With the Canada 5 year bond inching closer to a 7 year high earlier this week, pressures are mounting on fixed term mortgage rates. While many smaller lenders have increased their borrowing rates as a result, Canada’s big banks have been holding out. However, TD Bank was the first to flinch, announcing it is hiking it’s posted 5-year fixed rate a whopping 45 basis points (bps) to 5.59%, the largest increase in eight years. According to Canadian mortgage site Rate Spy, “If at least two other Big 6 banks follow TD’s lead (and they may), the mortgage qualifying rate will jump enough to shave off about 3% from a typical borrower’s buying power. That makes the government’s mortgage stress test all the more stressful and, of course, could add downward pressure to home prices, and trap more people with their bank at renewal, to the extent they can’t qualify elsewhere.” An additional 3% reduction in borrowing power on top of the most recent 20% reduction in borrowing power thanks to OSFI’s new B-20 Mortgage guidelines, otherwise known as the stress test. With rising rates and slumping home sales (national home sales dipped 16% in Q1 2018) the health and overall credit worthiness of over indebted

Vancouver Mayor Gregor Robertson announced the city expects to collect $30M in revenue from the city’s empty homes tax this year. The empty homes tax, which fines homeowners 1% of the assessed value if homes are left vacant (a home not occupied or rented for at least 6 months of the year), has already collected $17M in taxes this year and hopes to collect the remaining $13M in the coming months. The median amount of tax paid was $9,900, though taxed amounts varied from $1,500 up to more than $250,000. Per a tweet from the Mayor’s twitter account, “1,200 were declared vacant by the owner. 2,100 failed to declare, and they are deemed vacant. 5,200 properties were exempt.” Official numbers for the 2017 tax year suggest homeowners might not be truthfully declaring property status. Areas widely believed to be empty, including Shaughnessy and Kerrisdale reported incredibly low numbers of empty homes. Of course, there is also a long list of exemptions granted by the city of Vancouver. However, despite the exemptions, the $30M of revenues will outpace the city’s estimated $7.4M annual budget to enforce the tax. Don’t be surprised to see those costs climb with possible legal disputes. The revenue

With the implementation of the B-20 mortgage stress test, Canadian Real Estate is beginning to feel a noticeable slowdown. National home sales declined by 16% in Q1, with prices also dropping by 6%. It was the first time first quarter price growth has turned negative since 2009. Yet despite the cooling across the country, the province of BC remained relatively resilient. BC managed to squeeze out positive price growth on a year over year basis. The average sales price in Q1 2018 increased by 8.49% from Q1 2017. Although this was almost entirely fuelled by the condo market, which has come under siege following a plethora of buyers being knocked down the housing ladder following B-20’s recent mortgage tightening. Declining sales and volumes also suggest BC Real Estate could face further headwinds moving forward. Total residential sales trickled in at 18,932, marking the lowest total since 2014, placing sales at pre housing boom numbers. The pullback also marked the second annual decline for first quarter sales, suggesting new lending standards are eliminating buyers at current prices. The usually bullish BC Real Estate Association chief economist, Cameron Muir, also erred on the side of caution, stating “More burdensome mortgage qualifications are

With 2017 mortgage pre approvals having now expired, the first wave of buyers facing OSFI’s ground breaking mortgage regulations are being put to the test. The regulations, also known as B-20, require all borrowers to pass a stress test at an interest rate 2% higher than the qualifying rate. Early symptoms appear rather obvious. National home sales slid for the month of March, falling 23% year over year, and pushing the average sales price down 10%. Overall, it was a bearish quarter for Canadian housing, first quarter sales slipped 16% year over year. Much of the declines were felt in the single family housing market in Vancouver & Toronto, with many buyers unable to qualify at the recently inflated prices. The average sales price of a single family home in Greater Vancouver now sits at $1.6M and $1M in the GTA. Chief economist of the Canadian Real Estate Association, Gregory Klump, noted the squeeze as “tighter mortgage lending rules, which make it harder for home buyers to qualify for uninsured mortgages, are also shrinking the pool of qualified buyers for higher-priced homes.” To little surprise this reflected in the national home prices across Canada. The Q1 2018 average sales price declined

