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A first-time homebuyer’s guide to Canadian government programs and incentives

Whether you want to stop paying skyrocketing rental rates, start building equity, or own property that can be passed down to your children, purchasing a home is likely a long-term goal of yours. However, with rising home costs and the mortgage stress test introduced in 2018, achieving that goal can be a challenge for many Canadians. Fortunately, there are a number of programs and incentives offered by the federal government that first-time homebuyers can apply for.

“First-time homebuyers in Canada have the opportunity to take advantage of some great federal government programs to assist them when purchasing their first home,” says Michael Therriault, Financial Advisor at Scotiabank. “They can apply for multiple programs as long as they are eligible, so it is strongly recommended for potential first-time homebuyers to meet with a financial advisor at their bank to go over their individual circumstances and to help determine the best program(s) for them.”

1. Home Buyer’s Plan
Early withdrawals from an RRSP are usually considered taxable income, but with the Government Home Buyer’s Plan, you can apply your RRSP savings toward the price of your home — tax free.

“The Home Buyer’s Plan (HBP) is a program that allows you to withdraw up to $25,000 ($50,000 per couple) in a calendar year from your registered retirement savings plans (RRSPs) to buy or build a qualifying home for yourself or for a related person with a disability,” says Olga Coulter, Senior Account Manager at the Canada Mortgage and Housing Corporation (CMHC). “To be eligible, you must be a first-time homebuyer (ie. you haven’t purchased a home or lived in a spouse’s home within the last four years) and have a written agreement to buy or build a qualifying home for yourself or for a related person with a disability.”

However, it’s important to note that that these funds must have been in your account for at least 90 days before the purchase of your home and they do have to be paid back within a 15-year timeframe. “Essentially, you are ‘borrowing’ these funds from your RRSP as they need to be repaid over a 15-year period beginning the second calendar year after the withdrawal,” adds Therriault.

2. First-Time Home Buyers’ Tax Credit
Introduced in 2009, the First-Time Home Buyers’ (FTHB) Tax Credit helps to make purchasing a home more affordable by allowing Canadians to claim a portion of their home purchase on their personal tax return that same year. This helps to offset expenses like legal fees, home inspections and other closing costs.

“The FTHB Tax Credit offers a $5,000 non-refundable income tax credit amount on a qualifying home acquired after January 27, 2009,” says Coulter. “For an eligible individual, the credit will provide up to $750 in federal tax relief.”

To be eligible, you, your spouse or common-law partner must have acquired a qualifying home (a unit located in Canada purchased after January 27, 2009) and cannot have lived in another home you or your partner owned in the year of acquisition or in any of the four preceding years.

3. GST/HST New Housing Rebate
If you are purchasing a new construction home, performing substantial renovations to an existing home, or rebuilding a home that was destroyed by fire, you will want to apply for the GST/HST New Housing Rebate. Filling in this form can save you thousands of dollars, as it recovers a portion of the goods and services tax (GST) or the federal part of the harmonized sales tax (HST) if all eligibility conditions are met.

“You may qualify for a rebate of part of the GST or HST that you paid on the purchase price or cost of building your new house, or on converting a non-residential property into a house,” explains Coulter. “You may also be eligible if you are doing substantial renovations or have hired someone to complete substantial renovations to an existing home, such as an addition.”

CMHC Mortgage Loan Insurance Programs
In addition to tax-related programs, first-time homebuyers have access to several CMHC Mortgage Loan Insurance Programs that can help them achieve the dream of homeownership. Listed below, these programs offer flexible terms and conditions to meet a variety of financing needs and are available throughout the country.

4. CMHC Purchase
While it’s ideal to put at least 20 percent down, home prices in cities throughout Canada are rising faster than many homebuyers can save. “CMHC Purchase can help open the doors to homeownership by enabling homebuyers to buy a home with a minimum down payment of 5 percent,” says Coulter. “The premiums can either be paid up front in a lump sum or incorporated into an applicant’s mortgage loan payments.”

5. CMHC Improvement
With such tight housing markets throughout the country, homebuyers may be interested in purchasing a fixer-upper that needs a little TLC. “CMHC Improvement allows the purchase of an existing residential property with improvements and new construction financing,” explains Coulter. “Features include flexible financing options with the option for CMHC to manage up to four advances at no cost to the borrower.”

6. CMHC Newcomers
Obtaining a mortgage can be especially difficult for newcomers to Canada. If you’re a permanent resident with a strong credit rating you may be able to qualify for a typical bank mortgage, however, if you don’t meet all the criteria, the CMHC Newcomers program can help.

