Month: April 2021

How is it that you can have the same income and credit presented to various lenders but have different maximum loan amounts?

Depending on the type of mortgage product, lender, and program, this amount varies greatly. Let’s jump into the different types of mortgages and how these limits are calculated.

Insured mortgages

You’ve likely heard that if you have less than 20% available as a down payment, you’re required to obtain mortgage insurance. This is provided by one of the three insurers in Canada and is mandatory regardless of which bank your mortgage ultimately ends up with. The insurers have their own guidelines on maximum debt ratios and it’s the same for down payments from 5% to 19.99%. Because of the tight guidelines and no wiggle room, insured mortgages offer the lowest mortgage amounts out of the group.

Uninsured (conventional) mortgages

This type of mortgage is offered to borrowers who are able to provide a down payment of at least 20%. Once this threshold is reached, you are not required to obtain mortgage insurance and, therefore, your affordability is based on the lender guidelines. For the most part, most big banks have the same guidelines in place, although they can exercise discretion when it comes to stretching those numbers, however slightly. Under this umbrella, you can find mortgages by the big banks, credit unions and what are commonly referred to as alternative lenders. Lets break down each type of lender.

A lenders (Big Six)

These are the well-known “Big Six” banks—National Bank of Canada, Royal Bank of Canada, Bank of Montreal, Canadian Imperial Bank of Commerce, Bank of Nova Scotia, and Toronto Dominion Bank—and as balance sheet lenders they have discretion on how they underwrite your affordability. For the most part, though, they stick to the same debt ratio guidelines as insured mortgages, however, they have some wiggle room to extend these rules slightly, unlike on insured mortgages. The main advantage here is the banks can now qualify a borrower on a maximum amortization of 30 years as opposed to the insured cap of 25 years. That extra five years of paying back a loan helps reduce monthly payments and, in turn, increases the mortgage amount a borrower qualifies for.

Credit unions

Credit unions are provincially regulated, unlike the federally regulated Big Six banks. As such, they are able to skirt the latest rules surrounding the mortgage qualifying rate (MQR). What they are able to do is allow clients to qualify for a mortgage based on the contract rate they are offering rather than qualifying under the higher stress test rate (which, as of writing, is 4.79%). The advantages to this program are that it can open up your buying power and you can still get a fairly competitive rate (although slightly higher than uninsured big bank rates). The downside is that some credit unions have local requirements and are often not portable outside of their jurisdiction.

Alternative lenders

Alternative lenders are banks that can stretch debt ratios farther than either credit unions or A lenders. They often can use unconventional types of income (seasonal, self-employed, commission-based borrowers, etc.) that most other programs would not find eligible under their criteria, and they’re available through mortgage brokers. Rates are higher and terms are typically shorter, however, due to their higher debt ratio allowances they’re your best bet for maximizing your mortgage affordability.

Canada’s housing market caught fire in mid-2020 and that spurred more than half of the country’s homeowners to renovate their existing abodes either to remain in place or to sell, says a new report from RE/MAX.

The RE/MAX 2021 Renovation Investment Report, which involved a survey conducted by Leger Marketing, found 29% of Canadian homeowners also renovated their homes last year to aesthetically improve their homes, while another 29% undertook renovations for essential reasons, like safety and maintenance. Fifty-nine percent of respondents were cognizant of the additional value a renovation would provide their homes.

“The notion of the home as an investment continues to be an important consideration for Canadian homeowners, however, they clearly value the home for what it is meant to be: a place to live and enjoy spending time,” said Elton Ash, RE/MAX of Western Canada’s regional EVP. “The pandemic has influenced virtually every aspect of our lives, including what Canadians want and need in a home. The uncertainty also compelled many sellers to move to the sidelines or renovate their home to accommodate current quality-of-life needs, which has further tightened conditions across many Canadian real estate markets.”

The RE/MAX report also noted that in Ontario, from Kingston to London, listings sold quickly in 2020, regardless of their renovation status. Most renovations focused on outdoor upgrades.

