Mike Shafie

Residential and Commercial Real Estate

CMHC eases mortgage insurance rules, admits tightening was a mistake


July 06,2021

Canada Mortgage and Housing Corp. is making it easier to get federal mortgage insurance, reversing tougher rules that were imposed a year ago.

The federal housing agency admitted to making a costly mistake in unilaterally tightening its requirements last year, acknowledging it lost market share to competitors as a result.

“We are taking this action because our July, 2020, underwriting changes were not as effective as we had anticipated and we incurred the cost of a decline in our market share,” the CMHC said in an announcement.

Effective Monday, the mortgage insurer is lowering the required credit score and loosening other measurements that ensure homeowners have enough income to pay their mortgages and other debts.

Major lenders require mortgage insurance from the CMHC or a private-sector insurer if a borrower makes a down payment of less than 20 per cent of the purchase price of a home.

Under the new rules, borrowers need a minimum credit score of 600 instead of 680 to qualify for the CMHC’s mortgage insurance, and can have a higher ratio of expenses relative to their income.

CMHC study highlights Ontario’s rental shortage

A borrower’s gross debt-service ratio – the share of monthly household income used to pay the mortgage and other housing costs – can be as high as 39 per cent instead of 35 per cent. As well, a borrower’s total debt-service ratio – the share of monthly income used to cover all housing costs, credit cards, lines of credit and other loans – can be as high as 44 per cent instead of 42 per cent.

The rule reversal comes at a time when mortgage demand has spiked and after the Bank of Canada warned about the risks of highly indebted households taking on more debt. But it may not have an impact on home prices.

When the CMHC imposed the stricter rules last July, the agency thought it would protect homebuyers, reduce taxpayer risk and curb excessive homebuyer demand that was fuelling skyrocketing prices. But while the quality of the CMHC’s portfolio improved, the agency lost market share to other private-sector insurers and its actions did not slow demand. The average home price in Canada is now 38 per cent higher than a year ago, according to the Canadian Real Estate Association.

Bank of Montreal chief economist Douglas Porter said it is not obvious that the CMHC’s reversal alone “will significantly stoke the market, or make the financial system less sound, as the business was likely being taken up by the private insurers.”


Benjamin Tal, deputy chief economist at CIBC World Markets, said the CHMC’s reversal is “no game changer by any stretch of the imagination” for Canada’s heated housing sector.

“It’s just a market-share play with no impact on the size of the insured pie, since the competition didn’t change the rules,” he said.

The rule reversal is CMHC’s first major action under new chief executive Romy Bowers, who took over in April, and it brings the CMHC in line with Canada’s two private mortgage insurers – Canada Guaranty Mortgage Insurance Co. and Sagen MI Canada Inc. – which never matched the CMHC’s tougher rules last year.

The housing agency came under harsh criticism from lenders and the mortgage industry when it imposed its new standards in 2020.

The CMHC had expected the private insurers to follow its lead but they did not. Instead, lenders started sending business to the private insurers, triggering then-CMHC head Evan Siddall to reprimand the banks and other lenders for not supporting the CMHC.

Since last July, the CMHC’s share of the mortgage insurance market has dropped precipitously, according to a research note from Royal Bank of Canada. The bank said the CMHC’s market share was between 45 per cent and 50 per cent prepandemic but slipped to 23 per cent by earlier this year. In contrast, Sagen’s market share climbed to 44 per cent and Canada Guaranty’s to 33 per cent, according to the RBC note.

“I think most of the market-share gains the two private insurers made over the last year will remain,” said Dan Eisner, CEO of Calgary-based mortgage brokerage True North Mortgage. “Borrowers very rarely choose which insurer gets used. The lenders make that call.”

Mortgage broker Robert McLister agreed that the private insurers’ decision to rebuff the CMHC’s policy earned them loyalty from lenders. “There’s some degree of market share that CMHC may not get back for years, if ever,” said Mr. McLister, who is editor at Rates.ca.

In the first quarter of this year, the CMHC provided insurance to 1.04 million homeowners and insured $209-billion worth of their mortgages. That compared with providing insurance to 1.12 million homeowners with $225-billion worth of mortgages in the same period in 2020, according to the agency’s latest quarterly report.

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Canadians’ net worth surges on housing but renters left behind

Erik Hertzberg, Bloomberg News

The pandemic real-estate boom has made some Canadians richer, while others languish.

The net worth of the nation’s households increased by about $770 billion (US$633 billion) in the first three months of 2021, a record 6 per cent gain, to $13.7 trillion, Statistics Canada said in a report Friday. Since the start of 2020, that figure has increased by more than $2 trillion, largely thanks to rising home prices.

But the data also show that windfalls are going largely to homeowners and older Canadians. Households that own their home accounted for almost all of the gains in the first quarter — $730 billion. The wealth of renters was up just $43 billion. That disparity also comes as rising home values make owning increasingly out of reach for many Canadians.

“The numbers speak to exacerbating wealth inequalities, because we also know that it is becoming even more difficult for renters to get into the housing market,” Jimmy Jean, chief economist at Desjardins Securities, said by email. “The financial burden of owning a property is now untenable for many.”

