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This Week’s Top Stories: Banks See Canadian Real Estate Bubble Risks Soar, While Other Countries Move To Cool Markets – Better Dwelling

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Time for your cheat sheet on this week’s most important stories. 

Canadian Real Estate

Bank Of Canada Wants A Housing Bubble, While Other Central Banks Try To Pop Them

The Bank of Canada is embracing fast rising home prices, but that’s not a normal reaction. Especially at this time, in markets with overheated real estate. In France, they’re lowering leverage for buyers, cutting mortgage lengths, and service ratios.

South Korea is going further, looking to limit debt and make speculation unprofitable. The country is even banning mortgages in certain overheated markets.

New Zealand is working together with their central bank, to limit speculation. The government has even openly stated they will be targeting investors.

Monetary policy is often globally linked, injecting cheap money at the same time. However, each country has local issues that need to be addressed differently. Canada embracing higher home prices along with unemployment is a sign it doesn’t have a real economic plan.

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Canadian Real Estate Is “Playing With Fire,” Approaching Classic Bubble: BMO

BMO is warning about bubble risk, and it’s very different from the alarms others rang in 2017. Back then, BMO believed the foreign buyer “mini bubble” price jump was manageable. Today, if mortgage rates rise, it won’t be.

If rates rise to pre-pandemic levels, real estate affordability hits a “classic bubble.” If rates stay the same, and prices continue to rise, it hits that level next year.  All roads lead to unsustainable price levels.

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Canadian Real Estate Prices Have Synchronized, Meaning Bubble Risk Just Soared

Canadian real estate prices are seeing synchronized growth, often a sign of a bubble. Synchronization risk is when local factors are dismissed, and prices all move together. When this happens, buyers dismiss regional differences. Instead, they often just buy because others are. They feel silly for even thinking about risk prior to seeing their peers thrive.

The problem with synchronized risk is, it makes a whole asset class vulnerable to shock. A single unexpected shock can have a ripple effect across multiple markets at once. You’re no longer worrying about issues in Toronto – it’s the whole country.

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Home Prices Are Rising In A Recession Because Central Banks Killed Capitalism

The free market does a great job at regulating borrowing risk. Rates rise when the picture is unknown, helping to reduce leverage for borrowers. Rates fall when the economy is booming, helping to increase leverage for borrowers. It’s a simple but effective process that capitalism uses to reduce exposure.

Now what happens when the state decides people should load up on leverage during a downturn? They eliminate the efficiency of markets, and create moral hazard. Buyers now think if they can send home prices higher during a downturn, surely they won’t let the market crash. Assets are now being bid higher, with the belief the state will intervene in any downside.

Capitalism doesn’t exist without risk. Instead, we’ve adopted a system where the state decides who the winners and losers are. Unfortunately, it seems the state picks the same winners every time. It would be great, if people weren’t on the other end of those economic inefficiencies.

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Canadian Real Estate Prints 19th Quarter In Bubble Territory: US Federal Reserve

Canada is in its 19th quarter of “exuberant” territory, according to the US Federal Reserve. This is when buyers disregard fundamentals, and pay emotional premiums. Fed researches set out to find a “smoking gun” for housing bubbles after the Great Recession. This research is the result of their findings.

Real estate markets are “exuberant” when they have 5 consecutive exuberant quarters. Researchers believe after 5 quarters, the market is inefficient and requires a correction. Canada has done 19 consecutive quarters, or just under 5 years. That’s only 3.5 years if you don’t count the qualifying period. The bubble hasn’t persisted for as long as many think, meaning this hasn’t been a long-term reality. It only feels that way.

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RBC Sees Bank Of Canada Raising Rates Earlier Than Current Guidance

Canada’s largest bank thinks rates may rise faster than current BoC guidance. They see the central bank revising forecasts if the economy continues at this rate. A senior economist at the bank said he’s watching for a reduction in QE in April. If the central bank does taper its purchasing, it’s a reduction in ease. A reduction in easing would be a strong sign things are improving faster than they had forecast.

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Bank Of Canada Will Try To Suppress Rates, Says Housing Is “Stronger Than Expected”

The Bank of Canada made their rate announcement this week, which was widely expected to hold – and it did. Not much of an event, but the notes that accompanied were more interesting. The central bank said they were surprised by real estate demand.

