Archive for the 'Canadian Interest Rates' Category

In the final quarter of 2018, Canadian housing affordability worsened for a 14th consecutive quarter, found economic research from the National Bank Housing Affordability Monitor.

Using data from the Teranet-National Bank House Price Index, National Bank Deputy Chief Economist Matthieu Arseneau and Economist Kyle Dahms released a quarterly report on January 24, 2019 analyzing the final three months of 2018.

And they found that house prices are getting less affordable in many markets.

The Housing Affordability Monitor featured a representative home for each of the 10 metropolitan markets in the House Price Index, including the representative price for the condo market and for the non-condo market, and the average household income needed for each.

Here’s what they found for October, November, December of 2018:

1. Toronto Housing Market

Non-Condo

Price of the representative home in the metropolitan market: $902,916

Household annual income needed to afford the representative home: $165,755

Condo

Price of the representative condo in the metropolitan market: $536,082

Household annual income needed to afford the representative condo: $98,413

2. Montreal Housing Market

Non-Condo

Price of the representative home in the metropolitan market: $369,234

Household annual income needed to afford the representative home: $67,783

Condo

Price of the representative condo in the metropolitan market: $276,889

Household annual income needed to afford the representative condo: $50,831

3. Vancouver Housing Market

Non-Condo

Price of the representative home in the metropolitan market: $1,318,768

Household annual income needed to afford the representative home: $242,096

Condo

Price of the representative condo in the metropolitan market: $638,842

Household annual income needed to afford the representative condo: $117,277

4. Calgary Housing Market

Non-Condo

Price of the representative home in the metropolitan market: $494,689

Household annual income needed to afford the representative home: $90,814

Condo

Price of the representative condo in the metropolitan market: $266,107

Household annual income needed to afford the representative condo: $48,851

5. Edmonton Housing Market

Non-Condo

Price of the representative home in the metropolitan market: $422,508

Household annual income needed to afford the representative home: $77,563

Condo

Price of the representative condo in the metropolitan market: $231,117

Household annual income needed to afford the representative condo: $42,428

6. Ottawa-Gatineau Housing Market

Non-Condo

Price of the representative home in the metropolitan market: $428,595

Household annual income needed to afford the representative home: $78,680

Condo

Price of the representative condo in the metropolitan market: $261,454

Household annual income needed to afford the representative condo: $47,997

7. Quebec City Housing Market

Non-Condo

Price of the representative home in the metropolitan market: $286,491

Household annual income needed to afford the representative home: $52,593

Condo

Price of the representative condo in the metropolitan market: $211,768

Household annual income needed to afford the representative condo: $38,876

8. Winnipeg Housing Market

Non-Condo

Price of the representative home in the metropolitan market: $321,259

Household annual income needed to afford the representative home: 58,976

Condo

Price of the representative condo in the metropolitan market: $223,614

Household annual income needed to afford the representative condo: $41,050

9. Hamilton Housing Market

Non-Condo

Price of the representative home in the metropolitan market: $598,274

Household annual income needed to afford the representative home: $109,829

Condo

Price of the representative condo in the metropolitan market: $445,629

Household annual income needed to afford the representative condo: $81,807

10. Victoria Housing Market

Non-Condo

Price of the representative home in the metropolitan market: $850,469

Household annual income needed to afford the representative home: $156,127

Condo

Price of the representative condo in the metropolitan market: $485,937

Household annual income needed to afford the representative condo: $89,207

In some markets, the quarterly report found that the gap between condo and non-condo affordability is shrinking. The worst deteriorations in affordability in Q4 were in Victoria, Toronto, and Vancouver. The only markets showing an improvement were Calgary and Edmonton. Countrywide, affordability worsened.

View the full 2018 Q4 report from the National Bank here: https://housepriceindex.ca/wp-content/uploads/2019/02/NBFM-Housing-Affordability-Monitor-Q4_2018-Eng.pdf.

No matter what direction Canadian housing affordability heads, GeoWarehouse has tools that make you the property expert. Uncover real estate trends and opportunities before they hit the market.

