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Plenty of room for house prices in Canada to rise as interest rates stay low – CBC.ca

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In what’s shaping up as a post-pandemic battle for talent, an Ontario company has a plan to harness the Canadian itch to get into the property market with a scheme to attract and keep young employees.

Friday’s jobs numbers will give us a better idea of whether the incentive is necessary, but Crozier Consulting Engineers says it is offering new employees $20,000 to make it easier to fight their way into an overheated real estate market that simply refuses to die.

We’ll get a reading on the state of the national market next week when the Canadian Real Estate Association comes out with its latest data on resale homes, but Crozier’s housing incentive is only one snippet of news this week that shows — to paraphrase Mark Twain — reports of the demise of the housing market have been greatly exaggerated.

“We have seen first-hand the increasing demand for residential development and the frustrating situations our employees find themselves in, such as extreme bidding wars, when trying to buy their first home in today’s market,” said Nick Mocan, president of the company based in Collingwood, Ont.

Stoking the market

Before you rush to put your name in, some conditions do apply — as such offers always say in the fine print — including that the scheme only works for first-time buyers.

Similar to the federal First Time Home Buyer Incentive program, announced in the 2019 budget, it kind of helps boost the down payment for people, most of them young, struggling to get into a dog-eat-dog real estate market. Latest data from that federal scheme shows that nearly 11,000 people applied for shared equity mortgages, which represents more than $200 million in homebuyer support.

Home prices in Collingwood, Ont., continue to rise as people from bigger cities look for affordable real estate — making it harder for local residents to break into the market. An engineering company in the town is offering new employees $20,000 to make it easier for them to buy a home. (Don Pittis/CBC)

But whether from an employer or from the government, while such incentives give individual recipients an advantage, overall they merely stoke an already hot market that just doesn’t seem to want to cool.

“It’s not really surprising because the cost of borrowing is still low,” said Samantha Brookes, CEO of Toronto brokerage firm Mortgages of Canada. “And as long as the cost of borrowing remains low, you’re always going to have a lot of activity in the market.”

And there is no question that interest rates are staying low. For those who fit the criteria, mortgage broker Ratehub.ca this week declared a new record low for a five-year variable rate mortgage of 0.98 percent. At that rate, a million-dollar house will cost you $10,000 a year in interest.

No wonder the Toronto Regional Real Estate Board (TRREB) upped its 2021 forecast for this year. Previously the board, which covers properties in the Greater Toronto Area, predicted there would be 105,000 transactions with an average selling price of $1.025 million. It has now increased that outlook to 115,000 sales at prices averaging $1.070 million.

‘Persistent lack of inventory’

However, that latest higher forecast is based on an exceptional run of sales at the beginning of the year — and sales are now expected to trend below those record levels, the group announced Tuesday. That said, TRREB market analyst Jason Mercer expects a shortage of houses on the market will keep prices high.

“A persistent lack of inventory across most segments of the market will keep competition between buyers strong, resulting in an average selling price well above $1 million through the end of 2021,” Mercer said in a news release announcing the latest data.

Just like statistics from the Real Estate Board of Greater Vancouver this week, sales were down month over month in Toronto. But Vancouver data shows they were still strong by other measures. Sales in Metro Vancouver were up more than 50 per cent from the depths of the pandemic, but more significantly they were 18 per cent higher than the 10-year average for the month of June.

According to statistics released by the Real Estate Board of Greater Vancouver this week, house sales in June were down 11.9 per cent from May. But they were 18 per cent higher than the 10-year average for the month of June. (Evan Mitsui/CBC)

The debate continues over whether the continued buying frenzy, driven by low interest rates, needs to be controlled by tighter regulations to prevent a bubble that would pop once interest rates begin to rise.

But if the Canada Mortgage and Housing Corporation (CMHC), traditionally the country’s largest mortgage insurer, had hoped to use its clout to bring the market under control, that was reversed this week — one more potential boost to the market.

