Home sales set new record

Home sales set a record for the month of June, standing 11 per cent above June 2014 and 14 per cent above the 10-year national average for the month, according to the latest figures from the Canadian Real Estate Association.

But the trend is local, said the organization, pointing to increases in Hamilton-Burlington, the Durham region and the Greater Toronto Area, and decreases in Ottawa and Montreal.

“Low interest rates are helping sales activity set new records in and around the Greater Toronto Area, which is boosting national sales activity,” said Gregory Klump, CREA’s chief economist.

“Those records would be even higher were it not for an ongoing shortage of listings for single-family homes in the area. The combination of strong demand and a shortage of listings are continuing to fuel single-family home price increases.”

Sales were up on a year-over-year basis in around two-thirds of all local markets, led by activity in the Lower Mainland of B.C., Greater Toronto, and Hamilton-Burlington.

The actual national average price for homes sold in June 2015 was $453,560, up 9.6 per cent on a year-over-year basis.

However, this figure continues to be distorted by sales activity in Greater Vancouver and Greater Toronto, which are among Canada’s most active and expensive housing markets.

If these two markets are excluded from calculations, the average is a more modest $346,904 and the year-over-year gain is reduced to 3.1 per cent.
 

Canadians driven to huge mortgage rates  

by Steve Randall | 10 Jul 2015

The Canadian dream of owning a home is driving some to agree to exorbitant mortgage rates from the world of shadow lending. A Reuters report says that while home prices have been increasing, mortgage lenders have become more conservative and regulators have tightened lending restrictions, meaning that some buyers have taken on home loans at high rates. According to mortgage broker Lou Perrotta 20 to 30 per cent of his mortgage book is through private lenders, including his own money, amounting to up to $5 million of his $20 million of annual business. Many investors are seeing private lending as a high yield option often returning 9 per cent or more. Although this part of the mortgage sector is small, around 5 per cent is estimated, it still represents a potential risk as economic conditions, including interest rates, inevitably change. 

No need for policy on foreign investment says BCREA

HomeMarket Update

by CRE11 Jun 2015 Share on facebookShare on twitterShare on linkedinShare on google_plusone_share

The British Columbia Real Estate Association has published a report on the implications of foreign buyers on the housing market in the province.

It has concluded that there is no need for government action to tackle the issue at this time.

The report notes that housing affordability is, and has for a long time, been a problem for the Vancouver metro but says that data shows that the impact of foreign investment in such a large and diverse market is small with the exception of some luxury property.

BCREA says that a lack of land supply and densification policies have placed “significant upward pressure” on single-detached properties in the metro region.

Among the association’s findings are that foreign investment makes up no more than five per cent of sales activity and foreigners own “considerably less” than five per cent of housing stock.

However, the report recommends that the level of foreign ownership should be monitored by means of a residency declaration to the land transfer process or a similar procedure.
 

Why Are Bond Yields Rising? Will Mortgage Rates Follow?

Bond markets have tanked in the past several weeks, driving yields upward. Hundreds of billions of dollars have been wiped out in global bond markets. Ten-year government bond yields in Canada have risen 50 basis points (bps) in the past month as Treasury yields have jumped 32 bps. The rate increases in sovereign European bonds have been even greater, up roughly 60 bps for core Europe, albeit from extremely low levels. At today’s postings, 10-year Government of Canada bonds (GOCs) yields are at about 1.80% while 10-year Treasuries are at 2.24%. 

Rate cut talk gathers pace

Major cuts to come from BoC?

Bank Prime: 2.85%

Best Variable Rate: 2.15%

Best 5 Year Rate: 2.79%

Analyst explains why banks haven’t matched the BoC’s rate

by Justin da Rosa | 29 Jan 2015

The big banks’ decision to lower their prime rates – but not fully match the mark set by the Bank of Canada – was about balancing the economy, according to one bank analyst.

“The absence of a full prime cut slows the stimulus into the housing market late in the cycle while the negative impact on Canadian bank profitability is dulled by the fact that it is only a partial move,” Robert Sedran, analyst at CIBC World Markets said in a note to clients, according to the Financial Post. “We’ll see if this balance holds or if another cut in the overnight rate is coming.”

The Bank of Canada lowered its overnight rate by 25 basis points and the banks have all lowered their prime rates by 15 basis points. It took the banks almost a week after the central bank lowered its overnight rate to slash their own prime rates.

Some may question whether the refusal to lower its rates further isn’t simply about maximizing profit. Before the respective moves, many brokers weren’t surprised by the lack of action.

“I’m not surprised the banks haven’t dropped their variable rates. They want every last dollar they can get,” Rob Campbell told MortgageBrokerNews.ca earlier this week, before the banks lowered their prime rates. “At the end of the day it’s costing them less money to borrow and at the end of the day they have shareholders to answer to.”

Still, Sedran says the decision to not match the BoC’s rate is a “compromise”. “Perhaps we have arrived at a compromise,” he said. “The rate cut was behind the currency depreciation that should prove stimulative to economic activity and the partial move in prime is a marginal positive as well.”