November Greatest Number of Sales Since 1996!

November saw the greatest number of home sales in Victoria BC since 1996!

Is this a start of a new trend? Not according to Victoria Real Estate Board President Ara Balabanian. “The fact that we've had an unusual month does not necessarily mean that this is the start of a new trend. It is however, a good example of how outside forces can impact a housing market."

Balabanian suggests buyers have accelerated their purchase timelines in order to avoid the upcoming stress test on uninsured buyers coming into effect on January 1^st. The new stress test will now include those with a down payment of 20 percent or more. The test will require purchasers to prove they can make meet their commitment if interest rates rise above the five-year benchmark rate published by the Bank of Canada or 2 per cent higher than their contracted mortgage rate, whichever is higher.

"Judging by the sales we saw in November and what I have heard from our REALTOR® members, some buyers have indeed accelerated their purchasing plans to avoid the stress test,” says Balabanian. “This may change the numbers we see in the early months of 2018, as some buyers who had planned to buy next year have bought a bit earlier."

There were 1,764 active listings for sale on the Victoria Real Estate Board Multiple Listing Service® at the end of November 2017, a decrease of 7.4 per cent compared to the month of October and 2.8 per cent fewer than the 1,815 active listings for sale at the end of November 2016.

The Multiple Listing Service® Home Price Index benchmark value for a single-family home in the Victoria Core in November is now $824,600, which is slightly higher than October's value of $821,900. It is 10.2 percent higher than November last year when it was at $748,500. 

Home Partnership Program

The B.C. Government's Home Partnership program opened this year, which provides loans of up to $37,500 to help first-time homebuyers fund their down payment in Victoria’s pricey housing market.

This is a real boon from the provincial government for first-time home owners who want to get into the market! It’s a 25-year term mortgage with the upside that you are not charged any interest and you do not have to make any payments for five years!

You’ll need to plan for the five-year mark so you’re not caught off guard by extra payments, however, by the time you must start paying back the provincial loan, you will already have made 60 payments towards your primary loan’s principle. That increases the likelihood that you have built equity in your home.

Interestingly, studies show most first-time home buyers sell within seven years, at which time your primary mortgage and your government loan would be paid off.

There are a number of eligibility requirements. You need to be a Canadian citizen or permanent resident for five years, live in British Columbia, have a household income under $150,000 per year, be pre-approved for a high-ratio mortgage, be buying a home for less than $750,000 and intend it as your principal residence for five years.

Analyzing Housing Affordability in Canada and Around the World

In the news of late, there is a good deal of discussion about home affordability in cities around the world. Demographia International is a major contributor to this conversation with their Annual Housing Affordability Survey They use a simple way to determine affordability. They take the median price of a home in a city and divide it by the median income of a family in the city. The resulting number is the “Median Multiple”, or simply, the number of years of income it would take to pay a mortgage for the home.

It will come as no surprise Hong Kong homes are the least affordable in the world, and for good reason: A densely populated island with over seven million inhabitants packed into 1,106 square kilometers, it’s a major hub of world commerce, and mainland developers are driving up costs with their government’s blessing. Demographia International’s recent survey put the median home price at 18.1 times the gross annual median income. In other words, it will take a resident of Hong Kong 18 years to pay off a $900.000 home earning $50,000 a year…that means if every dollar of their income was used to pay the mortgage and they had absolutely no other expenses such as food, utilities, travel, shopping, commuting, and an occasional outing, it would take them 18 years to pay off their mortgage.

If you are interested in a more in-depth look at Hong Kong’s housing market, check out this excellent video CNBC put together.

The second least affordable city in the world was Sydney which scored an astonishingly out-of-reach multiple of 12.1 compared to the average family. There are plenty of reasons housing has become so unaffordable in Sydney, but it boils down to the booming economy and the serious shortage of housing inventory.

Home Affordability in Canada

Here in Canada, Vancouver currently leads the way (no surprise) with a median multiple of 11.8. Toronto started 2017 at 7.7 and Victoria at 8.1. Victoria’s median multiple of affordability is higher not because home prices are higher, rather, it is because Toronto’s median income, the divisor, is quite a bit higher than Victoria’s median income.

For greater perspective, the median multiple of financial hubs London and New York pale in comparison coming in at 8.5 and 5.9 respectively. Have a look at Demographia International’s 2017 Survey result. It’s quite interesting.

A more useful way to measure affordability in Canada is to look at homeownership as a percentage of monthly pre-tax income. According to the Canada Mortgage and Housing Corporation’s benchmark, housing is considered “affordable” when no more than 30% of pre-tax income is spent on homeownership expenses.

RBC recently came out with a report stating Canada’s housing affordability is at its worst in 27 years with the national average at 45.9%. This means many Canadians will spend nearly half of what they earn paying off their mortgage and household ownership related expenses, such as property tax.