Household net worth spiked 21.5 per cent in the first quarter from a year earlier, the largest gain in records to 1990. That’s more than triple the historical average of 6.8 per cent yearly gains.

Those with a major earner 55 or older held $1.1 million in net worth at the start of the year, versus $260,000 for households whose primary breadwinner was under 35, the agency said.

The further widening of the wealth gap from housing could feed demands for Prime Minister Justin Trudeau and other levels of government to tackle housing affordability issues.

 “Policy makers need to focus on ways to increase housing supply and make it more affordable,” Benjamin Reitzes, rates and macro strategist at BMO Capital Markets, said by email.

National net worth — which includes government and corporate wealth — jumped by over $1 trillion, reaching $15 trillion at the end of the first quarter.

“The growth of financial assets has not kept pace with that of real estate, resulting in a higher concentration of wealth in non-financial assets,” Statistics Canada said in the report.

December 09, 2020

Bank of Canada Confirms Commitment To Low Interest Rates

Despite the good news on the vaccine front since the Governing Council’s last meeting in late October, the Bank of Canada reasserted its commitment to provide extraordinary monetary policy support for many months to come. The statement released today reiterated that the Bank will hold the policy interest rate at its effective lower bound of 0.25% “until economic slack is absorbed so that the 2% inflation target is sustainably achieved.”  Although inflation in October picked up, it was mainly because of higher prices for fresh fruits and vegetables. The Bank’s policy statement said that measures of core inflation are all below 2%, and “considerable economic slack is expected to continue to weigh on inflation for some time.”  The economy will continue to require this stimulus until 2023–as stated in the most recent (October) Monetary Policy Report (MPR). 

The central bank will reassess the outlook when it meets again on January 20 when it releases the next full update of its outlook for the economy and inflation, including risks to the projection, in the January MPR. 


Nov 05, 2020

B.C. real estate agents asked to suspend open houses to protect clients from COVID 19.

Real estate agents across British Columbia are being asked to temporarily stop holding open houses in an effort to curb the rise of COVID-19.

The recommendation comes from the regulatory agencies overseeing B.C. real estate professionals as well as the provincial association representing Realtors.

Erin Seeley, the CEO of the Real Estate Council of B.C., says in a statement that real estate agents should use virtual tools to protect clients.

“Protecting the public during the pandemic remains our top concern,” Seeley said. “Real estate professionals in B.C. have been very successful in using virtual tools to limit in-person interactions with clients, and we encourage them to continue those innovative practices to keep themselves, their clients, and community members safe.”

Bank of Canada sees interest rates on hold into 2023

 The Bank of Canada reinforced its commitment to keep interest rates at historic lows over the next few years, but said it will make a number of technical adjustments to its bond purchase program that should maintain the current level of stimulus.

In a policy statement Wednesday, officials led by Governor Tiff Macklem held the central bank’s overnight interest rate at 0.25 per cent, reiterating they will keep it there for years. In a surprise move, however, they pledged to pare back their purchases of government bonds to a minimum $4 billion a week, down from US$5 billion. They will also shift their asset purchases to long-term bonds, which typically is a more stimulative form of quantitative easing.

The net effect will be a wash, the Bank of Canada said. “The Governing Council judges that, with these combined adjustments, the QE program is providing at least as much monetary stimulus as before,” according to the statement.

The adjustment may seek to address concerns that the central bank’s asset purchase program is too large for the size of the nation’s outstanding bond market.

The Bank of Canada reiterated its commitment to keeping its overnight rate at near zero until economic slack is absorbed and the two per cent inflation target is sustainably achieved — something that it said isn’t forecast to take place until 2023. It also recommitted to purchasing bonds until the recovery is “well underway.”


Record September for BC Housing Markets

Vancouver, BC – October 14, 2020. The British Columbia Real Estate Association (BCREA) reports that a total of 11,368 residential unit sales were recorded by the Multiple Listing Service® (MLS®) in September 2020, an increase of 63.3 per cent from September 2019. The average MLS® residential price in BC set a monthly record of $803,210, a 15.3 per cent increase from $696,647 recorded the previous year. Total sales dollar volume in August was $9.1 billion, an 88.3 per cent increase over 2019.

“The provincial housing market had a record-setting September,” said BCREA Chief Economist Brendon Ogmundson. “Both total sales and average prices were the highest ever for the month of September as pent-up demand from the spring pushes into the fall.”

“Average prices are skewing higher as demand for space during the pandemic drives sales of single-detached homes,” added Ogmundson. Total provincial active listings are still down about 12 per cent year-over-year, with some markets even more under-supplied as the pandemic continues to keep listings low.

Year-to-date, BC residential sales dollar volume was up 25.1 per cent to $49.7 billion, compared with the same period in 2019. Residential unit sales were up 12.5 per cent to 65,023 units, while the average MLS® residential price was up 11.2 per cent to $764,298.   