“We have helped newcomers with permanent resident status become homeowners with a minimum down payment starting at 5 percent – regardless of how long they have been in Canada,” says Coulter. “Non-permanent residents can also purchase a home with a minimum down payment of 10 percent of the value of the home.”

7. CMHC Self-Employed
Homebuyers who are self-employed may have difficulty qualifying for a mortgage given that their monthly income may be less predictable. CMHC’s Self-Employed program allows business owners with proper documentation to access mortgage loan insurance under the same criteria and insurance premiums as those with more calculable income.

“Self-employed Canadians make up about 15 percent of Canada’s labour force,” says Coulter. “CMHC facilitates access to mortgage loan insurance for business owners by providing enhanced flexibility for satisfying income and employment requirements for all self-employed borrowers at no additional cost.”

8. CMHC Green Home
“CMHC Green Home encourages homebuyers to choose more energy-efficient housing options to increase comfort and healthier living, while reducing greenhouse gas emissions,” says Coulter. “The program offers a partial premium refund of up to 25 percent directly to borrowers who either buy, build or renovate a home to make it more energy-efficient using CMHC insured financing.”

The amount of the refund varies depending on the level of energy-efficiency achieved by your home as assessed by Natural Resource Canada (NRCan). Condo buyers are also eligible for the CMHC Green Home refund if the building is built to the LEED Canada New Construction standard.

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Why the Bank of Canada’s ‘wait-and-see’ approach is best for homeowners and the economy: report

The Bank of Canada has stepped to the sidelines since it last hiked the overnight rate, which influences rates on the mortgage market, this past October.

Leaving the policy rate at 1.75 percent since then is a departure from the central bank’s gradual efforts to push interest rates higher: The Bank of Canada has embarked on five consecutive hikes, beginning in July 2017.

Though the bank has not been as aggressive of late as market watchers might have predicted if asked last year, in a report published this week, TD economists Beata Caranci and James Orlando suggest this tempered approach is indeed the right one for the Canadian economy.
For the past 10 or so years, they note, Canada has been able to count on the energy sector, housing, or both for economic growth. That isn’t the case today.

“Now we have a situation where both are going through what could be a prolonged adjustment period to a lower level of activity. This warrants a Bank of Canada pause,” reads their co-authored report titled “Patience is a Virtue.”

While lower oil prices and pipeline delays have been battering the Canadian economy, until relatively recently housing had picked up the slack. But with Canadian home prices posting their biggest decline since 1995, the economy is now facing another headwind, a situation TD nonetheless expects to clear up in the first half of the year.

“Our expectation is that evidence of housing stabilization and a rebound in the energy sector should become apparent in second quarter data, offering the central bank more confidence to resume its normalization process with interest rates thereafter,” the economists continue, saying the next rate hike is likely to occur in July.

However, TD notes that the data may not show the anticipated uptrends and risks may emerge.

“Household leverage and elevated sensitivity to interest rate changes have long been highlighted as the biggest risk to the economy,” the report states.

While TD’s view is generally in line with that of other big banks, there has been increasing speculation that the Bank of Canada may be encouraged to reverse at least one of its recent rate hikes in the event of a prolonged downturn in the housing market.
But BMO Chief Economist Douglas Porter isn’t buying that scenario.

“Another round of sour Canadian home sales figures, and a further cooling on household borrowing, seems to have awoken some of the big bears on Canadian housing,” Porter writes in a separate report.

“But before everyone goes all ‘sell Canada on the coming melt in housing’, we would just point to a variety of countering facts,” he adds.

For starters, policymakers were aiming at curbing out-of-control price gains when they implemented mortgage stress testing, hiked rates, and implemented foreign-homebuyer taxes in BC and Ontario — with that accomplished, more action isn’t likely for the time being.

Further, banks have begun cutting rates for five-year fixed-rate mortgages, the most popular type of mortgage for borrowers in Canada.

“As we have pointed out at every available occasion, do not forget that Canada is currently experiencing the strongest population growth in a generation,” Porter piles on.

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Following RBC, other Canadian banks are cutting mortgage rates. Could this boost the Toronto market again?

More Canadian banks are trimming mortgage rates following RBC’s move last week to hack 15 basis points off its five-year fixed rate.

It was likely welcome news for homebuyers in Toronto, one of Canada’s priciest markets with an average home price of $750,180, according to the local real estate board.

