Seeking Tax Fairness for Homebuyers

Because housing affordability directly impacts the quality of life of British Columbians, BCREA consistently and regularly recommends that the provincial government minimize the negative impact of the Property Transfer Tax (PTT). That’s why BCREA will put the following recommendations forward during the annual provincial budget consultation process, conducted by the Select Standing Committee on Finance and Government Services.

BCREA recommends the provincial government:

• index the 1% PTT threshold of $525,000 using Statistics Canada's New Housing Price Index, and make adjustments annually, and
• increase the 1% PTT threshold from $200,000 to $525,000, with 2% applying to the remainder of the fair market value.

The PTT has always been applied in the following way: 1% on the first $200,000 of the fair market value of a property, and 2% on the remainder.

Despite the dynamic nature of the housing market, the structure of the PTT has not changed since its introduction in 1987, when it was described as a “wealth tax.” At that time, the average home price was $101,916, and the 2% portion of the tax was expected to apply to only 5% of sales. In 2012, the 2% portion applied to more than 85% of homes sold in the province.

The PTT places an unfair burden on homebuyers, and is by far the highest provincial property transfer tax in the country. While BCREA understands the government’s objective to balance the budget, adjusting the PTT may well stimulate additional activity in the real estate market, encourage spending related to property transactions and would certainly demonstrate an understanding of the important role of real estate and property owners in the provincial economy.

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Housing Market Picking Up Steam: BCREA 2013 Third Quarter Housing Forecast Update

The British Columbia Real Estate Association (BCREA) released its 2013 Third Quarter Housing Forecast Update today.

BC Multiple Listing Service® (MLS®) residential sales are forecast to increase 3.9 per cent to 70,300 units this year, before increasing a further 6.1 per cent to 74,600 units in 2014. The five-year average is 74,600 unit sales, while the ten-year average is 86,800 unit sales. A record 106,300 MLS® residential sales were recorded in 2005.

"After a marked pull back of consumer demand in 2012, the housing market is now transitioning to more elevated home buying activity,” said Cameron Muir, BCREA Chief Economist. “However, the effect of sluggish employment growth this year is expected to spill over into 2014, limiting housing demand to a 6 per cent increase, with total home sales matching the 5 year average."  

"The average MLS® residential price in the province has been revised from remaining unchanged to increasing 3.3 per cent to $531,700 this year. A stronger than expected decline in the inventory of homes for sale has created balanced market conditions in the Lower Mainland, causing home prices to align more closely with overall consumer price inflation,” added Muir. The average MLS® residential price in BC is forecast to increase 2.2 per cent to 543,400 in 2014.

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Canadian Retail Sales

Canadian retail sales declined 0.6 per cent in June on a monthly basis but were 3.1 per cent higher year-over-year. Year-to-date, retail sales have grown 1.8 per cent compared to the first six months of 2012. Retail sales in June were dragged lower by a major labour strike in Quebec where sales fell 1.3 per cent and flooding in Alberta which trimmed sales by 0.6 per cent. Given today's data release, second quarter GDP growth is still tracking in a range of 1 to 1.5 per cent.

Retail sales in BC posted their strongest month since March, growing 1.3 per cent from May and 2.7 per cent year-over-year. However, for the first six months of the year, sales have grown just 0.3 per cent.  

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BCREA Housing Market Update (August 2013)

BC Real Estate Association (BCREA) Chief Economist Cameron Muir discusses the July 2013 statistics.

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Market Forecast Update

Overview

1.       Housing starts are forecast to total 27,100 units in 2013 and 28,600 units in 2014.

2.       Existing MLS®2 home sales in 2013 are expected to reach 70,100 units, up from 67,637 sales in 2012.

3.       In 2014, resale transactions will increase further to 77,000 sales, remaining below the ten-year average.

4.       Existing home prices are forecast to edge higher, increasing to $518,300 in 2013 from $514,836 last year and $523,200 in 2014.