Canada Has Recouped Two-Thirds Of Pandemic Job Losses

Sep 05, 2020

The August Labour Force Survey, released this morning by Statistics Canada, reflects labour market conditions as of the week of August 9 to 15, five months after the onset of the COVID-19 economic shutdown. By mid-August, public health restrictions had substantially eased across the country and more businesses and workplaces had re-opened.

Employment rebounded in August by 246,000 net new jobs, a slowdown from the 419,000 gain in July and June’s 953,000 rise. This slowdown was expected with the initial recovery boost from easing containment measures in the spring fading through the summer. 

The great news is that 84% of the headline jobs gain in August was in full-time positions. This follows the surge in part-time jobs in July. Full-time employment stood at 93.9% of pre-pandemic levels in August, compared with 96.1% for part-time work. In the months prior to the COVID-19 economic shutdown, full-time employment had reached record highs, while growth in part-time work was relatively flat. Compared with 12 months earlier, full-time employment was down 5.4% in August, while part-time work decreased by 5.1%. And an elevated share of those working part-time is doing so despite preferring full-time work. Hours worked increased more than employment in August–but are still down more relative to pre-shock February levels (-8.6%) than the headline employment count (-5.7%).

The August job growth brought employment to within 1.1 million of its pre-COVID February level, thereby recouping two-thirds of all the lost jobs.

The number of Canadians who were employed but worked less than half their usual hours for reasons likely related to COVID-19 fell by 259,000 (-14.6%) in August. Combined with declines in May, June and July, this left COVID-related absences from work at 713,000 (+88.3%) above February levels.

As of the week of August 9 to 15, the total number of Canadian workers affected by the COVID-19 economic shutdown stood at 1.8 million. In April, this number reached a peak of 5.5 million, including a 3.0 million drop in employment and a 2.5 million increase in COVID-related absences from work.

The number of Canadians working from home declined for the fourth consecutive month. In April, at the height of the COVID-19 economic shutdown, 3.4 million Canadians who worked their usual hours had adjusted to public health restrictions by beginning to work from home. This number has fallen each month since May when the gradual easing of public health restrictions began and reached 2.5 million in August.

Among Canadians who worked their usual hours in August, the total number working from home fell by nearly 300,000 compared with July, while the number working at locations other than home increased by almost 400,000.

BC Housing Markets Bounce Back in June

July 14, 2020

Vancouver, BC – July 14, 2020. The British Columbia Real Estate Association (BCREA) reports that a total of 8,166 residential unit sales were recorded by the Multiple Listing Service® (MLS®) in June 2020, an increase of 16.9 per cent from June 2019. The average MLS® residential price in BC was $748,155, a 9.1 per cent increase from $685,968 recorded the previous year. Total sales dollar volume in June was $6.1 billion, a 27.5 per cent increase over 2019.


Real Estate News

CMHC tightens mortgage rules amid downturn

  June 04, 2020 

Canada’s housing agency is tightening rules to make it more difficult for higher-risk borrowers to qualify for mortgage insurance.

As of July 1, homebuyers will need to have a higher credit score to qualify for default insurance, Canada Mortgage & Housing Corp. said Thursday in Ottawa. In addition, a borrower’s maximum gross debt service ratio — the share of income that goes toward paying all housing costs, including mortgage, taxes and heat — can’t exceed 35 per cent, down from 39 per cent previously.

The agency also said it would work to curb the practice of borrowing money for down payments. In addition, it suspended refinancing for multi-unit mortgage insurance except when the funds are used for repairs or reinvestment in housing.

CMHC expects prices to fall, and the agency doesn’t want new borrowers to get underwater on their mortgages, according to Rob McLister, founder of RateSpy.com, a mortgage comparison website that first reported the rule changes. However, the changes coming in the middle of the biggest ever economic contraction could hamper any recovery, he said.

“The biggest risk is the hit to market psychology due to the timing,” McLister said in an email. “Regulators usually make such changes when times are good, not when housing is teetering on the edge.”


Evan Siddall, CMHC’s chief executive officer, flagged the rule changes in May 19 testimony to lawmakers in which he said the combination of higher mortgage debt, declining property prices and increased unemployment is “cause for concern for Canada’s longer-term financial stability.”

What Are These Changes In Underwriting Policies

Effective July 1, the following changes will apply for new applications for homeowner transactional and portfolio mortgage insurance:

  • The maximum gross debt service (GDS) ratio drops from 39 to 35
  • The maximum total debt service (TDS) ratio drops from 44 to 42
  • The minimum credit score rises from 600 to 680 for at least one borrower
  • Non-traditional sources of down payment that increase indebtedness will no longer be treated as equity for insurance purposes

June 02, 2020

Metro Vancouver homes sales decline in May, but prices are as high as ever

Home sales in the Greater Vancouver area continued their steep year-over-year drop last month, amid confinement measures and physical distancing requirements related to the COVID-19 pandemic.

The Real Estate Board of Greater Vancouver said Tuesday home sales totalled 1,485 in May, a nearly 44 per cent decrease from May 2019 and 54 per cent below the 10-year average for the month.

