Costs of renting vs buying should be reviewed;

 
RENTING
Current rent = $1800 per month = $21,600 annually that renter will never see again
Current rent = $1200 per month = $14,400 annually that renter will never see again

BUYING
A mortgage of $250K = $1181* in mortgage payments monthly ($7,336  year 1 interest payments – this number decreases as years go by, good,  and also about ½ of the lower rent figure above, and $6836 in principle amount repaid annually and this number increases as years go by- good)

A mortgage of $300K = $1418* in mortgage payments monthly ($8803 in first year interest payments –$8203 in principle amount repaid)
A mortgage of $400K = $1891* in mtg monthly ($11,738 in first year interest paid, and $10,954 in principle amount repaid)

(*using today’s 5 yr fixed rate and 25 year amortization)

Of course there are other costs that must be taken into account such as;

·         Property taxes

·         Maintenance fees

·         Upfront purchase costs – 5% minimum down payment, and approx. 1.5% for legal fees, land transfer tax (% of purchase price)

BUT in general, the costs work out much in favour of buying if a client plans on living in the home for a while - especially with today’s very low mortgage rates!



CALL / GET IN TOUCH WITH ME FOR ALL YOUR REAL ESTATE NEEDS.

CHABA

chaba@ihouseu.ca

Downtown Toronto condos: Signs of life

Some Toronto realtors are seeing an unexpected surge in condo buyers scouring the market post Christmas and the return of a phenomenon not seen in months — bidding wars.
“I was shocked,” says ReMax realtor Peter Krpan who advised one couple, first-time buyers, that the softening condo market meant they could take their time and bid low on almost any downtown unit they wanted.

Instead, the couple found themselves outbid this month on their first choice, an 800-square foot condo listed for $324,000 on Queen’s Quay.

Their “backup” — an older, 660-square-foot condo on Victoria St. that had been on the market for 71 days — suddenly had three bidders and was gone before they could even put in an offer.

“I thought, ‘This can’t be happening. This isn’t in keeping with what we’ve been seeing the last few months at all,” says Krpan.

After a dramatic softening in sales and prices that started last spring and was exacerbated by tighter mortgage lending rules that left many first-time buyers on the sidelines, some Toronto realtors are seeing some signs of life in a market that, by December, was virtually dead.

Bidding wars have also broken out the last two weeks in some prime Toronto neighbourhoods where the inventory of houses for sale remains low, such as the west-end Junction Triangle and the east end Beach.

Even the well-supplied condo market is facing inventory issues, say veteran condo realtors. It’s not that there’s a shortage of units, per se, especially given the recent condo boom and the dramatic softening of demand just since spring.
It’s that too much of what’s for sale now are small, poorly laid-out units, aimed at investors, rather than the average buyer, realtors say.

“I think people who have been standing on the sidelines are realizing that we’re not having a crash. We’ve had a lot of clients come out of the woodwork the last couple of weeks,” says downtown realtor Joanna Kalbarczyk.

Kalbarczyk’s client, a young woman, paid over the $323,000 asking price for the older condo on Victoria St. that had three offers. She declined to say how much more because the deal is still being finalized.

Realtors, who have been anxiously awaiting the normally busy spring market, are hopeful this surge means the market is in pause mode — as it was in the nine months after the 2008 recession — rather than a continued decline.
But no one really knows.

Which is part of the reason ReMax has undertaken its first Canadian Homebuying Trends Survey, trying to gauge who’s buying and how that could impact the overall housing market.
The survey, released Tuesday, notes that “purchasing patterns have evolved, with a more conservative, fiscally-responsible purchaser moving to the forefront,” says Gurinder Sandhu, executive vice president and regional director of ReMax Ontario-Atlantic Canada.

First-time buyers are “experiencing a period of readjustment,” says Sandhu, in light of tougher lending rules from Ottawa that cut maximum amortizations from 30 to 25 years and put restrictions on the types of properties the Canada Mortgage and Housing Corp. will insure where buyers don’t have a 20 per cent down payment.

First-time buyers will account for about 30 per cent of purchasers over the next two years, notes the report.

While the report doesn’t break down local markets, it too confirms a significant shift to the downtown core over the suburbs in Ontario, as confirmed by a TD Economics report, also released Tuesday.

That report, by TD economist Francis Fong, notes that double-digit job growth in downtown Toronto from 2006 to 2011 has followed in the footsteps of all those folks who are now opting to live downtown, rather than in the suburbs, close to transit lines and amenities in what’s now become a vital, vibrant world-class city.

Report: Condo prices to rise in 2013 — except in Vancouver

TORONTO – A new condo report suggests first-time buyers, retirees and population growth will continue to fuel demand and price growth for the compact living spaces over the next few years.

