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Vancouver housing data reveal Chinese connection – ask a Vancouver mortgage broker

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The Globe’s Real Estate Beat offers news and analysis on the Canadian housing market. Read more on The Globe’s housing page.

One of the largest real estate companies in British Columbia says that more than one-third of all the single-family detached homes it sold last year went to people with ties to mainland China.

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MARKET VIEW Video: Market view: Does Toronto face a condo ‘supply deluge’? Macdonald Realty Ltd., which has over 1,000 agents and staff in B.C., said 33.5 per cent of the 531 single family homes sold by its Vancouver offices in 2013 went to people who the company said were a mix of recent immigrants and Canadian citizens.

Those buyers, the company added, tended to spend more money, too, with the average cost of a house sold to these clients topping $2-million, compared to $1.4-million on average overall.

The figures did not include Macdonald’s sales in suburban areas such as Richmond, Burnaby or North Vancouver.

“This is our snapshot of Vancouver,” says Dan Scarrow, vice-president of corporate strategy at Macdonald Realty.

The information is based on reports from the firm’s sales, anecdotes from its agents and Mr. Scarrow’s own experience working with mainland Chinese clients, and it’s a glimpse into the influence of mainland Chinese money on Vancouver’s real estate market, which is considered among the most expensive in North America.

Vancouver has been flooded in recent years by tens of thousands of investor-class immigrants from mainland China, who have seen the west coast city as a stable – and picturesque – place to park their capital in luxury property.

That has helped drive up the average price of a single-family home in Vancouver to around $1.2-million.

Mr. Scarrow, who noted the firm does not query buyers about immigration status, believes that investment flowing from mainland China into Vancouver real estate is a quantifiable phenomenon, but has not personally seen much of the more controversial type of buyer: Those from abroad who buy for investment purposes but never live in the city. “We still see very few pure investors from China who have no connection to Vancouver,” he says.

Getting a handle on foreign buyers is difficult and Macdonald’s survey is far from exact – though one major property developer in Richmond said “that sounds about right.” The federal government does not collect meaningful data on the number of foreign buyers purchasing Canadian real estate, leaving industry participants to debate the impact of foreign capital on the local market. And that debate has gotten heated recently, with some developers accusing others of racism and criticizing those who want to slap curbs on foreign investment. The issue is complicated by the fact that some of Vancouver’s ethnically Chinese-Canadian citizens with ties to Hong Kong view newer immigrants from mainland China with a degree of suspicion, assuming their wealth might have been accumulated in part by proximity to China’s Communist Party, rather than in a free market with the rule of law like Hong Kong.

The lack of hard data has also complicated discussions about the city’s affordability crisis and fuelled a local cottage industry where analysts attempt to decipher the scope of foreign money by looking at things like electricity usage in downtown neighbourhoods where some suspect foreign buyers have bought condos in which they never live.

“People always say there are no stats. Well, here are the stats,” says Mr. Scarrow. “This is actual evidence.”

There have been some reports and statistics about the scale of foreign money in Vancouver real estate before, but few have been conclusive – and none have settled the debate. One Sotheby’s report based on a survey of its agents found that 40 per cent of the luxury properties it sold in Vancouver were to foreign buyers – but not all of them were from China. Many developers trying to downplay fears about Chinese investment cite a statistic showing that only 1 to 3 per cent of Vancouver real estate purchases are “foreign” buyers – but, as is the case with Macdonald’s sales, many more expensive homes are still sold to people based here but who have come, at some point, from mainland China. A 2011 study by Landcor Data showed that 74 per cent of luxury purchases in Richmond and Vancouver’s expensive west side were by buyers with mainland Chinese names.

Mr. Scarrow says his company is “indicative of the overall market,” since his firm has some real estate agents who target overseas Chinese buyers, but is also firmly oriented toward domestic sales, unlike other real estate firms that deliberately target Chinese buyers.