However, the figures marked a notable increase from 1,109 home sales in April, the lowest total for the month since 1982.

Board chairwoman Colette Gerber said buyers and sellers are becoming more comfortable navigating physical distancing hurdles, with virtual interactions more prominent than ever.

Bank of Canada cutes rate again

The Bank of Canada today lowered its target for the overnight rate by 50 basis points to ¼ percent. This unscheduled rate decision brings the policy rate to its effective lower bound and is intended to provide support to the Canadian financial system and the economy during the COVID-19 pandemic (see chart below).

Strains in the commercial paper and government securities markets triggered today’s action to engage in quantitative easing. The Governing Council has been meeting every day during the pandemic crisis. Market illiquidity is a significant problem and one the Bank considers foundational. These large-scale purchases of financial assets are intended to improve the functioning of financial markets.

Credit risk spreads have widened sharply in recent days. People are moving to cash. Liquidity has dried up in all financial markets, even government-guaranteed markets such as Canadian Mortgage-Backed securities (CMBs) and GoC bills and bonds. The commercial paper market–used by businesses for short-term financing–has become nonfunctional. The Bank is making large-scale purchases of financial assets in illiquid markets to improve market functioning across the yield curve. They are not attempting to change the shape of the curve for now but might do so in the future.

These large-scale purchases will create the liquidity that the financial system is demanding so that financial intermediation can function. Risk has risen, which creates the need for more significant cash injections.

At the press conference today, Senior Deputy Governor Wilkins refrained from speculating what other measures the Bank might take in the future. When asked, “Where is the bottom?” She responded, “That depends on the resolution of the Covid-19 health issues.”

The Bank will discuss the economic outlook in its Monetary Policy Report at their regularly scheduled meeting on April 15. In response to questions, Governor Poloz said it is challenging to assess what the impact of the shutdown of the economy will be. A negative cycle of pessimism is clearly in place. The Bank’s rate cuts help to reduce monthly payments on floating rate debt. He is hoping to maintain consumer confidence and expectations of a return to normalcy.

The oil price cut alone would have been sufficient reason for the Bank of Canada to lower interest rates. The Covid-19 medical emergency and the shutdown dramatically exacerbates the situation. All that monetary policy can do is to cushion the blow and avoid structural problems to the economy. The overnight rate of 0.25% is consistent with market rates along the yield curve.

High household debt levels have historically been a concern. Monetary policy easing helps to bridge the gap until the health concerns are resolved. The housing market, according to Wilkins, is no longer a concern for excessive borrowing by cash-strapped households.

At this point, the Bank is not contemplating negative interest rates. Monetary policy has little further room to maneuver, given interest rates are already very low. With businesses closed, lower interest rates do not encourage consumers to go out and spend money.

Large-scale debt purchases by the Bank will continue for an extended period to provide liquidity. The Bank can do this in virtually unlimited quantities as needed. The policymakers are also focussing on the period after the crisis. They want the economy to have an excellent foundation for growth when the economy resumes its normal functioning.

Fiscal stimulus is crucial at this time. The newly introduced income support for people who are not covered by the Employment Insurance system is a particularly important safety net for the economy. There are many other elements of the fiscal stimulus, and the government stands ready to do more as needed.

The Canadian dollar has moved down on the Bank’s latest emergency action. The loonie has also been battered by the dramatic decline in oil prices. Canada is getting a double whammy from the pandemic and the oil price war between Saudi Arabia and Russia. The loonie’s decline feeds through to rising prices of imports. However, the pandemic has disrupted trade and imports have fallen.

The Bank of Canada suggested as well that they are meeting twice a week with the leadership of the Big-Six Banks. The cost of funds for the banks has risen sharply. CMHC is buying large volumes of mortgages from the banks, which, along with CMB purchases by the central bank, will shore up liquidity. The banks are well-capitalized and robust. The level of collaboration between the Bank of Canada and the Big Six is very high.

Bank of Canada cuts rate

March 13, 2020

The Bank of Canada has made an unexpected rate cut, cutting the central bank’s benchmark interest rate by 50 basis points to 0.75 per cent.

The central bank already cut its rate to 1.25 per cent at a previously scheduled meeting on March 4 to help counteract the impact of the coronavirus. Friday’s decision takes that one step further.

“This unscheduled rate decision is a proactive measure taken in light of the negative shocks to Canada’s economy arising from the COVID-19 pandemic and the recent sharp drop in oil prices,” the bank said.




Bank of Canada follows Fed with rate cut as virus fears mount

March 04, 2020

The Bank of Canada cut half a percentage point from its benchmark interest rate Wednesday, easing monetary policy for the first time in more than four years as it followed the Federal Reserve in trying to protect its economy from the coronavirus.

The central bank lowered its overnight rate to 1.25 per cent from 1.75 per cent and said the spread of the coronavirus represents a “material negative shock” to the Canadian and global outlooks. Officials said they’ll act again to reduce rates if necessary.

