DATE

Steve Saretsky -

There’s certainly no argument as to the important role new housing development has on the BC economy. As one of the main pillars of GDP, I find it extremely valuable to keep an eye on the Metro Vancouver development arena. With some help from Urban Analytics and their recent state of the market report, there are a few items to keep an eye on. Due to the recent housing correction, project launches, along with total units released nosedived in 2019. This resulted in fewer sales as well. New project launches fell 30%, new units released fell by 60%, which sent new home sales tumbling 50% compared to 2018. In other words, it was a tough year to be Property developer. What we are seeing is investors have pulled back from the pre-sale market, mostly because future price growth expectations have faltered. Investors are not being enticed to risk their capital and have it tied up in a project for several years. Particularly considering prices in the resale market have adjusted lower, while pricing for pre-sale projects simply haven’t adjusted much at all. This has created a much wider spread between pre-sale and resale pricing, as illustrated below. We are seeing

Steve Saretsky -

It’s no surprise 2019 proved to be a difficult year for the Vancouver housing market. This was perhaps especially true in the development community which witnessed many multi-million dollar projects launch unsuccessfully, or fail to launch entirely. Per official data released by Urban Analytics, The number of condo pre-sale units released for sale in 2019 fell sharply in Metro Vancouver. Developers put 7,588 units up for pre-sale, less than half the 18,998 released in 2018. Despite the lure of free avocado toast and other sales gimmicks, pre-sale condo buyers remained elusive in 2019. As noted by Michael Ferreira, head of Urban Analytics, the soft patch didn’t discriminate, “even some larger, experienced developers with deep pockets and more favourable financing thresholds to meet said their sales volumes had dropped as much as 70 per cent and they were putting on hold several high-rise, transit-oriented towers that had zoning and building permits secured and promotional brochures printed.” Remember, under the Real Estate Development Marketing Act, developers have nine months to secure construction financing, in which lenders typically require about 60% of a project to be pre-sold. A feat which proved insurmountable for many developers, particularly as investors scurried to the sidelines. As a result,

Steve Saretsky -

As has been widely anticipated over the past few months, changes have arrived for Canada’s mortgage stress test. The Canadian department of finance has changed the way insured mortgages will be stress tested, and it sounds like OSFI will follow suit with uninsured mortgages as well. Under the current stress test, borrowers had to qualify at the greater of the Borrower’s Contract Rate, which is the mortgage interest rate agreed to by the lending institution and the borrower, or the Bank of Canada 5-Year Benchmark Posted Mortgage Rate which currently sits at 5.19%. Over the past year we’ve seen a significant decline in bond yields, which has prompted a sharp decline in mortgage rates. However, the Bank of Canada 5-Year Benchmark Posted Mortgage Rate has remained relatively unchanged. In other words, today’s benchmark rate (currently 5.19%) is too high relative to actual mortgage rates. So, regulators are changing the benchmark rate. The new benchmark rate will be set using a weekly median 5-year fixed insured mortgage rate as calculated by the Bank of Canada from federally-backed mortgage insurance applications, plus an additional 200 basis points on top. Based off that metric, the new Benchmark Rate would be roughly 4.89% today.

Steve Saretsky -

The reflation trade is back on, and Canadians are jumping back into their asset of choice, real estate. Canadian home sales bounced 11.5% year-over-year in January, marking the best sales figures for the month in 12 years. Meanwhile, the number of newly listed homes was little changed in January, edging up a slight 0.2% on the heels of a series of declines which has left new listings at a near decade low. There was just 4.2 months of inventory for sale, the lowest level since the Summer of 2007. As a result, national home prices continued to push higher, with the home price index accelerating 4.8% from last year. Home prices have now increased for eight consecutive months, and while it is true all markets are local, the home price index moved higher in 14 of the 18 markets tracked by the index. With mortgage borrowing resuming, and home prices back on the climb, this will certainly keep policy makers awake at night, and perhaps pour a bucket of cold water on recent discussions to ease the mortgage stress test. Imagine the conversations at the Bank of Canada today. We are sitting on the highest interest rate policy in the developed