The study by Genworth Canada found that average condo resale prices are expected to rise next year in seven of the eight metropolitan centres studied.

Prices in Toronto are projected to jump 2.5 per cent to $312,352.

The highest increase however, is expected to be in Edmonton where prices could rise 3.2 per cent.

Vancouver is the only city where condo prices are expected to drop, by two per cent to $348,152.

The report stands in contrast to warnings from economists and officials that the condo market in some hot markets is reaching bubble territory that could soon burst.

The Bank of Canada and federal Finance Minister Jim Flaherty have cautioned Canadians repeatedly to moderate borrowing on real estate, declaring household debt to be the domestic economy’s number one enemy.

The central bank noted certain segments of the housing market that have a persistent oversupply — such as condos in Toronto — face a higher risk of a price correction.

Genworth — which earns revenue from selling mortgage insurance — notes that rising prices for single-detached homes are driving first-time buyers to condos, but retirees also continue to prop up demand.

It suggests that the population is expected to grow in all eight cities studied over the next few years, while employment growth and low interest rates should also support the market.

“This data corroborates our view that the demand for condos in Canada, particularly at the price-point we insure, is well supported by our economy and our population,” said Brian Hurley, chairman and CEO of Genworth Canada.

“For those seeking to own a home affordably in urban centres, condos remain a good option.”

The Genworth Canada report, produced with the Conference Board of Canada, reviewed trends in Quebec City, Montreal, Ottawa, Toronto, Calgary, Edmonton, Vancouver and Victoria.

Census figures for 2011 released in February show multi-unit dwellings — a category that includes condominiums — making up roughly half of all new housing stock, a category traditionally led by detached homes.

The numbers also indicate that Canadians are flocking to urban centres. Toronto’s population jumped more than 17 per cent over the previous census period in 2006.

A recent CMHC report said housing starts and home sales have been strong in 2012 — particularly when it comes to multiple-dwelling units such as townhouses, condos and apartments — but will soften moderately in coming months into 2013.

Condo boom doesn't mean Toronto housing bubble: RBC

TORONTO - A new report wants to burst the idea of a Toronto housing bubble.

Yes, condo sales and construction are booming, but the Royal Bank of Canada report says there is no housing bubble because the city's number of new housing units is in line with demographic needs.

The Greater Toronto Area sees an influx of close to 100,000 people each year.

That translated to approximately 38,000 new households per year from 2006 to 2011, according to RBC and Statistics Canada data in the report.

One constraint to urban development is the Ontario government's plan to handle growth and development in the Greater Golden Horseshoe, which is known as "Places to Grow" and seeks to curb urban sprawl.

Faced with the task of accommodating the 38,000 new households, new housing in Toronto has nowhere to grow but up.

May 2012 saw a record 44,100 condos and apartments under construction, as well as 6,200 multiple units, which are detached and row houses.

The report's findings also aim to quell fears that scores of empty condominiums are piling up.

"Concerns that large numbers of newly built condo units are sitting empty are simply not supported by the statistics," the report, released Tuesday, says.

The report says approximately 7.5 per cent of the condo units completed in the previous 12 months are unoccupied, and estimates that unoccupied units represent close to 0.2 per cent of the stock of multiple units. Both figures are less than numbers from the 1980s when Toronto saw a housing bubble burst.

While investors represent a large share of condo buyers, concerns about property "flipping" might be overblown, the report adds.

Canada Mortgage and Housing Corporation reported last fall that only 10 to 15 per cent of new condos are listed for sale within 12 months of registration.

Tuesday's report says the majority of condo investment properties are actually helping to fill a gap in the rental market.

"The biggest risk that we see for the coming years is a possible mismatch between the types of condo units bought by investors and the types ultimately demanded for occupancy," says the report.

A mismatch could occur with a greater emphasis on small, single-unit apartments when currently about three-quarters of rental demand is for high-rise multi-family units.

However, the report is quick to dismiss these concerns, pointing to the demand for rental units.

The report suggests that recent changes that tightened mortgage rules will push more people into the rental market.

As of last month, the maximum amortization period dropped from 30 to 25 years for government-insured mortgages, and the refinancing limit was capped at 80 per cent down from its previous 85 per cent.

The report notes that while the city saw an 18 per cent increase in condo rental units, the rental vacancy rate dropped to 1.1 per cent last year.

CMHC Rule Changes effective July 9, 2012

Since the 2008 credit crisis, the Department of Finance has been steadily been
clamping down on mortgage lending. We have had 3 rule changes. 2008, 2010,
2011 and now a 4th round of mortgage restrictions set to take effect on July 9,
2012. Not much time to prepare for the upcoming changes.

