Canada Mortgage and Housing Corp., in a report accompanying its quarterly earnings, said this week that mortgage rates near historic lows and improvements in employment have led to fewer claims under its mortgage insurance business despite higher home prices.

CMHC insurance protects lenders against default.

The agency said it expected fixed mortgage rates to stay relatively flat for most of the year, with the five-year posted rate at between 4.1 per cent and 5.6 per cent, then increase slightly in 2012, while variable rate mortgages would remain near historically low levels.

But prices of homes shown on the Multiple Listing Service are expected to grow slightly going forward because the resale market is likely to stay in balanced territory.

Meanwhile, CMHC said changes to mortgage rules introduced by the federal government earlier this year played a part in reducing mortgage interest payments and allowed Canadians to build equity in their homes faster.

Canadians are finding it easier to pay off their mortgages, with arrears levels improving and the volume of mortgage insurance claims lower than expected.

In March, the federal government put through new rules that reduced the maximum amortization period to 30 years and cut the maximum amount Canadians can borrow to 85 per cent of the home’s value.

After the changes, refinancing activity fell by nearly 40 per cent, which means fewer Canadians took on more debt.

Source: Mary Gazze, The Canadian Press

It was not the riots that did it. Instead it was an adjustment in Vancouver’s score for transport infrastructure, “reflecting recent intermittent closures of the key Malahat highway that resulted in a 0.7 percentage point decline in the city’s overall livability rating,” said the report.

The June riot came too late in the year to affect livability, the report said, but could lead to further downward revisions of Vancouver’s overall score in future surveys.

Overall, there was only a difference of 0.2 points between Melbourne (97.5) and Vancouver (97.2). The top three cities stacked up equivalent points for the indicators of stability, health care and education, with Vancouver scoring much higher than Melbourne and Vienna for culture and environment (100 as opposed to 95.1 and 94.4 respectively). The only place it stumbled was in terms of infrastructure — scoring 92.9 in the face of a perfect score of 100 by the other two cities.

Seven of the top ten cities are in Australia and Canada. Toronto ranked fourth and Calgary fifth.

The Economist Intelligence Unit’s livability rating is an annual survey aimed to quantify “the challenges that might be presented to an individual’s lifestyle in any given location, and allows for direct comparison between locations.”

Here are the world's 10 most livable cities, according to the EIU:

1. Melbourne, Australia

2. Vienna, Austria

3. Vancouver, Canada

4. Toronto, Canada

5. Calgary, Canada

6. Sydney, Australia

7. Helsinki, Finland

8. Perth, Australia

9. Adelaide, Australia

10. Auckland, New Zealand

Source: Medha, Vancouver Sun

Among the points in the guide - it's called Buying a Home in British Columbia: A Consumer Protection Guide - that the HPO suggests buyers should do, are the following:

1. Do you want a ready-to-move-into home or do you want to design every detail?

2. No matter which type of new home you are buying – a brand new custom built home or a spec home – be sure that you have a written contract that lists exactly what work will be done and when, what you are buying, what you will be charged and when you will pay. Ensure that the contract includes coverage for new home warranty insurance. Review the contract with a lawyer.

3. Make a list of the household's needs and wants to guide the search for a home.

4. Make a realistic budget for the home purchase, including the down payment, mortgage, closing costs and moving costs.

5. Check out the builder, including licensing, past references and professional organization affiliations.

6. Consider the option of having the home inspected by a home inspector or engineer.

7. When reviewing the meeting minutes for a strata lot you are considering buying, look for the minutes pertaining to all of these types of meetings:

• strata council meetings
• annual general meetings
• special general meetings, and
• any additional meetings such as information meetings.

8. And always use a qualified Realtor who is experienced in the type of home you are considering buying.

If you would like advice on your specific requirements, I would be happy to assist you.

According to a TD Canada Trust survey released this week, most of B.C.'s repeat buyers see large or luxurious as the way to go.

They're also moving more than other Canadians, more than even the survey's authors expected.

"My personal experience as a mortgage specialist is that most of my clients are moving to fit a growing family or downsizing as empty nesters," TD Canada's manager, residential services, Barry Rathburn said in an interview about the company's Repeat Home Buyers Report.

"A growing family is more concerned with the features of a home and they're not willing to compromise."

According to the report, 56 per cent of repeat buyers in B.C. are moving to larger or more luxurious homes, with 25 per cent saying they're moving because they've outgrown their old home, 10 per cent saying they've always wanted a bigger home and can now afford it, and 21 per cent saying their next home will be smaller but have more luxurious features.