But could these discounted rates add some fuel to activity in the market?
“Is this drop of 15 basis points… going to make a difference and jump-start the market once again? No, it’s definitely not,” says Shawn Zigelstein, a GTA-based real estate agent with Royal LePage Your Community Realty.

Such a decline would only save a borrower $40 a month on a $500,000 mortgage, Zigelstein estimates, while around “a couple thousand” would be shaved off the qualifying rate. “If you’re dropping 15 basis points at the end of the day, really you can afford four extra Starbucks at the end of the month,” says Zigelstein.

However, if the recent cuts are the sign of a future trend, the impact could be meaningful.

“If we start to see another potential drop, and then another potential drop could that then make things a little bit more attractive for the buyers out there that have been sitting on the sidelines recently? The answer probably is yes if you start to see a pattern,” Zigelstein adds.

Zigelstein’s remarks echo an earlier report from Capital Economics. After the initial RBC cut, Capital Economics said rates would “need to fall much further” to help Toronto homebuyers.

In terms of improving Toronto ownership housing affordability, Zigelstein says that removing, or tweaking, mortgage stress testing would be more effective.

Federally regulated financial institutions are required to test mortgage applicants’ finances to see if they could afford monthly mortgage payments that match either the Bank of Canada’s five-year benchmark rate (considerably higher than current mortgages) or are 2 percentage points above the rate they are applying for — whichever of the two is greater.

“I’d love to see that stress test disappear or be adjusted in some way or another,” Zigelstein.

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Are many Canadian households really on the brink of going bust?

A recent Ipsos survey painted a grim picture for many Canadians: apparently, nearly half are $200 or less from being too broke to pay the bills.

The annual survey of more than 2,000 adults in Canada garnered dire headlines across the country, with nearly a third of respondents reporting they haven’t any money left over at the end of each month.

However, National Bank’s deputy chief economist, Matthieu Arseneau, suggests the headlines are “more bark than bite” despite access cheap credit in recent years leading to ballooning debt as homebuyers took advantage of historically low mortgage rates.

Arseneau calls attention to last year’s version of the same survey. In it, 33 percent of respondents said they had no wiggle room with their finances.

“What happened next is interesting,” writes Arseneau in a Hot Charts note.

Namely, loan defaults, which occur when borrowers stop making monthly loan payments, didn’t surge. In fact, according to the most recently available data, although insolvencies increased 5.2 percent in November compared to 12 months ago, actual bankruptcies remained around record lows.

Insolvency data muddies the issue because it lumps proposals in with bankruptcies. Proposals are plans borrowers put forward to restructure debt, sometimes extending the timeline of a loan, for instance.

The 5.2 percent increase in November, then, reflects an increasing number of proposals rather than rising bankruptcies.

According to National Bank, the insolvency ratio (that’s bankruptcies and proposals as a percentage of the Canadian population, aged 20 and up) is only slightly up, hovering at 0.44 percent.

“That’s in sharp contrast to the 33 percent tsunami suggested by last year’s survey,” Arseneau points out.

The tsunami may not have come, but high household debt in Canada has been flagged as a risk for the economy.

As interest rates have begun rising in the wake of five Bank of Canada policy rate hikes since July 2017, there have been concerns about Canadian households’ abilities to service debt, such as keeping up with mortgage payments.
National Bank provides a few reasons insolvencies haven’t increased sharply with the arrival of higher rates. Disposable incomes are trending higher and Canadians are tightening their belts, putting off optional purchases.

While the general consensus is not one of a major financial crisis, CIBC says in another report out this week that it’s “reasonable” to expect the Bank of Canada’s previous rate hikes will moderately push the insolvency rate higher.

“The negative impact of increased debt financing costs will offset any positives on the unemployment front,” writes CIBC Deputy Chief Economist Benjamin Tal.

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4 key trends that are helping the Canadian housing market avoid disaster

The Canadian housing market’s performance has been even worse than TD expected, but there are multiple reasons one of Canada’s biggest banks doesn’t predict “a further sustained deterioration” — or worse — this year.

“These [reasons] include another year of strong population growth, healthy labour market conditions and a more patient Bank of Canada,” writes Rishi Sondhi, a TD economist, in a report titled “The Winter of Discontent.”

TD goes on to chart four of the trends it expects to insulate the Canadian housing market from a worse year than 2018, which saw the biggest price drop since 1995.

Immigration drives a housing fundamental: population growth

What’s going on here: Federal Immigration levels dating back to 2013, including a forecast for this year’s total.

