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WHere’s what’s really scary about high-ratio mortgages in Canada

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Canadians buying (overpriced) houses this spring with little money down, now face an additioimagenal burden with the recent announcement by CMHC – quickly followed by Genworth — that mortgage insurance will rise in price come June 1 of this year. Remember, this is the (bizarre) coverage that most homebuyers must pay for, which protects and indemnifies the lender in the event they (the homeowner) defaults.

Postmedia News Postmedia NewsSchulich School of Business professor Moshe A. Milevsky says homeowners with high ratio mortgages don’t realize the “risk pool” they have stepped into. Absurdly, this insurance stands in contrast to every other policy known to mankind, where the insurance premiums you pay are meant to protect you and not the payee. In contrast, with mortgage insurance you pay the premiums now when you buy the house and then in the event something horrible (financially) happens in your life, your banker won’t have to share in your misery.

Pity the high ratio mortgagor – a euphemism for buyers with very small down payments — who must now spend an additional 3.6% of the amount borrowed if they are only putting down 5% of the value of the house. And, the 3.6% insurance premium assumes a traditional form of down payment. For the non-traditional homebuyers, the premium rate is 3.85%. This, of course, is in addition to closing costs, land transfer taxes, moving expenses. Be prepared to spend.

But what really alarms me is what happens to these high ratio mortgage buyers and their spending after they have finally closed the deal and moved into their dream house. To be honest, I’m not sure they realize what a “risk pool” they have stepped into. Let’s look at the numbers.

The table below tells a scary tale. It is based on my analyses of Statistics Canada’s report on Survey of Household Spending. The data are somewhat stale – and worth monitoring very closely, if it were up to me — but based on anecdotal evidence the numbers are even worse today. Either way, here is what these sorts of numbers are saying very loud and clearly.

mortgage-table

Where does the money go? Look at the first column. The 3.7 million Canadian home owning households without a mortgage – lucky them – have a disposable income (after income taxes and transfers) of $57,000 per year. They spend approximately 15% of their disposable income on shelter. Obviously, they don’t have a mortgage, so they don’t have to make any mortgage payments. But they still have to spend money maintaining and sustaining the house. They ‘burnt’ the mortgage long ago, but the bills do keep coming. Again, they spend 15% on housing and approximately 18% on transportation, 13.4% on food and 7.5% on recreation. No surprises really, or anything very interesting quite yet. But, here is the good news. Households without any mortgage payments to make actually save 14.7% of their disposable income, which is actually higher than the national average. Indeed, perhaps this is the reason so many Canadians look forward to the day they can “burn” their mortgage documents (perhaps at age 75, at this rate.)

Now look at second column, which represents the entire group of 4.9 million Canadian home owning households with (any) mortgage debt. They actually happen to have a higher disposable income of $73,700 compared to those in the first column, perhaps because they are younger and/or still working. Interestingly, they don’t appear to spend any less percentage wise on transportation, food and recreation. Yes, they obviously spend much more on shelter, approximately 30% of disposable income because they do have a mortgage after all. But even those households with mortgages still manage to eke out a savings rate of 3.5% of disposable income. Not great, but positive and closer to the national average. (Math point to remember: X% of disposable income is less than X% of gross pre tax income.)

Now, if I didn’t know better than to be deceived by simple averages, I would (erroneously) conclude that Canadians would be OK. After all, even those with mortgage debt are still managing to sock away money for retirement and/or a rainy day. They are a prudent bunch.

But as we all know, you can drown in a pool with an average depth of a foot. Analogously, let’s take a close look at the Canadian families who live in the deep-end of the risk pool.

Now look at the third and final column in the table; the one I believe is the scary one. This summarizes the spending life of the 1.8 million Canadian households who have a mortgage liability ratio (MLR) larger than 20% of disposable income. Recall, this implies that they are spending at least 20% of their after-tax income to cover the mortgage (only). On a pre-tax basis this number is higher and this figure doesn’t include maintenance, property taxes, heating or utility bills and all the other things one needs to avoid freezing in the winter or melting in the summer. The 20% of disposable income (only) goes to keep the bank at bay.

Oddly enough or perhaps by force of habit, these 1.8 million households continue to spend a similar fraction of their disposable income – compared to their less leveraged counterparts — on food, recreation and transportation. They long for the house and need to furnish it as well as keeping up with the local Joneses.

