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In Canada’s housing market here’s what $500 K buys: A lake in Edmonton … a condo in Toronto – Consult with Bruce Coleman, Vancouver Mortgage Broker

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The Canadian Real Estate Association has predicted that the national average price for a home will be $391,000 this year.

Vancouver Mortgage BrokerBut it’s hard to compare how far your buck will go in Canadian cities using that figure, since the average prices at year’s end are so very different: $785,574 in Vancouver and $320,693 in Montreal, for instance. So we’ve found a round figure in the middle and asked, what could approximately $500,000 have bought homebuyers in various markets across the country?

EDMONTON

Shaughn Butts/Edmonton Journal
Shaughn Butts/Edmonton Journal$499,900 in Edmonton will get you two-and-a-half storey, three-bedroom show home, with double detached garage and 2.5 baths.

The place: Two-and-a-half storey, three-bedroom show home, with double detached garage and 2.5 baths

List price: $499,900

edmontonSquare footage: 1,901

Taxes: $3,400

Monthly fees: HOA $300/month

Where: Late stage of an established development in city’s southeast, south of the ring road. Forty minutes to downtown, 10 minutes to the airport, and five minutes to a residents-only recreational lake.

Top features: Loft-den, bonus room with Juliet balcony, hardwood, gas fireplace, all appliances, deck and landscaping included. As a bonus, all the furnishings are included. HOA fee includes access to a 32-acre freshwater lake with sandy beach, dock, tennis courts and all-season clubhouse.

Contact: Madeline Sarafinchin, Jayman Realty (Edm) Inc.; 780-913-6595

MONTREAL

Handout
HandoutThis four-bedroom bungalow in a western suburb of Montreal comes with a salt-water pool.

The place: Four-bedroom bungalow with two baths, built in 1959

List price: $492,500

Square footage: 1,442

Where: The Beaurepaire area of Beaconsfield, a western suburb of Montreal. Not far from Lac St. Louis and a commuter train station.

Top features: Comfortable bright living room with wood fireplace opening to dining area. Fully renovated three years ago, with spacious and modern kitchen with granite counter tops. Unique south-facing den adjacent to master bedroom. Fenced yard with new salt-water pool on a lot of 9,122 square feet. Extra-large basement family room with fourth bedroom, laundry room and workshop.

Taxes: $4,746

Monthly Fees: N/A

Contact: G. Shepherd Abbey, Abbey & Olivier Real Estate Agency; cell: 514-951-6008; office: 514-694-7866; shep@abbeyandolivier.ca

 OTTAWA

handout
handoutIn the east-end suburb of Orleans, separated by a 20- to 25-minute highway drive from downtown Ottawa.

The place: Two-storey single family home with four bedrooms and four bathrooms

List price: $499,900

Square footage: 3,200

Where: In the east-end suburb of Orleans, separated by a 20- to 25-minute highway drive from downtown Ottawa. This home is a short walk to shopping, cafés, parks, schools and public transit.

Top features: Classic crown moulding and gleaming hardwood floors run throughout the main level of this Naismith model by Minto. The kitchen is open to the family room to allow ease of flow when guests come to visit. An elegant curved hardwood staircase leads to the upper landing. Homeowners can spread out with two spacious ensuite bathrooms and three walk-in closets. The backyard is fully fenced with no rear neighbours.

Taxes: $4,879

Monthly Fees: N/A

Contact: Jason Pilon, Keller Williams Ottawa Realty, Jason@PilonHamilton.com, PilonHamilton.com; 613-845-0271

REGINA

Handout
HandoutThis two-storey split in Regina has13 rooms, including three bedrooms and three bathrooms.

The place: A two-storey split with 13 rooms, including three bedrooms and three bathrooms

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List price: $519,900

Square footage: 2,090

Where: Situated in a well-established, well-treed neighbourhood in southeast Regina, close to schools, parks and shopping. Only a few minutes drive from downtown. Backing green space.

Top features: A spacious family home, built in 1984, featuring many updates and upgrades, including a modern, eat-in kitchen with granite countertops, and heated slate flooring through the kitchen, dining area and hallway. A garden door leads to the deck overlooking a beautifully landscaped yard with patio, pond and flower beds. The over-sized garage is insulated and drywalled.

