More Canadian real estate being scooped up by foreign investors

Foreign investment proved to be one of the main drivers in the hotel sector last year, says a new report.

According to Colliers International, investors from outside the country bought $857-million worth of hotels in 2013 — the highest level for foreign investment in the sector since 2007.

The foreign investment figure was driven by one of the largest transactions of the year, the five-property Westin Canadian hotel portfolio which was responsible for 89% of all foreign purchases in the year. The winning bid was from an affiliate of U.S.-based Starwood Capital Group and backed by Middle East investors.

“This transaction had a significant impact on overall pricing and metrics for the year given its size and scope,” said Colliers, in its report.

Overall, it was a pretty good year for hotel investment with the $2.02-billion activity doubling the annual average of $1-billion over the past five years. There has been $16-billion in activity over the past decade.

“Much of this increased liquidity entering the hotel market is due to the entry of private equity vehicles, bringing with them massive amounts of capital and legitimizing the hotel asset class within the Canadian commercial real estate realm,” Colliers said in its report.

Institutional buyers have been net buyers of $2.9-billion of real estate over the past decade, the largest change in the structure of ownership. Public companies have been net sellers of $2.4-billion in real estate over the same period.

The price of a hotel room also continues to rise. The average hotel room sold for $133,000 last year, a 59% increase from a year earlier. Even removing some of the larger strategic deals, the average price still grew by 28% to $106,900.

G. Marr, Financial Post

Repost by Steven Porter, Broker - RE/MAX Aboutowne Realty Corp., Brokerage

Economist expects market to 'cool gently'

 Another economist has thrown his hat into the mix of forecasters who believe Canada’s housing market is set for a slow and modest correction.

“Rival views of the Canadian housing market portray it either as an overvalued bubble about to burst or, conversely, as being only slightly overheated but having basically sound economic underpinnings and thus likely to cool gently,” Robin Wiebe, senior economist for The Conference Board of Canada writes in his latest housing briefing. “The Conference Board of Canada embraces the latter scenario.”

The 22 page briefing, entitled “Bubble Fears Overblown,” considers mortgage costs as well as housing prices when determining the health of the market. It also argues sensible lending rules and underwriting have safeguarded Canada from experiencing a similar downturn to the one suffered in the United States.

Moreover, an improving Canadian economy is expected to bolster the housing market in the near future, according to the Conference Board of Canada.

“Canada’s firming economic prospects feature balanced housing markets, improving consumer and business confidence, and a stronger U.S. economy,” Wiebe writes. “Advances in both employment and real gross domestic productive forecast to pick up in 2014, while the unemployment rate is expected to drop.”

While he admits several markets are due for modest housing price corrections, Wiebe also argues mortgage rate increases and population growth and employment gains will soften the blow caused by slight price drops.

The housing correction is also expected to be gradual, based on the mortgage terms selected by most homebuyers.

“This locks in their monthly payments and cushions them from rate increases for at least a few years,” Wiebe writes. “When they do face renewal, they will have more principal in their residence, because low mortgage interest rates mean that a larger portion of their monthly payment covers capital reimbursement.”

Self-employed? Navigating through the recent mortgage rule changes

  For years, the self-employed could count on getting a mortgage on the strength of their credit score, and on their word that they were earning enough from their business to repay the loan.

These days, because of rules brought in almost two years ago by the regulator of Canada’s chartered banks, borrowing money to buy a home has become harder for many of the country’s 2.75 million self-employed workers.

In the summer of 2012, the Office of the Superintendent of Financial Institutions introduced Guideline B-20, which required federally regulated banks to tighten their processes for approving mortgages and home equity lines of credit. As part of B-20, banks must now look more closely at incomes before approving a mortgage application.

This presents a problem for self-employed workers, who typically lower their taxable income by maximizing business expenses and personal deductions. Because of the discrepancy between what’s on their tax return and how much money they actually earn, self-employed workers have typically obtained their mortgage through “stated income” applications, which required a signed income declaration and proof of self-employment such as a business registration number or articles of incorporation.

Today, self-employed workers can still apply for a stated income mortgage at some banks, but under B-20 they can borrow only 65 per cent of the purchase value – 10 per cent less than what was allowed before B-20 – without requiring default insurance from Canada Mortgage Housing Corp., Genworth Canada or Canada Guaranty.

If you have less than 35-per-cent down payment, your mortgage now has to be insured, and insurers have specific guidelines that you need to meet. CMHC will allow a stated income application as long as you have been self-employed for less than three years. More than three years and you have to qualify according to your net taxable income.

So what can the self-employed do to improve their chances of qualifying for the mortgage they need, on terms that work for them?

• Providing complete and current financial and tax documents is critical. Which includes the latest notice of assessment from Canada Revenue Agency and financial statements from the past two years.
• Bank statements to show regular income going into your bank account may also be required.
• Make sure you are up-to-date with income and sales tax returns, and that you don’t owe taxes.
• The more information you can provide the a bank about your business the better it can help self-employed borrowers qualify for the mortgage they want.
• Certain lenders allow add backs of things like car expenses, capital cost allowance or housing expenses. these add backs may enable an applicant to qualify.
• Some lenders take a different approach to increase the mortgage eligibility of self-employed workers for example adding 15 per cent to reported income if the self-employed borrower provides financial statements showing deducted business expenses totalled 15 per cent or more.
• Note that credit unions are not affected by B-20 and many still extend a mortgage of up to 80 per cent of purchase value to stated-income applicants without the need for default insurance.
• For sole proprietors or owners of an unincorporated business, making the leap to incorporation may also help. Most banks prefer salary, and if you have a corporation you can pay yourself a salary. That may make it easier for a self-employed individual to qualify for a mortgage.

