarter of 2013, reports the Real Estate Board of Greater Vancouver (REBGV) in its Commercial Edge survey. Sales were also down 15.4% from the same period in 2012.

“Our commercial real estate market was quieter this quarter than we’ve seen so far this year, although 2014 activity, overall, continues to keep pace with 2013 levels,” said Ray Harris, REBGV president.

Land accounted for nearly a quarter of all commercial real estate sales and half the total dollar volume, with 141 transactions, worth a total of $553 million. Still, the total dollar volume for land sales was down 17.7% from a year earlier.

Office and retail properties posted 139 sales, down 23.6% from a year earlier, while sales of industrial properties fell 15.4% from the same period in 2013, to 99 units.

Sales rental apartment buildings were down 16.7% to 25 buildings in the third quarter compared to a year earlier, and the total dollar volume slipped 12% to $118 million.

The statistics are gleaned from the Land Title and Survey Authority of BC in the Lower Mainland.

Copyright © Business In Vancouver

Court injunction orders Calgary man to stop dealing in real estate

December 17th, 2014

Johnson has been fined $65,000 by Alberta Real Estate Council

Other

A man holding himself out as a real estate agent in Calgary is being ordered to stand down after a court of queen’s bench judge ordered him and his aliases to cease and desist listing and selling real estate.  Derek Johnson, realtor from Calgary, has been fined several times for trading real estate without authorization, to the total of $65,000.

A Calgary man who has been posing as a real estate agent has been slapped with a court injunction.

A Court of Queen’s Bench judge has ordered Derek Johnson and his aliases to cease and desist listing and selling real estate.

Johnson was also ordered to take down the websites freelistcalgary.com and joerhealestate.com as well as to stop posting properties for sale on Kijiji.

Charles Stevenson, the director of professional standards for the Real Estate Council of Alberta (RECA) says they will do everything they can do to stop Johnson from preying on vulnerable people.

“As long as he is out there holding himself out in this way, consumers are harmed,” he said.

Johnson has been fined several times for trading real estate without authorization, to the total of $65,000.

According to Stevenson, Johnson approaches people who are having financial difficulties with their home and offers to help. 

“Finding people where foreclosure action has commenced is fairly simple, it’s readily available in the marketplace,” Stevenson said.

On the other end, Johnson tempts “investors” with low prices on these particular homes.

“In the meantime, the money that he collects for deposits, for rents so on and so forth, never gets repaid.”

One victim who had Johnson offer to purchase their home that was in foreclosure was allowed to stay in a rent-to-own scheme. It took six months to get the land title back in his name.

Johnson currently has his own property for rent, although his name was not listed on the “for sale” sign on his front lawn. RECA has registered a claim on Johnson’s property

Cas Lintott, a Calgary lawyer who has represented several of Johnson’s victims, says RECA could do even more against Johnson to collect the fines that it’s owed.

Lintott said Johnson’s actions are considered a civil matter and not a criminal one.

“The likelihood that the police will take a civil order like that and then enforce it, it’s just not a priority for them at the end of the day.”

Johnson has ignored previous orders from the Real Estate Council of Alberta and one of his websites is still operating.

Copyright © CBC 2014

How to unlock the secrets of your next property

December 16th, 2014

Jamie Henry
Other

Whether your aim is to bolster your property’s online profile or unearth the past secrets of a prospective purchase, search-engine sleuthing is worth the effort – after all, you wouldn’t start a new job or go on a blind date without a little Google search beforehand.

The same logic should apply when considering investing in a new property. “I do a general Google search and sometimes get interesting information, like if the property has been put up for sale before and then I would follow up with a Realtor to do some more digging,” said Quentin D’Souza, chief education officer at Durham Real Estate Investors.

Google image or map views can also help potential investors understand how a house is situated on a lot and what the neighbourhood looks like.

D’Souza would use a general Google search to discover whether any interesting events have occurred in the neighbourhood or the street.

He added: “I would also use online resource sites like HouseCreep and The Bed Bug Registry to dive a little deeper and look at some more specific problems that a property might have.”

Copyright © 2014 Key Media Pty Ltd

How will rising interest rates impact investors?

December 16th, 2014

Jennifer Paterson
Other

Most economists agree that interest rates will rise in 2015 – possibly as early as May – but property experts say the ups and downs of interest rates should never be the ‘be all, end all’ for an investor.

Eddy Boudiwan, head of real estate investments at Real Estate Rangers & Taft Forward Management Joint Venture, said: “As long as you have a decent fixed rate and controls over your debt (the mortgage on the building), buy in growth markets and manage your assets impeccably, you should do very well over the long term.”

A recent poll, which asked CREW readers whether a rise in interest rates in 2015 will be good or bad for investors, found that the vast majority (84 per cent) consider it a positive.

Ken Davidson, partner at BDO, agreed.

“It should allow for a strengthening in the rental market,” he said. ”New homebuyers will find it harder to purchase their own home and, generally, that is who most of the landlords are catering to in the rental market.”

However, Davidson does admit that there are scenarios where a rise in interest rates would be bad for landlords.

“It could be bad for a landlord if they are leveraged and they are in a community with slow turnover and not able to increase rents due to provincial rules,” he said.

But for landlords who have invested in growth markets, the scenario is a good one.

“When interest rates rise, the demand for rentals increases because fewer Canadians will convert to home ownership,” added Boudiwan.

“The rental supply is, in essence, fixed because very little rental buildings are constructed – a great scenario for landlords in growth markets. The above factors will push rents up and therefore increase the value of the assets.”

Copyright © 2014 Key Media Pty Ltd

Finance minister talks reining in housing market

December 15th, 2014

Justin da Rosa
Other

Finance Minister Joe Oliver, who is currently in meetings with his provincial counterpart, has said the government may take steps to rein in an overvalued housing market.
 
“In terms of household debt and the real-estate market, this is a subject, of course, we’re monitoring very carefully,” Oliver said, according to the Canadian Press. “So, we’re not going to take any dramatic steps in that regard, but we may take some moderate steps.”
 
Oliver, who took over for the late Jim Flaherty in March of this year, has said from the outset that monitoring the housing market will be a priority of his.
 
“Our government has taken action in the past to reduce consumer indebtedness and the government’s exposure to the housing market,” Oliver told CTV News in late March. “I will continue to monitor the market closely.”
 
The Finance Minister remains mum about what measures would be considered.
 
“Our longer-term objective is to reduce the government’s exposure to the mortgage market and we keep that objective in mind going forward,” he told CP.
 
The Bank of Canada recently took a stance on the state of housing prices, saying it believes the Canadian housing market is 10 to 30 per cent overvalued. However, the Governor of the Bank of Canada, Stephen Poloz, has also said he does not fear a housing crash.
 
“The risk comes when some catalyst sets off the vulnerability,” Poloz said on Thursday. “In this case it would be, let’s say, a rise in unemployment, a significant one, where it makes people have difficulty paying for their mortgage, or a rapid rise in mortgage rates, neither of which we’re expecting.”

Copyright © 2014 Key Media Pty Ltd