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Bank of Canada makes first rate hike of 2023

The Bank also gave a significant update on its plans for future rate announcements

The Bank of Canada has announced a quarter-point hike to its benchmark policy rate, a move that marks its eighth consecutive rate increase and the first of 2023 – although it also indicated that it could be its last for some time.

The decision, announced on Wednesday morning, means that the central bank’s trendsetting rate now sits at 4.5%, having risen sharply in 2022 as the Bank fought to curb inflation that surged to its highest level in nearly 40 years in June.

The Bank said in its statement accompanying the decision that it expected to hold the policy rate at its current level as long as economic developments continue to evolve in line with its forecast.

The 25-basis-point hike comes as little surprise, with stronger-than-expected economic data and a resilient labour market dampening speculation that it could be set to hold fire on a rate jump in January.

In its last statement of 2022 the Bank had hinted that it could be ready for a pause on rate hikes in the coming months, indicating that it would “be considering whether the policy interest rate needs to rise further” to continue dialling down inflation.

That was a notable departure from its aggressive tone of previous statements, in which the Bank confirmed that further increases to the policy rate were effectively a foregone conclusion.

However, the economy saw a December employment surge, adding 104,000 jobs that month, and while inflation also ticked down, it’s still hovering at 6.3% – well above the central bank’s target rate of 2%.

The news will see borrowing costs rise once more for thousands of Canadian mortgage holders and would-be buyers, with monthly mortgage payments for borrowers on a variable rate having already spiked dramatically last year.

Leah Zlatkin, a mortgage broker and LowestRates.ca expert, told Canadian Mortgage Professional in advance of the central bank announcement that the way forward for borrowers depends largely on their individual circumstances and whether variable-rate holders can absorb the impact of a high-rate environment or would prefer to switch to a more stable fixed option.

Much attention will now be focused on how the economic outlook evolves before the Bank of Canada’s next decision, set to arrive on March 8.

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Average rent increased by 10.9% in 2022, report shows

Canadians faced an average annual rent increase of 10.9 per cent in 2022, with another five per cent increase forecast for 2023, according to year end data from Urbanation and Rentals.ca.

Average monthly rent for December was up 12.2 per cent at $2,005 on a year-over-year basis, according to the groups’ monthly rental report. That marked a slight decline from November.

Out of the 35 cities surveyed, Vancouver had the highest monthly rent for December, with a year-over-year increase of 16.8 per cent for one-bedroom units and 17.9 per cent for two bedrooms, with average rents of $2,596 a month and $3,562 a month, respectively.

Toronto claimed second place as the most expensive monthly rent with a year-over-year increase of 21.3 per cent ($2,457) for a one-bedroom unit and 18.1 per cent ($3,215) for a two-bedroom unit.

Calgary finished third with an average year-over-year increase of 22.6 per cent to $1,816 per month for purpose-built and condominium apartments.

As for apartment and condo rentals in December, Ottawa and Edmonton ranked fourth and fifth, with annual increases of 14.5 per cent and 11.7 per cent, respectively, while Montreal’s average rent increased by only 6.6 per cent.

Higher borrowing costs have kept rental demand strong in the face of falling supply, Shaun Hildebrand, president of Urbanation said in the report.

“The Canadian rental market had one of its strongest years ever in 2022, more than reversing any weakness experienced during the pandemic,” Hildebrand said. “Rental demand is primarily being driven by a quickly growing population that is finding it increasingly more difficult to afford homeownership or find suitable rental housing. Looking ahead for 2023, rents are expected to continue rising, but less heated growth can be expected as the economy slows and new rental supply rises to multi-decade highs.”

According to the report, It is expected that rents will increase at a more moderate five per cent in 2023, as economic and employment conditions begin to soften after the rapid rise in interest rates and record breaking rents.

The annual rent increase figure of 10.9 per cent was determined by taking the weighted average for rents across all 12 months of 2022 and dividing over the weighted average rents across all 12 months of 2021, Rentals.ca said.

Source: financial post

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GTA Condo, Purpose-Built Rental Completions to See Record-Breaking Year

Just under 32,000 new condo units are slated for completion in the Greater Toronto Area (GTA) in 2023, according to real estate consulting firm Urbanation.