At the same time, Mr. Scarrow and Macdonald are so bullish on the potential for Chinese investment that he is spearheading the company’s efforts to open an office in China. “While there is very little data about foreign investors in Vancouver real estate, our own internal data is enough for us to commit to investing in a representative office in Shanghai,” said Mr. Scarrow, whose mother Lynn Hsu, who came from Taiwan in 1979, is the majority owner and president of Macdonald.

Others remain unconvinced – not about whether there is an influx of Chinese money, but whether the flow of foreign capital will continue unabated.

Richard Kurland, a Vancouver immigration lawyer who works with wealthy Chinese immigrants, believes Vancouver may see a slowdown in foreign investment. He said some wealthy Chinese buyers might get anxious and sell off second properties because of the current crackdown on corruption in China.

In meetings with top real estate agents earlier this year, Mr. Kurland predicted that luxury residential real estate could drop in value by as much as 25 per cent as foreign investment dips. As evidence, he points to July real estate figures that showed 106 homes for sale on the west side in the $3-million to $3.5-million price bracket, and just nine sales, compared to 73 active listings and seven sales during July of 2013.

Follow Iain Marlow on Twitter: @iainmarlow

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Five signs you are ready to take the home-buying plunge

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It may seem obvious, with today’s low interest rates, high rents and a strong housing market: If you’ve got the money, buy now.

But how to know when you are truly ready to make the leap?

Not everyone who would like to buy is actually prepared, financially and emotionally. Real estate experts have recognized signs that indicate when someone is, and meeting those criteria can make the difference between frustration and success.

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You’re taking financial steps

The first sign, of course, is the financial foundation upon which a potential buyer can build.

“If they have already started saving toward a down payment, that is a great sign,” said Jeffrey Baker, a real estate agent with Sutton Group in Montreal. “They have either been saving aggressively over a certain length of time and given themselves a target for the amount that will be their down payment. Or they will have had a meeting with a financial adviser or bank, who has shown them the amount they can realistically spend.”

They also should meet with a mortgage broker and gain pre-approval. Although, as Austin Keitner of Keller Williams Realty in Toronto pointed out, “pre-approval doesn’t mean they’re actually looking at your credit rating but asking questions about your income, expenses and getting to know your ratios a little bit.”

A buyer may not get the final approval if his or her credit rating is not up to snuff. But, nonetheless, “if they don’t have that done by the time they are talking to me, I encourage them to do that. Especially in this market, you want to be ready. You want to be able to act fast,” Mr. Keitner said.

You are plotting your spending

Ability to budget is key. “A well-educated first-time buyer needs to know their budgets to know where they stand,” said Russell Westcott, vice-president of Vancouver-based Real Estate Investment Network.

The move itself as well as the fees and taxes and the costs of properly maintaining a house can add considerable amounts to the down-payment and mortgage. Apartment dwellers might not think about these expenses. Whether it’s a lawn mower or a new roof, Mr. Westcott said, “they have to figure out how much their housing expenses are going to be.”

Does the new house need renovations? “As a general rule, renovation projects will take three times longer than you thought they would,” Mr. Baker said, “and cost at least twice as much as you had budgeted.”

You know what you want

Is it a condo, a townhouse or a big, fully detached home? You should decide that before you start browsing the listings.

“Until you have looked at your budget, and talked to your mortgage broker, you can’t really even determine what type of property you should be looking at,” Mr. Westcott said. “And, does it fit with your lifestyle?”

Knowing the neighbourhood where you want to be is another part of that process. It may be trendy or offer great views, but does it mean a longer commute to work, for example, or have the services – schools, supermarkets and transport links – you need?

“The buyer should ideally know what community they want to be in,” said Mr. Keitner, who has on occasion been asked by clients whether they can lease a property for a year, instead of buying it outright, to see whether it’s the right fit for them.

Otherwise, your location choice might come back to bite. “If you end up leaving the house after a couple of years, you’re going to lose money on it,” he said. “Because after your moving costs, legal costs and so on, its sale is not going to compensate you through market growth.”

You know what you actually need

For Mr. Westcott, the fourth sign that new home buyers are ready to make a serious commitment is when they have “put the focus on what they need, not what they want. Three bedrooms, two bathrooms and an attached garage – those are needs,” he said. “A want would be high-end fixtures, granite countertops or a wine cellar.”

