When schoolteacher Joshua Ogden decided to buy property in the remote B.C. town of Kyuquot, he faced an inconvenient dilemma.
Ogden learned banks were skeptical about providing mortgages to buy property in the tiny community on Vancouver Island’s northwest coast. Banks in Campbell River told him a regular mortgage was impossible. Private lenders, meanwhile, would require a 35 per cent down-payment with a minimum seven per cent interest rate.
Independent mortgage brokers pointed out that no bank or financial institution will lend to a place with limited accessibility. Kyuquot is accessible only by boat or float-plane.
Matt Bruining, manager of Royal Bank of Canada’s Campbell River branch confirmed Ogden’s story.
He said that while the lending policy for the bank is standard throughout the country, there are external factors to be considered if the property is not in a “service area.” Properties that lack easy access to fire-safety services, are examples of what the bank considers a “non-service” area. Insurance, and the cost of maintaining the property are also other criteria that weigh in on the lending decision.
So when a person with a good credit score can’t get a mortgage for a property in such areas, Bruining said the bank is “not declining people, but it is declining the property.”
Ed Handja, is a realtor with BC Oceanfront Properties. In his 25-year career, he has sold six properties in Kyuquot and considers it a “limited market,” meaning properties there can typically take anywhere from two months to two years to sell. Most banks consider that a financial risk not worth taking.
“Banks aren’t really comfortable because they do know enough that if they end up taking a property in foreclosure situation, it could take couple of months or years for them to sell it and they don’t want to get themselves into that situation,” said Handja.
Kyuquot is a vibrant community for four months of the year. However, at other times, outside of the Kyuquot Checleseht First Nation treaty land, it is almost a ghost town. On Walters Island where Ogden lives, most homes are owned by summer residents who use it as a holiday home.
Despite that, Ogden said renting was not easy either.
“Of the properties outside Kyuquot Checleseht First Nation treaty land, majority sit vacant for much of the year – unavailable to rent or purchase,” said Ogden.
Home owners are not comfortable giving out their properties for rent. Donna Holmes Vernon, a home owner on Walters Island who rented her place three times in the past said, landlords who don’t live in Kyuquot face “serious limitations” when it came to maintenance.
First of all, there was always damage done, said Vernon. Secondly, insurance prices and hydro rates on Kyuquot are exorbitantly high.
A lot of “outsiders” have bought property in Kyuquot because they had the money to pay up front said Eric Gorbman, who resides and runs a restaurant on Walters Island. Twenty years ago when Gorbman, an American, bought his property, locals were horrified, he said.
But the trend continued for a while when Kyuquot’s real estate was in demand by the “million-dollar club” of Americans, Vancouver-based tycoons, and out-of-province buyers who “gobbled” up property when it became available.
However, after the 2008 financial crisis in U.S., demand decreased. The owner of one of the last houses sold on Walters Island had to lower his price to the point where he literally had to give it away, said Gorbman.
The dilemma is always going to be a “circular issue,” said Gorbman and added that since locals cannot afford to buy houses, outsiders will continue to buy houses, most of which will be left vacant when they’re not around. He said this is something the provincial government needs to figure out.
“What Kyuquot needs to survive are young families, who can be assets to the community. But if they can’t find places to live, it’s a different thing altogether.”
TORONTO – One expert predicts Ottawa‘s changes to mortgage rules will help spur demand among potential homebuyers but says policies aimed at driving new supply are needed to address the “core issues” facing the market.
The federal government’s changes, set to come into force mid-December, include a higher price cap for insured mortgages to allow more people to qualify for a mortgage with less than a 20 per cent down payment.
The government will also expand its 30-year mortgage amortization to include first-time homebuyers buying any type of home, as well as anybody buying a newly built home.
CIBC Capital Markets deputy chief economist Benjamin Tal calls it a “significant” move likely to accelerate the recovery of the housing market, a process already underway as interest rates have begun to fall.
However, he says in a note that policymakers should aim to “prevent that from becoming too much of a good thing” through policies geared toward the supply side.
Tal says the main issue is the lack of supply available to respond to Canada’s rapidly increasing population, particularly in major cities.
This report by The Canadian Press was first published Sept. 17,2024.
OTTAWA – The Canadian Real Estate Association says the number of homes sold in August fell compared with a year ago as the market remained largely stuck in a holding pattern despite borrowing costs beginning to come down.
The association says the number of homes sold in August fell 2.1 per cent compared with the same month last year.
On a seasonally adjusted month-over-month basis, national home sales edged up 1.3 per cent from July.
CREA senior economist Shaun Cathcart says that with forecasts of lower interest rates throughout the rest of this year and into 2025, “it makes sense that prospective buyers might continue to hold off for improved affordability, especially since prices are still well behaved in most of the country.”
The national average sale price for August amounted to $649,100, a 0.1 per cent increase compared with a year earlier.
The number of newly listed properties was up 1.1 per cent month-over-month.
This report by The Canadian Press was first published Sept. 16, 2024.
MONTREAL – Two Quebec real estate brokers are facing fines and years-long suspensions for submitting bogus offers on homes to drive up prices during the COVID-19 pandemic.
Christine Girouard has been suspended for 14 years and her business partner, Jonathan Dauphinais-Fortin, has been suspended for nine years after Quebec’s authority of real estate brokerage found they used fake bids to get buyers to raise their offers.
Girouard is a well-known broker who previously starred on a Quebec reality show that follows top real estate agents in the province.
She is facing a fine of $50,000, while Dauphinais-Fortin has been fined $10,000.
The two brokers were suspended in May 2023 after La Presse published an article about their practices.
One buyer ended up paying $40,000 more than his initial offer in 2022 after Girouard and Dauphinais-Fortin concocted a second bid on the house he wanted to buy.
This report by The Canadian Press was first published Sept. 11, 2024.
