restate
New Member
Bubble, not likely so, and especially not the huge drop like in the United States...slight adjustments will occur, and it's perfectly normal after a hot Canadian Real Estate market especially for the last 1.5 years.
|
|
|
Baby, we got a bubble!?
- Thread starter simuls
- Start date
cdr108
Senior Member
only the last 1.5 years ... have you been asleep the for past 10-15 years ?!?!?
the current Canadian RE bubble has been premised by several factors, a few of them are as follows:
* lowest historical interest rates
* loosening of CMHC standards by extending amortizations from 25 years up to 40 years (2008) (which now have been slowly retracked to 30 years)
* loosening of CMHC standards by reducing the minimum down payment required to avoid the CMHC fees from 25% -> 20%
* loosening of CMHC standards by providing insurance for 0% down payment from a minimum of 10% (1992)
* changing of CMHC standards that only allowed only first time buyers to purchase a home with as little as 5% down payment under the former First Home Loan Insurance (FHLI) Program to allow anyone to purchase a home, whether it is their first, second, or third, with a 5% down payment. (1998) and at one point even as low as 0% down payment (2007)
* extending the maximum home price under the 'CMHC 5% down payment program from $250,000 to unlimited (2003)
interested
Senior Member
http://www.remaxcondosplus.com/blog/
From Jamie Johnson: DO PEOPLE AGREE WITH HIS CONCLUSIONS, IN PARTICULAR THOSE THAT ARE BOLDED?
More changes have been made by the Federal Government to CMHC lending practices. Note that these rules do not apply to mortgages that are conventional (under 80%). The first change is to mortgage refinancing. Now existing owners can only refinance to 85% from 90% previously. This will have no impact on the selling of condos.
Neither will the second change impact condo sales, whereby Home Equity Lines secured by a property will no longer be insured by CMHC. These loans were used by many for big purchases such as home renovations, investments, and second properties.
The key change to the condo market is the reduction in the amortization period from 35 to 30 years. The impact is to increase monthly mortgage payments by 7.8% for the same amount borrowed at the same interest rate. If a buyer is tight to the lending ratios, it means that their income would have to increase by this same 7.8% to qualify for the same sized mortgage.
What does this mean for the condo market? Certainly some buyers will be priced out of the market and will turn to renting condos – good for investors. This may actually help to increase rents which are too low for current pre-construction condos. The second result is that buyers will be forced to buy cheaper properties. That means smaller condos and for others it means buying a condo rather than a house. In summary, sales volumes will be minimally impacted, although the mix of sales may change.
For pre-construction sales, this change may actually be good news! These buyers are usually ‘all cash’ and if they do require a mortgage, it is always conventional and hence CMHC would not be applicable. And if rents go up, that would be a bonus in this market segment.
Posted in Toronto Condos Update, Toronto Real Estate Market Forecast
From Jamie Johnson: DO PEOPLE AGREE WITH HIS CONCLUSIONS, IN PARTICULAR THOSE THAT ARE BOLDED?
More changes have been made by the Federal Government to CMHC lending practices. Note that these rules do not apply to mortgages that are conventional (under 80%). The first change is to mortgage refinancing. Now existing owners can only refinance to 85% from 90% previously. This will have no impact on the selling of condos.
Neither will the second change impact condo sales, whereby Home Equity Lines secured by a property will no longer be insured by CMHC. These loans were used by many for big purchases such as home renovations, investments, and second properties.
The key change to the condo market is the reduction in the amortization period from 35 to 30 years. The impact is to increase monthly mortgage payments by 7.8% for the same amount borrowed at the same interest rate. If a buyer is tight to the lending ratios, it means that their income would have to increase by this same 7.8% to qualify for the same sized mortgage.
What does this mean for the condo market? Certainly some buyers will be priced out of the market and will turn to renting condos – good for investors. This may actually help to increase rents which are too low for current pre-construction condos. The second result is that buyers will be forced to buy cheaper properties. That means smaller condos and for others it means buying a condo rather than a house. In summary, sales volumes will be minimally impacted, although the mix of sales may change.
