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All posts for the month August, 2016

Agents from some depressed markets share their insights

Published August 29, 2016 by Real Estate Leads

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Over supply plagues once previously-booming markets such as Alberta.

Across Alberta, lower sales were accompanied by declining new listings in July 2016. This typically prevents further inventory gains and minimizes the downward pressure on benchmark prices.

By August 1st, the residential benchmark price was $440K similar to June, but still 4.2% lowers that July 2015 figures. While detached prices seem to be leveling, this is not the case for all property types. With over a 6 month supply of inventory in the apartment sector, over supply continues to create steep price declines.

According to the Calgary Real Estate Board’s annual forecast, released in mid-August 2016: benchmark prices are still expected to fall another 3.8% this year. While the market as a whole continues to be challenging for home sellers, the highest price declines are typically in the neighbourhoods and sectors where the largest amount of supply has built up, either from the resale market or the competing new home market.

In this kind of market, both buyers and sellers continue to be forced to adjust their expectations. July marked the 20th consecutive month of year-over-year Alberta sales declines. Prices in the detached property type segment of the market continue to be the most level while prices in the apartment property type continue to decline due to oversupply.

The best bet is to continue to sell the lifestyle that people are looking for. Not everyone is a pessimist about the damage done to the real estate market by low oil prices. What goes down usually eventually comes right back up – and this perhaps is the best way to simplify matters, and bring in more investors into currently depressed markets such as Calgary.

Thank you for reading the Real Estate Leads dot CA blog.

What “Affordable Housing” means to Different People

Published August 22, 2016 by Real Estate Leads

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The definition of ‘affordable housing’ is quite fuzzy across the board. For those in the various income classes, affordable housing means something different to different people.

For decades, a general rule of how much income should be set aside for rent is 30%. 1/3rd of a combined income is not usually enough for most families to qualify for a mortgage; they would need to spend more.

Across the country 40% of renters actually have to spend more than 30% of their household income on rent – about 20% fork over more than 50%. When a household is spending more than half their combined income only on rent – they are in the “red zone” – certainly at risk for becoming homeless (this refers to a large lot of our fellow Canadians).

So what does “affordability” really mean? If our average 30-something couple who are trying to find a house in Toronto (GTA), affordabilty will usually imply anything under $1-Million. (The average price of a detached home around Toronto is $1.2-Million this month.)

On lower rungs of the social-economic ladder – many Canadians are experiencing difficulties even finding a place to live (within their potential budget) – in the same neighbourhoods they grew up in or have lived in for years. In these ways matters are only worsening.

According to Canada’s largest real estate finder RentSeeker.ca, here are the average rent costs across Canada and here is the average cost of a house in cities across Canada.

According to CMHC’s own website, the Canadian Mortgage and Housing Corporation, housing is technically considered “affordable if shelter costs account for less than 30% of before-tax household income”. Therefore, one definition of “affordable housing” is in reference to a variety of programs and initiatives designed to help those in need.

As you can see the term ‘affordable housing’ is really an umbrella term referring to a variety of housing options that are funded from the private, public and non-profit sectors. From emergency shelters to subsidized housing, there is a range of programs designed to make housing affordable for people of all socio economic classes. Currently, the Federal Government invests approximately $2 billion into these initiatives, and you can find more information about them here.

There has been a fair amount of talk in recent weeks about affordable housing, and what can be done to help those that need it. The CMHC states that 80 per cent of Canadian housing needs are met through the open market, affirming the need to help a large number of Canadians find housing options within their means. As the national real estate market continues to explode, this issue is becoming increasingly relevant. RentSeeker is here to offer some insight into the current events that are greatly affecting the affordable housing real estate market.

Canadian Immigration

There are no shortage of jokes and memes in the media about the foreign desire to move to Canada. Whether you live in a country that is terrified about the potential of a presidential candidate winning or your country voted to ‘go solo’, Canada is a much more realistic home for many people across the world that may never have considered it before recent events. If even a small number of people who say they will move actually do so, Canada could experience a huge immigration increase in the next few years. Increasing the number of newcomers above what the country already experiences would drive up the demand for rental units, thereby making the rental market more competitive.

Neigbhourhoods or Vacation Destinations?