They also reiterated a commitment to flatten the yield curve, to keep cheap money flowing. That might be easier to say than do, considering suppression isn’t effective against inflation driven yields. However, that’s a totally different discussion for another day. Read More

Canadian Households Add $110 Billion To Mortgage Debt In 2020

Concerns that you can’t get people to borrow during a recession are out the window in Canada. In fact, households are now borrowing at a faster rate than before the pandemic. Households had $1.65 trillion in residential mortgage debt in Q4 2020, up 7.1% from a year before. The increase is the fastest rate of growth since 2011, smashing exuberance seen in the past 5 years.

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Canadian Mortgage Delinquencies Fall In 26 Cities, As Markets Flood With Cheap Credit

Canadian mortgage delinquencies are down almost everywhere in the country. Only six major real estate markets saw an uptick in mortgage delinquencies. Another 26 major markets saw the rate fall. The delinquency rates were widely expected to drop, considering deferrals.

However, things might already be changing in the post deferral world. CIBC’s latest quarterly report was only a month later than the above numbers. The data showed Toronto’s uninsured mortgage delinquency rate was 70% higher. It could be a one off, or it could be a new trend. Who knows, but Big Six banks typically see lower arrears, not higher.

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Canada’s Construction Investment May Be Pausing To See If Work-From-Home Sticks

Canada’s work-from-home trend may be forcing some developers to hit pause. Cheap money sent construction investment soaring across the country. Almost all of the growth is in the residential segment though. Despite commercial developers also benefiting from cheap cash, they haven’t scaled much. Clearly, this doesn’t have anything to do with a lack of money. Instead, they’re most likely waiting to see if work-from-home sticks. If it doesn’t, this might actually cause a squeeze in office space.

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Vancouver Real Estate

Even Foreign Real Estate Buyers Are Dumping Vancouver For The Suburbs

BC’s foreign buyers are down, but the few remaining are looking outside of Vancouver. In January, only 22.63% of non-resident real estate purchases were in Greater Vancouver. To contrast, that number was 60% a year before. Either affordability is impacting those wealthy enough to have second homes, or investors are following locals into more affordable markets.

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Hot real estate market sparks warnings to potential buyers as complaints to regulator double

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As home sales in the province continue on a dizzying trajectory, the province’s real estate watchdog and regulator are warning buyers to be wary of what they may be getting into.

The Real Estate Council of B.C. (RECBC) and the Office of the Superintendent of Real Estate said that in the first three months of 2021, they have seen an increase in inquiries and complaints.

Calls to the regulator were up 42 per cent over the previous year, while complaints, such as how offers were made and accepted, were double the number received in the same period in 2020.

“Buying a home is one of life’s biggest financial decisions. There are potential risks at the best of times, but with the added pressure and stress of the current market conditions, those risks are amplified,” Micheal Noseworthy, superintendent of real estate, said in a statement.

 

 

The Real Estate Board of Greater Vancouver says sales in the region have continued at a record-setting pace.

Residential home sales covered by the board totalled 5,708 in March 2021, up 126.1 per cent from March 2020, when the COVID-19 pandemic hit, and up 53.2 per cent from February of this year.

Rural and suburban areas have experienced the biggest spikes.

For the past two weeks, Jay Park has been in the middle of the buying frenzy.

He and his partner are trying to upgrade from their one-bedroom apartment to a two-bedroom condo or townhouse in Vancouver.

“I wish we had done this a month or two ago,” he said.

 

A condo tower under construction is pictured in downtown Vancouver in February 2020. (THE CANADIAN PRESS/Darryl Dyck)

 

Park put an offer on a $1-million condo, $4,000 above asking price.

“To entice the [seller], we put in a subject-free offer, but it wasn’t successful,” he said. “They accepted $110,000 over asking price that was also subject-free.”

The hot market has led to bidding wars. Some would-be buyers have even lined up outside for days to try to get a jump on a property.

Erin Seeley, the CEO of the council, is warning buyers to do their research and be aware of risks before making an offer.

“It’s really important that buyers have engaged with their lender before they’re making offers so they know how to stay within a reasonable budget,” she said.

Seeley said some of the complaints the council has heard from buyers is that they weren’t aware the seller has a right to take an early offer.

“And the seller was really in the driver’s seat about setting the pricing,” she said.

 

Demand continues to outstrip supply for housing in cities like Vancouver. (Rafferty Baker/CBC)

 

Aaron Jasper, a Vancouver realtor, advises clients to avoid cash offers and to include finance clauses even if it may mean they lose a deal.

“There’s a lot of frustration among buyers, feeling pressure to take some risk,” he said.

“You’re better to be delayed perhaps a year getting into the market as opposed to being completely financially ruined.”

Jasper also says realtors are limited in the advice they can give to clients on legal matters, home inspections, potential deficiencies with homes, and financing.

