Category Archives: debt

Negatives for real estate

Yvr2zrh shared this comment:

Wow. Quite a lot of negatives for real estate values.

1.) If you live outside Vancouver and keep an apartment empty there, you now have a very punitive tax. Total will be 3% by 2019 (only 0.5% provincial in 2018 as a bit of a leeway to allow people to sell).

2.) FBT @20% – pretty good. Big tax – starts immediately. Wow . More people will get caught again. Deals will die. Also if property is over $3M – this will make it 25% for a foreigner to buy a Van West house. Then they have to pay 3% per year ($90K?) to leave it empty. Game over.

3.) The 2% spec tax – Strange name – it’s more of an absentee owner / empty home tax. It’s pretty sizeable. It’s going to be strange but somehow I think they are going to force it onto certain “principal residences” i.e. students, 10-Year visa people – who don’t qualify for really being a resident. Then – if they really pay tax in BC there is a tax credit. Good system.

4.) Full reporting of pre-sale transactions for tax purposes. I suppose that may help but you need to require a tax withholding for non-residents because otherwise – they just won’t pay.

5.) Unveiling all the hidden ownership – starting with collecting on new transactions and forcing existing transactions to be unveiled.

So – I would say that “Housing for Housing” has been supported and properties for non-residents etc – – that will be tough. What about all the Okanagan properties owned by Albertans – – It’s going to be interesting to see how many people bail!!!

Mortgages getting more expensive

Southseacompany shared this article, looks like everyone’s mortgage is going to get more expensive:

The Bank of Canada raised its benchmark interest rate to 1.25 per cent Wednesday and signalled that, barring certain risks, more hikes are likely in the rest of the year. That’s creating an unusual situation for Canadians: for the first time in years, those renewing mortgages will be faced with higher rates and an increase in payments.

Even before Wednesday’s decision, five of the country’s largest banks hiked five-year fixed rates 15 basis points to 5.14 per cent last week. (CIBC is still offering 4.99 per cent.) In a country where consumers have grown accustomed to low rates, and where households are burdened with record levels of debt relative to income, this kind of change is worth noting. A recent survey published by insolvency trustee MNP Ltd.found 48 per cent of Canadian respondents were $200 or less away from being unable to fulfill their monthly financial obligations, an eight point increase since September.

Read the full article over at Macleans.

Tougher to get a mortgage in 2018

In the new year we’ll see a ‘stress test‘ added to all new uninsured mortgages, are you ready for that?

The Office of the Superintendent of Financial Institutions (OSFI), Canada’s banking regulator, confirmed earlier today that there will now be a qualifying “stress test” for all uninsured mortgages, affecting consumers with downpayments of 20 percent or more.

Under current housing rules, only borrowers with a downpayment of less than 20 percent require mortgage insurance. This category of borrowers are already subject to a mortgage “stress test” that was introduced back in July 2016, amidst concerns about rising household indebtedness.

Right now, if you’re applying for a mortgage with a downpayment of 20 percent or more, the lender will assess if your financial situation is robust enough to afford a five-year mortgage qualifying rate, which currently sits in the range of 4.64 to 4.89 percent.

Under the new rules, OSFI will require that lenders use that same five-year mortgage rate plus two percent — essentially you’ll need to have income that qualifies you to afford an interest rate on a home loan of roughly seven percent.

Dave Madani says this is equivalent to a 17% reduction in the maximum mortgage people will be able to qualify for. Read the full article over at Vice.

Flipper sues buyer who sold at a loss

Here’s a Vancouver story if ever we saw one: A Flipper is suing a buyer who lost half a million dollars selling their condo at a loss.

The industry insider who tipped us off feels that this will end up being a nightmare situation for both Collins and Schomaker.

“When the buyer finds out that the property is now in the middle of a lawsuit, they will walk away and the sale will fall through,” they told ThinkPol. “Prices in West Vancouver keep falling, and seller will be lucky to even get $2 million in 2018. I expect both the flipper and the eventual buyer to lose a lot of money.”

The insider blamed the real estate industry’s unethical practices for putting many working Canadians into a tough financial situations.

“The sad part for me is ordinary Canadians are falling prey to number manipulation by the industry trying to keep up the perception real estate prices can only go up,” the whistleblower said. “The amount of deception, corruption and outright fraud in the industry is appalling and there is so much secrecy around the process of purchase and sale that the public is kept in the dark on just about every aspect of it.”

Read the full sordid tale over at ThinkPol.

Rate hikes in 2018

Southseacompany points out this article in the Financial Post warning of ‘three or more‘ rate hikes next year.

Investors are assigning a 20 per cent chance of an increase at the decision Wednesday, with a statement to be released at 10 a.m. Ottawa time. Only four of 26 economists surveyed by Bloomberg News expect Poloz to increase his 1 per cent benchmark rate, with all major Canadian banks expecting a pause.

Central bank policy makers — who raised borrowing costs for the first time in seven years in July and September — are handling the normalization of policy very carefully. By their own measure, interest rates are still a full 2 percentage points below what they would consider “neutral” but the Bank of Canada is wary of raising borrowing costs too quickly for fear of inadvertently triggering another downturn.

Read the full article here.