A separate report recently released by Sotheby’s International Realty Canada demonstrated that home renovations bolstered price gains in the luxury segment of the housing market. The most common types of renovations, according to the report, involved outdoor spaces with gardens and landscaping, patio and deck upgrades, outdoor kitchens and dining areas, outdoor theatres, waterfront docks, and personal sports facilities, like pools and ball courts and children’s play amenities. Indoor upgrades typically involved kitchens, home offices and the addition of personal fitness areas and theatres.

A dearth of luxury listings in Canada’s three largest cities served as the impetus for luxury buyers choosing to buy properties in need of renovations, which is a departure from their usual buying habit of move-in ready properties.

“Prospective homebuyers are now more likely to be willing to purchase properties that require repairs and updates due to a lack of other options in their desired neighbourhoods. Others are purchasing luxurious move-in ready properties and renovating to meet bespoke personal preferences. While this renovation trend is largely driven by end-users, market confidence is also motivating investment-minded buyers to purchase homes for renovation in anticipation of future resale at a higher price.”

The City of Toronto’s condo market is going to be red-hot this month.

Toronto proper’s condo market was by far the most active segment in March, with sales rising by 87.9% to 2,614, but the average price actually declined by 0.7% to $707,835, says the Toronto Regional Real Estate Board (TRREB).

However, according to Alex Balikoti, SVP of sales with Balikoti Real Estate Group, that doesn’t tell the whole story.

“Last March is when the pandemic hit and everyone got scared and prices came down a little, but prices are now on par with pre-pandemic levels last year,” Balikoti told CREW. “Our inventory levels for condos in Toronto proper are back to normal—we’re sitting at almost 2,600 condo units for sale—and that means April will be extremely healthy.”

Balikoti added that preconstruction condo projects in Toronto’s core are selling out in weeks and that developers are raising prices to as much as $1,600 per sq ft. Moreover, the resale market is scorching.

“There were 2,600 sales last month and right now we have fewer than 2,600 units available, so that means we won’t last a month,” said Balikoti. “We’re again experiencing a shortage of inventory just as we were last year pre-pandemic.”

Total home sales in the GTA doubled on an annual basis in March to 15,652 from 7,945 a year ago amid low interest rates and fledging economic activity, according to the latest data from TRREB.

However, the board tempered the numbers by reminding that the second half of March 2020 was when the COVID-19 pandemic sparked mass shutdowns, including in the real estate market. As a result, sales surged by 174% year-over-year in the second half of March 2021 to 9,148, while sales were up 41% in the first 15 days of the month compared to the same time last year, reaching 6,504 transactions.

Transactions during the first half of March were still up considerably, the result of GDP growth rising 9.5% in Q4-2020 compared to the prior-year period. While unemployment in Toronto was 11.1% in February of this year, the Bank of Canada’s overnight rate is still only 0.25%, with a 2.45% prime rate.

There were 7,577 detached home sales in the GTA last month, a whopping 103.5% year-over-year increase, which brought the average price up by 26.6% to $1,402,849. In the semi-detached segment of the regional housing market, there were 1,479 sales for a 98.5% increase over March 2020, and the average price rose by 17.5% to $1,045,519. The GTA’s townhouse market saw sales rise by 90.5% year-over-year last month to 2,631, and the average price moved up by 20.7% to $870,553, suggesting that townhomes remain the most affordable type of ground-related homes. The regional condo market saw 3,821 transactions last month, up by 91.3%, but prices only climbed 2.6% to $676,052.

In the City of Toronto, there were 1,450 detached home sales in March, a 75.1% increase from the same month a year earlier, and the average price rose by 19.2% to $1,750,518, while semi-detached home sales increased by 106.6% to 471 with the median price up 11.5% to $1,288,005. Townhome sales in the 416 were also up 90.7% to 555, and the average price rose by 15% to $960,894.

