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Sales activity across the country, the association says, will be reduced by OFSI’s revised mortgage underwriting guidelines.
The Canadian Real Estate Association (CREA) has cut its home sales forecast for next year due to the impact of tighter mortgage regulations that come into effect New Year’s Day, which are expected to rein in spending for some buyers.
CREA said in an updated projection Thursday the banking regulator’s revised mortgage underwriting guidelines, which include a stress test for uninsured mortgages, will reduce sales activity across the country, particularly in and around Toronto and Vancouver.
The association now forecasts a 5.3-per-cent drop in national sales to 486,600 units next year. That new estimate shaves about 8,500 sales from its previous 2018 forecast.
Interest rates are going up, again, as Canada's red-hot economy continues to defy expectations.
After a summer of surprisingly good economic news, the Bank of Canada raised its benchmark interest rate a quarter of a percentage point to 1 per cent Wednesday – its second rate hike in less than two months and a prelude to higher borrowing costs for Canadians.
Major lenders, including Royal Bank of Canada, responded by raising their own prime lending rates by the same amount – moves that could squeeze the most heavily indebted Canadians and discourage others from buying homes.
The earlier-than-expected move caught investors and analysts off-guard, sending the Canadian dollar up to nearly 82 cents (U.S.) and raising expectations of more hikes this year. The dollar is now up about 14 per cent since hitting a low for the year of roughly 73 cents in April.
Bank of Canada Governor Stephen Poloz and his central bank colleagues acknowledged they have been taken aback at the strength of the economy, which surged ahead at an annual pace of 4.5 per cent in the second quarter to lead the Group of Seven countries. As recently as July, the central bank said GDP growth would reach just 2.5 per cent in the second quarter.
Wednesday's rate decision reinforces the message that the era of easy money and low rates is coming to an end in Canada. The central bank's overnight rate generally sets the pattern for mortgages, bonds and deposits.
The Bank of Canada may not be done. Economists are already bracing for further hikes if the economy continues to show strength through the rest of the year.
"Absent a significant shock, [Wednesday's] rate increase will be part of a larger and longer march towards rate normalization," Toronto-Dominion Bank economist Brian DePratto said in a research note.
Bank of Nova Scotia economist Derek Holt applauded the central bank for doing "the right thing" and said the door is "wide open to further rate hikes."
But there are limits on how far and fast the Bank of Canada can get its benchmark rate back to a more normal level.
Toronto home prices have just seen two of the strongest back-to-back months on record, but signs of cooling are
starting to emerge.
The Toronto Real Estate Board said Wednesday that prices in the Greater Toronto Area rose 31.7% in April, following a
record 33.2% rise in March. The price for all home types rose to $920,791, compared to $739,082 for all home types in
But there were some signs that upward momentum could be slowing in the coming months. First, prices from March
were nearly flat. Prices for single-detached homes actually fell from March to April, from $1,214,422 to $1,205,262. Finally, sales took a noticeable 3.2% tumble compared to a year ago.
All of that coincided with a flood of new listings in the market — 21,630 homes were listed for sale in the GTA last
month, up 33.6% from this time last year.
While the new listings come during the peak spring homebuying season, many buyers may also be trying to take advantage of record market prices to sell their homes.
"The fact that we experienced extremely strong growth in new listings in April means that buyers benefitted from considerably more choice in the marketplace," said TREB president Larry Cerqua. "It is too early to tell whether the increase in new listings was simply due to households reacting to the strong double-digit price growth reported over the past year or if some of the increase was also a reaction to the Ontario Government's recently announced Fair Housing Plan."
April housing numbers are being closely followed because the Ontario government released a set of new housing rules on Apr. 20. The rules include a new speculation tax on foreign buyers and new rent controls that limit rent hikes on buildings built after 1991. It's expected that data in the coming months will more clearly reveal how these new rules will affect the market.
TREB did release additional data Wednesday that painted a clearer picture of who the buyers in the current market are. It said that of the people that bought homes in the Greater Golden Horseshoe between 2008 and April 2017, only 2.3% were foreign buyers. The majority — 87-90% — purchased their homes as a place to live.
