Saturday, April 20, 2013

Canada’s housing market drawing the big-money crowd


Sotheby’s International Realty is seeing a surge in demand from wealthy Syrians, Egyptians and Europeans looking for a safe and relatively stable place to park their millions — Canada’s softening real estate market.

There has been an uptick in “very significant transactions” in tony areas like Oakville and North Toronto by Europeans, many with young families who originally had planned to settle in the U.S. but fell in love with Canada instead, says Sotheby’s Canada CEO Ross McCredie.

At the same time, Montreal’s exclusive Westmount area has become top of the real estate wish list for high-net worth Syrians and Egyptians looking for a safe haven for their money and families, he added.

Increasingly, many of these deals — especially those over $10 million — aren’t even showing up in MLS sales tallies because of buyers seeking the privacy afforded by private or exclusive deals, or finalized under the cloak of a corporate purchase, McCredie noted.

“The lack of inventory is a big problem in the high-end market,” so agents are having to find their own properties rather than look to the MLS system, said Andy Taylor of Sotheby’s Toronto office, which has done more international business in the last 18 months than in the last six years.

“What we are seeing is very wealthy high-net worth individuals who see the Canadian real estate market as undervalued in their world, in terms of what else they are looking at and what else they own,” added McCredie.

“They see this as a stable country. They love our currency. And they see cities that have changed dramatically in the last 20 years and are much more appealing to an international buyer.”

In a bid to better understand who is buying, why and where, the high-end realty company — which just launched into the Canadian market eight years ago — undertook a survey of its top agents in over a dozen key cities and produced what it calls its first Top Tier Trends Report.

While there has been a softening in demand for homes over $2 million, especially in Vancouver and Toronto, since housing sales began their double-digit slump last summer, Canada remains firmly fixed on the radar for the growing number of millionaires and billionaires from Shanghai to Sydney, notes the report released Thursday.

Wealthy Canadians, of course, remain the dominant players in this niche market, but in Toronto, Vancouver and Montreal they’ve been facing more competition, particularly in the last five years, from would-be Chinese, Russian, British and American buyers, it says.

Sotheby’s has seen heightened interest from Europeans, largely in Toronto real estate, since the euro crisis, says McCredie, adding that about 25 per cent of its luxury sales in the Toronto area are to foreigners from the U.S., China, Russia, the Middle East and India.

Its percentage of foreign buyers is closer to 40 per cent in Vancouver and 50 per cent in Montreal, notes the report, according to Sotheby’s agents surveyed for the study.

Most are looking for iconic, spacious homes with very high-end finishes, but others are willing to pay what it takes just to get a great location — even if it means pumping millions more into the place in renovations, said McCredie.

Just six weeks ago, Sotheby’s recorded a record $4 million sale — the highest price ever paid for a semi-detached house in Toronto.  The 4,000-square-foot semi is in Yorkville. The buyer was local, but 30 per cent of those looking at the well-appointed home were international buyers, said Taylor.

Tuesday, April 16, 2013

Interesting article on housing price directions

2013 Housing Forecast: New Home Prices to Rise Strongly This Year
Posted in National Housing Market

Posted on 03-29-2013
Written by Brad Hunter

I had already been calling for strong home price increases in 2013, and the latest evidence in the market suggests that the increases may be even stronger than most are forecasting. I am now expecting price increases in the new home subdivisions of 9.0% in 2013, and in the best “A/B” submarkets, 11%-15%. These are same-project forecasts, not averages. Resale home prices will rise as well, but not quite as fast; homebuilders will be driven by extreme cost pressures, and consumer demand will continue to strengthen this year, allowing builders to pass along the higher costs.
By 2014/2015, however, I believe the pace of escalations will slow down again. There are three independent reasons for this.
1) Resale listings, now extremely low, will start to replenish.The main reason (on top of the recent investor buying spree) that there are fewer listings is that a large number of would-be sellers are holding their units off the market until prices go higher. It would not be surprising to see more homes get listed after another year of rising prices. That increased supply will then start to slow the rate of price increase. Another point: much has been made of the reduced number of listings of resale homes, and many commentators have pronounced based on this that “inventories” are low, but MLS listings do not truly equate to “inventories,” in that most of the homes on the MLS are occupied. Don’t call MLS listings “inventories”; finished-vacant new home supply is a much better leading indicator for home prices.
2) The rate of increase in lot prices is completely unsustainable, so as the rate of lot price increase eases, the pass-through pressure will subside (in the next year or two).
3) When mortgage rates move from the high 3%s to the 6% range, which is likely in the next three years, the monthly payment will be 33% higher, and that will limit how much people can spend on a home.
Also remember that an unusually large share of the home buying that has occurred so far has been by the move-up audience; once the first-time home buyers re-enter the new home market in large numbers, normal household economics will come back into play. Home prices cannot outstrip wage growth for too long (we’ve seen that movie before!).
Even after things slow down, the pace of new home price escalation should be well in excess of the general inflation rate. The 9% increase expected for 2013 will give way to a still-strong 6% rate in 2014, easing lower (read: back toward normal) in 2015.