Urbanation President Shaun Hildebrand tells STOREYS the figure may more realistically be in the ballpark of 25,000 to 30,000 units — he says the industry typically falls short of its projected deliveries — but even so, completions are poised to climb to a new high.

In addition, he says 2023 is shaping up to be “the biggest year for purpose-built rental deliveries in three decades,” with around 7,740 purpose-built rental units scheduled for completion in 2023.

“And that’s happening at the same time as condos reaching a record level as well in terms of completions,” says Hildebrand. “The industry is still facing some supply chain issues, but projects that are scheduled this year have been under construction a long time, and they’ve made considerable progress.”

It’s important to note, however, that Toronto is coming off of two slow years for condo completions. Less than 14,000 units were completed in 2021, and although Urbanation has yet to compile the number of completions for 2022, Hildebrand estimates that less than 16,000 units were realized last year. The ten-year average is just over 17,000 units.

“In that sense, the completions that are happening this year are making up for some lost ground and bringing things back on trend in terms of deliveries,” he says. “But it will be a high level, a record level, and obviously coming at the same time as demand being challenged by quickly rising interest rates. I think, in that sense, it’s going to be one of the more challenging years we’ve seen for the condo market in 2023.”

Hildebrand adds that, in contrast to previous years, condo completions will deviate from the downtown core in a meaningful way, with less than a third slated for downtown Toronto. The rest are in the 905 region of the GTA, indicative of a shift in presale condo activity to suburban markets.

“In many cases, these projects that are coming to completion in the 905 region do have higher end-user components, so there’s not going to be as much turnover for units for rent or units for sale as you would in a downtown core investor-heavy project,” he says, adding that, with rents being so strong, those who bought units pre-sale will see a sizeable return on investment. “So I think a lot of investors will be inclined to hold on to their units this year, rather than flip them for sale. And that will limit supply pressures on the market and any sort of negative downward forces on prices.”

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How to protect yourself from real-estate title fraud

Recent news stories have highlighted the dangers of real-estate title fraud, which take place when fraudsters or scam artists steal ownership of a home in order to benefit from its value.

Yesterday, CBC News reported on a Toronto family that was able to thwart an attempted scam where someone used fake identification to pose as the 95-year-old homeowner and convinced real estate agents to list the home for sale without the family’s knowledge or permission.

The case resembles an ongoing Toronto police investigation, in which police say two homeowners left Canada for work in January 2022 only to learn months later that their property had been sold without their knowledge by people using fake identification.

So, what is title fraud and how can you prevent it from happening?

What is title fraud?

Title fraud takes place when a person uses fake identification or forged documents to steal the identity of a homeowner and take away their “title,” or legal ownership of a property.

Once fraudsters have their hands on a property’s title, they can re-mortgage it, sell it to an unsuspecting buyer, or extract value from it in some other way and make away with the proceeds.

Homeowners often don’t learn about what’s happened until they receive notice of missed payments or they try to sell, title insurance company First Canadian Title (FCT) says on its website.

“It can take considerable time, money and effort to deal with having to restore your title and/or remove any fraudulently registered mortgages.”
– First Canadian Title insurance company

Victims of title fraud lose the right to mortgage their home, can no longer leverage the equity and can’t sell the property until they re-establish their title rights through the courts, according to FCT.

“It can take considerable time, money and effort to deal with having to restore your title and/or remove any fraudulently registered mortgages,” FCT writes on its website.

Morris Cooper, a civil litigation lawyer in Toronto who successfully argued a landmark case in 2006 that shifted the responsibility for title fraud from victims to lending institutions, said seniors and people who rent out their homes to tenants can be at a high risk of title fraud.

But homeowners can take steps to protect themselves.

Take steps to protect your identity
Stealing a person’s identity is often the first step in title fraud.

Government-issued identity documents, including driver’s licences, passports, birth certificates, social insurance number (SIN) cards and citizenship cards, can all be used to apply for mortgages or to take steps to buy or sell a home.

The Canadian Anti-Fraud Centre offers the following tips for preventing identity theft:

  • Be wary of who you share personal information with.
  • Regularly check credit card reports, bank and credit card statements and report anything irregular.
  • Shred documents containing personal information before placing them in the garbage.
  • Limit mail theft by regularly retrieving mail.
  • Notify the post office, financial institutions and other service providers of your new address when you move.

