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Joe Oliver wants to lower taxpayer exposure to the housing market — but there’s no specific plan to do it

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TORONTO — Finance Minister Joe Oliver says Ottawa won’t be making any protective moves in Canada’s housing market.

At a news conference Thurimagesday, Oliver says the government’s long term aim is to gradually reduce taxpayer exposure to the residential real estate market, but there is no specific plan.

Oliver’s predecessor, Jim Flaherty, moved four times to tighten mortgage lending rules in an effort to cool a hot real estate market.

The minister’s comments follow an IMF warning on Wednesday that the housing market and household debt represent key risks to the Canadian economy.

Related IMF can’t stop worrying about Canada’s so-called housing bubble Home ownership became slightly more affordable in the third quarter, says RBC An IMF official estimated Canada’s housing market was over-evaluated by roughly 10% on a national scale, although in some regions those estimates could reach as high as 20%.

The IMF predicted a soft landing for the housing market, but warned Canada could be at risk of a sharp correction if interest rates rose too quickly and the job market suffered a downturn.

The finance minister spoke to the media Thursday ahead of his first pre-budget consultation roundtable in Toronto. LATEST PERSONAL FINANCE VIDEOS

Black Friday mortgage specials see rates dip close to historic lows

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imageForget about lining up to buy a flat screen television, Black Friday may be all about mortgage rates this year.

Thanksgiving in the U.S. is a tough day to find a broker but an Atlanta-based mortgage organization says Americans who can find someone working can get the best deal in months – something that can be chalked up to a lack of trading in bonds.

Getting into the holiday spirit, a Canadian mortgage broker say he has secured funding from a major credit union to offer a one-day special on a five-year fixed-rate mortgage for a record low 2.59%. On the variable side, the 24-hour special takes rates to 2.05%, which is just above the 2% rate that was offered by Investors Group in the spring which sent the market into a frenzy.

Related Pay off your mortgage or invest? How to figure out what’s best for you Great news coming if you’re renewing a mortgage, you’re about to save money ‘I did mess up’: Even the experts admit mistakes on picking a mortgage So-called “sales” in the mortgage market may not be that unusual, they pop up every spring, but this would be the first for Black Friday — a time when the housing market slows down as we head into the Christmas season.

Gibran Nicholas, chief executive of CMPS Institute, which certifies mortgage planning specialists in the U.S., says the lack of liquidity in the market because of the holidays can mean dramatic swings in bond prices, which mortgages rates are based on. Prices have risen, dropping yields, creating an opportunity for consumers.

“There have only been two days in the last 18 months where mortgage rates have been as low as they are now,” said Mr. Nicholas. “The problem is even if you can get a mortgage broker on the phone, they might be on vacation. It’s an important story because if you can get your banker on the phone, even though it’s the furthest thing on your mind because you want to spend time with your family, now might be the perfect time to lock in your rate.”

Rob McLister, editor of Canadian Mortgage Trends, said there are times of the year where lenders are willing to offer better deals. Usually those sales happen to kick off the busy spring season, which in the past has seen Bank of Montreal unleash on the market a 2.99% deal on a five-year mortgage. That rate has twice helped set off a rate war among the major banks.

“Mortgage sales happen all the time but they are typically called specials,” said Mr. McLister. “There are usually no shortage of promotions.”

Mr. McLister, who is also a broker and runs ratespy.com, is upping the ante and is introducing the five-year fixed rate mortgage of 2.59% which he maintains ties the all-time record for lowest rate for that term.

He says DUCA, an Ontario credit union has agreed to finance the 2.59% special, but he won’t say who is providing him funding for his five-year variable rate product which is 95 basis points off of prime. He is only offering both deals on Black Friday and then the sale is over.

“I can’t say who the later [variable rate] is being funded by or I’ll be cut off by them. They have other [clients they fund],” says Mr. McLister.

Getting a deal on a mortgage is only one element of making sure you get a good rate. The other is guessing which way rates are headed. A good deal doesn’t mean much if rates are double where they are today, something to keep in mind in the wake of the Organization for Economic Co-operation and Development calling this week for the Bank of Canada to raise rates next May.

“Deals are based on how narrow a profit margin lenders are willing to accept,” said Benjamin Tal, deputy chief economist with CIBC. “The deals happen when demand is strongest and the competition is hot. Banks use the mortgage market to attract customers.”

