• Housing affordability rising, but Toronto prices near bottom: RBC (BNN)
• Houses became more affordable for 1st time in over 2 years, says RBC, but there’s a catch (CBC)
• Oakville homebuyers purchased at their own risk, housing minister says (Toronto Star)
• Haider-Moranis Bulletin: Canada needs more up-to-date data on mortgage fraud (Vancouver Sun)
• Rising rates and mortgage rules weighed on Vancouver’s housing market last quarter. Here are 11 facts to prove it (BuzzBuzzNews)
• Here’s what the Liberal’s proposed Toronto-Waterloo high-speed rail system would mean for the Waterloo housing market (BuzzBuzzNews)
• Canada’s mortgage market might be a cesspool, the federal government just warned (Maclean’s)
• Vancouver home sales continue to drop but the new mortgage rules aren’t the main cause (BuzzBuzzNews)
• Customer says BMO ignored her plea to cap limit on joint line of credit with ex: debt more than doubles (CBC)

• That sound you hear this week will be the thud of Canadian home sales (Globe and Mail)
• ‘Getting close to the bottom’: Housing affordability relief likely to be short-lived, says RBC (Financial Post)
• Investors in new Toronto condos face growing risk that rent won’t cover expenses (Globe and Mail)
• Toronto real estate market may be poised for a spring rebound (Globe and Mail)
• Condo owners make big gains, but nearly half in negative cash flow: report (Financial Post)

WEEKLY RESIDENTIAL  MARKET UPDATE 

Industry & Market Highlights 

A Look At Rates, Inflation, Securitization News and More

Data released by Statistics Canada morning showed the annual pace of inflation accelerated to 2.2% compared to 1.7% the previous month.  Core inflation excluding volatile elements like gasoline prices climbed to 2.1% compared to 1.9% last month.

As you would imagine, inflation is a central piece of the information that influences the Bank of Canada’s interest rate decisions and, with both readings above the bank’s 2.0% target, another hike could come even sooner than previously expected.  Bond yields climbed 4-5 basis points on the news.

After leaving the target overnight rate unchanged at 1.25% back on March 7th, the implied probability of a 25 basis point hike at the April 18th meeting is about 40%.  Trade concerns with the US may yet weigh on that decision.

The Fed

Speaking of central banks, the Federal Open Market Committee (aka the Fed or FOMC) met on Wednesday and raised its benchmark target rate by 25 basis points for the sixth time since it began raising rates from near zero levels in December 2015.  The increase was widely expected and puts the new benchmark funds range at 1.50%-1.75%.  Along with the increase was another upgrade in the Fed’s economic forecast and the suggestion that the future path of rate hikes could accelerate.

Securitization

MCAP announced its highly anticipated Residential Mortgage Backed Security (“RMBS”) this week.  In case you’re unclear on the difference, an RMBS is composed of low ratio (<80% LTV) uninsured mortgages where NHA MBS are made up of Insured mortgages.

The $247 million Pass-Through deal features a $233 million AAA tranche supported by 6% credit enhancement through subordinated notes.  Indicated spread is in the GoC+100 range which is great value for the investor.  The prime collateral (not to be confused with ‘alternative’ or ‘alt-a’ mortgages) was carefully curated, and those willing to do the work to understand the asset, should be well rewarded.  While it might seem counterintuitive as a competitor, I’m definitely rooting for MCAP on this one.  The development of an RMBS market in Canada would be a good thing.

Two of the main actors that the Bank of Canada likes to watch took centre stage last week.  Both inflation and U.S. monetary policy played lead roles, but our central bank continues to wait in the wings.

Headline inflation in Canada jumped to an annual rate of 2.2% in February.  That is up sharply from the 1.7% annual rate recorded in January and it puts inflation above the central bank’s target rate of 2.0%.  Even core inflation crept above 2.0%.  Statistics Canada uses the average of three different measures of inflation, to strip-out the influence of volatile components like energy and food, to determine its core number.

In the United States the Federal Reserve moved forward with its tightening policy, raising its trend setting rate by a quarter percentage point.  The U.S. Fed rate is now running between 1.50% and 1.75%.  The Fed is also projecting U.S. inflation will finally climb above 2.0%.  Most market watchers are predicting three more Fed hikes this year.  In addition, China has raised a key, short term, interest rate and the Bank of England has made it clear it intends to raise rates as soon as possible.  (Although the BoE held its rate steady at 0.5% at its Thursday setting.)

Either one of these events – rising domestic inflation or increasing U.S. interest rates – would normally be a cue for the Bank of Canada to boost its benchmark, overnight rate.  But these are not normal times and the BoC is not likely to rise to the bait, just yet.

Canada’s February inflation numbers largely reflect the strong economic pace at the end of last year.  The Bank has already made three rate increases, to head off inflationary pressures brought on by that growth.  Since then the economy has slowed, easing those underlying inflationary pressures.

The increase in the U.S. Fed rate comes amid a lot of uncertainty for Canada, chiefly: the fate of the NAFTA renegotiations and high household debt.  That debt is a key concern for the Bank.

One consequence of the strengthening American economy and the tightening monetary policy is an increase in bond rates.  This has led to interest rate increases here, without any action by the Bank of Canada.    U.S. government bonds serve as the benchmark for bond prices around the world – particularly in Canada.  The increases there have seen the yield on Government of Canada five-year bonds increase by more than half a percentage point in recent months.  That has essentially added a quarter-point to market interest rates here in Canada, affecting mortgages and other borrowing costs.

The BoC is very mindful of these externally driven increases.  Given that Canadian households, on average, are carrying $1.70 in debt for every dollar of disposable income, the Bank is being very cautious about raising rates too far, too fast to avoid pushing those households over the fiscal cliff.  By Jason Ellis, Senior Vice President and Managing Director, Capital Markets, First National Financial.

Consumer Banking and Investing Complaints Soar in 2017.

Consumer complaints against Canada’s banking and investment industry took a jump last year.  The annual report from the Ombudsman for Banking Services and Investments shows banking related complaints hit a five year high in 2017.

OBSI saw a 28% increase in the number of dissatisfied banking customers it heard from.  Overall, for both banking and investment, the body opened a total of 721 cases, a 13% increase over 2016.  Of those cases, 370 were banking related and involved credit cards, mortgages and personal accounts.

Of interest to brokers, there were 67 mortgage complaints, accounting for 18% of the total of all banking related cases – a reduction from 24% in 2016 and 27% in 2015.  Key problems included pre-payment penalties and incorrect or incomplete information.

The industry funded ombudsman closed 349 of the 370 banking related cases it opened.  Customers received monetary compensation in 79 – or less than a quarter – of those cases (23%).  Nine of the complaints were settled with non-monetary compensation.

Overall, the total pay-out to banking customers was $165,000 while investment complainants received a total of $2,427,000.  Two of the country’s biggest banks are not included in the OBSI annual report.  They have opted-out of the group and use a private, third-party, dispute resolution firm. By First National Financial.

Canadian Data Release: Existing home sales fall to a five-year low as anxious buyers remain on sidelines

·       Canadian existing home sales fell for the second consecutive month, down 6.5% m/m in February – or about half of the January slump. Sales are now 16.9% below last year’s level and near levels last seen in early-2013.

·       The decline was widespread with four out of five national markets below last year’s levels. On a month-over-month basis, declines were seen in three-quarters of markets with just two provinces, P.E.I. (+2.98%) and N.B. (+0.79%) seeing gains. B.C. led the declines, down 12.7%, with the GVA down 15.8% and Fraser Valley down 16.3%. Calgary (-8.6%), the GTA (-8.2%) and several GGH markets including Hamilton (-12.1%) and Oakville (-8.8%)  were also down sharply on the month.

