Mississauga Real Estate | Buying a Home in Mississauga

Bank of Canada Governor Mark Carney’s patience with rising housing debt may be ending.

The Bank of Canada said yesterday it “may become appropriate” to begin raising its policy interest rate again after keeping it at 1 percent and extending the longest pause since the 1950s, saying record high household debt levels remain “the biggest domestic risk” to the economy.

Carney is signaling the potential for increases even as the U.S. Federal Reserve says it expects to remain on hold for two more years. Higher borrowing costs may cool off a housing market that has seen real estate prices almost triple in some Canadian cities over the past decade.

“Monetary policy should be considered as one of the tools you should use to cure the problem” of rising household debt, Paul-Andre Pinsonnault, senior fixed-income economist at National Bank Financial Group, said by telephone. “Monetary policy is what is causing the problem.”

Carney has frozen his main interest rate since September 2010 on signs that a strong currency and fragile global recovery will restrain exports, while at the same time warning that rising household debts risk derailing the recovery if the housing market corrects suddenly.

Real estate markets in cities like Toronto and Vancouver, where prices have almost tripled over the past decade, have created a dilemma for Carney and Finance Minister Jim Flaherty: how to avert a bubble in overheated areas without triggering a collapse elsewhere and undermining the recovery.

Monetary Policy Report

Carney may provide more guidance on how concerned he is about the housing market in a quarterly monetary policy report today, said David Tulk of Toronto-Dominion Bank.

“They recognize that as long as their policy rate is still encouraging this kind of behavior, the longer it runs, the harder it is to clean up,” said Tulk, chief macroeconomics strategist at TD Securities.

The central bank’s report is due at 10:30 a.m. today in Ottawa, with Carney holding a press conference at 11:15 a.m.

The Canadian dollar jumped as much as 1.3 percent yesterday after the central bank’s announcement, while two-year government bond yields rose 10 basis points to 1.33 percent, the highest since August, as investors bet Carney may increase interest rates this year. The difference between two-year Canadian and U.S. government notes widened to 1.06 percentage points.

The average sale price of a home in Canada has risen 98 percent over the past decade, and 35 percent since January 2009, according to data from the Canadian Real Estate Association. Canada’s household debt relative to disposable income was at 152.9 percent in the final quarter of last year, after touching a record 154.2 percent in the previous three months.

Voiced Concerns

Carney has repeatedly voiced concerns about household debt since a June speech in Vancouver and has said that monetary policy could be used to address rising levels of household debt that threaten financial stability. He’s also said that such action is the last line of defense, as policy makers should look first to proper regulation and supervision to safeguard stability.

Flaherty has tightened mortgage rules three times since 2008, including by shortening the maximum amortization period for government-insured mortgages to 30 years from 35 years, and lowering the maximum amount homeowners can borrow against the value of their homes. Still, he has resisted calls to act again, citing his preference for the market to correct itself.

Vancouver, Canada’s third-largest city where condominiums are being sold for as much as C$28.8 million ($29.1 million), has seen average home sale prices fall by more than 8 percent since touching a record high of C$831,555 in May 2011. Realtors in Vancouver sold 30 percent fewer homes in March than a year earlier.

No Spillover

That correction hasn’t spilled over into other markets. Home prices in Toronto were up 11 percent in March from a year earlier, while the number of multiple-unit construction starts rose 50 percent in Ontario last month, according to data from Canada Mortgage & Housing Corp.

Flaherty on April 13 said he was “encouraged” that Vancouver real estate seems to be correcting, and the national housing market is “softening.” Toronto-Dominion Chief Executive Officer Edmund Clark said yesterday he predicts the country’s housing market will slow down.

“It’s obviously been a source of tremendous growth in our core Canadian banking business,” Clark said at an investor conference.

Charles St-Arnaud, an economist with Nomura Securities International Inc. in New York, said monetary policy also may be a less risky way to slow the housing market than regulatory measures that may trigger an abrupt correction.

“When you look at other solutions, it’s probably the one that has the less probability of causing the collapse of the housing market,” St-Arnaud said, adding the Bank of Canada can move ahead gradually with rate increases. “Interest rates are probably the best approach.”

It’s a title Vancouver is more than happy to relinquish.

