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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.


Price of Single Detached Home in Greater Victoria for September 2017

In September the average price (or the mean) of a single detached home in Greater Victoria was $884,196. The median price was $795,000. Do you know the difference between mean and mode?

Here's a quick definition: We find the average by adding up all the homes sold and dividing by the number sold. We find the median by listing out all the homes sold and picking the price in the exact middle of all the listed numbers.

As you can see from this graph, either median OR mode can be higher.


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)

Home Equity Line of Credit
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.


Just to Say "Thank You"

As the summer rolls into fall, I want to take the time to thank all my wonderful clients whom I’ve had the privilege of serving. Helping you find a home you love or helping you sell the place you’re saying goodbye to is what motivates me every day.

It’s a privilege to say all my clients have become friends, and I’m always interested to hear about latest happenings in your life over a cup of coffee.

Finally, thank you to my clients who expressed their gratitude for what I get to do. It’s humbling and gratifying at the same time.

“The peace of mind that Jane gave to us was one that is borne out of genuineness, caring and support; simply stated, we felt like we were treated like family.”

Meagan and Dennis Oliphant


DIY Home Staging Strategies

As you prepare to sell your home, are you thinking about how to stage it to ensure it is universally desirable to your prospective buyers?

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 I understand if you are a reluctant or a bit suspicious of the hoodoo of home staging.

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. Please do not fool yourself with the notion that your beloved home will sell itself, or try to model your home’s “personality”. I’m being tongue-in-cheek, but that high-resolution image of your regiment of garden gnomes should never be included in your listing!

Corral the clutter

The coveted rock 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 moved 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.


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!


Short-Term Predictions for Canada's Real Estate and Household Debt

Last week, the Bank of Canada reviewed the financial system and downplayed fears that the Canadian economy was in serious jeopardy from a potential real estate market correction.

About time!

We are NOT going to suffer a U.S.-style melt-down. If a big drop in home prices were to occur in the Vancouver and Toronto regions, (which Is unlikely), it wouldn't drag the rest of the country down with it. As the Bank of Canada sees it, a full-on bust in the Toronto and Vancouver regions would have only “modest direct spillovers to housing markets in the rest of the country.”

Most experts do not see anything like a full bust coming, albeit sensationalist reporting from, for example, CTV News quoting David Mandani, senior Canadian economist of Capital Economics on Monday continues to scare homeowners who haven’t done their research.

Read more HERE


Garden Suites, Carriage Houses or Laneway Houses in Victoria

“Build it and they will come. Well we have a reverse problem: they have come, but we haven’t built it.” - Victoria Mayor Lisa Helps, April 13.

If you live in Victoria and you want to build a garden suite, carriage house or laneway house, good news! Garden suites will be permitted in all of Victoria’s single-family residential areas, and you no longer need to undergo a rezoning. All the existing requirements for size, setbacks and height will remain in place, but in order to streamline the process, you do not have to notify your neighbours (though it might be a good idea for the sake of neighbourly relations), and no rezoning triggered public hearing.

What this decision by City Council will do is increase options for renters who currently face an extremely low vacancy rate currently below half a percent, and homeowners will appreciate the chance for rental income. It you’re planning on selling your home, creating a garden suite will maximize your home’s sale value, and make it more attractive for buyers who may need a mortgage helper.


Spring 2017 Newsletter


The 2016 census recorded a population of 367,770 in metropolitan Victoria, an increase of 6.7% over 2011.  Most of the population, 235,689 (64%), reside in the Core Communities, followed by the West Shore with 82,543 (22%) and the Peninsula with 39,735 (11%).  The West Shore led in population growth at nearly +13%, largely attributed to growth in Langford at +21%.  The Core Communities grew by +5.2%, led by Esquimalt at +9%.  The Peninsula grew by some +4%, led by Central Saanich at +5.5%. 2016 was a record-breaking year for the real estate market in Victoria. There were 10,098 residential sales through the Victoria Real Estate Board’s MLS® in 2016, nearly double 5,492 sales in 2011.  Similarly, the dollar value of sales more than doubled in the same period, from $2.73 billion in 2011 to $5.98 billion in 2016.  The average sale price increased by $95,370 over this five-year period, up some +19.2%. 

