Category: Advice & Tips

Fixed rates were improving in early February until two data sets were released over the last week.

1. Canada’s employment report came in above expectations.
2. USA inflation data caused a spike in the bond yields.

Canada Jobs Report

The Canadian labour market added 150k positions in January, with full-time employment up 121k and part-time employment up 28.9k. This was 10x the expectations of 15,000. As wage inflation is a key contributor to CPI, this is a cause for concern moving forward for interest rates.

The report is sure to raise eyebrows at the Bank of Canada. The messaging for a pause on further rate hikes is contingent on a slowing of economic growth and an easing in the labour market. The Bank won’t adjust after just one report, but it will be closely watching to see if this trend of massive job gains continues.

U.S.A Inflation Numbers

United States inflation data sets were worse than projected.

• 6.4% y/y for headline inflation v.s. 6.2% consensus.
• 5.6% y/y for core inflation vs. 5.6% consensus.
• 4.6% for the Fed’s much-watched 3-month rate (not good news) vs. 4.3% in Dec.

Over the past year, shelter costs have accounted for roughly 60% of the total increase in core U.S. inflation. CIBC predicts this component will ease in the months ahead due to lag effects.

Overall the data could have been a lot worse, but the bond market is now reacting and it is taking yields up. This is causing fixed rates to rise to late 2022 levels.

Canada’s 4-year swap rate which is a leading indicator of fixed mortgage pricing has followed U.S. yields higher by 11 bps. It’s now approaching December’s high.

January Housing Stats

(18.3%): Average home price declines.

• The most in four decades of CREA records.

(1.9%): HPI drops month over month.

• Tied for the biggest monthly decline in records back to 2000.

$612,204: Canada’s average resale home price

• Down $14,114 from December and down $204,000 from the peak.

New listings were the lowest for a January in over two decades.

Housing Starts vs Immigration – Are We Building Enough?

• Desjardins estimates that housing starts would have to jump by 50% (100,000) to handle the surge of future demands caused by immigration.
• Canada is estimating that there were 955,000 newcomers to Canada in 2022.

What are the Impacts on Rent?

As more individuals enter the country, and we lag behind in suitable homes, rent will continue to increase. Just look at the two charts below, and the substantial rental increases over the past year.

Investor Housing Data

For the first time, Stats Can has published data on investors vs principal residence holders across Canada. This data is for 2020 and the full report can be found here.

Note; investor is defined as an owner who owns at least one home that is not used as their principal residence; cottage, second home, rental property, etc. No tenant is required.

Keys findings;

• The proportion of investors among owners varied from 20.2% in Ontario to 31.5% in Nova Scotia.
• Condominium apartments were used as an investment more often than houses (single-detached houses, semi-detached houses, row houses, and mobile homes). Ontario topped the list with the highest rate of condominium apartments used as an investment, at 41.9%.
• Houses used as an investment were mainly owned by individuals living in the same province as the property.

• The highest proportion of investors is in British Columbia
• For every 100 home owners, 20 own a second property

• The highest proportion of investors from out of province is in Nova Scotia.
• The majority of investors own a second home in the province in which they reside.

• Ontario has the highest proportion of investors owning condo’s as their investment.

• Toronto, City = 21.70%
• Vancouver City = 32.50%
• Greater Vancouver, district = 42.10%

Fast Facts

• Canada’s most mortgaged city is Milton, ON. 79% of homes have mortgage registrations.
• 3,726 – That’s the number of times humans were attacked by wildlife in Alberta over the last decade—the highest of any province. The most likely animal to attack is an Elk.

Questions?

Connolly Capital Mortgage Solutions

119 Lakeshore Rd. W, Upper Level, Mississauga, ON

(905) 491-3805

Matthew O’Neil – Mortgage Broker

matthew@connollycapital.ca

John O’Neil – Private Lending

johnoneilmortgage@gmail.com

Sean Clearihue – Mortgage Agent

sean@connollycapital.ca

Trenton Beaty – Mortgage Agent

trenton@connollycapital.ca

Kane Boultwood – Mortgage Agent

kane@connollycapital.ca

Rebecca Tanner – Client Relationship Manager

rebecca@connollycapital.ca

It’s early January and coming off a busy holiday season, perhaps you have New Year’s goals and resolutions. This is often an exciting time of year. But, for many, especially faced with big financial or family decisions, the decisions that lie ahead can be daunting.