“Governing council stands ready to adjust monetary policy further if required to support economic growth and keep inflation on target,” policy makers said in a statement, adding the move is part of a global response to the crisis.

The cut marks a reversal for Governor Stephen Poloz, whose prolonged resistance to lowering borrowing costs left the country with the highest policy rate among advanced economies. His position became increasingly untenable with the rout in global equities on concern the spread of the coronavirus could touch off a worldwide slowdown.

Policy makers were quick to highlight why a 50-basis-point cut, the first since the 2008-2009 recession, was necessary, saying “the outlook is clearly weaker now than it was in January.” Poloz is due to speak Thursday in Toronto to provide insight into the decision. The bank’s next meeting is April 15.

The virus has driven economic activity down sharply in some regions, disrupted supply chains, pulled down commodity prices and prompted a repricing of risk that has tightened financial conditions, policy makers said, warning the situation could worsen.

Feb 18, 2020

Morneau unveils new insured mortgage stress test rate

Finance Minister Bill Morneau announced changes Tuesday to the “stress test” rate for insured mortgages.

The new benchmark rate — the minimum rate a customer has to pay to qualify for insured mortgages — will be set at the weekly median five-year fixed insured mortgage rate from insurance applications, plus two per cent, according to a release from the Department of Finance Canada. The new rate will come into effect April 6, the Department of Finance said.

“The government will continue to monitor the housing market and make changes as appropriate. Reviewing the stress test ensures it is responsive to market conditions,” Morneau said in the release.

The change follows a review by the Office of the Superintendent of Financial Institutions (OSFI) conducted in January. The review concluded the minimum qualifying rate should better reflect changes in the housing market.

In a mandate letter addressed to Morneau in December, following the Liberals’ second-term election victory, Prime Minister Justin Trudeau tasked the finance department with considering recommendations from financial agencies in order to make the borrower stress test “more dynamic.”

In 2016, the Department of Finance said that insured mortgages must qualify for mortgage insurance at an interest rate which is either the greater of their contract mortgage rate or the Bank of Canada’s conventional five-year fixed posted rate. However, in its review of the housing market, OSFI stated that the Bank of Canada’s five-year rates are no longer moving in line with actual contract rates from banks.

“The gap has widened to exceed two per cent on a sustained basis, suggesting a less responsive floor than originally intended,” OSFI said in a release on Tuesday.

For now, the change applies only to insured mortgages. OSFI announced Tuesday is it considering the change in determining what the benchmark rate should be for uninsured mortgages. The regulator said it is seeking input from stakeholders on this proposal before March 17.

Feb 04, 2020

Home sale activity up, supply down to start 2020

Home sale and price activity remained steady in Metro Vancouver to start 2020 while home listing activity declined in January.

The Real Estate Board of Greater Vancouver (REBGV) reports that residential home sales in the region totalled 1,571 in January 2020, a 42.4 per cent increase from the 1,103 sales recorded in January 2019, and a 22.1 per cent decrease from the 2,016 homes sold in December 2019.

Last month’s sales were 7.3 per cent below the 10-year January sales average.

“We’ve begun 2020 with steady home buyer demand that tracks close to the region’s long-term average,” Ashley Smith, REBGV president said. “Looking at supply, we’re seeing fewer homes listed for sale than is typical for this time of year. As we approach the traditionally more active spring market, we’ll keep a close eye on supply to see if the number of homes being listed is keeping pace with demand.”

There were 3,872 detached, attached and apartment properties newly listed for sale on the Multiple Listing Service® (MLS®) in Metro Vancouver in January 2020. This represents a 20.1 per cent decrease compared to the 4,848 homes listed in January 2019 and a 143.8 per cent increase compared to December 2019 when 1,588 homes were listed.

Last month’s new listings were 17.4 per cent below January’s 10-year average.The total number of homes currently listed for sale on the MLS® system in Metro Vancouver is 8,617, a 20.3 per cent decrease compared to January 2019 (10,808) and a 0.2 per cent increase compared to December 2019 (8,603), and is 13.7 per cent below the 10-year January average.

For all property types, the sales-to-active listings ratio for January 2020 is 18.2 per cent. By property type, the ratio is 11.6 per cent for detached homes, 22.6 per cent for townhomes, and 23.9 per cent for apartments.

Generally, analysts say downward pressure on home prices occurs when the ratio dips below 12 per cent for a sustained period, while home prices often experience upward pressure when it surpasses 20 per cent over several months.

The MLS® Home Price Index composite benchmark price for all residential properties in Metro Vancouver is currently $1,008,700. This represents a 1.2 per cent decrease over January 2019, a 1.4 per cent increase over the past six months, and a 0.8 per cent increase compared to December 2019.

Sales of detached homes in January 2020 reached 439, a 29.5 per cent increase from the 339 detached sales recorded in January 2019. The benchmark price for detached properties is $1,431,200. This represents a 1.7 per cent decrease from January 2019, a one per cent increase over the past six months, and a 0.5 per cent increase compared to December 2019.