The takeaway: A growing population supports demand for new homes, and TD notes that the Canadian government’s immigration target for 2019 is 331,000, up from 330,000 last year. “Moreover, a significant portion of Canadian residents are in their household formation years, providing a solid foundation for demand,” writes Sondhi.

Canadian labour market to post “healthy” gains in 2019

What’s going on here: Annual employment growth presented as a percentage.

The takeaway: “Our forecast calls for over 150k jobs being added in 2019 while unemployment remains low. This should keep household incomes growing at a reasonable pace,” says Sondhi.

Toronto and BC are soft, but not all surrounding local markets are equal

What’s going on here: TD shows the sales-to-new listings ratio, which is an indicator of market strength, for Toronto and Vancouver, as well as the respective provinces they are in (minus those markets).

The takeaway: Ratios above 60 percent indicate conditions that favour sellers, and clearly a number of markets in Ontario are holding their own. “Outside of Toronto and Vancouver, an important (and perhaps overlooked) point is that markets in Ontario and B.C. are holding up much better,” Sondhi explains.

Five-year bond yields are trending lower, and that matters

What’s going on here: The yield on five-year bonds has been generally declining since late last year.

The takeaway: While the central bank’s policy rate tends to influence variable mortgages, the five-year bond yield has pull on five-year fixed-rate mortgages, the most popular option for Canadian borrowers. “Bond yields have moved significantly lower since November, which should feed through into lower mortgage rates.” Fixed-rate mortgages are more influenced by their corresponding government bond yields, as banks fund mortgages with bonds.

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RRSPs Vs. real estate

If you’re torn between investing in either RRSPs or real estate, don’t be.
Calum Ross, a leverage wealth expert and VERICO broker with Mortgage Management Group—and author of The Real Estate Retirement Plan: An Investment and Lifestyle Solution for Canadians—says Canadians should invest in both. Ross will be discussing that and more at this year’s Investor Forum on March 2 at the International Centre in Mississauga.
“People have a tendency to think of either RRSPs or real estate investing for their retirement plan,” Ross told CREW. “The reality is that consumers need both.”

The reason is that, in addition to diminishing rates of return, a growing number of Canadians these days don’t have defined contribution plans, which still don’t even give guaranteed payouts. Consequently, they need higher amounts of forced savings.

“When you consider the vast majority of Canadians’ wealth is tied up in their homes, the only solution to RRSP, TFSA, RESP, or investment savings catch-ups is essentially in the home equity of their property,” continued Ross. “When you consider the fact that life expectancies now are moving towards 90 years old, the probability that your registered savings account lasts a lot longer than your mortgage is very high. What we’ve been doing is engineering investment products to ensure that the rate of return exceeds the cost of borrowing.”

Ross defines retirement not as the point at which somebody stops working, but rather as the point at which they no longer need to work. If someone has enough money in their investment accounts, debts are easily repaid in full and a mortgage becomes an instrument that is acquired by design and not out of necessity.

Moreover, Ross notes that real estate investing doesn’t have the same tax deferral on capital gains that RRSPs have. He recommends using home equity appreciation as an RRSP catch-up.

Cash flow is still an important component of investing, and that means investors should seek blue-chip properties that they own directly. Of course, choosing the right property is an altogether different task.

“Picking a property depends on the current state of the economy, as well as its projected state,” said Ross. “It’s not just about the actual property today, it’s also about where the underlying economic fundamentals will be in five or 10 years, and the two biggest predictors of where a property will be are actual net migration of population inflow—because there will be housing demand—and areas with strong GDP growth.”

Toronto, for example, has strong population inflow, which is creating housing demand so strong that supply cannot maintain pace, but it’s also a geographical location wherein values have skyrocketed. Ross says that properties that cash flow positively will help meet the Canada Revenue Agency’s deductibility elements.

As for RRSPs, they offer diversified access to a number of different market options, but in tandem with real estate, investors are better shielded.

“If you put money in RRSPs and you take it out, you’re penalized, but in real estate the monthly payment has forced savings mechanisms,” he said.

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A recent court decision has put over 1200 acres of green space back into the hands of public ownership

(Mount) Pleasant Victory
A recent court decision has put over 1200 acres of green space back into the hands of public ownership. This is a massive victory for residents, and if upheld on appeal, will help ensure these lands are properly managed and remain publically accessible.

On January 3, Justice Sean Dunphy of Ontario’s Superior Court handed an immense victory for residents in the Greater Toronto Area when he announced that the Mount Pleasant Group of Cemeteries (MPGC) was a charitable trust and not a private corporation. Justice Dunphy also ruled that MPGC had taken actions that overstepped trust rules by opening visitation centres and funeral homes.