Bill Wiener and his wife Lillyann Goldstein purchased three condo units at a new build on St. Clair Ave. and while those units are initially slated to become rental properties, that’s going to change within a decade’s time.

Wiener and Goldstein purchased the units with the intention of eventually combining two of them into a single unit where they will age in place, while the third unit will likely be rented to a live-in caregiver.

“We don’t know when we’re moving in. We bought it as a place to go to when it’s time to go. As you get older in life, you never know when you will have to leave your house for whatever reason—immobility, it’s time to go, or even you don’t want to be there anymore—and the real question is: will you find what you’re looking for when it’s time to leave?” said Wiener. “So when you find something you like, and that you’d like to move into, if you have the extra resources, you put it aside for the future.”

Two of the units were designed with a passageway, which will be cut open when the couple move in, and laid out in such a way that they will fluidly combine into one larger unit.

“The 600 sq ft unit has its own entranceway into the hallway, and that lets us find a caregiver who can be independent, married and have their own unit, and still have access to our unit,” said Wiener. “We will have a live-in housekeeper with their own separate entrance.”

Wiener and Goldstein, respectively an engineer and a lawyer, are part of a growing cohort of GTA boomers deciding to age in place, and where possible, downsize into condominium units in buildings that have flexible enough floor plans to accommodate combination suites. Ben Rogowski, COO and EVP of Canderel, which designed the condo that Wiener and Goldstein will move into, says there’s been a noticeable uptick in the last year of older homebuyers making similar purchases.

“It started on our project at 900 St Clair Ave. W.; we always set aside certain parts of the building to allow for combination suites and we deliberately didn’t sell the project in a way that would leave us with Swiss cheese inventory,” he said. “We left contiguous spots because we believed there would be demand for it.”

Indeed there has been, and although it’s difficult to ascertain the exact reason for the budding demand, it likely isn’t a coincidence that COVID-19 started ravaging elderly care facilities, often fatally, just before Rogowski says the trend toward combination suites began.

“Soon after COVID started, these types of buyers were coming to us looking at those options. Through the first six months of COVID, it was quiet in the residential condo market and then we just saw a lot of this demand for combination suites. We quickly sold four combination suites that were a dozen smaller units used to make four larger suites.

“It has to be related to COVID and people not wanting to go to care facilities.”

Canderel has again built contiguous units into the floor plan of its latest project in North York, Bayview at the Village, a 10-storey condo with 239 planned units, although that number could decrease if more buyers opt for combination suites.

COVID-19 notwithstanding, given that there are certain benefits to aging in place rather than living in care facilities, Rogowski anticipates the demand for combination suites will keep rising.

“An obvious advantage is you get to pick your location: there are a lot more options for condo buildings than care facilities,” he said, “and you get to do it on your terms. There also isn’t much out there for people who aren’t quite ready to downsize but know they will be at some point.”

One can be forgiven for presuming that, in light of the COVID-19 pandemic, restaurateurs, bar and nightclub owners would happily break their leases to stop hemorrhaging money.

Turns out, not only are they bravely prepared to wait out the pandemic, hordes of business people are trying to find venues to open up their own nightspots and eateries. Tel Aviv-native Tomer Markovitz is exploring venues in Toronto’s downtown and central midtown to open a restaurant that will serve what he calls Israeli street food, mostly of a vegetarian variety.

“I have a very specific type of venue that I’m looking for. I’ve seen a lot of places in the past year. People are stealing locations,” said Markovitz. “I’ve started a few conversations with landlords but I’m still waiting for the right price. Before the pandemic you could easily do 300 to 500 customers in a day in the downtown core, but in the middle of the pandemic no money comes in, and if you’re a new business you don’t get a government subsidy.”

However, despite razor thin margins in the best of times, many restaurateurs are willing to wait out the pandemic because they’re collecting subsidies, and while indoor dining isn’t an option, food delivery services like Uber Eats are helping keep them afloat.

Chi Real Estate Group, a hospitality-oriented real estate firm, has a stable of prospective restaurateurs looking for venues in Toronto, but according to Ori Grad, Chi’s broker and managing director, finding availabilities is harder than one would think in the midst of a pandemic.