Get title insurance

Title insurance is an insurance policy that protects property owners and their lenders against losses related to the property’s title or ownership, including from title fraud, according to the Financial Services Regulatory Authority of Ontario (FSRAO).

While it can’t prevent you from becoming a victim of fraud, it is the single most important thing to mitigate its consequences.

“Title insurance will step in and save you in a situation like this,” said Varun Sriskana, a realtor, property manager and housing advocate based in Toronto. “It protects you in case someone defrauds you.”

Title insurance can cover legal expenses incurred by homeowners seeking to restore their right to their property’s title, according to FCT.

It protects homeowners from fraudulent claims on their property and pays for legal expenses to re-establish the homeowner’s title rights.

WATCH | Mortgage and title fraud ‘nothing new,’ Toronto real estate agent says:

 

If a buyer unwittingly buys a home that’s been fraudulently listed, the insurance should also protect them. In cases like that, the true owner will likely get their home back and the unwitting buyer will get their money back.

Know who you’re dealing with

People on both sides of a real-estate transaction should make sure they’re comfortable with the identity of the person on the other side of the deal, said Stephen Moranis, past president of the Toronto Regional Real Estate Board.

That means potential tenants should ensure the landlord actually owns the property, while landlords should check references and request documents like credit scores to verify potential tenants, Moranis said.

“Either side should be very, very careful to verify and ensure that the other party they’re dealing with is actually in a position, a legal position, to either lease or or sell the property that they’re considering,” said Moranis.

Murtaza Haider, a professor of data science and real estate management at Toronto Metropolitan University, said he spoke to neighbours the last time he was looking to purchase a home, asking them about the property and the current owners in a search for potential red flags.

Simply Googling a person’s name and cross-checking social media photos can also help turn up any irregularities, Haider said.

Preventing title fraud by renters

Homeowners who rent their homes to tenants could be at a higher risk of fraud because the tenants have physical access to the home.

Landlords should take steps to make sure that documents containing personal information like driver’s licence renewal applications or tax returns don’t fall into the wrong hands, Haider said.

“Make sure that your mail stays with you. Make sure that you have a forwarding address,” said Haider. “Make sure that they don’t end up in the hands of people that you don’t want other than yourself.”

Haider said homeowners can also search for their property online from time to time to see if it’s being inappropriately listed for sale or on a rental website like AirBnB.

“It’s always good to be checking the address, checking it at various locations on the internet to see your property is being used for for the intended use,” Haider said.

Landlords should also rely on banking information, rather than cash payments, as that adds another layer of due diligence, Haider said.

The Ontario government also provides a free, online tool that allows any member of the public to check the validity and current status of a driver’s licence. Driver’s licence numbers that come up as invalid could be a red flag.

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Average rent in Canada bounces back above $2,000 — $224 more than last year

After hovering just above and then just below the $2,000-a-month mark in September and October, the national average rent for all property types bounced back over the threshold in November, rising 2.5 per cent to $2,024, according to the latest report by Rentals.ca and Urbanation Inc.

While month-over-month rents increased only slightly, year-over-year rents were up 12.4 per cent, meaning new renters are paying roughly $224 more than last year.

“Rents in Canada are rising at an exceptionally high speed, which is having a profound effect on housing affordability as interest rates continue to rise,” Shaun Hildebrand, president of Urbanation, said in the report. “With the most expensive cities experiencing very low supply and the fastest rates of rent increase, regions with high population growth are seeing demand shift into more affordable areas.”

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National home sales rise in December

National home sales increased by 1.3% in December over the previous month, according to the Canadian Real Estate Association (CREA), although homebuying activity was down by more than 39% compared with the same time last year.

The association’s latest statistics also showed that the MLS Home Price Index fell by 1.6% on a monthly basis, with the non-seasonally-adjusted national average sale price plummeting by 12% from December 2021.

The number of newly listed properties in the Canadian housing market continued to tick downwards, falling by 6.4% from November, with British Columbia and Quebec seeing the most significant declines. Ottawa and Edmonton, meanwhile, contributed most strongly to the home sales gains posted in December.

