The Liberals have promised to increase limits and make some other changes to the First-Time Home Buyer program, if they win the federal election.

The flagship program, introduced earlier this month, has been criticized for limits which exclude potential buyers of homes in the priciest markets such as Toronto and Vancouver.

But the party says that it would immediately expand the Incentive to provide more help to communities in the greater Toronto, Vancouver, and Victoria regions by allowing homes valued at up to $789K to qualify.

Reacting to the announcement, Toronto Real Estate Board issued a statement:

“Today’s First-Time Home Buyer program announcement responds to the fact that housing markets vary from region to region, something TREB has long pointed out. The higher limits now take into account higher priced properties in markets like Toronto and Vancouver,” it states.

TREB re-stated its belief that its recommended solutions, including revising the mortgage stress test and bringing back 30-year mortgage amortization, will be effective in addressing ownership housing affordability.

Foreign ownership

The Liberals have also pledged to introduce a consistent, nationwide speculation and vacancy tax for non-resident Canadians.

In response, TREB says:

“Further analysis is required to understand if today’s proposed speculation and vacancy tax announcement will help increase the supply of available housing over the long term, or aid with affordability. We’re also keen to hear from the other federal political parties regarding their platforms on measures to assist with home ownership affordability.”

A new report shows disparity in home price trajectories across Canada, including some large decreases.

The CENTURY 21 analysis of home prices reveals that some communities have seen some steep decreases in price per square foot in the past year, most notably in British Columbia.

BC’s decreases are led by some significant downturns in Vancouver, many suburbs in Metro Vancouver, and even some markets on Vancouver Island and the Okanagan seeing declines of 10-20% year-over-year in the first 6 months of 2019.

“What strikes me in this survey is how pricing trends varied so broadly across communities and types of property over the last year,” says Brian Rushton, Executive Vice-President of CENTURY 21 Canada. “It is not surprising to see Vancouver prices drop so much, but the drop is actually more significant in some Metro Vancouver suburbs like West Vancouver and secondary B.C. markets such as Vernon and Kelowna.”

It was the first time since the study began 3 years ago that the price of a single-family home on Vancouver’s West Side slipped below $1000 per square foot, at $990psf it represents a 13.74% year-over-year.

Montreal on the rise
There were more moderate declines in Alberta and the Prairies, while Montreal condos jumped 25% ($709psf), Toronto gained 10% ($994psf), and most Atlantic Canada markets posted modest increases. Detached houses in Montreal gained 11.77% to $674psf

“Prices in Montreal and Toronto continue to head up, to the point detached houses in Montreal cost more per square foot than houses in many Metro Vancouver suburbs, and twice as much per square foot as Calgary,” noted Rushton.

Downtown Vancouver condos remain the most expensive properties in the survey at $1,241 per square foot, despite an 8.4% decline from the same period last year.

Calgary prices fell 3.59% from $293 per square foot to $282. Regina prices for a detached house fell 2.88% to $246 per square foot. Winnipeg saw the sharpest decreases in the Prairie Provinces, with decreases of almost 14% to $243 per square foot.

“With so much variation in the market and prices adjusting very differently depending on neighbourhood and property type, now more than ever it is important to have good information when making real estate buying and selling decisions,” Rushton added. “The list of complex local factors we see reflected in this survey is a long one, ranging from new taxes on property speculation and foreign buyers in B.C. through to a changing economy impacting neighbouring Toronto suburbs very differently.”

Home sales in Metro Vancouver increased in double digits year-over-year in August.

Total sales of 2,231 reported by the Real Estate Board of Greater Vancouver was 12.7% below the July total but was 15.7% higher than in August 2018. Sales were 9.2% below the 10-year average for August.

“Home sales returned to more historically normal levels in July and August compared to what we saw in the first six months of the year,” said REBGV President Ashley Smith.