TREB also looked into those who own multiple properties — a segment of buyers that some have said are fuelling speculation and leading to abnormal price growth. TREB found that those who own more than one property represent 6.2% of the market — a figure TREB says is "relatively small."
After spending years watching reality TV programs about renovating homes, most of us assume that if the location is
good, but your house isn’t working for you, the only options are to renovate or move. That was us. We bought an old
home and began to plan a renovation. Through that painful and frustrating process we started seeking alternatives.
We eventually chose to rebuild, but considered selling and moving too.
How do you determine which option is best for you? Here are seven important questions you need to ask yourself.
WHAT DO I NEED?
This is not an easy question. We know what we want, but wanting and needing are different. I think our overriding
tendency is to want a home that’s aesthetically pleasing — and this is important. But, we also need something that is
functional and promotes a stress free environment for the whole family. Do you have a space where you can be
together? Do you have a space where you can be alone? Can you entertain and/or provide homework assistance easily
while preparing a meal?
WHAT DO I HAVE?
This is a much easier question. What type of property do you own? Each property type has different parameters and
limiting factors. If you live in a condo, the changes you can make are very limited. Townhomes and semis provide more
options, but have complications inherent with common walls and property. Detached homes provide the most flexibility
because you own the entire structure and do not have any common walls.
HOW MUCH WILL IT COST TO RENOVATE MY EXISTING HOME?
Renovation projects vary in cost. If your needs can be met with only a few small relatively inexpensive changes, then a
renovation project is probably the way to go. However, if a major overhaul is necessary to fully meet your needs– like
changing the layout, moving plumbing, making substantial changes to the exterior, building additions, etc., your
renovation estimates will be much larger and will require a huge contingency budget. We decided we didn’t like that
kind of uncertainty (see Three Reasons Why We Chose to Rebuild). It’s important to have the project thoroughly and
accurately costed out.
WHAT IS THE CURRENT VALUE OF MY HOME AND PROPERTY?
The best way to determine this accurately is to hire an appraiser. The value of your property is not what a real estate
agent would list it for, but the combined value of the land and structures (house, garage, etc.) on the land. In Toronto,
property values are high, but often the value of the structures are not. In our case, the cost of the land alone was more
than five times the appraised value of our old house. The cost of the renovations we needed to make this old house
work for us was substantially more than the value of the old house. This made no sense.
IS MY HOME NEARING THE END OF ITS VALUABLE LIFESPAN?
The valuable lifespan of a house depends on a number of factors including: the quality of the home’s materials and
workmanship, maintenance and climate. In urban Toronto, a lot of houses were not built with the finest of materials,
maintenance has been poor and the climate is harsh. Many have reached the end of their valuable lifespan— but we
still continue to live in them. Why is that? Would you invest in overhauling the engine of a car that could not be on the
road more than a couple more years no matter what you do to it?
HOW MUCH WOULD IT COST TO REBUILD?
Rebuilding involves the obvious demolition and building costs, but also several other considerations like relocation for
the duration of the build. I documented all these costs during our project. Much to our surprise, the cost of the
demolition of our old house (see video) represented less than 1% of the overall build cost. The total cost of rebuilding
was higher than a major renovation, but gave us so much more value: a beautiful 100% new house which requires little
maintenance, and is space efficient, energy efficient and designed for modern living. It was also considerably less risky
because it eliminated the risks that can crop up when you want to rely on old existing structures and are often
expensive to remedy.
WHAT CAN I AFFORD?
Now that you have conducted the analysis, the final question becomes: can I afford what I need? If needs dictate a
major project— renovation or rebuild, it is obviously going to be expensive. If the house is old, as ours was, you may be
leaning towards a rebuild. This is where we found ourselves— and we didn’t have the necessary funds. But, after
considering all the options, including moving, we decided to put our project on hold for a little longer and work towards
putting ourselves in a position where we would be financially able to proceed with a rebuild. It took a little longer, but
the end result was definitely worth the wait.
