Buying a vacation property – what you need to consider

Owning a vacation home – whether for summer, winter, or year-round use – is a dream shared by many Canadians. With the loonie in good shape and U.S. vacation properties currently at bargain prices, more Canadians are looking southward for their dream retreat. In 2010, 23 per cent of all international U.S. home buyers were Canadian, up from 11 per cent in 2007.¹

If you are considering buying a second property, here are a few things – beyond price – that you should consider.

• Canadian banks generally will not provide mortgages on U.S. properties. If you intend to raise mortgage money here to buy a property there, you will need to get a line of credit or increase the mortgage on your Canadian property to provide the funds.
• Mortgages in the U.S. are structured differently and can be difficult to obtain. Down payments are high – you will likely be required to make a down payment of between 30 and 40 per cent of the purchase price.
• How often will you be using your property? Even if it is infrequently, you’ll be paying ongoing expenses such as insurance coverage, perhaps a property management company, and other everyday costs of property ownership. Also, property taxes may be higher for out-of-state owners.
• To help offset some of these costs, you may consider renting your vacation property when you’re not using it. If you do, you will be required to file a U.S. tax return and will be subject to a 30 per cent withholding tax.
• If the loonie goes down, your U.S. living expenses will go up.
• If you reside in the U.S. for more than 183 days in a year, you will be required to file U.S. income taxes.
• Gift and estate taxes and probate are also different in the U.S. – which may complicate passing your property to the next generation.
• The U.S. health care system is different than ours. Make sure you take care of your personal health care, medication and home care requirements.

Ownership options

Whether your dream home is in the U.S. or Canada, you will need to decide how you want to structure the ownership of your property. Do you register it in the name of both you and your spouse, one only or use a trust? Ownership issues can be complex. It’s important to get good advice and to consider the issues in the context of your overall estate plan.

Protect your dream

Once you’ve taken the plunge and made your purchase, it’s important to protect your vacation property against unforeseen events. Home insurance offers essential protection against such events as fire and theft. If you’ve financed your purchase, you should consider life insurance to cover the outstanding mortgage in the event of your death or the death of a spouse.

And make sure you have enough disability insurance to maintain payments if you or your spouse are unable to work. There is typically a less liquid market for vacation properties, so a forced sale could net much less than the property’s true value.

There are many things to consider when buying a cross-border property. It makes good financial sense to talk to your Consultant before you buy.

¹ Profile of International Home Buying Activity 2011. Page 12. National Association of Realtors

© iStockphoto.com/STEVECOLEccs/YinYang

There are plenty of reasons Vancouver no longer the world’s most livable city

Brian Hutchinson  Aug 30, 2011 – 9:00 PM ET | Last Updated: Aug 30, 2011 8:22 PM ET

Vancouver has lost its title as the world’s most livable city, but we soldier on. What has changed, really, since the last survey? We’ve experienced another hockey-related riot, bigger than the 1994 donnybrook. We’ve added a second large bicycle lane downtown to impede traffic and commerce. We’ve witnessed more loopy city council politics. Encouraged by Mayor Gregor Robertson and his Greenest City Action Team, we’re growing more chickens in our backyards, and now there’s wheat out front. The real estate market continues to punish middle class families. Consistency. That’s what Vancouver is all about.

And yet the city was dropped two pegs by the Economist Intelligence Unit, an off-shoot of the Economist magazine. The EIU produces annual livability rankings and city profiles, and sells them (current issue $3,150) to credulous, monied folk. Vancouver was the EIU’s top pick for a decade until Tuesday, bloody Tuesday. Now we’re Number Three, behind Melbourne and Vienna.

Toronto is ranked the world’s fourth most livable city. Calgary, fifth. So now we know: The annual survey is bunk.