Would-be buyers are sometimes seduced by the “bling,” he added, “and all of a sudden the budget gets thrown out the window.”

Conversely, ignoring properties that meet all your needs but not your whims will only make the already complicated process of buying a new home more challenging.

You have tempered your expectations

The final sign you are ready to take the big step is when you realize that, as Mr. Keitner put it, “there is no such thing as a perfect house. I’ve never really seen a eureka moment where it’s, ‘Oh my God, this is the place where I need to live.’” Rather, he said, the home you buy and make your own becomes the home you love.

“You have to be prepared, as a first-time homebuyer, to temper your expectations,” Mr. Westcott agreed. “You are not going to get what you want and, if you are young, you’re not going to get the style and the quality of living that your parents have.”

What’s more, Mr. Keitner said, “there’s a risk that if people don’t act on properties that they can make work, prices continue to go up. So a decision based on emotion, rather than practicalities, can cost tens of thousands of dollars.”

However, losing a home that, in retrospect, would have been the right buy is also part of the education of home buying.

“My experience with first-time buyers,” Mr. Baker said, “is that they have to live the experience of a place getting away from them to realize that sometimes the market won’t wait for them.”

Buying your first house is probably one of the most difficult decisions you will ever make. But understanding the signs of the well-prepared homebuyer will go a long way in ensuring that it’s the right one.

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Pockets of risk in Canada’s condo market but don’t expect a crash, Conference Board report says

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Pockets of risk continue to exist in the condominium markets of Toronto and Vancouver, but a broad-based downturn is unlikely, according to the latest Conference Board of Canada condo report commissioned by Genworth Canada.

Genworth is the largest private mortgage insurer in Canada.

Toronto’s condo market is expected to “cool slightly but avoid the collapse many fear due to healthy population growth, a solid economy and the desirability of downtown living,” the report says.

Vancouver’s condominium market is recovering along with the overall resale market, although slowing offshore demand “threatens to expose to area’s poor housing affordability.”

Robin Wiebe, senior economist at the conference board’s Centre for Municipal Studies, and co-author of the summer report, said “strong” underlying economic factors would help most condominium markets experience a soft landing.

Increases in average household incomes, for example, would help to keep mortgage costs affordable despite expected modest price gains over the next two years in all eight cities studied in the report.

“Continued growth in immigration, affordability pressures in major cities, and aging baby-boomers looking to downsize are all factors that support continued demand for condominiums in urban centres,” Genworth said in a statement.

Canada’s housing market on course for soft landing, says CMHC – Ask a Vancouver Mortgage broker

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OTTAWA — After consistently bucking predictions that a slowing trend was just around the corner, Canada’s housing market is now showing signs that it is, indeed, headed for a soft landing.

Both prices and construction are still rising, but the pace of construction is expected to taper off over the next two years as homebuyers increasingly turn their attention to excess supply in the market.

Housing starts should total between 179,600 and 189,900 units this year, and possibly increase by as much as 203,200 units in 2015 before building activity begins to ease, according to Canada Mortgage and Housing Corp.

“Recent trends have shown an increase in housing starts, which is broadly supported by demographic fundamentals,” Bob Dugan, CMHC’s chief economist, said Wednesday.

“However, our latest forecast calls for starts to edge lower as builders are expected to reduce inventories instead of focusing on new construction.”

Wednesday’s housing outlook for 2014-15 follows a CMHC report earlier this week that showed only a modest increase in housing starts between June and July, with the agency saying it “continues to expect a soft landing for the new home construction market in Canada.”

The federal mortgage-insurance agency also expects sales to range from 450,800 and 482,700 units in 2014, and between 455,800 to 502,900 units next year. Prices will average $394,700 to $405,700 this year and between $396,500 and $416,900 in 2015.

That works out to an average price increase of 4.5% this year and 1.8% in 2015.

Meanwhile, a separate report Wednesday showed Canadian home prices picked up last month.

The Teranet-National Bank price index rose 4.9% in July from the same month a year earlier, compared to a 4.4% annual rise in June, according to the index, which tracks repeat sales of single-family homes.