For pre-construction sales, this change may actually be good news! These buyers are usually ‘all cash’ and if they do require a mortgage, it is always conventional and hence CMHC would not be applicable. And if rents go up, that would be a bonus in this market segment.
Posted in Toronto Condos Update, Toronto Real Estate Market Forecast
cdr108
Senior Member
sometimes his comments seem reasonable, but this time i think he's blowing smoke up his *ss.
just as the extension of amortizations from 25 years to 30-, 35-, 40-years increased borrowing power, contributing to over-bidding and inflating prices; the reduction will do the opposite and lower prices.
are rents too low for pre-con condos ?
i can't say as rents range from $30-36 PSF for the average unit new build, which already takes a good chunk of one's income; plus there's a huge inventory of condos coming online this year, as well as next i believe.
who are these 'all cash' pre-con buyers?
if it's the first-time buyer, not very likely.
if it's the famed foreign investor buyer, then perhaps.
interested
Senior Member
I think he is talking about foreign investor buyers being all cash. Definately not the first time buyer. I say this from other info from his blogs.
I was curious about the rental comment since that is of interet to me. My personal feeling is the additional units coming onboard will keep rents stable at best and may offset what I would have thought might have been a slight decline. However, if alot are forced to the sidelines, and the bulk of buyers were at the margin, then I guess alot more renters will become available. That said, one would think the same would apply to property prices as the marginal buyer disappears, prices would drop to get to the point were marginal buyers could once again buy in.
so I guess a good news/bad news story. More renters helps investors, lower prices hurts investors but does help first time buyers down the road.
I was curious about the rental comment since that is of interet to me. My personal feeling is the additional units coming onboard will keep rents stable at best and may offset what I would have thought might have been a slight decline. However, if alot are forced to the sidelines, and the bulk of buyers were at the margin, then I guess alot more renters will become available. That said, one would think the same would apply to property prices as the marginal buyer disappears, prices would drop to get to the point were marginal buyers could once again buy in.
so I guess a good news/bad news story. More renters helps investors, lower prices hurts investors but does help first time buyers down the road.
cat
New Member
cat
New Member
New Rental Numbers out from TREB this morning:
Get the latest news and information from TREB
www.twitter.com/TREB_Official
www.facebook.com/TorontoRealEstateBoard
www.youtube.com/TREBChannel
GTA REALTORS® Report Rental Market Figures
TORONTO, January 19, 2011 ‐ From September until the end of 2010, TREB Members reported
4,920 rental transactions for condominium apartments and townhouses, representing a 27 per
cent increase from the 3,859 transactions recorded during the same time period in 2009.
There were a total of 9,227 apartments and townhouses listed for rent during the reporting
period, representing a 22 per cent increase compared to the last four months of 2009.
There was substantial growth in condominium apartment completions in 2010, which explains
the strong growth in the number listings that were available during the reporting period.1
Many of the condominium apartments that were completed over the past year were owned by
investors. Some of these investors chose to list their units for rent.
While the number of units listed for rent increased strongly on the TorontoMLS® system, it is
important to note that the number of rental transactions actually increased at a greater rate.
The number of households signing lease agreements in the last four months of 2010 more than
accounted for the increase in supply.
Central Area • In TREB’s Central districts, 1,760 one-bedroom apartments rented for an average of $1,555 per month
- up one per cent over last year’s average of $1,540 per month. In addition, 1,053 two-bedroom apartments were rented for an average rent of
$2,193 per month – a one per cent increase over the 2009 average of $2,174 per month.
• There were 78 townhouse rentals in the Central districts, including 33 three-bedroom units, which rented for an average of $2,626 per month - down four per cent from
last year’s average of $2,725 per month.