Become a subscriber today. Call 1-866-237-5937 or visit www.geowarehouse.ca.

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January 28, 2019

Last year in 2018 we saw many changes to the Canadian housing market. Now that 2019 is here, what will this year bring?

We’re breaking down real estate predictions for the year ahead. Here’s what’s on our radar:

1. Interest Rate Increases

In 2018, we saw Canadian interest rates rise from 1% to 1.75% and more hikes are on the horizon for 2019. Economists speculate we may see interest rates reach 2.25% by 2020.

This may seem small, but it could have a big impact on Canadian household debt. It may change what kinds of houses Canadians are able to afford and how well they can keep up with expenses, like utility payments.

2. Housing Prices

Overall, in 2018, house prices in Canada rose at a slow rate — the slowest since 2009 in some months. The Teranet-National Bank House Price Index has captured all of the data from the past year. Toronto and Vancouver have struggled, but other markets, like Montreal and Ottawa-Gatineau, have recorded larger increases over the past few months.

In 2019, we may see more stabilization, but it will likely take more time before we return to where we were.

3. Dwelling Shifts

With increased interest rates and mortgage stress tests, homebuyers are gravitating towards different dwelling types — in particular condos and multi-family units. Supply for single-family residential homes is tight in major cities.

This may mean that multi-family units continue to rise in popularity. It could also mean that more families seek out different areas to reside in — for example, opting for an affordable small town instead of a bigger urban centre.

4. More Affordable Housing

In 2018, the Ontario Real Estate Association (OREA) joined forces with other agencies to lobby the provincial government for more affordable housing options for millennials. Particularly in Toronto, OREA has said there is a housing crisis.

This conversation is taking place across the country about how to create more affordable housing, especially with home prices on the rise. We expect these talks will continue into 2019.

5. Insurance Premiums May Rise

As of January 1, 2019, new MICAT (mortgage insurer capital adequacy test) guidelines are in effect, which could see default insurance premiums rise.

6. Technology

Digital transformation has been a buzzword for a while, but in 2019 we are entering a new age of real estate technology. On the residential front, this will look like more smart devices in homes — such as voice technology using Amazon’s Alexa or the Google Home

systems. Home buyers may also want to control lighting and other utilities from mobile devices and the like.

On the real estate sales front, more technology also amounts to more opportunities for sales professionals. We may see a surge in paperless real estate, or more automation being included in property evaluation, like aerial imagery from drones or viewing a home through virtual reality (VR).

No matter what changes affect the real estate market in 2019, GeoWarehouse can help you adapt. Our tools are accurate, up-to-date, and easy to access, meaning you’ll be able to stay agile and competitive.

Learn more by calling 1-866-237-5937 or visit www.geowarehouse.ca.

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Good news for those who have resolved to buy a house in 2019: the Bank of Canada overnight rate is staying the same for now.

On January 9, 2019, the Bank of Canada (BOC) announced that the overnight interest rate would stay at 1.75% (the rate set in October of 2018) for the time being.

Part of the reason for the hold was Canadian housing investment.

“…consumption spending and housing investment have been weaker than expected as housing markets adjust to municipal and provincial measures, changes to mortgage guidelines, and higher interest rates,” the BOC stated in a release.

“Household spending will be dampened further by slow growth in oil-producing provinces. The Bank will continue to monitor these adjustments.”

Between mortgage guidelines introduced in January 2018, interest rates increasing from 0.5% of 1.75% from July of 2017 to now, and other measures, such as the foreign buyers’ tax, the Canadian housing market has been slowing down.

But it’s not just the real estate market. With higher interest rates and less disposable income to spend, consumers are spending less on non-essential goods. While there are other factors that drive the economy, the drop in consumer spending is having an effect.

The real estate market wasn’t the only reason for the BOC’s decision. Two other factors were the global economic outlook – particularly the U.S.-China trade conflict — and global oil prices. The BOC has said it will continue to monitor these items.

Interest rate increases have been predicted to slow down in 2019, but the BOC doesn’t think they’ll stop altogether.