The housing agency announced last summer that it planned to raise its underwriting standards to require higher credit scores, lower debt ratios and a ban on borrowing money for a down payment if it was going to insure someone’s mortgage.

For those who don’t know, mortgage insurance protects the lender, not you, the mortgage borrower. By lifting its standards, the CMHC hoped to concentrate the minds of banks and other lenders, forcing them to lend only to those least likely to default in a future recession.

Private-sector competition

But this week, the government agency announced it was reverting to the old lower standards after private insurers Canada Guaranty and Genworth, now operating under the name Sagen, failed to follow suit. So borrowers simply switched from CMHC to its private competitors, resulting in a plunge in the federal agency’s market share.

A debate continues over whether the cause of rising prices is a shortage of housing or whether — as Bank of Canada governor Tiff Macklem has warned — it is increasingly driven by a rush to buy properties to take advantage of their rising value as returns on other safe investments stagnate.

From her experience, Brookes of Mortgages of Canada is one of those who believe the market is at least partly driven by new Canadians getting on the property ladder, but she sees an end in sight to soaring prices.

“This will not continue, I can guarantee you that much,” she said. “Because at some point, markets have to level out, and that’s going to happen once rates start to increase.”

WATCH | Tougher stress test makes it harder to get a mortgage in Canada:

As of June 1, Canadian homebuyers will face a tougher mortgage stress test. The new rules will make it harder to get into the housing market now, but could make it easier for others down the road. 1:57

But at the Collingwood engineering firm, Nick Mocan said that the company’s real estate incentive is paying off, allowing employees to be able to find a place to live near town rather than making long commutes. So far, nine employee have received the benefit, and he is certain it inspires loyalty. Other companies looking to find and retain staff may be taking note.

“The interest is rather overwhelming,” Mocan said.

Follow Don Pittis on Twitter @don_pittis

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Here are some facts about British Columbia’s housing market

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Housing affordability is a key issue in the provincial election campaign in British Columbia, particularly in major centres.

Here are some statistics about housing in B.C. from the Canada Mortgage and Housing Corporation’s 2024 Rental Market Report, issued in January, and the B.C. Real Estate Association’s August 2024 report.

Average residential home price in B.C.: $938,500

Average price in greater Vancouver (2024 year to date): $1,304,438

Average price in greater Victoria (2024 year to date): $979,103

Average price in the Okanagan (2024 year to date): $748,015

Average two-bedroom purpose-built rental in Vancouver: $2,181

Average two-bedroom purpose-built rental in Victoria: $1,839

Average two-bedroom purpose-built rental in Canada: $1,359

Rental vacancy rate in Vancouver: 0.9 per cent

How much more do new renters in Vancouver pay compared with renters who have occupied their home for at least a year: 27 per cent

This report by The Canadian Press was first published Oct. 17, 2024.

The Canadian Press. All rights reserved.

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B.C. voters face atmospheric river with heavy rain, high winds on election day

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VANCOUVER – Voters along the south coast of British Columbia who have not cast their ballots yet will have to contend with heavy rain and high winds from an incoming atmospheric river weather system on election day.

Environment Canada says the weather system will bring prolonged heavy rain to Metro Vancouver, the Sunshine Coast, Fraser Valley, Howe Sound, Whistler and Vancouver Island starting Friday.

The agency says strong winds with gusts up to 80 kilometres an hour will also develop on Saturday — the day thousands are expected to go to the polls across B.C. — in parts of Vancouver Island and Metro Vancouver.

Wednesday was the last day for advance voting, which started on Oct. 10.

More than 180,000 voters cast their votes Wednesday — the most ever on an advance voting day in B.C., beating the record set just days earlier on Oct. 10 of more than 170,000 votes.