Source : http://kaavliving.com/7-important-questions-to-ask-before-renovating/
It is increasingly common to run across house rebuild sites in urban Toronto. I spot them regularly as I drive and cycle
through the neighbourhoods. A number of different factors can prompt property owners to rebuild. Many of them
co-exist in the current Toronto real estate landscape, resulting in Toronto becoming this hotbed for home rebuilds.
Unless these factors disappear, we will continue to see the trend grow as rebuilding becomes a more recognized and
viable alternative to renovating.
HERE ARE FIVE MAJOR FACTORS THAT PROMOTE REBUILDING:
PEOPLE WANT TO LIVE IN CENTRAL, ESTABLISHED NEIGHBOURHOODS
People want to live in popular neighbourhoods with good amenities, schools, transit, retail, restaurants and more, that
are within a reasonable commute to downtown Toronto. Individuals, couples and families are increasingly interested in
these neighbourhoods, which rarely have vacant lots. Often the only choice is to buy existing houses, which are
generally not suitable for modern living, and make it work for them. Many compromise on the size and condition of the
house intending to address these issues after purchase.
RENOVATING OLD HOMES IS RISKY AND EXPENSIVE
Renovating old homes is not straightforward. Unexpected issues can arise because of the vagaries of older homes and
prior renovations. In Toronto, it’s not uncommon for renovation projects to grow in size and expense as the walls and
the floors are opened up making creative plumbing and missing or damaged structural supports visible. Surprises like
these inevitably lead to more expense, time and stress. With budget reallocations, aspects of the originally planned
renovation are deferred. Rebuilding may have seemed like the more expensive proposition but, in the end, renovating
may not prove to be cost-effective either. Homeowners often regret not considering a rebuild more seriously. This is a
major reason we chose to rebuild.
Homeowners who bought what they thought was a starter home often become stuck on their property — in Toronto
this problem is increasingly common and is called buyer gridlock. It is believed that this is because, with soaring house
prices, homeowners cannot afford to move into their next, bigger and better home. As a result, they cannot address
their housing needs by moving and must consider the two remaining options: renovate or rebuild.
THE VALUE OF THE LAND IS HIGH BUT THE VALUE OF THE HOUSE IS NOT
In Toronto the value of the land often far exceeds the value of the structures on it. In the last 20 years property values
have increased dramatically. On the flip side, houses depreciate and lose their value over time because the materials
houses are built with only last so long. In contrast, land can appreciate, causing these properties to increase in value.
Once the value of the land exceeds the value of the house, property owners become more open to the idea of
rebuilding. Learn more in 7 Important Questions to Ask Before Renovating.
GREATER WEALTH CREATED BY THE RAPID RISE IN LAND VALUE
Fortunately, homeowners who purchased their property some years ago have watched their equity grow as the land
value has risen. This newfound wealth provides some homeowners with the financial means to rebuild on the same
property using construction mortgage financing.
REMOVING A FURTHER BARRIER TO TORONTO HOME REBUILDS
In consideration of these existing factors, the main barrier I see to rebuilding is the knowledge, experience and time to
make it happen. This is where KAAV LIVING comes in. We can create models for common property types and needs,
and make it happen for you. We have the knowledge, time and experience to make rebuilding more accessible, so risky
renovations can be avoided.
Source : K A A V Living
According to marketing research by leading Real Estate Firms in Canada the best day of the year to buy a home is the Christmas Day; however,
a very few people are actually looking to buy one, but buying on Christmas Day is a smart move. If you scout out the homes on which you'd like to make offers a few days before Christmas, you'll be better positioned. Why is Christmas Day so attractive?
Of course, the key is to find a real estate agent who will a) work on Christmas and b) be aggressive enough to worm her way into the seller's home without batting an eyelash. Those agents are out there.