·       On the other hand, new listings rose robustly, up 8.1% on the month. All provinces by Sask (-4.0%) and Alta. (-2.0%) saw gains, with the Atlantic Region (+17%), Ontario (12.4%) and B.C. (11.0%) experiencing gains of double-digits.

·       With sales and listings moving in opposite directions, the ratio of sales to new listings plummeted to 55% from 63.7% in the previous month. The current ratio suggests that the national market is by-and-large balanced with all but three provinces in the 40% to 60% range typically considered balanced-territory. Both P.E.I. (65.8%) and B.C. (61.9%) pulled back, down 27.6pp and 16.9pp, respectively, but they remain the tightest markets in Canada. On the other hand, Newfoundland & Labrador (32.4%) and Sask. (42.4%) round out the bottom of the table.

·       The average home price fell for the second month straight, down 2.8% in February, to an 18-month low. Six provinces exhibited gains, but this was offset by the declines in P.E.I. (-6.8%), B.C. (-1.9%), N.B. (-1.4%) and Ontario (-0.7%). Moreover, the decline in activity amongst the priciest markets acted to drag down the price given the compositional change.

·       On a year-over-year basis, the quality adjusted MLS home price index decelerated from 7.7% to 6.9% as acceleration in GVA (up 0.3pp to 16.9%), Fraser Valley (up 1.7pp to 24.1%), Vancouver Island (up 1.1pp to +20.7%) and Montreal (up 1.0pp to 6.2%) was offset by cool-off in GTA (down 2.0pp to 3.2%), Oakville (down 0.7pp to -1.9%), and Guelph (down 1.6pp to 9.3%).

Key Implications

·        While the give-back related to the pull-forward in activity experienced late last year, as buyers rushed to close deals prior to the updated B20 rules, appears to have been largely complete in January, the softness in sales nonetheless persisted this month. We believe that much of it has to do with lingering uncertainty, with additional regulations introduced in the B.C. budget adding further tensions, along with B20 impacts and rising rates.

·       Despite a less-than-stellar headline, there were some modestly encouraging details in the report. While sales did drop, the pace of decline eased considerably relative to January. New listings also perked up a little during the month, suggesting rising confidence on the part of sellers after recent B20-related volatility.

·       All in, we expect policy-related turbulence and higher rates to negatively impact sales in the near-term, before some stabilization in activity begins to take hold mid-year. We look for prices to drop, on average, this year, though balanced-market conditions across much of the country should mitigate the magnitude of the decline. We expect conditions to improve next year, with price growth returning to the market alongside a rise in transaction activity.

By TD Economics.  Read the full report Here.

Economic Highlights

Last week: Bank of Canada, what will they do next?

The major news last week, which you all know by now, is that the Bank of Canada decided to keep their overnight interest rate unchanged earlier in March. If you are keeping track, that’s an 0-for-2 on interest rate increases this year by the BoC. If you were wondering, that’s a surprisingly worse record than my March Madness bracket, which is currently 10-for-16.  Overall, the BoC decision to keep the interest rate level at 1.25% was interpreted as ‘small dovish’, meaning they are kind-of-sort-of-maybe being cautious with hikes going forward. The statement released had many plagiarized lines from their previous statements, so you would have to split hairs to find any sharp leanings one way or the other on their stance. Luckily, bank economists thrive on hair splitting.

In brief, the statement largely re-iterated their data dependent tone which means any further action taken by the BoC will be driven by hard stats on wages, growth and inflation.  Of the few changes to the statement, housing got a shout out as the BoC stated ‘time’ will be needed to judge the impact of new housing measures.   The Bank of Canada also noted their growing uncertainty on Canadian and global economic outlooks due to trade policies.

Trade policy was the topic du jour last week as the hypothetical trade war targeting Canada/Mexico was called off by the USA. The aluminum and steel tariffs which dominated the news wires a couple weeks ago also came with exemptions for Canada and Mexico, as the countries strived to get NAFTA worked out. The markets reacted favourably as the Loonie gained off the 8-month lows seen earlier last week. However, the CAD is still the worst performing major currency this year.

It’s worth mentioning that last week also had employment numbers for Canada. As the BoC is increasingly seen as being ‘data dependent’, the report was not much of a needle mover. Last Friday’s February job’s data was a rebound from the -88k loss in January, but still came in under expectations of 21,000 new jobs vs 15,400 actual.  The unemployment rate came in at 5.8%, which is a historical low.  All of this begs the question, “When will the next interest rate hike come?” Well, firing up the CANADA-OIS Model, the market is predicting a 30% chance of increase in April and only 47% chance in May. Yawn.

This week: BIS and CMB’s

The major news this week was probably missed by most as its ‘March Break’ for many and information seeking is at an all-time low on the beach. Thankfully, for all the beach goers and office dwellers alike, this week was relatively soft on the economic news front.

A report came out on Monday which swept across many a sleepy trade floor. The BIS or Bank for International Settlements, noted that Canada was among the three countries to be flagged for signs of a potential banking crisis. This was raised before I’m pretty sure, but the report highlighted our high aggregate credit-to-GDP and total debt-service ratios.  It’s also worth noting that the Bank of Canada disagrees with some aspects of the flag-raising, as they have us in the amber and not red category, which is nice.

More importantly for all the commercial mortgage people out there, the new 5 year CMB was priced this Wednesday.  The new 2.35% June 2023 was priced at 32.5 Bps over the GoC 5 year. Pricing was wider by 0.5bps compared to last December’s 5 year auction. However, the new bond was tighter by 12.5bps compared to last year’s March 5 year auction (+45 bps).  Let us know if you can figure out why. The auction size was only $5 billion which is lower than the last four auctions which were all $5.25 Billion. The program is now running $500 Million below pace, which can suggest higher issuance going forward. Overall, demand for the 5 year CMB was strong, which is a good thing if you’re in the business issuing mortgages.

Finally, Saturday brings us one of the most celebrated holidays of the year: St. Patrick’s Day.  The day where everyone wears green and can trace back their lineage to Ireland. I suggest you read up on the holiday, there is a storied history and many interesting facts I didn’t know that I was planning on mentioning. However, as I was writing this up I read something that awoke a moment of self-realization and enlightenment, something I assumed you achieved only after years of study in the Himalayas. A Romanian court just rejected a man’s claim that he is alive and that, legally, he is dead. Are we all in a simulation? Is this real life? I’ll need another pint of Guinness.  By First National Financial Analyst, Andrew Masliwec, Capital Markets.

Mortgage Interest Rates

No change to Prime lending rate currently at 3.45%.  Bank of Canada Benchmark Qualifying rate for mortgage approval is at 5.14%.  No change in fixed rates.  Deeper discounts are becoming available for variable rates making adjustable variable rate mortgages more attractive again.

Other Industry News & Insights

Canadian Consumer Debt Reaches New High

Canadian households’ credit market debt reached a record high in the second quarter of 2017. This is debt from mortgages, lines of credit, home equity lines of credit, car loans, credit cards, and other consumer credit.

In CMHC’s national Mortgage and Consumer Credit Trends report for the second quarter of 2017, we continue to follow key credit market indicators. Highlights from the report show that, for the second quarter of 2017:

•consumers’ average monthly obligations increased for all major credit products relative to the second quarter of 2016. In particular, average non-mortgage obligations reached their highest level compared to the same quarter in all previous years since 2013.

•the average credit card balance per consumer increased to $2,910. This was a 1.1% increase from a year earlier. Also, this indicator has been trending up since the second quarter of 2014.

There were more encouraging findings, as well:

•The share of mortgage loans of which payment was in arrears for 90 or more days was at its lowest in 5 years.

•The average mortgage arrears rate decreased in all age groups in the second quarter of 2017 compared to the same period in 2015 and 2016.

•The share of outstanding mortgage loans held by consumers with a very good or excellent credit score reached its highest point since this data became available in 2012.