Alas, with over 20% of disposable income going to the bank, what gives in the family budget? You guessed it, savings. Whether it be for retirement or even an emergency, there is no money left at the end of the month. They don’t save.

Well, actually, it’s worse.

These 1.8 million households are taking a (1.) highly leveraged bet on the continued appreciation of housing, and (2.) aren’t willing to reduce their discretionary consumption to account for the new risks on their balance sheets. Look carefully, they are actually saving -13% (dissaving 13 per cent) of their disposable income.

How exactly do you dissave 13% of anything? Well, by foolishly buying things on credit cards, perhaps refinancing their mortgage every few years and spending some home equity, or perhaps other non-traditional (i.e. off-balance sheet) methods of borrowing. Anecdotally, again, my understanding is that parents and family members are yet another creditor of the high ratio mortgagor. Their home is the nest egg.

Yes, “but Cassandra” I am quickly reminded by every bullish realtor and agent in town, “the pricey house is their big savings.” After all, the promoters assert with confidence, if housing continues its steady march to the clouds we will all retire rich. “Why bother with any other forms of saving?” they ask.

Well, if you work your way backwards, the amount by which housing prices would have to appreciate over the next 10 to 15 years to justify negative savings rates — and still leave a decent liquid nest egg for retirement – is staggering. Personally, I can’t get the math to work out even in the shallow (i.e. small mortgage) end of the risk pool, let alone the deep (i.e. big mortgage) end. And, worst case scenario, if real estate disappoints and/or interest rates swell, just when it comes time to renew your mortgage in three to five years, well, I guess these 1.8 million Canadian families will learn what it’s like to run their house like a hedge fund.

Moshe A. Milevsky is a professor at the Schulich School of Business at York University, and author of the recently published book: King William’s Tontine: Why the Retirement Annuity of the Future Should Resemble Its Past, Cambridge University Press (2015.)

Federal Budget 2015 holds off on new measures to cool housing

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Household debt reached record levels in the last quarter, according to Statistics Canada, but Ottawa says our appetite for credit, driven by home ownership, has simagetabilized.

It appears that Finance Minister Joe Oliver has no plans to impose further restrictions on borrowing, with the budget noting Ottawa has tightened rules on government-backed insured mortgages four times since 2008.

The federal government says the overheated housing market is now a Toronto and Vancouver problem with the rest of the country having already witnessed moderation in pricing.

“There has been an appropriate and desirable moderation in housing activity in most regional markets across Canada. Toronto and Vancouver, in contrast, have continued to experience periods of strong sales and price growth, with housing market strength in these cities supported by such factors as population growth and land scarcity,” according to the budget.

Related Here’s what’s really scary about high-ratio mortgages in Canada Forget gold, buy a Vancouver condo if you want to stash your wealth, says world’s top money manager The federal budget states housing has been an “important” contributor to Canada’s gross domestic product but Ottawa doesn’t seem to think consumers are overstretched and noted the interest cost of servicing debt is at an all-time low.

“Higher debt loads leave the household sector more vulnerable to income shocks or a sudden sharp increase in interest rates,” according to the document. “However, as households have accumulated debt in a very low interest rate environment, the cost of servicing that debt is at a record low.”

The government says Canadians have been taking advantage of “solid employment gains” and record low interests to invest in all kinds of housing, including buying first homes, moving into larger homes or renovating existing homes.

“The pace of household debt accumulation relative to disposable income increased between 2002 and the depths of the global recession in mid-2009, before slowing and then broadly stabilizing at an elevated level since 2012,” states the budget document.

Household to disposable income was 163.6 per cent in the latest quarter but was under 110 per cent in 2002 before consumer borrowing began to take off. LATEST PERSONAL FINANCE VIDEOS

Vancouver home affordability improves on wage gains, but prices continue to climb

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Rising Ontario prices created a drag on the national figure for home-ownership affordability, according to a report from the Royal Bank of Canada, which says strong data from Vancouver could impact those numbers even more.

RBC said Tuesday it became

Image Copyright - THE CANADIAN PRESS/Jonathan Hayward

Image Copyright – THE CANADIAN PRESS/Jonathan Hayward

more expensive to buy a home for a second straight quarter as 2014 closed, news that comes out as the Real Estate Board of Greater Vancouver said sales were up 60% from January with prices up 6.4% from a year earlier, based on its index.