More proof? Vancouver was bumped, the EIU explained, because of transportation issues. It cited precisely one, the “recent intermittent closures of the key Malahat highway that resulted in a 0.7 percentage point decline in the city’s overall livability rating.” The Economist’s intel team might have checked a map; the Malahat Drive, as it’s properly known, is a pretty but treacherous section of the Trans-Canada Highway. On Vancouver Island. A 90-minute ferry trip from Vancouver, across the Strait of Georgia, and then another hour’s drive after that.

The only recent extraordinary event along the Malahat occurred in April, when a fuel truck crashed near Goldstream Provincial Park, spilling 42,000 litres of gasoline and 600 litres of diesel fuel. The Malahat was closed for 22 hours; traffic was forced to detour, an inconvenience to be sure. B.C.’s transportation ministry ordered a review of the incident and a subsequent 21-page report offered eight recommendations to improve traffic control and communications along the route. Responding to local ridicule and a Globe and Mail investigation, EIU survey editor John Copestake explained that the “Malahat Highway, despite the fact that it’s not in central Vancouver, [is] obviously in the broader region.”

While Vancouver has plenty to recommend it — and is a great place to live and work, for those who can afford it — residents know the score. Livability? What about shoddy home construction, and leaky condos? That crisis isn’t over yet. Or the almost billion-dollar boondoggle formerly known as Vancouver’s Olympic Village, now a privately owned ghost town?

Or an increasingly opaque municipal government? Hours after the Economist released its livability survey on Tuesday, Vancouver councillor Suzanne Anton and her municipal party, the Civic Non-Partisan Association (NPA), claimed that city bureaucrats “won’t allow the public” to scrutinize another batch of city-funded projects, green-themed citizen initiatives intended to make the city great again.

Vancouver’s Greenest City Neighbourhood Grants program is built to “generate more community involvement for the Greenest City goals in areas of zero waste, local food, trees/greening and active transportation.” A request for proposals was issued this year; 54 applications were received and reviewed by city bureaucrats for worthiness. Sixteen applicants were then approved to receive a total of $100,000 in taxpayer-supplied funds.

Ms. Anton, who is running for mayor in elections to be held in November, asked to see complete descriptions of all successful project applications. They arrived last month, along with a dire warning from city manager Penny Ballem. Keep the details to yourself, or face a lawsuit.

“This is confidential information which should not be disclosed to any third parties,” Dr. Ballem’s warning reads. “After consulting with Legal Services and the Information and Privacy Manager, I remind you that this [grant] information must be kept confidential, as it is subject to statutory restrictions on its disclosure pursuant to the Freedom of Information and Protection of Privacy legislation.”

Ms. Anton was not impressed. “I’ve now seen the in-depth description of the Greenest City grant applications, but I’m forbidden from showing taxpayers the details,” she said Tuesday. The $100,000 is being spent on “wacky schemes that waste tax dollars,” she insists. Councillor Geoff Meggs says he’s “baffled” at Ms. Anton’s remarks, noting that City Hall has offered more disclosure than she suggests.

According to a City of Vancouver administrative report prepared in May, projects approved for Greenest City funding include a private tricycle courier business ($15,500), a “pilot project to explore small scale grain production by converting conventional grass lawns” ($5,000), and “a forum/conference on the physical and mental health benefits of time spent in nature” ($2,000).

Trikes, talk and homegrown wheat. Wacky schemes? Perhaps. But this is a city in ratings free fall; the Economist says so. We’ll endure what we must to climb back on top.

http://fullcomment.nationalpost.com/2011/08/30/vancouver-endures-slide-but-anticipates-hike-back-to-peak/

B.C.’s home sales, property values to slow as job growth ebbs: BCREA

VANCOUVER – Slower job growth in British Columbia’s economy will mean slower increases in home sales and property values through to 2012, the B.C. Real Estate Association said Thursday.

And by the end of 2012, the association expects the high-flying prices in some of B.C.’s bigger markets to show small declines.