Overall, the data shows that consumers have a lot of confidence in using credit to make large purchases. However, this dependence on credit, coupled with a declining household savings rate, is worrying. These factors, together, mean that households have a lower capacity to manage their debts.

By CMHC.  Read the full Consumer Trend Report here.

Adriaan Driessen

Mortgage Broker 

Dominion Lending Forest City Funding 10671

Cell:     519.777.9374

Fax:      519.518.1081

riebro@me.com

www.iMortgageBroker.ca

415 Wharncliffe Road South

London, ON, N6J 2M3

Adriaan Driessen

Sales Representative & Partner

PC275 Realty Brokerage

Cell:     519.777.9374

Fax:      519.518.1081

adriaan@pc275.com

www.PC275.com

415 Wharncliffe Road South

London, ON, N6J 2M3

WEEKLY RESIDENTIAL  MARKET UPDATE 

Industry & Market Highlights 

Reasons to Keep and Eye on Toronto & Vancouver

Market watchers often find themselves being subjected to mortgage and real estate news that focuses on the exceptional circumstances in Toronto and Vancouver.

However, the attention that is focused on these frenzied markets would seem to be of little concern to the agents, brokers and buyers who are not directly involved in them. Even the Canadian Real Estate Association makes a point of saying – in all of its releases – that “all markets are local” and the best advice is to work with a local expert (i.e. one of its members).  As true as that may be, there are good reasons to keep an eye on Toronto and Vancouver.

Toronto is Canada’s financial capital and the country’s top technology hub.  The Greater Golden Horseshoe area, around the west end of Lake Ontario, accounts for a fifth of the national economy.  Vancouver is a top destination for property investors from around the world and a key landing point for Chinese capital.

Prices in Toronto have risen by 43% in the past three years.  Vancouver has seen a whopping 63% increase.  If the people who work in these centers, keeping key economic sectors running, cannot find or afford places to live it presents a broader, national economic problem.  The head of Canada Mortgage and Housing Corporation, Evan Siddal, has said that his main, long-term, concern about the housing market is the supply of housing in Toronto and Vancouver.

As we know, governments at all three levels have been fighting to rein-in these galloping markets, in some cases with national consequences.  By First National Financial.

Bank of Canada Concerned About Trade Risks

The Bank of Canada held rates steady today, as expected, highlighting “trade policy developments” as an “important and growing source of uncertainty for the global and Canadian outlooks.”

As the seventh round of NAFTA negotiations commenced in Mexico City, President Trump dropped a bombshell late last week, threatening to impose a 25% tariff on imported steel and a 10% tariff on imported aluminum for national security reasons. The news reverberated around the world, causing U.S. trading partners in Europe to announce potential retaliatory actions quickly. The European Union raised the stakes for Trump by aiming levies on the GOP heartland, saying it would slap tariffs on products like Harley-Davidsons, Kentucky bourbon and Levi, bluejeans if President Trump goes ahead with his plan. Paul Ryan, Speaker of the House, is the Republican Representative from Wisconsin, headquarters of Harley-Davidsons. He immediately urged the President to stand down or ‘to be more surgical’ on tariffs. Hardliners such as Secretary of Commerce Wilbur Ross argued that any retribution would be trivial.

Well-known Republican economic advisors to the president warned that the tariff plan would do more harm than good, having adverse effects on consumers and many companies that use imported metals in the production of their products. The number of jobs lost in the auto sector and construction, for example, could be far more significant than the positive impact on the comparatively few jobs in the steel industry mainly in Pennsylvania. Prices of many products would rise including infrastructure costs, energy and food products.

Canada is ground zero in this maelstrom as the number-one exporter of steel and aluminum to the U.S., supplying $7.2 billion of aluminum and $4.3 billion of steel to the United States last year. Trump has often accused China of forcing U.S. steel and aluminum companies to fold by inundating the market with cheaper materials, but Trump thus far has refused to exclude Canada from the tariff proposal, holding Canada hostage to a favourable NAFTA deal.

Canada and the rest of the world are hoping that reasonable voices are going to prevail, but the resignation of Gary Cohen, White House Economic Adviser and formerly President of Goldman Sachs, is a victory for the protectionists (and immigration hawks). A registered Democrat, Cohn was regarded as one the few political moderates close to the president. His absence will amplify voices like Commerce Secretary Wilbur Ross and trade adviser Peter Navarro who back the president’s impulses to buck convention and pick trade fights on a global stage.

Housing Another Factor Postponing Rate Hikes

Even before the escalating trade tensions, the Bank of Canada was concerned about the impact of rising mortgage rates and new mortgage guidelines on housing, a significant contributor to the 3% growth in the economy last year. “Strong housing data in late 2017, and softer data at the beginning of this year, indicate some pulling forward of demand,” according to the Bank of Canada press release. The central bank is monitoring the economy’s sensitivity to higher interest rates, pointing out that “household credit growth has decelerated for three consecutive months.”

Inflation has edged upward to close to the 2% target. Wage growth has firmed, but even with the hike in minimum wages, the rise in compensation remains smaller than usual at full-employment.

The Bank of Canada commented once again that the economic outlook is expected to warrant higher interest rates over time, but some continued monetary policy accommodation will likely be needed to keep the economy operating close to potential with inflation on target. The next scheduled Bank of Canada policy announcement is April 18 when the full economic outlook will be updated in the quarterly Monetary Policy Report.

To be sure, if the Trump administration goes ahead with the tariffs, the Bank will keep rates steady in April as well. Investors have pared bets on rate hikes after weaker-than-expected fourth-quarter growth, turmoil in global equity markets and the sharp decline in the Canadian dollar. Traders are not pricing in another rate hike until July according to Bloomberg News calculation on overnight index swaps. A month ago, expectations pointed to at least one increase by May. By the Bank of Canada’s measure, interest rates are still about two percentage points below what it would consider “neutral” for the economy.  Dr. Sherry Cooper. Chief Economist, Dominion Lending Centres.

Economic Highlights

United States

·        Markets sold off sharply this week, following a somewhat hawkish assessment of the U.S. economy from the Fed’s new chair Jerome Powell and the announcement of steep tariffs on steel and alumimium imports by Donald Trump.

·        Despite the market reaction to Powell’s comments, there was not much in the data this week to indicate that the economy is overheating. Both headline and core PCE inflation remained unchanged in January, coming in at 1.7% y/y and 1.5% y/y, respectively. Real consumer spending fell by 0.1% on the month. Vehicle sales also weakened in February.

·        Both consumption and GDP will start the year on a softer footing but weakness is expected to be short-lived. Tax cuts and tightening labor market will support consumer spending and above-trend growth over the remainder of 2018.

Canada

·        The marquee event this week was the 2018-19 federal budget, which despite an array of new spending measures, contained little in the way of policies intended to address Canada’s newly disadvantaged tax position versus the U.S.

·        Real GDP hit 1.7% (annualized) in the fourth quarter, below the Bank of Canada’s forecast. The monthly figure edged modestly higher in December, up 0.1%, signaling diminished momentum to end the year and a soft hand-off into 2018.

·        A softer-than-expected GDP print coupled with a maintenance-type budget provides the Bank room to be patient on the rate hike front, but data-dependency remains in place.

By TD Economics.  Read the full report Here.

Mortgage Interest Rates

No change to Prime lending rate currently at 3.45%.  Bank of Canada Benchmark Qualifying rate for mortgage approval is at 5.14%.  5 year fixed rates increased slightly.  Deeper discounts are becoming available for variable rates making adjustable variable rate mortgages more attractive again.

Mortgage Update – Mortgage Broker London

Other Industry News & Insights

Roundup of the latest mortgage and housing news.

From Mortgage Professionals Canada.