“Almost every province and city improved [in affordability] except Ontario and Toronto,” said Craig Wright, chief economist with RBC, about his bank’s study.

The bank said that during the fourth quarter, affordability – the cost of owning a home as a percentage of pre-tax income – climbed by 0.1 percentage points to 42.7% for bungalows, 0.2 percentage points to 48.1% for two-storey homes and remained unchanged at 27.4% for condominiums. Costs include mortgage payments, utilities and property taxes.

Mr. Wright said Vancouver, still the least affordable place to own a home in the country at 82.4% for a detached bungalow, saw improvements because of wage gains in the province.

In Vancouver, the average price of a detached home reached almost $1.4 million last month, with the local board reporting multiple offers becoming more commonplace.

Related Four years on, economist stands by prediction of Canadian housing’s ‘day of reckoning’ Calgary’s housing market under pressure as new listings, inventory soar Even before housing sales began dropping in Calgary, the oilpatch saw affordability improvements in the fourth quarter as incomes rose, said Mr. Wright.

The average price of a home in Calgary dropped 4.2% in February from a year ago, but that might not be enough to improve affordability if people start losing their jobs. The income part of the RBC measure is based on an average of the population and unemployment will lower that number.

Overall, lower interest rates across the country have helped consumers save money on their housing costs. “We’ve seen this time and time again. Any time interest rates move down, it’s a pretty powerful force for affordability,” Mr. Wright said.

Real estate author Don Campbell thinks Canadians are probably immune to the effect of lower interest rates because they expect to borrow at sub 3% rates now. If anything, he says a rise in interest rates would create a stampede to buy.

“I don’t think a quarter-point drop has much of an impact anymore,” he says. “I’m borrowing at 2.34% now. Who cares if they go lower.”

Mr. Campbell, who is based in Vancouver, said the city’s sales numbers might have been inflated last month because of unusually warm weather.

“A lot of the March, April and May product sold [earlier than expected] in February because we have 15-degree weather,” said Mr. Campbell. “We had a spring-buying season activity.”

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Calgary homeowners and buyers left wondering what’s next as once-sizzling housing market succumbs to chills

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calgary2Calgary’s housing market is the hot topic of conversation these days not only in the city but across the country.

Mortgage firms tighten lending standards in Calgary as housing boom turns sour

The oil that fuelled Calgary’s housing boom has created the conditions for a bust.

Genworth MI Canada Inc., the country’s largest non-government mortgage insurer, said last week it’s preparing for more losses this year and into 2016. Home Capital Group Inc., the largest non-bank mortgage lender, is tightening standards in the oil-rich province of Alberta to reduce the risk to the company of falling housing prices.

“The warning signs are out,” said Gerald Soloway, chief executive officer of Home Capital. “It’s only prudent for everybody who participates in that market to heighten their alertness.” Keep reading. The once-sizzling real estate sector has cooled tremendously thanks to a precipitous decline in oil prices and that has people, from economists to realtors to homeowners and potential buyers, speculating and wondering what that will do to housing prices.

And there is no lack of opinion on the topic, ranging from forecasts of a small increase in average prices for the year to a 10% or more decline. MLS sales are expected to fall dramatically this year – TD recently said by as much as nearly 50% – with new listings rising at a steep pace.

“There is no surprise that the range is so vast. Trying to forecast an average sale price change . . . in today’s market is impossible,” said Don Campbell, senior analyst with the Real Estate Investment Network. “Why? Simply because the most important variable is not known.

“How long oil will stay under $70 and how confident the oil industry is about it levelling at that number. Without that knowledge, real estate market price forecasting is mathematically impossible.”

According to the Calgary Real Estate Board, year-to-date up to and including Saturday there have been 1,758 MLS sales, down 37.17% from the same period last year, while new listings have risen by 24.66% to 5,551. The average sale price has dropped by 2.17% to $463,938.

Related Mortgage risks lingering in the shadows from non-regulated lenders, says CIBC Canadian home sales drop 3.1% as ‘sense of panic’ sweeps western markets Since 1990, the annual average MLS sale price has fallen from the previous year only four times – 1991, by 1.08%; 1995, by 0.47%; 2008, by 2.46%; and 2009, by 4.67%.