Economic Outlook

British Columbia’s economy is forecast to expand 1.9 per cent in 2013 and 2.5 per cent in 2014, slightly ahead of the national average. Modest growth in consumer spending and business investment are expected to contribute to economic growth. Population and employment growth are forecast to help increase consumer spending, while a weaker Canadian dollar and increasing demand from the U.S. is expected to boost provincial exports. Growth in exports will support business investment.

British Columbia’s labour market conditions are forecast to improve in 2014 with employment growth increasing to 1.5 per cent next year from 0.4 per cent in 2013. This year’s shift to higher levels of full-time employment will carry over into 2014. An increase in full-time employment will support wage growth and homeownership demand.

Demographic trends support a rising level of housing demand in the province. Migration from other countries, partly offset by people moving to other provinces, is expected to add 38,000 people this year and 41,300 people next year. As well, population projections by age group indicate a larger number of people in the 25 to 44 year age range, which has traditionally contributed to first-time homebuyer demand.  Population growth in this age range is projected to increase from 1.1 per cent in 2012 to 1.8 per cent by 2017, up from less than one per cent per annum during the previous five year period. The resulting growth in population, combined with stronger employment growth, will push housing sales and starts higher next year.

Housing Market Outlook

Single-detached starts are projected to rise to 9,000 units in 2013 and 9,900 units in 2014. Growth in demand for new single detached homes will shift from urban to rural BC in 2014, reflecting both lower land costs and rising resource sector employment.

British Columbia’s multiple-family starts will ease slightly to 18,100 units in 2013, due to rising inventories and increased competition from a well-supplied resale market for condominium apartments. Multiple family starts are forecast to edge higher, increasing to 18,700 units in 2014 as demand strengthens and inventories of new completed and unoccupied units are drawn lower. Multiple-family construction in the province has been supported by low vacancy rates in the rental sector and demand from buyers seeking less costly and lower maintenance alternatives to single-detached housing. Expect smaller phased projects to continue to get underway in housing markets outside of Vancouver, with an increase in larger multiple-family projects starting construction in Vancouver, including several intended for the rental market.

MLS® sales are forecast to increase to 70,100 in 2013 and 77,000 in 2014. Demand will be broad-based, fueled by rising employment, coupled with low interest rates, ample supply and stable prices.

Expect rising new listings in line with stronger existing home sales to keep price growth in check this year and next. The average residential MLS® price in British Columbia is forecast to edge higher, with projected increases below the pace of consumer price inflation. The average price is forecast at $518,300 in 2013 and $523,200 in 2014.

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Canadian Manufacturing Sales

Canadian manufacturing sales declined 0.5 per cent in June, the fourth decrease in the past six months. Weaker sales were recorded across the manufacturing sector as 16 of 21 manufacturing subsectors saw sales decline. 

In BC, manufacturing sales fell 4.5 per cent as sales were pushed lower by an 11 per cent decline in BC wood products, the second decline in that sector in the past two months following a remarkably strong start to the year. However, in spite of recent weakness, wood product sales remain 35 per cent higher through the first half of 2013 compared to the first half of 2012. Overall manufacturing sales in BC are 2 per cent higher through the first 6 months of the year. 

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1905 Creek Street

Exceptional value for this 4 bed, 3 bath home.  New roof in 2012, this home is loaded with style and provides lots of comfort all at an affordable price.  The backyard is an extension of the open concept floor plan which flows easily from room to room.  A private deck off of the master bedroom is your personal oasis where you can unwind at the end of a busy day. Your family will take pleasure in the relaxed atmosphere this home creates.  The main floor has 3 bedrooms and 2 bathrooms.  The lower level easily converts into a 1 bedroom, 1 bath In-law suite.  Bamboo floors, clean lines and contemporary style are some of the features that at this price make this home incomparable. A great location that feels rural yet is in the city limits and close to Lions Park.  Other features include mountain views from the living room and a fenced backyard.  Don’t be fooled by the driveway, this home is a must see at this price.  Call your Robert @ 250-354-8500 today to arrange a showing.   MLS# 2392535

$384,900

Canadian Manufacturing Sales

Canadian manufacturing sales declined 0.5 per cent in June, the fourth decrease in the past six months. Weaker sales were recorded across the manufacturing sector as 16 of 21 manufacturing sub-sectors saw sales decline. 