Taxes: $3,263

Monthly Fees: N/A

Contact: Leanne Tourney, Re/Max Joyce Tourney Realty; 306-791-7666

Handout
HandoutFormer show home with all the bells and whistles: hardwood floors, kitchen island and walk-in pantry, central air, central vac, four bathrooms and a fully finished basement.

SASKATOON

The place: Two-storey, four bedrooms, four bathrooms

List price: $504,900

Square footage: 3,975

Where: Premium Stonebridge location in the south end of the city. New development full of young families, close to shopping, parks and leisure facilities. Quick access to freeway means that downtown Saskatoon is only a short drive away.

Top features: Former show home with all the bells and whistles: hardwood floors, kitchen island and walk-in pantry, central air, central vac, four bathrooms and a fully finished basement. Open concept. Main-floor laundry.

Taxes: $3,975

Monthly Fees: N/A

Contact: Listed by Manning Luo, Re/Max Saskatoon; 306-242-6000; manning@saskatoonrealestates.ca

TORONTO

Handout
HandoutFor around $500,000 in Toronto you can get a two-bedroom townhouse and have to pay $503 per month in fees.

The place: Two-bedroom, two-storey loft townhouse with one bathroom and one parking space

List price: $489,900

Square footage: 806

Taxes: $2,802.21 in 2013

Monthly fee: Maintenance/HOA of $503 per month

Where: Excellent downtown-west location in the trendy Niagara neighbourhood, with transit, cafés and restaurants nearby. Walking distance to the 37-acre, uber-popular family- and pet-friendly Trinity Bellwoods Park.

Top features: Exposed concrete feature walls, floor-to-ceiling windows, custom kitchen, gas hookup for barbecue on its garden patio.

Contact: Brad Lamb, Brad J. Lamb Realty Inc.; 416-368-5262; brad@torontocondos.com

Faith Wilson Group
Faith Wilson GroupThis one-bedroom condo at “The Grafton”, a heritage conversion building in Yaletown in Vancouver goes for $475,000.

VANCOUVER

The place: 1-bedroom, 1-bathroom condo in The Grafton

List price: $483,000

Square footage: 850

Where: Situated in a prime Yaletown neighbourhood in the heart of downtown, with trendy eateries, entertainment, sports venues and shopping on the doorstep, as well as the seawall and myriad transportation options.

Top features: A New York-style home that merges original heritage features — exposed brickwork and wood beams — with a modern open-concept interior. Features include hardwood floors, expansive windows and a functional floor plan, a gas fireplace, custom kitchen, master bedroom with walk-in closet, five-piece ensuite, storage locker and parking stall.

Taxes: $2,000

Monthly fees: $431 per month

Contact: Faith Wilson at Faith Wilson Group; 604-224-5277; toll-free: 1-855-760-6886

WINDSOR

Postmedia News
Postmedia NewsIn Windsor you can get a four-bedroom, house with games room and office above garage, hardwood floors throughout, maple staircase and designer granite kitchen.

The place: Executive two-storey, four bedrooms, master ensuite bathroom, 2.5-car garage. Located in the suburb of Lakeshore

List price: $499,900

Square footage: 3,300

Taxes: $5,200

Where: Situated in a two-year-old subdivision, 20 minutes from downtown Windsor. Just minutes away from four golf courses and Lake St. Clair.

Top features: A games room and office above garage, hardwood floors throughout, maple staircase and designer granite kitchen, large fenced yard, covered porch and fenced, in-ground pool.

Contact: Larry Pickle, Re/Max Preferred; 519-944-5955

Canadian snowbirds’ dream of U.S. vacation home fading fast – Ask a Vancouver Mortgage Broker

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The hundreds of thousands of Canadian snowbirds who flock to the United States are being hit by a falling loonie that should see their purchasing of U.S. winter homes start to slow, says a new report.

Vancouver Mortgage BrokerHere’s what $500K buys in Canada’s housing markets: A lake in Edmonton … a condo in Toronto

From four bedrooms in Windsor to one-bedroom in Vancouvercheck out how far $500,000 goes in 8 major markets across Canada

It’s not going to be any sort of collapse, which is good news for Florida, the number one draw of Canadians where 3.5 million of us spend $4.4-billion annually.

“Make no mistake, the depreciation of the Canadian dollar will have an impact on Canadian stays in snowbird destinations such as Florida, but less than one might expect,” says Derek Burleton, deputy chief economist with Toronto-Dominion Bank, in a report.

