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Mortgage insurance premiums to rise by up to $15 a month

Canada Mortgage and Housing Corp. is raising the cost of mortgage loan insurance effective March 17.

 

The Crown corporation estimates the increases will add about $5 to a monthly mortgage payment for its average Canadian homebuyer.

 

However, those with larger mortgages, like homeowners in the red-hot Toronto and Vancouver markets, will pay more. Borrowers with a $450,000 mortgage will pay about $8.47 more, while those with an $850,000 mortgage will pay almost $16 more.

 

CMHC says the changes reflect new regulatory requirements that came into effect on Jan. 1 that require mortgage insurers to hold additional capital.

 

The premiums are calculated based on the loan-to-value ratio of the mortgage being insured.

The size of the increase in rates depends on that ratio.

 

Lenders typically require mortgage loan insurance when a homebuyer makes a down payment of less than 20 per cent.

The cost can be paid in a single lump sum, but CMHC says the amount is often added to the mortgage principal and repaid over the life of the loan.

 

The premium hikes come amid concern about Canadians’ debt levels.

In November, the CMHC warned that interest rate hikes could cause an economic crisis, with overinflated house prices falling by as much as 30 per cent and unemployment rising.

 

And in December, the Bank of Canada warned that unsustainable debt levels posed a risk to the national economy.

The bank said at a national level the proportion of highly indebted borrowers with mortgage-to-income ratios above 450 per cent reached 18 per cent in the third quarter of 2016, up from 13 per cent two years earlier.


While Vancouver real estate prices eased after the introduction of a foreign buyers tax, they continue to soar elsewhere, with prices setting new records in the Greater Toronto Area and Victoria.

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Daily Hive
Simran Singh Dec 15, 2016 10:37 am 11,617
 

The BC provincial government has announced a plan to help first-time homebuyers get into the housing market.

 

The BC Home Owner Mortgage and Equity (HOME) Partnership program will contribute to the amount first-time homebuyers have already saved for their down payment.

 

The program will provide up to $37,500 (or up to 5% of the purchase price) with a 25-year loan that is interest-free for the first five years.

“We believe every British Columbian deserves a place to call home,” Premier Christy Clark said in a release.

 

“We’ve invested in affordable rental housing, we’ve invested in transitional and emergency housing, and now we’re partnering for the first time with first-time buyers to make the purchase of their first home more affordable.”

 

The Province will be investing about $703 million over the next three years to help over 42,000 first-time buyers purchase their first home.

 

“People need a partner in scraping up that first down payment,” Clark said at a press conference on Thursday. “Our BC government wants to be your partner if you want to buy your first home.”

 

“The dream of home ownership must stay in the reach of the middle class here in British Columbia.”

 

The details

To be eligible for the loan, first-time homebuyers must be approved for an insured high-ratio first mortgage. They also must meet the following criteria:

  • Have been a Canadian citizen or permanent resident for at least five years
  • Have resided in BC for at least one year preceding the date of the application
  • Be a first-time buyer who has not owned an interest in a residence anywhere in the world at any time
  • Use the property as their principal residence for the first five years
  • Purchase a home that has a purchase price of $750,000 or less (excluding taxes and fees)
  • Obtain a high-ratio insured first mortgage on the property for at least 80% of the purchase price
  • Have a combined, gross household income of all individuals on title not exceeding $150,000
  • Have saved a down payment amount at least equal to the loan amount for which the buyer applied

Interest-free loan

During the first five years, there will be no monthly interest or principal payments as long as the home remains the home buyer’s main residence.

 

After the five years, homebuyers will make monthly payments at current interest rates. The loan can be paid off over the remaining 20 years. However, they can make extra payments or repay it in full anytime without a penalty. The loan also must be repaid in full when the home is sold or transferred to another owner.

 

Applications for the BC Home Partnership open January 16, 2017.

 

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The provincial government will be taking steps over the coming weeks to end the shady practice of shadow flipping of real estate in British Columbia. Premier Christy Clark made the announcement today in response to growing concerns over Metro Vancouver’s out-of-control real estate market.

 

Shadow flipping occurs when realtors sell a contract for a property at higher prices before a sale is fully closed. Throughout the process, the realtors receive a commission for each time the property is resold, and this can occur multiple times without the knowledge of the seller.