What if as part of your plan you are in the throes of getting your house ready to sell? Or perhaps you will ponder the idea in the coming months. What should you consider and what do you need to know to set appropriate expectations for a sale?

The last interest rate announcement by the Bank of Canada on December 7 saw another 50 bps hike bringing the prime lending rate up to 6.45%. If the bank raises again on January 25, the prime lending rate would reach a 21-year-high. To put it simply, the cost for a buyer to borrow money to buy your home has not been this high in a long, long time.

I can hear my father chuckle at the last point. He would say yes, but historically, money is still cheap and people need places to live. This leads me to my next point.

Demand for housing is expected to increase as we roll through 2023. Consumers are adapting to the rapid pace of increased interest rates and have a much clearer picture of what they can afford. The rate of employment is high and millennials, many of whom are at peak first-time home buying ages, will increase demand.

Supply is expected to stay below the rate of demand as many homeowners hold onto the sub- 3% mortgage rates they locked into last year. This will have an interesting impact on pricing as interest rates regulate the imbalance of supply and demand. Many are predicting housing prices to creep up ever so slightly. Be careful what you read about home price predictions, as prices will be highly variable across local housing markets.

As a seller, depending on the type of home and the location you live in, don’t expect 40 showings in a weekend or multiple buyers with briefcases of cash being thrown at you frivolously—as happened at this time in 2022. Instead, expect a more “normal” transaction, where your home may take 30, 60, or even 90 days to sell. Think of it like the olden days of 2018.

Price is key to a successful sale. If you’re hoping for a price that would have been achieved in Q1 2022, please go buy a lottery ticket and close your eyes; do not hold your breath and let me know what the outcome is. The fact is the market has shifted like it has for the past century and will continue to shift as the months and years come and go. Price your home appropriately and it will sell for fair market value.

Remember, relativity is important. Everyone sells a home for different reasons. Some because they have to. Some for financial strategy. Others out of fear. Make sure you have a solid plan of where to go before selling. Going at this blindfolded can be like playing with fire. If you are buying and selling in the same market, prices will be relative. If you’re selling in Oakville and moving to the Yukon, well, let’s say your dollar will probably go a lot further.

The bottom line is, if you’re selling your home, selecting an agent who has experience in a historically balanced market will be a critical decision. Navigating the sale of a home in the best of times comes with a risk. Selling a home is easy. Selling a home with reduced risk, in a timely manner, and for the highest price the market will bear, well, that’s a different story.

Principal Residence / Real Estate Taxes / Home Renovations / Real Estate Fees-Commissions

Selling a home is a big deal. There is a lot riding on the sale of a home. Often there are moving arts that do not meet the eye and thus a trusted real estate professional should be consulted before doing so.

Renovations

To renovate my home or not to? An age old question. Simple math would suggest that if a homeowner spends a dollar on their home to improve it, then the price of the home should go up. 

Not all of the time. Studies have proven that money invested in curb appeal, the kitchen and bathrooms, yield the highest return on investment (ROI).

Like most things, there is an expensive way to do this and an inexpensive way. Unfortunately, there is no one answer that fits everyone’s situation. 

A trusted real estate agent can make life easier by giving direction based on current market conditions in your marketplace.

Taxes

Though it’s best to consult your local real estate lawyer, tax expert or accountant, here are a few of the basics. 

No! There is no tax to be paid on the sale price of your home if it is your principal residence – a home a Canadian taxpayer or family maintains as its primary residence. 

However, if the property you are selling is not that, such as a: vacation home, cottage, real estate used for business, investment property – there is a good chance the sale may be subject to a capital gain tax or HST. 