Canada’s hottest real estate market is finally cooling off, new sales figures show, much to the relief of those who have grown weary of talk of a West Coast property bubble.

At more than $761,000, the average cost of a Vancouver home is still higher than anywhere, but was 3.1 per cent lower in March than in the same month last year. Sales activity is slower, too, down 22.3 per cent through the first three months of 2012.

But the data from the Canadian Real Estate Association indicate that Toronto’s sizzling market is still gaining momentum, with average prices in the country’s largest city soaring more than 10 per cent last month, to about $504,000.

The diverging fortunes of the country’s two most important real-estate markets adds to the complexity of the policy decisions facing Finance Minister Jim Flaherty and Bank of Canada Governor Mark Carney. Both have issued repeated warnings about the high level of personal debt that Canadians are taking on to buy increasingly expensive houses.

But Mr. Flaherty has said he is reluctant to tighten the rules on mortgages again, believing that the market will correct itself, while Mr. Carney is unlikely to raise interest rates any time soon for fear of driving up the currency and hurting other parts of the Canadian economy.

Toronto and Vancouver together account for about one-quarter of all real estate activity in Canada.

The opposing directions of the two cities have resulted in a country-wide average price that’s edging lower, easing economists’ concerns of a U.S.-style crash. And should the trend continue, it may also ease the worries of officials in Ottawa.

“When it comes to housing, Toronto is not Canada, nor is Vancouver,” Douglas Porter, an economist in Toronto at BMO Nesbitt Burns, said in a report.

“For most cities, the market looks well balanced, and is broadly moderating on its own accord.”

Nationally, the average price of a home fell 0.5 per cent to $369,677 in March from last year while sales rose 1.6 per cent.

“The slight decline in the national average price points to a tug of war between Toronto and Vancouver,” Gregory Klump, chief economist for the Canadian Real Estate Association, said in a statement. “The decline in average price reflects the change in Vancouver’s sales mix, not housing price deflation.”

Despite the price drop, few in Vancouver are calling this a correction. The spring of 2011 saw a spike in sales of expensive luxury homes in Vancouver that is now skewing the data for 2012, some argue.

Real estate agent Steve Di Fruscia, who specializes in selling high-end homes, said the Vancouver market, particularly in pricey areas such West Vancouver, are in the midst of a “typical cooling-off period,” after the frenzied activity of a year ago

“We’re still on a very optimistic, greedy part of the year where people are trying to cash in on extra high prices, believing that we will have the same spring as we did last year and prices will continue to skyrocket another 10 to 15 per cent,” he said.

Mr. Di Fruscia markets his clients’ properties in both Canada and mainland China. Some have blamed Vancouver’s high prices on an influx of so-called “foreign” and “speculative” money from foreign investors. However, Mr. Di Fruscia said 95 per cent of his sales of Vancouver homes are to Chinese buyers who are immigrating to Canada as citizens or permanent residents.

There are no statistics on what, if any, impact foreign investors are having on the real estate market in Vancouver, Toronto nor the rest of Canada. Cameron Muir, chief economist of the B.C. Real Estate Association, suggested that in Vancouver, the number of foreign buyers are “much lower” than many people think, accounting for between 1 per cent and 3 per cent of the market.

In Toronto, a low supply of properties is leading to bidding wars that drove up the average price of Toronto homes to $504,117 in March. Toronto’s average home prices have set a new record high in every year since 2000 and 2012 should be no different.

“We’d love to have more inventory to sell because there’s no shortage of buyers looking for good inventory,” said Kevin Somers, the broker area manager for Royal LePage Real Estate Services Ltd. in central Toronto.

“As long as the basic economic indicators and interest-rate outlook remain positive, people will always need a place to live and would rather own than rent in most cases.”

Canadian real estate agents may have recorded the first year-over-year sales drop in 11 months in March, regional data suggest, as the Vancouver market plunged.

The value of purchases reported by 11 regional real estate boards fell 1.1 percent from a year earlier to C$12.4 billion ($12.4 billion), as the number of homes sold fell 1.4 percent, according to real estate board data compiled by Bloomberg News. Those markets had a 9.1 percent annual rise in value during the prior month.

