House prices to increase as new home builds slow, CMHC says

 Housing agency expects housing starts to slow down a little this year and next

Canada's national housing agency says it expects fewer homes to be built this year and next as the market absorbs a flood of new condominiums already underway.

The Canada Mortgage and Housing Corporation revised its forecast for housing starts lower for 2014 and 2015, saying it expects there to be between 160,600 and 203,600 construction starts next year.

Those come on the heels of the between 172,300 and 189,900 it expects to be built this year.

In 2013, 187,923 new Canadian homes were built. That was lower than the 214,000 starts the year before.

Growth slowing

"Builders are expected to continue to manage their starts activity in order to ensure that demand from buyers seeking new condominium units is first channelled toward unsold completed units or unsold units that are currently under construction," CMHC economist Mathieu Laberge said.

On the price side, the housing agency expects activity to slow down, but still remain in growth territory. Its point forecast for the average price for 2014 as a whole is up by 3.5 per cent to $396,000 before ticking up another 1.6 per cent next year to $402,200.

Data from the Canadian Real Estate Association released last week showed the average price of a Canadian home hit $409,708 last month, up 7.6 per cent in the last 12 months.

In terms of sales, CMHC also sees activity slowing down. The housing agency expects about 457,900 homes to be sold in Canada this year, up only marginally from 457,338 in 2013. In 2015, the sales forecast picks up a little to 471,100 units.

CMHC economist Laberge says he sees no catalysts that would result in a hard crash in the market as some have predicted because fundamentals, particularly population, employment and economic growth, low interest rates and the pool of first-time buyers all support the market.

"When we set house prices against those fundamentals, we do see some modest level of over-evaluation, but it's within historical norms."

CIBC housing analyst Benjamin Tal agrees with the CMHC view, saying a crash would require a "trigger," such as sharply rising mortgage rates, but there is no sign of that happening. The Bank of Canada under Stephen Poloz has taken a dovish stance on rates and many don't expect any hikes until the spring of 2016, and even then that the increases will be small.

Reposted by: Steven Porter, Broker - REMAX Aboutowne Realty Corp.

Municipal land transfer tax threatens local economies

 Our government affects our lives in many ways through policy, including what they tax and how. It is a price to pay for living in a great democratic society, but something we must keep an eye on so that negatives do not outweigh benefits.
In particular, taxes affect the real estate market and home ownership. One obvious tax that home buyers and owners regularly consider is property tax, by which the city pays for many important services. And of course, we’re especially sensitive to property tax rates in an election year.
Cities like Hamilton get criticized for having high tax rates. Without going into a detailed analysis, I would suggest that there are always opportunities for improvement in a budget, but a direct comparison of one city’s tax rates to another’s is not always “apples to apples” – there are many things to take into consideration such as property values and differences in the tax base.
There are other taxes that impact the real estate market, too, affecting people’s buying ability.
New homes are subject to HST and all real estate transactions in Ontario require payment of the provincial Land Transfer Tax (LTT). There are limited relief programs for first-time buyers, but if you are paying these taxes they are upfront expenses on top of your down payment.
While these taxes are all well-established, there is also a new threat on the horizon: the municipal land transfer tax (MLTT). An MLTT is in addition to the provincial LTT, adding to the expense of purchasing your next home. Currently, Toronto is the only city allowed an MLTT, but politicians from other areas are lobbying for this tax power as well.
The problem with MLTTs is that they reduce homebuyers’ purchasing power, sometimes forcing them to delay buying indefinitely. This impacts on local economies, where every home purchase leads to an average of $53,000 in economic spin-off, from professional fees, renovations, appliances and so on. Where houses are not bought, this doesn’t happen.
It is estimated that Toronto’s MLTT cost its economy $2.3 billion in the short time it has existed, while only raising $1.6 billion in revenue.
There are other negative consequences of an MLTT and I would urge you to visit the Ontario Real Estate Association’s informative website at http://donttaxmydream.ca. Learn about it and ask your provincial candidates what their stance is on the MLTT for other municipalities.
by Jeff Bonner

Posted by Steven Porter, RE/MAX Aboutowne Realty Corp.

Mortgage rates in Canada just fell below 2% from lenders

 If you thought mortgage rates could not go any lower, you were wrong. Investors Group is rocking the mortgage world with what appears to be the deepest discount in Canadian history on a floating rate loan, offering a deal that takes an effective mortgage rate down to 1.99%.
Full article –http://tinyurl.com/l9zureb