In BC, manufacturing sales fell 4.5 per cent as sales were pushed lower by an 11 per cent decline in BC wood products, the second decline in that sector in the past two months following a remarkably strong start to the year. However, in spite of recent weakness, wood product sales remain 35 per cent higher through the first half of 2013 compared to the first half of 2012. Overall manufacturing sales in BC are 2 per cent higher through the first 6 months of the year. 

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July Home Sales Highest Since 2007

The British Columbia Real Estate Association (BCREA) reports that a total of 7,650 residential sales were recorded by the Multiple Listing Service® (MLS®) in BC for July, up 18 per cent from July of 2012. Total sales dollar volume was 32.8 per cent higher than a year ago at $4.09 billion. The average MLS® residential price in the province was $534,360, up 12.5 per cent from July 2012.

"Home sales in the province posted their strongest July since 2007,” said Cameron Muir, BCREA Chief Economist. “After six consecutive months of rising consumer demand, it’s now clear that BC housing markets are recovering from tighter lending regulations introduced last year,” added Muir.

"Rising home sales are unlikely to put any significant upward pressure on home prices,” cautioned Muir, “as the inventory of homes for sale is expected to keep pace with demand.” Many potential home sellers that have been holding off for improved market conditions are expected to put their homes on the market to meet the swelling ranks of home buyers.

Year-to-date, BC residential sales dollar volume was down 2.8 per cent to $22.9 billion, compared to the same period last year. Residential unit sales were down 4 per cent to 42,986 units, while the average MLS® residential price was up 1.3 per cent at $531,928.

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2693 Shoreacres

MLS # 2392215

$499,900

Here is a home that must be at the top of your list. Privately positioned on a prime 4.24 acre parcel overlooking green pasture with the Kootenay River in the not too distant view. As attractive as this home is from the exterior, the inside is instantly appealing and inviting. It offers a generous foyer leading to a spacious living room with a fireplace and vaulted ceilings. The kitchen is modern and is open to the dining room and an adjoining family room. Hardwood flooring and tile throughout the main. 1 bdrm and den on main and 3 more bdrms up. A covered deck wraps around 3 sides and makes warm weather living a pleasure. The barn doubles as a workshop. The property is fully fenced and currently operates as a market garden selling organic raspberries, blueberries and blackberries.  Just 20 mins from Nelson or 15 minutes to Castlegar.

Call Robert at 250-354-8500

Canadian Employment and Housing Starts

Employment

Canadian employment dropped by 39,000 in July, pushing the national unemployment rate higher by 0.1 points to 7.2 per cent. Employment growth has averaged 11,000 per month over the past six months.

BC gave back the nearly 9,000 jobs gained in June as employment fell by 12,000 in July. The provincial unemployment rate rose 0.4 points to 6.7 per cent. In the twelve months to July, employment has grown just 0.1 per cent in BC. The decline in employment was led by a decline in part-time work of nearly 18,000 while full-time payrolls expanded by 6,100.


Housing Starts
Canadian housing starts were relatively unchanged in July at a seasonally adjusted annual rate (SAAR) of 192,853 units, but were 9 per cent lower than July 2012. Year-to-date, Canadian housing starts on trending at a rate of 187,400 units annually.

New home construction in BC urban centres built on momentum in June, rising 4.9 per cent to 30,832 SAAR. On a year-over-year basis, total starts were 28 per cent higher than July 2012. Single-detached starts fell 9 per cent last month compared to July 2012 while multiple units rose 47 per cent.

Looking at census metropolitan areas (CMA) in BC, total starts in the Vancouver CMA were 40 per cent higher compared to last year with multiple starts jumping 51 per cent while single-detached starts were up 2 per cent.  New home construction in the Abbotsford CMA fell 4 per cent in July as continued strong growth in multiples was offset by weaker single-detached starts.  Housing starts in the Victoria CMA were lower once again, falling 37 per cent compared with June 2012. Housing starts in the Kelowna CMA were up sharply in July, rising 48 per cent year-over-year as a result of a 244 per cent year-over-year increase in the construction of multiples. 

