Moneyville - Wed Aug 24 2011
All that hot weather did nothing to cool buyers’ heels as new home sales surged in July across the greater Toronto region.
Halton region recorded the biggest spike: a 305.4 per cent increase in new home sales compared to July 2010 and a 214 per cent increase in condo sales. Most of these were in the Milton area.
Toronto registered an unusual 90.5 per cent gain, thanks largely to sales at The Neighbourhoods of Queen St. E., a chic townhouse development underway near Boulton Ave. and Clark St.
Across the GTA, the volume of sales rose an average 36 per cent.
Most of that increase came in the 905 region, which reported a 64 per cent spike in house sales and a 20 per cent jump in condo sales, according to statistics released Monday by the Building Industry and Land Development Association (BILD).
“It speaks to this island that the GTA has become. We are the largest new home housing market in North America, by far, right now,” said BILD president Stephen Dupuis.
Almost 27,000 new homes and condos have been built in the GTA so far this year, up 22.2 per cent from the same period last year.
“The public perception is that the economy is weaker than it is, but the real estate market is defying that. It has been for months,” said Dupuis.
Neighbouring Peel saw a significant decline in condo sales, almost 90 per cent, compared to a July 2010, when a number of new buildings opened in Mississauga and Brampton.
Dupuis noted there’s a lingering lack of supply in the new home sector across the GTA, with just a five-month backlog of new properties on the market.
Helping you is what I do!
Thursday, August 25, 2011
Tuesday, August 16, 2011
Market downturn could jeopardize surprisingly strong housing market
By Sunny Freeman, The Canadian Press
A stronger than expected housing market has helped propel growth in the Canadian economy this year, but economists say recent economic and market tumult could jeopardize momentum in the sector.
The Canada Mortgage and Housing Corp. said Monday that national housing starts rose to 205,100 units on a seasonally adjusted basis in July, 11.6 per cent higher than the 188,900 reported in the same month last year and 4.3 per cent more than the 196,600 recorded this June.
However, the pickup, driven by strong construction on condos and apartment buildings in urban centres, is likely due to builders catching up to robust demand last year, rather than expectations of coming growth.
Home building activity has been increasing through the first seven months of 2011, but starts are still down 4.6 per cent from a year ago.
During the first half of last year, the market was rebounding from recession and buyers were on a tear, prompting an influx of demand and the need to build more units.
Housing starts tend to lag activity in the resale market, and economists believe the recent strong construction activity is the result of increased demand last year.
But they doubt whether the pace can continue as the prospect of a double dip recession in the U.S. forces them to rethink the prospects for economic growth in Canada.
The housing market and the Canadian economy as a whole are more susceptible to an economic downturn than they were at the outset of the 2008-2009 recession, said Diana Petramala, an economist with TD Bank.
"Households aren't starting in a position where they have a strong ability to take on more debt (and) continue spending despite the economic downturn and help drive a recovery," Petramala said.
"I think at this point . . . households would start to ease on their rate of borrowing and probably cut back on purchases."
Any continuation of stock market volatility could weaken consumer and business confidence, meaning that households may hold back on big ticket purchases like home buying and developers could be jittery about new builds, she added.
"Home prices in Canada are 10 to 15 per cent overvalued, particularly in Toronto and Vancouver," she said. "That certainly leaves the market susceptible to any potential economic downturn."
TD Economics has predicted that home prices will contract by about 16 per cent in 2011-2012, but Petramala said that could now happen sooner than expected.
Stock markets — although they rebounded sharply on Tuesday — have seen severe selloffs in recent days over fears about U.S. and European debt loads and the potential for a double-dip recession south of the border.
The Canadian economy is so closely linked to the U.S. that slower American growth translates into less demand for Canadian goods, and lower employment and income growth in Canada.
Those worries could soon sour the mood of real estate investors who may not want to bet on an improving economy by the time new builds go on the market.
Buyer sentiment is "vulnerable to recent market turmoil," as the large decline on stock markets has a negative effect on consumer wealth and confidence, making them less inclined to make big purchases, said CIBC economist Peter Buchanan.
"That of course can cut both ways, it can make investors fearful of buying real estate, on the other hand it does mean the Bank of Canada won't be tightening quite as early," Buchanan said.
