Archive for September, 2018

There is a lot of opportunity available for private investors in real estate. Often, though, we hear about private investors who find it hard to compete with big investment firms who have deep pockets and seemingly endless resources.

There is a way to level the playing field, though: real estate technology.

You need access to technology that not only helps you source deals, but also properly evaluate what a property is worth in order to make effective buying decisions.

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  • How to access the same property data large investment firms use.
  • A better way to investigate potential investment areas.
  • About property investment tools that can help you evaluate the property’s financial position quickly and accurately.

By the time you’re done reading, you’ll know exactly how to compete with larger investors with deeper pockets and understand what technology can help you get there.

This eBook is available today for free. Just click here to get started downloading.

GeoWarehouse is your source for property searches and more. All of our data comes from the Province of Ontario Land Registry Information System, meaning that it’s accurate, up-to-date, and available when you need it.

Learn more about how we can assist with your real estate investment business today. Contact John Singh at 416-360-8863 ext. 2557 or email john.singh@teranet.ca.

 

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September 12, 2018

In August the Teranet–National Bank National Composite House Price IndexTM was up 0.2% from the previous month.[1] Removing normal seasonal patterns (seasonal adjustment), the index would have been virtually flat, following retreats in June and July. In other words, after seasonal adjustment, the downtrend of June and July did not turn around in August.

Individual market indexes were up in eight of the 11 metropolitan markets surveyed. Seasonally adjusted, they would have been up in only four. The published (non-seasonally-adjusted) indexes were up strongly under any respect in Ottawa-Gatineau (1.4%), Hamilton (1.4%), Montreal (1.2%) and Quebec City (0.5%). However, gains in Toronto (0.3%), Edmonton (0.2%), Victoria (0.1%) and Winnipeg (0.1%) only reflected usual seasonal pressures. After seasonal adjustment, these indexes would have dropped or be flat. Indexes were down for Halifax (−0.6%), Calgary (−0.3%) and Vancouver (−0.4%).

The published Toronto index was up for a fifth straight month. But it is the opposite after seasonal adjustment as the index would then have been down for a fifth straight month. For Vancouver and Victoria it was a third straight month of decline after seasonal adjustment.

In August the composite index was up 1.4% from a year earlier, the smallest 12-month rise since November 2009. This weakness is partly attributable to a peak in August 2017 from which the index declined in following months. For this reason the 12-month rise is likely to accelerate in the months ahead. August 2018 indexes were down from a year earlier in Toronto (−3.3%), Hamilton (−0.7%), Calgary (−0.5%) and Edmonton (−0.3%). They were up from a year earlier in Winnipeg (1.3%), Quebec City (1.4%), Halifax (4.6%), Montreal (4.8%), Victoria (5.0%), Ottawa-Gatineau (5.2%) and Vancouver (7.6%).

Besides the Toronto and Hamilton indexes included in the composite index, indexes exist for the seven other urban areas of the Golden Horseshoe. In July, two of these, Barrie and Oshawa, were, like Toronto and Hamilton, below their peaks of Q3 2017. Indexes not included in the composite index also exist for seven markets outside the Golden Horseshoe, five of them in Ontario and two in B.C. The 12-month rise of these indexes varied widely, from 1.5% for Sudbury to 14.3% for Abbotsford-Mission.

For the full report including historical data, please visit: www.housepriceindex.ca

 

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Have you been working with real estate deals financed using syndicated mortgages? If so, it may be time to re-evaluate.

Syndicated mortgages are investments where a developer finds several private lenders to invest money in a property, instead of getting a loan through a bank.

Syndicated mortgages have been linked to mortgage fraud, including more than 120 people in the Greater Toronto Area who allegedly lost millions during a syndicated mortgage deal in 2017, as reported by the CBC.

In February of 2018, the Financial Services Commission of Ontario (FSCO) issued $1.1 million in fines as part of a settlement with four mortgage brokerage companies involved with syndicated mortgages tied to real estate projects for Fortress Real Developments Inc. and revoked five broker licenses.

The Government of Ontario has created new regulations to hopefully minimize these types of occurrences. As of July 1, 2018, provincial regulatory changes to syndicated mortgage transactions in Ontario are in effect under the Mortgage Brokerages, Lenders, and Administrators Act. Under the new rules, non-qualified syndicated mortgages will have to comply with expanded requirements.

