Buy? Sell? Should Canadians buy into real estate or not? Yahoo Finance Article - with interview Shannon Murree

Interview: Yahoo Finance

Buy? Sell? Should Canadians buy into real estate or not?

It’s either the best of times to buy a house, or the worst of times. A conflicting sea of economic factors doesn’t help matters as on-the-fence Canadians try to decide whether to take the plunge into home ownership.

With prices rising, it may seem like an easy choice to lock in now. But with continued economic uncertainty due to the stagnating American recovery and its effect here, some Canadians are feeling skittish. Is it time to panic or is time currently on Canadians’ side?

“Some Canadian cities are experiencing price increases that seem out of step with consumer affordability,” says Gregory Smith, a partner in Novantas. “But I think it’s inaccurate to say the whole country is experiencing a housing bubble.”

On the plus side, interest rates remain at historic lows. Reduced unemployment — the national rate was down to 7.4 per cent in May — may encourage more Canadians into the market. And when they start looking, they’ll find that prices in most regions still haven’t recovered to their pre-recession highs.

Rising prices, though, are being driven by an influx of money, some of it from foreigners seeking relatively affordable real estate investments abroad. That means the clock is ticking before the window of opportunity closes; a situation that only fuels speculation and fears about waiting too long to buy.

But there’s a dark side that’s giving many Canadians pause before they pick up the phone and call a realtor. Those low-as-can-be interest rates have nowhere to go but up, and despite continued debate over precisely when they’ll begin their one-way trip in that direction, no one disagrees it’s only a matter of time.

Bank of Canada Governor Mark Carney says rising rates coupled with record-high levels of household debt and recent moves by the federal government to tighten eligibility for mortgages will all dampen demand for real estate.

“There will be a large section of soon-to-be homeowners who will no longer qualify at higher borrowing costs,” says Smith. “That has a knock-on effect through the rest of the housing market and soon thereafter house prices flatten or decline. I believe that rather than a bubble bursting, we’ll experience a bubble stabilizing or deflating to a more reasonable, natural buoyancy.”

Jobs are another sobering factor. Slowly sinking unemployment rates in most regions of the country mask a more troubling reality: That many Canadians have simply given up looking for work. Even for those who have jobs, employment uncertainty breeds fear that may keep many out of the market.

“The fundamentals of the economy are driven by GDP growth, population growth and employment,” says Addy Saeed, a sales representative with Re/max Active Realty Inc. Brokerage in Toronto. “Canadians are unemployed at a higher rate, which is troubling. But GDP and population growth has been steady, which is bringing new money into the country.”

That new money comes with a cost to Canadians, says Aaron Best, a realtor and property manager with Coronet Realty Ltd. in Vancouver.

“When you have foreign speculators buying here just to ‘park’ money outside of their home country, it skews the market,” he says. “It’s no longer a level playing field.”

But does this mean we’re in a bubble? Likely not.

Michael Drouillard, author of ‘Landlording in Canada,’ cites historical pricing in B.C.’s lower mainland as an example. After prices there increased rapidly and dramatically between 2003 and 2008, the pattern shifted.

“If this were a classic bubble, prices would have rapidly declined afterwards, but they didn’t,” he says. “Prices have been stagnant for a few years and now it looks like they are slowly moving upwards once again.”

Drouillard says “all we need right now is something like an increase in interest rates and that could set us over the edge and cause a decline.”

Regional pricing trends play a significant role, too, but that still doesn’t mean Canada is riding the bubble.

“We feel it’s business as usual in the housing market,” says Terry Loney, sales representative with The Loney Group in London. “We don’t feel there’s a housing bubble due to the fact that the real estate market fluctuates differently in each region across Canada. Certain areas such as Vancouver and Toronto have a shortage of supply with high demand, while other cities have their own regional influences.”

Loney says as rates begin to rise, the market will start to slow down, with prices continuing their steady rise.

Some real estate professionals, like Shannon Murree, a sales representative with RE/MAX Chay Realty Inc, Brokerage in Barrie, say the long-term trajectory of the market is clear, and speculation over whether or not we’re in a bubble does little to change reality.

“So long as the population is growing and people are working, house prices will go up,” she says. “This is especially true in Canada with our conservative practices. And no other investment can offer the returns that real estate can.”