Mr. Burleton’s real estate remarks are part of a broader report on the impact of a falling loonie on trips to the United States that are worth about $22.3-billion annually to the American economy based on 23.5 million Canadian visits.

For snowbirds looking to buy, TD says affordability has been impacted not just by the decline of the loonie against the greenback, but also increasing U.S. home prices.

Looking at just Florida, TD says the bottom of the market was reached in 2011 and there has been a steady increase in what it calls its Florida House Price Index. The index is up almost 50% over the past three years.

Much of the increase in Canadians buying in Florida — half a million Canadians own property in the Sunshine State — occurred over the past five years because of what TD calls a “60% cheapening” in property prices.

“No matter how you slice it, new purchase activity by Canadian in the U.S. looks set to slow markedly over the next few years,” writes Mr. Burleton.

In addition to a falling loonie and rising home prices, the cost of borrowing has climbed one percentage point in the U.S. over the past year based on 30-year mortgage rates.

Another problem is Canadians tend to look for cheaper homes where inventories have been drying up. More than half of Canadian buyers paid less than US$200,000 where inventories are down 20% in 2013.

Mr. Burleton emphasizes that the decision to seek a snowbird lifestyle is not going to drop dramatically, demographic trends guarantee that. But it could change people’s thought patterns on buying versus renting.

Existing homeowners might be inclined to ride out a downturn in the loonie because their U.S. homes are rising in values. Investors in U.S. real estate will have the upside of revenue coming in the increasingly stronger greenback.

But for the snowbird looking to buy right now, the game might have changed south of the border.

“We see renting becoming an increasingly preferred option,” said Mr. Burleton.
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What you need to know before, and after, buying a condo- ask Bruce Coleman, Vancouver Mortgage Broker

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What you need to know before, and after, buying a condo

ROB CARRICK.  –  The Globe and Mail

 

Your life as a homeowner will likely include some time in a condo. Condos suit young adults, and retirees who want to downsize. As houses rise in price, more people in between those extremes may opt for condos. Given the strong foundations for condo demand, there are surprisingly few resources available to help people make smart buying decisions.

MORE RELATED TO THIS STORY

Your life as a homeowner will likely include some time in a condo. Condos suit young adults, and retirees who want to downsize. As houses rise in price, more people in between those extremes may opt for condos. Given the strong foundations for condo demand, there are surprisingly few resources available to help people make smart buying decisions.

MORE RELATED TO THIS STORY

BOOK EXCERPT Does it make more financial sense to own a condo or rent an apartment? FINANCIAL FACELIFT Couple’s health concerns make for tough choices Signs of sanity in Toronto’s condo craze

VIDEO Video: Take a look inside Toronto’s priciest condo on the market

MARKET VIEW Video: Market View: Canada’s housing market poised for stable 2014

CARRICK TALKS MONEY Video: Carrick Talks Money: Condo reality check for seniors Into this void comes a new book called The Condo Bible For Canadians: Everything You Must Know Before and After Buying a Condo. (Read an excerpt from the book here.) It’s written by Dan Barnabic, a former Realtor, developer and consumer advocate who now runs a paralegal firm in Toronto. Here’s an edited transcript of a recent conversation I had with Mr. Barnabic about condos.

What accounts for the big rise in popularity of the condo as a place to live?

It’s basically hype fuelled by several forces, many of them developers. The buildings themselves were built much nicer – not better – than ordinary apartment buildings, and they had more amenities. You had swimming pools, you had gyms, you had perks that made you say, why not? As a result, things mushroomed to the point of a deluge of condo towers, especially in Toronto.

Don’t you agree that condos serve a need for some people?

Yes. Condo ownership can be very advantageous for some, including older people who are tired of the hassles of maintaining a house.

What’s the main reason for unhappy condo ownership experiences?

The No. 1 reason is the management of the complex. You can hardly find a condo complex in which the tenants are very happy with the way it’s being run.

What’s the role of the condo board, and how can I make sure they know what they’re doing before I buy?

The condo board is supposed to be in charge of the governance of the complex, making sure that money is being spent properly, that management of the condo is performing its job diligently, that the proper bidding takes place for any repair – stuff like that. You have to find out for yourself if the board is doing its job. Talk to the residents and ask them if they’re happy.