Environment Canada says voters in the area of the atmospheric river can expect around 70 millimetres of precipitation generally and up to 100 millimetres along the coastal mountains, while parts of Vancouver Island could see as much as 200 millimetres of rainfall for the weekend.

An atmospheric river system in November 2021 created severe flooding and landslides that at one point severed most rail links between Vancouver’s port and the rest of Canada while inundating communities in the Fraser Valley and B.C. Interior.

This report by The Canadian Press was first published Oct. 17, 2024.

The Canadian Press. All rights reserved.

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No shortage when it comes to B.C. housing policies, as Eby, Rustad offer clear choice

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British Columbia voters face no shortage of policies when it comes to tackling the province’s housing woes in the run-up to Saturday’s election, with a clear choice for the next government’s approach.

David Eby’s New Democrats say the housing market on its own will not deliver the homes people need, while B.C. Conservative Leader John Rustad saysgovernment is part of the problem and B.C. needs to “unleash” the potential of the private sector.

But Andy Yan, director of the City Program at Simon Fraser University, said the “punchline” was that neither would have a hand in regulating interest rates, the “giant X-factor” in housing affordability.

“The one policy that controls it all just happens to be a policy that the province, whoever wins, has absolutely no control over,” said Yan, who made a name for himself scrutinizing B.C.’s chronic affordability problems.

Some metrics have shown those problems easing, with Eby pointing to what he said was a seven per cent drop in rent prices in Vancouver.

But Statistics Canada says 2021 census data shows that 25.5 per cent of B.C. households were paying at least 30 per cent of their income on shelter costs, the worst for any province or territory.

Yan said government had “access to a few levers” aimed at boosting housing affordability, and Eby has been pulling several.

Yet a host of other factors are at play, rates in particular, Yan said.

“This is what makes housing so frustrating, right? It takes time. It takes decades through which solutions and policies play out,” Yan said.

Rustad, meanwhile, is running on a “deregulation” platform.

He has pledged to scrap key NDP housing initiatives, including the speculation and vacancy tax, restrictions on short-term rentals,and legislation aimed at boosting small-scale density in single-family neighbourhoods.

Green Leader Sonia Furstenau, meanwhile, says “commodification” of housing by large investors is a major factor driving up costs, and her party would prioritize people most vulnerable in the housing market.

Yan said it was too soon to fully assess the impact of the NDP government’s housing measures, but there was a risk housing challenges could get worse if certain safeguards were removed, such as policies that preserve existing rental homes.

If interest rates were to drop, spurring a surge of redevelopment, Yan said the new homes with higher rents could wipe the older, cheaper units off the map.

“There is this element of change and redevelopment that needs to occur as a city grows, yet the loss of that stock is part of really, the ongoing challenges,” Yan said.

Given the external forces buffeting the housing market, Yan said the question before voters this month was more about “narrative” than numbers.

“Who do you believe will deliver a better tomorrow?”

Yan said the market has limits, and governments play an important role in providing safeguards for those most vulnerable.

The market “won’t by itself deal with their housing needs,” Yan said, especially given what he described as B.C.’s “30-year deficit of non-market housing.”

IS HOUSING THE ‘GOVERNMENT’S JOB’?

Craig Jones, associate director of the Housing Research Collaborative at the University of British Columbia, echoed Yan, saying people are in “housing distress” and in urgent need of help in the form of social or non-market housing.

“The amount of housing that it’s going to take through straight-up supply to arrive at affordability, it’s more than the system can actually produce,” he said.

Among the three leaders, Yan said it was Furstenau who had focused on the role of the “financialization” of housing, or large investors using housing for profit.

“It really squeezes renters,” he said of the trend. “It captures those units that would ordinarily become affordable and moves (them) into an investment product.”

The Greens’ platform includes a pledge to advocate for federal legislation banning the sale of residential units toreal estate investment trusts, known as REITs.

The party has also proposed a two per cent tax on homes valued at $3 million or higher, while committing $1.5 billion to build 26,000 non-market units each year.