On a month-over-month basis, the index increased 1.1% from June.

Calgary led year-over-year gains with a 8.2% jump in house prices, followed by Hamilton with 7.1%, Toronto at 6.6% and Vancouver rising 6.1%.

Benjamin Reitzes, senior economist at BMO Capital Markets, said a soft landing is unlikely to really take hold until interest rates start rising, which many analysts expect will be in mid-2015.

“When that happens, then you’re going to see the housing market roll over a bit and things slow down on the pricing front, on the sales front and on the construction front,” he said.

“But there’s nothing to make us believe that a crash or any kind of significant correction is coming broadly to the market.”

Unlike in the United States, Canada’s housing market has so far avoided a correction. In fact, the housing sector in this country has shown surprising resilience — even as the overall economy struggles to maintain growth.

But given record-low mortgage rates in this country, there have been concerns about the amount of debt that homebuyers are taking on — prompting the federal government to progressively tighten lending rules since the 2008-09 recession.

Still, Finance Minister Joe Oliver also expects a soft landing for the housing market. “We’re aware, of course, that prices keep moving up in a somewhat more moderate way,” he said Tuesday.

“We know that part of the reason for this is low interest rates,” he told reporters ahead of a two-day meeting with private-sector economists and business leaders in Wakefield, Quebec. “We’re monitoring the market carefully but [we] are not alarmed by what we see.”

Consider a trust fund for your kids even if you’re not rich – Consult with a Vancouver Mortgage Broker

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Becoming Mortgage Free Faster

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How a homebuyers’ ‘bellwether’ is buoying optimism in Canada’s housing market

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Genworth MI Canada Inc. and Home Capital Group Inc. reported profits that beat analysts’ estimates as low interest rates drive demand for Canadian homes.

Genworth, the country’s largest private mortgage insurer, reported July 29 that loan losses slid to the lowest level since its initial public offering in 2009 and premiums jumped 17%. Home Capital Wednesday boosted its dividend as net income rose 20%.

“The mortgage insurers are a bellweather for consumers — particularly Genworth is a bellweather for first-time homebuyers,” Nick LeBlanc, a financial analyst at DBRS Ltd., said by phone Wednesday. “The continued strength of the housing market, stable economic conditions, and low interest rates, have helped out the Canadian consumer.”

Canada’s residential housing market has drawn concern from regulators and economists who say it may be 20% overvalued and that consumers are taking on too much debt. The low losses at Genworth show Canadians aren’t having trouble paying off their mortgage debt, while the increased origination highlights strong demand.

Home Capital, the country’s largest alternative mortgage provider, also beat analysts’ earnings estimates and increased its dividend to 18 cents a share. First National Financial Corp., the largest non-bank mortgage lender and underwriter, increased originations 12% over last year to $4.7 billion.

Genworth’s profit excluding some items was $1.04 a share, the Oakville, Ontario-based company said, beating the 93-cent average estimate of nine analysts surveyed by Bloomberg. Loan losses declined to 12%, a record low. Genworth forecast that loss ratio will rise to a range of 15% to 25% for the year.

Stable Market

Bank of Montreal analyst Tom MacKinnon raised his rating on Genworth to an outperform from market perform after the results were announced.

“The housing markets are performing well,” Genworth Chief Executive Officer Brian Hurley said in an analyst conference call. “The interest rate environment is stable and looks to stay that way for a while.”

Genworth Chief Operating Officer Stuart Levings cited Vancouver and Toronto as cities that are facing affordability pressure. Toronto’s home prices soared more than 76% in the last 10 years and Vancouver prices rallied 4.4% in June over the previous year to $800,689.

“The Canadian consumer has been able to service their debt,” LeBlanc said. “Even though debt levels in Canada are increasing, we’re seeing really low defaults. You’re not seeing strain there.”