TREB also listed figures for N, E, W districts but I did not include. - Cate
Get the latest news and information from TREB
www.twitter.com/TREB_Official
www.facebook.com/TorontoRealEstateBoard
www.youtube.com/TREBChannel
GTA REALTORS® Report Rental Market Figures
TORONTO, January 19, 2011 ‐ From September until the end of 2010, TREB Members reported
4,920 rental transactions for condominium apartments and townhouses, representing a 27 per
cent increase from the 3,859 transactions recorded during the same time period in 2009.
There were a total of 9,227 apartments and townhouses listed for rent during the reporting
period, representing a 22 per cent increase compared to the last four months of 2009.
There was substantial growth in condominium apartment completions in 2010, which explains
the strong growth in the number listings that were available during the reporting period.1
Many of the condominium apartments that were completed over the past year were owned by
investors. Some of these investors chose to list their units for rent.
While the number of units listed for rent increased strongly on the TorontoMLS® system, it is
important to note that the number of rental transactions actually increased at a greater rate.
The number of households signing lease agreements in the last four months of 2010 more than
accounted for the increase in supply.
Central Area • In TREB’s Central districts, 1,760 one-bedroom apartments rented for an average of $1,555 per month
- up one per cent over last year’s average of $1,540 per month. In addition, 1,053 two-bedroom apartments were rented for an average rent of
$2,193 per month – a one per cent increase over the 2009 average of $2,174 per month.
• There were 78 townhouse rentals in the Central districts, including 33 three-bedroom units, which rented for an average of $2,626 per month - down four per cent from
last year’s average of $2,725 per month.
TREB also listed figures for N, E, W districts but I did not include. - Cate
interested
Senior Member
cat Interested said:
cdr108
Senior Member
Eug
Senior Member
Mortgage Rule Change Q&A
Q: When must I apply in order to secure a 35-year amortization on a high-ratio mortgage or a 90% loan-to-value refinance?
A: To be safe, ensure that you are approved by Thursday March 17.
Be careful about making changes to your application after March 17 if those changes would require that your application be reapproved. Otherwise your mortgage could be underwritten under the new rules and may not close.
Q: How are pre-approvals affected?
A: The act of getting a pre-approval before March 17 does not guarantee you'll be approved for a 35-year amortization. That's because insured pre-approvals that turn live after March 17 will be subject to the new amortization limit of 30 years.
“Turn live” refers to the time when a borrower has signed a binding purchase agreement and submitted a full bona fide mortgage application with a specific closing date.
Q: How will the elimination of 35-year amortizations on high-ratio insured mortgages affect monthly payments?
A: The payment on a 30-year amortization is $34.72 higher for every $100,000 of mortgage, compared to a 35-year amortization. (This assumes a 4% sample interest rate and standard underwriting criteria.)
Q: How many people will be affected by the reduction to 85% loan-to-value on refinances?
A: Lowering the refinance LTV threshold to 85% likely impacts less than a tenth of all refinances (Src: TD).
For those affected, they’ll now be able to refinance an average of $17,228 less debt based on the typical Canadian home value. The average Canadian has $25,163 in non-mortgage debt (Src: TransUnion via WSJ).
In addition, we’re waiting to confirm how this change affects mortgagors with collateral charges over 85% LTV. In those cases, switching lenders at renewal requires a refinance. Thus far, the Finance Department hasn’t stated that it will allow exceptions to the 85% LTV refinance limit. This is a key point so we’re awaiting official confirmation from the Finance Department. We’ll report back shortly once we’re certain.
The 85% refi limit also handicaps peoples’ ability to refinance in the event of higher rates or falling home prices. If you’re a mortgage professional, ensure that you counsel clients about this possibility if they are buying a house with less than 15% down. If home prices tumble, some people won’t be able to refi to lower their payments.
Q: Can I still get 40-year amortizations?
A: Lenders not bound by insurance restrictions can theoretically offer any amortization they want, regardless of a borrower’s equity. That said, not many actually go to 40 years.
Q: Will 35- and 40-year amortizations still be available on conventional insured mortgages?