Open Access

•RBC chief warns foreigners using Canadian real estate as piggy banks (BNN)

•7 stats that explain why the GTA housing market was heating up in February (Buzz Buzz News)

•Ontario’s growth plan could be hurting the GTA housing market — here’s how one expert wants to fix it (Buzz Buzz News)

•BlackRock Says Market Being Too Aggressive in Pricing Canadian Hikes (Bloomberg)

•Consumer Confidence Takes a Hit With Canada’s Economy Gearing Down (Bloomberg)

•‘Don’t do it’: Four things to know before buying real estate with bitcoin (BNN)

•Ottawa could be heading into a seller’s market (CBC)

•Toronto Home Sales Remain Depressed as Prices Begin Stabilizing (Bloomberg)

•Toronto home sales plunge 35% in February as new rules rattle buyers (BNN)

•Toronto-area home prices saw year-over-year drop in February, as number of sales plunged (Toronto Star)

•This province’s housing market is starting to take off (Hint: it’s not Ontario) (BuzzBuzz News)

•Will the federal budget help with the GTA’s serious rental shortage? This expert doesn’t think so (BuzzBuzzNews)

•Tumbling Toronto home sales signal a return to normal market, say analysts (Toronto Star)

•Governments bent on cooling home prices could get more than they bargain for (Vancouver Sun)

•One-on-one with Bill Morneau after the budget: Part 1 (BNN)

•Commercial property deals in Canada set record at $43 billion (Toronto Star)

•Laurentian Bank mortgage probe continues, price tag expands (CBC)

•Massive Toronto Project to Lure Amazon Envisions 50,000 Workers (Bloomberg)

•3 charts that show that the Canadian housing market isn’t as cool as it might seem (BuzzBuzzNews)

•Should Canadians be concerned about mortgage fraud? This credit rating agency thinks so (BuzzBuzzNews)

Subscription May Be Required

•‘Risky business’: The Bank of Canada will be patient today, but the loonie may not be (Globe and Mail)

•Foreign buyers using Canadian homes as piggy banks, RBC CEO warns (Financial Post)

•Greater Montreal home sales grow 5% from February 2017, as active listings drop (Financial Post)

•Toronto-area home prices, sales volume in February down from 2017 record highs (Financial Post)

•Forward looking markets aren’t buying bullish takes on the Canadian economy (Financial Post)

•Toronto home prices climb on heels of tougher mortgage rules (Globe and Mail)

•‘Market is being too aggressive’: Bank of Canada will hike rates only once in 2018, BlackRock says (Financial Post)

•RioCan transforming some retail shopping centres into mixed-use communities with rental, condo units (Financial Post)

•Toronto home sales plummet 35% from a year ago as new mortgage rules bite (Financial Post)

•Greater Montreal home sales rise 5 per cent from a year ago (Globe and Mail)

•Toronto housing market takes a February nosedive (The Globe and Mail)

•CIBC’s new rules for foreign clients could squeeze Vancouver market (The Globe and Mail)

•It’s time to kill the federal Home Buyers’ Plan (The Globe and Mail)

•Budget proposes allowing credit unions to use ‘generic bank terms’ (The Globe and Mail)

•Laurentian Bank says progress being made on problematic mortgages (Financial Post)

•Bank of Canada likely to take cautious path with two more rate hikes this year (Financial Post)

•Federal budget 2018: Seven changes that could affect your finances (The Globe and Mail)

•Federal budget 2018: New measures enhance financial security – for some (The Globe and Mail)

Now’s the perfect time of year for a free mortgage check-up. With spring on its way and interest rates on the rise, it makes sense for us to revisit your mortgage and ensure it still meets your needs. Perhaps you’ve been thinking about refinancing to consolidate debt, purchasing a rental or vacation property, or you simply want to take a vacation. Whatever your needs, we can evaluate your situation and help you determine what’s right for you.

If you are looking to purchase a property and are having frustrations in qualifying, there is a good chance part of the reason lies behind the Trudeau lead Liberal Government’s implemented new mortgage lending rule changes.

The Office of the Superintendent of Financial Institutions (OSFI) has implemented 3 new mortgage rule changes starting January 1, 2018 under the B20 lending guidelines:

Non insured mortgage consumers (buyers with a 20% or greater down payment) must now qualify using a new minimum qualifying rate. The minimum rate will be the greater of the five-year benchmark rate published by the Bank of Canada or the lender contractual mortgage rate +2.0%.

For a high ratio insured mortgage, buyers with a less than 20% down payment) must now qualify using the Bank of Canada Benchmark qualifying rate, currently at 5.14%.

The First set of rule changes affected first time home buyers the most, since most first time home buyers will have less then 20% downpayment available.

The latest set of rule changes impact repeat homebuyers and higher income customers purchasing average and higher priced executive properties most – since those are also the clients that you can expect to have a 20% or more downpayment already.

When it comes to qualifying for a mortgage: A borrowers income, credit score, downpayment amount, and debts/liabilities are they main factors parts used to determine what your maximum price point is, and how much you qualifying for a mortgage.

Any of the following and combination of the following can increase the maximum mortgage loan amount and purchase price:

• Increasing your income.
• Having a clean, strong and thick credit history with a minimum beacon score of 680.
• Having no outstanding debts/liabilities in the form of loans, credit cards, unsecured lines of credit, secured home equity lines of credit and leases.
• Increasing your downpayment amount with owned or immediate family gifted funds, not borrowed funds.
• Purhcase a multi unit owner occupied rental property.
• Obtain a strong family member co-signer.
• Consider a pooled mortgage.

If you have been pre-approved somewhere, and already maxed out your pre-qualification purchase limit with your income, debts and downpayment options as noted before, and your are still short of where you need to be to get into your dream home – contact an experienced mortgage broker.

An experienced Mortgage Broker is still able to get you approved using the old non OSFI-B20 guidelines of the mortgage contract rate to get you qualified for more using select Credit Union lenders.

Here are some other questions you need to ask yourself and auto upon:

Have you been pre-approved and are not totally satisfied with the service and results received?

Have you been pre-approved and are not 100% certain you are getting the best deals and lowest rates?

Take a quick minute to connect with your iMortgageBroker at Dominion Lending Centres.  A second opinion could benefit you immensely!

Our goal is to assist you with approval at a higher price point if needed, and we also strive to provide you with service excellence, better deals and lower rates to ensure your best interest is protected.

WEEKLY RESIDENTIAL  MARKET UPDATE 

Industry & Market Highlights 

The Activist Budget—There Is No Problem This Government Cannot Fix

Patting himself on the back, the Finance Minister opened his speech by reminding us that “a little over two years ago…Canadians had the opportunity to stay the course. They could stick with a Government that favoured cuts and a set of failed policies that produced stubborn unemployment and the worst decade of economic growth since the depths of the Great Depression.” This, of course, was Stephen Harper’s Conservative Government. Never mind that the global financial crisis caused the recession, not the “failed policies” of the previous government. Throughout the budget documents, the message is that austerity was “needless” or “excessive.” Instead, Canadians chose, “a more confident and more ambitious approach…that gave Canadians the tools they needed to succeed. Starting with raising taxes on the wealthiest, so we could lower them for the middle class.”

The Liberals have forgotten their promise to run deficits no larger than $10 billion and to balance the budget by 2019. Instead, they now see sound fiscal management as a declining debt-to-GDP ratio—never mind that double-digit deficits remain as far as the eye can see—to a stunning $12.3 billion deficit at the end of the forecast horizon in fiscal year (FY) 2022-23.

The deficit figures have indeed improved—down more than $2.0 billion in FYs 2017 and 2018–thanks to the stronger-than-expected economy and rapidly reduced unemployment last year. But, initiatives in today’s federal budget add $6.3 billion to the current year’s (ending March 31, 2018) budget deficit, $5.4 billion to next year’s federal red ink and an additional $2.0-to-$3.0 billion annually over the forecast horizon ending in FY 2022-23 (see Table below).