As well, 51 per cent of B.C. repeat buyers are moving earlier than they thought they would, while 22 per cent who had no plans to move are nevertheless back on the house-hunt.

The report concluded that B.C. residents love to move often, with 39 per cent having owned more than four homes compared to 29 per cent nationally. Twenty-two per cent have owned five or more homes throughout their lives, compared to 15 per cent nationally. Rathburn noted that most repeat buyers have equity in their previous homes, making the move to a larger or more luxurious home a lot more affordable.

"To me it's not a surprise," added Rathburn, who is also a mortgage specialist in Nanaimo. "Generally speaking, everybody sets out on a househunting trip with dreams of grandeur tempered by affordability, mortgage approval and down payment requirements. The key is using your equity to upgrade."

The report said B.C. buyers are also the most likely in Canada to say investment opportunities (26 per cent versus 21 per cent nationally) and market conditions (28 per cent versus 21 per cent nationally) played a factor in their decision to buy another home.

Rathburn said that while their research indicates British Columbians aren't staying in one home as long as other Canadians, it's something worth reconsidering because of the costs associated with a move. "It might be more affordable to renovate."

Results for the survey were collected in an online survey, with a total of 1,025 completed surveys, including 131 in B.C., June 16-28 from people who have either purchased a home that was not their first home within the past two years, or plan to purchase a home that's not their first home within the next two years.

Source: Brian Morton, Vancouver Sun

Royal Bank of Canada, the country’s largest bank, kicked off the increases on Tuesday, raising the rates on its five-year variable closed residential mortgages by 0.20 percentage points. As a result, the price of its current special offer rate is now prime minus 0.45 per cent. Bank of Montreal followed suit hours later with a 0.15-percentage-point hike. The prime rate is currently 3 per cent.

The profit margins that banks are earning on variable rate mortgages have become extremely thin. That’s becoming more of a problem for lenders because there are already signs that Canadians are piling back into variable-rate, as opposed to fixed-rate, mortgages. The trend is being fuelled by diminishing expectations that the Bank of Canada will raise interest rates significantly in the near future, expectations that fell further after the U.S. central bank recently signalled it intends to keep rates at rock-bottom levels well into 2013.

The moves by RBC and BMO signal that they are choosing profits over market share. RBC tends to lead the pack on mortgage-rate changes and some other rivals are likely to follow suit. But some might decide to keep rates low with the hope of luring new customers who may eventually lock in to more profitable fixed-rate mortgages.

A spokesperson for RBC said that mortgage rates are tied to the bank’s funding costs, which change from day to day. “Our long-term funding costs have gone up considerably due to global economic concerns, and while we have held off in passing on these rate changes to our clients, it is now necessary for us to increase this mortgage rate,” the spokesperson said.

Alyssa Richards, CEO of Ratehub.ca, said banks tend to move their variable rates higher as they near the end of their fiscal years to help pad their profits and meet targets. With the fourth quarter under way, she said the timing shouldn’t come as a surprise.

“You start to see some tricky stuff going on around this time of year,” she said. “The takeaway for a buyer is that you should probably get a pre-approval if you’re in the market, because they’ll lock you in at a rate for up to 120 days.”

Source: Tara Perkins and Steve Ladurantaye, Globe and Mail

The report, which noted 4,839 new multi-family units sold during the quarter, said local and Asian investors were active in the market, absorbing "signature" highrise projects in Vancouver, Burnaby and Richmond.

Meantime, "end users were active at new, value-priced, low-rise offerings and townhouse projects in New Westminster, Burnaby, Coquitlam and South Surrey," said MarketShare.

"The quarterly results surpassed the best quarter of last year and bring year-to-date sales to 7,366 units or 82 per cent of the total volume of sales in 2010," said Scott Brown, Collier International's senior vice-president of residential project marketing and sales.

"We are expecting the momentum to continue through the fourth quarter after the expected summer lull, provided more recent concerns regarding the U.S. economy do not negatively impact consumer confidence in a significant way."

In the second quarter, 56 per cent of sales of new multi-family homes were at highrise projects, with 27 per cent and 17 per cent at low-rise and townhouse projects, respectively.

Source: Vancouver Sun

The latest Housing Trends and Affordability report released yesterday by RBC Economics Research once again singled out the British Columbia city as the least affordable in the country.

"Vancouver's housing market is without a doubt the most stressed in Canada and is facing the highest risk of a downturn," said Craig Wright, senior vice-president and chief economist with RBC.

[However, please note that there are specific areas, namely Vancouver, West Vancouver and Richmond, where high sales prices have accelerated the overall figures].