Affordable housing doesn’t just affect those living in the big cities. Areas that have become popular as vacation destinations can have a devastating financial effect on locals who can’t afford to keep up. In Ontario, the Muskoka region has seen a huge increase in housing prices just as the Okanagan region in British Columbia. For many families who have lived in these regions for decades, the cost of living has simply gotten too high.

Accessible & Adaptable Homes

These homes enable both the elderly population and those living with special needs to remain in their communities, and advocates say there isn’t enough being done to help them. Accessible homes can be costly, as modifications need to be done in order to accommodate the needs of the people who live there. For many landlords, this isn’t a tempting investment when compared to utilizing development opportunities on the open market. As the Baby Boomers age, the increase of the aging population will put more stress on the system, and many are worried that retirees will have little choice but to move out of their home in search of more affordable options.

Affordable housing is a complex social issue, and unfortunately, there will always be those in need of these important services. While cities like Vancouver are ranked extremely high for unaffordable housing (just behind New York and London) there is work being done from both the private and public sectors to improve the lives of Canadians across the country. Affordable housing affects thousands of Canadians and it’s important to know what the term actually means as it becomes more prevalent in the media along with the importance of our national real estate market.

Canada’s Real Estate Boom

Simply put, the real estate boom in major cities is creating affordable housing issues. The increase in the real estate market has a direct effect on rental prices, and as one increases so will the other. Foreign investment in condo opportunities has also played a part in driving up costs, but this is pale in comparison to the overall growth that popular cities have experienced in recent years. Despite the number of people waiting for a crash or even a market correction, there is no sign it will anytime soon.

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Rebuilding Fort McMurray: Naturally the biggest building boom in Canada during the past quarter-century

Published August 15, 2016 by Real Estate Leads

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About two thousand homes in & around Fort McMurray were grazed by the Alberta mammoth wildfire of 2016. As of mid-year work has begun cleaning up the rubble and rebuilding.

However, it will take between 3-6 years before residents generally view their home city as fully recovered. The Fort McMurray inferno left behind more devastation than the fire that swept through Slave Lake in 2011, which destroyed about 420 homes, and that disaster took more than a year to rebuild.

The aftermath of the fire is the most expensive natural disaster in Canadian history. It is projected that insurance companies will be forking out over $3.5 billion dollars, as per the Insurance Bureau of Canada. Insurance companies are starting to sort through about 23,000 claims from the fire.

On one hand, a family’s beloved home was turned into smoke, soot and rubble; on the other hand each burned out home is now being seen as a ‘housing start’ on the books.

Eventually, most residents will be returning to the same piece of land which they had to quickly evacuate during those days of disaster. However, a yet untold number will be selling their restored homes; as many owners have already found or are now finding new employment in other areas of the province, or Canada.

These restorations are expected to create the largest new home construction activity Fort McMurray has seen in over 20 years. About 10% of the city is to be entirely rebuilt. Much of the rebuilding, including about 1800 homes will be inside leveled subdivisions of Beacon Hill, Abasand, and Waterways.

The rebuilding effort will do much, for at least the next year or two – to reverse the decline seen in Fort McMurray’s housing market – which had directly suffered from the drop in oil prices that began in late 2014, likewise affecting the surrounding tar sands mining.

In the months leading up to the wildfire, home sales had sagged back down to half the 5-year average. Average resale prices in the 1st quarter were down 17% from the same period two years earlier. Builders were working on constructing only 13 new homes in entirety. The area’s rental vacancy rate had floated down to nearly 30%.

Most of Fort McMurray’s rental units were spared by the flames so many returning homeowners are expected to first rent while waiting for ( or for some – “if” ) – their homes to be rebuilt – which will back-fill the previous void of vacant apartment stock.

In the past 3 months, after the wildfire forced about 88 thousand residents to evacuate the community , about 72 of the 88 thousand have returned (as per information the public information officer for Regional Municipality of Wood Buffalo published on their website). Wood Buffalo encompasses Fort McMurray.

A large-scale effort to begin cleaning up the neighbourhoods are currently underway. Municipal spokespeople stated it hopes to have the most heavily affected areas cleared and cleaned up in the September/October 2016 time-frame. Crews have already removed more than 11,000 refrigerators and freezers – which were taken to landfills to be degassed and crushed. The cleanup alone is a complex exercise. Many houses were so badly damaged that most will have to have the basements demolished as well.