"The other thing is that if people are worried about putting their money into the equity market, hey real estate may not look so bad."
Many observers believe the Bank of Canada may now hold its overnight rate — which affects variable mortgage rates tied to bank prime rates — at the current low one per cent until next spring. Fixed rate mortgages could also fall as bond markets react to government debt issues.
The U.S. Federal Reserve announced Tuesday that it will likely keep interest rates at record lows near zero through mid-2013. The Fed had previously said only that it would keep it low for "an extended period" and the more explicit time frame was aimed at giving nervous investors a clearer picture of how long they will be able to obtain ultra-cheap credit.
Low mortgage rates are a big incentive for buyers to get into the market, and led to rampant activity last year.
But even with low rates that make the cost of carrying a mortgage cheaper, pent up demand in the housing market could be largely exhausted.
Many buyers rushed into the market during the closing months of 2009 and early 2010, when the Bank of Canada rate was set at an emergency low of 0.25 per cent. Others decided to buy before the implementation of the new HST in Ontario and British Colombia in July 2010, or to beat two rounds of tighter lending rules.
The trend toward much higher construction on multiple-unit dwellings, and a decline in single family starts, could indicate the housing market isn't as strong as it appears at first glance. Single family homes are usually the barometer of growth in household formation and more multiple unit homes could signal more people are looking to rent.
Multiple urban starts were 13 per cent higher at 120,200 units, while urban single starts decreased by 7.8 per cent to 65,000 units.
For the first seven months of 2011, multiple units starts are up 16.4 per cent year over year while single units are down 22.1 per cent.
CMHC overall urban starts were up 36.1 per cent in the Atlantic region, 33 per cent in British Columbia and 1.7 per cent in Ontario. Quebec posted a decrease of 7.8 per cent in July, while urban starts were off 0.3 per cent in the Prairies.
A stronger than expected housing market has helped propel growth in the Canadian economy this year, but economists say recent economic and market tumult could jeopardize momentum in the sector.
The Canada Mortgage and Housing Corp. said Monday that national housing starts rose to 205,100 units on a seasonally adjusted basis in July, 11.6 per cent higher than the 188,900 reported in the same month last year and 4.3 per cent more than the 196,600 recorded this June.
However, the pickup, driven by strong construction on condos and apartment buildings in urban centres, is likely due to builders catching up to robust demand last year, rather than expectations of coming growth.
Home building activity has been increasing through the first seven months of 2011, but starts are still down 4.6 per cent from a year ago.
During the first half of last year, the market was rebounding from recession and buyers were on a tear, prompting an influx of demand and the need to build more units.
Housing starts tend to lag activity in the resale market, and economists believe the recent strong construction activity is the result of increased demand last year.
But they doubt whether the pace can continue as the prospect of a double dip recession in the U.S. forces them to rethink the prospects for economic growth in Canada.
The housing market and the Canadian economy as a whole are more susceptible to an economic downturn than they were at the outset of the 2008-2009 recession, said Diana Petramala, an economist with TD Bank.
"Households aren't starting in a position where they have a strong ability to take on more debt (and) continue spending despite the economic downturn and help drive a recovery," Petramala said.
"I think at this point . . . households would start to ease on their rate of borrowing and probably cut back on purchases."
Any continuation of stock market volatility could weaken consumer and business confidence, meaning that households may hold back on big ticket purchases like home buying and developers could be jittery about new builds, she added.
"Home prices in Canada are 10 to 15 per cent overvalued, particularly in Toronto and Vancouver," she said. "That certainly leaves the market susceptible to any potential economic downturn."
TD Economics has predicted that home prices will contract by about 16 per cent in 2011-2012, but Petramala said that could now happen sooner than expected.
Stock markets — although they rebounded sharply on Tuesday — have seen severe selloffs in recent days over fears about U.S. and European debt loads and the potential for a double-dip recession south of the border.
The Canadian economy is so closely linked to the U.S. that slower American growth translates into less demand for Canadian goods, and lower employment and income growth in Canada.
Those worries could soon sour the mood of real estate investors who may not want to bet on an improving economy by the time new builds go on the market.
Buyer sentiment is "vulnerable to recent market turmoil," as the large decline on stock markets has a negative effect on consumer wealth and confidence, making them less inclined to make big purchases, said CIBC economist Peter Buchanan.