MPGC runs several cemeteries in Toronto, including the 205 acre Mount Pleasant Cemetery and the 18 acres of Toronto Necropolis. In total, it has ten cemeteries that comprise approximately 1200 acres of green space, or about $2 billion in land and assets. Following a number of controversial moves MPGC took at Mount Pleasant Cemetery, I joined a lawsuit launched by the Friends of Toronto Public Cemeteries as a private citizen.

The origin of MPGC is the former City of York’s first non-denominational burial ground called Potters Field, in what is now Yorkville, purchased residents for $300 and established in 1826. Potters Field would later be moved to what is now the Toronto Necropolis. Rules for the appointment of trustees to the then Toronto General Burial Ground was created through a special provincial 1849 Act, which included a provision allowing citizens to elect trustees. This act has never been changed or repealed.

Since the 1980s, the trustees—changing the corporation name to MPGC and now calling themselves directors—stopped publically advertising the appointment of new trustees as required by the 1849 Act. In addition, the MPGC board had argued that they were not a charity, limiting potential oversight and scrutiny. The MPGC also advertised itself as a private entity and began changing historical landscapes, demolishing historic vaults, covering green space for funeral homes, cutting trees and using pesticides that were not permitted by our by-laws.

The impact of this ruling means that not only will there be more oversight into the operations of MPGC, but that approximately 640 acres of green space in the City of Toronto and 580 acres in the GTA are now owned by the public.

MPGC has appealed this ruling; they will not give up $2 billion worth of land and assets without a fight. But for now, take a pleasant stroll through Mount Pleasant Cemetery or the Toronto Necropolis; you own it after all.

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Where are Canadian mortgage rates headed in 2019? Experts weigh in

It wasn’t so long ago that there was hardly any doubt that Canadians would be seeing higher mortgage rates this year.

The Bank of Canada was widely expected to continue on its path of tightening monetary policy with continued increases to the overnight rate, which influences mortgages, particularly those with variable rates.

While that may still be a majority consensus among market watchers, mortgage broker Elan Weintraub is hearing conflicting viewpoints these days. “I think there’s a lot of uncertainty in the marketplace right now,” he tells Livabl.

“If you rewind to maybe six months ago, the Bank of Canada was pretty clear that they would be raising rates, but now that there’s a lot of problems with oil, there’s problems with Trump, there’s a lot of things going on,” he adds.

Bank of Canada rate hike(s) widely expected in 2019
Still, Weintraub is holding to his prediction that the Bank of Canada will hike rates one to two times this year, likely once in the spring/summer and perhaps another hike in the winter. In a note published today, TD Economics echoed Weintraub’s prediction for further rate movement starting this spring.

Since July 2017, the Bank of Canada has increased the overnight rate on five occasions. Each time it was by 25 basis points, with the last hike this past October leaving the rate at 1.75 percent. Most recently, the bank held the rate steady during its policy announcement today.

While Weintraub’s view is widely shared, he acknowledges not everyone is on the same page. “There are even some people that are thinking that there might be a decrease on the way,” he notes.

But not everyone agrees
Capital Economics, a bearish economist research firm, is one of them. Capital Economics forecasts the central bank will need to cut the overnight rate towards the end this year.

In a response to the Bank of Canada’s latest rate announcement, Capital Economics reiterated its call for lower rates in late-2019.

“If we’re right that oil and housing will be a bigger drag on the economy than the Bank expects, then further interest rate hikes are very unlikely and the odds of interest rate cuts will rise in the coming quarters,” writes Stephen Brown, Capital Economics senior Canadian economist, in a note.

While Capital Economics remains somewhat of an outlier, others — even those who think a hike is on the horizon — are at least entertaining the possibility that the central bank will backtrack on rates.

Canadian credit union Central 1 anticipates the Bank of Canada will raise the overnight rate by 25 basis points in October. But that outlook is based on oil prices increasing and remaining steady, U.S.–China trade war prospects lowering, and the global economy stabilizing.

“A worse-case scenario — where U.S.–China tensions escalate or U.S. policies cause more disruptions and its political situation worsens — would bring a rate cut scenario into play,” Central 1 writes in a report.

Variable and fixed-rate mortgage borrowers benefit from policy moves
For now, though, borrowers need not worry about dramatic changes to interest on their mortgage rates — at least in the short term.

Real estate portal Zoocasa notes that it isn’t just holders of variable rate mortgages who are benefitting from the Bank of Canada’s current hands-off approach.