The report found most housing markets in the country are still reasonably affordable or merely slightly unaffordable with the costs of homeownership hovering around historical norms.

Country-wide, the percentage of household income required to own the benchmark detached bungalow used in the report increased 1.7 percentage points to 43.3%. The higher the reading on the the affordability measure, the more it costs to own a home based on going market values.

For a condo, it went up 0.8 percentage points to 29.2% and for a two-storey home, it increased 1.8 percentage points to 49.3%.

The report notes that since the beginning of the year, increases in housing costs in the Greater Vancouver Area have directly accounted for up to one-third of the nationwide changes.

Other markets such as Montreal, Ottawa and Toronto also became less affordable in the quarter. The benchmark measure for a detached bungalow increased in all three cities, with Toronto's bump of 2 percentage points pushing it over the halfway mark to 51.9%.

Montreal was up 1.4 percentage points to 42.6% and Ottawa was up 1.3 percentage points to 41.2%.

The measure also increased in Calgary and Edmonton, which were both up 0.6 percentage points to 37.1% and 33.8% respectively.

In contrast to these increases, the costs of owning a detached bungalow in [the city of] Vancouver shot up 10.4 percentage points to reach the 92.5% level.

The silver lining, Mr. Wright suggests, is that due to recent stress in global financial markets, an interest rate hike at the federal level is no longer expected until the middle of 2012, according to RBC's projections.

"Housing affordability in Canada may not deteriorate as quickly or by as much as we previously expected," Mr. Wright said.

However, he said the future for housing prices remains uncertain, as the delay in the interest rate increase could prompt buyers to remain active for longer, extending the current upward momentum in prices.

Source: Christine Dobby, Financial Post

Desjardins had previously expected the central bank to raise interest rates in December this year, and its new call puts them among the most bearish among Canadian primary dealers on rate expectations.

The Fed is likely to be on hold until 2014, well beyond its recent pledge to keep interest rates low for at least another two years, Desjardins said.

“We just expect the recovery to be slow through 2012 and 2013,” said Jimmy Jean, an economic strategist at Desjardins Capital Markets in Montreal.

Also, the Bank of Canada might be reluctant to push its interest rates too far above U.S. levels, because the rate premium would drive the Canadian dollar even higher, putting more pressure on Canada’s export-oriented economy.

“The Fed’s policy will effectively take the BoC’s monetary policy hostage via the dollar and trade vulnerabilities. We don’t expect the BoC to be able to move until the middle of 2013 as a result,” Jean said, adding he now expects Canada’s economy to grow 2.1 percent this year, compared with a previous view of a 2.7 percent gain.

Source: Thomson Reuters 2011

UBS Wealth Management recently released its latest Prices and Earnings report, which details the truly most expensive cities on the planet. Based on comparing average wages against the cost of a "basket of goods" which includes things like the cost of a three-room apartment, public transportation, etc.

In rankings of price levels excluding rent, Toronto ranks ninth and Montreal 17th.

According to UBS, the other top 10 most expensive cities are (#1) Oslo, (#2) Zurich, (#3) Geneva, (#4) Copenhagen, (#5) Stockholm, (#6) Tokyo, (#7) Sydney, (#8) Helsinki, and (#10) Singapore.

Vancouver, Canada's most bubbly housing market, wasn't among the 73 cities studied. (When I first called UBS to ask about Vancouver, the folks that could help me were at lunch, in Zurich, the world's second-most expensive city.)

In terms of gross wages, Toronto ranks 14th and Montreal 15th. And by domestic purchasing power based on gross hourly pay, Montreal ranks 11th and Toronto 15th.

In its last study, Toronto ranked 8th and Montreal ninth among the top 20 cities in terms of expense.

To read the full report, please click here.

Source: Michael Babad, Globe and Mail

Construction costs in Switzerland are more than 25% higher than anywhere else in the world, according to the annual International Construction Cost Comparison Report released by built asset consultancy EC Harris. 

The annual report, which benchmarks the construction costs in 55 countries across the globe using UK prices as a baseline, found that Europe continues to be the most expensive continent in which to build, providing eight of the top ten entrants in the final league table.

According to the report, the price of construction in Switzerland is 71% higher than in the UK where costs are now more than 20% below their peak price in mid-2008. Overall, the UK is now tied with Bahrain as the twelfth most expensive place in the world to build, up four places from 2010 where it finished in sixteenth place. However, this has been largely due to falling costs in other countries rather than rising prices in the UK where construction costs have continued to drop over the last twelve months, with contractors prepared to work for ever slimmer profit margins to try and secure work in an increasingly competitive arena.