Policy makers, including Finance Minister Jim Flaherty, have said parts of Canada's housing market have become overvalued as households add to record debt levels, encouraged by historically low mortgage rates. Canadian builders began work in March on the most housing units since 2008, led by condominium construction in Toronto, the country's biggest city, Canada Mortgage & Housing Corp. reported Friday.

As I burn the midnight oil filing my usual 150 income tax returns this spring, a number of changing trends are emerging.

When I started preparing returns for the public more than a decade ago, perhaps 10 per cent of my client families owned rental property. Now, nearly 40 per cent have at least one rental property, or rent out part of their own home.

One reason is that interest rates have been near all-time lows for an extremely prolonged period. That has made mortgages attractive for home buyers, and financial institutions have opened up to them, causing a booming uptake on Home Equity Lines of Credit, or HELOCs.

Despite the financial crisis all around us in 2008, many Western Canadians continued to hold jobs and prosper, freeing up cash. An aging population, having been out of debt for a few years, was willing to borrow against their future.

With stock markets having gone through a "lost decade" in which indices wound up where they were 10 years earlier, real estate has become a more attractive investment in many places.

But having a proliferation of rental properties being held by everyday people is cause for concern.

One of my clients bought more than a half-dozen rental resort properties near the Alberta-B.C. border, which was having a building renaissance a few years back. Then the United States housing crisis hit, and many Canadians who used to holiday regularly in the Canadian Rockies tried out U.S. vacations instead, looking to buy depressed property there. Suddenly, Canadian resort rental properties had vacant periods.

I have also seen people not that far removed from retirement being more than a halfmillion dollars in debt from mortgages and HELOCs.

ATB Financial notes that "Canada's collective love affair for real estate doesn't look to be slowing," as the country's seasonally adjusted annualized rate of housing starts hit 215,600 in March, some 17 per cent higher than the previous month, and the highest since the 2008-09 recession. Alberta starts of 35,500 in March marked a 71 per cent increase.

Bank of Canada governor Mark Carney and federal Finance Minister Jim Flaherty have warned about the perils of wallowing in debt, and Carney said it might be time for the Bank of Canada to raise interest rates to rein in consumer spending and real estate speculation.

That poses a philosophical question: Who, if anyone, should prevent Canadians from financial ruin - politicians, the financial industry, or t citizens themselves?

Most banks have been reluctant to be viewed as "the bad cop," taking away the credit punch bowl just when the party is in full swing, so government has stepped in three times to tighten mortgage lending requirements.

But a recent report by PricewaterhouseCoopers Canada showed 82 per cent of Canadians feel that banks should help consumers manage their borrowing by setting limits. Some 63 per cent said they wanted to reduce their debt in the next year, and 41 per cent of working-age participants admitted their debt loads were too high.

So what will all these well meaning people do with any money they might get from income-tax refunds?

A report by ATB Financial economist Will van't Veld shows that 60 per cent of Albertans expect to receive a tax refund, 22 per cent think they will owe money, and 19 per cent think they'll break even.

In the same survey, people showed little desire to use their tax refund for consumption. The largest group, 42 per cent, said they would pay down credit-card bills, more so among young people aged 18 to 34. Some 12 per cent said they would pay down a mortgage.

Of interest, Edmontonians were the Albertans most interested in spending their refunds on vacations.

Another major trend I see this tax filing season is a huge growth in medical expenses.

For the 2011 tax year, single taxpayers, or a couple combined, can claim tax credits on allowable medical expenses that are more than three per cent of one person's net income, or else $2,052 federally and $2,188 provincially.

Years ago, many people didn't have enough expenses to make a claim, so they carried forward the expenses, in case they combined with future expenses within a 12-month period to exceed the threshold.

Now, the majority of families, and even far more single people, have enough medical expenses to claim tax credits. Medical insurance premiums are more expensive, fewer expenses are partly or totally covered by insurance, and an aging population has either more medical expenses if they're sick or is taking out travel medical insurance if they're healthy.

The resources sector is not only fuelling British Columbia’s economy but also its housing market, the Vancouver Real Estate Forum heard Wednesday.

There is a high level of anxiety in the housing market, Scotiabank’s chief economist Warren Jestin said in the forum’s morning keynote address. And that anxiety is based on price increases, especially in Vancouver and Toronto.