Jim Murphy, chief executive of the Canadian Association of Accredited Mortgage Professionals, said there’s almost a sale on mortgages every day in the market.

“Nobody pays posted rates,” said Mr. Murphy, who agrees it’s like stores that offer 20%-to-30% off. “There is something every day. To me it seems like a stretch that there will be Black Friday sales [on mortgages] but you never know.”

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Why the price of your home may not be up as much as you think

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The national average home price rose in October but the impact of Canada’s two largest markets is continuing to influence Canada-wide numbers, according to the Canadian Real Estate Association.

Toronto and Vancouimagever home prices pass Rome and close in on Paris

Canada’s two priciest cities for homes can now be included in an international class that is attracting foreign investors from around the world, says a new real estate study. Find out more Across the countries prices were up 7.1% from a year ago to an average of $419,699. Once Toronto and Vancouver are removed, the annual gain slips to 5.4% and the average sale price for October drops to $330,596.

“Low interest rates continued to support sales in some of Canada’s more active and expensive urban housing markets and factored into the monthly increase for national sales,” said Beth Crosbie., president of CREA, in a statement. “Even so, sales did not increase in many local markets in Canada, which shows that national and local housing market trends can be very different.”

For the sixth straight month sales rose and last month proved to be the strongest for October since 2009.

Related One way to lose money even when you’ve made 5000% on your home Toronto housing market still on fire, adding heat to national debate Calgary’s condo market booming as average price for single-family homes tops half a million “While the strength of national sales activity is far from being a Canada-wide phenomenon, it extends beyond Vancouver, Calgary and Toronto,” said Gregory Klump, chief economist with CREA. “Sales in a number of B.C. markets have started to recover from weaker demand over the past couple of years. They have also been improving across much of Alberta, where interprovincial migration and international immigration are reaching new heights.”

Actual October sales were up 7% from a year and sales were up 70% of all local markets, led by Greater Vancouver and the Fraser Valley, Victoria, Calgary, and Greater Toronto. Those five markets combined for 40% of the national sales activity.

For the first 10 months of the year, sales were now up 5.2% from a year ago and 2.5% above the 10-year average for the same period.

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Great news coming if you’re renewing a mortgage, you’re about to save money

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Canadians renewing a mortgage in the next six months are likely to be all smiles as they end up with a lower interest rate that should prove to be positive for the overall economy, says a new report out Tuesday.

The Canadian Association of Accredited Mortgage Professionals says in its annual state of the mortgage market that the average existing rate in Canada for consumers with a mortgage due in first half of 2015 is 3.5%. Just 60,000 of the 140,000 people renewing in the next six months have a rate lower than 3.5%.

image“During the coming year, mortgage renewal is likely to be a positive event for the borrowers and therefore the broader economy,” says the report.

Related Is helping children buy their first home becoming ‘the next parental responsibility’? One way to lose money even when you’ve made 5000% on your home Why the price of your home may not be up as much as you think

According to www.ratespy.com the best rate on a fixed five-year mortgage is now 2.74% while a five-year variable rate mortgage is 2.15% based on a hefty 85 basis point discount off of the prime rate that the product is tied to.

“We have seen in aggregate that interest payments as a share of disposable income have been trending downward. The reduced interest payments also allow many to accelerate principal payments and/ or increase spending. Regardless this is a net positive for the economy,” said Benjamin Tal, deputy chief economist for the Canadian Imperial Bank of Commerce.

Record low interest rates have continued to a propel the housing market to new heights and on Monday the Ottawa-based Canadian Real Estate Association reported that October sales were the strongest for the month since 2009.

Canadians who bought last year saw some of the best deals in history with the average rate negotiated over the first 10 months of the year 2.89%. That topped the average rate of 3.25% just six months earlier.

“Mortgage rates have been cut in half in the last seven years so it’s been a renewer’s paradise. But rates are leveling off. The clock is ticking on the opportunity to renew into substantially lower rates,” said Rob McLister, editor of Canadian Mortgage Trends.

Already CAAMP says of the 1.35 million Canadians who renewed or refinanced mortgages since the start of 2014, 1.05 million saw their rate drop. There were 175,000 that faced a rate jump while 125,000 saw no change at all.