There was a drop in new MLS listings of 3.5% month-over-month and 18.8% year-over-year (3,747) taking the total inventory to 13,396, almost 6% lower than in July but up 13.3% from August 2018.

“With more demand from home buyers, the supply of homes listed for sale isn’t accumulating like earlier in the year. These changes are creating more balanced market conditions,” Smith said.

The sales-to-active-listings ratio was 16.7%.

The MLS® Home Price Index composite benchmark price for all residential properties in Metro Vancouver in August was $993,300, down 8.3% year-over-year and down 0.2% from to July.

Stats by property type

Sales of detached homes in August 2019 reached 706, a 24.5% increase from the 567 detached sales recorded in August 2018. The benchmark price for detached homes is $1,406,700, a 9.8% decrease from August 2018 and a 0.7% decrease compared to July 2019.

Sales of apartment homes reached 1,116 in August 2019, an 8.9% increase compared to the 1,025 sales in August 2018. The benchmark price of an apartment property is $771,000, a 7.4% decrease from August 2018 and a 0.1% increase compared to July 2019.

Attached home sales in August 2019 totalled 409, a 21.4% increase compared to the 337 sales in August 2018. The benchmark price of an attached unit is $654,000, a 7.8% decrease from August 2018, a 0.2% increase compared to July 2019.

As Canadians enjoyed the Labour Day holiday, a new government scheme was officially launched that aims to help more people get on the housing ladder.

But the First-Time Home Buyer Incentive may not be the panacea for potential new entrants into Canada’s housing market that Justin Trudeau and his ministers hope.

Critics say that it will not make a widespread difference to the ability of first-time homebuyers to afford to follow their homeownership dreams.

With the program’s requirements for household earnings of a maximum $120,000 and a mortgage-to-income ratio capped at 4 times household income, the top-end of the homes that the scheme will help to buy is far short of the $826K average home price in Vancouver or $982K in Toronto.

“It’s a very narrowly-focused program,” Royal LePage President Phil Soper told Bloomberg. “It’s just not a big enough slot of the market to move it.”

100K borrowers or 5K?

CMHC, which is administering the program, estimates that it could help 100,000 first-time homebuyers but Mortgage Professionals Canada thinks the figure could be as low as 5,000 as potential buyers are dissuaded by giving up equity in their new home and mortgage insurance requirements.

“The government says it wants to make homeownership more affordable and accessible, but its actions say otherwise,” MPC chief economist Will Dunning told Bloomberg. “The proposals “to improve access are likely to have only small positive effects.”

The First-Time Home Buyer Incentive helps qualified first-time homebuyers reduce their monthly mortgage carrying costs without adding to their financial burdens.

The First-Time Home Buyer Incentive launches September 2, 2019*.

* The program will be ready to receive Incentive applications on September 2, 2019 (barring any unforeseen circumstances). The first closing will take effect on November 1, 2019

There was a continued decline in mortgage originations in the second quarter of 2019.

Originations fell 8.9% year-over-year with younger Canadians (18-25 years) showing a 13.4% drop according to the Q2 2019 Industry Insights Report from TransUnion Canada.

Although the report acknowledges the multi-factor impacts on mortgage originations including home prices, interest rates, consumer sentiment, and unemployment levels; it says that the regulatory changes introduced in 2018 have had a material effect on originations.

“The new mortgage regulations seem to be having the intended effect in cooling the overheated housing market and broadly preventing consumers from overextending themselves with mortgage debt. This is now the fourth consecutive quarter we have seen a decline in both mortgage originations and balances,” commented Matt Fabian, director of financial services research and consulting for TransUnion Canada.

He added that there are signs of some potentially unintended consequences.

“We have started to see an uptick in co-borrowing as the means of getting a foothold on the property ladder, where multiple consumers make an application together – in effect combining the power of their salaries. Although this is nothing new, it is now often with the help of a parent, other relative or a friend rather than just a partner or a spouse,” said Fabian.