“Inventory is low. There’s huge demand right now of people looking to buy buildings with restaurants in them, and one thing we’re seeing with COVID is it’s creating opportunity that would never have existed without a pandemic,” said Grad. “There are old operators looking to retire and certain newcomers getting into the market that never would have.”

That wasn’t always the case, he added. Tom Jones Steak House, one of the oldest establishments of its kind in Toronto, is on the market for a reported $5 million. Additionally, the famed Rivoli on Queen St. W. hit the market during the first couple of months of the pandemic.

“At the beginning, we had more people trying to get out of the business. We were getting calls from restaurants every day talking about how they needed to stop the bleeding,” said Grad. “But people always have wanted to hold on. This is their livelihood and most restaurants don’t have six months’ rainy day funds.”

At the moment, there’s demand for cheap kitchens, “ghost” kitchens, and outdoor patio space. Grad also notes that Queen St. E. is receiving a lot of interest—not hard to believe considering that it’s on the verge of a condo boom.

One thing appears apparent: given how much demand and how little inventory Chi Real Estate Group has, Toronto could very well be on the cusp of its own version of the Roaring Twenties when the pandemic is over. Unlike Montreal and New York, cities that are renowned for their food and nightlife, Toronto has traditionally been a more subdued counterpart, but that could soon change.

“We have a couple of guys aggressively looking for nightclubs, and they were outbid by another group,” said Grad. “When the pandemic’s behind us, we’re going to have the Roaring Twenties here.”

March was a record-setting month in Metro Vancouver with 5,708 sales, says the Real Estate Board of Greater Vancouver (REBGV).

Sales surged by 126.1% year-over-year from 2,524 in March 2020, and by 53.2% from 3,727 a month earlier. Moreover, last month’s sales total was 72.2% above the 10-year March average.

The region’s rural and suburban areas saw the most significant increases in activity, including in Delta-South, where sales surged by 195.8% year-over-year, Whistler, where sales increased by 194.7%, and Squamish, where sales rose by 188.6%.

According to the REBGV, there were 8,287 new listings in the form of detached, attached and condo apartments on the MLS in Metro Vancouver last month, representing an 86.8% year-over-year increase from 4,436 listings in March 2020, and a 64.2% month-over-month rise.

There are currently 9,145 homes listed on the Metro Vancouver MLS, which is 4.8% below the number of listings in March 2020, and 18.6% below the 10-year average for March.

“While we did see a record number of listings enter the market last month, the demand in today’s market isn’t allowing that new supply to accumulate. As a result, the overall inventory of homes for sale decreased compared to last year,” Taylor Biggar, the REBGV’s chair, said in a statement.

The average price of a Vancouver area home last month was $1,123,300, which is 9.4% higher than in March 2020, and a 3.6% month-over-month increase. Detached homes increased by 17.9% year-over-year to $1,700,200, while attached homes rose by 10.4% to $872,200, and condo prices were up 3.7% to $715,800.

Meanwhile, the Calgary Real Estate Board (CREB) reported that home sales increased by 147% last month to 2,903 from 1,174 in March 2020, which it attributed to the low interest rate environment and excess savings in the city’s households. Moreover, the sales spike marked a 14-year high.

The board noted that bidding wars are commonplace in Calgary’s housing market and that inventory had declined to 5,416 properties last month from 5,863 during the prior-year period. New listings also rose by 83% to 4,437 from 2,418.

The benchmark price of a Calgary home increased by 7% to $441,900 in March from $414,800 a year earlier, while the benchmark detached house price rose to $516,300 from $478,400, and condos climbed to $250,000 from $242,500.

“Low lending rates and improved savings have supported sales activity,” said CREB’s chief economist Ann-Marie Lurie in a statement. “However, sales have been somewhat restricted by the lack of listings. This month there was a jump in new listings, contributing to the strong monthly sales.”