Fortunately, Canada has by far the lowest debt-to-GDP ratios in the G7, reflective of the austerity programs of the past, beginning in the mid-1990s and continuing until the financial crisis in 2008-09 when counter-cyclical global fiscal policy was essential to assure financial stability and rebounding economic activity by late-2009. While the U.S. and much of the rest of the developed world suffered the longest and deepest recession since the Great Depression, Canada’s was the shortest and mildest recession in the postwar period—contrary to the impression left by the Finance Minister in his opening remarks.

Thanks to this backdrop, the debt-to-GDP ratio in Canada will continue to decline despite continued fiscal stimulus. The ratio is forecast to gradually edge downward from 30.4% this year to 28.4% in 2022-23, assuming the economy continues to grow. Clearly, all bets are off if we hit a pothole, such as the end of NAFTA or a recurrence of plunging oil prices.

Budget 2018 proposes to:

• Put more money in the pockets of those who need it the most, by improving access to the Canada Child Benefit and introducing the Canada Workers Benefit, a stronger and more accessible benefit that will replace the Working Income Tax Benefit.

• Make significant progress towards equality of opportunity, by taking leadership to address the gender wage gap, supporting equal parenting, tackling gender-based violence and sexual harassment, and introducing a new entrepreneurship strategy for women.

• Support the next generation of researchers, by providing historic funding to increase opportunities for young researchers and provide them the equipment they need, while strengthening support for entrepreneurs to innovate, scale up and reach global markets.

• Uphold Canada’s shared values and support the health and wellness of Canadians, by partnering with provinces and territories to address the opioid crisis, taking action to advance national pharmacare, and bolstering support for Canada’s official languages.

This list summarizes 367 pages of more than 100 relatively small government initiatives impacting everything from Workers Benefits payments to low-income families, improving access to the Canada Child Benefit to supporting opportunities for women, pay equity for federal workers, strengthening trade, improving worker skills, and cracking down on tax evasion—all of this among the roughly 25 government actions described in Chapter 1 under the heading of Growth. The details of changes in the rules regarding the holding of passive investments inside private corporations as well as closing tax loopholes fall under this Growth rubric.

Chapter 2, called Progress, includes more than 35 initiatives under the headings of Investing in Canadian scientists and researchers, Stronger and more collaborative Federal science, and Innovation and Skills Plan—a more client-focussed Federal partner for business.

Chapter 3, Reconciliation, largely deals with Indigenous Peoples, including roughly 20 actions.

And finally, Chapter 4, called Advancement, covers the environment under Canada’s Natural Legacy, Canada and the World, Upholding Shared Values, and Security and Access to Justice. I lost count here at over 40 initiatives.

And, that’s not all! A bonus section called Equality, goes into detail regarding Canada’s commitment to gender budgeting, which includes $6.7 million over five years for “Statistics Canada to create a new Centre for Gender, Diversity and Inclusion Statistics, a Centre that will act as a Gender Budget Accounting data hub to support future, evidenced-based policy development and decision-making”.

I kid you not. At my rough count, I have been to 34 budget lock-ups, but I can’t remember ever seeing anything like this for sheer magnitude of the number of relatively tiny initiatives, nor can I ever remember leaving a lock-up with such a screaming headache.

Dr. Sherry Cooper. Chief Economist, Dominion Lending Centres

Federal Budget Housing Market Overview

Mortgage Professionals Canada was invited by the Minister of Finance’s office to the attend today’s budget lock-up in Ottawa. As a result of our advocacy efforts, we are pleased that the government has not introduced any new changes to mortgage rules.

However, we are disappointed that the government has not committed to increasing the supply of new homes in Toronto and Vancouver and remain concerned about the economic impact the existing changes are having on the marketplace.

The government did announce support to build more rental units and clarified the rules around taxation for passive investments. More information on the specifics of those measures are outlined below.

Support for Rental Units

The government proposes to increase the amount of loans provided by the Rental Construction Financing Initiative from $2.5 billion to $3.75 billion over the next three years. In total, this measure alone is expected to spur the construction of more than 14,000 new rental units across Canada.

Passive Investments in a Corporation

The government proposes two new measures to passive investment savings in a corporation, which replace the previous announcement made in the summer.

First, Budget 2018 proposes to introduce an additional eligibility mechanism for the small business tax deduction, based on a corporation’s passive investment income.

Under the proposal, if a corporation and its associated corporations earn more than $50,000 of passive investment income in a given year, the amount of income eligible for the small business tax rate would be gradually reduced.

The small business deduction limit would be reduced by $5 for every $1 of investment income above the $50,000 threshold (equivalent to $1 million in passive investment assets at a 5-per-cent return), such that the business limit would be reduced to zero at $150,000 of investment income (equivalent to $3 million in passive investment assets at a 5-per-cent return).

Existing savings will not be subject to any additional tax upon withdrawal and capital gains, realized from the sale of active investments or investment income incidental to the business, will not be considered passive investments under this proposal.

Second, Budget 2018 proposes that corporations no longer be eligible to obtain refunds of taxes paid on investment income while distributing dividends from income taxed at the general corporate rate. Refunds will continue to be available when investment income is paid out.

The two measures will apply to taxation years after 2018.

We will continue to advocate for common-sense changes to the existing mortgage rules to improve choice and competition for Canadian consumers.  By Mortgage Professionals Canada.

New CMHC study sheds light on rising house prices

In June 2016, CMHC launched a study to better understand the causes of rapidly rising home prices in major metropolitan centers across Canada. The report represents one of the most thorough examinations of house price patterns ever completed in Canada and is the result of advanced, data-driven analyses and engagement with stakeholders and government partners.

Why undertake this kind of study in the first place?

Housing affordability challenges exist in many centres throughout Canada. Rapidly rising house prices in high priced markets have benefited existing homeowners, but have also created challenges for first-time buyers. However, this is not just an issue for first-time homebuyers. Rapidly rising house prices also tend to drive rents higher and increase the cost of rental assistance and non-market housing solutions.

What were the study’s findings?

In conducting this study, it was important to look at both supply and demand. Very briefly, we found that:

•Strong economic and population growth, together with low mortgage rates, have been important drivers of house price growth in Canada

•The increase in average house prices in Vancouver and Toronto is also attributable to rising income inequality in these centres — price increases have tended to be greater for more expensive single-detached housing, rather than for condominium apartments

•Supply response to rising house prices has been weaker in Toronto and Vancouver, than in other Canadian metropolitan areas

What are the next steps?

The report represents an important step towards stimulating discussion across all levels of government, housing advocates, industry, academia, and the general public — with the full recognition that this is the beginning of a process of improving the functioning of Canadian housing market.

Read the full report by CMHC Here.

Canadians Have $230 Billion In Home Equity Loans – Raising Red Flags In Ottawa

Canadians are borrowing money against their homes in record amounts – a situation that is raising red flags among politicians and policy setters in Ottawa.

Balances on Home Equity Lines of Credit (HELOCs) rose 7.2% in December 2017 from a year earlier, the fastest annual growth rate since 2012, and hitting a record amount of $230 billion, according to data released by the Office of the Superintendent of Financial Institutions (OSFI).

All other types of consumer debt such as personal loans, credit cards, car loans and overdraft limits climbed just 3.2% over the same period, less than half the pace of HELOC growth, the same data showed.

Canadians can tap HELOCs for up to 65% of the value of their homes, and the funds are most commonly used for renovations, investing and consolidating other forms of debt, according to a June 2017 report by the Financial Consumer Agency of Canada.

“Houses are becoming piggy banks,” said Paul Gulberg, a Bloomberg Intelligence analyst following the release of the data from OSFI. “It’s either greed based or need based,” he added.