Other debts are rising

While mortgage originations were lower, the report shows that Canadians continued to load up on other debts.

Overall consumer credit balances continued to grow in the second quarter—up 4.3% compared to the same period a year ago—bringing total outstanding consumer credit to $1.88 trillion.

The number of consumers with access to credit grew 1.7% year-on-year (YoY) in Q2 2019.

The average non-revolving balance per consumer grew 6.2% year-over-year to $31.4K in Q2 2019. This figure was primarily made up of installment and auto loans but excludes mortgages.

Borrowing for revolving products (including credit cards and lines of credit) saw a slight drop, down 1.2% YoY to end Q2 2019 at $18.5K.

The increases in overall borrowing have been driven by lower interest rates and low unemployment; and consumers have been managing their debts well so far with delinquency rates stable over the past year.

However, as the economy slows and risks of an economic downturn remain prevalent, it will be important for consumers to manage these higher debt levels diligently to remain current on their obligations,” warned Fabian.

Line of credit originations were the strongest in Q2, up 13.9% year-over-year.

Gen X lead debts

The largest cohort in terms of total debt balances in the second quarter was Gen X with a combined $767.4 billion, an increase of 3.4% year-over-year.

However, Millennials are catching up fast with a 12.33% year-over-year increase taking their overall debt to $515.9 billion. Gen Z gained 50.53% to $24.8 billion.

Older Canadians reduced their overall balances: Baby Boomers by 1.8% to $514.3 billion and the Silent Generation by 7.45% to $52.5 billion.

“At a headline level, the consumer credit market continues to grow. However, growth hasn’t been uniform, and in major categories like mortgages, we continued to see a decline in origination volumes when compared to the same period a year ago,” continued Fabian. “The shift in focus toward non-revolving credit products is something we’ve seen over recent quarters. The rise of Millennials, who have equaled and slightly surpassed Baby Boomers when looking at outstanding balances, is having a fundamental impact on the approach lenders take to how they market to and service their customers.”

A global ranking of luxury housing markets has highlighted the divergence of Canada’s two largest markets.

Vancouver remains at the bottom of the table of 46 cities worldwide compiled using Knight Frank’s global research network while Toronto ranks 13th.

The Prime Global Cities Index tracks the movement in prime residential prices of the 46 cities.

Second quarter stats show Berlin at the top with a 12.7% increase over the past 12 months but no movement in the past 3 months. The top 5 includes Frankfurt (up 12% over 12 months / 0% over 3 months), Moscow (up 9.5% / 1.8%), Manila (up 6.2% / 0.8%), and Geneva (up 6% / 1.7%).

Vancouver sits at the bottom with a 13.6% decrease in prices over 12 months and a decrease of 2.4% over the past 3 months.

It’s the only city among the 46 to post a double-digit decline. Other cities that have lost value over 12 months include Auckland (down 7.5%), London (down 4.9%), and New York (down 3.7%).

Meanwhile, Toronto posted a gain in prices of 3.8% over 12 months and 2.8% over 3 months, making it the highest-ranking city in North America among the 46, beating Miami (1.5% 12-month gain), San Francisco (1.2%), and Los Angeles (0.7%).

The British Columbia housing market showed improvement in July with residential sales up 12.4% year-over-year.

The latest assessment of the market from the British Columbia Real Estate Association reveals 7,930 home sales through the MLS system in July.

The average residential price in the province was $684,497, down 1.6% year-over-year but total sales dollar volume was $5.43 billion, a 10.5% increase from the same month last year.

“BC home sales climbed higher for the first time in 18 months on a year-over-year basis in July,” said BCREA Chief Economist Cameron Muir. Housing demand has also trended higher since March, rising 21 per cent on a seasonally adjusted basis. “Households appear to be adjusting to the tighter credit environment as the shock of the B20 stress test dissipates.”

Listings ease

While new listings in July fell 3% from the previous month on a seasonally adjusted basis, inventory was 12.4% above that of a year earlier with 41,621 units available for sale.