When buying a condo, you suggest starting with a low offer, say 75 per cent of asking. Won’t that just insult the seller?

Is it better to try and get a chance of a better price on a condo, or should you worry about insulting the seller? You’ve got nothing to lose. The worst that will happen is that you’ll be rejected.

Can you explain your warning about buying a condo in a building where more than 25 per cent of units are rented?

If you’re an owner, then it is obvious that you will take care of your condo, that you will not abuse the common elements, that you will look after the amenities.

Tenants simply don’t have the same interest, and you don’t expect them to because they’re not owners.

How can I tell if condo fees in a particular building are reasonable – not kept low to suit the short-term interests of residents, or so high as to work against resale?

You have to basically hit the pavement and compare – go around to other buildings and ask how much people pay and how big their units are.

Special assessments in addition to regular condo fees are a recurring horror story of condo ownership – how can you avoid them?

There’s no such thing as avoiding them. In the first 10 years of a condo, not much happens and it’s unlikely you’d face a special assessment.

After that, the roof is usually good for 10 years and then you have to start patching it up. Elevators start coming into play in 10 years if they’re well made. Outside balconies can become a problem.

There have been reports about leaky condos in Vancouver and falling windows in Toronto – how do you protect yourself against buying a poorly built condo?

The idea is to check on the reputation of the builder. Buying a condo really requires two months’ preparation time to do your due diligence on everything. There are reputable builders, and we have to recognize that. But there are also guys doing things in a hurry to make a buck.

Where do you live?

I am actually renting a very nice apartment on the top floor and not worrying about what expenses the building may incur.

———-

Which makes more financial sense – owning a condo or renting an apartment? Read an excerpt here from The Condo Bible for Canadians by Dan Barnabic.

 

Condo correction not in the cards for Toronto, Vancouver, says new report – Ask a Vancouver Mortgage Broker

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The rental housing market has “passed it peak” but condominium investors can probably rest easy because vacancy rates will only edge up slightly, says a new report.

Vancouver Mortgage Broker

A new report on the condo market says despite the huge influx of supply, rental rates should remain relatively strong — all good news for condo investors.

How Canada’s new immigration rules could slow high end real estate sales

Canada’s luxury housing market has already been impacted by changes to immigration policy and could be in for rougher times as foreign investors are lured to the United States. Read on

CIBC says all those real estate bears waiting for the property market to crash may be out of luck.

“Canadian real estate bears are patient. For more than half a decade they have been waiting for the inevitable crash in the Canadian housing market, only to be disappointed by a defying market,” said Benjamin Tal, deputy chief economist of CIBC, in the report. “The market will be tested by higher interest rates. But as things stand now, those bears will have to continue to wait as interest rates are likely to remain low well into 2015.”

CIBC says despite the fact Toronto has 64,000 condo units under construction — up to half of them could end up rented out — it doesn’t expect that to have a significant impact on rental rates. The report estimates Toronto will see about 11,500 new rental units per year, about 1,000 more than are needed based on household growth. He suggests an analysis of the Vancouver market reveals very similar results.

“Such excess supply will raise vacancy rates in the condo space by an estimated 0.3% to 0.4% in both cities in the coming years,” says Mr. Tal. “That is not large enough a damage to derail the market or lead to a substantial softening in rental inflation.”

The other determinant of rental rates is demand and the report says growth for rental units has probably peaked from levels reached in 2012 and 2013.

Mr. Tal suggests the real challenge for investors in the coming years will be higher financing or opportunity costs as mortgage rates eventually rise. Five-year fixed rate mortgages have headed back to about 3% as bond yields have dropped in the past few weeks.

He suggests while there will be a correction but it will be “much gentler” than what is feared by some. That fear is based on a view the the increase in supply of rental units will flood the market and force investors to sell in a panic.

“Our assessment of demographically-driven demand for rental units reveals a market that has passed its peak,” said Mr. Tal. “Vacancy rates will probably rise in the coming years and rent inflation will ease. But a careful analysis of the magnitude of the projected supply/demand mismatch suggests a much gentler adjustment than feared by many.”

Canada home sales fell 3.3% in January, CREA says – Consult with Bruce Coleman, Vancouver Mortgage Broker

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Canadian existing home sales fell for a fifth month in January on fewer transactions in Toronto and Vancouver, adding to evidence the nation’s housing market is cooling.