It is strongly advised to contact a professional before selling to understand whether tax will be owed.

Municipal Land Transfer Tax

Often confusing, this is a tax that is paid for by the buyer, not the seller. When you acquire land or a beneficial interest in land, you pay land transfer tax to the province when the transaction closes.

Note: Some municipalities, like the City of Toronto, charge a secondary land transfer tax

Calculating ROI

Property owners who own rental property should consider costs of investing based on annual roi. If you bought a property with the intention of making money on it, like an investment property, depending on your accounting style you’ll want to look at separating principal and interest. 

Interest would be an expense that would go against your Roi. Other deductions would be property taxes, maintenance and insurance.

Of course the purchase price matters so consult with your buyers agent to make sure you’re paying fair market value. It’s advised to work with a buyers agent that is an expert in the community you’re investing in.

Home Maintenance

If a home shows that it is well cared for and loved, the chances of a buyer making an offer earlier in the listing and for more money increase. It’s a Important to keep up with Home Maintenance and home repairs.

If you’re unsure of the condition of your home, consider hiring a home inspector. Having a home inspection done is like having home insurance. It safeguards you against any surprises at a later date.

 Home styling and Home Decor go a long way as well. I properly styled home can affect home prices. Home staging and decluttering go along way.

General Home Maintenance like keeping gutters cleaned from debris and water away from foundations impresses upon the buyer that the home is being well-maintained. It also helps with personal liability should the worst happen and you have to call your insurance company.

Government Sales Tax

In Ontario, the provincial government changes HST (Harmonized Sales Tax) on most taxable goods and services. HST almost always applies to and fees for service that a homeowner engages with or needs during the sale process. 

Moving expenses, storage costs, legal and real estate fees are all subject to HST based on the amount of the fee for services rendered.

Moving Expenses

The shoes does not fit every foot when it comes to moving expenses. The moving industry is mostly unregulated and all companies operate at different standards and with different costs.

Variables such as moving distance and the volume of possessions being moved weigh heavily into the cost. Most overs can provide a cost estimate before you start the process.

A lot of moving companies even provide boxing and storage services which can add to the cost depending on how much you choose to delegate. 

Make sure to consult a professional and trusted real estate agent for a referral or two – after all, the Realtor is dealing with a lot of these companies on an ongoing basis.

Legal Fees

Legal fees can vary mainly on what the law firm chooses to charge. Like any service though, you get what you pay for.

It is strongly advised to hire a lawyer that specializes in real estate transactions as close to your given area as possible. The amount of moving parts leading up to the closing of a sale would make most people’s heads spin.

Proper due diligence by your solicitor can save many headaches and save you thousands, if not tens of thousands of dollars in problems. 

Real Estate Fees

Similar to legal fees, real estate fees vary, are not fixed and are based primarily on what the brokerage or agent chooses to charge. Generally speaking the fees are a percentage of the sale price of the home. 

Beware of real estate agents that charge too low of a fee but also be aware of realtors that are too expensive. How do you determine what is fair and proper? Ask the real estate professional what you get in exchange for their fee. 

What type of marketing and exposure will I get? What communication systems do you have in place that ensure nothing slips through the cracks? 

How do I know you have the time to service my needs? Is that agent too busy? Will they market internationally? Ultimately, you get what you pay for. 

Flat fee brokerages and hourly rate are rare in Ontario but do exist. 

Advice In A Nutshell

JANET MCFARLAND AND BRENT JANG

TORONTO AND VANCOUVER

20 HOURS AGONOVEMBER 2, 2017

Home sales climbed in October in both Toronto and Vancouver as buyers moved to lock in purchases in Canada’s most expensive cities before new mortgage stress-testing rules take effect in January.

The Toronto Real Estate Board said home sales in the Greater Toronto Area climbed 12 per cent in October, marking the biggest month-over-month growth in sales since Toronto’s overheated housing market hit a sales peak in March. October sales were 27 per cent lower than October last year, however, when the GTA had record sales.