“While the fixed cost of borrowing isn’t directly impacted by the BoC’s monetary policy, it is influenced by the bond market, which is very sensitive to interest rate movement,” writes Penelope Graham, managing editor of Zoocasa.

“Bond investors are happy when the BoC cuts or holds its rate, as it means the yield on their investment – its payout upon maturity – remains competitive in comparison to newly-issued bonds.”

In fact, BMO Economics suggests that variable rates seem set to remain relatively flat this year in light of the Bank of Canada’s less-aggressive approach this year and fixed rates may even decline.

“The chunky decline in longer-term bond yields on both sides of the border could translate into modestly lower fixed-rate mortgages, if history is any guide,” writes BMO Senior Economist Robert Kavcic, in a note to clients.

Weintraub agrees. “There could be a little bit of softening in the fixed rate pricing, and fixed rates could come down slightly in the next couple months,” he tells Livabl. “The banks need to do volume, they need to get the money out there, they need to lend money.”

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Unsold new homes in Ontario were on the decline in 2018

Sales activity in Ontario’s existing-home market was slowing last year, but homebuilders weren’t saddled with high levels of new unsold dwellings, suggests a recent report from Central 1 credit union, which predicts the trend will continue.

Across the province, there are 2,112 homes that — despite being finished — have not found buyers. However, that’s down 13.2 percent from the previous year, according to an Ontario Economic Briefing. “We’re well below the long-term average,” Edgard Navarrete, a regional economist with Central 1, tells Livabl in a followup interview. “We’re seeing a slight increase for low-density [homes],” he adds.

While more completed single-family homes remained in builders’ inventories, this was offset by demand for new condo units. Together with row and townhomes, apartments account for 82.7 percent of units currently being built.

“There is no need for concern yet, but it is pointing to a shift in demand from low-rise housing to hi-rise housing due to affordability concerns,” writes Navarrete in the report.
Prices for new homes averaged $834,206 in 2018, up 6.1 percent annually. In 2017, prices surged by 10 percent.

“Even with the moderation in price growth, the average price level is pushing potential homebuyers to the resale market or deciding not to purchase at all,” notes Navarrete.

“This is especially true in the more expensive markets such as Toronto and Ottawa-Gatineau,” he adds.

One result will be a slower pace of new home construction in 2019, Central 1 suggests, anticipating builders will break ground for 71,000 units in Ontario this year, down from 75,956 in 2018.

That’s around the level of construction seen in 2016 and, before that, in 2008 during the recession.

However, Canada Mortgage and Housing Corporation (CMHC) sees factors that are supportive of somewhat of a rebound in single-family home construction, at least for 2019.

“Single-family existing home sales and starts will post a partial recovery in 2019 as better than expected job growth and migration levels encourage buyers to re-enter the market before sales and starts ease further into 2020,” the Crown corporation wrote in a Fall 2018 Housing Market Outlook.

Navarrete notes that some of the pullback in detached home demand stems at least in part from mortgage stress testing.

“It put a lot of people that were willing to buy, that are able to buy, on the sidelines,” he explains. “The people that can still go forward and buy… they tended to go for higher-density options,” he adds.

But looking ahead, Navarrete expects the number of unsold homes in Toronto — and more broadly in Ontario — to continue to trend lower.

“As people save for a downpayment a little bit longer, some of them will be able to take those single-detached homes that are unsold off the market, and also builders will be a little bit more cautious about the number of new projects they bring to the market,” Navarrete notes.

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The drop in 2018 Canadian home prices isn’t what it seems

Although much has been made about the decline in Canadian home sales and prices, one economist suggests it wasn’t as bad as it seems.

“Remember: If the price of every house in the neighbourhood stays the same in a given year, but fewer of the expensive ones change hands in favour of the cheaper ones,

the ‘average price’ will fall,” writes Robert Kavcic, a senior economist for BMO, in a client note.

Kavcic acknowledges the fact that, yes, Canadian home prices did indeed fall in 2018.

The average price of a Canadian home this past December was $472,000, down 4.9 percent from the same month a year ago, according to the Canadian Real Estate Association (CREA).

For the whole year, home prices were down by 4.1 percent marking the biggest drop since 1995, Kavcic notes.

“But the decline is exaggerated by the arithmetic of a changing sales mix,” he continues.

What Kavcic means is, sales were especially soft in the costly Toronto and Vancouver markets, which is going to have considerable pull on the national average price.