Vancouver Mortgage Broker

The industry group for Canadian real estate agents said sales activity was down 3.3% last month from December.

Sales declined 3.3% in January from the previous month, the Canadian Real Estate Association said today in a statement. The average price of a home sold in January rose 0.3% from the previous month and 9.5% from a year ago.

The report adds to recent data showing real estate has ceased to drive Canadian economic growth. Canada Mortgage & Housing Corp. reported Feb. 10 work on new home construction fell to the lowest in 12 months. The Bank of Canada forecast last month housing won’t add to output in 2014.

CREA, based in Ottawa, cited cold weather for the drop in sales last month.

“A number of buyers likely waited out January’s deep freeze before going house hunting,” said Laura Leyser, president of association.

The number of homes sold in Toronto fell 4.2% in January from a month earlier, while the number of transactions in Vancouver were down 3.9%, the group said.

Bloomberg.com

Canada’s housing starts fell twice as fast as expected, raising concern about GDP growth – Ask a Vancouver Mortgage Broker

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Canadian housing starts fell twice as fast as economists expected in January, led by a drop in multiple-unit projects.

Vancouver Mortgage Broker

‘Housing no longer looks to be a source of growth’ for the economy, says CIBC economist Avery Shenfeld.
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Work on new homes fell 3.7% to a 180,248-unit annualized pace, the third straight decline, Ottawa-based Canada Mortgage & Housing Corp. said Monday. Permits for dwellings such as apartments and condominiums fell 6.0% to 102,289 units and single-family homes rose from the lowest since July 2009 in January, gaining 3.4% to 60,869 units.

Bank of Canada Governor Stephen Poloz expects a “soft landing” for the housing market after consumer spending and record debt accumulation led the world’s 11th economy out of the 2008 global financial crisis. CMHC said Monday’s figures are in line with its prediction that builders will slow new construction to avoid an inventory glut.

“Housing no longer looks to be a source of growth,” for the economy, said Avery Shenfeld, chief economist at CIBC World Markets in Toronto, in a note to clients.

The Bank of Canada’s growth outlook calls for increasing exports and business spending to take over from consumers.

“A slower pace of construction activity to start the year is consistent with the wider theme of domestic fatigue that will inevitably put more pressure on net exports to drive the next stage of Canada’s economic recovery,” said Connor McDonald, economist at Toronto-Dominion Bank, in a client note.

Canada’s dollar was 0.2% weaker after the report, trading for C$1.1048 per U.S. dollar at 9:14 a.m. in Toronto. One Canadian dollar bought 90.51 U.S. cents

Economists surveyed by Bloomberg had forecast a decline to 185,000 from the revised December reading of 187,144.

Bloomberg.com

TFSA or RRSP? Here’s how to decide – Consult with Bruce Coleman, Vancouver Mortgage Broker

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NOREEN RASBACH-  The Globe and Mail

Vancouver Mortgage BrokerKuly Gill is every financial planner’s dream. The Calgary lawyer, in his 30s, owns a house, drives an older car and forgoes some annual vacations to save more for retirement. “I live cheap and put everything away,” he says.

His investment strategy is simple: Contribute the full amount allowed each year to a tax-free savings account (TFSA) and any other retirement savings into RRSPs. His portfolio is 100-per-cent equities, mostly blue chip, dividend-paying stocks.

In the TFSA versus RRSP debate, Mr. Gill has made a clear choice – TFSAs first. But as any financial expert will tell you, most Canadians are less certain about which tax-sheltered vehicle to choose if they can’t afford to contribute the maximum allowable amount to both.

Mr. Gill cites the rule used by many financial planners as a rough guideline: If your income (and therefore your tax rate) is greater now than you expect it to be during retirement, go with the RRSP; if it’s lower, go with the TFSA.

“If everything works out as I want it to, I expect to have a lot of income in the future,” Mr. Gill says.

However, for most young people, says David Chilton, author of The Wealthy Barber Returns, that’s an almost impossible guideline. “It involves a lot of guesswork,” he says. Who knows at 30 or 40 years old how much money they will have 25 or 35 years later, or what the tax system will be like decades from now?