Steve Saretsky -

A new report from RBC, highlights consumer insolvencies jumped a rather alarming 9.5% in 2019, the largest annual increase since 2008-09 during the great recession. This is a pretty thought provoking development when you consider that insolvencies are rising rather quickly despite record low interest rates and an economy at full employment. Not to mention massive monetary stimulus from the worlds global central banks. Here’s an update on real central bank interest rates across the globe: So yes, Canadian insolvencies are rising in a pretty easy financial environment. This shouldn’t be overly surprising if you’ve been watching the household debt service ratio. It recently hit a new record high of 15% in Q3 2019. The last time household debt servicing costs were this high was in the second half of 2007 when the Bank of Canada’s overnight rate hit 4.50%. It is important, however, to distinguish that the rise in consumer insolvencies is largely concentrated in consumer proposals, or in other words, unsecured debt. This suggests its not homeowners hitting a wall, as further evidenced by the fact that just 0.23% of mortgages were more than 90 days in arrears as of August 2019, matching the lowest rate since 1990.

Steve Saretsky -

My inbox has been flooded with questions surrounding the condo insurance conundrum that is making headlines across BC. In case you weren’t already aware, insurance premiums are skyrocketing across the province, catching many strata buildings completely blindsided. Make no mistake, it is a real problem, although the media does a fantastic job in highlighting extreme cases, making the situation look apocalyptic. Check out some of these headlines. Here are a few recent cases of insurance mayhem. As per The Province Newspaper, When residents of Anchor Pointe in New Westminster gathered for the strata’s annual meeting in December, they were stunned to learn their building’s insurance premiums were expected to increase by 40 per cent for 2020. “It was a total shock to everybody,” said strata president Bruce Campbell. Unfortunately for the 30-year-old tower’s residents, things were about to get worse. The strata had budgeted for the 110-unit building’s insurance premium to increase by about 40 per cent for 2020 — to $95,000 for the year, up from about $70,000  — but when January rolled round, the strata council learned it would not be close to sufficient. Instead, Campbell said, the premium would be $259,000 this year — more than 3.5

Steve Saretsky -

Per Bloomberg, the “top 1%” is the symbol of wealth and power thanks to a protest movement. Since Occupy Wall Street popularized the term almost a decade ago, inequality has surged, and this exclusive group has only gotten richer and more influential. Indeed, the top 1% covers a wide span, from prosperous professionals to billionaires with more wealth than many nations. And the difficulty of making the cut varies greatly depending on where you live.To join the exclusive club in Canada, it requires an annual income of $201,000 USD. While many may aspire to reach the top percentile, those who ultimately succeed may be disappointed with the perks of said exclusive membership. With home prices showing few signs of delivering affordability, particularly in the cities of Vancouver & Toronto, homeownership remains elusive even for the top income producers. That hasn’t stopped Canadians from trying to keep up. Mortgage borrowing has accelerated, now growing faster than it did before the B-20 mortgage stress test. For those with inadequate incomes, private lenders are stepping in to fill the void. Alternative mortgage companies are increasingly providing riskier loans, a new report from the national housing agency says. Among large mortgage investment corporations and

Steve Saretsky -

January stats released by the Real Estate Board of Greater Vancouver sparked a flurry of confusion, and various market pundits incorrectly analyzing the data. This is ultimately one the main reasons why I started this blog several years ago. There’s a lot of noise out there, and my job is to cut through that. About eighteen months ago I was having to convince people that prices were indeed starting to fall. Fast forward to today and I’m now having to convince people that prices are rising once again. However, it’s important to understand that each area, and price segment is performing differently. Obviously we could analyze things to death, but i’ll spare you and me the headache. Let’s take a brief overview of the month that was. The condo market in Greater Vancouver as a whole, continued to show signs of a recovery in January, with sales increasing and new listings declining. This kept inventory levels in check. Condo sales jumped 46% year-over-year and were just slightly above their ten year average for the month of January. Overall, demand looks fairly healthy, albeit sales are still well below the boom years. Again the big story here is the persistent weakness