Vancouver still tops the chart at 79.7% in the first quarter of 2017 even after the decrease since the third quarter of 2016 which saw it at an astonishing 92%. British Columbia’s 15% foreign buyer’s tax may have contributed to the decrease, but there’s still some disagreement about whether the government’s new tax made the difference, or if the market was simply due for a cool down.

The Greater Toronto Area (GTA) comes in second place at 72%, up 8.3 percentage points compared to the third quarter of 2016. Ontario’s new 16-point housing affordability plan implemented in April has inarguably cooled the market and single detached home prices took a precipitous drop of nearly 40 percent over the summer months. However, Condos and Townhomes continue to have a strong market appeal due mainly to the fact that they are now the most affordable option for the average family.

Montreal, Calgary, and Ottawa round out the top five on the list of most unaffordable homes at 43%, 39.6%, and 34.8%, respectively. Although these numbers are lower than Toronto and Vancouver, they’re still above the 30% affordability threshold.

The most affordable homes in the country are in Atlantic Canada. Saint John, N.B. leads the way at a mere 26% of pre-tax monthly income, or four percentage points below the affordability benchmark, followed by St. John’s, N.L. at 28.6%. While affordability in these cities has decreased slightly, they remain relatively stable compared to Toronto and Vancouver.

OSFI’s Recommended Changes Will Soon Impact How Much Home You Can Afford

If you’re an average-income family or first-time home buyer and you have been saving a larger down payment, contact me before the new stress test rules recommended by OSFI (Office of the Superintendent of Financial Institutions) come into effect.

Right now, homebuyers can go to an alternative or subprime lender, or even the "bank of mom and dad" to borrow money to boost their down payment to 20% or more to avoid the stress test. Proposed new regulations will close this loophole, and you will need to qualify based on the ability to make a much higher monthly payment based on the current five-year posted rate by the Bank of Canada (currently at 3.410 percent). That ultimately means you will not qualify for as large a loan, and you may not be able to purchase what you need or want after the stress test is in place.

If you’re planning to purchase your next home soon, give me a call to discuss attaining a long-term rate hold and other financial strategies to help you save money.

Frank Rudge

No Rentals to be Found

The rental vacancy rate in B.C. has hovered at an average of 1.3 per cent over the past three years, according to stats from the Canadian Mortgage and Housing Corporation.

In Victoria, the rate sat at only 0.5 per cent at the end of 2016.

In the Lower Mainland, the City of Vancouver’s rate is 0.8 per cent, while Surrey sits at 0.4 per cent. The rate is 0.5 in Abbotsford and Mission, and White Rock has the fewest available rentals in the region, at 0.1 per cent. Kelowna is sitting at 0.6 per cent.

If you have kids going to Royal Roads, Uvic or Camosun College, consider helping them buy a condo instead. A condo is a valuable family asset that will appreciate, and a good way to set your kids on a path towards building their own financial future rather than a landlord's.

Reviewing Home Equity Lines of Credit (HELOCs)

In recent years, home equity lines of credit — or HELOCs — have become popular for homeowners that want to turn their huge house price gains into cash.

In a HELOC, a lender allows a borrower to withdraw a certain amount of money against the equity in their home. The interest rates tend to vary between 0.5 and two points above prime, so they're a little more expensive than mortgages.

And they are extremely convenient. While people will do anything to make their monthly house payment and avoid default, HELOCs allow borrowers to simply make payments against the interest with no obligation to pay down the principal each month. Most people had no real intention to pay them off, and most felt safe about taking a loan in the face of rising home values. Almost 40 per cent of people who have them did not make regular payments against the principal. They owe the same amount on the principal as they did four or five years ago.

A generation ago, the common wisdom was to pay off your mortgage. Now people are using their homes like an ATM. That’s a big shift in financial thinking, and it may not serve them as well with the looming economic realities.

HELOCs are not a small share of the market either! Currently, there are over three million active HELOCs across Canada, with an average balance of about $70,000.

Statistics Canada 2011 reported 13,320,610 homes, meaning 23 per cent of homes are using HELOCs with an average balance of $70,000 per home. That’s 211 billion dollars in loans.

The downsides of HELOCs:

Before you consider taking one, be aware of three facts:

They can be called in at any time. They are "demand loans" which means, unlike a mortgage, the lender can call them in at any point and insist on paying back the full amount.

Most are set at variable rates and are in lockstep with central bank rate hikes. Your interest payments are going to increase.

Most have no limitations on how fast they can rise beyond that with no warning.