It’s true that house prices have gone up much faster in Canada than in the United States, where prices are still 25- to 30-per-cent lower than when the recession began, Jestin said.

“The subprime crowd don’t have the credit scores needed to follow a borrow-to-buy strategy and they accounted for one-quarter of new mortgages between 2004 and 2007,” he said.

“Why is the Canadian market red hot? Record levels of employment, lifetime lows in interest rates, more confidence that the Canadian economy can continue in a buoyant way over the next few years,” he said.

And when the supply of unsold homes is compared to long-term averages “we do not see inventories or a lot of overbuilding in general Canada-wide,” Jestin said.

And even looking at Vancouver’s hot prices, since 2000 prices in other cities — notably Regina, Saskatoon, St. John’s and Edmonton — have increased more. Those are cities where resources are fuelling the economy.

And it’s in those provinces — Newfoundland and Labrador, Saskatchewan, Alberta and B.C. — where income growth has been strongest, he said.

“The resource story translates very very clearly into the gains in the housing market,” Jestin said. It’s those provinces too where economic growth will be the greatest over the next few years because of continued demand for resources, he said.

And that demand will come from emerging countries.

Ten years ago countries like China, Brazil and India were thought of as cheap suppliers of imported goods. Now that has changed, Jestin said.

“[Now] it is the domestic market itself in China or India or Brazil that is a principal driver for exporters in Canada and many other parts of the world,” Jestin said.

“It’s that growth in domestic demand that will become increasingly the engine of performance in these economies and offers excellent opportunities for producers here and around the world.”

Low rates and high temperatures conspired to increase home prices in the first quarter of 2012, according to new numbers from one of the largest real estate organizations, but few sales likely involved investors.

The Royal LePage House Price Survey showed the average price of a home in Canada increased between 2.2 and five per cent in the first quarter of 2012, compared to the previous year.

In the first quarter, standard two-storey homes rose five per cent year-over-year to $398,282, while detached bungalows increased 4.4 per cent to $356,306. Average prices for standard condominiums increased 2.2 per cent to $243,153.

Market activity in the first quarter of 2012 was unusually high resulting in tight inventories and strong price appreciation in most major cities, said the survey.

Investors, grappling with new tighter lending guidelines at the banks, didn't significantly contribute to that climate, whereas homebuyers, with greater access to lending options, drove the market, using historically low mortgage rates. For their part, sellers brought listing inventory to market earlier than normal, encouraged by unseasonably warm weather.

“Our housing market is being pulled in opposite directions by opposing economic forces,” said Phil Soper, president and chief executive of Royal LePage Real Estate Services. “On one hand, there is the rapidly strengthening U.S. economy, increasing Canadian consumer confidence and what can only be called a national mortgage sale encouraging activity and bidding up home prices. On the other, we have signs of over-shooting values and strained affordability in our largest cities. We are likely to see much more modest price appreciation as the year unfolds.”

Soper commented that the effect of low mortgage rates, which fell below three per cent for a five-year fixed-mortgage, is more pronounced in cities that are affordable such as Winnipeg, Ottawa and St. John's.

“In Vancouver, the average price of a standard two-storey home is now $1,182,250,” he said. “Although the city posted strong year-over-year price gains in the first quarter, we expect to see Vancouver’s housing market to reach a level of price resistance. Although desirability is high, many potential buyers have simply been pushed out of the market and cannot take advantage of low mortgage rates, which will ease demand and should bring price relief.”

In comparison, Soper commented that he did not expect price resistance to affect Toronto’s housing market where a standard two-storey home would sell for $645,467.

Another notable exception was Calgary whose flat year-over-year house price appreciation masked a very active housing market that witnessed double digit growth in unit sales compared to the same period in 2011.

TORONTO - Canadians surveyed in a new poll appear to be conflicted about whether to buy a home this year, with a majority believing now is the right time to buy but more than 70 per cent saying they are unlikely to do so.

The Royal Bank's annual home ownership survey found 59 per cent of respondents believe now is the time to get into the housing market, instead of waiting until next year.

That's four percentage points higher than in last year's poll.