CAAMP estimates that fewer than 25,000 borrowers saw rate increases of more than one percentage point, a small number in the context of the 5.64 million Canadian homeowners who have mortgages.

“Low interest rates continued to support sales in some of Canada’s more active and expensive urban housing markets and factored into the monthly increase for national sales,” said Beth Crosbie, president of CREA after the monthly results were released which showed the average home in Canada sold for $419,699 last month.

Despite low rates, Canadians are also trying to pay those loans down. The CAAMP survey shows that in the past year about 38% of people with a mortgage took some action to pay down their debt faster than they had to. The top choices at 16% were to increase a monthly payment or make a lump sum payment.

Another 7% of Canadians increased the frequency of their payments. One of the more popular recommendations in the mortgage industry is that consumers make a mortgage payment every two weeks instead of monthly. The 26 payments a year can reduce your amortization from 25 years to 21.5 years.

“The fall report paints a picture of homeowners whether just starting out on their ownership journey or long time mortgage holders, as remarkably confident,” said Jim Murphy, chief executive of CAAMP. “They wait until they are financially stable before buying, and they take advantage of low interest rates to aggressively reduce their mortgage debt. Home ownership continues to be an important anchor for the Canadian economy.”

The survey does show that Canadians are also using their home equity to finance other behaviour. CAAMP found that over the past year $63-billion of equity was taken out of homes. About 11% of homeowners took an equity take-out.

The most popular reason was debt consolidation with $20.6-billion of home equity used to repay consumer loans. Another $17.4-billion of debt was used for home renovation, $7.7-billion for investments, $6.6-billion for purchases including education and $10.3-billion for other purchases.

The survey is based on 2,000 online interviews and was done in mid-October.

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Are we really overbuilding, constructing too many condominiums and creating too much sprawl? A new report maintains we need that housing more than ever.

Great news coming if you’re renewing a mortgage, you’re about to save money

Canadians renewing a mortgage in the neimagext six months are likely to be all smiles as they end up with a lower interest rate that should also boost the overall economy, says a new report Benjamin Tal, deputy chief economist with Canadian Imperial Bank of Commerce, says we might be substantially underestimating household formation because we are not factoring in up to 100,000 immigrants.

“Ask any real estate developer in any of Canada’s major cities about the risk of overbuilding, and the first line of defence would be immigration and its critical role in supporting demand,” writes Mr. Tal, in a note he coauthored with Nick Exarhos. “It turns out that at least for now, this claim is more valid than widely believed.”

Mr. Tal points out that not only do new immigrants account for about 70% of our population growth about half of them are in the 25-44 age cohort, a key demographic that will lead to more household formation.

In 2013, the number of Canadians aged 20-44 grew by 1.1% which is the fastest pace in more than two decades and stronger than the average of countries in the Organisation for Economic Co-operation and Development.

Related Why the price of your home may not be up as much as you think Toronto and Vancouver home prices pass Rome and close in on Paris Calgary’s condo market booming as average price for single-family homes tops half a million “Healthier demographics are benefitting trends in household formation,” the pair write. “In fact, despite some concerns of overbuilding in the current housing boom, the ratio of housing starts to household formation is not far from its long-term average of 1.03.”

The bottom line is that when the housing boom does wind down it will not be as dramatic as once feared because of those immigrants picking up the slack, argues the paper.

In spate of the stronger than anticipated household formation, markets in Alberta, British Columbia and Ontario might still be outstripping what should be built based on demographics.

Their argument that immigration is being underestimated comes largely from underestimating the number of non-permanent residents in Canada which includes students, temporary workers and humanitarian refugees. That number was 22,000 in 2013 which brought the total number of NPRs to 774,000.

“Those are big numbers. And evidently when it comes to measuring household formation in Canada and its implication for the appropriate level of home-building, we understate the number of those non-permanent residents,” say the economists.

The pair say researchers are using the 2011 census to estimate household formation in Canada and that census bases household formation on 400,000 non-permanent residents which is 200,000 below even figures reported by Citizen and Immigration Canada.

“It’s a huge gap,” they write. “The gap is increasingly becoming more relevant for household demand since a growing portion of non-permanent residents come from workers and students with a high propensity to rent.”

The pair say there is no doubt that the pace of growth of the echo generation is slowing and foreign workers will face more barriers to entry albeit that will be offset by a decision by Ottawa to raise the annual immigration quota by 20,000 to 30,000 per year.