There is nothing like a spring real estate market. Offers fly through FAXes and emails and cell phones ring constantly. Everybody wants a deal, and everybody wants to sell. Typically the marketplace is flooded with inventory. There is more on the market in the spring than any other time of the year.
It's also the worst time to buy a home. Except for one day. There is one day in the spring that a buyer will have the edge against all the other buyers.
We're simply saying that if you are in the market for a new home, the inconvenience of the cold and snow could pay off with serious savings.
There are many advantages to purchasing a new home: buyers are able to build equity, to enjoy the pride of ownership, and to obtain accommodation that is often larger and/or more luxurious than what is available to rent. Property has also proven to be a relatively safe and profitable investment in the wake of the technology stock plummet of 2000 and the Enron and Worldcom scandals.
If you are planning to buy a home within the next few weeks or months, preparing now can help you save time and money. When competing in a seller's market, being prepared may also give you an advantage over other buyers. Consider the following tips prior to beginning your home search.
1. Know your bottom line before you begin looking at homes.This means more than just knowing what price you are willing to pay. Consider the distance you are willing to commute to work, the number of bedrooms and bathrooms you require and what you need in terms of local community facilities. If you have children, the proximity to schools and parks will likely also be a consideration.
By knowing your bottom line, you can avoid making snap decisions guided by emotional responses to attractive home features or the pressures of competing buyers
2. Check your credit.Bad credit can happen to good people. Sometimes it’s due to an unpaid or lost bill and other times it can be inaccuracies in the report itself. Who wants to discover that they have a bad credit rating after finding the home of their dreams? Rather than waiting for a lender to inform you of your credit rating, it is wise to obtain a copy prior to beginning your home search. This will give you an opportunity to address any inaccuracies and perhaps settle any outstanding debts. The more ‘blemishes’ you have on your credit report, the more likely it is that your lender will charge you a higher interest rate as a hedge against a bad loan. You can obtain a copy of your credit report from accredited organizations such as Equifax.
3. Avoid making any major purchases prior to buying home.Lenders tend to become nervous when they see that a potential homeowner has stretched their disposable income to the breaking point by buying a car or a boat for example. Such purchases can make it more difficult to obtain a mortgage or may lower the mortgage amount.
4. Calculate the maximum monthly mortgage payment you can afford.Generally, the banks will allow people to take out a mortgage that is approximately equal to 30 percent of their gross monthly income. Depending on your personal circumstances, it may not be wise to take the largest mortgage possible. Consider your other long and short-term expenses such as tuition for yourself or your children, a new car, or vacations. Also be sure to factor in monthly retirement savings.
5. Anticipate higher interest rates.Recalculate the above maximum monthly mortgage payment based on interest rates that are two or three percent higher than current rates. Ask yourself if you could afford to pay a higher monthly payment without infringing on other commitments
6. Determine your cash flow at the time of purchase.There are various fees involved in closing a deal including the down payment, closing costs (federal and property taxes, appraisal fees, title insurance, survey fees, etc.) and home insurance. If you are moving from a rental suite, you should also be prepared for expenses that may have been incorporated into your rent such as heat, hot water, electricity and cable service.
7. Budget for any repairs and maintenance that may be required in your new home.Sometimes people purchase a 'fixer-upper' because the home has other redeeming features such as a large backyard or proximity to schools or parks. If your new home will require repairs or maintenance be sure to budget for these expenses. For example, a bedroom renovation can wait for a few months but most families cannot go a day without a functioning water heater!
8. Get your paperwork in order.Lenders will often need to see bank statements, pay stubs, and tax documents for the past two years. If you are self-employed, tax documents, bank statements and collateral such as a vehicle or other property are important criteria to securing a mortgage
9. Get pre-approved for a loan.Once you have calculated a budget you can live with, approach a lender to find out if you can get approved for a mortgage and how much you can spend on a home. Being pre-approved can put you in a stronger position when you make an offer and can save you valuable time in a seller’s market.
Buying a home is not only a lifestyle change; it is an important investment. Making the most of your investment means planning ahead to find the right home, the best rates and the ideal time for you to enter the market.