“Weighing all of these factors, Governing Council continues to judge that the policy interest rate will need to rise over time into a neutral range to achieve the inflation target,” the BOC stated.

“The appropriate pace of rate increases will depend on how the outlook evolves, with a particular focus on developments in oil markets, the Canadian housing market, and global trade policy.”

The next Bank of Canada interest rate announcement is scheduled for March 6, 2019. View the full text of the BOC’s January 9 decision here: https://www.bankofcanada.ca/2019/01/fad-press-release-2019-01-09/.

No matter what changes with interest rates, or the Canadian real estate market, GeoWarehouse has tools that can help. Our property information enables you to stay on top of a changing market.

Contact us today to learn more about becoming a subscriber. Call 1-866-237-5937 or visit www.geowarehouse.ca.

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October 24, 2018

The Bank of Canada overnight rate has gone up to 1.75% after an October 24, 2018 announcement.

This is the fifth interest rate increase since July of 2017, and the third in 2018.

The Bank of Canada (BOC) cited robust U.S. and Canadian economies and the new US-Mexico-Canada Agreement (USMCA) as some of its reasons for the increase.

Other justifications included business investment and export projections, a stable inflation rate, and steady household spending.

There was only one mention of the Canadian housing market in the announcement.

“Households are adjusting their spending as expected in response to higher interest rates and housing market policies,” the BOC stated.

“In this context, household credit growth continues to moderate and housing activity across Canada is stabilizing. As a result, household vulnerabilities are edging lower in a number of respects, although they remain elevated.”

The October 24 rate increase was expected by many, especially once the USMCA deal was approved.

The BOC indicated there will be more increases on the horizon, though perhaps not as many as originally thought.

“In determining the appropriate pace of rate increases, Governing Council will continue to take into account how the economy is adjusting to higher interest rates, given the elevated level of household debt,” the BOC said.

There is one more interest rate announcement scheduled for 2018, on December 5.

The effects of the hike on real estate interest rates remain to be seen.

GeoWarehouse has tools for real estate professionals that can help navigate interest rate changes. Research the latest property data, comparable sales, and more.

Call 1-866-237-5937 or visit www.geowarehouse.ca to learn more.

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July 11 and July 12, 2018 were busy days for the Canadian real estate market.

On July 11, 2018 news broke of a Bank of Canada interest rate increase to 1.5% — the highest interest rates have been since December of 2008.

Then, on July 12, 2018, the Teranet-National Bank House Price Index came out showing that house prices are making up lost ground in the second half of 2017.

While unrelated, both announcements share a commonality: they indicate what could be on the horizon for the Canadian housing market.

In its July 11 announcement, the Bank of Canada (BOC) referenced Canadian housing trends.

The BOC stated that household spending is being dampened by higher interest rates and tighter mortgage lending guidelines. It referenced recent data suggesting housing markets are beginning to stabilize following a weak start to 2018.

The following day, the House Price Index released, showing the same stabilization. The composite index in June 2018 was up 0.9% from May 2018, indicating that some of the ground lost in the second half of 2017 is being recovered.

However, even though the numbers are showing recovery, the index increase is still weak for this time of the year. According to the June 2018 report, written by National Bank of Canada senior economist Marc Pinsonneault, if the Index were purged from seasonal patterns, it would have been flat over the past three months.

Different types of dwellings are also affecting the Index. For instance, condo prices have risen rapidly in Toronto and Vancouver since the beginning of 2018 (after seasonal adjustment, up 7.8% and 16.3% annualized respectively).

Prices for other types of dwellings have held their ground, which could be reassuring in the wake of higher interest rates and stricter mortgage rules, such as the B20 lending guidelines.

In summary, the good news is that:

  • Canadian household debt levels are going down. This is also good for lenders who are stress testing mortgages and looking at other components, such as the Gross Debt Service Ratio (GDS) – the amount of total housing-related debt a person carries – and the Total Debt Service Ratio (TDS) – amount of total debt a person carries.
  • Even as interest rates rise, and mortgage regulations become stricter, house prices for more traditional dwelling types are holding steady.
  • Condo prices are still on the rise, indicating that they continue to be a popular and affordable.
  • While not at a record high, the House Price Index has shown stabilization. Only time will tell if this trend continues, but many economists are predicting it will.