The changes: In order to qualify for a prime CMHC Insured mortgage.

Maximum amortization lowered to 25 years from 30 years

Maximum refinance Loan to Value lowered to 80% of the value
of the real estate from 85%

Gross Debt Service Ratio (GDS) and Total Debt Service Ratio
(TDS) are limited to 39% and 44% respectively. Currently
qualified Borrowers with Beacon scores above 680 do not have a
GDS qualification

Eliminate CMHC Insurance on any property over $1,000,000.
Today you can purchase a home with as little as 5% down, even
on the $1MM property. With the new rules you will need
$200,000 vs. $50,000.

If you have clients that are purchasing a home and need extended amortization
or an expanded qualification they need to have a deal in place by July 9, 2012

If they are refinancing their home to assist with the purchase of another
home or cottage later in the year, have them prepare financing now under the
old rules while there is still some time.

If you have a purchaser of a $1MM + home who may still require CMHC financing Act Now

Remember, 5% down payment financingis still available to qualified purchasers

Collateral versus Standard Charge Mortgages

nother lender has moved to collateral charge mortgages so it's becoming increasingly important to understand the differences between a collateral and standard charge mortgage. Which is better for you? It all depends on your preferences and future needs.

Collateral charge is ideal if you want to be able to access your equity for debt consolidation, renovations, or to invest in property or investments easily and cost effectively. Your mortgage is registered for the same or more than the property value; 100% at ING, 125% with TD Bank, which is why you can access your equity. The downside is at renewal because your negotiating ability with your lender may be affected; it is harder to switch lenders without getting a new mortgage and paying legal fees. In addition, the lender may be able to seize equity to cover other debts with that same lender.

Offered by the majority of lenders, standard charge is ideal if you won't need to refinance your mortgage during your term, and if you want to have the ability to easily and cost effectively move from lender to lender at renewal. If you have a standard charge and need to borrow more, you have the option of a second mortgage or line of credit. Some lenders offer both – standard charge mortgages and HELOCs, which are often a collateral charge.

Whether you're buying your first or next home, getting ready for renewal, taking out some equity for debt consolidation, renovations, or investing, let us help you get the right mortgage type (collateral or standard charge) with the rate and features matched to your needs.

Greater Toronto Area REALTORS Release March 2012 Resale Housing Market Charts

Here are the most recent Housing Market Charts from the Toronto Real Estate Board. There is still a shortage of listings in the market place but notice that over the past three years this is a seasonal issue.

Why banks don’t fret about household debt

For all the talk about Canada's sky high household debt loads, you don’t see much action from Canada’s banks. In fact, for a brief moment there, Bank of Montreal (BMO-T58.18-0.12-0.21%) led a charge that forced a number of them, including Royal Bank of Canada (RY-T54.420.100.18%) and Toronto-Dominion Bank (TD-T78.99-0.17-0.21%), to lower their mortgage rates below 3 per cent.

The laissez-faire attitude has prompted outrage. How can they encourage borrowing when Canadian households’ ratio of debt to personal disposable income was last pegged at a high of 152.98 per cent?

Take a look at the banks' portfolios, as outlined in a recent Moody's report, and you’ll understand why. For credit cards, Canadians' payment rates are much, much better than the U.S. and the U.K., and have been for the past decade. As for mortgages, the percentage whose payments are 90 or more days past due is quite low -- and even lower than the peaks at two different periods during the 90s. On top of that, the banks insure these mortgages to offset losses.

Of course, this doesn’t make endless borrowing right. Everything may look good now, but the situation can very quickly deteriorate. As seen in the U.S. during the crisis, pretty much everything is correlated. Go through a big bout of unemployment, and suddenly credit card and mortgage payments become a big problem at the exact same time.

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Why banks don’t fret about household debt
tim kiladze
Globe and Mail Update
Posted on Wednesday, February 22, 2012 10:49AM EST

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For all the talk about Canada's sky high household debt loads, you don’t see much action from Canada’s banks. In fact, for a brief moment there, Bank of Montreal (BMO-T58.18-0.12-0.21%) led a charge that forced a number of them, including Royal Bank of Canada (RY-T54.420.100.18%) and Toronto-Dominion Bank (TD-T78.99-0.17-0.21%), to lower their mortgage rates below 3 per cent.
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The laissez-faire attitude has prompted outrage. How can they encourage borrowing when Canadian households’ ratio of debt to personal disposable income was last pegged at a high of 152.98 per cent?