Mr. Chilton, not surprisingly, takes a behavioural approach to the decision. If you’re going to put money in a registered retirement savings plan and “blow the refund on something stupid,” then a major advantage of the RRSP – the immediate tax benefit – is lost, he says. Similarly, because you can withdraw money from a TFSA at any time and put it back later, you may be tempted to raid your plan.

“A lot of people think the flexibility [of a TFSA] is an advantage, but I see it as a great disadvantage,” Mr. Chilton says.

Gordon Pape, the author of a slew of books on Canadian retirement planning, says there are other considerations when choosing between an RRSP and a TFSA. If you have a high salary and a blue-chip pension plan, such as a government pension, the TFSA may be the better bet. That’s because the pension, combined with Old Age Security and the Canada Pension Plan, could push your income high enough to prompt clawbacks of the government supports. RRSP withdrawals are considered income; TFSA withdrawals aren’t.

The same principle applies if you have a low income – RRSP withdrawals could affect whether or not you receive the Guaranteed Income Supplement.

However, Mr. Pape says that for most people, RRSPs make the most sense. Most people don’t have larger incomes when they retire, plus they can invest the tax refund they get immediately and benefit in the long-term from compound interest. “You have to look at the magic of compounding – the more years you have for your money to compound in a tax-sheltered environment, the more you’re going to have at the end of the day,” he says.

In the end, it’s the investments you make that matter the most, says Jon Palfrey, the Vancouver-based senior vice-president of Leith Wheeler Investment Counsel Ltd.

TFSAs and RRSPs are tools that can hold a variety of investments, but investors should follow a few important rules: First, he says, avoid any investment that is wildly speculative. “Don’t swing for the fences. You don’t get any benefit from a loss if [the investments] go down. Nothing can be offset.”

Mr. Palfrey’s second rule: Don’t put in cash – or GICs. “If you’re making less than 1 per cent on your GIC, the sheltering benefit is not meaningful.”

There are other investment decisions that apply to both. Mr. Palfrey says that if investors also have non-registered accounts, they should make sure to put bonds in a tax-sheltered account because of their high tax rates.

There are, however, two major differences between the two investment tools. The first involves U.S. stocks: If you hold a dividend-paying U.S. stock in your RRSP, you do not have to pay withholding tax on those dividends, Mr. Palfrey says. You would have to pay the tax (about 15 per cent) if the same stock was in your TFSA.

The second involves an investor’s age. As Mr. Pape points out, “you can’t have an RRSP after the age of 71, but you can have a TFSA for the rest of your life.”

For investors who complain about having to convert RRSPs to RRIFs at age 71 – and then being forced to take out a minimum each year after – TFSAs can be great alternatives.

———–

RRSP vs. TFSA: the basics

Taxes

  • RRSP contributions are tax deductible (which means you get a tax refund), but you pay tax when you withdraw from the RRSP.
  • TFSA contributions are not tax deductible, but withdrawals are tax-free.

Contribution limits

  • For RRSPs, 18 per cent of your previous year’s income, to a maximum of $24,270 in 2014 (less any pension adjustment).
  • For TFSAs, $5,500 in 2014. If you haven’t put money in a TFSA since they were introduced in 2009, your cumulative limit is now $31,000.

Age limits:

  • You can’t make contributions to RRSPs after the year in which you turn 71.
  • No age limits for TFSAs.

CMHC: Canadian housing starts and prices to stabilize in 2014 as demand slows

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TORONTO — Canada’s federal housing agency nudged up its forecast for housing starts and prices in 2014 and said sales and construction will be steady to higher in 2015 as an improving economy tempers the impact of rising mortgage rates.

imageThe view from the Canada Mortgage and Housing Corp suggests the nation’s once-roaring housing market is settling into a soft landing, with construction moderating to more sustainable levels and sales and prices ticking slowly higher.

The CMHC said on Thursday housing starts will be in a range of 176,600 and 199,800 in 2014, with a point forecast, or most likely outcome, of 187,300 units, relatively unchanged from 187,923 units in 2013. That is up slightly from CMHC’s October estimate of 184,700 starts.

The agency said there will be 163,200 to 206,600 units started in 2015, with a point forecast of 184,900.

Both forecasts represent a sharp slowdown from the 214,827 starts of 2012, when the market was at record highs and the government intervened to tighten mortgage lending rules.