But 73 per cent said they are unlikely to buy within the next two years, up two percentage points from last year.

The poll was done in late January, about the time Prime Minister Stephen Harper first indicated his government's intention to reform Canada's retirement system. There was also widespread concern about the Greek debt crisis at the time.

"I would say that people are pretty conflicted around home buying intentions," said Marcia Moffat, head of home equity financing for RBC.

"Consumer sentiment is not all pointing in the same direction," she said.

However, confidence in home ownership is on the rise, she added.

About 88 per cent said they believed a home is a good investment, up two percentage points from last year and 68 per cent said they thought the value of their home has risen in the past two years.

Most of the 2,006 Canadians surveyed also said they expect home prices to remain stable next year, in line with economist consensus.

"Where the mix of opinions comes in is as to whether or not it makes sense to buy a home right now."

"I think consumers recognize that mortgage rates are at historic lows so that would factor into people thinking that it makes sense to buy now
"Some may have already recently bought and may not be in the market for another home, or maybe the available supply is not there in their community, or what they think is affordable and appealing to them."
After four years of sentiment leaning toward the belief the market is tilted toward buyers, there was an increase this year to 27 per cent of respondents who felt the market is in sellers' hands. That's up from 20 per cent in 2011.

Still, nearly four-in-ten of those surveyed said they believed it is still a buyers market, in which the number of homes available exceeds the number of buyers.

Meanwhile, three-quarters of survey respondents said they feel they are well-positioned to weather a potential downturn in home prices.

The Bank of Canada and some economists have warned that Canadians are piling on too much mortgage debt while interest rates are low, and some may no longer be able to afford their homes when interest rates rise.

One paper issued by the central bank suggested that home prices have been influenced not only by low mortgage rates but also on expectations that values will keep rising.

In RBC's poll, less than half of respondents felt that housing prices will be higher this time next year, while 46 per cent said they expect mortgage rates to stay the same.

"There's a mix of opinions on the housing market, as Canadians still feel confident about real estate but are a little uncertain about where the market is heading and when it makes sense to buy," said Moffat.

The survey findings come as some of Canada's biggest banks begin raising variable mortgage rates, even though the Bank of Canada's overnight interest rate remains unchanged.

That could signal the end of the era of cheap borrowing that has encouraged many Canadians to take on houses they may not have been able to otherwise afford.

Many economists had expected the housing market to cool off much more than it has in the past year.

Last year, it had been anticipated that the Bank of Canada to begin raising its key interest rate by the middle of 2011 but that didn't happen _ which has also propped up home sales longer than anticipated.

The survey was conducted by Ipsos Reid on behalf of RBC between Jan. 24 and 30. It has an estimated margin of error of plus or minus two percentage points 19 times out of 20.

OTTAWA — Survey results suggest most Canadians feel now is a great time to buy a home, but not for them personally.

A poll done for Royal Bank of Canada found 59 per cent of those asked said now is the time to get into the housing market, as opposed to waiting until next year. That was up four percentage points from when the same question was asked in a survey a year earlier.

However, 73 per cent said they are unlikely to buy a home within the next two years, up two points from the previous year.

"There's a mix of opinions on the housing market as Canadians still feel confident about real estate but are a little uncertain about where the market is heading and when it makes sense to buy," Marcia Moffat, RBC's head of home equity financing, said in a statement.

Eighty-eight per cent considered housing a good investment, 68 per cent said the value of their homes had increased over the last two years, but just 47 per cent said housing prices would be higher a year from now.

The survey was done with 2,006 adult Canadians in an online panel by Ipsos Reid between Jan. 24 and 30. A random sample this size would have accurately represented the population within two percentage points, 19 times out of 20, RBC said.

Meanwhile, real estate firm Royal LePage released a report Thursday saying housing prices in Canada were up in the early part of this year after an "unusually high" number of sales resulted in tight inventories. Record-low mortgage rates at less than thee per cent, on five-year fixed plans, were part of reason why activity was so high, Royal LePage said.

It said the average price of a standard two-storey home in the first quarter was $398,282, up five per cent from a year earlier. The average bungalow price was up 4.4 per cent to $356,306, while the going rate for a condominium rose 2.2 per cent to $243,153.

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