The cost of borrowing for a home is predicted to get a little cheaper this year.
That’s according to the latest mortgage rate forecast from the B.C. Real Estate Association.
“The average contract rate for 5-year mortgages has declined about 30 basis points from its peak in 2018, reaching 3.44 per cent in March,” the BCREA states in a two-page report. “Unfortunately, this still means a stress test rate of 5.44 per cent, even for the highest quality borrowers.”
However, the association points out that if five-year bond yields remain at the current level, “a 5-year qualifying rate of under 5 per cent should follow suit.”
The contract rate refers to the interest percentage listed on the face of a note or a bond.
The qualifying rate refers to a lender’s determination of what a borrower can afford. This takes into account a person’s income, debt obligations, utility, and living costs, as well as the amortization period and mortgage rate.
The qualifying rate is forecast to fall to 4.99 percent in the second quarter and 4.84 percent in the third quarter, before rising to 4.99 percent in the fourth quarter.
“While there is an outside chance of a rate cut from the Bank of Canada, our baseline is for the Bank to remain on hold for 2019,” the BCREA states. “Therefore, we are forecasting no change in the prime rate, from which variable rates are discounted.”
The BCREA predicts that the qualifying rate will rise to between 5.14 percent and 5.34 percent in 2020.
Metro Vancouverites carry large debt loads
According to the Canada Mortgage and Housing Corporation, Metro Vancouver leads the country in the ratio of liabilities to annual income at 242 percent.
The mortgage debt-to-interest ratio in this region is 178 percent, which is three times the figure in St. John, New Brunswick, which has the lowest rate in the country.
In October 2017, the Office of the Superintendent of Financial Institutions announced that the minimum qualifying rate for uninsured mortgages to be the greater of two figures:
* the five-year benchmark rate published by the Bank of Canada;
* or the contractual mortgage rate plus two percent.
This meant that many homebuyers could not take out as large a mortgage, reducing the value of what they could afford to purchase.
That, in turn, is one of the factors cited in the monumental slowdown in the Metro Vancouver housing market in 2018.
The BCREA report questions whether these new mortgage stress-test rules can continue to apply to Canadians with more than 20 percent in home equity.
That’s because the association maintains that they “will be stress tested at a rate much higher than what we estimate as a long-run equilibrium mortgage rate”.
“Given the disruption caused in Canadian housing markets by the stress test at the presently lower rates, the stress test is not likely to be sustainable in the long-run as currently constituted,” the BCREA declares.
A Calgary entrepreneur has launched an innovative real estate company offering made-in-Alberta technology for homebuyers and sellers in Calgary and Edmonton.
Bōde is an online peer-to-peer platform directly connecting buyers and sellers so they can work out a deal on their own time and on their own terms, without a real estate agent, thus saving consumers money.
“There is a lot of supply in the Alberta market right now and people are motivated to keep as much of their home value as possible,“ said Robert Price, CEO of Bōde. “So, the timing is ideal because the cost savings are dramatic, and the result is that homes sell faster, buyers pay less and sellers make more.
“It’s creating a direct relationship in a similar way that Autotrader or Airbnb or Amazon or eBay or a number of other very successful software services have to establish a more efficient and more customer-centric experience and eliminate the need for agents to middleman the process.”
Price said the listing service is aimed at a large and growing market of digital consumers who are already comfortable making large purchases online.
“The buyer can save money on an offer. The seller can price more competitively and still make the same amount or more. And the home sells faster. So we really see it as a competitive advantage versus the vast majority of the market that’s still doing it with the traditional four per cent commission structure. We’re at one per cent so 75 per cent cheaper,” he said.
“We’ve built what we’re calling the Bōdiverse, which is a marketplace of experts who are offering services that you need to be successful in the process. Lawyers, inspectors, appraisers, stagers, all those competencies that you need. You’re able to transact with them knowing their pricing.”
The real estate platform charges a flat one per cent fee once a property sells.
