With the Federal Liberals’ vanity election of last Monday completed with a cost of $610 million to do nothing more than maintain the status quo, many people in the country are now wondering what proposed measures will be effective for increasing housing affordability in Canada. No doubt that $600+ million could have been better spend in many ways – including in investing in affordable housing starts or providing $ incentives to developers to build affordable housing complexes – but as we all know fiscal propriety or accountability is never going to be part of a Liberal government.

However, it is what it is and people who are struggling to get into the housing market are genuinely wondering what is coming with regards to policy designed to increase the supply of affordable housing in the country. One of the proposals made by the Liberals was a temporary ban on foreign buyers, with the idea that insulating the housing market to be more exclusively for Canadian citizens is going to be beneficial and will ‘cool’ the market in a way that will appease the thousands of Canadians who are anxious and uncertain about their ability to ever afford their home.

This issue is about prospective homebuyers first and foremost, but there are many different groups of other people who are affected by all of this in roundabout ways. Realtors feel a pinch too when there are fewer qualified and / or willing buyers, and there’s fewer homes being put on the market as owners doubt their own abilities to afford something else unless they are ‘downsizing’. Our online real estate lead generation system here at Real Estate Leads is ideal for countering that lack of new clientele, leveraging the power of Internet Marketing to identify and deliver people who are genuinely ready to make a real estate move.

If we are to swing back onto track here though, there are economics experts who say that yet again the Mimbo and his policy makers in Ottawa are set to miss the mark again, and that this foreign buyers ban may actually backfire on them. Here’s why.

24 Month Ball Drop?

The idea of banning foreign buyers from purchasing homes in Canada for 2 years builds upon provincial taxes imposed on foreign homebuyers in the hottest housing markets in British Columbia and Ontario in 2016 and 2017. Both have done little to improve housing affordability.

Most notably is the way that Americans will be lumped in with the group of ‘foreign buyers’ that most Canadian take exception to but aren’t particularly keen to own up to it. There are many Americans who buy property in Canada, and it would be very disadvantageous if their government was to do the same to Canadian buyers who would like to buy a home in the USA.

You can be sure that such a move will not go unnoticed in America, and it will not be favorably received in any way, shape, or form. Let’s keep in mind that quite often Canadians are the foreign buyers elsewhere and to be given a taste of our own medicine would taste very good at all.

Less of a Factor

Next, the truth of the matter is that foreign ownership of homes in Canada is not nearly the problem it’s made out to be by some people. Let’s consider a study by Statistics Canada in 2017 that determined non-residents owned only around 3.4% of all homes in Toronto and 4.8% of ones in Vancouver. Sure, that number has probably gone up in the last 4 years, but not much. Let’s consider as well that condos were the most popular housing segment for foreign buyers, with non-residents owning 7.2% and 7.9% in Toronto and Vancouver.

The detached homes that so many people decry for the lack of supply are basically unaffected by home ownership in the big picture – 2.1% for Toronto and 3.2% for Vancouver. Fact of the matter is the vast bulk of the demand for detached homes comes from Canadians living in Canada, especially as more and more people migrate to these desirable locations.

Banning foreign buyers may mean greater access to condos for prospective homebuyers, but the young professional with a young family who needs more space isn’t going to benefit from this move much if at all.

Looking in the Mirror

Let’s again not look past the fact that Canadians are the top foreign buyers of property in the United States. Between April of last year and March of this year Canadians put US$4.2 billion into the purchase of American residential real estate, and that works out to 8% of all non-U.S. citizens or Green Card holders who purchased homes in the continental USA over the course of that year.

A foreign homebuyer ban that puts the brakes on the reciprocal nature of this between countries isn’t going to an administratively punitive one necessarily, but it’s going to put a strain on it and the irony is that this group of buyers is NOT the one that people in Canada want to have in their sights when it comes to disadvantaging foreign buyers.

What is for sure is that we’d see significant bipartisan opposition from Congressional representatives in both the U.S. House of Representatives and the U.S. Senate, and any taxing or enforcing other penalties on Canadian owners of U.S. property would quickly become an issue of contention that the Feds will have to deal with as a fallout of their short sighted decisions.