The growth in the use of HELOCs raises red flags for policy makers in Ottawa. It’s a type of borrowing that may contribute to increased household vulnerabilities because it typically doesn’t require the principal to be repaid on a fixed schedule, the Bank of Canada said in its most recent financial system review. About 40% of HELOC borrowers don’t regularly pay down the principal on the debt. Of total loans secured to individuals for non-business purposes, those secured by residential property represent about 46%, the OSFI data shows.

Compared to other loan types, such as car loans and credit cards, rates on HELOCs are typically cheaper, making them more attractive to consumers. They also tend to be more sensitive to fluctuations in borrowing costs, because they’re usually tied to prime interest rates.

“It’s a rising risk factor because it’s something that re-prices more rapidly than a typical mortgage pool,” said Mr. Gulberg, adding the risk is rising “in conjunction with the fact that it’s fuelling overall consumer credit, which is considered to be an issue.”

Canadians have about three million HELOC accounts and the average outstanding balance on them is $70,000, which makes borrowers vulnerable to rising interest rates and a housing market correction.

By Joel Baglole.

Economic Highlights

U.S. Highlights

A holiday-shortened trading week light in economic data left markets to focus on communications from the Federal Reserve.

U.S. existing home sales slumped in January, beleaguered by low inventories and deteriorating affordability.

The FOMC minutes revealed a Fed busy revising up economic projections, suggesting that further gradual policy firming is warranted.

Canadian Highlights

The December 2017 data continued to disappoint, with declines in retail and wholesale trade joining earlier softness in trade and manufacturing.

Real GDP in 2017 as a whole likely saw a robust 2.9% expansion, with a respectable 2.0% pace of growth expected for Q4. The December softness and weaker housing market activity in January suggest a further deceleration is likely, leaving 2018 to start-off on a softer note.

Noise can mask the trend, which can hardly be defined by a few months’ data. Prudence in the face of domestic and external risks suggests that the Bank of Canada is likely to stand pat until mid-year, when it is better able to assess the underlying Canadian growth trend.

By TD Economics.  Read the full report Here.

Mortgage Interest Rates

No change to Prime lending rate currently at 3.45%.  Bank of Canada Benchmark Qualifying rate for mortgage approval is at 5.14%.  Slight increase in fixed rates.  Deeper discounts are becoming available for variable rates making adjustable variable rate mortgages more attractive again.

Mortgage Update – Mortgage Broker London

Other Industry News & Insights

Roundup of the latest mortgage and housing news.

From Mortgage Professionals Canada.

Open Access

•Tighter tax rules for small businesses and passive income in Liberal budget (BNN)

•Federal budget’s simpler plan to tax passive income likely to calm small business outcry (National Post)

•National Bank first-quarter profit rises 11%, beating estimates (BNN)

•How is the Fair Housing Plan affecting the Ontario housing market in 2018? Experts weigh in (BuzzBuzzNews)

•These BC real estate boards think new property taxes will have little impact on housing markets (BuzzBuzzNews)

•More evidence of fraud in Canadian mortgages, warns ratings agency S&P (CBC)

•Scotiabank Looks Abroad for Earnings as Profit Beats Estimates (Bloomberg)

•How much is a lack of supply driving up GTA home prices? More than you think, according to this expert (BuzzBuzzNews) 

•Toronto new-home sales down 48% from January 2017 (Toronto Star)

•Royal Bank’s Mortgage Juggernaut Shows Little Sign of Slowing (Bloomberg)

•Expansion of foreign buyers tax to Okanagan, Vancouver Island questioned (Vancouver Sun)

•B.C. housing taxes could put recent buyers underwater on mortgages (Vancouver Sun)

•The Canadian housing market hasn’t been this affordable in 3 years (BuzzBuzzNews)

•RBC tops first-quarter profit expectations, raises dividend (BNN)

Subscription May Be Required  

•Small businesses with large passive investment income to be taxed more (Globe and Mail)

•Laurentian Bank continues to review problem mortgages (Globe and Mail)

•Ontario regulator probes cryptocurrency use in real estate (Globe and Mail)

•Evidence of mortgage fraud in Canada raises red flag at credit rating giant (Financial Post)

•RBC boosts dividend as earnings beat market expectations (Globe and Mail)

Now’s the perfect time of year for a free mortgage check-up. With spring on its way and interest rates on the rise, it makes sense for us to revisit your mortgage and ensure it still meets your needs. Perhaps you’ve been thinking about refinancing to consolidate debt, purchasing a rental or vacation property, or you simply want to take a vacation. Whatever your needs, we can evaluate your situation and help you determine what’s right for you.

Industry & Market Highlights

New CMHC study sheds light on rising house prices

In June 2016, CMHC launched a study to better understand the causes of rapidly rising home prices in major metropolitan centers across Canada. The report represents one of the most thorough examinations of house price patterns ever completed in Canada and is the result of advanced, data-driven analyses and engagement with stakeholders and government partners.

Why undertake this kind of study in the first place?

Housing affordability challenges exist in many centres throughout Canada. Rapidly rising house prices in high priced markets have benefited existing homeowners, but have also created challenges for first-time buyers. However, this is not just an issue for first-time homebuyers. Rapidly rising house prices also tend to drive rents higher and increase the cost of rental assistance and non-market housing solutions.

What were the study’s findings?

In conducting this study, it was important to look at both supply and demand. Very briefly, we found that:

• Strong economic and population growth, together with low mortgage rates, have been important drivers of house price growth in Canada
• The increase in average house prices in Vancouver and Toronto is also attributable to rising income inequality in these centres — price increases have tended to be greater for more expensive single-detached housing, rather than for condominium apartments
• Supply response to rising house prices has been weaker in Toronto and Vancouver, than in other Canadian metropolitan areas

What are the next steps?

The report represents an important step towards stimulating discussion across all levels of government, housing advocates, industry, academia, and the general public — with the full recognition that this is the beginning of a process of improving the functioning of Canadian housing market.

In Summary: Markets are, generally, behaving in accordance with fundamental economic rules like supply and demand (point 1).  However supply in the two hottest markets is not keeping up (point 3).  Point 2 speaks to the tendency of major urban centres to attract high wage jobs.

Toronto appears to be a contradiction though.  Prices there rose by 40% between 2010 and 2016.  CMHC says only about 40% of that increase can be attributed to economic fundamentals.  On the other hand Vancouver saw a 48% increase in prices, but three-quarters of that can be explained by fundamental factors such as increased population, higher wages and low mortgage rates. By First National Financial.

Read the Full Report Here.

Toronto homeowners facing nearly 3% property tax hike

Toronto homeowners are in for a nearly three per cent property tax hike, as city council approved the 2018 budget on Monday.

Councillors voted 31 to 11 in favour of the budget, which included the 2.1 per cent property tax hike.

However, residents will have to pay an extra 0.5 per cent for the city’s build fund, which supports transit and housing projects, as well as an increase of 0.31 per cent as part of the city’s business climate and reassessment impact strategy. This brings the total residential property tax hike to 2.9 per cent.

For example, a homeowner whose home is assessed by the city at $624,418 will have to pay an extra $82 in municipal property taxes for a total of $2,907 for 2018.

Since taking office Mayor John Tory has been steadfast in his refusal to raise property taxes above the rate of inflation every year, which is what city council has done again this year.

However, some councillors are critical of the mayor and his unwillingness to hike taxes a little more.

“This is an election budget, it’s a band-aid budget, but more important, it’s an unsustainable budget,” Coun. Sarah Doucette said.

Coun. Mike Layton also believes the rate needs to be higher, in order to pay for what the city needs.

“We’ve decided to build this straw house, to build the unsustainable house, to go halfway on some of these measures to investigating in a really strong city,” Layton said.