The biggest annual hike was recorded in 2006 when prices soared by 39.78% from the previous year to $358,385 and then jumped another 18.25% in 2007 to $423,798.

According to the Conference Board of Canada, the city’s economic growth in 2006 was 7.0% – the second highest rate of growth in the past 25 years behind only the 7.9% recorded in 1997.

Christina Hagerty, a realtor with RE/MAX Realty Professionals, who started in the business in 1991, said real estate in Calgary has always been a good long-term investment.

“In fact, if you look at real estate values over the course of 10 years, all have performed double to triple their value right across the board, not just in the inner core,” said Hagerty, who specializes in that area.

The old-timers like us who have seen a couple of decades of activity aren’t fretting “So the old-timers like us who have seen a couple of decades of activity aren’t fretting.”

Hagerty said the current rental vacancy rate in the city remains low. That combined with some of the lowest interest rates in history and still good overall consumer confidence will keep the real estate market healthy.

“I would say based on this, housing prices should continue to see a slight positive gain. Unless there are reasons for sellers to take a substantial decrease, most would not do so. Why would you want to lose 10% on your real estate value when you can lease out for a premium based on such low vacancy rates?,” she said.

Ann-Marie Lurie, chief economist with CREB, said there is a wide range of price expectations for this year because there is a significant amount of uncertainty regarding the duration of lower oil prices and ultimately the impact on employment.

“Regardless if you look at average, median or benchmark prices, annual home prices within city limits declined in 2008 and 2009,” she said. “During that time several global economies were in a recession. In 2009 Calgary saw GDP contract by nearly 4%, net migration fell, full-time jobs were being lost, there was a large amount of newly-constructed product available, and the impact of the financial crises created several changes to the lending industry.

“This year the housing market has seen sales activity fall, likely a result of reduced consumer confidence in the market. At the same time, listings have continued to rise, driving up inventories. If this continues, this will place downward pressure on pricing. However, to reach the double-digit decline rates in housing prices, this would assume that the energy prices would stay low for this year with not much upside prospect into 2016, causing job losses, low levels of migration, and persistent excess supply in the housing market.”

For prices to remain stable, said Lurie, the city would have to see stability in the employment sector and the pace of new listings slow.

“With this much uncertainty I think it is prudent to consider there are several factors that can drive the prices. Based on current expectations, prices are likely to remain at or just below levels recorded near the end of last year,” she added.

Hagerty said Calgary is a young city and many people are not used to the volatility of the oilpatch and its relation to the real estate market.

“So those of us who have been around for a couple of decades aren’t concerned,” said Hagerty. “We aren’t day-trading real estate. We get to live in this tangible asset as it grows in value. Savvy investors are sitting back hopeful the next seller will think the sky is falling so they can seize the opportunity. They know that Calgary’s a sure thing with strong fundamentals that make it a great investment.”

Campbell said real estate continues to be a strong long-term investment and income replacement.

“We have always believed that real estate is a safe long-term play. The numbers don’t lie – since prices have begun to be tracked, they have increased,” he said. “Of course we have seen short-term fluctuation with dips and corrections, but in the long term the arrow has always pointed up.

“Calgarians have hosted many an oil boom party in the past and have learned of these inevitable dips. However, because the province’s population, and the city itself, has grown at record numbers over the last two years, we have a large cohort of the population who have never experienced a Calgary ebb and flow. That has led to an increase in knee-jerk response in the market as shown by the dramatic increase in listings.”

He said it is at about this point that strategic Calgary investors start to hunt for good deals, knowing that when the market recovers – be it in one or two years – that it will prove to be the ultimate buying window.

Calgary Herald

Calgary home prices were the fastest growing in Canada in November

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Calgary, Canada’s oil capital and hottest real estate market last year, continued to lead national home price increases in November.

Prices for new homes in Calgary gaiimagened 0.3 per cent in November, the biggest advance among the nation’s largest real estate markets, Statistics Canada said today in Ottawa. From a year earlier, prices in the city were up 6.5 per cent.

Calgary prices rose in November amid concerns even then about the health of the oil industry. Oil prices continued their decline, with benchmark West Texas Intermediate crude this week falling below $48 a barrel for the first time in more than five years.