Take a look at the banks' portfolios, as outlined in a recent Moody's report, and you’ll understand why. For credit cards, Canadians' payment rates are much, much better than the U.S. and the U.K., and have been for the past decade. As for mortgages, the percentage whose payments are 90 or more days past due is quite low -- and even lower than the peaks at two different periods during the 90s. On top of that, the banks insure these mortgages to offset losses.

Of course, this doesn’t make endless borrowing right. Everything may look good now, but the situation can very quickly deteriorate. As seen in the U.S. during the crisis, pretty much everything is correlated. Go through a big bout of unemployment, and suddenly credit card and mortgage payments become a big problem at the exact same time.

Yet the banks have trouble acting on their own to prevent such a situation. If, say Scotia (BNS-T53.51-0.20-0.37%), were to hike its mortgage rates to deter borrowing, the other banks have no reason to follow suit. There just isn’t any urgency because their mortgage portfolios are all in good shape. And the banks can’t exactly come together on their own to hash out a plan because that would be collusion. That’s why you hear calls from people like TD's Ed Clark to get the government to consider tightening the mortgage requirements once again.

Still, in residential mortgage land, the percentage of loans whose payments are 90 or more days past due rose to only about 0.45 per cent during the crisis, according to the Canadian Bankers Association, and has since fallen to about 0.4 per cent. (Keep in mind that arrears of 90+ days are the worst kind, because they’re the most likely to be written off by the bank.) Twice in the 90s, this rate hit about 0.65 per cent, showing just how much better things look today.

As for credit cards, Canadians’ principal payment rates have been remarkably steady for the past decade. Over the eight years leading up to 2008, the payment rate averaged 33.4 per cent, according to Moodys, and during the crisis period of 2008-09, it only dropped to 30.6 per cent. For much of the past decade, payment rates in the U.S. and U.K. were in the 16 to 20 per cent range.

Of course, Canada saw some stress, and there was a big spike in credit card delinquencies in 2009 and 2010, but they have since come way down. Charge offs are now just north of 3 per cent, and the average for the decade before the crisis wreaked havoc was about 2.5 per cent.

Toronto real estate: Average detached house $606,600

The Canadian Real Estate Association has launched a new system for tracking home and condo sales prices aimed at giving buyers and sellers a more precise picture of what’s happening right in their neighbourhoods.

The new system will track Canadian and regional home sales and price escalations based on “benchmark prices.” Those benchmarks are based on quantitative factors (the number of rooms, bathrooms, age of home) and qualitative factors (proximity to schools, parks) and are intended to shine a light on highly localized factors that may be skewing prices up or down but not necessarily reflect market conditions.

CREA has also established a new MLS Home Price Index — similar to the Consumer Price Index which measures price inflation — that tracks prices relative to January, 2005 based on house type, be it single-family homes with one or two storeys, townhouses, row homes or condo apartments.

As of January, the benchmark price of a single-family home in Toronto hit $606,600 — $100,000 more than the $499,800 benchmark price for a similar home in the rest of Canada. That Toronto home cost 50.3 per cent more than it would have in January, 2005.

Over time, far more localized data will become available for MLS districts that should paint a clearer picture of neighbourhood trends.

“One of the key goals is to take a little bit of volatility out of housing statistics,” says Jason Mercer, senior analyst for the Toronto Real Estate Board. “It’s going to provide a good tool for consumers to understand where their home fits into the market.”

CREA will continue to release its traditional Canada-wide and regional breakdowns of average and median home prices, which it claims are often “misinterpreted” and can swing significantly, as national prices did last year when there was a rush of foreign investors snapping up homes in high-end Vancouver neighbourhoods.

Right now, just five major real estate boards across Canada are part of the new system — the GTA, Greater Vancouver, the Fraser Valley, Calgary, and Greater Montreal.

Eight more boards will start using the new measures this year, and another eight boards next year.

Canadian housing is ‘pricey,’ but far from a bubble: BMO

OTTAWA—The Bank of Montreal says Canada’s somewhat pricey housing market is likely to cool, not crash.

The bank’s economists say the only real trouble spot is Vancouver, where there are plenty of vacant high-priced condos going begging.

The report suggests that alarms about Canada’s housing market by international observers, from the International Monetary Fund to The Economist magazine, are exaggerated or simplistic.

Even Toronto’s hot condo market — one of the subjects of many of the warnings — is more likely to cool rather than collapse, the economists say.

A comparison of house prices to household incomes shows an increase from a decade ago, but not an excessive one, the report points out.

Nor are most Canadians close to an American-style debt wall that preceded the subprime crash in 2007.

Nevertheless, the BMO economists say house values are somewhat pricey and expect sales, starts and prices to flatten out this year.