Home sales through the realtor-controlled Multiple Listing Service should hit 74,640 by the end of 2011, which is up four per cent from 2010, and then rise to 80,300 in 2012, association chief economist Cameron Muir said in his report.

However, those estimates are below B.C.’s long-term average for sales and the forecast for 2011 represents reduced expectations from Muir’s forecast from earlier this year that B.C. should see 78,200 sales this year.

“Following a decade where unit sales broke all records, consumer demand for the next few years will be relatively moderate,” Muir said in releasing the report.

A positive note, however, is that weaker global economic growth and uncertainty in world financial markets are signals that interest rates, including mortgage rates, will remain low and “help underpin housing demand.”

Across the province, Muir is forecasting that the average home price, which has been heavily influenced by strong sales in the more expensive pockets of Metro Vancouver, to hit $559,179 by the end of 2011.

However, by the end of 2012, Muir is forecasting that the average price will fall back 2.5 per cent to $545,964.

The 2012 price declines, however, are expected to show up primarily in the Lower Mainland Markets, which influence the overall provincial averages.

Muir expects Metro Vancouver’s average price to slip 3.5 per cent in 2012 to $742,000. However, that will be a decline off 2011, which Muir predicts will end with the average price having shot up 14 per cent to $769,000.

And Muir is forecasting that the Fraser Valley will see its average price in 2012 dip 1.4 per cent to $498,000. But that follows 2011, where he expects the average price will have gained 12 per cent from the previous year to hit $505,000.

© Copyright (c) The Vancouver Sun

Read more: http://www.vancouversun.com/business/home+sales+property+values+slow+growth+ebbs+BCREA/5307420/story.html#ixzz1WQFdRm00

Royal Bank, BMO increase its five-year variable mortgage rates

Sunny Freeman, The Canadian Press, On Tuesday August 23, 2011, 8:01 pm EDT

By Sunny Freeman, The Canadian Press

TORONTO – Royal Bank of Canada (TSX:RY) is raising its variable rate mortgages for homebuyers in a move that reflects higher costs of borrowing in the bond market.

Canada’s largest bank said Tuesday it is hiking the rates charged on its five-year variable closed mortgages by a fifth of a point, effective Wednesday.

That will put that rate even with the bank’s prime rate of three per cent.

Bank of Montreal later joined Royal in raising its five-year variable closed mortgage to three per cent which, in the case of BMO, represented a 0.15 percentage point increase.

Meanwhile, the Royal’s special variable rate mortgage also increased by a fifth of a point to prime minus 0.45 percentage points, making it 2.55 per cent.

In the past when banks raised variable rates without a corresponding increase in the Bank of Canada rate, they were accused of trying to boost profit margins at the expense of borrowers.

But Royal Bank, which is also Canada’s largest mortgage lender, said the latest increase reflects higher costs in the bond market, where it raises money to finance its mortgage loans.

Bond interest rates have risen due to growing debt fears in the United States and Europe as lenders want higher rates to part with their money in a riskier global economy.

The increase in market interest rates comes at the same time central banks are keeping their rates low to stimulate the weak economy.

In the U.S., the Federal Reserve Board has said it will keep interest rates flat for another two years to spur growth, while the Bank of Canada is also expected to hold the line on rates well into next year.

Low mortgage rates in recent years have been a big factor in spurring growth in the Canadian housing market, which remains buoyant in most parts of the country.

Although it is unusual for banks to hike their variable rates without a rise in the Bank of Canada’s overnight lending rate, it is not unprecedented.

“This is not the first time that the price for variable rate mortgages is changing relative to prime without a corresponding change in the BOC rate,” a Royal Bank spokesman said in an email.

“In fact, over the period that BOC increased its overnight rate from 0.25 per cent to one per cent, the bank reduced the pricing levels for new mortgages relative to prime.”

The mortgage market is highly competitive in Canada and in the past variable rate mortgages were popular with borrowers when interest rates were expected to remain low and there was little chance of sudden hikes in borrowing costs.