Nationally, new home prices rose 0.1 per cent in November and 1.7 per cent from a year earlier.

Related Oil prices are making housing forecasts a tough call in Alberta Sales of Canadian homes worth over $1M grew substantially last year and will again in 2015 Canada’s municipal real estate markets diverged over the last year, with gains in Calgary and southwestern Ontario markets such as Toronto and Hamilton offset by weakening elsewhere. Prices in Vancouver fell 0.2 per cent in November and are down 0.6 per cent from the same month a year earlier.

Home prices in Montreal recorded their first annual decline in November since 1997.

Statistics Canada’s new home price index doesn’t include condominiums or apartments, which comprise about a third of the new real estate market.

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Downtown living, where properties are small, but convenient, seen as driving force in 2015 real estate

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toronto-condo1TORONTO — Homeowners who choose the convenience of city life over the more generous living space in suburbia are driving Canada’s real estate market, according to a new report jointly produced by consultancy PricewaterhouseCoopers and the non-profit Urban Land Institute.

Your dream home could become a nightmare if you’re not prepared. Here are 7 pitfalls to be aware of so that your purchase doesn’t come back to haunt you. Read on

The annual outlook on emerging real estate trends says the move downtown, which has emerged in the past few years, will continue as more Canadians decide to stay in or move back to urban cores.

Much of this is due to changing demographics as young families and millennials forgo the white picket fence and house in the suburbs to take advantage of downtown living, where properties are smaller but offer more conveniences, said the 112-page report released Tuesday.

According to Statistics Canada, the most recent numbers available show that the population of urban centres grew 7.1% between 2006 and 2011.

Frank Magliocco, Canadian real estate leader at PricewaterhouseCoopers, said there are a number of factors behind the urban growth, including that Canadians are more aware of the environmental costs associated with urban sprawl as well as the cost in time and money of lengthy commutes.

As well, provincial land use regulations that protect green spaces — for example Toronto’s Greenbelt involving about 800,000 hectares of protected land from Peterborough, Ont., to Niagara Falls, Ont. — have made it more difficult to find land to develop and has pushed an explosion of condominium growth in major cities.

But one of the concerns is what will happen to these urban properties once the younger generation grows out of them.

“This continuing urbanization trend has fuelled the condo boom in Toronto and other cities, but some question what will happen as the lifestyles of today’s young urban singles and couples change. Will they move out of the city core in search of larger homes, schools and services, or will they — like their counterparts in other parts of the world — simply adapt to smaller living spaces?” the report asks.

Magliocco said Canadian cities will either go the way of New York, where families are willing to sacrifice space to live in the city, or the way of London, where families are used to living outside the city and commuting downtown for work.

The rapidly growing condo markets in cities such as Toronto and Vancouver have also raised concerns about an oversupply of units and whether the boom is overly weighted towards wealthy, foreign investors who lease the units to others.

Meanwhile, an expected rise next year in interest rates from historically low levels may also influence demand in the housing market.

However, among the 1,400 people interviewed and surveyed for the report, which included private property investors and developers, commercial developers and real estate service firms, the consensus was that the Canadian market is strong enough to weather a bump in mortgage rates.

“The improvement in the U.S. economy indicates that higher rates could be coming, but the economic stability in Canada and the United States will continue to attract foreign capital,” said the report. “In addition, retiring baby boomers are likely to flood the market with private capital as they look to turn stock options and retirement packages into stable, income-generating assets.”

Overall, the report sees developers responding to the needs of downtown dwellers by building more mixed-used properties, which include residential and retail space.

“Looking ahead, we can expect to see more and more retail and services along the streets of Canada’s city cores and along major transit arteries, especially where new developments predominate. Major brands are likely to move into these new spaces, too — though with new formats and smaller footprints,” said the report.

The report also noted that Calgary, Edmonton and Vancouver, will see the most residential growth in 2015, a trend that has been helped by more jobs becoming available in the West than in Central Canada, while Calgary and the Greater Toronto Area will hold the most potential for retail growth.

Foreign buyers are fuelling a seismic spike in Vancouver’s luxury housing market, realtors say

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VANCOUVER — Chinese investors’ global hunt for prime real estate is helping drive Vancouver home prices to record highs and the city, long among top destinations for wealthy mainland buyers, is feeling the bonanza’s unwelcome side-effects.