“But for the here and now, any claim of significant overbuilding in the Canadian market is not supported by the rise in household formation relative to starts,” says the paper, adding non-permanent residents will continue to provide the market a cushion from any downturn.

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Is helping children buy their first home becoming ‘the next parental responsibility’?

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It’s the type of family support that some people will be proud to give and others will be jealous they never got, but a new survey shows first-time home buyers are getting on average more than $10,000 from family members.

Why the price of your home may nimageot be climbing as much as you think

The average home price in Canada now tops $400,000 but unless you live in Toronto or Vancouver, you’re probably not cashing in on the housing boom The housing market is full of anecdotal tales of people receiving help from their parents to push them over the top in a bidding war or children getting just enough cash for a 20% down payment which helps them avoid costly mortgage default insurance.

But the study from the Canadian Association of Accredited Mortgage Professionals due to be released on Tuesday, a portion of which was released in advance to the Financial Post, shows that on average first-time buyers are putting down 21% of the purchase price and that on average about 13% of that money comes from family.

The latest data from the Canada Real Estate Association puts the national average sale price at $419,699. That would make the average down payment for a first-time buyer $88,137 and mean family was chipping in $11,458.

“I’m surprised it’s not even higher,” said Jim Murphy, chief executive of CAAMP. “I think there are a generation out there of retired people or people getting close to retirement who have a lot of wealth and there will be a transfer of wealth and that is including assistance on their home.”

Will Dunning, chief economist with CAAMP, said the online survey was done with 2,000 people in mid-October, asking them about their first home purchase. Responses went back to 1990 but, for people who bought their homes from 2010 to 2014, the average family support was 17% of the down payment.

“You hear about the unusual situations [about parents buying their children homes]. It’s like houses selling over list. The only ones you hear about are the ones that do sell for over list,” said Mr. Dunning.

The reality is that while there is plenty of family support, most first-time buyers are scraping together their own savings to buy a home. Personal savings accounted for on average 45% of the down payment, 28% came from another loan from a financial institution, 9% came from a Registered Retirement Savings Plan and 4% came from other sources.

Related One way to lose money even when you’ve made 5000% on your home Toronto and Vancouver home prices pass Rome and close in on Paris Jason Heath, a Toronto-based certified financial planner with Objective Financial Planners Inc., says in his practice he sees an increasing reliance on parental support to buy a home.

“For most middle class people I think helping out stops with education,” said Mr. Heath. “My general take on people with money and kids is: help them out to the point where they can help themselves out. I’ve got nothing against people who want to spend their last dollar on their last day. It makes you wonder if this isn’t the next parental responsibility. Forget saving up for education, parents will have to start savings for kids’ down payment.”

Bank of Montreal senior economist Robert Kavcic said there still isn’t enough data on parental support to prove what impact it is having on the housing market, namely whether it has been inflationary.

“I’d guess the impact is probably not that big, that it is still at the margins,” said Mr. Kavcic. “You presume support is increasing because valuations are up but it would be a guess with no data.”

Tighter mortgage rules, which restrict government-backed loans on properties worth more than $1-million, may be playing some part in people helping out of their children, said the economist. “You basically need 20% down if you are looking at a detached home [in Toronto or Vancouver],” he said. “The support might be more important and necessary.”

Kevin Lee, chief executive of the Canadian Home Builders’ Association, says family support is a function of the affordability issues now in the marketplace.

“It’s a barrier that is in front of young families and they need that financial gift from the bank of mom and dad just to get into the housing market. That is part of the affordability crisis we are seeing and it is a way around it, but how long can it last?” says Mr. Lee.

Scott Hannah, the Vancouver-based chief executive of the Credit Counselling Society, cautions parents really need to encourage children to save at the same time as they are giving them money.

“You really want them to have some skin in the game,” he said. “The worst case I’ve seen was a woman who came to me and said she helped her son with a $150,000 down payment and that got [her son and his wife] into a $600,000 home. They ran up a line of credit, because once you have a home you can get a line of credit. They couldn’t manage it and the parents bailed them out of that. I told her ‘if you don’t help your son get financially independent, he’ll be coming to you in his 40s.’ The line went silent and she said ‘he’s 43′.”