Negligible Effect

The only solution to improve housing affordability in Canada is to increase supply, and that’s because negating demand from one group does nothing to mediate demand coming from elsewhere – in this case, within the country and from Canadian citizens or ones that have interests in purchasing homes that are not based in any investment thinking. That is literally hundreds of thousands of people if not millions, and that’s the reality of the situation.

The impact of preventing those who are not Canadian citizens or permanent residents from buying homes in Canada would be negligible at best. What is also true is the nationality of a homebuyer matters far less than the purpose that newly-purchased home will serve. It is a known fact that Canadians buy properties with idea of having them appreciate in value and rent them out at market rates just as readily as foreigners do, and that it’s not a ‘level playing field’ is also untrue when you consider many Canadian are equally as financially qualified to be doing so as the foreign buyers.

Same goes for those who buy properties and leave them vacant (tax or not) in order to preserve the value of the home. Is that harmful? Yes it is. Is it just as common with domestic buyers as it is foreign buyers? Yes, it is.

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Sign up for Real Estate Leads here and receive a monthly quota of qualified, online-generated buyer and / or seller leads that are delivered to you exclusively as a realtor. These are leads for the area where you are working as an agent, and you will be the only realtor who receives them. This creates an exclusive opportunity to be first in touch with these people and put your knowledge and professionalism on full display to bring them into the fold as new clients for your real estate business.

It’s election day here in Canada and sometime late this evening we’ll know if the Trudeau Liberals will stay in power or if Erin O’Toole’s Conservatives have received the majority of the vote and will form a new government. All the major political parties have included housing affordability in their platforms, but no matter which one forms or continues government finding workable ways to make housing more affordable for Canadians is going to be a steep challenge.

The people who are most disadvantaged in the Canadian housing market as it is these days are first-time homebuyers. That is to be expected, and there’s not much explaining that needs to be required when ever-rising median home prices come with ever-greater amounts needed for down payments as well as a greater chance that prospective buyers won’t qualify for the mortgages they’d need. As a realtor working in Canada that means that some people who might otherwise be your clients stay as renters instead.

Less pie to go around, but our online real estate lead generations service here at Real Estate Leads is an excellent resource to help realtors who might be struggling to generate new clients. What it does is give them an inside track to being first in touch with people who have been identified as genuinely ready to make a move in the real estate market.

Highly recommended, but let’s today look at a part of the Conservative government platform that might actually be quite effective in addressing housing affordability in Canada.

Fixed Across 7 /10

Part of what the Conservative Party is pledging is to create a new market for fixed mortgages in the seven- to 10-year range, with an idea to promote better housing affordability. Industry experts tend to think that there is real merit in it, and that it would provide stability both for first-time home buyers and lenders. The belief is that it would be another path to homeownership for Canadians, and that it will also reduce the need for mortgage stress tests- another major stumbling block for 1^st time homebuyers that can derail the home purchasing plans all too quickly.

The party also has an intention to amend the mortgage stress test so that it no longer discriminates against those who aren’t the typical ‘qualified buyer’ – small business owners, contractors and other non-permanent employees like casual workers. The ideas is that these types of revised terms would force different mortgage lenders to offer more competitive rates. Better rates would mean many would-be buyers that might be locked out because of a lack of this type of competition might still be able to purchase a first home.

It is also believed that fixing a mortgage rate for seven to 10 years would eliminate the need for a stress test when owners have the freedom to choose not to refinance for prolonged periods of time, and that this would work out to much more in the way of affordability for buyers. It would also help to slow the massively expanded levels of mortgage debt in Canada – $1.98 trillion in May of this year.

Helpful Restrictions

Let’s say a household with in the vicinity of $125,000 as their total annual income qualifies for a mortgage with a 15-20% down payment at 2.44%. Currently and because of the stress test they would be restricted to about $600,000 purchasing power with a monthly payment of just under $2700 or so. This would work out to about  33% of the total debt service (TDS) ratio. This new plan works on the belief that that households with that type of net income should be able to afford a mortgage of up to $800,000 with related monthly payments in the vicinity of $3,500 or so.