Thinking about a move-up buy? Forget it, new study says you can’t afford it

You’re likely stuck in your current home because of new imagetougher mortgage regulations and ever-rising prices in the Canadian real estate market. Read on The latest wave of Chinese money, linked in part to Beijing’s anti-graft crackdown, is flowing into luxury hot spots. But it has also started driving up housing costs elsewhere in a city which already ranks as North America’s least affordable urban market.

For decades Vancouver, along with Hong Kong, Sydney and Singapore and more recently New York and London has been attracting Chinese and other Asian buyers.

And just like those other cities, Vancouver got caught in the most recent buying frenzy, which realtors say has intensified after President Xi Jinping announced his anti-corruption crusade in late 2012.

“In the last year there’s been the corruption crackdown in China and a lot of people have seen their wealth evaporate over there because of that,” said Dan Scarrow, a vice president at MacDonald Realty. “So they want to put it somewhere they perceive as safe and there’s nowhere safer than the west.”

Related Secret path revealed that allows wealthy Chinese to transfer billions overseas by buying pricey property in Vancouver, New York and Sydney Vancouver’s housing market is the second least affordable in the world, survey finds

Canadian PressThe impact of the latest inflow of foreign cash is particularly acute for Vancouver, its market already tight because of limited building space and a decade-long nationwide property bull run fuelled by low borrowing costs. Canada does not track foreign property buyers, but analysis of city assessment data carried out by a leading urban planner and made available to Reuters helped identify Vancouver’s hottest neighbourhoods. Interviews with realtors active in those areas confirmed the perception that Chinese buyers were largely behind the latest rally.

My market, the luxury real estate market, is primarily Asian buyers — mostly from mainland China Andy Yan of Bing Thom Architects found that values for detached homes in the $2-5 million range have risen by 49% since 2009, making it the fastest growing segment in Vancouver’s housing market. Home values in a handful of luxury enclaves in Vancouver’s west climbed more than 50% over that period, driving city-wide values up more than 35%.

Realtors are saying that more than half of buyers in prime markets are mainland Chinese.

“My market, the luxury real estate market, is primarily Asian buyers — mostly from mainland China,” said realtor Malcolm Hasman, a partner at Angell Hasman and Associates. Hasman said Asian buyers accounted for roughly 90% of sales of properties costing $5 million and more.

The impact of the latest inflow of foreign cash is particularly acute for Vancouver, its market already tight because of limited building space and a decade-long nationwide property bull run fuelled by low borrowing costs.

Condo towers are now built without a fourth floor, as that number is unlucky in Asian cultures, and wok kitchens are standard in most new homes

Getty ImagesAn Asian buyer visits a show apartment of the central luxury real estate complex in Vancouver, Canada. Condo towers are now built without a fourth floor, as that number is unlucky in Asian cultures, and wok kitchens — a second kitchen for cooking with a smoky wok — are standard in most new homes. However, its headaches might offer a glimpse of things to come for other world cities that attract global capital.

Sales volumes for detached luxury homes soared in Vancouver by 38% in the first half of 2014 compared with the year earlier period, led by properties valued at or above $2 million, according to a report by Sotheby’s International Realty Canada.

“Foreign investors are competing with other wealthy Canadians and there’s a lot of demand,” said Ross McCredie, chief executive of the luxury-focused realty firm.

Over the past 12 months, the benchmark price for a detached home in western Vancouver rose 10% to a record $2.28 million, according to the Real Estate Board of Greater Vancouver.

STATUS SYMBOLS

Getty ImagesA wealthy Chinese immigrant family inspect a villa in the high-class neighboorhood of West Vancouver. Realtors say Asian buyers accounted for roughly 90% of sales of properties costing $5 million and more. Nowhere is the China effect more apparent than at the top end of the market.

An English-style estate on a one-acre lot in Vancouver’s exclusive First Shaughnessy neighborhood is on sale for $17.9 million and all 10 offers it has attracted so far are from ethnic Chinese buyers. All are either newcomers or those who have arrived in the past decade, according to the listing agent.

“It’s all about status,” said Sherry Chen, a realtor with Rampf-Anderson Real Estate Group, who deals mainly with wealthy clients from mainland China.