Residential sales in the Core Communities reached 5,773 in 2016, an increase of +72% from 3,351 in 2011.  Over the same period, the total value of residential sales increased +109% and the average sale price rose to $632,482, an increase +21% over 2011.  Clearly, many buyers are willing and able to pay for more expensive housing to enjoy the convenience and the amenities available in the core area of Greater Victoria.  The proportion of sales in the Core Communities fell by -3.0%, from 64% in 2011 to 61% in 2016. There were 1,124 residential sales on the Peninsula in 2016, up from 715 in 2011, an increase of +57%.  The value of residential sales increased +104% and the average sales price reached $686,970, an increase of +30% over 2011.  The average sale price reflects the impact of the number of waterfront and estate type properties on the Peninsula. The proportion of sales on the Peninsula fell -2.0%, from 13% in 2011 to 11% in 2016.  The West Shore has experienced the most rapid growth in real estate sales in the region.  Residential sales reached 3,201 in 2016, up +125% from 1,426 in 2011.  The total dollar value of residential sales rose +159% over the five-year period.  The average sales price reached $487,307, an increase of +15%, which is modest when compared to other areas.  The West Shore still offers the most affordable housing in the region and is the preferred choice of many first-time home buyers.  At the same time, the proportion of sales in the West Shore increased +6.0% from 26% in 2011 to 32% in 2016.


Perhaps the predominant characteristic of Victoria’s real estate market in the 1st Qtr of 2017 is the shortage of supply and the accompanying upward pressure on prices.  Supply (i.e., the number of homes put up for sale) has not been this low in more than twenty-five years.  Demand (i.e., the number of sales) remains high, indeed many argue that sales would have been substantially higher had there been more properties available to purchase.  Sale prices continue to increase.  The differential between the sale price and the original list price has decreased. Indeed, most homes sold at or above their list price. Finally, properties are spending less time on the market.  The number of “residential properties” (i.e., all types of housing excluding lots/acreage and commercial properties) listed through the Victoria Real Estate Board’s MLS® in the 1st Qtr of 2017 was 2,453, down -26.0% from 3,316 in the 1st Qtr of 2016. Residential sales through the VREB’s MLS® totaled 1,955 in the 1st Qtr of 2017, down -14.6% from 2,289 in the 1st Qtr of 2016, but still up +26.5% from 1,546 sales in the 1st Qtr of 2015.  The sales-to-new-listings ratio was .80 (a remarkable figure for this time of year) even stronger than .69 last year.  Properties that sold in the 1st Qtr of 2017 were on the market for an average of 32 days compared to 49 days last year.  The average sale price of a residential property in Greater Victoria and other areas was $628,293 in the 1st Qtr of 2017, up +13.5% from $553,417 in the 1st Qtr of 2016.  The median sale price was $535,000 in the 1st Qtr of 2017, up +9.2% from $489,900 last year.  The figures for Victoria compare with average residential sale prices and year-to-date percentage changes of $950,185 (13.3%) in Vancouver, $624,704 (-8.4%) in the Fraser Valley, $834,628 (+25.6%) in Toronto and $459,337 (+2.6%) in Calgary for the first two months of 2017. THE MARKET INVENTORY As shown in Table 2, there were 981 properties active on the VREB’s MLS® database for the Greater Victoria area (i.e., excluding the Malahat, Up-Island and the Gulf Islands) on Apr 1, 2017, down -43% from 1,712 on Apr 1, 2016.  (This is the lowest the inventory has been on an April 1st in over two decades).


Sales of SFDs in Greater Victoria totaled 937 in the 1st Qtr of 2017, down -23.4% from 1,223 sales during the same period last year.  The average sale price of SFDs in the 1st Qtr of 2017 was $839,019, up +17.9% from $711,555 last year.  The median sale price was $734,000 in the 1st Qtr of 2017, up 17.9% from $622,500 last year.  SFDs that sold in the 1st Qtr of 2017 were on the market for an average of 29 days, down from 35 days a year ago.  The sales-to-new-listings ratio was .74 in the 1st Qtr of 2017, up from .50 last year.  As shown in Chart 4, both the average and median sale prices have been on a steep upward trend since the 4th Qtr of 2014.


Condominium sales remained strong in the 1st Qtr of 2017 with total sales of 668, up +6.2% from 629 in the 1st Qtr of 2016.  The average sale price for a condominium was $393,852 in the 1st Qtr of 2017, up +17.8% from $334,235 last year.  The median sale price was $350,000, compared to $290,000 last year.  Condos that sold in the 1st Qtr were on the market for an average of 21 days, down significantly from 56 days last year.  The sales-to-new-listings ratio was .78 in the 1st Qtr of 2017, up from .76 last year.  As shown in Chart 5, the average and median sale prices of condominiums recently have shown a steady upward trend.


