For years Canadian Real Estate has been the unstoppable engine propelling the economy forward. The little engine that could, along with the finance and insurance sector managed to contribute 23% of GDP in 2017. The resulting housing boom has inflated national home prices by 49.68% in just five years per the MLS home price index. However, recent data from the Canadian Real Estate Association suggests the party may be coming to an end. National home sales fell by 16.9% year over year in February. The decline marked a five year low in activity for the month of February and pushed sales 7% below the ten year average. “The drop off in sales activity following the record-breaking peak late last year confirms that many homebuyers moved purchase decisions forward late last year before tighter mortgage rules took effect in January,” said Gregory Klump, CREA’s Chief Economist. “Momentum for home sales activity going into the second quarter is also likely to weighed down by housing market uncertainty in British Columbia, where new housing polices were introduced toward the end of February.” Price growth appears to be tapering on a national level, despite new listings sinking 6.4% below the ten year average. The

Financial regulators continue to caution on the health of the Canadian financial system. Earlier this week, The BIS (Bank of international settlements) released their quarterly report citing Canada, along with Hong Kong & China are flashing early warning indicators of a potential banking crisis. Canada, whose economy grew last year at the fastest pace since 2011 was flagged thanks to its households’ maxed-out credit cards and record high household indebtedness. Several days later, Moody’s, one the largest credit rating agencies, also jumped on the bandwagon. Moody’s raised concerns over Canadian households stretching their debt to disposable income to 171%, adding “Almost half of outstanding mortgages will have an interest rate reset within the year, which will increase the strain on households’ debt-servicing capacity.” Fortunately, The Bank of Canada believes mortgage renewals would be “manageable for most.” Specifically, citing higher income, and more home equity at the time of renewal to be mitigating factors. Additionally, many borrowers that will renew in the next year, could be locking in lower rates than when they had secured a mortgage 5 years ago. However, Canadian households are already feeling the pinch following the Bank of Canada’s 2017 rate hikes. As of the fourth quarter of 2017

As British Columbians await the final details of the new policies aimed at cooling the property market and taxing speculators into oblivion, it’s clear the BC NDP Government is juggling a political hot potato. The BC NDP, which has been left to clean up the housing file after years of inaction from previous Government and a reluctance from the Bank of Canada to hike toxically low interest rates, are caught in the middle of a growing social divide that could get ugly. It’s now believed the 2% speculation tax which targets homeowners not paying income tax in BC would also capture BC income tax payers who own recreational or seasonal properties. For example, a British Columbian who owns two homes, a principal residence in Vancouver and a seasonal vacation home in Kelowna would receive a non-refundable income tax credit to offset the speculation tax. However, in many cases it appears the income tax credit would not be enough to offset the speculation tax. For instance, the speculation tax, which is calculated at 2% of the assessed value on a $1 million dollar recreational property would fetch $20,000 in taxes payable. A British Columbian with an income of $100,000 a year

After a surprising 4% GDP print back in July, Bank of Canada Governor Stephen Poloz moved quickly to hike rates three times. However, recent data suggests, Poloz may have moved too quickly. The latest Q4 2017 GDP numbers came in at a disappointing 1.7% growth, well below the Banks forecasted 2.5%. Today, as expected, the Bank of Canada took their foot off the pedal. The central bank decided to keep rates on hold, and took a cautious outlook moving forward. “Strong housing data in late 2017, and softer data at the beginning of this year, indicate some pulling forward of demand ahead of new mortgage guidelines and other policy measures. It will take some time to fully assess the impact of these, as well as recently announced provincial measures, on housing demand and prices. More broadly, the Bank continues to monitor the economy’s sensitivity to higher interest rates. Notably, household credit growth has decelerated for three consecutive months.” The deceleration of mortgage credit comes as a concern to the overall Canadian economy which has become heavily dependant on an incredibly long credit cycle. Canada’s credit cycle has been responsible for driving a historic housing boom, while inflating total outstanding mortgage