In most cases, these are “astronaut families” where the husband keeps working in Asia flying back and forth, while the wife establishes an education base for the children in Canada.

Close correlation between high-end property prices and the discontinued “millionaire visa” program for wealthy individuals has raised concerns that its termination this year could hurt the market. But prices seem to have recovered after a temporary dip, McDonald Realty’s Scarrow said, adding that property investors had several other ways of accessing the market.

The money flow has transformed the DNA of the city. Condo towers are now built without a fourth floor, as that number is unlucky in Asian cultures, and wok kitchens — a second kitchen for cooking with a smoky wok — are standard in most new homes.

The influx is also having a trickledown effect as people sell out in prime locations and move to other neighborhoods driving up prices and widening the gap between housing costs and the condition of the local economy.

“We are in this unprecedented situation right now in terms of housing prices and how quickly they’ve escalated. They’ve become completely disconnected from local incomes,” said Geoff Meggs, a Vancouver city councillor.

Vancouver has ranked the second least affordable major city after Hong Kong for the past three years in an annual survey by think-tank Demographia which tracks housing costs and incomes in top markets such as New York, Sydney, Singapore and London.

That raises fears of brain drain and concerns about the markets excessive reliance on foreign money.

“I think Vancouver faces challenges a number of cities are facing in the world,” said Yan. “And that is what does one do in this new environment of global capital and money flows.”

© Thomson Reuters 2014

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housesaleA lukewarm summer didn’t cool off Toronto’s red hot housing market which remains in sellers’ territory, according to the city’s realtors.

The average price of a home in the country’s largest market continued to rise, reaching $546,303 for the region — an 8.9% increase from a year ago. In the much sought-after detached home segment of the market, the average sale price reached $902,428 in the city of Toronto proper, a 14.7% increase from a year ago.

“The number of listings in August was down in comparison to last year while the number of sales increased. This means the sellers’ market conditions remained in place with a lot of competition between buyers, said Jason Mercer, director of market analysis with the Toronto Real Estate Board, in a release.

Mr. Mercer expects sales growth to continue to outpace listings growth which will lead to ongoing increases in year-over-year average sale prices.

For the first eight months of the year, sale prices across the GTA averaged $562,504, an 8.5% increase from a year ago.

New listings for August were 11,733, down from 12,103 a year earlier. Sales were up to 7,600 from 7,391 during the period.

Sales growth was experienced in all segment of the market and across the greater Toronto area. Condominiums experienced the weakest price growth but the average sale price in the GTA still climbed 4.4% from a year ago to $352,942.

Toronto’s stellar results come on top of data released from Vancouver and Calgary which show prices continue to rise in those cities, indicating national averages will likely climb when those numbers are released mid-month.

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Welcome to the world’s most expensive apartment: $440-million penthouse comes with chauffeur, caterer and infinity pool

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france_tour_odeonEven by the sky-high standards of Monaco, a penthouse at the top of the Odeon Tower is set to fetch a vertiginous price, according to developers.

Tour Odeon, which is under construction and when finished will be the principality’s first skyscraper since the Eighties, will be topped with a five-floor penthouse that would cost a potential owner 300-million euros ($440-million), making it the most expensive in the world.

 

 

 

www.odeon.mc
www.odeon.mcTour Odeon will be Monaco’s first skyscraper since Prince Rainier banned tall buildings on the shoreline
to avoid overshadowing the city.

The penthouse will have several swimming pools, including a large infinity pool with a slide leading from a dance floor in the rooms above.

www.odeon.mc
www.odeon.mcThe world’s most expensive penthouse towers forty-nine stories above Monaco, offering the principality’s latest breed of ultra-wealthy transients a place to flash their bling and still enjoy secrecy.

The 35,000 square-foot apartment will also come with a private chauffeur, a caterer, three staff bedrooms, a 24-hour concierge service and access to a health centre.

Tour Odeon, which will house 36 more luxury flats, will be Monaco’s first skyscraper since Prince Rainier banned tall buildings on the shoreline to avoid overshadowing the city. Instead he encouraged the development of wider, lower buildings built on an extension into the sea. His decision was reversed in 2009 by his son and successor, Prince Albert, and plans for the 560-foot Tour Odeon were drawn up.

www.odeon.mc
www.odeon.mcThe view from a kitchen in an apartment in the Odeon Tower. So far, 26 flats have been sold.