Canada sidestepped the worst of the financial crisis of the last decade because it avoided the real estate excesses of its U.S. neighbor, and a post-recession housing boom helped it recover more quickly than its Group of Seven peers.

But the housing market began to cool in mid-2012 after the country’s Conservative government, worried about a potential property bubble, tightened mortgage rules. Demand fueled a strong rebound in 2013, and economists are largely predicting a softer but stable market this year.

The CMHC forecasts see homebuilding and sales leveling off, with prices continuing to notch small gains.

CMHC said existing home sales will range from 436,000 to 497,000 in 2014, with a point forecast of 466,500 units. That’s down slightly from October’s forecast of 468,200 but up from 457,485 in 2013.

For 2015, it expects a move up to a range of 443,400 to 506,000, with an increase in the point forecast to 474,700.

Price gains are expected to slow in 2014 and 2015. CMHC’s point forecast for the average price calls for a 2.1% gain to $390,400 in 2014, and a 1.7% gain to $397,100 in 2015.

© Thomson Reuters 2014

Think house prices are unaffordable now? It gets worse – Ask Bruce Coleman Vancouver Mortgage Broker

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How Canada’s housing market will look in 2024: If you’re wealthy, it’s healthy.

If house prices rise from current levels by an average annual rate of 2.5 per cent over the next 10 years, the average Canadian home will cost half a million dollars. By my rough estimate, that would be a realistic purchase only for families with pretax income of at least $125,000 or so. Just for context, the most recent Statistics Canada numbers put the median total family income at $72,240 in 2011.

How Canada’s housing market will look in 2024: If you’re wealthy, it’s healthy.

If house prices rise from current levels by an average annual rate of 2.5 per cent over the next 10 years, the average Canadian home will cost half a million dollars. By my rough estimate, that would be a realistic purchase only for families with pretax income of at least $125,000 or so. Just for context, the most recent Statistics Canada numbers put the median total family income at $72,240 in 2011.

The “housing market is fine” people talk about immigration, low inventories and the fact they’re not building any more houses in some urban downtowns. But questions about basic affordability undermine all of these supports for the market.

Current affordability levels are a problem documented in a previous column that you can read here. Another way to look at this issue is to imagine what might happen if prices keep rising at recent levels.

House prices have risen in the area of 5.5 per cent annually on average over the past 17 years, almost exactly what the Canadian Real Estate Association has estimated for 2013. Looking ahead to the end of this year, CREA sees a gain of 2.5 per cent on a Canada-wide basis. Let’s apply that number on an average annual basis to sketch out what the housing market might look like 10 years from now across Canada and in five major markets from coast to coast.

The average price across Canada would rise to $500,622, which means the minimum 5-per-cent down payment would cost you $25,031. Now, for your mortgage costs. If you were to buy that average Canadian house in 10 years’ time, your mortgage rate would almost certainly be somewhat higher than it is today. Let’s conservatively project a discounted five-year fixed rate of 4.5 per cent, which compares to 3.5 per cent today, and would produce monthly payments of $2,709 on the average-priced Canadian house.

To qualify for a mortgage, the total of your mortgage, property tax and heating costs must be no more than 32 per cent of your gross household income. If we estimate costs of $4,000 for property taxes and $1,800 for heating today and increase them by 2.5 per cent annually over the next 10 years, we can project that a household income of $124,775 would be needed to support the average-priced Canadian house. That’s up from $89,713 today.

Might annual wage increases bridge us from today’s income levels to where we need to be a decade from now if we want to maintain affordability at current levels? To get from the most recent median total family income figure of $72,240 to $125,000 over 10 years, you’d need annual pay hikes of 5.6 per cent. Dream on.

The national estimate of where prices might go mixes lower-cost markets like Halifax and Montreal with high-cost cities like Vancouver and Toronto. Vancouver – no surprise – is where the most gruesome numbers are. The average house price there jumps to $991,978 over the next 10 years, which would mean a minimum 5-per-cent down payment of $49,599.

It’s usually estimated that buyers will need 2 to 4 per cent of the price of their home for closing costs like legal bills, moving and, in some locales, a land-transfer tax. If we take 2 per cent of $991,978 and add it to the down payment, we end up with people in Vancouver needing almost $69,450 in cash to buy an average home.