Sales-to-active listings ratio at 19.1%, similar to a year earlier.

Year-to-date, BC residential sales dollar volume was down 18.9% to $30 billion, compared with the same period in 2018. Residential unit sales decreased 14.4% to 43,612 units, while the average MLS® residential price was down 5.3% to $687,413.

The recent slowdown in Canada’s hottest housing markets is turning a corner and a potential new price boom is threatening to frustrate would-be buyers’ hopes.

The real risk to Canada’s housing market today is not a crash, but a return to nosebleed levels of price growth thanks in part to falling interest rates, said Doug Porter, chief economist at Bank of Montreal.

Policymakers will have to “be ready to wield some tough measures” if they want to prevent housing costs from becoming even more unaffordable, Porter told HuffPost Canada ― though he said he would “leave it to policymakers” to decide what those should be.

The latest data from the Toronto and Vancouver real estate boards shows the markets shaking off foreign buyers’ taxes and the mortgage stress test. Home sales jumped 24 per cent in both cities in July, compared to a year earlier.

Much of that has to do with more affordable mortgages. The collapse in interest rates on government debt around the world in recent months has pushed down the rates Canadian lenders can offer.

Ratehub

A new report from CMHC looks at the state of the Canadian mortgage market and highlights some of the challenges that it faces.

The inaugural Residential Mortgage Industry Report says that recent mortgage regulations, rising interest rates, and softening home sales were factors in a slowing mortgage market in 2018.

It also reveals that the share of uninsured mortgages increased.

Last year saw the slowest year-over-year growth rate of outstanding mortgages in more than 25 years with new mortgages for the purchase of property down 19%, while refinanced mortgages by the same lender decreased by 12%, compared to 2017.

Insured mortgage originations accounted for less than 1 in 3 new mortgage loans in 2018 and, over time, the share of outstanding insured mortgages has decreased by about 16 percentage points from 57% in the first quarter of 2015 to 41% in the same period in 2019.

This increase in uninsured mortgages is the result of adjustments to regulatory changes, of changes in economic conditions and of changes to portfolio insurance, CMHC’s report says.

Lenders and loans

Federally regulated financial institutions (FRFIs) held an estimated 78% of all mortgage debt in 2018 with credit unions holding approximately 14% and mortgage finance companies (MFCs) holding approximately 6%.

Mortgage Investment Corporations (MICs) held an estimated $13-14 billion of mortgages outstanding with their share of mortgage originations more than double their share of the stock, partly due to their increasing market share in the uninsured space.

Fixed-rate 5-year mortgages continued to be the preference of Canadian homebuyers and owners, but variable-rate loans have become more popular with the average share of new mortgages with a variable rate at 29% in the first quarter of 2019, a 12-percentage point increase from the same period in 2017.

Michel Tremblay, Senior Vice-President, Policy and Innovation, Canada Mortgage and Housing Corporation, said that efforts are continuing to fill data gaps across the Canadian housing spectrum as they are identified.

“This new report gathers information from several key initiatives and partnerships including the Non-Bank Mortgage Lender Survey, a Mortgage Investment Corporation (MIC) survey, and our own residential Mortgage data-reporting framework of NHA MBS issuers. The availability of information helps support evidence-based policy and informed decision making within the housing finance sector.”

Mortgage funding trends

• Deposits are the main source of mortgage funding for chartered banks and credit unions. As of the fourth quarter of 2018, the Big Six Banks funded more than 64% of their residential mortgages through deposits, while credit unions used this funding source for more than 3 out of 4 mortgages.
• Covered bonds have gained close to 1-percentage point of the funding market, reaching a record 9.5% in the same period.
• Private securitization such as RMBS and ABCP still account for a very small share of funding sources in Canada, hovering between 0.5% and 1.5%
• CMHC’s funding programs accounted for 30% of all outstanding mortgage credit in Canada at the end of 2018.