Removing Greater Vancouver and the GTA from calculations trims close to $100,000 from the national average, CREA says.

“Main points here: It wasn’t as bad as the headline 2018 national price decline looks; but it wasn’t good for much of the country either; and this year could see housing stagnation become a wider and more persistent theme,” Kavcic concludes.

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Chinese listings site adds focus on retiring in Canada

The leading property listings website for Chinese consumers has added a new channel focused on those who want to retire abroad.

Juwai.com, which reaches more than 3 million Chinese consumers each month has launched its Retirement and Lifestyle Channel to provide information and real estate listings for retirement properties and communities internationally.

“The countries that are most popular for Chinese retirees are the US, Canada, and Australia,” explains Juwai.com CEO and Director Carrie Law. “Most older Chinese want to live near their children and grandchildren, and these are the countries with the largest Chinese immigrant populations.”

As well as family, Law says that Chinese seniors are drawn to those countries that have affordability, good medical care, and an attractive lifestyle.

The site’s new channel’s popular articles include news of a Canadian proposal to curtail birthright citizenship, and a listing for a 5-bedroom oceanfront mansion in the California city of Newport Beach.

Big markets for big spenders
Law says the market for Chinese retirees is vast.

“Within 11 years, there will be 340 million Chinese aged 60 or above. That’s more than the present population of the entire United States. We know that most people begin planning and investing for retirement in their 40s and 50s,” she says.

Across all demographics and property type, Juwai.com estimates that Chinese buyers spent U$123.9 billion on global real estate.

These 10 countries are the best for retirement. Is yours part of the list?

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Municipal Law Bulletin – Province Releases Proposals to Change Growth Plan for Greater Golden Horseshoe

On January 15, 2019, the Minister of Municipal Affairs posted proposed changes to the Provincial Growth Plan for the Greater Golden Horseshoe on the Environmental Bill of Rights Registry. The province is now receiving comments on the proposed changes for 45 days.

Highlights of the changes include:

· Permitting small additions to settlement areas (up to 40 hectares) on municipal initiative outside the context of a Municipal Comprehensive Review

· Removing the obligation of municipalities to de-designate “excess lands” in settlement areas

· Streamlining study requirements for expansions of settlement areas

· Establishing new, more practical, intensification and density targets

In Hamilton, Peel, York and Waterloo, 60% of growth should be through intensification. Greenfield densities are now 60 jobs/people per hectare (down from 80)

In Barrie, Brantford, Guelph, Orillia, Peterborough and the Durham, Halton and Niagara regions, 50% of growth should be through intensification (down from 60%). Greenfield densities are now 50 jobs/people per hectare (down from 80).

For the city of Kawartha Lakes and the counties of Brant, Dufferin, Haldimand, Northumberland, Peterborough, Simcoe and Wellington, intensification should maintain or improve on targets in existing Official Plans. Greenfield densities are now 40 jobs/people per hectare.

· Conversions to residential uses will be permitted in employment areas outside of a Municipal Comprehensive Review where there is a need, and where it will “maintain a significant number of jobs” on the lands.

· Conversions will not be permitted in 29 designated “provincially significant employment areas.”

· The provincial mapping of the Natural Heritage System is put on hold, to be implemented through refined mapping by single and upper-tier municipalities.

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Seniors housing touted as 2019’s safest investment

With seniors slated to comprise nearly a quarter of Canada’s population by 2030, real estate that caters to their needs is being touted as one of the most investment-friendly sectors this year.

That’s in spite of a somewhat volatile interest rate environment that’s expected to carry through 2019, says Montreal-based Fred Blondeau, an analyst with Echelon Wealth Partners.

“The sector should be able to generate significant growth no matter how interest rates evolve, so we’re putting more emphasis on senior living at this point,” he said, referring to a report Echelon released last month.

The report, The Ultimate All-Weather Investment: Canadian Senior Living Real Estate, differentiates between long-term care, which is the purview of governmental agencies, and senior housing, which requires private funds.

“The appetite from investors for senior living spaces remain strong,” said Blondeau. “The sector will be subject to strong inflows from investors wanting to put their money in the space.”

Echelon Wealth Partners reckons that times are turbulent and, in particular, it is worried about the global macroeconomic outlook. However, according to Blondeau, irrespective of whether the economic environment improves, remains stable or becomes more unstable, senior living spaces will be unaffected.

“Especially in Canada’s strongest markets, like Toronto and B.C.,” he said. “We also feel like the market will continue to see strong activity and development of products. The sector will be subject to major capital investments, too, so it will remain a very vibrant sector no matter what happens with both the global and Canadian economies.”