Condo fees explained

First-time condo buyers are sometimes confused by the monthly maintenance fee that condo buildings charge. Combined with property taxes and your mortgage payments, they can add up to a hefty percentage of your total housing costs. But what is a condo maintenance fee and what does it cover? And how does it compare to the costs of owning a house?

Janice Pynn is president of Simerra Property Management, a FirstService residential management firm and the third-largest in Toronto, with interests in over 32,000 units. “Condo maintenance fees are your percentage share of the costs to run the building as a whole,” she explains. “Unlike rent, they are not a profit source for the management; in fact, each building is registered as a non-profit corporation.” 

Generally, Pynn explains, these fees correspond to the individual utility bills you pay on a home, along with maintenance work such as window cleaning, snow shovelling, housecleaning, gardeners, and so on. Fees are calculated according to the size of your unit – a two-bedroom’s fees are higher than a studio’s, for instance – and are recalibrated each year, up or down, according to the building’s annual operating budget.

A certain portion is also set aside as part of a “contingency fee,” which every condo must maintain by law. The contingency fund covers any special costs incurred as part of building upkeep, such as a new roof or repairs to heating or plumbing equipment. 

The maintenance fees for townhouses within a complex are usually slightly lower. Often townhouses have their utilities separately metered, so these are not included in the fee; buttownhouse owners still pay a share for maintenance of common areas, security and other general costs. 

Beyond these basics, there’s a wide variation in the features each individual condo building offers, and the fees vary accordingly. One building might offer beefed-up security, concierge service and underground parking; another might have a fully equipped gym or pool with trainers and classes; or you may have access to special perks like a rooftop patio or guest suite. All of these are reflected in the monthly fee, and in some cases are optional.

One last area to consider is a category known as “special assessments.” These are one-time fees for repairs not covered by the contingency fee, and can be substantial, especially with older buildings and conversions; once the bill is paid off, the maintenance fee will drop accordingly.

Kathy Monahan of Forest Hill Real Estate in Toronto says one of the most important things you should do when considering a condo is to ascertain what the monthly maintenance fee covers, so you’re comparing apples with apples when deciding between two buildings. Consider whether the extra features are worth it to you, or conversely, whether your budget can handle paying separately for things that are not included. “One option I always do recommend if it’s offered, however, is a parking space, even if you don’t drive,” she says, “since you can rent it out and earn some income from it.” This is particularly true downtown.

Kathy offers some examples of condos she’s recently sold in the Toronto area, their fees and what the buyers get for them. (It’s important to note that these merely provide an idea of what to expect; your experience, even with the buildings named here, may be different.)

• 
  Ritz Carlton Hotel, Wellington and John Streets: Two-bedroom, $2455/month, hydro extra. Thirty-plus floors. High-end suites with all the perks of a modern hotel, including 24-hour concierge, top-drawer appliances and finishes, and parking.
• TIFF Lightbox, King and John Streets: Starts under $500 for a small studio. Thirty-plus floors. Options include gym and pool facilities with trainers, access to Autoshare rental cars, and a roof deck with Weber barbecue.
• College Street, Little Italy: $795 for a two-bedroom, hydro extra. Seven floors. One of the earliest conversions in the city, a former church. Each unit is unique, but not many extras. It’s worth noting that units are heated electrically, making the monthly hydro a significant consideration.
• Edith Avenue, Yonge and Eglinton: Starts at $502 for a one-bedroom. Five floors. All-inclusive, including hydro and parking; great neighbourhood, especially for singles, but not many extras.

Both Janice and Kathy state that overall, the costs of condo buying, including maintenance fees, often work out to roughly the same as owning a house the same size, location and price. Would you rather have your own garden, or never have to shovel your sidewalk again? “Ultimately,” says Janice, “it’s a lifestyle choice, rather than a financial one.”

Courtesy Martha of Style At Home

Who gets the family home when a marriage breaks down?

Who gets the family home when a marriage breaks down?

  

When a marriage breaks down, one of the major questions for a couple is how to deal with the matrimonial home. On the one hand, there may be a desire for one spouse to stay in the home with the children, to provide some family stability. However, due to the tax advantages relating to the matrimonial home, legal advice should be sought before making any decisions.

As the attached article indicates, there are many issues, including division of assets, support and taxation that will have to be determined.