The next BOC rate announcement is set for September 5, 2018. It is appears unlikely, however not impossible, for there to be another increase at that. The Royal Bank of Canada predicted in July of 2018 that the BOC will continue to raise interest rates to 2.25% by the first half of 2019, but growing household income will provide some offset.

GeoWarehouse’s tools can help you continue to assess property information in a changing real estate market. A neighbourhood search can tell you the property values of a certain area. You can also find condo buildings, demographics, property information, and more.

Even as uncertainty remains, our real estate technology will help you stay agile and provide your clients with their best options.

Learn more today about how we can help. Visit www.geowarehouse.ca.

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On July 11, 2018, Canadian housing interest rates rose for the fourth time in a year, going up to 1.5%.

The Bank of Canada interest rate increases began in July of 2017, going from 0.5% to 0.75%. From there, they went to 1% in September of 2018, and 1.25% in January of 2018. The July 11, 2018 announcement is the most recent increase.

Higher interest rates mean that Canadians will have to pay more on outstanding, unsecured debts, including credit cards, unsecured lines of credit, and variable-rate mortgages.

This could also affect potential homeowners as mortgage lenders have to stress test mortgages against current interest rates following the introduction of B-20 guidelines in January of 2018.

Lenders are encouraged to look at the gross debt service ratio (GDS), meaning the percentage of a person’s household-related debt, and the total debt service ratio (TDS), meaning the percentage of a person’s total debt, rather than using only the loan-to-value ratio of a potential property purchase.

The Bank of Canada (BOC) has been hinting for months that more interest rate hikes were on the horizon, and this month it came to fruition.

The BOC referenced several reasons for the increase in its statement, including the Canadian housing market.

“Canada’s economy continues to operate close to its capacity and the composition of growth is shifting,” the BOC stated.

In past years, the Canadian economy depended on lower interest rates to stay afloat — household spending and the Canadian real estate market were both big economic drivers. But recently that makeup has changed and those items are not as critical. Instead, exports, business investments, and the like are becoming the economic strongholds.

As a result, the BOC is now trying to curb the high level of Canadian household debt through higher interest rates. They also cited recent data “suggesting housing markets are beginning to stabilize following a weak start to 2018” .

More interest rate increases are expected to come but will take a gradual approach. The BOC will be monitoring incoming data, the impact of higher interest rates, capacity and wage pressures, and trade actions.

According to Bloomberg, investors are anticipating additional hikes every six months or so until the benchmark rate settles around 2 or 2.25% by the end of 2019.

The next BOC announcement is scheduled for September 5, 2018.

GeoWarehouse can help you navigate Bank of Canada interest rate impacts to the Canadian housing market. Our tools help make you a property expert, so you can find new real estate leads, assess neighbourhood demographics, compare sales, and more.

Visit www.geowarehouse.ca or call 1-866-237-5937 to get started.

 

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Looking at news outlets, the current state of the Canadian real estate market can seem pretty doom and gloom. Interest rate increases combined with new Canadian mortgage rules and a declining housing market have presented challenges, to be sure, but could there also be an advantage?

While the housing market has been slowing so far in 2018, the flipside is that houses have become more affordable. For instance, the Teranet-National Bank House Price Index reported in the final quarter of 2017 that the housing affordability measure fell 0.2 per cent. This is the first time that’s happened since the second quarter of 2015.

Even as we are seeing interest rate increases and stricter Canadian mortgage rules, Canadian wage growth is going up. Increased wages and more affordable housing could definitely present real estate sales opportunities if your target market is affected.

Changes to the Canadian real estate market can also be navigated with flexibility, for example, shifting your target market to adapt to new trends. The Teranet Market Insights report March 2018 edition reported that condo demand continues to be high, particularly in Toronto. Not only that, but new condo development is also remaining strong.