Literally, for most sites, the plan is first to create ‘greenfield’ lots again before beginning to rebuild; such is the case for entire subdivisions.

Alberta is also trying to nip-in-the-bud what officials have called the “chaos” of the Slave Lake fires – where some homeowners were devastated twice: 1st – when they lost their homes to the fire and then 2nd when various developers they hired to restore their properties literally took the money and ran (leaving behind half-finished homes and unpaid bills). To avoid this, the government has now required eligible builders in Fort McMurray to register and provide detailed information about their business histories and finances. So far, only 7 building companies have fully registered (according to the Alberta government’s website).

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How would many Canadians feel the return tide of higher interest rates?

Published August 8, 2016 by Real Estate Leads

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Many of our fellow Canadian families would go financially underwater

The average price of homes in Burnaby, in suburban Vancouver – ranged from $773k to $857k in July 2016.

Some savvy Canadians, well the percentage that can afford to get into Vancouver’s real estate market are looking for ‘fixer uppers’.

As interest rates have been hovering at all times lows, for the past several years, many have become accustomed to these low rates. These rates have seemingly become the ‘new normal’.

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Many are making sizable down payments and locking in a mortgage rate somewhere between 2-3%; with a contractual promise that the rate will not change for a handful of years, usually 4 or 5 years.

Each day breeds a different reality. As rates fluctuate daily – no Canadian can be guaranteed such a potentially favorable rate, as from any preceding day.

Our beloved fellow Canadians, with all of us in the mix, we are making payments on the lowest mortgage rates seen in the history book going back more than 2 generations (65 years). This is not entirely a domestic effect – there are other machinations behind the scenes – as low interest rates are currently a rather global phenomenon.

Currently in mid-August 2016, Canadian banks will lend at mortgage rate between 2.5 to 3.0%, but how long will the low fruit remain hanging within reach?

Some predict a return to mortgage rates near 5%, which used to be the then-normal median rate for an entire decade prior to the banking pyramid’s adjustment of interest rates. Let’s look at the financial stress a tidal return for 5% rates would have on an enormous number of Canadian families.

The average mortgage payment on a property purchased as per today’s average home price ($503,301) would be jacked up by about $600 per month, from about $2,000 to $2600.

In pricier Toronto, payments on an average-priced home would rise by $900 per month; from about $3,000 to $3900.

In Vancouver, payments would rise by about $1100 per month – from $3,600 to $4,700!

However, a recent poll conducted by Huffington Post Canada found that half of Canadian families can’t even afford $200 increase. So, what could a rise in rates bring to so many Canadian families?

Basically Canadian households have a huge vulnerability to any hike in interest rates!

Much thought now needs to go into how Canada can fix future housing affordability issues – *before* interest rates begin to rise.

Could further tightening of mortgage rules work? Could a government policy change make it easier to increase the supply of housing by loosening currently existing land use restrictions and zoning constraints? Now with some forethought – can that be done before interest rates dramatically rise back to “retro-normal” levels?

Earlier this year The Parliamentary Budget Office predicted interest rates would rise to “normal” levels over the next 5 years. Guess what? That’s the same time-frame which most of Canada’s mortgages are coming up for renewal.

The report forecasts the high risk of Canadian households falling into a debt crisis by 2020. “The financial vulnerability of the average household would rise to levels beyond historical experience,” states the PBO report.

The crisis would be intensified by the banks (most) who are willing to lend to a completely ‘maxed out’ family.

Looking at banks’ mortgage calculators, we can see that some lenders are willing to issue mortgages that would eat up around 44% of household income. That is 14% higher than 30% – which is Canada Mortgage and Housing Corp’s affordability guideline.

Lenders are required to make sure borrowers are able to pay at the Bank of Canada’s mortgage qualifying rate, of currently about 4.6%. However, for 5-year, so-called ‘fixed-rate’ mortgages, banks are not required to make sure borrowers can handle the Bank of Canada’s rate – they are being qualified at the discount rate offered by the bank. The 5-year fixed-rate is one of the most common mortgages in Canada.

Motto of this article:

Perhaps do the right thing for your clients, and don’t recommend going for what the bank is willing to lend them. Explain that you have their best interests at heart, and they should wisely borrow what they could afford in the event that interest rates return to average historical levels. They probably will see you more as a real estate “angel”.