There were some motions brought forth for the property tax hike to be greater, but they were voted down.

Aside from property taxes, the city will also be making a record high investment in transit this year, with $1.98 billion in the budget allocated for the TTC — that makes TTC funding about one-fifth of the city’s operating budget this year.

Budget details

Toronto city council approved a 2018 tax supported operating budget of $11.12 billion and a 10-year capital budget and plan of $25.98 billion. Some of the details, provided by the city, are below. Click here for more information on the budget.

The 2018 operating budget includes funding for new and enhanced services including:

• Additional 1,515 childcare subsidies, and support for the new Child and Family Centres Program
• 700 winter respite shelter beds
• Operation of three new permanent shelter sites
• Implementing TTC’s recommended two-hour time-based transfer policy on Presto
• $3 million to relieve overcrowding on TTC bus routes
• $1.3 million to implement congestion-fighting measures such as Traffic Enforcement Officers

Some of the new investments in the 10-year capital plan include:

• $279 million in interim capital funding to address the TCHC state-of-good-repair backlog and current revitalization projects to avoid permanent closure of its units
• $485.8 million for the George Street Revitalization project
• $178.6 million to acquire and construct nine shelter sites and renovate two leased sites over a three-year period that will add 1,000 new permanent shelter beds
• $6.4 million for a feasibility study of the Rail Deck Park, $3 million for the design and development phase of determining future uses of Old City Hall and $3.5 million to complete design work for the new Etobicoke Community Centre
• $46.7 million for critical state-of-good-repair projects such as the St. Lawrence Centre Roof project, Toronto Strong Neighbourhoods Strategy project and the Multi-Branch Renovation project of the Toronto Public Library
• $2 million to address critical waterfront rehabilitation due to high lake-effect flooding

City council also approved a 2018-2027 tax supported capital budget and plan of $26 billion, 72 per cent of which will be allocated to transit and transportation projects such buying buses and streetcars, expanding the subway, and fixing the Gardiner Expressway.  By Toronto CityNews.

Real Estate Investment Trends to Watch Out for 2018

The latest wide-ranging market outlook released by Morguard Corporation painted a confident picture of the Canadian real estate investment segment’s robust activity this year, a trend fuelled by a healthy demand for quality assets.

“Investors remain enthusiastic about the Canadian commercial real estate market after a record volume of transactions in 2017,” Morguard director of research Keith Reading said during the release of the 2018 Canadian Economic Outlook and Market Fundamentals Research Report.

“There is a high supply of capital ready to be invested and Canadian commercial real estate is a proven performer. We are predicting another very busy and competitive market environment across the country in the coming year.”

The downtown areas of Vancouver and Toronto are projected to remain the most desired investment destinations in 2018. Suburban Toronto, Ottawa, and Montreal are also predicted to enjoy strong activity levels. And even Alberta, which had previously pulled down nationwide averages, is showing signs of renewed life.

“Intense bidding for a limited pool of downtown properties will force investors to look elsewhere for opportunity,” Reading stated. “Class A properties in suburban markets, particularly those near transit nodes, will be in high demand. Edmonton and Calgary will also see increased activity as investors look for high-quality assets in a recovering market and economy.”

“Long term, market-dominant retail centres should be able to alleviate immediate pressure on vacancy by providing prime space to new, high-growth traditional retailers and service retailers,” Reading added. “The fact remains that Canada is a country of shoppers, and recent positive economic and employment trends should drive healthy spending growth for the foreseeable future.”  By Ephraim Vecina. The full report can be accessed here.

CHMC Says Policy Should Tackle Supply, Not Demand

The Canada Mortgage and Housing Corporation has published a new report on housing affordability in Canada’s biggest cities but admits it doesn’t have all the answers.

The agency found that escalating house prices are mainly driven by strong economic and population growth, and low mortgage rates; with Toronto and Vancouver lagging on the supply side.

While the two hottest markets showed large and persistent price increases during the analysis period of 2010-2016, Montreal saw only modest growth and the oil-dependent Calgary and Edmonton markets gained slightly.

Vancouver led the gains over the 6 year period with a 48% rise in house prices with population and disposable income rises, and low mortgage rates, accounting for almost 75% of that rise.

House prices increased by 40% in Toronto over the same time period with 40% of the rise being explained by conventional economic factors.

These price increases have tended to be for single-family homes rather than condo apartments. Supply of condos has been proportionately greater than for single-family homes.

“Large Canadian centres like Toronto and Vancouver are increasingly behaving like world-class cities,” said Aled ab Iorwerth, CMHC’s deputy chief economist. “Their strong local economies and historically low interest rates make them attractive to both people and industry which drives up demand for housing. When you have weak supply responses, as you do in these markets, prices have nowhere to go but up.

Although investor demand for condos has increased the rental supply, CMHC says that they tend to be more expensive than purpose-built rentals.

The report also highlights that measures to address the supply challenges are “more likely to have positive impacts than measures focused on the demand side.”

“While it is true that the supply response in Toronto and Vancouver has been significantly weaker than in other Canadian metropolitan areas, we do not fully know why this is the case,” said Evan Siddall, CMHC’s president and CEO. There continues to be data gaps and we need to work more closely with jurisdictions at all levels to fully understand what is happening.” By Steve Randall.

Is This The Crash? Gold, Silver & Bitcoin Update from Mike Maloney

Is this the beginning of a major crash? Join Mike Maloney for his latest update where he analyzes the stock market, gold & silver, and bitcoin.  Watch the video here.

Are you a GoldSilver Insider? Mike released an earlier, Insider-only version of this video that reviews his latest investment moves and changes in his personal holdings. If you’re not an Insider, here are the details of this exclusive program.

The articles Mike references in this video:

• What Happens to Gold & Silver If the Stock Market Crashes?, by Jeff Clark, Senior Analyst, GoldSilver
• “Things to Come” Video, by Mike Maloney
• Technical Analyst Clive Maund’s Gold Update

Jobs Decline In January Following Blockbuster Year

Canada shed 88,000 jobs in January, the most significant drop in nine years, driven by a record 137,000 plunge in part-time work. Full-time employment was up 49,000 while the unemployment rate increased a tick to 5.9%–only slightly above the lowest jobless rate since 1976. January’s sharp decline brings to an end a stunning 17-month streak of gains. While the top-line loss of 88,000 jobs is striking, it still only retraced about 60% of the 146,000 jump in the past two months.

The disappointing employment report will no doubt keep the Bank of Canada on the sidelines for a while, but it follows the most robust job market in 15 years. More than 400,000 net new jobs were created in 2017. Expectations are now that the Bank will hike interest rates cautiously, taking a pass at the March meeting.

Average hourly wages jumped 3.3% year-over-year, the strongest gain since March 2016. This was boosted by the rise in the minimum wage to $14.00 an hour in Ontario at the start of this year. Ontario now has the highest minimum wage in the country.

The largest employment losses were in Ontario and Quebec. There were also decreases in New Brunswick and Manitoba. Declines were spread across some industries including educational services; finance, insurance, real estate rental and leasing; professional, scientific and technical services; construction; and healthcare and social assistance. Employment increased in business, building, and other support services.

Canada’s economy has still seen employment increase by 288,700 jobs over the past 12 months — 146,000 of which came in November and December. Full-time employment is up 558,900 over the past 18 months, which is unprecedented.

Dr. Sherry Cooper

Chief Economist, Dominion Lending Centres

Ontario Ministry of Financing Updates to Land Transfer Tax

Land Transfer Tax -New tax statements about the Non-Resident Speculation Tax (NRST), solicitor obligations, and transferee recordkeeping requirements are required for the registration of Instruments requiring land transfer tax statements or land transfer tax affidavit. Ministry of Finance forms and Teraview, Ontario’s electronic land registration system, have been updated.