What is a qualified syndicated mortgage?

Let’s first look at what counts as a qualified syndicated mortgage:

  • Negotiated or arranged through a mortgage brokerage.
  • Secures a debt obligation on a property that is used primarily for residential purposes, includes no more than a total of four units, and (if used for both commercial and residential purposes) includes no more than one unit that is used for commercial purposes.
  • At the time the syndicated mortgage is arranged, the amount of debt it secures, together with all other debt secured by mortgages on the property that have priority over, or the same priority as, the syndicated mortgage, does not exceed 90% of the fair market value of the property relating to the mortgage, excluding any value that may be attributed to proposed or pending development of the property.
  • Limited to one debt obligation whose term is the same as the term of the syndicated mortgage.
  • The rate of interest payable under it is equal to the rate of interest payable under the debt obligation.

A syndicated mortgage that secures a debt obligation incurred for the construction or development of property is not qualified.

What’s changing?

As of July 1, 2018, mortgage brokerages dealing with non-qualified syndicated mortgages (anything not complying with the list above) will be required to:

  • Collect and document specific information related to a potential investor’s or lender’s financial circumstances, needs, objectives, risk tolerance, and level of financial and investment experience using a new FSCO form.
  • Undertake and document a suitability assessment, using specific criteria, for each potential investor or lender using a new FSCO form.
  • Collect and document expanded disclosure information using a new FSCO form. This includes information regarding the property appraisal and, in the case where the borrower is not an individual, the borrower’s financial statements.
  • Observe a $60,000 limit on non-qualified syndicated mortgage investments over a 12-month period for investors or lenders who are not part of a ‘designated’ class of investors and lenders. The regulation defines the designated classes of investors and lenders as those that have already met higher income and asset tests.
  • Report written complaints received by the brokerage related to non-qualified syndicated mortgages to FSCO’s Superintendent of Financial Services within 10 business days of receiving the complaint.

What real estate sales professionals can do

If you are aware of a deal being financed with a syndicated mortgage, do your due diligence. Make sure that it’s compliant with the above regulations.

You can also independently verify the property value. For example, our GeoWarehouse tools make it easy to validate that information and more.

View the full text of the new FSCO regulations here: https://www.fsco.gov.on.ca/en/mortgage/Pages/smi-amendments.aspx

With the FSCO cracking down on syndicated mortgages, it’s more important than ever to exercise due diligence. GeoWarehouse can help.

Learn more about how our tools can help detect mortgage fraud. Visit www.geowarehouse.ca.

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The Bank of Canada (BOC) interest rate is remaining at 1.5% for September of 2018.

The BOC increased interest rates from 1.25% to 1.5% in July of 2018 — the fourth increase in a year. On September 5, 2018, the BOC announced that interest rates would stay at 1.5% for now.

High cost of consumer price index inflation due to gasoline prices, the U.S. economy, and uncertain trade policies all influenced the BOC’s decision — as did the Canadian real estate market.

“Meanwhile, activity in the housing market is beginning to stabilize as households adjust to higher interest rates and changes in housing policies,” the BOC said in the September 5 announcement.

“Continuing gains in employment and labour income are helping to support consumption. As past interest rate increases work their way through the economy, credit growth has moderated and the household debt-to-income ratio is beginning to edge down.”

The Teranet-National Bank House Price Index has seen some stabilization over the summer months, although that stabilization has largely been seasonal.

The new mortgage stress test for uninsured mortgages, introduced on January 1, 2018, appears to have affected the market. Mortgage Professionals Canada “Report on the Housing and Mortgage Market in Canada” for July 2018 stated that an estimated 100,000 Canadians have been prevented from buying a home as result of stress testing.

Statistics Canada reported that the Canadian household debt-to-income ratio decreased to $1.68 for every $1 earned as of June 2018, although that figure is still higher than it was a year earlier.

The BOC said in the September 5 announcement that interest rates will continue to increase gradually. Many economists are predicting at least one more hike in 2018 — likely in October.

The next interest rate announcement is scheduled for October 24, 2018.

The property data tools from GeoWarehouse can help real estate professionals adapt to changing housing interest rates and more. Contact us today. Call 1-866-237-5937 or visit www.geowarehouse.ca.

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