Vancouver’s detached market remained awfully quiet in February, following a continued trend of weaker sales and rising inventory. Vancouver detached sales in the city of Vancouver fell 20% in 2017, dipping to it’s lowest levels since 2008. That continuation is well underway to begin 2018, and with further Government regulations aimed at cooling the property market even further the short term prospects for the detached market remain rather grim. Vancouver Detached Sales Vancouver detached sales fell to a 27 year low for the month of February. There were just a total of 130 home sales in the area, a shockingly dismal number for a once red hot property segment. On a year over year basis, detached home sales fell 26%. Or 54% below the ten year average for February. New Listings/ Inventory New listings, which have plagued the Vancouver real estate market in recent history, enjoyed a solid rebound this February. New listings climbed 32% on a year over year basis, but still registered 13% below the ten year average. Should new listings hold steady it would certainly apply further downwards pressure on prices, given the weak sales. Total inventory levels climbed 9% year over year. There’s currently 11 months

The Vancouver condo market remained robust through February. Despite continued regulations aimed at cooling the Vancouver Real Estate market, including the BC Governments recently announced 30 point plan, strong demand and aggressive bidding wars persisted. While some demand has been pulled forward as a result of recent mortgage regulations, the full extent of recent changes have yet to be seen and may not fully rear it’s head until later in 2018. Vancouver Condo Sales Vancouver condo sales fell by 6% on a year over year basis. This is a trend that will likely continue from the resulting policy changes aimed at curbing demand. Vancouver condo sales for the month of February were 3% below the ten year average, and well peak sales activity in February 2016. Vancouver condo sales using a 6 month average highlights the shift towards declining sales volumes. New Listings/ Inventory Levels New listings had a nice rebound following a dismal February 2017, growing by 18% in February 2018. Despite the year over year growth, new listings were still near historically low levels for the month of February, coming in 14% below the ten year average. Vancouver condo inventory levels continue to garner headlines, ensuring what many

When the BC Government announced their 30 point plan to address housing affordability, they quietly noted they would be phasing out the BC Home partnership program. It appears the move to quash the program is happening much quicker than anticipated. Per the BC Housing website, the program will no longer be accepting applications after March 31, 2018. A rather dull ending for the controversial program. The lending scheme was first introduced by the BC Liberal Government at the start of last year and pledged to match the downpayment of struggling first time buyers. First timers who couldn’t save enough for a downpayment would have their downpayment matched by the BC Government up to a maximum of 5% or a sum of $37,500. The loan was interest and payment free for the first five years, and registered on title as a second mortgage.  While the program may have been well intentioned, the lending scheme ultimately encouraged first time buyers to purchase on nearly 100% leverage during a frothy a housing market. Yes, the BC Government was essentially involving itself in the subprime lending business using tax payer money. As a result, the program received considerable backlash during a time when financial regulators were

The munch anticipated BC Budget was announced today. It was expected to bring swift measures to the Residential housing market and it certainly didn’t disappoint. The BC Government introduced extreme policies aimed at “moderating” a historically frothy property market. The BC Government introduced a 30 point plan for housing affordability. The full report can be found here, but a recap is detailed below. Speculators Tax A speculators tax will be introduced later this fall. The tax will be aimed at foreign and domestic speculators who own residential property in BC but don’t pay taxes here, including those who leave their units sitting vacant. Satellite families- households with high worldwide income that pay little income tax in BC will also be captured by the tax. Up-front exemptions will be available for most principal residences. Up-front exemptions will also be available for qualifying long term rental properties and certain special cases. The majority of homeowners in BC will be exempt from this tax. A non-refundable income tax credit will also be introduced to offset the new property tax. The new tax will apply province wide, exempting rural areas, with a tax rate of 0.5% of the assessed value in 2018. In 2019 the tax