Incorporating could also reduce tax rates and allow the business owner to collect a higher salary or dividend payout.

Posted by Steven Porter, Broker  -  RE/MAX Aboutowne Realty Corp., Brokerage
based on a story in Globe & Mail titled More self-employed mortgage wall because of recent rule changes

Canadian Real Estate Association Takes a SWAT at Foolish Homebuyers

A GOTTA-WATCH Video Clip . . .

The Canadian Real Estate Association (CREA) and creative agency Union have created a new TV spot to get potential buyers to understand the value of having a Realtor.

To do that, they brought out the heavy artillery.

“The goal is to get Canadians and homebuyers to understand some of the pitfalls that are unknown to us in buying and selling a home and some of the skills real-estate agents bring to the table,” says Subtej Nijjar, a partner at Union. “The goal was to show the value of what a real-estate agent brings to the process of buying and selling a home.”

The 60-second spot that’s airing online shows a SWAT team raiding a hose in the middle of the night – a misunderstanding that a realtor may have helped to avoid.

Posted by; Steven Porter, Broker -
REMAX Aboutowne Realty Corp., Brokerage
www.PorterRealEstateSystem.com

Market Watch

See the real estate market performance for the GTA. February 2014 Market Watch Charts available here:
http://www.torontorealestateboard.com/market_news/housing_charts/index.htm

Posted by: Steven Porter, Broker - REMAX Aboutowne Realty Corp.
www.PorterReaEstateSystem.com

Home buyers squeezed out of market must save more - or settle for less

Nearly one in 10 prospective home buyers who as recently as two years ago qualified for mortgages but no longer do so. Rule changes have made it tougher for them to scrape together down payments, to get mortgage insurance and to arrange affordable payment terms.

The tighter rules include regulators putting an end, in 2012, to zero-money-down mortgages, as well as shortening the maximum amortization period for a mortgage to 25 years, down from 30, making payments higher.

What’s a buyer in the marginal category to do?

Purchasers can still put as little as 5 per cent down. But those who put down less than 20 per cent are required to buy insurance from Canada Mortgage and Housing Corp., which has just raised premiums. Also, the rules for obtaining home equity lines of credit and purchasing rental properties are tighter.

Despite the squeeze, wannabe purchasers still have a few, limited options:

Look to the bank of mom and dad. Young Canadians are turning more to parents and relatives to help put together a down payment.

Can’t afford houses? Look at condos. People are also buying farther from Toronto, they’re now looking in places like Hamilton.

First-time buyers can also borrow from their own registered retirement savings plan. They can borrow up to $25,000 from their RRSPs – there is no tax penalty if they pay this back within 15 years from the time of their home purchase.

If you only have 5 per cent to put down you can get an RRSP loan for the next 5 per cent and then borrow from your own RRSP. Make sure that your financial institution doesn’t have a rule requiring you to keep the money in your RRSP for a minimum length of time.

Another option is to be creative about where you want to live, and how. Some young people are looking at co-ownership with other couples, for example – buying a house with separate living quarters and sharing the mortgage payments. Others are looking at homes that include rental units.

Other advice: Try to live within your means. Pay off some debt. Don’t buy a car; lease or get a used one. Save a little more.

Posted by Steven Porter, REMAX Aboutowne Realty, www.PorterRealEstateSystem.com
ref. DAVID ISRAELSON

Financial Post - Realtors say Canada’s housing market can still grow

Home sales and prices are expected to still grow over the next two years, albeit at a slower pace, says the national organization that represents realtors. The Ottawa-based Canadian Real Estate Association says sales are forecast to reach 463,700 in 2014 which would represent a 1.3% increase from 2013. The national average home price is forecast to be $397,000 in 2014, a 3.8% increase from a year earlier.

Full article – http://tinyurl.com/l6ydx2h

Re-Posted by: Steven Porter, REMAX Aboutowne Realty

A third of Canadians would enter bidding war to buy a home: survey

A third of Canadians would enter bidding war to buy a home: survey
TORONTO — The Canadian Press
Published Wednesday, Mar. 05 2014, 6:24 AM EST

More Canadians are willing to enter a bidding war and fight it out to secure a property, according to a home buying report released today by Bank of Montreal.

It says 34 per cent of Canadians surveyed are willing to enter a bidding war when it’s time to buy a home, an increase of six points, or 21 per cent, from a year ago.

The survey, conducted by Pollara for BMO, suggests the appetite for competitive bids among major cities is the highest in Toronto, at 44 per cent, and Vancouver, at 41 per cent.

On a provincial basis, prospective buyers in the Prairies and British Columbia are the most willing to compete on the price of a home, with a reading of 38 per cent in both regions.

The BMO survey also reports current homeowners say they visited an average of 9.5 homes before buying. While 49 per cent said they were successful on their first bid, the figure drops to 42 per cent among those who bought in the past five years – including 32 per cent in Vancouver and 24 per cent in Toronto.

The survey results are based on random online interviews with 2,007 Canadians between Jan. 24 and Feb. 3. Of those, 1,051 were prospective homebuyers and the remainder were current homeowners.

The polling industry’s professional body, the Marketing Research and Intelligence Association, says online surveys cannot be assigned a margin of error because they do not randomly sample the population.