The additional $200,000 in borrowing power would go a long way towards affording homes these types of people would want / need in major urban areas of the country where house values are high and will continue to be that way. Higher monthly payments would be more comfortable if secured over 5, 7, or even 10 years. Keep in mind that in the USA  10-25-year terms are quite normal.

By creating incentives to keep their mortgages intact homeowners would benefit from greater affordability, and this is really something to consider.

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Sign up for Real Estate leads here and receive a monthly quota of qualified, online-generated buyer and / or seller leads that are delivered to only one realtor working in the same area – YOU. You’ll be the only realtor to get them, and that’s what makes this service so valuable. Present yourself as trustworthy, knowledgeable, and genuinely caring agent and it becomes very likely these couples and individuals will become a part of your growing client base.

Experienced realtors will know very well what it’s like to have to think on your feet and be able to help clients navigate challenges without delay as they present themselves. Multiple offers on homes for sale may not be anywhere near the norm in rural areas of Canada (although that’s changing with some of them) but if you are a real estate agent working in one Canada’s big cities it’s about as commonplace as can be. If you’re one of them you know how surreal these scenarios can be, and you never to what extent they’re going to go to.

We’ve gone on at length here many time how being all-knowledgeable about the real estate business takes years, but the sooner you get to that point the sooner you’ll have established yourself as a preferred choice for people who want to buy or sell real estate. Clients will look to you for your expertise, and providing it to them and then having them reap the rewards of working with you goes the longest way possible in making a name for yourself in the business.

As with anything, you need to start at the start and that means generating clients in the first place. That can be challenging if you’re new to the business, but our online real estate lead generation system here at Real Estate Leads is an excellent way to hit the ground running in this business and bring clients into the fold with maximum efficiency. It’s all based on the power of Internet Marketing, and candidates are determined based on their responses to voluntary user polls.

But enough about that, and let’s get back to our focus here this week – helping clients come out on top and successful in buying a home when there’s multiple offers on it.

1. Play to Win & not to Lose

If you want to look behind the insane soaring of housing prices you’ll see that a primary reason for them is that the sellers are engaged in a numbers game. Putting lower listing prices in place means they’ll get more initial offers with higher values as buyers look to strike while the poker is hot. It’s true that bidding wars do usually push up prices well beyond the true market value of the home. As an agent, you should know an approximate ballpark value point based on market statistics and if you feel sure that the over-asking price is exceeding your client’s budget then you should retract their offer. If not, you’ll be just increasing the competitive drive. Let the market balance itself out.

2. Due Diligence is Best

You should also do what it takes to get complete information on the sellers. These are the types of questions you should try to answer:

• Who are they?
• How are they employed?
• Why are they selling?
• Where are they going?

The best way to obtain this seller information is to talk to the neighbours. An estimate is to be in touch with five or so surrounding houses. Do that and you’re almost sure to dig up valuable info about the house and the people who are selling it. Info that’s going to help you in the offer situation.

3. Compliment the Agent

All agents working together representing clients speak to each other, and you should know how to tailor your communications with them to further your clients’ interests. Tell them you want to bring an offer and you have a few questions. In advance of that take some time to learn something about the agent. They will almost certainly have some type of online profile that you can reference to know more about them.

It’s a good idea to compliment the agent first to start and then go into the seller info. The key is in building rapport, emotions and relationships.

4. Evaluate What Else Might be Included in the Offer

A common example here could be with furniture and belongings in the house, items that you might put in the offer where there might be benefit on behalf of the seller. This could make your offer stand out, and a good spot to try this is with sellers who you know are moving long distance or out of country.

5. Provide Deposit Cheque or Approval Letter with the Offer

Providing the seller’s agent with a non-refundable deposit cheque along with your offer will strengthen the offer. Including an approval letter with your offer is an option too. The aim here  is to show your client’s financial freedom as well as show the seller (and their agent) how much your clients want the house.