Despite the continued decline of Vancouver’s detached housing market, which witnessed sales sink to a 27 year low for the first quarter of 2018, housing affordability remains at crisis levels. Per the Royal Bank of Canada’s April report on housing trends and affordability, The re-acceleration of home prices since the middle of last year put housing affordability back at the top of the list of concerns in the Vancouver area. “Vancouver-area buyers experienced the most significant deterioration in RBC’s aggregate affordability measure in Canada in the fourth quarter, rising by 1.8 percentage points. In light of such challenging affordability trends, it wasn’t a surprise to see the BC government announce further housing policy initiatives to cool the market in its 2018 budget.” RBC summarized current conditions as “the worst affordability levels ever recorded anywhere in Canada. The costs of owning a home at today’s prices would have represented an astounding 85.2% of a typical household’s income in the fourth quarter.” Vancouver detached homes reached 116.5 on the affordability index, registering a 2.1% quarter over quarter increase. This marked the worst affordability reading in Vancouver history, ticking in at 69% above the historical average dating back to 1985. Vancouver condo affordability hit

With early cracks beginning to emerge in the Canadian Real Estate market, national home sales declined 17% year over year in February, bulls and bears alike are trying to predict what lies ahead. While the reality is nobody can predict with any degree of accuracy, there remains many hypothetical scenarios. One of which has been gaining some traction. Are Canadian officials gearing up for a weaker loonie & would it cushion house prices? A weaker loonie would allow Canada to beef up exports in the event of a recession, while simultaneously importing substantial amounts of inflation. While this devaluation and inflation of the currency would have many consequences, including the destruction of savers purchasing power, it would keep interest payments in cheque and house prices more buoyant. The devaluation of the currency has already been happening for decades, most Canadians just haven’t clued in. For example, over the past couple years Vancouver house prices have surged nearly 50% in Canadian dollars, but they’ve gone virtually nowhere when priced in gold. This can also be seen in Canada’s M2 money supply which is the total amount of money in circulation (including cash, savings/ chequing accounts, deposits, etc). Ultimately, the increase of inflation

Amidst a slowing Vancouver Real Estate market which witnessed the detached segment register a twenty seven year low in sales for the month of March, the Vancouver condo market appears to be undergoing a cooling of it’s own. Vancouver condo sales trickled in at just 508 sales for the month, it’s lowest total since the year 2013. It was the second annual decline and a 43% decline from it’s peak in March 2016. However, despite the obvious slowdown and decline in buying activity, multiple offers remain consistent. A total of 48% of Vancouver condo sales sold above the asking price in March, an 11% jump from the year prior. This is a result of listing inventory still stuck at crisis levels. Total inventory for sale sunk 16% on a year over year basis. It appears fewer buyers are chasing less supply, particularly at the entry level, where 58% of one bedroom units sold above the asking price. Luckily for condo buyers, relief is on the way. Completions of new construction condos are ramping up. The twelve month rolling average of unit completions hit a record high in February of 23,623 units. Purchasers of these units, who are rarely end users,

As the Vancouver Real Estate market gears up for the usually busy spring buying season, sellers might be caught off guard. Home buying activity in Vancouver’s single family housing market has been eerily quiet to start 2018. Official numbers from the Real Estate Board of Greater Vancouver show detached home sales in the city of Vancouver registered a twenty seven year low for the first quarter of 2018. There were just 352 sales from January 1st to March 31st, eroding the previous low set in the first quarter of 2009. While it would be convenient to chalk this one up to bad weather, this slowdown has become even more acute in the month of March. Detached sales for the month of March ticked in at just 136 sales, resulting in a 44% decline on a year over year basis, while simultaneously recording a 27 year low of it’s own. The steep decline of Vancouver’s luxury property market appears to be suffering the effects of a global pullback of overseas capital. Luxury markets across the globe have cooled significantly following China’s capital controls. With Vancouver home buying peaking in 2016. Further, the BC Government hasn’t made lower prices any more enticing for