Early cracks are emerging in the Vancouver pre sale condo market. Vancouver based developer Jago Developments Inc. alerted buyers they would be served with a 15% price increase following substantial delays in the construction process of their New Westminster condo project, the Westbourne. The low rise wood frame condo building featuring a total of 55 units, was initially sold out in 2016 around $475/ square foot with an expected completion date of spring/early 2017. However, per the developer, “Due to numerous factors beyond the developer’s control, including unforeseen soil conditions, labour shortages and extreme weather, among others, there have been significant delays and, as a result, the project has been delayed and the developer will lose a substantial amount of money,” citing “cost overruns in the millions of dollars”. As a result, buyers are being told they’ll be partly responsible to foot the bill. They must agree to a new price that is 15% more, If not, they can choose to terminate their sales contracts and get their down payment returned, plus an additional 50%. They can also opt to get their down payment back, and then wait for the developer to eventually sell the unit to a new buyer and

As if the Canadian housing market needed another round of tightening, it appears CIBC is pulling the plug on it’s controversial mortgage program which targeted foreign Income. As first reported on Better Dwelling, CIBC has quietly notified its mortgage advisors the “Foreign Income Program” has ended. The program was replaced on February 1, 2018, with a new program designed to ensure compliance with B-20 guidelines from OSFI. The foreign income program went viral in early 2016 following the branch advertising a 35% down, no income verification mortgage scheme. It touted favourable interest rates, ideal for international students. CIBC will now qualify income in accordance with OSFI B-20 mortgage regulations which have already been considered some of the most aggressive changes in Canadian lending history. CIBC will now require the following: The client’s T1 General, complete with foreign income stated (line 104). CRA Form T1135, a.k.a. a Foreign Income Verification Statement, showing assets. Companies using income will require a CRA Form T1134, Information Return Relating To Controlled and Non-Controlled Foreign Affiliates. A Canadian credit bureau report, and a foreign credit bureau report to confirm any foreign liabilities. It’s believed several other large banks will follow suit. This new clamp down will ensure those

Since the NDP Government took power in July 2017 they have been relatively quiet on the housing front. This comes amidst sweeping promises to bring drastic measures to the housing market, some of which included a 2% absentee speculators tax, an agency task force to prevent money laundering, and a rebate for renters. However, just one week away from their budget announcement on February 20th, the NDP Government hinted at what’s to come. Lieutenant-Governor Judith Guichon reiterated, “Safe, decent housing is a right that is under threat by speculators, domestic and foreign, who seek windfall profits at the expense of people who work, live and pay taxes in B.C.” She added, “Your government believes that people seeking to profit from B.C.’s real estate must also contribute to housing solutions.” Guichon’s remarks hint towards a much anticipated real estate speculation tax. If so, it will be a hefty blow to property flippers. It could further erode profits of detached house flippers, many of whom have been caught eating losses with that segment of the market having gone stale. Meanwhile, Vancouver condo flipping, which hit a 9 year high, could be in for a rude awakening. In 2017, nearly 11% of all condo

As Vancouver’s housing market reached dizzying heights in early 2016 many buyers were forced further out into the suburbs of the Fraser Valley. Detached houses in the suburbs exploded into multiple offers, and like clockwork, as Vancouver detached homes cooled so too did the Fraser Valley. It appears to be a follow the leader scenario, with the condo market now following a similar pattern. Vancouver condos hit a record high average sales price over $1M this past month. This continues to push buyers further and further east, as buyers squeeze each other out for the remaining bit of affordability. As of January, inventory in the Fraser Valley plunged to decade lows amid buyers desperately bidding up the remaining housing stock. This has sent prices surging to new highs, with the average sales price showing a 31% increase year over year and the median sales price jumping an eye watering 45%. Bidding wars appear to be growing stronger, as many buyers rush to beat expiring rate holds and rising interest rates. In January, 53% of Fraser Valley condos sold over the asking price, just off an all time high of 59% in December. Meanwhile, speculators have been gifted with incredible liquidity