6. Send Texts 15 minutes Before the Offer

Discourse with a seller’s agent can include letting them know you’ll text them in advance of the offer as a reminder. Say the offer presentation is at 5:00, then you’d text them at 4:45 and mention lightly that your clients like the home very much and then ask them what might improve their chances of winning it

7. Send a Letter or Video

It is wise to represent your client’s best interest by giving sellers an idea of just what type of person is going to be purchasing the home. Sending a short video of your clients talking about how much they love the house or showing their little kids in front of the house can go a long way in swaying the home sellers if there are multiple similar bids they’re considering.

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Sign up for Real Estate Leads here and receive a monthly quota of qualified, online-generated buyer and / or seller leads connecting you directly with genuine buyers who are in the same area of any city or town in Canada where you work as a real estate agent. You can know you’ll be the only agent receiving these leads, and the opportunity to gain these people as clients is all yours. This is a dynamite way to supercharge your client prospecting efforts, and more and more realtors are realizing this.

Owning a home in Canada is an increasingly difficult proposition for people nowadays, and that can be true for people looking to move up the property ladder into 2^nd or 3^rd homes as their realties change as much as it is for 1^st-time homebuyers looking to purchase a home for the first time. With the upcoming election in a few weeks time the major party leaders are all promising measures that will re-establish access to the housing market for people who currently can’t afford to buy the home they need.

This is a daunting challenge and there really is no quick fix. But among the other things being proposed is significantly increased taxes on big banks as proposed by the Liberals to address the ridiculous and obscene amount of national debt they’ve run up in a very short period of time. Fiscal responsibility is not part of the equation with these politicians, but even if the ‘bank tax’ might help pay down the debt it turns out that some economists and industry experts feel this may make the scenario worse for disadvantaged would-be homeowners.

The belief is very much that Trudeau’s election campaign promise to raise taxes on Canada’s biggest banks is going to backfire and actually result in homes becoming even less affordable, which would be harming his goal of helping buyers in one of the world’s hottest markets. Which in theory would benefit those working in the real estate business and especially for agents who may be struggling to bring new clients into the fold to the extent they’d like.

This makes our online real estate lead generation system in Canada here at Real Estate Leads such a good choice, but we’ll stay on topic and expand on why the general thinking is the Liberal’s ‘bank tax’ isn’t likely to provide what they’re hoping for it and will also won’t be any type of a fix for an overheated housing market that many people are struggling to get into.

Here’s Why

The way banks usually respond to tax increases is to pass on the cost to borrowers, and the standard way is through higher interest rates and service fees. That means home buyers assuming extra expenses in a housing market that’s already out of reach for many Canadians – the average cost of a home is up 16% over the past year to just under $670K. When you consider that’s a median price for homes ALL across the country it’s really something of a staggering figure and highlights how many middle-income earners won’t be able to even consider paying that amount for a home.

Last week the PM said that his government would add to the tax rate on bank and insurer profits above C$1 billion, and take it  to 18% from the current rate of 15%, claiming that would raise C$2.5 billion over the next four years.

But again experts say the increase in bank fees and rates would be transferred to borrowers and not existing business clients. This is because they have fewer alternatives and because lenders would be wary of upsetting larger and much more profitable customers. Keep in mind as well that higher costs for borrowers could also have a trickle-down effect for purchases at retailers and restaurants. All of which factors in further to a reduction in purchasing power for many looking to buy a home.

Let’s not look past he fact that the bank’s job is to make money and raise money for shareholders and they have the means to make sure they can take on an obstacle put in their way. It is true that this tax was announced the tax during a week in which 4 of the country’s largest 5 banks posted quarterly profits above C$2 billion.

This proposed bank tax may also negatively affect homebuyers because it could also spur banks to take on more debt and buy tax-advantaged government bonds to soften the impact on them rather than raising capital by putting more equity up for sale.

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Sign up with Real Estate Leads here and receive a monthly quota of qualified, online generated buyer and / or seller leads that are delivered exclusively to you. No other realtor will receive them, and they’ll be for people living in your area who have proven themselves to be genuinely ready to buy or sell a home. You’ll have the opportunity to convince them that you are the best real estate professional to give them the assistance and guidance they’ll want in buying the right home or making sure they get the best value of out of one they are going to sell.