Sales of apartment homes reached 814 in January 2020, a 45.6 per cent increase compared to the 559 sales in January 2019. The benchmark price of an apartment property is $663,200. This represents a one per cent decrease from January 2019, a 1.5 per cent increase over the past six months, and a one per cent increase compared to December 2019.

Attached home sales in January 2020 totalled 318, a 55.1 per cent increase compared to the 205 sales in January 2019. The benchmark price of an attached unit is $782,500. This represents a 0.7 per cent decrease from January 2019, a 1.6 per cent increase over the past six months, and a 0.5 per cent increase compared to December 2019.

Jan 22, 2020
Bank of Canada keeps rates on hold, trims growth forecast for 2020

The Bank of Canada held interest rates steady at a meeting Wednesday but expressed heightened concern about an economy that has slowed more than expected, suggesting officials are becoming less confident in a year-long holding pattern.

While the Ottawa-based central bank kept its policy rate unchanged at 1.75 per cent for a 10th-straight decision, it acknowledged the domestic weakness at the end of last year is already spilling over into 2020, and could even persist. They also raised estimates of slack in the economy and dropped language about the current rate being appropriate.

The comments are a departure from recent communications in which officials sought to accentuate the positives of an economy they said was resilient in the face of global uncertainty. While Wednesday’s decision still leaves the Bank of Canada with the highest policy rate among major advanced economies, markets may interpret the statement as an attempt to at the very least open the door for a future move.

“In determining the future path for the Bank’s policy interest rate, Governing Council will be watching closely to see if the recent slowdown in growth is more persistent than forecast,” policy makers led by Governor Stephen Poloz said in the statement. “In assessing incoming data, the Bank will be paying particular attention to developments in consumer spending, the housing market, and business investment.”



Jan 10, 2020

Metro Vancouver saw record levels of housing starts in 2019, suggesting the market is “finding its footing” after a period of declining sales and falling prices, according to reports Thursday.

Canada Mortgage and Housing (CMHC) reported that Metro saw developers start construction on 28,141 new homes in 2019, up 20 per cent from 2018, with a substantial number of those, some 6,727, purpose-built rental units.

The CMHC report came out on the same day that Royal LePage released its latest house-price survey showing that aggregate home prices across the region declined 4.8 per cent in the fourth quarter of 2019 but in a market showing signs of recovering sales.

Royal LePage found that the condo markets in West Vancouver and North Vancouver were the only segments to see prices rise in the fourth quarter, by 6.3 per cent and 3.3 per cent, respectively.

And it was condo housing starts across the region that saw the biggest boost in construction, albeit with a “recalibration” of pricing levels, according to CMHC analyst Eric Bond.

“There is demand, strong demand for homes in price ranges that can be reasonably purchased by people based on their local incomes,” Bond said. “That’s where sales have been the strongest. The market is finding its footing again and developers are taking that longer-term view that, ‘I’m building for 2021, 2022.’ ”

And the record starts for 2019, which Bond said exceed the last record set in 2016 by about 200 units, brought the total number of housing units under construction in Metro to 46,000, another record.

“What that means is everyone is busy building,” Bond said, leading to constraints on the availability of materials, equipment and labour for building, which will help keep a lid on growth in housing starts over the next two years.

However, the sheer number of homes being completed over the coming years, particularly condos, might also bring an additional dampening effect to either prices or rents, according to University of B.C. academic Tom Davidoff.

“I think completions (of units) are very good for the resale market and the rental market,” said Davidoff, director of the UBC centre for urban economics and real estate at the Sauder School of Business. “A lot of the buyers are investors, so I think we’ve seen a slowdown at least in the rate of growth in rents in the last year.”

However, the news of increased construction comes at the same time that sales have increased in the market for existing homes, which has others estimating the prices have at least stopped declining. Royal LePage tracked declining prices across Metro in the last three months of 2019 with the median price of a standard two-storey home falling 4.7 per cent to $1.4 million. The median price on condos fell six per cent to $645,607 over the same period.

Inventories are also declining at the same time that sales have increased, said Randy Ryalls, general manager of Royal LePage Sterling Realty in Port Moody, which is “a good sign of recovery on the horizon.”

“I think the correction is over,” Ryalls said. “I don’t see anything lining up to say that prices are going to fall.”

At the same time, the dramatic decreases in property prices have happened more at the high end of the market among homes priced over $2 million. Townhouses in the suburbs that were priced in the $700,000-$800,000 range, however, didn’t see corrections as steep.

“I don’t think anybody would look at Vancouver’s market and say, ‘Oh, OK, it’s affordable now,’ ” Ryalls said.

Davidoff said some people hoped that the market downturn, influenced by the federal mortgage stress test and provincial foreign-buyers tax would help make Metro’s market more affordable.

“I think we’ve learned that just getting rid of outside demand is not going to get us all the way to affordability,” Davidoff said.

Dec 10, 2019

The B.C. government has announced it is raising the Speculation and Vacancy Tax on Dec. 31 from 0.5 per cent to two per cent for foreign owners and for satellite families, the majority of whose income is not reported on a Canadian tax return.