The process begins by a seller listing a property on the website, which takes about 15 minutes. Once it’s listed, the company will directly market that listing through other channels, including Realtor.ca, Zillow and 30 other websites, including Facebook Marketplace and Kijiji.
The system includes ways to make offers on properties and sign contracts, with a checklist to close with lawyers and transfer of fees.
Price said a model has been created that doesn’t require any human intervention from the start to the finish, just people’s interaction with the platform.
“We believe that homeowners are the true experts on their homes. Once people are armed with robust information and the tools to simplify the process, they are fully willing and capable to take the reins on real estate transactions,” said Price.
“We love Alberta and our family has been proud to be leaders in the pursuit of a diversified economy that does not simply rely on energy tax revenue. We have the experience that tells us when you create the right customer-centric answer, it becomes exportable. We want to prove that it works here and take it across Canada and beyond.”
Price said the company is planning to expand across the province in the coming weeks and upon that success, expand across Canada and internationally.
U.S. private equity firm Blackstone Group Inc said on Wednesday it has raised the largest ever real estate fund, amassing $20.5 billion to be invested in property assets around the world.
Large buyout firms such as Blackstone have been attracting a lot of capital from investors seeking higher returns not available in public markets.
The capital ready to be deployed has swollen to over $2 trillion, according to data provider Prequin, driving up asset prices and deal making activity.
Blackstone said in a statement the fund, named Blackstone Real Estate Partners IX (BREP IX), has already made its first investment: the purchase of U.S. industrial warehouse properties from Singapore-based logistics provider GLP for $18.7 billion.
The deal, in which BREP IX co-invested with other Blackstone funds, was announced in June and is expected to close in coming weeks, the company said.
Blackstone is the world’s largest alternative asset manager and one of the biggest property investors, with $154 billion in real estate assets under management. (Reporting by Chibuike Oguh; Editing by Sandra Maler)
I’ve often thought about the many ways there are to make money – and there are many. Throughout the years, we have created side hustles, worked hard at our jobs, built an investment portfolio and we have bought and sold a lot of real estate.
We love real estate, and over the past 25 years, we have bought and sold six principle residents and six recreational properties. The majority of our housing transactions made money, and we broke even on a couple. There have also been lessons learned along the way.
Here are a few.
1. Listen to the experts. They are qualified in their field so believe them when they say location sells. Try not to be the most expensive house on the street and don’t let your emotions drive your buying or selling decisions.
2. Don’t fall in love with your assets, or in this case, your home. Sometimes you need to make tough decisions financially and that may mean selling the family home. Your assets will never love you back but your family will.
3. When selling, don’t be greedy. If your home isn’t selling, it is priced too high. Listen to what prospective buyers are silently telling you as they move on and check out the next listing.
4. Get your home ready to sell as soon as you move in. Life has a funny way of throwing you a curve ball when you least expect it. Curb appeal matters but the inside likely matters more. This is where you live. Keep it neutral and up to date. Look at your home as a prospective buyer would. Small changes can yield big financial results.
5. Avoid concentration risk. Don’t put all your money in the real estate basket.
6. Take the time to save up the down payment. Consider all-in and all-out costs such as insurance, appraisals, real estate, moving, land transfer costs and the dreaded unknown repairs. There will always be something that requires your financial attention.
7. Don’t buy beyond your means. I’ve been there and it isn’t fun. No one wants to be 100 per cent house poor. You aren’t expected to be flush with cash when you are new homeowner but you also don’t want to live life worrying about the next mortgage payment each month.
8. Buy low and sell high. Even if you love real estate you are always scouting out new opportunities, this investment mantra still must hold true.
9. Focus on your stage of life. Do you really want to be building your dream home for your family as your children head off to university or are beginning to build their own lives under their own roof? Just because you want your family there doesn’t mean they will be. Buy for reality not dreams.
10. Put in offers earlier in the week. You are more likely to have less competition and more likely to get a deal if you do. Everyone is out looking on the weekends. Don’t follow the herd mentality.
11. Take advantage of the capital gains exemption on your principle residence. This is one of the best tax-savings opportunities to create wealth I know.