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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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Are desperate homebuyers being pushed into sidestepping Canadian mortgage rules in favour of shadier methods of financing? Some Canadians may be having a harder time buying a home due to the change in mortgage rules last year.

Now that the Bank of Canada has raised the overnight rate, and new federal mortgage rules have made it that much harder for customers looking for short-term mortgages, home renovation loans, or debt consolidations, many homebuyers or home refinancers may be forced to consider turning to riskier alternatives for financing their home.

Canada’s financial watchdog is advising regulated subprime mortgage providers to avoid partnerships with unregulated providers who may skirt the rules that were put in place to end risky lending in the first place! The Office of the Superintendent of Financial Institutions (OSFI) recently suggested banning co-lending arrangements, or bundled mortgages, that sidestep rules designed to stamp out risky lending.

Lenders can offer combined mortgages worth up to 90 percent of a property’s value with a “bundled loan” or co-lending agreement with an unregulated rival. However, federal rules prohibit regulated lenders from lending more than 65 percent of the value of a home to borrowers with bad or no credit. They also can’t lend more than 80 percent even to borrowers with good credit without government-backed insurance.

However, with “bundled loans”, lenders can offer borrowers up to 90%, circumventing rules on how much mortgage providers can lend against a property. As Canadian regulators tighten lending standards to shield borrowers in case a decade-long housing boom goes bust, these arrangements have increased in number.

Under Canadian mortgage rules, all high-ratio insured homebuyers are required to take a ‘stress test’ to qualify for mortgage insurance at a rate that is greater than their contract mortgage rate or the Bank of Canada’s conventional five-year fixed posted rate. With the rising level of debt amongst Canadian consumers and the rising costs of houses, this means more people may not qualify for a mortgage and choose risky lending alternatives. Now, the OSFI is proposing requiring stress tests for all uninsured mortgages and adjusting maximum lending amounts for local market conditions.

Are buyers with poor or no credit left with no choice but “bundled loans”? Do they put Canada’s real estate market at risk? Are the new rules helping at all, and if so, how? As a real estate professional, tell us how the recent changes to Canadian mortgage rules and rate increases have changed the way you do business. Join the conversation @GeoWarehouse.

To learn more about the tools and resources available with a GeoWarehouse subscription, visit 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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July 11, 2016

geo2The first quarter of 2016 has closed so we thought, what better time to recap Canadian housing numbers? A good starting point is the Teranet – National Bank House Price Index™ (HPI). The Teranet National Bank House Price Index reports the rate of change of Canadian single-family home prices.

We like to rely on this index for two reasons:

  1. Where the data comes from – data is derived from property records of public land registries – which is the most accurate source for land data.
  2. Coverage – the HPI covers 11 major Canadian Cities – Victoria, Vancouver, Calgary, Edmonton, Winnipeg, Hamilton, Toronto, Ottawa, Montréal, Québec and Halifax.

Here is how Q1 played out:

  • Jan 2016 – Home prices dropped by 0.1%
  • Feb 2016 – Home prices increased by 0.6%
  • Mar 2016 – Home prices Increased by 0.8%
  • Q2 Teaser: April 2016 – Home prices increased by 1.2%

Good news for real estate sales professionals – 3 out of 4 months saw increases. In fact, the past 3 months consecutively have shown increases.

The Vancouver and Toronto markets continue to fuel the market with red hot increases to property values as evidenced by house price indices across the board. The average price of a single family detached home in Canada was widely reported to have soared over 1 million dollars coming into 2016 with Canada’s average recently reported by CBC to be over $500,000 – you can read more on this here: http://www.cbc.ca/news/business/crea-house-prices-march-1.3537143.

Many have speculated that foreign investment is, at the least, behind what seems to be a boom in British Columbia, to the point where the government has even expressed concerns over supply vs. demand. Here are some interesting articles on the topic to whet your appetite:

Meanwhile, in Toronto, soaring house prices are pushing buyers to look outside of the city and we don’t just mean in the GTA. Toronto’s market has led to booms in Hamilton, Barrie and other cities that are not considered the GTA.

No doubt that the Bank of Canada maintaining the incredibly low lending rate of 0.5% is helping as well. With a strong first quarter, all indicators seem to point towards a strong spring and summer in this ever exciting Canadian real estate market. Let’s keep our fingers crossed that things continue to grow as they have been over the last few months!

For more on the Teranet – National Bank House Price Index™ please visit: http://www.housepriceindex.ca/.

Want to take advantage of the tools that give you a bigger piece of the action? Visit www.geowarehouse.ca today.

 

 

 

 

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