"That of course can cut both ways, it can make investors fearful of buying real estate, on the other hand it does mean the Bank of Canada won't be tightening quite as early," Buchanan said.
"The other thing is that if people are worried about putting their money into the equity market, hey real estate may not look so bad."
Many observers believe the Bank of Canada may now hold its overnight rate — which affects variable mortgage rates tied to bank prime rates — at the current low one per cent until next spring. Fixed rate mortgages could also fall as bond markets react to government debt issues.
The U.S. Federal Reserve announced Tuesday that it will likely keep interest rates at record lows near zero through mid-2013. The Fed had previously said only that it would keep it low for "an extended period" and the more explicit time frame was aimed at giving nervous investors a clearer picture of how long they will be able to obtain ultra-cheap credit.
Low mortgage rates are a big incentive for buyers to get into the market, and led to rampant activity last year.
But even with low rates that make the cost of carrying a mortgage cheaper, pent up demand in the housing market could be largely exhausted.
Many buyers rushed into the market during the closing months of 2009 and early 2010, when the Bank of Canada rate was set at an emergency low of 0.25 per cent. Others decided to buy before the implementation of the new HST in Ontario and British Colombia in July 2010, or to beat two rounds of tighter lending rules.
The trend toward much higher construction on multiple-unit dwellings, and a decline in single family starts, could indicate the housing market isn't as strong as it appears at first glance. Single family homes are usually the barometer of growth in household formation and more multiple unit homes could signal more people are looking to rent.
Multiple urban starts were 13 per cent higher at 120,200 units, while urban single starts decreased by 7.8 per cent to 65,000 units.
For the first seven months of 2011, multiple units starts are up 16.4 per cent year over year while single units are down 22.1 per cent.
CMHC overall urban starts were up 36.1 per cent in the Atlantic region, 33 per cent in British Columbia and 1.7 per cent in Ontario. Quebec posted a decrease of 7.8 per cent in July, while urban starts were off 0.3 per cent in the Prairies.
Thursday, August 4, 2011
Why becoming a landlord can pay off
By Rubina Ahmed-Haq
When I started my first permanent job as a journalist in 2004, I made the best financial decision of my life — I invested in two rental properties with my brother.
While many of our friends were living in chic condominiums, we were chasing tenants for rent and fixing leaky pipes.
We made mistakes that cost us time and money, but years later we're financially ahead.
Our first investment was a triplex in east Toronto. We took the lowest available five-year, fixed-rate mortgage. Considering the low interest-rate environment that followed, a variable rate would have saved us more than $20,000. But at the time, we were unwilling to take the risk.
With no time or money to renovate, we chose a house that was in move-in condition.
It closed at the beginning of the month, giving us enough time to advertise and have renters in place before the first mortgage payment was due. We moved into one unit and rented out the other two.
From the beginning we paid rent. After all, we were tenants in our investment.
Eighteen months later we took equity out of the investment and bought another property in the same area. We stuck to what we knew and we bought another turnkey triplex.
For the first three years we managed both properties, which was a lot of work. From taking calls in the middle of the night when the furnace broke to the death of a tenant, this was real work and we often thought of quitting.
We also made a lot of mistakes.
In the beginning, we didn't keep a good account of the money we spent on our investment.
Also, we missed opportunities to write off expenses; we saw our tenants as friends and were lax in collecting rent. And we often spent weekends removing snow and throwing out garbage that was piling up because we had failed to create a system for general maintenance.
And, as bad as it sounds, our biggest mistake was borrowing money to put down a responsible 20 per cent on our first property. At the time, 5 per cent would have been enough, and we could have written off the mortgage interest, saving thousands.
After a few years of managing on our own, we sought professional help. We had both moved into our own homes, so we hired a property manager to oversee the six units. His company charges 6 per cent of total rent revenue collected each month. He finds the tenants, does the credit checks and deals with the day-to-day calls.
We're not out-of-touch landlords. My brother and I meet once a month to go over our account, do the checks and balances and bring up any concerns.
We also have a line of credit against our investment. This is our business line and we pay all the bills from it. The interest on this loan is tax deductible and we pay it down with the money collected from rent.