It appears to be the end of the road for the Vancouver detached housing market. Sales are expected to round out the first quarter of 2018 at their lowest total in twenty years. With that, speculative activity has also dried up. As of March 29th, Vancouver detached home flipping, (a home bought and resold within 24 months) plummeted to it’s lowest total since November 2008. The Vancouver detached market finds itself increasingly vulnerable following increased taxation, tighter borrowing conditions, and a clamp down on illicit money. A $3M purchase now requires a foreign buyer to cough up $668,000 in taxes upon closing. Meanwhile, credit unions have failed to replace the hole left by the big banks following the B-20 mortgage stress test. Per Northcove Advisors analyst Ben Rabidoux on Twitter, “If credit unions are providing a workaround to B-20, it’s sure not showing up in the data yet. Annualized mortgage growth from the end of 2017 is 1/3 that of the banks.” Further, it appears BC has also been relatively successful in it’s ability to curb funny money entering BC casinos and local Real Estate. Eby noted suspicious transactions to B.C. casinos had fallen to $200,000 in February, down from a high

As anticipated, the BC Government rolled out several amendments to the property speculation tax following it’s controversial and hotly debated announcement. The initial speculation tax hit homeowners who did not pay BC income taxes as well as BC income tax payers who owned second homes but did not rent them out on a long term basis. These homeowners would be required to pay a 2% tax on your homes assessed value every year. This left many BC residents wondering if they were unintentionally targeted as speculators for owning vacation homes. While also targeting Canadian tax payers who lived in other provinces. The tax has now been revised as follows. The tax will only apply to the following areas: Metro Vancouver The Capital Regional District (excluding the Gulf Islands and Juan de Fuca) Kelowna and West Kelowna Nanaimo-Lantzville Abbotsford, Chilliwack and Mission In 2018, the tax rate for all properties subject to the tax is 0.5% of the property value. In 2019 and subsequent years, the tax rates will be as follows: 2% for foreign investors and satellite families; 1% for Canadian citizens and permanent residents who do not live in British Columbia; and 0.5% for British Columbians who are Canadian citizens or

As national home sales slide, falling 17% year over year in February, the attention shifts to British Columbia, Canada’s most expensive housing market. Despite the barrage of Government policies aimed at curbing the residential housing market, including, a 20% foreign buyers tax, a speculation tax, and an increase of property transfer tax, the market has remained surprisingly resilient. Since prices bottomed in November 2008 after the financial crisis, BC home prices have inflated 97%, peaking out In February 2016 at $779,419. As prices reached dizzying heights many defeated buyers gave up their aspirations for the detached market, and instead, feasted on the condo market. However, despite the red hot condo market, the total average sales price across BC has failed to eclipse it’s 2016 peak. As of February 2018 the average sales price sat at $748,149 a 9% increase from February 2017 but 4% below 2016 levels. The resulting decline of the average sales price falls in line with the decline of total dollar volumes, which have sunk 38% from February 2016. It would appear the glory days of irrational exuberance are in the rearview mirror. At least in the residential space. Avison Youg is reporting the value of British Columbia’s commercial real

In recent months Canada’s financial regulators have taken a concerted effort to cool the great Canadian housing boom and slow the pace of record high household indebtedness. There appears to be a strong desire to shift away from a Canadian economy over dependant on household borrowing. Recent policies aimed at curbing mortgage credit growth, known as the B-20 mortgage guidelines, have been lauded as the most stringent mortgage changes in recent history. The clamp down which comes fully loaded with three Bank of Canada interest rate hikes in less than a year, appears to be working. National home sales fell 17% year over year in February. Hitting their lowest total for the month of February in the past five years. According the Canadian Real Estate Association price growth has also decelerated for ten consecutive months. Household debt to income also edged down in the fourth quarter of 2017 from 170.5% to 170.4%, while Household credit growth decelerated for three consecutive months, turning negative in January, the first time in over six years. “While it’s too early to tell, we just might have seen the peak in the debt ratio in Q3, as Q1 will no doubt see a sizeable decline