Also, a new form is available for NRST refund or rebate applications.

The above changes are outlined on the following webpages:

Land Transfer Tax

Non-Resident Speculation Tax

A Guide for Real Estate Practitioners – Land Transfer Tax and the Electronic Registration of Conveyances of Land in Ontario

Refunds and Rebates of Land Transfer Tax

Economic Highlights

Canadian Data Release: Existing home sales slump in January as B20 rules bite

• Canadian existing home sales slumped 14.5% m/m in January, ending a five month streak of increases and erasing all the gains seen during this time.
• Only five of the twenty-six main markets experienced increases, with the group consisting of: Newfoundland & Labrador, Saguenay, Gatineau, Sudbury and Regina. On the other hand, fifteen markets experienced double digit percent declines. Ottawa (-32.6%), GTA (-26.6%) and Hamilton (-31.7%) led the pull-back with sharp declines also seen across the rest of the Greater Golden Horseshoe (GGH). Most B.C. markets also experienced significant decreases with Victoria (-17.1%), Fraser Valley (-14.8%) and GVA (-10.5%). Alberta and Manitoba markets also dipped lower, with Calgary (-15.3%), Edmonton (-14.9%) and Winnipeg (-10.8%) all down in double digits. Remaining Canadian markets were moderately lower.
• New listings were not to be outdone, slumping an even greater 21.6% nationally. Ontario and B.C. markets led the pullback with London (-44.8%), GTA (-39.3%), Fraser Valley (-38.8%) and GVA (-33.0%) topping the list. Only four markets experienced an uptick in listings – mostly markets that have also experienced an increase in sales.
• The outsized decline in listings led to a tightening of market conditions, with the sales to listings ratio up 5.3 points to 63.6% nationally. Most acute tightening was experienced in several GGH markets. The ratio surged in Kitchener-Waterloo (up 32.3 to 102.8%) and London (up 23.2 to 94.6%), with the GTA also up a healthy 9.7pp to 45.7%. Fraser Valley (up 26.3 to 93.6%) and GVA (up 19 to 75.7%) also tightened up sharply.
• The average home price declined 2.4% m/m, buckling the five month trend. It was a mixed bag across markets, half the provinces experiencing declines led by N.S. (-3.9%) while P.E.I. (+9.8%) and N.B. (+6.1%) lead the gains. Prices ticked down by 1.6% in Ontario and B.C. with values 4.2% lower in the GVA, while GTA prices were slightly softer, down 0.9%.
• The price decline was entirely due to the change in composition of properties sold, with GTA and GVA sales accounting for just 23.4% of national sales – down from 25.8% in the previous month. After seasonal adjustment, the national HPI rose 0.5%, with gains of 1.1% and 0.4% for GVA and GTA. On a year-over-year basis the national index decelerated from 9.2% to 7.7%. The trend was mirrored by the GTA HPI, which slowed to 5.3% from 7.3%, while the GVA HPI accelerated from 16% to 16.8%.

Key Implications

• This morning’s report was a highly anticipated oneas it gave us a glimpse of how the implementation of updated B20 rules impacted the Canadian housing market and how the market is faring in light of higher interest rates.
• On the whole, the numbers confirmed our expectations that B20 rules would pull-forward activity into late-2017, with sales slumping in January on the give-back. The pull-forward was further corroborated by the dynamics of new listings, which also increased ahead of the new rules, before properties being pulled-off. While it is too early to precisely estimate how much of the rise in late-2017 is related to the pull-forward, the report suggests that this dynamic accounted for much of it.
• The notion that pull-forward was central to the rise in late-2017 is further confirmed by the regional dynamics. The give-back was most apparent in Ontario and (to a lesser extent) B.C. – the two markets most affected by the B20 rules owing to their high prices and relatively large share of federally-regulated lending (particularly in Ontario).
• We expect some near-term volatility to persist in the market, as the fallout from the new rules and rising rates is absorbed by buyers and sellers, before some stabilization by mid-year. Thereafter we expect activity to remain weighed down byrising interest rates, but with markets largely in balanced territory prices should remain well supported. For our detailed forecast please click here.

By Michael Dolega, TD Economics Senior Economist

United States

• Major U.S. stock indices entered correction territory on Thursday but remain elevated relative to where they were a year ago. The sell-off was spurred by fears of higher interest rates, as the 10-year government bond yield hit a four-year high.
• The $300 billion increase in the spending cap over two years, laid out in the federal budget deal, could add to inflationary pressures at a time when the economy is already operating at close to full capacity, pressuring yields up further.
• Next week, investors will turn their attention to hard data, with advanced January retail sales providing an indication of whether or not first quarter growth will be affected by the residual seasonality.

Canada

• It was a sea of red in Canadian financial markets this week, with the S&P TSX, oil prices and the Canadian dollar all losing ground.
• Canada’s trade deficit widened in December, suggesting that net trade will be a drag on growth in the fourth quarter.
• Employment started the year off on a soft note, shedding 88k jobs in January. Losses were concentrated in part-time positions. The unemployment rate ticked up a point to 5.9%.
• Housing starts topped 200k units for an 8th straight month in January, despite some unfavourable weather conditions

Mortgage Interest Rates

No change to Prime lending rate currently at 3.45%.  Bank of Canada Benchmark Qualifying rate for mortgage approval is at 5.14%.  No change in fixed rates.  No change in adjustable variable rates.

Other Industry News & Insights

Roundup of the latest mortgage and housing news.

From Mortgage Professionals Canada.

Open Access

• What’s Driving Canadian Homebuyers?(Canadian Mortgage Trends)
• Canadian home prices rise as Toronto sees first gain in 6 months(CBC)
• Home Capital Q4 profit sinks 40%, CEO says lender ‘turned the corner’(BNN)
• Andy Yan, the analyst who exposed Vancouver’s real estate disaster(Maclean’s)
• Toronto home prices climb for first time in six months: Teranet(BNN)
• Here’s what homebuyers can purchase with $500,000 in these major Canadian cities (BuzzBuzzNews)
• Yes the Canadian housing market is cooling, but it hasn’t been “too badly hit”: BMO(BuzzBuzzNews)
• ‘Mission accomplished’ on cooling markets, but affordability gap aiding ‘unequal society’: CMHC CEO(BNN)
• Gap between housing supply and demand largest in Toronto and Vancouver: CMHC(CBC)
• Bank of America Is Said to Explore Canada’s Uninsured MBS Market(Bloomberg)

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• Supply shortages in Toronto, Vancouver left house prices ‘nowhere to go but up’(Financial Post)
• Mortgage rules ‘better than hoped’ but housing remains out of balance: CMHC CEO(BNN)
• Canada’s new home prices stall for first time since 2015(BNN)
• Canada January housing starts dip slightly, December new home prices stall(Reuters)
• Mortgages issued to non-permanent residents on the rise in Canada’s largest cities(BuzzBuzzNews)
• These Ontario housing markets have seen huge price spikes in the last decade (BuzzBuzzNews)
• How new mortgage rules hammer indebted households(Globe and Mail)
• Millennials’ prolonged stay at Parents Inn is having a profound impact on housing markets(Financial Post)
• Dividing the real estate market into ‘us and them’ would be a costly mistake for our economy(Financial Post)
• Pre-sale regulations in spotlight as hot GTA condo market leaves buyers out in the cold(Globe and Mail)

Now’s the perfect time of year for a free mortgage check-up. With spring on its way and interest rates on the rise, it makes sense for us to revisit your mortgage and ensure it still meets your needs. Perhaps you’ve been thinking about refinancing to consolidate debt, purchasing a rental or vacation property, or you simply want to take a vacation. Whatever your needs, we can evaluate your situation and help you determine what’s right for you.

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Change Of Space January 2018

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