According to the Canadian Press, some families are actually choosing smaller living over larger suburban dwellings. Families of five are living in 1,000 sq. ft. condos, or 950 sq. ft. houses. The right buyer might be tempted to consider some out-of-the-box housing arrangements.

BuzzBuzz News Canada reports that there is still more demand in the Canadian housing market than supply, meaning many real estate agents are seeing more buyers than sellers. If that’s the case for you, you can take advantage. Use property valuation tools to identify selling opportunities in your target area and identify new leads.

Another advantage of these changes is that real estate sales professionals aren’t the only ones dealing with them. Mortgage brokers and mortgage lenders also have to work with the same constrictions and they’re developing products to meet shifting demands. You can take advantage of this by making these industry connections. When you know how mortgage professionals are adapting, you can have more options to offer your clients who might be seeking financing.

It’s difficult to say exactly where the Canadian real estate market is headed in 2018, but you can find a way to adapt and perhaps profit even more from recent changes. Understanding your target market is key to identifying new opportunities. Technology, like GeoWarehouse, puts vital property data at your fingertips so you can quickly and efficiently access the information you need to know when you need to know it.

Not only that, but the GeoWarehouse store also provides important fraud detection resources, like Parcel Registers* and Instrument Images*. These tools let you find out whether there’s an encumbrance, such as a lien or an undisclosed mortgage, on a property so you’re not caught unaware.

Not a GeoWarehouse subscriber? You can become one today. It’s easy — just visit www.geowarehouse.ca to learn more.

* An official product of the Ontario government pursuant to provincial land registration statutes.

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April 2018 won’t be seeing an interest rate increase the Bank of Canada announced this week.

On April 18, 2018, the Bank of Canada (BOC) decided to hold its key interest rate at 1.25% but warned of hikes to come in the future. They cited the Canadian real estate market as a factor in this decision.

“Slower economic growth in the first quarter primarily reflects weakness in two areas,” BOC wrote in its release.

“Housing markets responded to new mortgage guidelines and other policy measures by pulling forward transactions to late 2017. Exports also faltered, partly owing to transportation bottlenecks. Some of the weakness in housing and exports is expected to be unwound as 2018 progresses.”

The mortgage guidelines and other housing policy measures were referenced as well in the March 2018 BOC announcement.

The lack of change means that those with variable-rate mortgages, or those who are up for mortgage renewal, have more time to lock in to a fixed rate if they so choose before interest rates increase again.

The recent quarterly MNP consumer debt index survey found that 43% of respondents said they are already feeling the effects of higher interest rates in Canada. 51% said they fear the rising interest rates could affect their ability to pay down debt. One-third of the respondents said the rising interest rates could possibly push them toward bankruptcy.

One thing BOC made clear in the April 18 announcement is that more interest rate increases are coming.

“Some progress has been made on the key issues being watched closely by Governing Council, particularly the dynamics of inflation and wage growth,” BOC stated.

“This progress reinforces Governing Council’s view that higher interest rates will be warranted over time, although some monetary policy accommodation will still be needed to keep inflation on target.”

Despite the housing market cool off in the beginning of the year, BOC expects inflation and wage growth to pick up the slack in the coming months.

Experts are predicting there will be more interest rate increases in 2018. The next BOC announcement is scheduled for May 30.

GeoWarehouse can help you identify new real estate leads and opportunities even with increasing interest rates. Our tools include accurate, up-to-date, accessible property information that makes you the expert.

Learn more about how we can help your real estate business thrive at www.geowarehouse.ca.

 

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The Ontario housing market continues to be red-hot. House prices have increased significantly because of supply and demand challenges, often leading buyers to go above and beyond asking prices, engaging in bidding wars in an effort to find housing in a market that can’t seem to meet the demand.

While some homeowners have enjoyed this increase in home values and sold to their own benefit, others have not been able to enter the market because of various factors, including a lack of supply, sky high prices and larger down payment requirements.

The cost of housing isn’t just impacting homeowners. Many renters are also feeling the effects as some landlords choose to arbitrarily drive up rental costs.

