A home for sale in Toronto’s Annex neighbourhood is photographed on July 18.Fred Lum/The Globe and Mail
The housing market appears to have cooled in recent weeks, but that doesn’t mean it’s now more affordable to enter the market. In fact, owing to rising interest rates, the opposite is true.
Within the past four months, the average yearly income needed to buy a home on a fixed mortgage with 20 per cent down has climbed by $18,000, according to new data from Ratehub, a loan-comparison website. It determined these numbers by contrasting real estate data from March with June, using the average mortgage rates of Canada’s five largest banks.
In Vancouver, would-be homebuyers must now take home a minimum of $232,000 a year to afford a home, an increase of almost $32,000 since March. To purchase a home in Toronto, Ratehub.ca says people need to make roughly $226,000 a year, an additional $16,000 in four months time.
The greatest increase since March occurred in Victoria, where the minimum annual income to afford a home, on average, is pegged at $188,000 – ballooning by 23 per cent, or about $36,000.
The mortgage stress test is to blame for these large jumps. As concerns over inflation have pushed mortgage rates up in recent weeks, the threshold required to pass the government-mandated mortgage stress test has also risen, making homeownership even less attainable to many Canadians.
The stress test was first introduced during the 2016-2017 housing boom to ensure that homebuyers could afford their mortgage payments if interest rates rose, as well as to slow the frenetic markets in Toronto and Vancouver.
Interestingly, despite the notion that home prices have declined in markets across the country in the wake of rising interest rates, Ratehub found that among the 10 cities it assessed, only half saw their average home prices shrink between March and June.
”Home prices will need to drop significantly in order to neutralize the effects that higher mortgage rates have on the stress test,” said James Laird, co-CEO of Ratehub. “Unless this happens, home affordability will continue to be impacted significantly by the current rising rate environment.”
Change in annual income required
to buy a home in Canada
New analysis from Ratehub.ca, a loan-comparison website, shows it’s now more expensive to buy a home in Canada than it was a few months ago, despite the fact that the housing market has significantly slowed in many parts of the country. Rising mortgage rates – which have, in turn, caused stress-test rates to tick up – are to blame.
Select cities, June, 2022
Income req.
Increase from March, 2022
% increase
Data are based on: 20 per cent down payment, 25-year amortization, $4,000
annual property taxes and $150 monthly heating; mortgage rates average of
the Big Five banks’ five-year fixed rates in March and June; average home
prices from CREA MLS home price index.
the globe and mail, Source: ratehub.ca
Change in annual income required
to buy a home in Canada
New analysis from Ratehub.ca, a loan-comparison website, shows it’s now more expensive to buy a home in Canada than it was a few months ago, despite the fact that the housing market has significantly slowed in many parts of the country. Rising mortgage rates – which have, in turn, caused stress-test rates to tick up – are to blame.
Select cities, June, 2022
Income req.
Increase from March, 2022
% increase
Data are based on: 20 per cent down payment, 25-year amortization, $4,000
annual property taxes and $150 monthly heating; mortgage rates average of
the Big Five banks’ five-year fixed rates in March and June; average home
prices from CREA MLS home price index.
the globe and mail, Source: ratehub.ca
Change in annual income required to buy a home in Canada
New analysis from Ratehub.ca, a loan-comparison website, shows it’s now more expensive to buy a home in Canada than it was a few months ago, despite the fact that the housing market has significantly slowed in many parts of the country. Rising mortgage rates – which have, in turn, caused stress-test rates to tick up – are to blame.
Select cities, June, 2022
Income required
Increase from March, 2022
% increase
Data are based on: 20 per cent down payment, 25-year amortization, $4,000 annual property taxes and
$150 monthly heating; mortgage rates average of the Big Five banks’ five-year fixed rates in March and
June; average home prices from CREA MLS home price index.
the globe and mail, Source: ratehub.ca
As of last June, the stress test requires potential buyers to prove that they can keep up with mortgage payments at either a minimum rate of 5.25 per cent or their individual mortgage rate plus 2 per cent –whichever is higher.
With historically low interest rates, that meant the stress-test rate was almost universally set at 5.25 per cent for people seeking both variable and fixed-rate mortgages, which appear, by far, to be the most popular option in Canada.
But now that fixed-mortgage rates have increased by two-thirds in only four months, according to Ratehub, many hoping to buy with a fixed rate are facing stress-test rates around 7.21 per cent, on average.
John Pasalis, president of a Toronto-based real estate brokerage called Realosophy Realty, played down the significance of these changes. Most buyers, he said, are now opting for variable-rate mortgages because their stress-test rates are now closer to 6 per cent.
Dave Larock strongly disagrees. The president of Integrated Mortgage Planners Inc., a Toronto firm, told The Globe and Mail these numbers highlight a major regulatory misstep by the Office of the Superintendent of Financial Institutions (OSFI), the independent federal agency that oversees the mortgage stress test.
“There should never be a point where a borrower can borrow more if they take a variable rate versus a fixed rate,” Mr. Larock said. “That’s a flaw in the design of the stress test.”
It’s now easier for the most stretched borrowers to qualify for variable-rate mortgages, according to Mr. Larock. OSFI should have addressed this problem at its previous meeting in late June, he added.
“As a banking regulator whose stated goal is to preserve the stability of the market, that was a glaring mistake,” he said.