Some new exemptions to the tax will be brought in while others currently in place will be phased out.

“When we introduced the Speculation and Vacancy Tax, our province was at the peak of a real estate crisis and moderation in the market was long overdue,” said Finance Minister Carole James.

Based on the data collected from the first year, the government says the tax is working as it was designed to — capturing speculators, foreign owners and people who own vacant homes.

The next phase of the tax brings:

  •  An exemption for property owners who are members of the Canadian Armed Forces while in active service and their spouses.

  • An exemption for people who own properties which are only accessible by water. 

  • An end on Dec. 31, 2019, to the exemption for foreign owners of vacant land.

The exemption for empty strata properties in buildings where rentals are banned will be phased out by Dec. 31, 2021.

A strata title allows individual ownership of part of a property — generally either an apartment or townhouse — with shared ownership in the remainder of the building.

Under the new rules announced Tuesday,  if the strata lot remains unoccupied, even if the building’s bylaws prohibit rentals, the tax will be levied.

September 2019

VANCOUVER—The real estate industry sees the start of a recovery for British Columbia’s battered housing market, but for some realtors and developers, the pain continues.

In a forecast released Thursday, the British Columbia Real Estate Association said it expected sales to “normalize” by 2020. The number of residential home sales is expected to fall 5 per cent in 2019, before rising 11 per cent above that forecast in 2020. The association is expecting prices to fall by an average of 2.4 per cent this year but is forecasting a 3-per-cent price increase in 2020.

On the ground in Vancouver, where sales and prices have been dropping for a little over a year, it’s a story of delayed projects and slashed prices.


One example is Vinson House in West Vancouver, an infill project that includes four homes on one single-family lot.

Michael Geller, the architect and developer behind the project, told Star Vancouver in April he was “desperate” to sell the project, which had been sitting on the market for months. One of the three-bedroom units recently sold at $1.7 million, reduced from an initial asking price of $2.59 million, according to MLS records.

Geller declined to comment on the Vinson House development for this story but said another similar project, Major Rush Mews, is coming to market in two weeks. Geller said he was thinking of creative ways to sell the project, such as trying to identify a large extended family who might like to buy the homes together.

“Hopefully on Rush Mews, I’ll break even,” Geller said.


MLA Canada, a condo marketing firm, has tracked 17 delayed condo projects in the Metro Vancouver area, totalling 6,000 units of housing. Developers have postponed the pre-sales launch date for those projects to 2020 in hopes of finding more favourable market conditions, according to MLA’s mid-year market report for 2019.

Oct 24, 2018

 The cost of loans linked to the big bank prime rates are headed higher in the wake of the Bank of Canada’s decision to raise its key interest rate target by a quarter of a percentage point.

The Royal Bank of Canada, Bank of Montreal, CIBC and TD Canada Trust said they are raising their prime rates by a quarter of a percentage point in the wake of the central bank decision.

The big four Canadian banks each raised their prime lending rates to 3.95 per cent from 3.70 per cent, effective Thursday.

  • Bank of Canada raises rate to 1.75%, signals more hikes to come
  • Bank of Canada raises rates: Read the official statement

The increase raises the cost of loans with interest rates linked to the prime rate such as variable-rate mortgages and home equity lines of credit.

The Bank of Canada raised its key interest rate target by a quarter of a percentage point to 1.75 per cent.

September 18, 2018

Vancouver city council has voted 7-4 in favour to allow duplexes in 99 per cent of the city’s low-density, single-family areas.

It was a move closely watched because allowing for duplexes is seen as a nod to a “quick-start action” that will pave the way for later allowing triplexes and multi-unit buildings in single-family neighbourhoods and is part of a broader program to increase housing options across the city.

Vision Coun. Kerry Jang cast it as a “polemical debate” between “those who fear change and people saying they need a place to live.”

It was the last major decision for Vision Vancouver, a party that has ruled for a decade, but will have no real power in the next term.

City hall veterans in Vancouver have long described changing single-family neighbourhoods as an issue that is basically to be avoided or untouchable because it can only lead to political ruin.

“There’s no doubt the idea of massive, blanket rezoning of single-family areas is very much a third rail. … There has always been something about keeping the sanctity of single-family zoning,” said former six-term councillor Gordon Price, heading into the evening portion of last night’s public hearing and ahead of knowing the evening’s outcome.

April 18, 2018

The Bank of Canada decided to keep its benchmark interest rate right where it is on Wednesday, but warned of rate hikes to come as inflation heats up.

The target for the overnight rate stays at 1.25 per cent. The central bank’s rate impacts rates that Canadians get from retail banks for savings accounts and debt such as mortgages and lines of credit

February 20, 2018

BC budget includes new real estate taxes and spending commitments

Housing was the dominant issue in today’s provincial budget.

The government released a 30-point housing strategy aimed at reducing housing demand, curbing tax fraud, building affordable housing, and increasing security for renters. 

New tax measures include increasing property taxes and property transfer taxes on residential properties valued above $3 million, expanding the foreign buyer tax, and implementing a housing speculation tax.