A: 35-year amortizations will still be available on conventional insured mortgages. However, we’ve heard that 40-year amortizations on conventional insured mortgages might be outlawed (but we haven't confirmed it). Currently, very few lenders still allow 40-year amortizations on prime conventional mortgages. Merix Financial is one example.
Q: What can people do if they want to refinance up to 90% after March 17?
A: A small number of niche lenders offer uninsured refinances to 90% LTV. As time goes on, expect additional specialty lenders to hit the market with second mortgages up to 90%. (There is good opportunity here for selective lenders who can manage default risk.) In all cases, the rates will be notably higher than insured mortgage rates (often 3-6 percentage points higher, or more).
Q: I have a HELOC now. Will it be affected by the new HELOC rules?
A: Lines of credit put in place before April 18 will generally be unaffected by the HELOC rule changes. Insured HELOCs will stay insured until they are discharged.
Q: Is 100% financing still available?
A: Essentially yes. The government’s rule changes did not eliminate one’s ability to borrow a down payment. That means borrowers can still get their 5% down payment from lenders who offer cash-back down payment programs. It is “interesting” that the government saw more risk in HELOCs (which have rigid qualifications and are backed by 20%+ equity) than in cash-back down payment products, which are effectively 100% LTV on closing day.
Q: When must I apply in order to secure a 35-year amortization on a high-ratio mortgage or a 90% loan-to-value refinance?
A: To be safe, ensure that you are approved by Thursday March 17.
Be careful about making changes to your application after March 17 if those changes would require that your application be reapproved. Otherwise your mortgage could be underwritten under the new rules and may not close.
Q: How are pre-approvals affected?
A: The act of getting a pre-approval before March 17 does not guarantee you'll be approved for a 35-year amortization. That's because insured pre-approvals that turn live after March 17 will be subject to the new amortization limit of 30 years.
“Turn live” refers to the time when a borrower has signed a binding purchase agreement and submitted a full bona fide mortgage application with a specific closing date.
Q: How will the elimination of 35-year amortizations on high-ratio insured mortgages affect monthly payments?
A: The payment on a 30-year amortization is $34.72 higher for every $100,000 of mortgage, compared to a 35-year amortization. (This assumes a 4% sample interest rate and standard underwriting criteria.)
Q: How many people will be affected by the reduction to 85% loan-to-value on refinances?
A: Lowering the refinance LTV threshold to 85% likely impacts less than a tenth of all refinances (Src: TD).
For those affected, they’ll now be able to refinance an average of $17,228 less debt based on the typical Canadian home value. The average Canadian has $25,163 in non-mortgage debt (Src: TransUnion via WSJ).
In addition, we’re waiting to confirm how this change affects mortgagors with collateral charges over 85% LTV. In those cases, switching lenders at renewal requires a refinance. Thus far, the Finance Department hasn’t stated that it will allow exceptions to the 85% LTV refinance limit. This is a key point so we’re awaiting official confirmation from the Finance Department. We’ll report back shortly once we’re certain.
The 85% refi limit also handicaps peoples’ ability to refinance in the event of higher rates or falling home prices. If you’re a mortgage professional, ensure that you counsel clients about this possibility if they are buying a house with less than 15% down. If home prices tumble, some people won’t be able to refi to lower their payments.
Q: Can I still get 40-year amortizations?
A: Lenders not bound by insurance restrictions can theoretically offer any amortization they want, regardless of a borrower’s equity. That said, not many actually go to 40 years.
Q: Will 35- and 40-year amortizations still be available on conventional insured mortgages?
A: 35-year amortizations will still be available on conventional insured mortgages. However, we’ve heard that 40-year amortizations on conventional insured mortgages might be outlawed (but we haven't confirmed it). Currently, very few lenders still allow 40-year amortizations on prime conventional mortgages. Merix Financial is one example.
Q: What can people do if they want to refinance up to 90% after March 17?