Mr. Larock, who said he firmly supported the implementation of a stress test, went on to question whether it’s still necessary with rates as high as they are now. If it’s to remain, he said OSFI should set a single stress-test rate for all would-be homebuyers.
TOKYO (AP) — Japanese technology group SoftBank swung back to profitability in the July-September quarter, boosted by positive results in its Vision Fund investments.
Tokyo-based SoftBank Group Corp. reported Tuesday a fiscal second quarter profit of nearly 1.18 trillion yen ($7.7 billion), compared with a 931 billion yen loss in the year-earlier period.
Quarterly sales edged up about 6% to nearly 1.77 trillion yen ($11.5 billion).
SoftBank credited income from royalties and licensing related to its holdings in Arm, a computer chip-designing company, whose business spans smartphones, data centers, networking equipment, automotive, consumer electronic devices, and AI applications.
The results were also helped by the absence of losses related to SoftBank’s investment in office-space sharing venture WeWork, which hit the previous fiscal year.
WeWork, which filed for Chapter 11 bankruptcy protection in 2023, emerged from Chapter 11 in June.
SoftBank has benefitted in recent months from rising share prices in some investment, such as U.S.-based e-commerce company Coupang, Chinese mobility provider DiDi Global and Bytedance, the Chinese developer of TikTok.
SoftBank’s financial results tend to swing wildly, partly because of its sprawling investment portfolio that includes search engine Yahoo, Chinese retailer Alibaba, and artificial intelligence company Nvidia.
SoftBank makes investments in a variety of companies that it groups together in a series of Vision Funds.
The company’s founder, Masayoshi Son, is a pioneer in technology investment in Japan. SoftBank Group does not give earnings forecasts.
Shopify Inc. executives brushed off concerns that incoming U.S. President Donald Trump will be a major detriment to many of the company’s merchants.
“There’s nothing in what we’ve heard from Trump, nor would there have been anything from (Democratic candidate) Kamala (Harris), which we think impacts the overall state of new business formation and entrepreneurship,” Shopify’s chief financial officer Jeff Hoffmeister told analysts on a call Tuesday.
“We still feel really good about all the merchants out there, all the entrepreneurs that want to start new businesses and that’s obviously not going to change with the administration.”
Hoffmeister’s comments come a week after Trump, a Republican businessman, trounced Harris in an election that will soon return him to the Oval Office.
On the campaign trail, he threatened to impose tariffs of 60 per cent on imports from China and roughly 10 per cent to 20 per cent on goods from all other countries.
If the president-elect makes good on the promise, many worry the cost of operating will soar for companies, including customers of Shopify, which sells e-commerce software to small businesses but also brands as big as Kylie Cosmetics and Victoria’s Secret.
These merchants may feel they have no choice but to pass on the increases to customers, perhaps sparking more inflation.
If Trump’s tariffs do come to fruition, Shopify’s president Harley Finkelstein pointed out China is “not a huge area” for Shopify.
However, “we can’t anticipate what every presidential administration is going to do,” he cautioned.
He likened the uncertainty facing the business community to the COVID-19 pandemic where Shopify had to help companies migrate online.
“Our job is no matter what comes the way of our merchants, we provide them with tools and service and support for them to navigate it really well,” he said.
Finkelstein was questioned about the forthcoming U.S. leadership change on a call meant to delve into Shopify’s latest earnings, which sent shares soaring 27 per cent to $158.63 shortly after Tuesday’s market open.
The Ottawa-based company, which keeps its books in U.S. dollars, reported US$828 million in net income for its third quarter, up from US$718 million in the same quarter last year, as its revenue rose 26 per cent.
Revenue for the period ended Sept. 30 totalled US$2.16 billion, up from US$1.71 billion a year earlier.
Subscription solutions revenue reached US$610 million, up from US$486 million in the same quarter last year.
Merchant solutions revenue amounted to US$1.55 billion, up from US$1.23 billion.
Shopify’s net income excluding the impact of equity investments totalled US$344 million for the quarter, up from US$173 million in the same quarter last year.
Daniel Chan, a TD Cowen analyst, said the results show Shopify has a leadership position in the e-commerce world and “a continued ability to gain market share.”
In its outlook for its fourth quarter of 2024, the company said it expects revenue to grow at a mid-to-high-twenties percentage rate on a year-over-year basis.
“Q4 guidance suggests Shopify will finish the year strong, with better-than-expected revenue growth and operating margin,” Chan pointed out in a note to investors.
This report by The Canadian Press was first published Nov. 12, 2024.
TORONTO – RioCan Real Estate Investment Trust says it has cut almost 10 per cent of its staff as it deals with a slowdown in the condo market and overall pushes for greater efficiency.
The company says the cuts, which amount to around 60 employees based on its last annual filing, will mean about $9 million in restructuring charges and should translate to about $8 million in annualized cash savings.
The job cuts come as RioCan and others scale back condo development plans as the market softens, but chief executive Jonathan Gitlin says the reductions were from a companywide efficiency effort.
RioCan says it doesn’t plan to start any new construction of mixed-use properties this year and well into 2025 as it adjusts to the shifting market demand.
The company reported a net income of $96.9 million in the third quarter, up from a loss of $73.5 million last year, as it saw a $159 million boost from a favourable change in the fair value of investment properties.
RioCan reported what it says is a record-breaking 97.8 per cent occupancy rate in the quarter including retail committed occupancy of 98.6 per cent.
This report by The Canadian Press was first published Nov. 12, 2024.
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