It's also good to have one accountant looking at all the tax claims in your family. It gives them a holistic view of your financial situation and helps identify opportunities to save money. Ours is great. She's not cheap — last year I paid more than $800 in fees — but her advice has saved us thousands over the last few years.
When the time came to renew our first mortgage, I quickly learned banks offer better treatment to new customers and we could take advantage of this fact. Mortgages are banks' biggest business, and they're willing to offer huge incentives to make you a client. We moved our business from one major bank to another and collected thousands in cash-back incentives.
Both of us are in our 30s and we estimate the properties will be paid off by the time we're in our early 50s. Conservatively our real-estate agent says our houses are worth 45 per cent more than what we paid. We realize we've benefited from the housing price boom, but according to the Toronto Real Estate Board the long-term trends are still good. Even with the threat of a house price correction we're okay.
Real-estate investment is not for everyone. If you're a so-called couch-potato investor, don't become a landlord.
In the beginning it's a lot of work. But for us it was worth it and I feel good knowing our investments are growing.
Life only gets more expensive — I realize now the disposable income I had during my first job was the most I will probably ever have and investing it was the smartest move I made.
When I started my first permanent job as a journalist in 2004, I made the best financial decision of my life — I invested in two rental properties with my brother.
While many of our friends were living in chic condominiums, we were chasing tenants for rent and fixing leaky pipes.
We made mistakes that cost us time and money, but years later we're financially ahead.
Our first investment was a triplex in east Toronto. We took the lowest available five-year, fixed-rate mortgage. Considering the low interest-rate environment that followed, a variable rate would have saved us more than $20,000. But at the time, we were unwilling to take the risk.
With no time or money to renovate, we chose a house that was in move-in condition.
It closed at the beginning of the month, giving us enough time to advertise and have renters in place before the first mortgage payment was due. We moved into one unit and rented out the other two.
From the beginning we paid rent. After all, we were tenants in our investment.
Eighteen months later we took equity out of the investment and bought another property in the same area. We stuck to what we knew and we bought another turnkey triplex.
For the first three years we managed both properties, which was a lot of work. From taking calls in the middle of the night when the furnace broke to the death of a tenant, this was real work and we often thought of quitting.
We also made a lot of mistakes.
In the beginning, we didn't keep a good account of the money we spent on our investment.
Also, we missed opportunities to write off expenses; we saw our tenants as friends and were lax in collecting rent. And we often spent weekends removing snow and throwing out garbage that was piling up because we had failed to create a system for general maintenance.
And, as bad as it sounds, our biggest mistake was borrowing money to put down a responsible 20 per cent on our first property. At the time, 5 per cent would have been enough, and we could have written off the mortgage interest, saving thousands.
After a few years of managing on our own, we sought professional help. We had both moved into our own homes, so we hired a property manager to oversee the six units. His company charges 6 per cent of total rent revenue collected each month. He finds the tenants, does the credit checks and deals with the day-to-day calls.
We're not out-of-touch landlords. My brother and I meet once a month to go over our account, do the checks and balances and bring up any concerns.
We also have a line of credit against our investment. This is our business line and we pay all the bills from it. The interest on this loan is tax deductible and we pay it down with the money collected from rent.
It's also good to have one accountant looking at all the tax claims in your family. It gives them a holistic view of your financial situation and helps identify opportunities to save money. Ours is great. She's not cheap — last year I paid more than $800 in fees — but her advice has saved us thousands over the last few years.
When the time came to renew our first mortgage, I quickly learned banks offer better treatment to new customers and we could take advantage of this fact. Mortgages are banks' biggest business, and they're willing to offer huge incentives to make you a client. We moved our business from one major bank to another and collected thousands in cash-back incentives.
Both of us are in our 30s and we estimate the properties will be paid off by the time we're in our early 50s. Conservatively our real-estate agent says our houses are worth 45 per cent more than what we paid. We realize we've benefited from the housing price boom, but according to the Toronto Real Estate Board the long-term trends are still good. Even with the threat of a house price correction we're okay.
Real-estate investment is not for everyone. If you're a so-called couch-potato investor, don't become a landlord.
In the beginning it's a lot of work. But for us it was worth it and I feel good knowing our investments are growing.
Life only gets more expensive — I realize now the disposable income I had during my first job was the most I will probably ever have and investing it was the smartest move I made.
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