“We welcome the provincial government’s commitment to address money laundering concerns and increase the supply of affordable, social, and rental housing in our province,” Jill Oudil, Board president said. “We’re concerned, however, about the series of tax measures announced today. The budget introduces new taxes, hints at future taxes, and hikes existing taxes on housing. Taxes don’t make homes more affordable.”

Below is a summary of the key real estate measures announced today. There’s considerable information to go through. We’re analyzing each item to understand the implications to you and your clients and will report back with more information and analysis in future communications.

Affordable housing
  • The province is investing $6 billion in affordable housing to create 114,000 homes over the next 10 years.
  • The province will enhance local government capacity to build and retain affordable housing.
  • The province will require developers to collect and report comprehensive information about the assignment of pre-sale condo purchases.
  • The province intends to track beneficial ownership information.
  • The province will collect additional information to increase transparency and strengthen enforcement in real estate.
Tax measures
Speculation tax
  • The province will implement a new speculation tax on residential properties, targeting foreign and domestic homeowners who don’t pay income tax in BC. This includes those who leave homes vacant.
  • The tax will apply to the Metro Vancouver, Fraser Valley, Capital, and Nanaimo Regional districts and in the municipalities of Kelowna and West Kelowna.
  • In 2018, the tax rate will be $5 per $1,000 of assessed value. In 2019, the tax rate will rise to $20 per $1,000 of assessed value.
  • The province will administer the tax and will collect data to enforce it including, social insurance numbers, household information, and world-wide income information.
Foreign buyer tax
  • Effective Feb. 21, 2018, the foreign buyer tax will increase to 20 per cent from 15 per cent and will be extended to the Fraser Valley, Capital, Nanaimo, and Central Okanagan Regional Districts.
  • If the property is located in the Capital Regional District, Fraser Valley Regional District, Regional District of Central Okanagan, or Nanaimo Regional District, and the property transfer is registered on or after February 21, 2018, there are transitional rules available here.
Property Transfer Tax

Effective Feb. 21, 2018, the Property Transfer Tax on residential properties above $3 million will increase to five per cent from three per cent.

Provincial School Tax

Beginning in 2019, the provincial school tax will increase on most residential properties in excess of $3 million.

Database on pre-sale condo assignments

The province will require developers to collect and report comprehensive information about the assignment of pre-sale condo purchases. The information will be reported to a designated government office and shared with federal and provincial tax authorities to ensure taxes are paid.

Online accommodation PST and MRDT

Online accommodation platforms are enabled to collect and remit the Provincial Sales Tax and Municipal and Regional District Tax (Hotel Room Tax).

Property tax treatment for ALR land

As part of the Agricultural Land Reserve (ALR) review, the province is examining residential land in the ALR to ensure land is used for farming.

Clarity of property ownership
Compelling access to MLS®

The province plans to enable tax administrators to compel access to information relevant to property transfers, such as information held in a MLS® database. (We’re asking government for clarification.)

Beneficial land ownership registry

The province will require additional information about beneficial ownership on the PTT form.

Administered by the LTSA, the information will be publicly available and shared with federal and provincial tax and law enforcement authorities. Legislation will be introduced to require BC corporations to hold accurate and up to date information on beneficial owners in their own record offices available to law enforcement, tax and other authorities.

Task force on money laundering and tax evasion

The province will work with the federal government to formalize a multi-agency working group on tax evasion, money laundering and housing.

Residential Tenancy Branch

Increased funding to the Residential Tenancy Branch to reduce wait time, improve service and deal with disputes more quickly, as well as strengthening the Residential Tenancy Act and the penalties for those who repeatedly break the law.

Jan 18, 2018 

Canada’s biggest lenders have raised their prime lending rates on the same day the country’s central bank moved its benchmark interest rate a quarter percentage point higher.

The Bank of Canada raised its key lending rate by a quarter point to 1.25 per cent Wednesday morning, the third time it has moved its benchmark rate from once-record lows last summer.

The bank rate has an impact what Canadians pay lenders for things like mortgages and personal loans. While the move means borrowers can expect to pay more, savers can expect to earn more, too, on savings accounts and guaranteed investment certificates.

That’s exactly what happened later on Wednesday afternoon, when Canada’s five biggest banks — Royal, TD, CIBC, BMO and Scotiabank — all hiked their own prime lending rates by a quarter percentage point, effective tomorrow.

As of Thursday, Jan. 18, all five now have the same prime lending rate of 3.45 per cent. Prior to the Bank of Canada’s move, their rates were all 3.2 per cent.

The central bank was widely expected to raise its rate after data in recent months showed gross domestic product growing, the job market healthy and the cost of living ticking higher.

The bank’s benchmark rate is now at its highest level since 2009.

  • Interest rates are about to go up — no, for real this time

In the MPR, the bank nudged up its expectations for how the economy will perform this year and next. The bank now expects Canada’s economy to expand by 2.2 per cent this year and 1.6 per cent in 2019. Previously the bank was anticipating 2.1 and 1.5 per cent growth..