This has led many to call for housing reform and governmental action – and the government seems to be listening.

Just last week, the Ontario Government announced a list of measures aimed at cooling the market and making housing more affordable for all (both renters and homebuyers).

Dubbed the Fair Housing Plan, the announcement included 16 measures that, it is hoped, will do just that – make housing prices a little fairer across the province. Here are some of the highlights:

New Taxes

  • A new 15% foreign buyer tax – this means that non-Canadian citizens, non-permanent residents and non-Canadian corporations will be charged this new tax on residential properties that have 1-6 units. This tax will apply to property purchases in the Golden Horseshoe area.
  • A provision that would allow Toronto and other municipalities (if interested) to charge a tax on vacant or unoccupied units.

New Regulation

  • An expansion of rent control which will apply to all private rental units built after 1991. The goal is to protect tenants from “sudden and dramatic” rent increases.
  • Examination of ways to investigate practices like paper flipping (shadow flipping).

New Opportunities

  • Identify new opportunities for the government to create affordable housing on provincially owned surplus lands.

Supporting Developers

  • A $125 million, 5-year program aimed at encouraging the construction of new apartment buildings.
  • The creation of a new Housing Supply Team. Their goal will be to identify challenges that housing developers are facing and help them work more effectively with municipalities.

As long as supply and demand continue to be issues, Ontario’s market will continue to accelerate. These changes are expected to be a step towards easing that acceleration. You can view the full announcement here https://news.ontario.ca/opo/en/2017/04/making-housing-more-affordable.html.

What do you think? Do you think these will eventually help to cool the market? Join the conversation @teranet_social.

 

 

 

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geo1With a July rate announcement right around the corner the Canadian interest rate guessing game begins. It has been wildly reported that one of the things that could certainly smolder a hot real estate market would be rate hikes.

2015 was an interesting year. With talk that Canada was in a recession combined with the ever dropping oil prices and a dollar that hit the floor, the Bank of Canada reduced interest rates by .25% twice, leaving Canada’s lending rate at .5% which has only been seen twice prior to 2007, before the recession in 2008 hit.

In fact, we took a look back at the Bank of Canada’s past interest rate announcements since 2007 and the results were interesting:

  • Jan 2004 – 4.25%
  • Jul 2007 – 4.5%
  • Dec 2007 – 4.25%
  • Jan 2007 – 4%
  • Mar 2008 – 3.5%.
  • April 2008 – 3%
  • Oct 2008 – 2.25%
  • Oct 2008 – 2%
  • Dec 2008 – 1.5%
  • Jan 2009 – 1%
  • Mar 2009 – .5%
  • Apr 2009 – .25%
  • June 2010 – .5%
  • July 2010 – .75%
  • Sept 2010 – 1%
  • Jan 2015 – .75%
  • July 2015 – .5%

A few points to note:

  • Interest rates have not been as low as they are now since July 2010
  • Interest rates remained at 1% from Sept 2010 – Jan 2015
  • The Bank of Canada reduced rates twice in 2015, the first time since 2009 when the BOC reduced rates 3 times during the course of the year.

Where speculation is concerned, Canada is not currently in a recession (this acknowledges the issues in Alberta) and oil prices are increasing (see more at: http://oilprice.com/Energy/Energy-General/Why-Oil-Prices-Increased-Despite-Doha-Disaster.html). Could this mean a July 2016 interest rate increase or, as was the case with April’s announcement, will the Bank of Canada maintain the status quo?

There is no doubt, should interest rates get back to 2007 levels, that this will have an impact on the housing market. Look at urban centres like Toronto and Vancouver, where the average price of a single family detached home has surpassed 1 million dollars, where a mortgage on the same property at 2007 interest rates vs todays rates would cost significantly more to repay both in bottom line cost and in massive mortgage payments. This could certainly impact demand.

Also, what is interesting is that, should rates go up, depending on how the economy is performing, it could happen as rapidly as they went down – and we saw that they went from 4.5% in July of 2007 down to .25% in under 24 months.

What are your thoughts? Join the conversation on our social networks:

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