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Best Rate Mortgages from Dominion Lending Centre

Your home value for mortgage purposes

Whether you’re purchasing a home or looking to refinance, determining a property’s value is an essential step in the mortgage application process. You can help by providing precise and accurate information about your property.

The value of a property is determined by a number of different criteria, each of which can influence how much your home is currently worth. These criteria range from the square footage and the age of your home, to its location, construction quality, architectural features and even the number of bathrooms.

It’s important to remember that a property valuation is not a fixed or permanent number – it’s simply a snapshot of what your home is worth today, in relation to current market conditions and what other, similar properties are selling for. This value can change over time based on improvements to the property, as well as changes in your neighbourhood and the overall housing market.

Property valuation and mortgages

When applying for a mortgage, you’ll be asked a series of questions about your property. This information will help establish the property value – a critical element for determining the amount of your mortgage loan.

If you’re buying a home, your mortgage application will include the purchase price along with a detailed description of the property.

For refinancing, the lending value will be established after considering recent sales in your area, the latest municipal value assessment and any significant improvements you’ve made to the property. If you want to add the cost of any planned improvements to your mortgage application, be sure to provide all of your plans and cost estimates.

Professional appraisal

A professional appraisal may be required if a more in-depth assessment of the value of your property is needed.

This process includes a professional assessment of the property’s physical and functional characteristics, a detailed comparison of the home to recent comparable sales in nearby areas and an assessment of current market conditions affecting the property. It’s important to allow the appraiser access to the property in a timely manner, in order to minimize the time required to obtain financing.

From time to time, the property value assessment will not support the loan amount requested. Should this happen, we can explore all options available to you.

Preparing for rising mortgage rates

The interest rate party for borrowers is almost over. Following almost five years of historically low rates, we’ve started to see some upward movement in the cost of money.

Most people watch the central banks for indications that rates are about to take off. But that’s not where the real action is for fixed-rate mortgage holders. This actually takes place in the rarefied world of the bond market, where institutional traders like banks and pension plans operate. By the time the Bank of Canada gets around to acting, the bond market will have left it in the dust.

In order to save as much money as possible, a proactive approach is recommended when dealing with rising interest rates:

1. Budget for future plans. Many borrowers opt for the maximum mortgage for which they can qualify. The problem with this approach is that life happens. It’s important to plan ahead for future changes such as starting a family, maternity leave, relationship changes, health issues, career changes, and so on.
2. Ensure you would still qualify for your mortgage if rates continue to increase. For instance, if the five-year rate reached 5.2%, could you still afford the payment? We can sit down and run the numbers to ensure we build a buffer zone into your mortgage.

3. Use your prepayment options.This will enable you to increase your payment in relation to the increased rate. For instance, if you have a five-year fixed mortgage at 2.89% and rates increase to 3.49%, increase your monthly (or bi-weekly) payment to the equivalent. That way, you won’t experience “rate shock” when your mortgage is up for renewal. It’s important to remember that any extra payments you can make will go straight towards paying down your principal faster, which means you will be mortgage-free quicker!

It may be worth your while to take advantage of a free mortgage check-up before rates increase any further. This will help you determine if it makes sense, for instance, to renew your mortgage a few months early if this means being able to lock in to a new five-year term before rates increase even more.

With rates on the rise, it’s more important than ever to take advantage of mortgage brokering services, since we can shop different lenders and advise which ones not only have the best rates, but also which lenders have the best prepayment options and mortgage offerings to suit your individual needs.

As always, if you have questions about mortgage rates, or other mortgage-related questions, I’m here to help!

Canadian Building Permits

Canadian building permits fell 10.6 per cent in June to $6.6 billion, the first decline in the past six months. The decrease was mainly due to a decline in permitting activity for Ontario condos and the non-residential sector in Quebec.