TREB said the average GTA home sold for $780,104 in October, up 0.6 per cent from September and 2.3 per cent higher than the same month last year.

Toronto’s housing market began a modest recovery in September and continued to grow slowly in October, suggesting the GTA has at least halted the sharp downturn in house prices that began in May after the provincial government announced its Fair Housing Plan changes, including a new foreign-buyer tax.

Greater Vancouver, by contrast, has fully shrugged off last year’s market downturn, with the volume of sales climbing 35 per cent in October compared with the same month last year and jumping 7 per cent compared with September. The Real Estate Board of Greater Vancouver said sales in the region were 15 per cent higher than the 10-year average for October.

The benchmark sales price for all homes in Greater Vancouver was $1,042,300 in October, up 12 per cent compared with October last year and an increase of 0.5 per cent over September.

Jason Mercer, TREB’s director of market analysis, said the Toronto market is continuing to follow the recovery pattern of the Vancouver region, which saw sales fall after the B.C. government introduced a foreign-buyer tax in August, 2016, then begin to recover by January this year.

Toronto realtor Eryn Richardson, general manager of Century 21 Heritage Group, said his offices saw home sales climb in October not only compared with September, but also compared with October last year. He says buyers no longer seem concerned about a bubble bursting , so are back shopping for homes.

Mr. Richardson also said buyers are concerned about looming new mortgage stress-testing rules announced by Canada’s banking regulator – the Office of the Superintendent of Financial Institutions – on Oct. 17. Buyers are keen to move before the rules take effect Jan. 1, he said.

“That’s getting people out and buying – I think that’s a big factor for sure,” Mr. Richardson said.

Chris Alexander, regional director for Ontario and the Atlantic region at Re/Max, said he credits the pending mortgage rule change with spurring at least half of the buying action in the GTA in October.

“The OSFI stuff is definitely driving some of this,” he said. “On a year-over-year basis, price appreciation is in healthy territory. I think there’s still a ton of demand and the market fundamentals of the GTA are very strong. … I think we’re in a really good spot.”

The OSFI rule change will require buyers who are making down payments of more than 20 per cent of a home’s value to prove they could still afford their mortgage payments if interest rates were 2 percentage points higher than the rate they negotiated.

Royal LePage chief executive officer Phil Soper said he thinks most buyers will be unaware of the details of the stress-testing rule and are not buying because of them.

Instead, he believes the Toronto market is being driven by high demand for housing due to the region’s strong economy and continuing population growth. He said he now worries about the risk of another huge price runup.

“I’m more concerned about the upside than the downside,” Mr. Soper said. “I hope that the OSFI moves will take some of the steam out of the market in the spring of 2018 and keep a lid on home price appreciation, because I do believe there’s more risk that the market will get away and trend toward that irrational exuberance we saw last year. That would be my bigger fear, rather than the downside.”

Royal LePage real estate agent Shawn Zigelstein, who is based in Richmond Hill, said the biggest factor driving sales has been the large increase in active home listings in the market, which could also lead to sales growth in November compared with October.

TREB reported 18,859 homes were listed for sale in the GTA as of Oct. 31, up 78.5 per cent from 10,563 homes a year ago.

“We have so much more product on the market, it’s up almost 80 per cent year over year,” Mr. Zigelstein said. “It’s a huge number, and we will see how that translates into November and December.”

The condominium sector remains the strongest segment of the housing market in both Toronto and Vancouver, while detached home sales have lagged.

In the GTA, condos sold for an average of $523,041 in October, up 0.5 per cent over September and 21.8 per cent higher than October last year. The average detached home sold for $1,008,207 in the GTA in October, a drop of 0.7 per cent compared with September and a decline of 2.5 per cent compared with a year ago.

The price for detached houses in Greater Vancouver averaged $1.8-million last month, up 12.8 per cent from $1.6-million in October, 2016. Prices for townhouses in the region averaged $892,349 in October, up 23.2 per cent from a year earlier, while the average price for condos sold reached $687,053 for a 22.2-per-cent gain year over year.