This is just kind of sad if it’s true, an analyst says that the associated fees for buying and selling real estate (commissions, taxes, legal costs and fees) make up a stunning 1.9% of GDP.
That’s more than agriculture, fishing, forestry and hunting combined.
Doyle points out that the U.S. was relying big time on home ownership transfer fees in 2005, when its real estate market peaked. But even then, those fees made up only about 1.5 per cent of U.S. GDP. Now, years after the U.S. housing market crash, transfer fees make up less than one per cent.
In Canada, upcoming data will likely show those fees have already started to fall, as the number of home sales across the country fell in June by the most in seven years.
Doyle says Canada’s increased reliance on real estate fees can be blamed on years of ultra-low interest rates, worsened during the oil price slump when the Bank of Canada cut rates even further.
“I think they felt that the lesser of two evils in that situation was to cut interest rates,” Doyle said.
But that fix has helped put Canada in another tricky situation, where the economy relies to an unusual extent on home transactions. That could have particularly negative consequences as the central bank begins to raise rates again.
“The drag on the economy that’s going to flow from [higher rates], I think, will prove to be much more severe than it’s been in the past,” Doyle said.
Read the full article here.
Well it’s been a year since the BC government brought in a ‘foreign buyer tax‘ in the Vancouver metro area. How’s that affected the market?
“The public perception is that it hasn’t brought down prices and has had no effect,” said Simon Fraser University professor Josh Gordon, a political scientist in the university’s school of public policy. “But the slowdown in price increases is a positive.”
Even before the tax was implemented, Mr. Gordon said it was unlikely to have a huge impact since it was not targeting all foreign money, much of which comes in with new immigrants who are not affected by the tax.
He and others have always said that the province – or country – would need to add many more measures: more investigation into the sources of money coming into the country; more rigorous pursuit of people avoiding capital-gains tax on their real-estate transactions; a more comprehensive tax that targets people not paying income-tax in Canada.
Mr. Gordon believes that, if the lack of dramatic impact from the tax proves anything, it’s that people in Vancouver have a profound belief that the market will continue to rise.
Read the full article over at the Globe and Mail.
The Canadian Mortgage and Housing Corporation keeps on giving the national real estate market it’s worst possible rating. You can probably guess which cities get singled out as the most at risk:
CMHC’s valuation is part of its quarterly Housing Market Assessment, something the Crown corporation calls an early warning system, alerting Canadians to areas of concern developing in housing markets so that they may take action in a way that promotes market stability.
In terms of the 15 individual markets studied, CMHC said it saw strong evidence of overall problematic conditions in Victoria, Vancouver, Saskatoon, Hamilton and Toronto – the same five markets singled out a quarter ago.
CMHC defines problematic conditions as imbalances in the housing market that occur when overbuilding, overvaluation, overheating and price acceleration, or combinations of those issues exceed historical norms.
Read the full article here.
New government, new housing mandate.
In your role as Minister of Municipal Affairs and Housing I expect that you will make substantive progress on the following priorities:
- Partner with local governments and First Nations to develop a community capital infrastructure fund to upgrade and build sports facilities, playgrounds, local community centres, and arts and culture spaces.
- Through partnerships with local governments, the federal govenrment, and the private and not-for- profit sectors, begin to build 114,000 units of affordable market rental, non-profit,
co-op, supported social housing and owner-purchase housing.
- Create new student housing by removing unnecessary rules that prevent universities and colleges from building affordable student housing.
- Amend the Residential Tenancy Act to provide stronger protections for renters, and provide additional resources to the Residential Tenancy Branch.
- With the Minister of Finance, deliver an annual renter’s rebate of $400 dollars per rental household to improve rental affordability.
- Work in partnership to develop a homelessness action plan to reduce the homeless population through permanent housing and services. As part of the plan, conduct a province-wide homelessness count.
- Work with the Minister of Finance to address speculation, tax fraud and money laundering in the housing market.
- As the Minister responsible for TransLink, support the Mayors’ Council 10-Year Vision for Metro Vancouver Transportation by funding 40%of the capital costs of every phase of the plan, in partnership with all levels of government.
We suspect many people reading here are disappointed that Eby isn’t the housing minister and are curious to see how that second to last point turns out. You can read the full letter here.
YVR pointed out this article by Rob Mclister about the OSFI B-20 bombshell:
The new OSFI’s stress test rules will make 20% of the mortgage market not qualify or they will have to reduce their mortgage by 18% to qualify. That is before recent and future mortgage rate increases are factored in.
Roughly 80% of new big bank lending in the richly valued Toronto and Vancouver markets is low-ratio mortgage lending
OSFI’s stress test, as proposed, would slash buying power for prime buyers by roughly 18%
For non-prime borrowers, qualifying rates would immediately rocket into the 6% to 7% range
Read the full article here.