Steve Saretsky -

Canadians lust for owning Real Estate continues to prove insatiable. Over the past few months there has been a flurry of media headlines pronouncing the resurgence across large parts of the nation. Nationally, we already know home sales bounced 23% year-over-year in December, and early indications suggest that should continue in January. The trend in rising sales activity is in large part spurred on from Greater Vancouver, where home sales jumped 47% year-over-year for January, and should officially hit media headlines in the next couple of days. Of course, the large spike in activity should be taken into context. January 2019 was one of the slowest in recent history, thanks to concerns of a global recession and rising interest rates, which saw five year fixed mortgage rates jump to 3.5%. Fast forward twelve months and mortgage rates have plunged, now down to 2.79% with market participants mostly ignoring the persistent softness in the economy- Canadian GDP is expected to have a zero handle in the fourth quarter of 2019. Borrowing has resumed in Canada, at least for mortgages. Residential mortgage credit growth on a 3 month annualized pace is growing at 6.72%, significantly faster than prior to the introduction of

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The Canadian Economy

Steve Saretsky -

There’s certainly no argument as to the important role new housing development has on the BC economy. As one of the main pillars of GDP, I find it extremely valuable to keep an eye on the Metro Vancouver development arena. With some help from Urban Analytics and their recent state...

Steve Saretsky -

It’s no surprise 2019 proved to be a difficult year for the Vancouver housing market. This was perhaps especially true in the development community which witnessed many multi-million dollar projects launch unsuccessfully, or fail to launch entirely. Per official data released by Urban Analytics, The number of condo pre-sale units released...

Steve Saretsky -

As has been widely anticipated over the past few months, changes have arrived for Canada’s mortgage stress test. The Canadian department of finance has changed the way insured mortgages will be stress tested, and it sounds like OSFI will follow suit with uninsured mortgages as well. Under the current stress...

Steve Saretsky -

The reflation trade is back on, and Canadians are jumping back into their asset of choice, real estate. Canadian home sales bounced 11.5% year-over-year in January, marking the best sales figures for the month in 12 years. Meanwhile, the number of newly listed homes was little changed in January, edging up...

Steve Saretsky -

A new report from RBC, highlights consumer insolvencies jumped a rather alarming 9.5% in 2019, the largest annual increase since 2008-09 during the great recession. This is a pretty thought provoking development when you consider that insolvencies are rising rather quickly despite record low interest rates and an economy at...

Steve Saretsky -

My inbox has been flooded with questions surrounding the condo insurance conundrum that is making headlines across BC. In case you weren’t already aware, insurance premiums are skyrocketing across the province, catching many strata buildings completely blindsided. Make no mistake, it is a real problem, although the media does a...

Steve Saretsky -

Per Bloomberg, the “top 1%” is the symbol of wealth and power thanks to a protest movement. Since Occupy Wall Street popularized the term almost a decade ago, inequality has surged, and this exclusive group has only gotten richer and more influential. Indeed, the top 1% covers a wide span,...

Steve Saretsky -

January stats released by the Real Estate Board of Greater Vancouver sparked a flurry of confusion, and various market pundits incorrectly analyzing the data. This is ultimately one the main reasons why I started this blog several years ago. There’s a lot of noise out there, and my job is...

Steve Saretsky -

Canadians lust for owning Real Estate continues to prove insatiable. Over the past few months there has been a flurry of media headlines pronouncing the resurgence across large parts of the nation. Nationally, we already know home sales bounced 23% year-over-year in December, and early indications suggest that should continue...

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The Saretsky Report. December 2022