  

Original article from Real Estate Expert and Lawyer, Mark Weisleder's article. Also important to know and protect yourselves somehow even before purchasing the home. See some examples below:

• if you were single individuals and already owned homes independently - why not keep them and instead of selling - rent them out. This way they become and investment or a house to fall back on
• speak with a real estate lawyer before you get married to determine how title should be registered

Without a marriage contract, most assets accumulated by a couple will be divided 50-50 on separation. But in order to minimize the impact of divorce on a family, in many cases one spouse stays in the house with the children while the other spouse leaves.

How is the matrimonial home valued vs. a family business?
This is a tricky question. Although you can appraise a home and a business and put values on them, the tax treatment for each is very different. For example, let’s say you have a home and business and each are appraised at $500,000. They were each purchased for $100,000. When you sell a business, you will have to pay tax on any gain that you made. Yet when you sell your home, which is your principal residence, no tax will be payable. Therefore, in most cases, a home that is appraised the same as a business is actually worth more than the business. This must be taken into account when negotiating any division of property.

Can one spouse be forced to move out?
Each married spouse has the equal right to live in the family home. Let’s say the house is registered in the wife’s name alone. They decide to separate. The wife cannot demand that her husband leave. If this cannot be worked out amicably, then the couple will likely have to go to court to get an order as to whether one spouse leaves, or whether the home is sold and the money divided.

Does it matter who stays in the house?
In many cases, upon separation, one spouse will move out of the family home. It will still require the permission of both spouses to either mortgage or sell the home, even if they are not on title. However, while the spouse who lives in the home will not be paying any rent, the spouse who moves out will have to pay rent in another location, and will likely still be responsible for 50 per cent of the mortgage and other expenses in the matrimonial home.

Can the spouse who stays put a mortgage on the home and keep the money?
The answer is no. Even if you leave the home, and even if the property is registered solely in the spouse’s name who stays, you cannot mortgage a family home without the permission of both married spouses.

Do common law spouses have the same rights?
The answer is no. Common law spouses have no entitlement to a share in a family home, unless their name is on title, or if they can prove that they have contributed financially to the purchase of the home. If you are buying a home with your common law partner, you must get your name on title to protect yourself.
Family lawyer Elliot Birnboim of Toronto also tells me that when one spouse gets possession of the family home, this will also affect child and spousal support calculations.

The lesson here is to obtain expert family law advice before you make any decision about what to do with your family home if you decide to separate. The goal should be to balance what will be best for all members of the family, while also ensuring that any property is divided fairly.

About Mark Weisleder

Mark is a lawyer, author, instructor, Toronto Star columnist  and keynote speaker for the real estate industry. 

Mark Weisleder

62 Hillmount Ave. Toronto, Ontario,M6B 1X4

(416) 702-2499

170 Wilkinson Rd., Brampton, Ontario, L6T 4Z5

(905) 454-9606

CMHC seeking to hide foreclosure information from home buyers

First of all...what is CMHC?
The Canadian Mortgage and Housing Corporation defines it as this:

Mortgage loan insurance is typically required by lenders when homebuyers make a down payment of less than 20% of the purchase price. Mortgage loan insurance helps protect lenders against mortgage default, and enables consumers to purchase homes with a minimum down payment of 5% — with interest rates comparable to those with a 20% down payment.

To obtain mortgage loan insurance, lenders pay an insurance premium. Typically, your lender will pass this cost on to you. The premium payable is based on a percentage of the home’s purchase price that is financed by a mortgage. The premium can be paid in a single lump sum or it can be added to your mortgage and included in your monthly payments.

Mortgage loan insurance is not to be confused with mortgage life insurance which guarantees that your remaining mortgage at the time of your death will not be a burden to your estate.

Here's the article:
Canada Mortgage and Housing Corp. has been asking realtors for months to keep consumers in the dark about whether the properties it sells are part of a foreclosure, according to a document obtained by The Financial Post.

The move, said to be part of CMHC national policy, upset Quebec realtors who refused to play ball, worried about an ethical breach.

The Quebec Federation of Real Estate Boards, which oversees the 12 real estate boards in the province, says it challenged CMHC about the change requiring them not to report on a detail sheet that properties for sale were part of a foreclosure, despite the fact that information is considered mandatory when loaded by brokers onto the selling system of local boards.