One in three of Monaco’s 38,000 residents is a millionaire, according to a study by Spear’s magazine and WealthInsight.
Irene Luke, of Savills, the estate agency, who moved to Monaco in 1990 from London, said it was becoming increasingly popular with wealthy Britons.

“It’s becoming more and more like London by the sea,” she said.

www.odeon.ms
www.odeon.msThe master bedroom in an Odeon Tower apartment. One in three of Monaco’s 38,000 residents is a millionaire.

Tax changes in some areas of Switzerland are also “making Monaco look like a very safe, stable place,” Miss Luke added.

The penthouse is expected to go on the market next year. So far, 26 flats have been sold.

Mortgage rules may be tighter for the self-employed, but options remain – Consult with a Vancouver Mortgage Broker

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99345955If you are self-employed, live in a rural area or don’t have the best credit, you may find it increasingly difficult to get a mortgage.

Yet while tighter lending rules are making it harder for some people get approved by a bank, going to a second or third-tier lender isn’t something everyone is comfortable with.

Real estate experts say if you are self-employed, traditional lenders like the big banks may still lend you the money – it may just come at a higher interest rate, require a bigger down payment and increased scrutiny.

Customized products for the growing number of people who are self-employed often come with a minimum 10 per cent down payment instead of the usual five per cent, while the typical five-year closed rate for most is higher than what many banks are offering, said John Andrew, a real estate expert with Queen’s University.

Your chances are also better if you can show income tax records dating back a few years that suggest a steady income.

“If you can show your income tax records and things like that going back 10 or 15 years, and your income is fairly steady or even better, rising, they’re still going to consider you to be self employed, but you’re going to be about as well off as you can possibly be,” Andrew said.

“You’ll never be as good as somebody with a non-self-employed job, which is kind of ironic because you can still lose your job, and that’s the complaint that a lot of self-employed people have. They could be doctors or dentists or lawyers and be making $400,000 and have been doing it for 20 years, but at the end of the day, they’re still consider to be self-employed, and there’s always this suspicion that doesn’t apply if you can show a pay stub from your employer.”

Jason Scott, a mortgage associate with the Mortgage Group in Edmonton, says some people who are self-employed may also have difficulty getting approved by a traditional lender because the tax breaks available to them may make their income look lower than it actually is.

“If they’re being tax efficient, they’re paying more for that mortgage but they’re saving a lot of money on income tax,” he said.

Bad credit history is trickier, although some alternative lenders will still consider backing you if you can explain what happened.

“It has to have a story. It has to (give me) some sense as to why you were bankrupt,” said Matthew Robinson, chief executive of W. A. Robinson Asset Management Ltd., which backs mortgages through its Pillar Financial Services division.

“What happened? Were you sick? Did you go a through a divorce? (I need) a story that makes sense, not just that you had bad credit because you don’t know how to pay credit cards.”

That may get you a higher interest rate, but those lenders argue the rate is justified because of the risk attached, and because of the extra work that goes into verifying information and working to understand the circumstances that led to the bad credit.

“Everybody thinks they deserve a 2.99 (per cent) mortgage. But at the end of the day, a 2.99 mortgage is zero risk. It’s the lowest end of the scale,” said Robinson, whose company works with self-employed people, rural properties and also provides bridge financing for construction projects.

“If there’s any work involved, if there’s any administration on a any level, the bank cannot afford to do a 2.99 mortgage. There’s not enough room.”

He suggests talking to a mortgage broker who will have relationships with various institutions and be able to steer you toward the best mortgage for your particular situation.

“Mortgages are becoming so complex, and there are so many options for people, they should actually be using a mortgage broker even if they think they’re best client in the world,” says Scott, who has also written a book to help homeowners titled, Approved! Mortgage Advice for All Stages of Life.

“It becomes a case of you don’t know what you don’t know. There are so many strings and such fine print on mortgages these days that it really does pay to use a broker.”

Whatever approach you take, experts say there is always room to negotiate – whether on the mortgage rate or on the quality of your documentation.

And you would also be wise to put any mortgage documents you get from alternative lenders in front of a lawyer to make sure you are comfortable with the terms.

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