In Toronto, the average price rises to $689,813 in 10 years and requires a minimum down payment of $34,491. On that basis, your mortgage payment would be a massive $3,727 per month with a five-year fixed rate of 4.5 per cent. The household income needed to carry this home would be $162,950, which compares to Toronto’s 2011 median total family income of $69,740. Something like $55,000 in cash would be required for the down payment and closing costs that, as of today, include a city and provincial layer of land-transfer taxes.

And what if average home price increases maintain a 5-per-cent clip for 10 more years? The average Canadian home would then run you about $637,000, Vancouver would be at $1.3-million, Calgary at about $725,000 and Toronto at almost $878,000. These are fantasy numbers, of course. Even if prices keep rising at half the average rate of the past 17 years, they’ll be utterly unaffordable for everyday people. We’re not far from that now.



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ROB CARRICK– The Globe and Mail

Vancouver Mortgage BrokerIn an increasingly unaffordable housing market, it’s natural for parents to want to help their kids buy a home.

Talk to a real estate agent or mortgage broker and you’re bound to hear stories about parental financial help. “The bottom line is that when a first-time home buyer buys a house, the parents more often than not are contributing something to the down payment,” said David Larock, a mortgage agent with Integrated Mortgage Planners.

Parents, there are three good reasons to think twice about helping your kids buy a home. But I suspect you’ll do it anyway, which is why there are also guidelines here for giving the gift of down payment money or co-signing a loan.

First, the reasons to rethink the idea of offering financial help:

1. You can’t help with the biggest affordability problem.

It’s not the down payment, which admittedly can be a very large amount of money in hot markets such as Vancouver, Calgary or Toronto. Rather, it’s the income needed to carry a mortgage, home upkeep, and the cost of raising kids and meet savings obligations. Incomes aren’t growing enough to keep up with rising house prices – that’s why your kids can’t afford a house.

2. You may yet need the money yourself.

Longer lifespans mean you need substantial retirement savings, in part because of the potential for health problems that require long-term care. Why not leave any leftover money to your kids as an inheritance after you die?

3. Your thinking on the financial benefits of home ownership may be wrong.

Owning a home as a place to live and raise a family is one thing. But if you want to help your kids buy a home because it’s an investment, you’re making a backward-looking assessment that may not have any relevance to what’s ahead. Houses can’t keep rising in price at current rates and be accessible to anyone but upper income earners (read my analysis on what happens if house prices keep rising). The era of houses as a no-brainer investment won’t last.

Still want to help your kids buy a home? Mr. Larock suggests parents come through with down payment money only after their kids have decided what they can afford and have chosen a home. “Parents who wait until their kids have found a house are doing it right because they’re making sure that their contribution doesn’t in any way inflate the child’s budget,” he said.

Lenders don’t much care whether clients come up with a home down payment themselves or with parental help, Mr. Larock said.

Idea: Help kids top up a down payment to 20 per cent or more so they don’t have to pay the additional costs of mortgage default insurance. This insurance would add $10,190 in costs when buying the average-priced home in Canada with a 5-per-cent down payment, and $7,021 with 10 per cent down.

If their kids can’t qualify for a mortgage on their own, parents can help by co-signing the loan. Be sensible about this kind of assistance – if a bank doesn’t want to give your kid a mortgage, that’s a sign that he or she isn’t ready to buy a home. Remember, co-signing parents are on the hook if the child defaults on the mortgage.

Mr. Larock said that in Ontario, parents should be aware that co-signing a mortgage can complicate the process of claiming the province’s land transfer tax refund for first-time buyers. According to the Ontario Ministry of Finance website, the rebate would be available if the parent does not have an ownership interest in the home and is just helping to satisfy lenders. Mr. Larock said the same rules apply to Toronto’s land transfer tax refund. (Combined, the two refunds max out at $5,725.)

The simplest way to help your kids buy a home is the cash gift. Cleo Hamel, senior tax analyst at H&R Block, said there are no tax implications for either parents or kids in this situation. Parental loans to a child are a different story, though. “When repayment begins, the interest is income to the parent that lent the money,” she said.

One final thought for parents who want to help their kids afford a house: Stop all financial assistance at once and let market forces take over. Losing those subsidies from mom and dad might be the jolt the real estate market needs to take a pause and let incomes catch up to prices.

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Should parents help their kids buy a house? See what people are saying about this and other topics on my Facebook personal finance page.

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