“Because the repossession field is currently a mandatory field in the brokerage system you have no choice by to indicate ‘no’, which goes against ethical rules stipulating that real estate brokers are obliged to publish information that is truthful and verified,” the group said in a statement to members.

The two sides resolved the issue by making it no longer mandatory to reflect the foreclosure status of a home, based on the seller’s instructions.

The issue raises a larger concern about why CMHC is acting now to tighten up its practices for foreclosures.

Some real estate industry insiders wonder whether the Crown corporation is simply being prudent, not letting potential buyers know a property is part of a distressed sell so they can put in a low-ball bid.

Others question whether the Crown corporation is just getting things in order in case home prices collapse and they are forced to sell properties that are backed by government insurance.

In Canada, anyone buying a home with less than 80% down and borrowing money from financial institution covered by the Bank Act must get mortgage default insurance. CMHC, which controls about 75% of the insurance market, is ultimately backed 100% by the federal government.

“Look at what is going on right now in financial institutions and everybody is ratcheting up their loan-loss provisions,” said Ben Rabidoux, a Canadian analyst for California-based Hanson Advisors, a market research firm whose clients are institutional investors. “Everybody expects loan losses to rise. I can’t imagine CMHC is in the dark on that. My suspicion is they want to limit any loss on that hits their books.”

By limiting the information on whether a property is part of foreclosure, the Crown corporation would potentially avoid a situation in which a buyer knows it has to sell. In the United States, foreclosed properties have sold at huge discounts.

“CMHC is trying to get the better price,” said Don Lawby, chief executive of Century 21 Canada, who had not heard of the new policy. “You know something is repossessed, you low-ball the offer. You know you are not dealing with a homeowner but an investor.”

Based on current market conditions, CMHC doesn’t appear to be looking at a huge uptick in foreclosures. The latest data from the Canadian Bankers Association shows only .32% of mortgage holders are in arrears and number is actually on the decline.

A CMHC spokesperson was not available for comment.

Some also question whether the strategy would amount to much because although brokers may not load the foreclosure information onto a public site, it would become readily apparent to any buyer it was a repossession when CMHC is revealed to be the seller.

The Quebec Federation of Real Estate Boards, while leaving brokers the option about publishing the information, indicated brokers will ultimately tell people CMHC is behind the sale when asked.

“The broker has to give the information once anyone is interested in that property,” said Chantal de Repentigny, assistant director of media relations with the federation. “The only thing that has changed is they have the choice to do it on the listing.”

Source: Financial Post - Garry Marr 

The Power Of Equity

The ability to access equity is one of the most powerful tools you can use to expand your portfolio. Vincent Power explains how to get around the tighter lending policies that are now confronting many investors 

Whether you invest in property for the equity growth or for the rental return, no one can deny that equity will help you buy the next one. 

You buy property, watch it grow in value over time or you can increase its value through renovation and/or development, creating equity. In the end, accessing that equity is an important part of owning investment property. 

Equity is the lifeblood of a property investor. Without equity the investor can run into problems that can, potentially, only be solved by selling and if you are in it for the long haul, problems like those must be avoided. 

The secrets to releasing equity that I will discuss will apply whether you have one property and are thinking about buying an investment property or whether you already own multiple properties. It doesn't matter whether you are self-employed. 

While the details may change for each category, the principles remain the same throughout. Accessing equity is about applying specific principles to your finance position, just as successful property investing revolves around repeating successful strategies over and over again. 

Lender diversity is the key 

One of the first things to do is to split up the portfolio into separate facilities with separate lenders. For some investors this will be hard to come to grips with. The No. 1 reason that investors end up with a portfolio financed with only one lender is convenience. 

I was going to say laziness but perhaps that's too harsh. There is no doubt that it is very convenient to have a personal banker "on call" to approve any new purchases and there is also the attraction of a lower than normal rate if the portfolio is big enough. That's the myth. The facts are that your personal banker is not allocated to you alone. 

He or she is a personal banker to hundreds of bank clients and all too often they change jobs regularly. Just when you get used to one, they are promoted (if they are good at their job) or transferred to another area (if they aren't suited to it). 

The other issue is that these days banks don't see large portfolios on their books as a good thing. Think about this. Larger loans attract greater risk for the bank so naturally, they keep an eye on them. At the first sign of danger who will they look at first? The worst part is the bank will always have control over your ability to increase your financial position. I don't know about you but I do not think the bank has the right to tell me if I can be rich or not! 