Eby’s NDP government has enacted a suite of policies aimed at speeding up the development and availability of middle-income housing and affordable rentals.

They include the Rental Protection Fund, which Jones described as a “cutting-edge” policy. The $500-million fund enables non-profit organizations to purchase and manage existing rental buildings with the goal of preserving their affordability.

Another flagship NDP housing initiative, dubbed BC Builds, uses $2 billion in government financingto offer low-interest loans for the development of rental buildings on low-cost, underutilized land. Under the program, operators must offer at least 20 per cent of their units at 20 per cent below the market value.

Ravi Kahlon, the NDP candidate for Delta North who serves as Eby’s housing minister,said BC Builds was designed to navigate “huge headwinds” in housing development, including high interest rates, global inflation and the cost of land.

Boosting supply is one piece of the larger housing puzzle, Kahlon said in an interview before the start of the election campaign.

“We also need governments to invest and … come up with innovative programs to be able to get more affordability than the market can deliver,” he said.

The NDP is also pledging to help more middle-class, first-time buyers into the housing market with a plan to finance 40 per cent of the price on certain projects, with the money repayable as a loan and carrying an interest rate of 1.5 per cent. The government’s contribution would have to be repaid upon resale, plus 40 per cent of any increase in value.

The Canadian Press reached out several times requesting a housing-focused interview with Rustad or another Conservative representative, but received no followup.

At a press conference officially launching the Conservatives’ campaign, Rustad said Eby “seems to think that (housing) is government’s job.”

A key element of the Conservatives’ housing plans is a provincial tax exemption dubbed the “Rustad Rebate.” It would start in 2026 with residents able to deduct up to $1,500 per month for rent and mortgage costs, increasing to $3,000 in 2029.

Rustad also wants Ottawa to reintroduce a 1970s federal program that offered tax incentives to spur multi-unit residential building construction.

“It’s critical to bring that back and get the rental stock that we need built,” Rustad said of the so-called MURB program during the recent televised leaders’ debate.

Rustad also wants to axe B.C.’s speculation and vacancy tax, which Eby says has added 20,000 units to the long-term rental market, and repeal rules restricting short-term rentals on platforms such as Airbnb and Vrbo to an operator’s principal residence or one secondary suite.

“(First) of all it was foreigners, and then it was speculators, and then it was vacant properties, and then it was Airbnbs, instead of pointing at the real problem, which is government, and government is getting in the way,” Rustad said during the televised leaders’ debate.

Rustad has also promised to speed up approvals for rezoning and development applications, and to step in if a city fails to meet the six-month target.

Eby’s approach to clearing zoning and regulatory hurdles includes legislation passed last fall that requires municipalities with more than 5,000 residents to allow small-scale, multi-unit housing on lots previously zoned for single family homes.

The New Democrats have also recently announced a series of free, standardized building designs and a plan to fast-track prefabricated homes in the province.

A statement from B.C.’s Housing Ministry said more than 90 per cent of 188 local governments had adopted the New Democrats’ small-scale, multi-unit housing legislation as of last month, while 21 had received extensions allowing more time.

Rustad has pledged to repeal that law too, describing Eby’s approach as “authoritarian.”

The Greens are meanwhile pledging to spend $650 million in annual infrastructure funding for communities, increase subsidies for elderly renters, and bring in vacancy control measures to prevent landlords from drastically raising rents for new tenants.

Yan likened the Oct. 19 election to a “referendum about the course that David Eby has set” for housing, with Rustad “offering a completely different direction.”

Regardless of which party and leader emerges victorious, Yan said B.C.’s next government will be working against the clock, as well as cost pressures.

Yan said failing to deliver affordable homes for everyone, particularly people living on B.C. streets and young, working families, came at a cost to the whole province.

“It diminishes us as a society, but then also as an economy.”

This report by The Canadian Press was first published Oct. 17, 2024.

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