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Builders are Flat Out Busy!

According to a report released by Canada Mortgage and Housing Corporation (CMHC) on February 8th, the number of January starts – 100 units – is down from 175 starts last January.

CMHC Stats

However, 2017 was a near-record year with close to 4000 units started. That’s nearly double what the Capital Regional District normally sees – on average 2000 – 2200. Builders in the Greater Victoria region started 2,966 multi-family units and 896 single-family homes last year for a total of 3862 new homes. This number beats every other year except 1976 when the region saw 4439 starts.

 

Lack of Inventory Driving Home Prices

Real estate prices have risen a good deal in the last year, driven by the lack of inventory which was at a record low in January.

There was a total of 1,491 active listings for sale on the Victoria Real Estate Board Multiple Listing Service® at the end of January 2018, 1.6 percent fewer than the 1,516 active listings for sale at the end of January 2017.

The lack of inventory in our market is maintaining pressure on pricing, especially as high demand continues in many areas of Victoria.

The Multiple Listing Service® Home Price Index benchmark value for a single-family home in the Victoria Core in January 2018 was $831,900, a 9.3 percent increase from January 2017.


HPI benchmark value for a condominium in the Victoria area in January 2018 was $450,600, a 20.1 percent increase from January 2017.

 

Welcome News for the Burnside Area

An 88-unit development geared to moderate-income families is in the works for the grounds of the former Burnside Elementary School, thanks to the collaboration of the Greater Victoria school district, the City of Victoria, and the Pacifica Housing Society.

Victoria Mayor Lisa Helps said the plan for Burnside is among the most exciting projects to come up during her time in office.


“It’s the beginning of a village centre, it’s new childcare spaces which are desperately needed, community space,” she said. “It doesn’t get much better than this. “It’s one of those projects everyone should be jumping for joy about, and I certainly am.” Read the full article.

 

Brisk December Sales and Looking Forward into 2018

December real estate sales were brisk and quick, capping off a very busy 2017!

We saw 462 properties sold in the Victoria Real Estate Board region, only 1.9 percent fewer than December in the record-breaking year of 2016.

Several factors were working together to increase the number of sales in December.

A continuing low inventory of properties for sale: Buyers faced competitive situations in high demand areas, and multiple offers were still common. We had only 1,384 active listing in December - the lowest level of inventory in the area for this month since the Real Estate Board started tracking stats in 1996.

As well, the changes to mortgage qualifying rules, especially the mortgage stress test which was to come into effect on January 1st, 2018 (and did) pushed people into the market earlier than they originally planned.

The Multiple Listing Service® Home Price Index benchmark value for a single-family home in the Victoria Core in December 2017 was $823,800 – an increase of 9.3 percent over December 2016. Benchmark values for townhouses came in at $572,858, and benchmark values for condominiums were $449,460. These types of homes saw an increase over last year of 8.0 percent and 16.3 percent respectively.

What can we look forward to in 2018? No one can ever say for certain, but I'll quote Victoria Real Estate Board President Ara Balabanian.

"Moving forward, we expect to see more inventory come into the market, which will continue to move us toward a more balanced state," says Balabanian. "We also expect housing prices to remain stable, without the increases we tracked in 2016, and anticipate steady slow growth.”

A grand total of 8,944 properties sold over the course of 2017, 15.8 percent fewer than the record-breaking 10,622 that sold in 2016. 2017 sales came in at 21.7 percent over the ten-year average of 7,349 properties sold.

I trust you’ll find this information interesting. As always, I’m here to take care of your real estate needs.

 

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 1st. 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 percent 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 percent 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. 

 

Tips for First Time Home Buyers

Much like owning your first car, buying your first home brings you a whole lot of freedom, but it can also bring you a whole lot of emotional stress.

Many first-time home buyers quickly tire of the home buying grind and they end up settling too quickly before they find out what is possible. It gets really difficult to be patient when the search stretches into weeks or even months – especially after your bank or mortgage broker has given you the green light – but patience and diligence will reward you in the end.

If you see what you like right away, don’t immediately succumb to that “it’s meant to be” feeling. Even in current market conditions of high demand and low inventory, it’s almost always better to take your time for a thorough look rather than make an impulsive purchase only to find your property’s downsides later on. Finding a place to live isn’t hard; finding a home requires patience, diligence, research, and, yes, a bit of frustration along the way.

Financial Readiness:

Run a personal credit check. You can request a free report by mail from Equifax Canada and TransUnion – the two consumer credit reporting agencies. Details on how to go about it HERE. https://www.ic.gc.ca/eic/site/oca-bc.nsf/eng/ca02197.html

Be sure you really know your budget, what you have for your down payment and where it’s coming from. Rising real estate prices are making it difficult to scrape together a down payment.

Canada Home Buyer’s Plan:

Did you know Canada’s Home Buyer’s Plan allows a first-time purchaser a one-time chance to withdraw up to $25,000 from their RRSPs? If you are a couple, that gives you access to $50,000 with the condition that you repay it within 15 years’ time.

Make your registered retirement savings plan contribution more than 90 days before the withdrawal, or it may affect your down payment. Make sure you also fill out for T1036, Home Buyers Plan Request to withdraw from your RRSP account.

Repayments are due in the second year following the year you made the withdrawal. If you make a withdrawal this year, your first payment of generally one-fifteenth of the loan will be due in 2019 and then every year following until it has been repaid. If you don’t make a repayment in any given year, that amount is deemed income and you pay additional taxes.

An interesting fact that many homebuyers may not realize is if it has been more than four years since you or your spouse sold your first house, you can still qualify as a first-time home buyer, and capitalize on all the benefits.

Mortgage Insurance:

You can pay as little as 5 percent down if you pay for mortgage insurance through CMHC, however, that will add another 4 percent to your mortgage if your down payment is under 10 percent or 3.1 percent if your down payment is between 10 and 15 percent.

If you want to avoid CMHC mortgage insurance all together, you will need 20 percent down. If you buy a Triple Crown condominium at the current starting price of $324,000, a 20 percent down payment would be $64,800 (minus the $10,000 purchase option you would already have paid which gets converted into part of your down payment).

More information HERE. https://www.cmhc-schl.gc.ca/en/co/moloin/moloin_002.cfm

G.S.T. New Housing Rebate

The full rebate is available for new homes priced up to $350,000, then on a sliding scale until the rebate diminishes to zero at $450,000. Assuming the purchase price of you new home is $350,000 (excluding G.S.T.) The gross G.S.T. would be 5 percent of $350,000, which is $17,500. The G.S.T. New Housing Rebate is 36% of $17,500, which is $6,300. Thus, the applicable G.S.T. is $17,500 less $6,300, which equals $11,200.

More information HERE. http://www.thetownhouseguy.ca/confused-about-how-gst-works-on-your-real-estate-purchase

If you’re buying your first home in Victoria, I’ll be happy to serve as your guide to purchasing your first home.

 

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 homeowners 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.

 

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.