A: A small number of niche lenders offer uninsured refinances to 90% LTV. As time goes on, expect additional specialty lenders to hit the market with second mortgages up to 90%. (There is good opportunity here for selective lenders who can manage default risk.) In all cases, the rates will be notably higher than insured mortgage rates (often 3-6 percentage points higher, or more).
Q: I have a HELOC now. Will it be affected by the new HELOC rules?
A: Lines of credit put in place before April 18 will generally be unaffected by the HELOC rule changes. Insured HELOCs will stay insured until they are discharged.
Q: Is 100% financing still available?
A: Essentially yes. The government’s rule changes did not eliminate one’s ability to borrow a down payment. That means borrowers can still get their 5% down payment from lenders who offer cash-back down payment programs. It is “interesting” that the government saw more risk in HELOCs (which have rigid qualifications and are backed by 20%+ equity) than in cash-back down payment products, which are effectively 100% LTV on closing day.
CN Tower
Banned
Are you telling me that 500 sq. ft. condos rent for $1500?
My take on the new mortgage rules is that they will simply aggravate the already emerging trend of slower sales. Furthermore, I sincerely believe that the flood of new completions will result in substantially higher vacancy rates and lower rents. Overall I see a much weaker market ahead of us.
And for the record I would completely ignore TREB rental stats. Not only is their info suspect on its face but they don't represent a meaningful % of rental transactions in this city. If you want to see how the rental market is doing either talk to a landlord or read some 3rd party vacancy reports.
When looking for condos to rent recently, yes, we saw some 500 sq ft condos that rented for $1500 -- at Maple Leaf Square for example. Depressing isn't it? We ended up getting one in an older building that's almost 700 sq ft ... for $1500 all-in.
We were actually looking for 2 bdrm at the time. Good luck finding something decent downtown for $1500 -- we found some, but they were gross, nasty, bedbug-infested apartment buildings. For 2 bedroom, we ended up finding decent stuff in the $1800-$1900 range, so at that price point, it really makes sense to split the rent and go for the 2 bedroom. The problem though is finding them -- there's tons of one bedrooms to pick from, a lot fewer 2's.
We were actually looking for 2 bdrm at the time. Good luck finding something decent downtown for $1500 -- we found some, but they were gross, nasty, bedbug-infested apartment buildings. For 2 bedroom, we ended up finding decent stuff in the $1800-$1900 range, so at that price point, it really makes sense to split the rent and go for the 2 bedroom. The problem though is finding them -- there's tons of one bedrooms to pick from, a lot fewer 2's.
Last edited:
CN Tower
Banned
Actually more shocking than depressing. Frankly I am impressed. While I can appreciate the uniqueness of this project I don't see the appeal of the area at all. It's extremely congested.
It's depressing because I'm paying 
If I were the landlord, I'd likely be impressed.
But shocking yes; I was looking for 2 university students, and the other parents were adament they didn't want to go over $1500 but after two months of looking and sending them pictures, they agreed that they needed to up the budget if they wanted their daughter in a decent, safe place.
You can get better deals digging around on Kijiji or Craig's list, but after the nightmare we went through by doing that, I'd rather pay a few bucks more.
If I were the landlord, I'd likely be impressed.But shocking yes; I was looking for 2 university students, and the other parents were adament they didn't want to go over $1500 but after two months of looking and sending them pictures, they agreed that they needed to up the budget if they wanted their daughter in a decent, safe place.
You can get better deals digging around on Kijiji or Craig's list, but after the nightmare we went through by doing that, I'd rather pay a few bucks more.
cdr108
Senior Member
yes, there are some 500SF condos that rent for $1500/m, but i would say the majority would be closer to $1200/m.
rental rates have been pretty much stagnate for the past 10 years.
for the most part, i agree with you that the upcoming supply will suppress rentals from going up.
in addition, it's not like there will be more renters if they are priced out as RE agents suggest because they are usually renters before they'd be buying ... so in essence, the same group remains a renter - no flood of NEW renters.
and it's true, the majority of rentals are NOT done via MLS ... mostly private placement.