Canada is easing up on its mortgage lending rules to give buyers a bit more purchasing power, but the changes will likely jack up home price in the city, Toronto realtors say.
“It’s going to blow up the market,” says Meray Mansour, a Toronto-based realtor with Re/Max Hallmark Realty.
On February 17, finance minister Bill Morneau announced changes to the way the so-called “stress test” is calculated.
Since January 2018, potential home buyers making a down payment of less than 20 per cent have been required to purchase government-backed mortgage insurance. Qualifying for that insurance without paying premiums meant succeeding in a stress test that calculates whether borrowers could afford their mortgage at either the five-year average posted rate or two per cent more than their actual mortgage rate – whichever is higher.
“For many middle-class Canadians, their home is the most important investment they will make in their lifetime,” Morneau said in a statement. “Our government has a responsibility to ensure that investment is protected and to support a stable housing market. The government will continue to monitor the housing market and make changes as appropriate. Reviewing the stress test ensures it is responsive to market conditions.”
The new stress test, which takes effect April 6, will calculate whether borrowers can afford the weekly median five-year fixed insured mortgage rate (a more up-to-date measure) plus two per cent.
Realtors predict the relaxed stress test combined with lower interest rates, hot demand for Toronto real estate and low inventory will bring the market back to the highs we saw in 2017.
“This is not a significant change,” says Odeen Eccleston, a broker with Right At Home Realty and expert on HGTV’s Hot Market.
“There certainly is room for a slight bump,” adds Stephen Parks, a mortgage broker with RedPath Financial, who argues that there’s more of a perceived gain than actual gain to the new stress test rules. “If you talk about someone who has a $100,000 gross income, they’re going to see a three per cent gain in what they qualify for. “
Today, a borrower would be stress tested at the posted rate, which is 5.19 per cent. But borrowers are acquiring mortgages at around 2.89 per cent. If you use that rate as the median with the new stress test rules, borrowers would only need to afford a rate of 4.89 per cent. The difference is only 0.3 per cent, making for a rather slight improvement on purchasing power. In borrowing terms, it means a home buyer could go from getting a $515,000 mortgage to $530,000.
The changes also only apply to insured mortgages for homes purchased at under $1 million. Homes over $1 million are still subject to the old stress test, but Parks suspects the new rules will be adopted for those larger purchases in time for spring. Not that the change will make a huge difference for million-dollar home sales, either.
“If you’re buying a $2 million property, does $60,000 actually make a huge difference?” Mansour asks. “Maybe not. Really what it’s going to do is encourage buyers who are on the fence. If they can almost afford something but are not quite there, it’s going to give them that push.”
But even if the practical effect is a bit subdued, Mansour argues that public perception will fuel the market and drive prices up to the way they were pre-stress test.
“If people can afford more they will spend more,” says Parks. “That’s the actual gain. If somebody previously could afford, $515,000, they’re going to spend up to that limit. Well now they’re going to spend up to $530,000. But does that mean that they’re buying anything different? Likely not. They’ll probably just buy the same thing.
“The price will just go up by a bit because everyone else who is bidding on it can afford more now too,” he continues.
Mansour and Eccleston recall 2017 when the stress test and a foreign buyers tax were being discussed as ways to cool the hot market. Potential buyers rushed to get in before the new rules were implemented. When the stress test was implemented, Toronto house prices levelled out while sales in the 905 plummeted.
“However, the condo market exploded because of the stress test,” says Mansour. “All of a sudden condo prices go through the roof. In urban neighbourhoods, condo prices went up at the rate that homes used to.
“Now people are saying, ‘Oh shit, condo prices are almost the same as houses for the same square footage but we have to pay maintenance fees.’ So they’re going back to buying houses, increasing the demand for houses again.”
Mansour expects that the renewed appetite for houses in concert with the new stress test, competitive mortgage rates crawling down towards 2.6 per cent and low supply will bring two terrifying words back into the Toronto market: bidding wars.
“A lot of this is psychological,” says Eccleston. “This gives people confidence. They’re like, ‘Oh my god, now’s the time, I don’t want to miss out.”
“This spring is going to be nuts,” Mansour adds. “I can feel the buyers getting ready.”
Google real estate executive says 5% more workers coming in to office each week
Alphabet Inc’s Google has seen an increasing number of employees coming in to its offices each week, particularly younger workers, the company’s real estate chief said during an interview at the Reuters Next conference on Friday.
On Thursday, Google indefinitely pushed back the mandated return date for employees due to concerns about the Omicron variant. The company had previously said its 150,000 global employees could be required to come in to the office as soon as Jan. 10.
Nevertheless, David Radcliffe, Google’s vice president for real estate and workplace services, said many Googlers are returning of their own volition. About 40% of its U.S. employees on average came in to the office daily in recent weeks, up from 20-25% three months ago, he said. Globally, 5% more employees are returning to offices week after week, he added.
“People are actually showing voluntarily that they want to be back in the office,” Radcliffe said. “We’re moving in the right direction.”
Younger employees and those who joined Google more recently have been coming in at higher rates, seeking opportunities to learn from colleagues, Radcliffe added.
Google expects workers in the office at least three days a week once it mandates a new return date.