 

These extra commissions can reach tens of thousands of dollars for a single property, and it forces the final buyer to pay for inflated prices while the seller receives less. Shadow flipping is formally known as the Real Estate Contract Assignment Clause, and this is legal in B.C. and contributes to the local housing affordability crisis.

 

“Shadow flipping in Vancouver, we all know, has been driven by greed… pure, naked greed,” said Clark during a press conference. “And the way to end that shady practice for greedy people, is to take the profit out of it.”

She said that forthcoming changes will require sellers to provide consent before any contracts can be reassigned to new buyers. In addition, any profits from assignments must be returned to the home owner.

 

These policy changes are regulatory and can be adopted quickly as it will not require new legislation.

Enforcement of the new regulations will be through the Real Estate Council of British Columbia, which has already established an Independent Advisory Group to examine the impact and prevalence of shadow flipping. The Advisory Group is also investigating licensee conduct and potential conflict of interest, such as dual agency representation where one licensee acts as both the seller and buyer.

 

The provincial government will consult with the Council to establish penalties for those who do not follow the regulations.

 

But in all likelihood, the abolishment of shadow flipping is unlikely to make a significant impact on the housing market given that only a small fraction of realtors are believed to practice it for the purpose of profit. While it might regulate the practices of real estate transactions, it only addresses a relatively minuscule symptom of the entire crisis, which is largely fuelled by speculation and a low demand in housing stock.

 

Clark also noted that both Finance Minister Michael de Jong and Deputy Premier Rich Coleman will meet with Vancouver Mayor Gregor Robertson to collaborate on the next steps that their levels of government can take to tackle the housing crisis.

 

“The provincial government’s move to prevent ‘shadow flipping’ is a good first step to reduce the unhealthy speculation that is taking place in our housing market,” said Robertson in a statement.

“As Vancouver’s economy grows, we need to make sure that our housing is first and foremost for homes, not to be treated as a commodity. Vancouver City Hall will continue to seek out every option to both protect and increase affordable housing, and I look forward to meeting with the ministers to discuss new tools for both the Province and cities to do so.”

 

Over the last five years, prices for single-family homes have risen between 45% and 70% while multi-family homes have increased between 14% and 40%. The strong provincial economy, foreign investment, speculation, population growth, and a low supply of homes entering the market have been commonly deemed as the main causes for the escalating cost of housing, particularly in the Metro Vancouver region.

 

The unaffordable housing market is forcing young talent to leave Metro Vancouver, which makes it difficult for well-paying companies to establish a presence in the city. A recent poll by Ipsos Reid found that a generation of more than 150,000 families are considering leaving the region because they are being priced out real estate market.

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By Lauren Sundstrom

Vancity Buzz


Kitsilano real estate records were broken on Tuesday after a home sold for $735,000 over the asking price of $3.5 million.

 

The house at 3555 West 1st Avenue was built in 1912, is 3,400 square feet and sits on a standard 33 x 120 foot lot without a view. The selling price of $4.23 million is about $1.6 million above the lot’s assessed property value.

 

“For it to go over $4 million is remarkable. I had five offers,” Price tells Vancity Buzz. “These were local buyers just looking to make a shift who wanted to move into this area.”

 

“They were willing to sacrifice lot size to move into this area.”

 

The home had been renovated back in 2010, “down to the studs,” says Price, which is unusual for houses in the area.

One local real estate expert, however, thinks things are getting out of hand.

 

“These prices are getting pretty freaking nuts in my opinion,” Thomas Davidoff with UBC’s Sauder School of Business tells Vancity Buzz.

 

Davidoff says purchasing a lot for that much money is only beneficial to the buyer if they plan on developing it. Buying that Kitsilano lot for $4.2 million, in his opinion, doesn’t make much sense.

 

“As a proposition for someone who’s going to live in that house and what you’re getting for four million plus – that is a ridiculous joke and that is not something that’s going to work for people who just make a living in Vancouver.”