Condos make up more than half of housing starts in Canada’s biggest cities: CMHC

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OTTAWA — Condominiums accounted for more than one-third of all Canadian housing starts last year, and more than half of the total in several of the country’s biggest cities, the Canada Mortgage and Housing Corp. says.

Too many condos in Canada? Looks like we may not have enough

Are we really overbuilding, constructing too many condominiums and creating too much sprawl? A new report maintains we need that housing more than ever The federal agency says condominium apartment starts represented less than one in five Canadian housing starts in the early 1990s, but that proportion had grown to more than one in three in 2013.image

Vancouver, the country’s most expensive real estate market, saw condos make up 62.6% of its housing starts last year. In Montreal, condos accounted for 56.3% of the starts and in Toronto they accounted for 53.9% of new housing construction, CMHC said in an annual market review released Thursday.

“This long-term trend toward a higher share of condominium starts, especially in higher-priced urban centres, is likely due to the relatively lower price of condominium apartment units compared to freehold single-detached dwellings,” CMHC said in the 2014 Canadian Housing Observer.

“In addition, in most large urban centres, the secondary rental condominium market has become an increasingly important complement to purpose-built rental housing.”

CMHC said the share of purpose-built rental starts was about 20% of total starts in the early 1990s, but fell to 14% in 2013.

Related Housing bubble begone. Turns out we just might need all those new condos and houses Great news coming if you’re renewing a mortgage, you’re about to save money Calgary’s condo market booming as average price for single-family homes tops half a million Vancouver saw rental starts make up 16.8% of total, while 15% of the starts in Montreal last year were purpose-built rental properties. However in Toronto, just 2.1% of the housing starts were purpose-built rental starts.

The report also noted that after taking into account differences due to exchange rates, inflation and other factors that affect the purchasing power of home buyers, Canadian home prices remain higher than those in the United States

“This Canadian ’premium’ could be a cause for concern, because it may indicate that house prices in Canada are overvalued,” the report said.

“CMHC is analyzing these differences, in order to understand the reasons for the price differential, be they structural, temporary or reflective of relative overvaluation in Canada.”

The strength of the Canadian housing market and concerns about a possible housing crash have garnered much attention.

Last month, the Bank of Canada raised concerns about the “renewed vigour” it detected in the housing market and consumer spending since the summer.

However, both Bank of Canada governor Stephen Poloz and Finance Minister Joe Oliver have downplayed the susceptibility of the Canadian housing market.

Oliver and most analysts have predicted a soft landing for the real-estate market.

Movin’ on up: Couple eye bigger home, a solid retirement foundation

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face-14rb1After working out of the country for a year, Edgar and Abby are ready to set down roots. He’s self-employed, bringing in anywhere from $120,000 to $200,000 a year. She works in communications, earning roughly $90,000 a year.

He is 41, she is 34. They have a toddler and hope to have another child or two before long. As a result, they want to move up from their condo to a family-sized home in the Toronto area.

“How much can we afford to spend on a new home?” Edgar asks in an e-mail. “And is it possible to hang on to our existing home as a rental property?”

Neither has a company pension, so their long-term goals include “building a good financial foundation for our retirement,” Edgar adds. “Should we be prioritizing retirement savings or paying down our mortgage?”

They wonder, too, how much money they will need when they retire and what effect their age gap will have on their plans.

“My wife will be in her working prime when I’m retirement age,” Edgar says.

We asked Jason Pereira, a financial planner and investment adviser at Bennett March/IPC Investment Corp. in Toronto, to look at Edgar and Abby’s situation.

What the expert says

“Edgar and Abby have three immediate goals that unfortunately conflict and would take too much cash flow – have another child, upsize their home and keep their current property, all within the next two years,” Mr. Pereira says. Even with their high income, they can’t achieve them all at once, he says.

“The loss of income for a year due to maternity leave, and the high cost of having two children in daycare, are big issues,” Mr. Pereira says.

In order to buy a larger home, Abby and Edgar would have to borrow as much as possible against the equity in their condo, the planner says. If they did, and then rented the condo out, it would likely lose money for the first few years after mortgage and condo fees, he says.

“Given that you want a bigger home, sell the condo.” They do not want a starter home that they would have to move up from later, he notes.