Based on feedback from those already back, it is redesigning floor plans to increase private, quiet spaces for distraction-free individual work and adding conferencing and other collaboration areas in open spaces both indoors and outdoors.
Real estate and human resources experts have considered Google a trailblazer for the past 20 years in sustainable office design and variety of workplace perks, including free meals, massages and gyms.
To extend those sustainability and wellness benefits to remote work, Google has encouraged employees to buy carbon offsets and non-toxic furniture for their home offices. It also has provided free cooking classes and discounts to fitness studios near workers’ homes.
“It was amazing how many employees had really never cooked themselves,” Radcliffe said.
(Reporting by Paresh Dave in Oakland, Calif., and Julia Love in San Francisco; Editing by Sonya Hepinstall and Matthew Lewis)
Calgary real estate is on a late-year roll – Western Investor
With $468 million in sales – not counting the $1.2-billion Bow office tower purchase that has yet to close – in the third quarter (Q3) 2021, Calgary is on track to top $2 billion in commercial and industrial real estate sales this year, according to Altus Group.
Meanwhile housing sales in November reached 2,110 transactions, just shy of the record for the month set in 2005, as the sales-to-new-listing ratio hit a blistering 100 per cent.
Altus reports that the Calgary’s commercial real estate market recorded 115 transactions for a total investment volume of $468 million in the third quarter, bringing the total investment volume for the year close to $2 billion. The total sales volume was up 37 per cent from the first three quarters of 2020.
Industrial sales led the commercial and industrial assets investment parade in the third quarter, with 27 transactions valued at $188 million. This sector was dominated by two substantial distribution logistics centre deals. These were the $69.7 million purchase of a Canadian Tire 496,000-square-foot distribution centre by Skyline Commercial Real Estate Investment Trust (REIT); and the $32.18 million sale of the Valad Construction headquarters industrial and office complex to Nexus REIT.
The ICI (industrial-commercial-institutional) land sector was the second most active in terms of dollar volume with 38 transactions amounting to $83 million, up 62 per cent from Q3 of 2020.
The multi-family rental apartment sector saw 15 transactions totalling $82 million, a 70 per cent increase from the same point last year, and only a marginal decrease from the previous quarter.
The retail sector tallied $44 million in transactions amounting to a 110 per cent increase from Q3 2020.
The biggest retail sale was the $8.35 million purchase of the Hansen Ranch Plaza, a near-12,000-square-foot retail centre in northwest Calgary, bought by local investors.
“Calgary’s beleaguered office market has remained flat, with five transactions amounting to $15 million, a negligible change from the same quarter last year,” noted Ben Tatterton, manager of data solutions at Altus, who prepared the Calgary report with national research manager Krut DSesai.
The landmark sale of the Bow office tower will be registered in a future quarter, Altus noted.
The two-million-square-foot Bow tower was purchased in August from Toronto-based H&R REIT by Oak Street Real Estate Capital, of Chicago, for $1.216 million, in a deal expected to close by the end of this year.
The Calgary Real Estate Board (CREB) reported a rush of home buyers in November.
“Lending rates are expected to increase next year, which has created a sense of urgency among purchasers who want to get into the housing market before rates rise,” said CREB chief economist Ann-Marie Lurie. She added that supply levels have tightened, causing prices to rise.
The benchmark composite home price in November was $461,000, up nearly 9 per cent from November of 2020, according to Lurie.
Saskatchewan real estate market conditions making it hard for buyers: realtors – Globalnews.ca
“The really good houses, you pretty much have to go the exact same day as (they’re) listed, and even then you probably are going to get into a bidding war,” he said Friday.
He adds that bidding wars over Saskatoon homes are happening at a rate he has never seen in his 11 years working in Saskatchewan.
“(Last) Friday I got into two bidding wars with two different clients,” he laughed. “That’s not something you see too much of.”
A new report from RE/MAX shows this is the case across the country, making it harder for first-time homebuyers to get into the market.
RE/MAX Canada Regional Executive Vice President Elton Ash says this competition could continue.
“In March, we’re anticipating the Bank of Canada to start edging the overnight rate up with inflation concerns and that sort of thing,” he said Thursday. “That’s going to push buyers suddenly, because they’ve been looking and they’re going to want to lock in at a lower rate.”
Rural Boom: Why millennials are flocking to small town Canada
He said buyers from all across Canada are now seeing the value of an affordable new house in the Prairies.
“People are looking at that and saying, ‘Hey, yeah I might today be working in Toronto but I can work remotely and I can move back home to Saskatchewan where prices are much more affordable; family life will be better and I can work remote,’” Ash explained.
Ens says he’s seen this play out in his day-to-day job, with plenty of newcomers in the last year.
“We’ve seen people from Toronto, Chilliwack, B.C., places like that that are coming here,” he said.
From his perspective, the report is accurate in its prediction that houses will likely only continue to slowly increase in price, but he says a seller’s market won’t always make things easier.
“When you have bidding wars and you have multiple offers it sounds great for a seller,” he explained. “But it’s also very tricky because you could actually lose all the offers because you do something wrong.”
The bottom line, he says, is that Canada is a seller’s market — and Saskatchewan is selling fast.
© 2021 Global News, a division of Corus Entertainment Inc.
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