The simple answer to this inherent problem is to have multiple lenders looking after your portfolio. Yes, this means you have to take responsibility for the management and review of the portfolio but it does give you more safety, more flexibility and more control. 

Understandably this is not as easy today as it has been in the past; however diversity is extremely important to your ability to keep moving forward. 

Diversity gives you the ability to refinance a single property without notifying every lender that you have done so. Remember we want equity. Equity will enable you to buy again or hold on during tough times. I am not advocating withholding information from a lender here. That would be wrong on so many levels. 

What I am saying is that the lender you want to get finance from is the only one, at that point in time, who needs to know about this particular transaction. 

Naturally, when you next deal with another lender, at another time, your current details will be required for that loan application. 

The existing lenders do not need to know about your new loan until you approach them for another loan down the track. Another advantage of using separate lenders is that each lender has their own method of calculating your maximum borrowing amount. 

These calculators are reviewed regularly and get updated when interest rates change as well as when other factors alter either in the economy or the risk profile within the lender itself. 

Source: Canadian Real Estate Magazine Editorial Team

What direction are home prices headed? Depends on who you ask

It has become the new mantra of real estate watchers — there’s no crash coming, just a soft landing and an ever-so-minor correction in prices.

The message came through loud and clear from three separate sources Tuesday: a Bank of Montreal roundtable of industry players, a new forecast from one of the country’s largest real estate companies and the head of the country’s largest bank.

But nobody can escape the fact sales are falling fast in the housing sector. In Canada’s most expensive city for housing, the Real Estate Board of Greater Vancouver said in January total sales in 201 were off 22.7% from a year earlier. The decline in Toronto was not as steep but sales were off about 3.8% in 2012 compared to 2011, with the trend picking up steam later in the year.

Prices have remained relatively firm in most parts of the country. Toronto prices ticked up 7% over the past year to an average of $497,298. In Greater Vancouver, the Board’s MLS Home Price Index reached $625,000 in May and has dropped 5.8% since.

David Madani, an economist at Capital Economics and a noted bear who has predicted home prices will decline as much as 25% on average in Canada, says the rhetoric from organized real estate is typical for any housing cycle.

“Look what happened in the United States, people started calling for a soft landing. It’s almost to be expected. It’s the narrative in the boom, bust housing cycle. You can look to other countries, too,” Mr. Madani said. “The industry insiders say ‘don’t worry.’ ”

He sees the dropoff in sales as a standoff between buyers and sellers, and the next phase will see prices cut if people want to move their homes.

It has come down to an argument over how much prices will pull back. Phil Soper, chief executive of LePage, added his voice to the debate Tuesday with a report from his company calling for a “brief, mild correction,” with prices actually rising 1% overall by the end of 2013.

“The silver lining in every real estate market correction is that there is a balance shift. After an extended period of frustrating bidding wars in key, supply-constrained regions, and spring markets characterized by price increases that make financial planning difficult, Canadian homebuyers will see momentum shift in their favour this spring. They should be met with more choice — and stable prices,” he said.

At the BMO conference, the bank’s senior economist Sal Guatieri said much of what is happening in the market was to be expected and generally in line with past performances.

“In most regions demand is down from last year but remains healthy at near the past decade norm,” said Mr. Guatieri. “After a decade-long boom, the so-called soft landing appears to be underway in most regions. We expect it to continue.”

Gord Nixon, chief executive of Royal Bank joined the fray at an RBC banking conference in Toronto, telling audience members the real estate market is relatively solid in Canada. “We have seen a slowdown in sales and we’ve certainly seen a slowdown in mortgage demand but price levels are relatively stable,” he added, noting that by most metrics — other than debt-to-disposable-income — indicators are in line with historic standards. “So our expectation is we’ve got this sort of soft landing scenario on the real estate side.”

At the BMO roundtable, the message was that markets in Alberta and Saskatchewan could buck the national trend, driven by growth in both provinces.

“Alberta is the talk of the country, planning on leading the country in economic growth. Of course, it’s been buoyed by our strong oil and gas industry,” said Charron Ungar, president of the Canadian Home Builders’ Association, Calgary Region.

(source - Garry Marr )