In the last few months, more consumers opted to lock into fixed terms when it looked like the Bank of Canada would begin to push rates sharply higher to fight inflationary pressures in the economy.

But the recent stock market and economic turmoil that has kept central bank rates low could push borrowers back to variable terms in the Canadian market.

Royal Bank said the Bank of Canada’s rate is just one of many factors that go into pricing decisions. Banks mortgage costs are also based on changes in the bond markets, where rates have been volatile and banks raise money for their mortgage lending.

Recent global uncertainty over whether the U.S. can come up with a plan to deal with its debt problems, and over fears the debt crises in smaller European economies will spread across the continent, have caused bond rates to rise.

That makes it more expensive for banks to fund their mortgage operations, and led RBC to recoup some of those costs through a higher variable rate.

“Mortgage rates are tied to the banks funding costs which change from day to day,” the bank said. “Due to global economic concerns, the funding costs for banks have been increasing.

“While we have held off in passing on these high costs to our clients, it is now necessary for us to increase this mortgage rate.”

The big Canadian banks usually move in tandem when there is a variable rate change along with a change in the Bank of Canada’s overnight lending rate, but its unclear whether the rest will follow this time.

Competitive pressures could force some banks to keep variable rates low to attract customers.

Royal Bank will report its third-quarter results on Friday.

http://ca.finance.yahoo.com/news/Royal-Bank-BMO-increase-five-capress-2468898936.html?x=0

Understanding house prices

What factors affect the value of a home?

Location: Real estate people always say “Location, location, location.” That’s because the area you live in will be the biggest factor affecting your home’s price. It’s smart to buy a home where housing prices are likely to increase. Also, the people who may buy your home from you one day may be willing to pay more for a home that is close to schools, sports centres, stores, services, and so on. Keep that in mind as you look.

The condition of the home and the property it is on: Does the home need a lot of repairs? How is the roof, plumbing, and electrical wiring? A home in good repair may be worth more. Also, the condition of the outside of the home, the lawn, gardens, driveway, and trees will all affect the value of a home. These are the first things that buyers see, and are together known as curb appeal.

Renovations and updates: An older home might need some work to keep it safe, modern, and comfortable. If you are buying at a home that has had some renovations, check the quality. When you do work on a home you own, do it as well as you can. Poor work can lower the value.

The economy: There are some things you can’t control that affect house prices, like interest rates. Higher interest rates mean it costs more for a mortgage, so fewer people buy homes. When that happens, the prices of homes can fall. Lower interest rates, on the other hand, can boost buying and drive prices up. House prices often go up for a while, and then come down a bit. Try to find out as much as you can about how prices are changing, or may change, when deciding to buy or sell a home. Often there will be stories in the paper about housing prices.

How much is my home worth today?

If you’re considering buying a home, or you just bought one, you know how much it’s worth. But if you’ve owned your home for a while, its value has probably changed. Here’s how you can find out how much it’s worth now:

Call a real estate agent: Ask them for an estimate of your home’s value. You may be able to get an agent to do this for free, because they hope to get your business in the future.

Ask an appraiser: Your bank or a real estate agent should know a number of appraisers. Banks use them to estimate house values before they approve mortgages. You can also look in the yellow pages. An appraiser will charge a fee for the service.

Check to see what other homes in your area have sold for recently: Compare your home with similar ones that have sold. Unless you keep up with what’s happening in your area, this information may be hard to get. Ask your real estate agent if you can’t find it yourself.

How much will my home be worth in the future?

To estimate a home’s future value, you will have to do some informed guessing. Start with finding out what has happened to prices in your location over several years.

This chart shows how house and condo prices in 12 Canadian cities changed from 1990 to 2010. Note that there has been a sharp rise in prices in the last few years. Still, the average growth for these cities since was 4.6%, close to the historical average of 5% a year.