Genworth rose 0.9% to C$39.60 at 10:34 a.m. in Toronto. First National fell 1.8% to C$23.42. Toronto- based Home Capital climbed 0.9% to C$51.93, after earlier reaching a record high.
Bloomberg.com

Nine ways to power-save your way to a down payment – ask a Vancouver mortgage broker

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The question that comes up more and more in the country’s expensive housing markets is: Where are first-time buyers getting the money?

Parental help is a big factor, so much so that the federal agency Canada Mortgage and Housing Corp. has launched a study of the phenomenon. Also, it’s virtually a given that today’s buyers will raid their registered retirement savings plans to use the federal Home Buyers’ Plan. And then there are savings – money put away week by week over a period of years to build a down payment.

I took a look at housing affordability in a recent column and concluded that heroic savings measures are needed by anyone hoping to buy in expensive cities such as Vancouver, Calgary and Toronto. In other words, sacrifices must be made on all your spending, from the day-to-day to special occasions. Here are nine ways to power-save your way to a house down payment in any city:

Thinkstock1. Move in with your parent or in-laws
Explain that you’re thinking strategically in moving back home. The quickest way to get into the housing market is to maximize savings, which is difficult to do when you’re paying the cost of rent in a big city. You’ll pay your parents a token amount of rent, but most of your savings will go directly into your house down payment fund. Tell your parents to think of the grandchildren you’ll be raising in the house you’re saving for.

Yearly rent at $800 per month: $9,600
Minus token rent payment to parents: $2,400
One-year savings: $7,200

photos.com2. Move down one level of rental
If you have a two-bedroom apartment, try going down to one bedroom. Or, trying squeezing into a bachelor apartment. You could also look at moving to a cheaper part of town, as long as it won’t jack up your commuting costs. Get rid of stuff that won’t fit in your new, smaller place, or store it in your parents’ basement. Don’t spend money on a storage unit.

Yearly rent at $800 per month: $9,600
Minus yearly rent at $650 per month: $7,800
One-year savings: $1,800

Sami Siva3. Sell your car and take the bus
You’ll be saving on fixed costs such as parking, insurance, gas, maintenance and possibly car payments, and you’ll be protected against the risk of financially catastrophic four-figure repair bills. Rent a car or use a car-sharing service for those times when the bus won’t cut it. A cheap bike will help you save on bus fare.

Estimated annual cost of gas, insurance and maintenance and parking: $5,000
Minus estimated annual cost of a bus pass and occasional car rental: $1,500
One-year savings: $3,500

Robert Byron4. Stop buying lunch
A pain, but worth it. You’ll have to think ahead by either picking up the right groceries to make your own lunch, or by scooping up after-dinner leftovers. Healthier than your food-court lunch, which you’re probably sick of anyway.

Estimated cost of buying lunch at $8 or so per day: $2,000
Minus cost of spending about $15 per week to stuff to make your lunch with: $750
One-year savings: $1,250

5. Dial down your vacations
New York is out. Maybe Buffalo. For West Coasters, maybe Seattle instead of Hawaii. Use the likes of Airbnb (airbnb.ca) to find cheap accommodations instead of staying in a pricey hotel. Or stay home and use some of the money you saved on hotels to try some nice restaurants in your town. This is good practice for when you own a home and find that fancy vacations are unaffordable without going into debt.

Summer vacation somewhere in the U.S.: $2,500
Minus the cost of a Staycation: $500
One-year savings: $2,000

Getty Images/iStockphoto6. No pets
Buy a house, and then get a dog, cat, ferret, parakeet or whatever. Pets don’t cost a lot on a day-to-day basis, but vet bills will blow your mind if something goes wrong. Protect your house down payment fund.

Food, vet, toys etc.: $500
One-year savings: $500

7. Put a $100 price limit on birthday presents
Extravagant presents are fun to both give and receive. But they’re a luxury for people who are more financially settled than someone who is madly saving for a house down payment.

Yearly cost for a couple of buying presents for various occasions: $1,000
Minus using the $100 present limit: $500
One-year savings: $500

Matt Rourke/AP8. Cut your cable TV and landline
Almost like heat and hydro, an Internet connection is essential. But a home phone is dispensable if you have a smartphone, and cable TV can be replaced by Netflix, watching shows online and using an HDTV antenna. Also, try buying up DVDs of movies and TV show seasons at garage sales, or find stores that sell used DVDs, CDs and videogames.