Monday, April 8, 2013

DND to Nortel Campus being challenged

Interesting story about MPP Phil McNeely challenging the DND move to Nortel Campus under the Official Languages Act. 

McNeely estimates about 6,000 people in Orléans are employed by DND, the Canadian Forces or the RCMP.

DND and the Canadian Forces have 42 office locations in Ottawa and Gatineau. The department is hoping the move of personnel to the sprawling former Nortel campus will reduce that number to seven or less.

Please click here to read the complete article

Thursday, April 4, 2013

Ottawa Real Estate Board - March numbers

Members of the Ottawa Real Estate Board sold 1,167 residential properties in March through the Board’s Multiple Listing Service® system, compared with 1,388 in March 2012, a decrease of 15.9 per cent.
“The Ottawa market has been described as steady and stable for the past few years. It’s not going up drastically, and it’s not going down drastically,” says Tim Lee, President of the Ottawa Real Estate Board. “The market was forecasted to slow down in 2013 as a result of recent mortgage changes, and indeed it has.”
“According to chief economists at the Canadian Real Estate Association (CREA) and intelligence garnered from large mortgage lenders, large mortgage brokers, and large real estate brokers, the most recent changes to mortgage rules and guidelines has largely impacted first-time buyers by forcing them to focus on more affordably priced homes. They were, to a much lesser extent, priced out of the market,” explains Mr. Lee. “When the changes were first announced, those who were actively shopping had to re-evaluate how much home they could afford to finance. Another factor for the slow-down of the Ottawa market could be the role of public service employment cuts in the local economy. ”
March’s sales included 253 in the condominium property class, and 914 in the residential property class. The condominium property class includes any property, regardless of style (i.e. detached, semi-detached, apartment, stacked etc.), which is registered as a condominium, as well as properties which are co-operatives, life leases and timeshares. The residential property class includes all other residential properties.
The average sale price of residential properties, including condominiums, sold in March in the Ottawa area was $358,102, an increase of one per cent over March 2012. The average sale price for a condominium-class property was $267,604, a decrease of 4.1 per cent over March 2012. The average sale price of a residential-class property was $386,197, an increase of 2.7 per cent over March 2012.

The Board cautions that average sale price information can be useful in establishing trends over time but should not be used as an indicator that specific properties have increased or decreased in value. The average sale price is calculated based on the total dollar volume of all properties sold.  Source: Ottawa Real Estate Board



Relevant?

“I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful.”


-Warren Buffet

Wednesday, April 3, 2013

Is Canada’s Debt Mountain Really That High? by Don Curran

Everyone knows about the enormous mountain of debt piled on the shoulders of Canada’s over-leveraged households. But exactly how high is that mountain?


One frequently cited measure, the ratio of credit-market debt to disposable income, from Statistics Canada, reached a record high of almost 165% in the fourth quarter. That makes household borrowing look like Mt. Everest–particularly when compared to the dwindling debt of the retrenching U.S.

Other measures make it look more manageable, but still daunting–more like a peak in the Canadian Rockies rather than the Himalayas.

Take economists at the Royal Bank of Canada: They recently did a “snapshot” of household finances, which suggests household debt in Canada is sustainable, and likely to remain so.

“The debt to income measure, which people tend to focus on, we don’t necessarily view as the best gauge of overall household financial position,” said David Onyett-Jeffries, an economist at RBC. It’s best to use a number of metrics, he said.

In comparing the situation in Canada with that in the U.S., it’s important to compare apples to apples. Modifying StatsCan’s data to make it more comparable with that of the U.S., the credit market debt to income ratio for Canada comes in at 153.9%, RBC found.

That’s higher than the 138.7% reading for the U.S., but well below the 164.6% recorded by the U.S. just before the financial crisis.

Growth in household borrowing is slowing, RBC says, and will continue to do so in the absence of some major, unexpected shock.

While debt-to-income ratios have hit record highs, net worth to disposable income has as well, reaching a record high at 639% from roughly 550% in 2000.

Debt-service costs are low by historical standards, and likely to remain so, Mr. Onyett-Jeffries said.

The fact housesholds are coping with current debt-servicing costs is reflected in low mortgage delinquencies, which were at 0.3% of all mortgages in the fourth quarter, compared to 3.0% on the U.S.

It’s also apparent in low credit card delinquencies, with Canada at 0.9% of total outstanding credit card debt, and the U.S. at a markedly higher 10.6%.

Interesting read - click here