High-End Home Sales in Calgary to Continue to Rebound

 

A built-in coffee machine, here below the wine rack, adds a touch of luxury to the daily              

CP, The Canadian Press
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Published on: January 12, 2017 | Last Updated: January 12, 2017 12:04 AM MST  routine.

Supplied / Calgary Herald

 

Sotheby’s International Realty Canada says it’s expecting a buyers’ market for luxury homes in Calgary in the first quarter of 2017 following a lift in sales last year.

After declining 40 per cent year-over-year in 2015 due to the sudden plunge in oil prices, sales of homes worth $1 million or more rose 19 per cent, to 612 properties, in 2016.

The realtor released a report Wednesday that looked at sales of homes for more than $1 million in Calgary and three other cities — Toronto, Montreal and Vancouver.

It said high-end sales activity in Calgary stabilized last year as prices better aligned with buyers’ conditions. Sales of $1 million-plus single-family homes grew 22 per cent year-over-year to 548 properties. Nineteen luxury condo units sold for $1 million or more.

Toronto is poised to lead the country in high-end home sales for a third consecutive year, Sotheby’s Canada said.

It concluded 19,692 such properties were sold last year in the Greater Toronto Area — an increase of 77 per cent compared to 2015. Sales of homes worth more than $4 million in the GTA rose 95 per cent year-over-year to 290 properties.

In Vancouver, high-end home sales started off strong but slowed in the second half of the year as a number of government policy changes took effect. They included a one-per-cent tax on vacant homes implemented by the City of Vancouver and the B.C. government’s 15 per cent tax on foreigners buying homes in Metro Vancouver.

Those changes amplified a cooling in the Vancouver real estate market that started over the summer, Sotheby’s said.

Sales in Vancouver’s $1 million-plus market were down 34 per cent year-over-year in the second half of the year compared to the same period in 2015. But on an annual basis, sales of Vancouver homes worth $1 million or more were relatively flat last year, down one per cent year-over-year to 4,515 properties.

Luxury home sales were up 36 per cent year-over-year in the city, with 573 properties priced at more than $4 million trading hands.

The realtor says global turmoil — including Britain’s vote to exit the European Union and Donald Trump’s election win in the U.S. — injected uncertainty into global real estate markets last year.
Canada, which is regarded as a haven, has a low dollar and a strong real estate market, making it a desirable destination for real estate investment and immigration, the report said.

CMHC Hiking Insurance Premiums

By Robert McLister

Homebuyers with less than 20% down are going to pay more.

CMHC is hiking mortgage insurance rates for the third time in three years. Premiums are jumping up to 0.65 percentage points on the highest LTV mortgages, effective March 17, 2017. Here’s the new premium table:



But high-ratio hikes aren’t the only story. Premiums on mortgages between 65.01 and 80% LTV are soaring too.

At 80% LTV, the premium is almost doubling to 2.40%. That will push up interest rates among lenders who currently pay this premium for their customers in order to securitize the mortgage.

CMHC had a conference call this morning about the increases. Here were some takeaways:

• It says these premium hikes are due mainly to OSFI’s capital requirement changes, which took effect January 1.
• OSFI’s new capital requirements include a formula based on LTV, credit score, location and other things. Oddly, this formula disproportionately targets (increases the costs for) mortgages in the conservative 65.01 to 80% LTV bracket.
• Bulk insurance premiums have increased similar to the low-ratio transactional premiums, says CMHC.
• The insurer says it has communicated bulk pricing criteria to lenders (although the securitizing lenders I’ve spoken with cite considerable obscurity in bulk pricing, which has led many of them to transactionally insure their mortgages instead).
• Roughly two-thirds of CMHC’s business is in the 95% LTV category, said CMHC, and about 4% of its transactional insurance is used for low-ratio customers.

Steven Mennill, Senior Vice-President, Insurance, said that CMHC is “Not doing this to affect housing markets…” and doesn’t think it will have a significant effect on competition.

Mortgage finance companies would vehemently disagree. Higher premiums have already limited competition in the low-ratio market where MFCs must charge rates that are up to ¼ point higher on 80% LTV deals (compared to last fall).

Big banks, which don’t need to rely on insured mortgages for securitization purposes, now have more pricing power than ever—at least since the dawn of NHA-MBS. And no one should blame banks. They’re not writing these rules. But from a consumer standpoint, Joe Borrower is getting the shaft, which leads us to the legislated purpose of the National Housing Act:

“The purpose of this Act, in relation to financing for housing, is to promote housing affordability and choice, to facilitate access to, and competition and efficiency in the provision of, housing finance, to protect the availability of adequate funding for housing at low cost, and generally to contribute to the well-being of the housing sector in the national economy.” (emphasis ours)

 

The recent decisions by the Department of Finance, OSFI and CMHC appear to twist or flout these essential provisions of the National Housing Act.

Policymakers argue that such measures are warranted for the stability of the market. That’s a whole other debate, one that’s not well supported by any publicly available mortgage risk data (default rates, overall credit quality, equity levels, etc.).

Suffice it to say, Canada’s mortgage industry never required an unlevel competitive playing field to create stability. But that’s what these new premiums have now given us.

 

5 things about CREB® 2017 forecast

 

Jan 11, 2017Jan 11, 2017 crebnow Housing Market

What you should know about the year ahead for Calgary’s housing market
CREB® has released its annual economic outlook and regional housing forecast. But what does it all mean? CREB®Now takes readers through the numbers.
18,335
After posting successive sales declines in 2014 (25,552), 2015 (18,839) and 2016 (17,809), CREB® is forecasting MLS® activity in Calgary to rebound slightly in 2017. Citywide sales are expected to total 18,335 units, a three per cent gain over 2016, but 12 per cent below long-term averages. By category, detached sales are predicted to hit 11,550 in 2016, while attached and apartment sales will reach 4,002 and 2,783, respectively.

0.3
Small as it may seem, CREB® projected 0.3 per cent price growth for 2017 follows a much more significant decline in 2016 (3.84 per cent). CREB® credits overall growth to Calgary’s detached sector, where prices are expected to grow by 0.8 per cent. Prices in the city’s attached sector are predicted to increase by 0.3 per cent. Following a decline of 5.99 per cent in 2016, price declines in Calgary’s apartment sector are expected to moderate to just two per cent for the year.
$50-$55
With the relative health of Calgary’s economy dependant on the price of oil, much of what’s in store for the city’s real estate market hinges on where a barrel of crude is selling 2017 and beyond. Having started 2016 at $29.01 US, prices spent the rest of the year hovering between $40 and $50. Looking into 2017, CREB® expects prices to show more stability, fluctuating between the $50-to-$55 mark.
7.8
Calgary’s unemployment rate is predicted to decline in 2017 to 7.8 per cent after topping 10 per cent in the later stages of 2016. While this will not compensate for all the losses in the past year, softer unemployment rates should help prevent any further contractions in housing demand, said CREB®.
1,600
Job losses and higher unemployment levels mitigated the number of newcomers to the city last year. Following a five-year period that saw annual net migration numbers in excess of 20,000, net migration posted a net loss of 6,527 people in 2016, according to the City of Calgary. In 2017, net migration is expected to post a modest increase of 1,600.