Remember, There’s no guarantee what housing prices will do. Location and the condition of the home are both important factors, as is the economy as a whole. http://ca.finance.yahoo.com/news/Understanding-house-prices-getsmarteraboutmoney-1897978095.html

Real estate buyers to focus on low interest, ignore market turmoil

Mary Gazze, The Canadian Press

TORONTO – Canada’s real estate market will grow in the rest of the year as Canadians undeterred by recent turmoil in global stock markets will continue to be drawn in by low mortgage interest rates, economists say.

The economists made the comments as the Canadian Real Estate Association revised its forecast for national home resales up for the rest of the year, citing stronger than expected sales and higher prices in the second quarter.

The association said sales should grow less than one per cent this year, compared with 2010, up from an earlier forecast that called for a one per cent dip in sales.

CIBC deputy chief economist Benjamin Tal said the stock market uncertainty due to the European debt crisis and the United States credit downgrade is actually helping boost activity in Canada’s real estate market.

He said that bad economic news abroad tends to keep Canadian interest rates low, with economists predicting the Bank of Canada will leave rates untouched until at least next year.

“The uncertainty globally is really benefiting mortgage holders because it’s really postponing the increase in interest rates in Canada,” he said, explaining that when the stock market turns volatile, real estate becomes an attractive investment because of its security.

“Many people can use this opportunity to look into extremely low mortgage rates, so again the misery of other people elsewhere is helping Canadian home buyers.”

Sonya Gulati, an economist at TD Economics said the bank is anticipating that sales will be a bit more subdued in the short term, but buyers, especially first timers and immigrants won’t likely be deterred in the longer term as interest rates stay low.

“People may be waiting to see whether or not they want to purchase homes, see if things turn for the better. It really has been a roller coaster for the last little while so we anticipate a little bit more subdued activity in August and September.”

“(The stock market) will be a factor in their decision making process, but at the end of the day one of the key things for people is the interest rate and mortgage rates are still very low and they may actually want to enter the market for that reason despite the uncertainty out there.”

Overall, CREA said Tuesday that 450,800 housing units are expected to be sold across Canada under its multiple listing service in 2011, and the average selling price will be slightly higher.

About 90 per cent of resales in Canada are listed on MLS.

On a regional basis, British Columbia’s 2011 sales forecast has been revised slightly higher as home sales in the province appear to have bottomed out soon than predicted, while stronger than expected activity in Ontario is expected to offset slightly softer than anticipated demand in Quebec, Manitoba and Newfoundland and Labrador.

Meanwhile, the association said sales expectations for 2012 were revised downward to 447,000 units, roughly on par with the 10-year average, CREA said.

“While there had been some talk of potential interest rate increases. That hasn’t happened,” said CREA president Gary Morse.

“In fact, rates have actually come down and are now expected to remain low for the remainder of this year and into 2012. It’s a great opportunity to purchase a property with financing at very favourable rates.”

The national average home price is expected to rise 7.2 per cent in 2011, to $363,500, reflecting increases in the second quarter in Vancouver and acceleration in other parts of the country, particularly Toronto.

“These two markets exert an outsized influence on the national average due to their relatively high level of activity and average price,” CREA said.

CREA said the average price is expected to moderate in the second half of the year, returning to normal following a heavily skewed start to the year due to a surge in multimillion-dollar sales in selected areas of Vancouver and a higher than normal share of overall sales in more expensive markets.

Additional new listings should also result in a more balanced resale housing market in most provinces, with the national average price forecast to stabilize in 2012.

http://ca.finance.yahoo.com/news/Real-estate-buyers-focus-low-capress-322648189.html;_ylt=As4mSBOF7iz2.uKTOD1LjXzg2ppG;_ylu=X3oDMTFkZzRhY2toBHBvcwMyBHNlYwNuZXdzSHViQXJ0aWNsZUxpc3QEc2xrA3JlYWxlc3RhdGVidQ–?x=0