Townhouse sales totaled 180 in the 1st Qtr of 2017, down -27.4% from 248 last year.  The average selling price was $507,315 in the 1st Qtr of 2017, up +11.5% from $454,841 in the 1st Qtr of 2016.  The median sale price was $471,450, up +10.5% from $426,500 last year.  Townhouses that sold in the 1st Qtr of 2017 were on the market for an average of 26 days, down from 48 days last year.  The sales-to-new-listings ratio was .80, compared to .53 last year.  As shown in Chart 6, average and median sale prices have shown a steady upward trend over the past two years.


There were 57 sales in the 1st Qtr of 2017 compared to 66 sales in the 1st Qtr of 2016, 34 sales in the 1st Qtr of 2015 and 24 in the 1st Qtr of 2014.  The average and median sale prices of lots/acreage in the 1st Qtr of 2017 were $333,372 and $216,000 respectively.  (Note: the clear majority of these sales were in Sooke where land is comparatively less expensive). 


Summary of the CDN home sales activity across Canada till the end of March

Information provided by Sean Dhillon - Manager, Mortgage Specialist, Vancouver Island, TD Canada Trust

Overall as rates continue to decline, and they have dropped quite a bit in the past month, then the high home sales activity will continue in 2017.

Data Release: Canadian homebuyers brave the colder weather in March

· Neither higher mortgage rates nor colder-than-normal weather managed to slow the Canadian housing market in March. Canadian existing home sales rose 1.8% m/m in March or 6.6% from a year ago, and were at their highest level on record.

· Listings rose by more than sales (2.5% m/m), bringing the sales-to-listings ratio down a touch to 67.4%, from 68.3% in the prior month. However, the housing market remained well entrenched in seller's territory and upward pressure on home prices remained strong. The average sales price rose 8.2% year-over-year to reach $549,000, while home prices on a quality adjusted basis were up by 18.6% from last year – the fastest annual gain since the index was constructed in 2005. The speed of apartment prices (+16.3% y/y) is quickly catching up to that of single-family detached homes (+19.6%).

· The Greater Toronto Area (GTA) remained one of the hottest markets across the country, with home price growth topping 32% y/y on an average basis and 29% y/y on a quality adjusted basis. But, demand seems to be moving further out of the city center and into what were once more affordable markets. Sales were up just 0.4% in the GTA in March, but 2.6% across the rest of Ontario. Average home prices were up by over 30% in almost half of the markets in Ontario.

· Elsewhere, market activity was more subdued with the MLS composite home price index up moderately in Regina (+1.7%), Ottawa (+4.0%), Montreal (+3.3%) and Moncton (+4.7%), but still down in Calgary (- 1.2%) and Saskatoon (-1.5%) on a year-over-year basis. Meanwhile, home prices in Vancouver (+12.8% y/y) have retraced half of the loses experienced since August 2016 on a quality adjusted basis. However, the pick-up in prices in Vancouver is more of a reflection of tight market conditions, with listings tumbling to near-record low levels in recent months. Existing home sales were still down 37% from year ago levels in March. Key Implications · All eyes appear focused on the Ontario housing market as prices continue to race ahead of underlying economic fundamentals, such as population and household incomes. The speed at which home prices are rising have become a cause for concern with unsustainable home price growth at least in part attributed to speculative activity.

· The key question is however, "what will stop it?". As we look into the rest of 2017, the economic drivers are supportive of a continued acceleration in housing activity. The economy appears to be on a better footing, while interest rates have come down in the last month from their post-U.S. election peaks. The best available 5-year fixed mortgage rate is down 10 basis points from a month ago. Should the lower rates persist, home price growth could top 25% this year in Ontario, putting the onus on policy makers to take some action which could come as early as Ontario’s Budget Plan 2017, scheduled to be tabled on April 27th.

· As for the rest of the country, low interest rates will help offset the impact of relatively modest economic conditions and past changes to mortgage insurance qualification guidelines through most of 2017. Having said that, housing activity is likely to hold up given it’s more sustainable pace than that in Ontario as of late.

Sean Dhillon, Senior Manager, Mobile Mortgages TD Bank 250-818-1943