BC building permits rose 10 per cent in June, helping to offset last month's 15 per cent decline. Residential building permits were flat, albeit down 0.1 per cent on a monthly basis and were 10 per cent lower year-over-year. Non-residential construction intentions jumped 36 on a monthly basis and were up 24 per cent year-over-year.

Permitting activity in BC's four major census metropolitan areas (CMA) was mixed. In the Vancouver CMA, permits rose 13 per cent on a monthly basis but were 2 per cent lower year-over-year. Construction intentions in the Victoria CMA were up sharply in June, rising 85 per cent on a monthly basis and 18 per cent year over year. in the Kelowna CMA, permits fell 16 per cent from May and were 14 per cent lower than June 2012. Finally, in the Abbotsford-Mission CMA, building permits declined 29 per cent month-over-month and 25.5 per cent year-over-year.

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Impact of Limits to CMHC MBS

Most Canadian mortgage lenders fund some portion of their mortgage lending using CMHC’s National Housing Act Mortgage Backed Securities (NHA MBS). That is, cash flows from mortgages are aggregated into investment securities and then sold to investors through a process called securitization. Payments from these mortgage backed securities are guaranteed by the CMHC, and therefore backed by the federal government,  which allows banks to fund their mortgage business more cheaply than would be possible through other sources of funds such as deposits or uninsured mortgage securitization.   

At the beginning of each year, the Department of Finance and the CMHC set out a maximum volume of mortgages that can be securitized through its NHA MBS. That number for 2013 was $85 billion. It is important to note that the limit on NHA MBS has not changed. However, by the end of July lenders had already issued $66 billion or 78% of this year’s MBS limit. To ensure that the 2013 MBS limit is not reached before the end of the year, and that access to the program is fairly allocated, the CMHC announced yesterday that it has capped each lenders MBS issuance for this month at $350 million until it can formalize a new process to allocate the remaining amount of the 2013 NHA MBS limit. That means that some lenders may need to fund new mortgage issuance through alternatives to NHA MBS and will therefore likely experience higher mortgage funding costs. These higher costs would likely be passed through to mortgage rates. Preliminary estimates put the potential impact on mortgage rates in a range of 20 to 65 basis points (0.25% to 0.65%). 

The market impact of an increase in mortgage rates in the short-term is uncertain. Preliminary modelling by TD Economics suggests that a 1 per cent increase in mortgage rates leads to an initial 6 per cent increase in sales as buyers rush to lock-in existing rate holds, but that those gains are reversed in subsequent months, leading to an ultimate 1% decline in sales. Therefore, the impact of a 20 to 65 basis point increase would, all else equal, likely lead to a minimal decline in overall sales activity.

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909 Vernon St

MLS # 2392195

Situated on a gorgeous tree lined street in Nelson, BC, this classic Victorian home is located in a popular residential area that is adjacent to the downtown core.  From this ideal location you are just a short walk to the theatres, shopping, restaurants and nightlife that the Queen City is known for.  This home has an open floor plan and features wood floors and updated bathrooms.  There is off street parking, a covered porch and loads of character.  The basement is unfinished but has potential to be more than it is. Quick possession is available.  This 3 bedroom home is a must see for those who would like to take advantage of an opportunity to be part of the culture and community that is Nelson.  

$309,900

Call Robert 250-354-8500 to arrange a showing

   

US Non-Farm Payroll

US employment growth continued its run of good but not great results in July with US firms adding 162,000 new jobs to payrolls, similar to the underlying trend growth of 150,000 to 175,000 jobs per month. The US unemployment rate fell 0.2 points to a four-year low of 7.4 per cent. On the negative side, total hours worked fell slightly and average earnings dipped. Overall, a fairly lacklustre jobs report that may delay any potential 'tapering' of bond purchases by the Federal Reserve, which should in-turn help to halt the rise in long-term interest rates. Indeed, the Canadian 5-year bond yield (the benchmark rate for mortgage rate setting) was off 6 basis points following today's US jobs report. 

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