“This can be a wise decision as it saves the costs associated with moving,” he says. They plan to look for a house in the $950,000 plus range, which they could afford if they sell their condo and liquidate assets outside their RRSPs and RESP, Mr. Pereira says. “This size home, and its corresponding mortgage, will leave them without much wiggle room,” he adds.

The planner offers a glimpse of their financial picture once the new house is bought and Abby is on parental leave. Their net income will drop to $167,400 (Edgar $144,200; Abby’s employment insurance $20,800; childcare benefit $2,400). He then subtracts Edgar’s RRSP contribution ($25,200) and income taxes ($46,960) for net cash flow of $95,240. He further subtracts registered education savings plan contributions for the children of $5,000, and lifestyle expenses of $87,067 for net cash flow before debt repayments of $3,173.

“Therefore, in the year the house is purchased, they will have to dip into their savings to pay the estimated $28,600 mortgage payment on their $491,720 mortgage,” the planner says. That assumes the condo is sold and the net proceeds, plus some of their savings, are used for a down payment.

The situation improves a bit when Abby goes back to work, although childcare expenses of $25,462 take a big chunk of their income. Their net cash flow before debt payments will rise to $35,366, leaving free cash flow of $6,766 a year after the mortgage payment ($28,600). “All free cash flow should be used to pay down the mortgage faster,” Mr. Pereira says.

Indeed, Edgar and Abby asked what their priority should be, paying down the mortgage or saving for retirement.

“Both,” Mr. Pereira says. Given Edgar’s high income, contributing as much as possible to a registered retirement savings plan should be a priority, he says, providing tax relief of more than $10,000 a year. Once the children are in school and Abby is back at work full time, they should contribute $10,000 a year to her RRSP, with any additional funds going to pay down the mortgage. This way, they should be debt-free with enough money for them both to retire by the time Edgar turns 65, the planner says.

“Assuming a 7.5-per-cent rate of return from now until they retire, they will have about $3.7-million saved at retirement,” Mr. Pereira says. This money, plus their Canada Pension Plan and Old Age Security benefits, should be enough for them to maintain their lifestyle until Edgar is 96, after which they will still have their house to fall back on.

**

Client situation:

The problem: Can they afford to buy a larger home while still hanging on to their condo as a rental?

The plan: Sell the condo, buy the larger home, then focus on both paying down the mortgage and saving for retirement.

The payoff: Financial security, both now and in future.

Monthly net income: $10,000 to $14,000.

Assets: Cash $30,000; non-registered investments $98,000; his TFSA $40,000; her TFSA $39,000; his RRSP $220,000; her RRSP $70,000; RESP for child $8,000; residence $483,000. Total: $988,000

Monthly disbursements: Mortgage $756; condo fees $405; property tax $130; other housing $152; transportation $800; grocery store $1,200; child care $1,500; clothing $500; line of credit $73; gifts, charitable $350; vacation, travel $1,100; other discretionary $150; dining, drinks, entertainment $970; grooming $235; sports, hobbies $170; other personal $100; life insurance $108, critical illness insurance $65; telecom, TV, Internet $160; RRSPs $1,460; RESP $250; TFSAs $915. Total: $11,549

Liabilities: Home mortgage $156,000 at 2.69 per cent; investment loan $25,000; loan from parents $20,000; his income tax owing $18,000. Total: $219,000

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Want a free financial facelift? E-mail finfacelift@gmail.com Some details may be changed to protect the privacy of the persons profiled.

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Housing starts miss expectations as condo construction cools

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condoto_npOTTAWA — Canada Mortgage and Housing Corp. says the pace of housing starts was down in October, compared with September, as the rate of new multiple-unit homes starting construction, including condominiums, slowed.

The agency estimates the standalone monthly seasonally adjusted annual rate was 183,604 units in October, down from 197,355 the previous month.

Economists had expected a rate of 200,000, according to Thomson Reuters.
CMHC says the pace of urban housing starts in October decreased across the country, with declines led by British Columbia and followed by Quebec, Atlantic Canada, the Prairies and Ontario.

It says the rate of urban starts came in at 164,683 in October, down from 177,053 in September. The drop was due to a slower pace of multiple-unit urban starts which fell to 98,673 compared with 114,539 in September. The rate of single-detached urban starts segment increased to 66,010 from 62,514.

The agency says rural starts recorded a seasonally adjusted annual rate of 18,921 in October.