I'm not saying you shouldn’t get one. After all, lenders will be unlikely to call in those loans and start a panic. But, don’t let low monthly payments lull you into forgetting this is a loan, and the $211 billion in outstanding HELOC debt is a greater risk to the Canadian economy than mortgages ever were.

http://www.statcan.gc.ca/tables-tableaux/sum-som/l01/cst01/famil55c-eng.htm

http://www.cbc.ca/news/business/interest-rates-helocs-canada-debt-1.4192847

http://news.buzzbuzzhome.com/2016/12/canadians-mortgage-debt.html

Staging Your Home Yourself? DIY Tips

Human beings are wired to have an emotional response to physical surroundings. There is a lot to be said for the ancient Chinese philosophical system of Feng Shui which makes a study of arranging environments to create or reinforce harmony and comfort. Even colours have a measurable effect on psychology, leading to that moment a buyer walks into your home and says, “It feels just right”!

A professional stager can help you feature your home in a way that can add thousands of dollars to your asking price, but if you feel you can do a good job staging your home on your own, I recommend these five simple staging ideas:

Remember Personality Doesn’t Sell

This is almost always the biggest mistake home sellers make, so if nothing else in today’s blog makes an impression, please understand this: The personal touches you love in your home are all about you and may not be universally appreciated.

Corral the clutter

The coveted collection and family photos are distracting clutter that takes the buyers attention away from the flow of the rooms, and any interesting architectural features. For the cost of a roll of tape, boxes and possibly renting a small storage space, get your treasures pre-packed. Doing so will depersonalize the space and automatically increase the perceived dimensions of your home. Prepacking is also a simple step towards emotionally preparing for your inevitable move.

White it out

Are you prepared to paint? Fabulous! You can’t go wrong with white or bright neutral palate. Hotels are well known for using white to demonstrate how clean everything is.

A simple coat of white or neutral paint elevates the perceived value of the property and creates a “move-in-ready” feel that buyers are willing to pay top dollar for. White signifies clean, fresh, and new.

Light it up

Electricity isn’t free, but since you will be turning on the lights for photographs and showings anyway, I suggest you go the extra step by adding accent lights to really set the scene. It’s simple to place them strategically to add drama and to illuminate shadowy corners.

Completely retracting blinds or removing window coverings will let in as much as fifty percent more natural light.

A clear window will enhance the view, and create that sense of openness and space, so pack away any curtains or window-hangings, especially those dated ones, and let the window frame be the highlight.

Mow and Mulch

In addition to a freshly mowed lawn, mulch adds instant curb appeal. Mulch is inexpensive, comes in a variety of lovely shades and textures, and adds cultivated freshness to scraggly, dry, or unkempt garden beds. Ordered by the load or purchased in bags, mulch is lightweight and perfect for a DIY, last minute staging.

Conclusion

These five simple staging tasks will show off your home’s very best features, add both real and perceived value, and maximize returns for you!

Thinking of Purchasing a Condominium?

If you are working to get into the real estate market for the first time, or you want to downsize after your kids have left the nest, a condominium lifestyle can offer freedoms and opportunities beyond the single detached dwelling worth considering at any age. Here are six reasons:

Affordable Lifestyle

Living in a condominium is usually more affordable. It cost less to buy vs. a house, and your mortgage is typically lower. As of June, the benchmark average price of condos as per the Victoria Real Estate Board (VREB) is $416,281 That’s now less than half the benchmark average price of a single detached dwelling in Greater Victoria now pegged at $885,281. Selling your paid off family home to buy a condominium can provide you with a desirable nest egg in your retirement years. Or, if you’re just starting out, a condominium is certainly a less expensive way to get into the real estate market.

You Live in a Great Location

Condos are often built in densified areas of a city. That means entertainment, restaurants, and shopping are all close by, and you don’t usually need a car to get to your favourite event. If you’re a professional working in downtown Victoria, the time and money you will save walking to work from your condominium versus commuting from the home in your price range well outside of Victoria is certainly worth considering.

Peace of Mind

A condominium provides the additional security of a two-key system – one for the front door and one for your unit – which makes break and entry less likely. Your neighbours are a kind of built in block watch! It’s hard for a thief to remove large items from your home without being seen by someone.

Live Maintenance Free

Because you are living a maintenance-free lifestyle, you have more time to do what you enjoy doing. All those time-consuming tasks like cutting the lawn, weeding the gardens, and cleaning the gutters don’t exist when you live in a condominium. Instead, you contribute to a monthly fee that takes care of maintenance and repairs. Any large, future costs such as roof repairs or window replacements are usually less expensive in a condominium versus a house because everyone contributes to a contingency fund.

Enjoy More Freedom

When you want to travel, you don’t have to make your plan around house maintenance considerations. Someone else is doing it for you. All you might need to do is ask one of your trustworthy neighbours to water your plants while you’re gone, and you can come and go as you please.

Gain Instant Community

Condominium living offers great opportunities for a vibrant social life in a friendly, close-knit community. You’re going to meet at least one of your neighbours in the halls or by the mailbox every day. If you’re moving to Victoria from another city, being able to access a ready-made community

A condominium lifestyle might be the right choice for you for these and other reasons. If you’re thinking about purchasing a condo, I’d be pleased to guide you through all the factors you need to consider before making your decision and to help you find your perfect next home.