The end of the year saw 4.2 months of inventory available nationally – close to pre-pandemic levels, CREA said, although still almost one month below the long-term average.

In remarks accompanying the news release, CREA’s chair Jill Oudil sounded a note of optimism on the rising-rate environment that gripped the housing market throughout last year.

“The market’s adjustment to higher rates may be mostly in the rear-view mirror at this point,” she said. “That could start to bring buyers back off the sidelines this spring.”

2023 outlook

Looking ahead to the 2023 market, CREA’s senior economist Shaun Cathcart said its trajectory will depend largely on the extent that high inflation and rising interest rates return to a more normal level.

“Demand for housing continues to grow and supply remains the biggest issue across the entire spectrum,” he added. “Whether that plays out in the rental market in 2023 or shifts back over into the ownership space is a matter of how quickly the Bank of Canada can get inflation under control and starts turning the dial back down on borrowing costs.”

Home sales over the course of 2023 are likely to be 0.5% lower than last year, CREA said, with the average price expected to decrease by 5.9% annually to $662,103.

That should be followed by a rebound in 2024, when national home sales should increase by 10.2% with the national average home price projected to increase by 3.5%.

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Record number of condos to flood Toronto market in 2023

A record number of new condo units will be completed in Toronto in 2023, just as skyrocketing mortgage rates make it harder for investors to close on their properties.

Nearly 32,000 condos will hit the city and surrounding suburbs, according to data from condo research firm Urbanation Inc. That surpasses the previous high in 2020, when 22,473 units were completed.

The raft of units are coming on the market after jumps in interest rates have ramped up borrowing costs and led to a drop in real estate sales and home prices.

Now, many buyers are having problems qualifying for a mortgage, with five-year interest rates topping 5 per cent. As well, lenders are appraising units at lower prices, meaning that the buyer has to come up with extra funds to make up the difference between the smaller mortgage for a unit, based on the lower appraised price, and what the buyer agreed to pay.

Preconstruction condos, which have not yet been built, are mostly bought by investors who plan to rent their units and/or profit from a resale. To secure a preconstruction condo, a 20-per-cent down payment is required. After the condo has been built, the buyer is required to pay the remaining 80 per cent.

“Investors could be looking to exit before they have to close on the unit and they may face difficulties qualifying for a mortgage given what’s happening with interest rates,” Urbanation president Shaun Hildebrand said.

This has led to an uptick in buyers trying to get out of their newly built condos by selling the right to buy their new unit, also known as an assignment sale.

“A lot of people are assigning because they can’t qualify for a mortgage nowadays,” said Brigitte Obregon, a broker with Re/Max Ultimate Realty who has sold preconstruction condos since 2009.

Higher mortgage payments have also made it less profitable for investors to own condos.

The average condo ownership cost in Toronto was $3,506 a month as of the third quarter of 2022, according to Urbanation. In comparison, the average monthly rent in the region was $2,733, which left the condo owner paying an average of $773 out of pocket every month. That is up from an average shortfall of $235 a month in the third quarter of 2021, $196 in 2020 and $17 in 2019, according to Urbanation.

Preconstruction condo sales in Toronto had been on the rise for years, driven by demand from investors and developers. But since home prices started to fall in 2022, it has become somewhat cheaper to buy an already built condo on the resale market.

The average rate for a preconstruction condo was $1,427 a square foot as of the third quarter of 2022, according to Urbanation. In comparison, the average price for a condo on the resale market was $891 a square foot.

“People are saying ‘Okay, now it seems like I can get the better deals on the resale market, or the preconstruction assignment market,’” said Vicky Huang, chief executive of Bay Street Group, a real estate brokerage that works with Chinese buyers in the resale and preconstruction housing market.

The typical price of a home across Canada is down 10 per cent from peak prices in February, 2022. In the preconstruction market, investors are not seeing the value of their properties grow as quickly as it has in the past. That is expected to further contribute to the slowdown in preconstruction sales in 2023.

Activity had already dropped significantly, and by the third quarter of 2022, preconstruction sales hit their lowest level since the 2008-09 global financial crisis. Dozens of projects had no sales during the quarter, according to Urbanation.

Source: The Globe and Mail

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