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for_saleJoe and his wife are both 84. They bought their house in 1956 for $14,000. Demand for their almost 60-year-old bungalow in midtown Toronto is strong.

A week never goes by without some realtor or developer knocking on the door or leaving a note asking the couple to sell. The cold calls offer a dazzling deal — a sale price that amounts to more than a 5000% increase from what they paid. Toronto and Vancouver home prices pass Rome and close in on Paris

Canada’s two priciest cities for homes can now be included in an international class that is attracting foreign investors from around the world, says a new real estate study.

The report from CBRE says “prime” residential property in Toronto is now $1,225 per square foot while Vancouver is $1,368 per square foot. Those dollar figures have vaulted the city past some pretty impressive competitors like Rome and Milan. Similar property in Paris is $2,000 per square foot while the most expensive city in the study, London, comes in at $3,636 per square foot. Keep reading.

But Joe, he didn’t want his real name used lest he attract even more would-be buyers, knows these people don’t just want his house. They want to scoop it out from under him for below market value, hoping to fleece an elderly homeowner who has no idea of today’s housing prices.

“There was my one of my neighbours, who I guess had been talking to a builder and told him he had a house,” said Joe, referring to another elderly homeowner. “He told him ‘I’ll buy the house from you, we can avoid real estate fees’.”

In this case, the homeowner with a 30-foot lot sold out for what Joe described as “eight and change.” If you need any proof the senior didn’t get full value, Joe pointed out the builder rapidly flipped the lot to another developer for close to $1-million, albeit after he had absorbed the cost of having the property rezoned to allow a larger house.

Financial literacy for seniors has become a key focus of the federal government and Ottawa’s financial literacy leader Jane Rooney has put seniors at the top of the list for education. It only seems to make sense that your single largest asset be considered part of any action plan.

Some seniors expect to outlive their money but won’t sell their house

“How seniors expect to use their houses as assets was a shocker,” said Tom Hamza, president of the Investor Education Fund, about surveys his group has done on the subject. “Some seniors expect to outlive their money but won’t sell their house. The emotional attachment of the house is much larger than they thought. For a lot of individuals, they are not seeing this as an important part of their retirement.”

It really should be. Seniors have never been wealthier, according to a report from Bank of Montreal issued this year which showed average net worth climbed 312% from 1984 to 2012 for those 65 and older. Seniors have a lot to lose if they don’t get full value on their homes.

Environics Analytics found at the end of 2011 that among households headed by someone 65 or older average liquid assets were $391,818. The average value of an owner-occupied dwelling for a household headed by someone 65 or older was $329,417, as of 2011.

One Toronto realtor, who asked that his name not be published because he works with builders, said seniors often end up taking less than market value because of a misunderstanding of the marketplace.

“You bought something for a few thousand bucks and someone says ‘here, you don’t have to do anything, I’ll give half a million dollars.’ You think that’s great and sell,” said the broker. “The builders are looking for the best deal they can get, what do you expect from them?” Related

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He says seniors are reluctant to put their homes on the market because they don’t want people traipsing through an open house and have security fears, making a quick sale more appealing. Commission is a contentious argument — many people feel realtors charge too much — but ultimately how much you net on any sale should be the focus of any transaction.

Jeff Spencer, vice-president of national sales with HomEquity Bank which specializes in reverse mortgages, says it’s not unusual for him to see clients with homes that have gone up 600% in value.

“You have gains of 6% annually and that adds up quickly,” said Mr. Spencer, adding the problem for seniors is “none of them want to move.” A reverse mortgage is a tool to stay in your house but at the end of the day you still want to know what that home is worth.

Everybody should have a better understanding of the process and get an objective opinion.”

Bruce Matthews, deputy registrar for the Real Estate Council of Ontario which regulates the industry, said people should get at least three appraisals of their property, and even up to five, before selling.

“It’s a legitimate concern, certainly for folks who have not been in the market and been in their current place for 25 years,” said Mr. Matthews. “It’s not just seniors, everybody should have a better understanding of the process and get an objective opinion.”

Even RECO says you shouldn’t sign with the first real estate agent who knocks on your door asking if you want to sell your home.

Joe says when he’s ready to sell he knows what he’s going to do. “I’ll get an opinion and then I’ll get another and another,” says the octogenarian.

He’s right. Using his strategy he’ll probably get a 7000% gain. Tax-free.

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