‘Caught up in the craziness’

Other tips from the council include seeking professional advice before making a subject-free offer or proceeding without a home inspection, and speaking to a professional to determine how market conditions may be affecting prices.

Meantime, people like Jay Park say they are still keen to buy. Park has more viewings scheduled and is optimistic.

“It’s a very exciting time for us, but I also don’t want to get caught up in the craziness and make a purchase that’s above our means.”

Source: – CBC.ca

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Black Press Media introduces one of Western Canada's best real estate platforms helping home buyers Find. Love. Live. that new home – Aldergrove Star

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Need an agent who knows the community?

Or, is it time to look for a new place to live, but you don’t know what’s on the market?

Whatever the real estate need is for residents in the communities of British Columbia, Yukon & Alberta, there’s a new way to do that one-stop shopping – by visiting Today’s Home.

The slogan for the site is “Find. Love. Live.”

“We want people to find their dream home, love it, and live in it,” said group publisher Lisa Farquharson.

Building on the success of Black Press Media’s niche digital platforms – Today’s Home brings the same wealth of knowledge and local expertise to the search for a home, be it buying, selling, or even just daydreaming about what changes you can make in the future.

Search hundreds of listings that local real estate agents have available.

The listings cover properties around the region, from a one-bedroom, one-bath condo for $339,900 to million-dollar acreages throughout the province of BC, Yukon, Central Alberta and beyond.

Click on a listing, and see not only the realtor handling the property sale, but links to his or her other listings and social media feeds. With the click of a mouse, take a virtual tour of the property, find the property’s walking score, and learn about nearby amenities.

There are links available to schedule a showing, or send the agent a comment or question.

Want to share a listing? When you click on the share button, you’ll actually send an attractive digital flyer of the prospective property, not just a link.

There’s even a button to help determine how much you have to spend, courtesy of the convenient mortgage calculator.

Plus, scroll down the page on Today’s Home and find a list of expert local real estate professionals who can answer questions or help with that home sale, Farquharson explained.

Today’s Home offers the advantage of the massive reach that Black Press Media has built throughout Western Canada with its network of community newspapers and online products. That allows the public to tailor real estate searches based on location, price, and other key factors while allowing real estate professionals to gain unprecedented audience reach with their listings.

Today’s Home will dovetail into the media company’s existing print real estate publications.

“Black Press Media has real estate solutions in print and now we can add in the digital component,” Farquharson said.

Watch for expansion of the Today’s Home platform in the near future, she added. That will come as Black Press Media adds a new component – the development community. Developers will be able to reach a huge audience when their projects are ready for presentation.

For information on Today’s Home, contact group publisher Lisa Farquharson at 604-994-1020 or via email.

Happy house hunting!

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PGIM Real Estate, Revera Affiliate Target UK Market in Newly Formed JV

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Real Estate Sales In September

PGIM Real Estate has been active in recent months providing capital to facilitate blockbuster senior housing acquisitions. Now the firm is looking to capitalize on demand for senior housing in the United Kingdom.

The Madison, New Jersey-based real estate investor and lender announced this week it is entering into a joint venture with Signature Senior Lifestyle, an affiliate of Revera, to develop and operate senior housing communities around greater London

Mississauga, Ontario-based Revera serves 20,000 older adults in long-term care homes and retirement residences in Canada. It is also the majority shareholder of Sunrise Senior Living, one of the largest senior housing providers in the U.S. The company operates a portfolio of 12 communities in the U.K. under the Signature Senior Lifestyle brand, with one community in development that is slated to open in autumn 2021.

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The JV has one development underway — a senior housing community, or “prime care” home, in southwest London. PGIM worked with Elevation Partners, a London-based investor and asset manager in U.K. health care real estate, in sourcing, structuring and executing the venture. Additionally, PGIM will retain the firm to leverage its expertise.

PGIM and Revera did not respond to requests for comment from Senior Housing News regarding details about its development pipeline.

London is emerging as a future hotbed of senior housing development, spurred by favorable demographic growth trends and a lack of available supply, and the PGIM-Revera venture will find competition.

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Maplewood Senior Living CEO Gregory Smith told SHN last month that demand for U.K. senior housing is comparable to major U.S. markets such as New York and San Francisco, where supply has historically been constrained.

Maplewood and its investment partner, Omega Healthcare Investors (NYSE: OHI) are looking to expand its luxury Inspir brand to the U.K., and identified five suburban markets around London with high barriers to entry that are favorable for the brand’s growth.

Revera CEO Tom Wellner sees similar untapped upside potential for senior housing in the U.K.

Source: – Senior Housing News

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