Denmark retained its position as the second most expensive place to build, closely followed by its Scandinavian neighbour Sweden. Australia and Canada were the only non-European markets to make it into the top ten although Bahrain just missed out, finishing in twelfth place overall alongside the UK. India and Sri Lanka were tied as the cheapest countries in which to build with construction costs estimated to be 72% cheaper than the UK baseline.

Average construction costs in the US are around 10% lower than in the UK although as the economic recovery progresses these costs are likely to rise. Costs in Canada have dropped since 2010 and are now on a par with the UK.

Mathew Riley, head of cost and commercial at EC Harris, said: “It’s no surprise to see that Switzerland and the Scandinavian countries are the most expensive places to build as high labour costs and the need to import materials are all combining to drive prices up. The interesting element is that we’re now starting to see signs that developing nations are closing this gap as they continue to invest in significant new-build programmes to fuel further GDP growth.”

Ten most expensive countries in the world to build:

1 - Switzerland

2 - Denmark

3 - Sweden

4 - Ireland

5 - France

6 - Australia

7 - Germany

8 - Austria

9 - Belgium

10 - Canada

CREA is now predicting 450,800 sales in 2011 which is just under a 1 per cent increase from a year ago. The group had been forecasting a decline of 1 per cent. Sales are expected to drop less than 1 per cent in 2012.

Prices in Vancouver continues to affect the country as they helped pushed CREA’s forecast for the average sale price in 2011 to $363,500, a 7.2 per cent increase from a year ago. This was also an increase from a previous forecast. Next year prices are expected to be flat.

The group noted long-talked-about increases in interest rates have failed to materialize in the market.

“While there had been some talk of potential interest-rate increases, that hasn’t happened,” said Gary Morse, president of CREA. “In fact, rates have actually come down, and are now expected to remain low for the remainder of this year and into 2012.”

Doug Porter, deputy chief economist at Bank of Montreal, said the housing market just seems to keep surprising everybody.

“In a world seemingly awash in negative economic surprises in 2011, one positive surprise has been the resiliency of Canada’s housing market,” said Mr. Porter, adding few analysts were predicting the kind of price increases the market has seen.

“Canadian housing remains surprisingly robust, thanks to still low interest rates and solid job growth. While the recent financial market turmoil may temporarily weigh on activity, sales should ultimately find support from continued exceptionally low borrowing costs.”

Phil Soper, chief executive of Royal LePage Real Estate Services, said his company’s recent forecast was for a 2 per cent decline in sales and a 3 per cent increase in price for 2011. He doesn’t anticipate that changing.

“I think we’re going to start to see it’s not so much the strength of the market but the weakness last year. The market had run out of steam at this point last year,” Mr. Soper said. “I think we are seeing a more normal curve to the market, with the exception of the Vancouver market.”

Source: (in part) Garry Marr, Financial Post

If you are thinking of listing your home or would like some advice, please contact me. I would be happy to help. Vancouver properties for sale.

The Canadian Real Estate Association said the national average price for homes sold in July 2011 stood at $361,181, which is the lowest level since January. In June, the average price was $372,700. Despite the slowdown, prices have nonetheless gained 9.3 per cent in the past 12 months.

"Earlier this year, the national average price was being skewed upward by sales in some expensive Vancouver neighbourhoods, but this factor is now diminishing,” CREA's chief economist Gregory Klump said. “Upward skewing of the national average price is also shrinking due to overall sales trends in Vancouver, and most recently in Toronto."

The pullback was expected, as most economists have been forecasting for months that prices and sales will moderate somewhat through 2011 after an exceptional run following the recession that ended in 2009.

"Sales should ultimately find support from a continuation of exceptionally low borrowing costs," Bank of Montreal economist Doug Porter said in a note Tuesday morning.

Sales activity, meanwhile, was flat on a monthly basis (up by less than one per cent) but it came in 12.3 per cent above national levels reported in July 2010. The large gain is a bit misleading because it came against an oddly low comparison point: Sales activity in July 2010 was the lowest it's been since 2002.

In a separate release Tuesday, CREA updated its forecast for the housing market as a whole. The agency now expects 450,800 homes to change hands across Canada this year, an increase of less than one per cent from their last forecast in May.

Sales are forecast to then slip to 447,700 units in 2012.

CREA also expects the average price of a sold home will be $363,500 through 2011 as a whole. That's slightly higher than the July figure, but well below some of the monthly averages seen so far in 2011.

Source: CBC News