 

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China-gate home price-inflation real estate solution idea for all Canadians

Published August 2, 2016 by Real Estate Leads

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Canada’s Housing Market Should Have Never Been Allowed To Be Turned Into A Stock Market.

And drastic problems necessitate drastic solutions…

What rights, in regards to owning a piece of Canada, should foreign non-residents really have in Canada?

This idea we are presenting here could make the Canadian real estate market not just hot/volcanic , but suddenly, atomic – as an after-effect of a huge potential populous push who agrees with the insights & solutions proposed in this article. This article focuses on an idea to solve the problem. A proper solution would be making housing affordable again for working tax-paying Canadians. The idea is about bringing over more of the Chinese culture, not less. Imagine Chinese designed sky tower cities (see picture above) on parcels of land given to them by the BC government, here and there, perhaps an existing a park or two? The huge China tower cities to be built in downtown Vancouver could also serve as a money laundromat for the Chinese and other foreign nationals; keeping the money launders happy.

By some accounts (including some top West Vancouver Realtors and real estate lawyers) 80% of new and pre-owned housing sales are purchased with Chinese money and people.

The BC government enacted a law that comes into effect Aug 2nd, giving only 8 days notice before imposing the new 15% foreign buyer tax on home sales. This happened in Hong Kong 2 years ago – a 15% surcharge tax on top of the land-transfer tax was attached to foreign purchases of real-estate. See: http://vancouversun.com/news/staff-blogs/hong-kong-puts-15-per-cent-tax-on-foreign-buyers-will-b-c-follow-suit This obviously did not take much high powered thought, as it was copy-cat legislation.

Recent poll results show that about 75% (3 out of 4) of native Canadians have quite alot of anger directed at B.C. politicians over housing costs. All 3 levels of government got scathing reviews in the poll. The provincial government was vilified the worst, with 76% of British Columbians expressing dissatisfaction with the Liberal’s amount of action.

Now the people across Canada (with pitchforks in their closet, about 3 out of 4 on this issue) need to get the provincial government to do what the Canadian people want! Is this not a democracy?

Most people feel that foreigners should not be allowed to buy residential real-estate in Canada.

How can this all be reversed? Believe it or not – the answer is already in the law books.

See: https://en.wikipedia.org/wiki/Land_ownership_in_Canada

Quote: “Since Canada uses primarily English-derived common law, the holders of the land actually have land tenure (permission to hold land from the Crown) rather than absolute ownership.”

What is proper, and necessary, solution?

We, the Canadian people, must force the government to allow foreigners to own residential property for only 1 more year after a to-be-decided date – or the property will be foreclosed and donated to the BC homeless community. Then they must start selling!

Native Canadians will be the eager buyers. There is no short supply of Canadians who wish to own a home but are unable to afford the million dollar price-tags. There is an over-supply of young millenials forced into renting. The people know this.

Those same Chinese buyers will then be able to buy, and own, condominiums (even multi-story townhouses) within the Sky City tower – until they are able to move into it, they will only be able to rent Canadian residential real estate; perhaps the same houses they are currently in – however now Canadians will be their landlords until the foreign owners can move into one of the Chinese-built sky tower addresses.

Real estate agents will love it, because it will swing the pendulum and create a strong Canadian citizen’s buyer’s market over the course of the given year – creating a market frenzy, lowering house prices, allowing young Canadians to buy in easier, while agents conduct deals. Everyone wins, maybe with the exception of the foreign millionaire property owners.

There is plenty of demand, they are just limited by lack of housing supply and also most currently are not able to afford homes around Vancouver.

There really is no other solution to making homes affordable to middle class, or young Vancouverites.

So what rights should non-residents and foreigners have? Maybe make sell in a year’s time or the property gets forfeited to the homeless of BC.

The Chinese know how to build huge tower-cities. Let the government give them some parkland to build one of those puppies on, and let the foreign money flow through that city within Vancouver and Vancouver folks/construction crews get to build/work on it.

Vancouver’s hyper-inflated real-estate mega-problem-solved!

What do you and your colleagues across Canada think? Please forward to others and let us know. We’d love to hear ( contact@realestateleads.ca ) from real estate agents and also any Canadian citizens.

 

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