Yearly cost of cable and home phone: $1,200
Minus approximate cost of a Netflix subscription: $110
One-year savings: $1,090

Stockbyte/Getty Images9. Halve your spending at restaurants and bars
Studies of Generation Y spending habits show that going out to eat and drink is big. Hey, everyone needs a hobby. But this one is too expensive for people who are set on buying a house. Aim to eat out less often, and rather than pay marked-up restaurant or bar tabs, grab a beer from the fridge.

Annual cost of spending $250 monthly: $3,000
Minus half that annual cost: $1,500
One-year savings: $1,500

TOTAL ONE-YEAR SAVINGS FROM ITEMS 1-9: $19,340

Getty Images/iStockphotoAnd one more thought: Ask for a raise at work!

Freedom 58? How Canadians are shaving thousands off the cost of their mortgage

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TORONTO — A new survey says Canadians, on average, expect to be mortgage-free by age 58, one year later than in a similar poll a year ago.

How this man plans to be mortgage free by age 31

This 29-year-old pension analyst is $130,000 away from paying off his $425,000 home in Toronto, without money from parents or the lotto. Find out how But the survey, conducted for CIBC by Angus Reid, found some big discrepancies across the country.

For example, homeowners in British Columbia thought they wouldn’t be able to pay off their mortgages until they hit 66, while those in Alberta expected to be mortgage-free more than a decade earlier at 55. The survey also found that just over half of those polled were taking advantage of the current low interest rate environment to pay down their mortgages faster.

Fifty-five percent said they were putting in extra effort into repaying their mortgages, although that was down from 68% last year.

Related Canadians’ household debt worries ease as mortgage borrowing slows in May: RBC Savings crippled by kids’ illnesses, parents in their late 50s struggle to find a way to retire and pay off $287,000 mortgage How to pay $67,000 of debt in 3 years and save for a house and retirement CIBC says even small efforts can lead to big savings for homeowners in the long run.

For example, someone paying 4.99% interest on a $250,000 mortgage with 25-year amortization can expect to save nearly $35,000 of interest if they add $147 to their $1,453 monthly payments.

The same homeowner can save as much as $30,000 on interest if they make $726 payments every two weeks, instead of waiting until the end of the month to make a payment.

The bank pointed out that even making a lump sum payment every year — for instance, putting the average $1,600 tax refund towards the mortgage — would shave off $33,103 of interest.

“Employing one or more of these strategies does take some planning and discipline,” said Barry Gollom, vice-president of secured lending and product policy at CIBC.

“If becoming mortgage-free sooner is something you want to achieve, it’s important to look at your mortgage as part of your overall financial picture and to balance your mortgage payment plan against your other goals.”

Of those paying off their mortgages quicker than necessary, 32% said they were making payments more often, 28% were increasing the amount they pay while 18% said they had made either an additional prepayment or a lump sump payment.

Beyond Alberta and British Columbia, the survey found the average age respondents expected to be mortgage-free ranged from 56 years in Quebec to 57 years in Atlantic Canada and Ontario and 58 years in Manitoba and Saskatchewan.

The online poll was conducted by Angus Reid Forum with 1,509 Canadian adults between May 21 and May 22.

The polling industry’s professional body, the Marketing Research and Intelligence Association, says online surveys cannot be assigned a margin of error as they are not a random sample and therefore are not necessarily representative of the whole population.

Canada’s top court declines to hear Toronto realtor case appeal

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Canada’s top court said it won’t hear an appeal of a case on whether Toronto’s main realtor group must give wider access to their historical price data.

The Ottawa-based Supreme Court published the decision on its website Thursday.

The Toronto Real Estate Board blocks its 35,000 members from publishing sale prices on their internal websites, according to a summary of the case from the court’s website, a policy challenged by the federal Competition Commissioner.

The realtor group won its first case at a tribunal before a federal appeals court ordered a second hearing. TREB then asked the Supreme Court to review the case. Bloomberg.com