 

In order to afford a detached home in many areas of Metro Vancouver, Davidoff says you need to be “filthy stinking rich.” He uses North Vancouver as an example, where he says buyers have to be wealthy in order to purchase a detached home in the city, even in Lynn Valley, an area that’s appreciating far beyond what’s within reach for the majority of home buyers, which Davidoff says wasn’t the case just two or three years ago.

 

While he’s hesitant to say whether we can expect to see more over-asking-price offers like this one in Vancouver, Davidoff says the market is driven by what people are willing to pay in the end.

 

“We are at risk of it. This business of rich people from all over the world – that’s what’s driving these prices up.”

“This is not a locals’ market. The incomes here just don’t support it,” says Davidoff.

 

Another local real estate expert isn’t surprised by the offer these buyers put forward to purchase the home in Kitsilano. Adam Scalena, who hosts a podcast that discusses real estate in Vancouver, says offers of $200,000 over the asking price of a home have become par for the course. Beyond that, he says a home in West Vancouver recently sold for $1.26 million over asking.

 

“Whether foreign or not, everyone is frustrated competing on the low supply of homes, which is making people bid very aggressively,” he tells Vancity Buzz. “The market is jumping at a pace where the sold comparables don’t support the sale price.”

 

Scalena says the massive leaps in local real estate prices can be partially attributed to a low Canadian dollar and even lower inventory. He says sellers don’t want to sell because it’s very tough to find something else if they need to stay in Vancouver.

 

For his part, Davidoff says it’s impossible to pinpoint where Vancouver’s housing market is heading next, but the risks are astronomical.

 

“The uncertainty around Vancouver’s housing market is huge. I believe prices are going to keep on rocking, but at this point we’re at huge risk of a collapse too,” he says.


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BC Budget 2016 – Real Estate Update

The BC government introduced its 2016 budget today. The budget included a number of items intended to affect affordability and availability in the Lower Mainland’s housing market. 

 

Here’s a summary:

Property Transfer Tax (PTT)

• a New Housing exemption will apply to newly built homes or newly subdivided units priced up to $750,000, saving buyers up to $13,000; and

• a partial exemption will apply on newly built homes priced $750,000 to $800,000.

• a new 3% PTT rate will apply to the portion of a home sale that exceeds $2 million.

 

For homes that sell for below $2 million, the PTT will continue to apply at a rate of 1% on the first $200,000 and 2% on the balance. 

 

These changes will take effect on February 17, 2016. 

 

 “While we applaud the government’s efforts to improve affordability for home buyers purchasing new housing, there’s more work to be done, including indexing PTT thresholds to keep pace with changes in home prices over time,” Darcy McLeod, Board president said. 

Data collection

Starting this summer, individuals and corporations buying property must disclose if they are Canadian citizens or permanent residents of Canada and if neither, their home country. These changes will provide information on the volume of foreign investment in BC. 

 

Home Owner Grant


The Home Owner Grant threshold will increase to $1.2 million from $1.1 million for the 2016 tax year.

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Metro Vancouver real estate continues to climb to astronomical levels. A new report from the Real Estate Board of Metro Vancouver says the average cost of a detached home in the metro area has climbed to over $1.82 million.

Image: REBGV

Image: REBGV

Home sales in Metro Vancouver last month were 46% above the 10-year sales average, ranking it as the second highest January on record.

 

“Fundamental economics are driving today’s market. Home buyer demand is at near record heights and home seller supply is as low as we’ve seen in many years,” said REBGV president Darcy McLeod in a statement.

 

With fewer homes for sale and more demand than ever, prices will continue to be driven up. On the Multiple Listing Service in Metro Vancouver, there are currently 6,635 properties for sale, a 38.6% decline compared to January of 2015.

With that said, more detached homes are for sale now than at this time last year. In January of 2015, there were 781, and in January of 2016, there were 1,047.

More expensive parts of Metro Vancouver saw staunch increases as well. The average cost of a detached home in West Vancouver rose to $2.76 million – that’s a 131% rise since 2006.

Detached homes in places like Shaughnessy will run you even more. Single-family homes in Vancouver West will set you back an average of $2.9 million. 

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Tax proposal on vacant B.C. homes aims to combat housing crisis

 

 

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Greater Vancouver real estate assessments grew by $90 billion in 2015

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