David Stoller, vice president of marketing at Mysense.ai, an analytics platform that monitors health and behavioural patterns in individuals, expects substantial investment in the senior living sector over the coming decade. For proof, he points to hospitals.

“As population ages, we run into capacity issues within hospitals, so there will be a huge priority in keeping older adults living at home longer,” said Stoller. “There is greater need for residences designed to support and help older adults remain independent longer.”

That need is already manifesting in through-the-roof demand for monitoring devices for fall detection and wandering.

“Scarcity will be a major issue in the senior living sector,” said Stoller. “When you can find an industry that’s growing, you want to attach yourself to it, and this is one of those industries because we see an increase in consumer demand, an increase on the business side with suppliers and technology, and that should be met with an increase in supply.”

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Oracle opens next generation Oracle Cloud Infrastructure data centre in Toronto

With a focus on security and performance, Oracle today announced the opening of a 700,000 square-foot data centre in Toronto to support customer demand in the region.

Oracle has “leapfrogged” the competition when it comes the next-generation of cloud infrastructure, and its making good on the company’s promise to automate the tedious processes behind cloud transitions and upgrades, said Rich Geraffo, executive vice-president of the North America Technology division for Oracle. The newly announced Toronto data centre is Oracle’s first next generation Oracle Cloud Infrastructure data centre in Canada, and offers customers Oracle Autonomous Database, a managed cloud database service.

“Today, most customers have to manually performing patches, monitor the database and manage the infrastructure, but our autonomous infrastructure is using next generation technology like machine learning and AI to shift those responsibilities to us,” Geraffo told CDN.

Oracle Cloud is an enterprise-grade Infrastructure-as-a-Service (IaaS) platform with built-in core-to-edge security, and is able to run both traditional and next-gen workloads on a cloud system. Oracle didn’t disclose how much money it dropped on the new data centre, but it’s clear the expansion won’t stop here. In a press release, the company said it wants to open additional regions in Australia, Europe, Japan, South Korea, India, Brazil, the Middle East and in multiple states across the U.S.

A large chunk of Oracle customers are large enterprises and institutions, making the database and cloud services provider a unique competitor against the likes of AWS, which owns the biggest slice of the cloud-services pie and sells to a much wider range of businesses. But Geraffo said the Canadian channel partner community will greatly benefit from the new data centre, especially those who’ve had reservations about adopting cloud technologies because of security concerns. Companies of any size will be able to run the most demanding workloads securely and save a lot of money while doing it, he explained.

Geraffo cited an IDC Software Tracker report that says Canada’s public cloud software market will grow six times faster than on-premises deployments, reaching $4.1 billion by 2019. He said the numbers are a clear reflection of the need for more cloud infrastructure in Canada. A separate IDC report says spending on public cloud computing in Canada will hit $5.5 billion by 2020, and will generate more than 50,000 new jobs across the country. Oracle says all of the top 10 and 76 of the top 100 Canadian companies by revenue use Oracle products and services. Additionally, 43 of the top 100 Canadian companies already use Oracle Cloud, including Software-as-a-Service, Platform-as-a-Service and IaaS deployments.

“Canada is a very strategic marketplace for Oracle and we are excited to continue to invest in the country,” said Geraffo.

When asked about Oracle’s former product chief Thomas Kurian and what imprint he may have had on the new data centre in Toronto, Geraffo indicated he wasn’t able to comment, but pointed to comments made by Oracle chief technology officer and chairman, Larry Ellison, who for months has been hinting at the company’s push into autonomous infrastructure.

“If you listen to what Larry’s been saying, we made a big shift to an autonomous strategy and the autonomous database,” he said. “We think this is a big benefit to customers want to get the most value out of their IP and information.”

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New condo sales are still surging in these Canadian housing markets

A national trend of dampening homes sales has not swept through the new condo segment of every large Canadian housing market.

Activity is markedly down in a number of Canada’s major housing markets, but new condo sales in a handful of cities tracked by real estate consultancy Altus Group are actually surging.

Specifically, new condo sales in 2018 skyrocketed 69 percent on a year-over-year basis in the Kitchener-Waterloo area, 31 percent in Montreal, and 19 percent in Hamilton, according to Altus Group’s joint New Home Outlook 2019 and 2018 year in review report.
Both Kitchener-Waterloo and Hamilton had similar appeal for condo buyers over the past year.

“Markets outside of the GTA have continued to benefit from their relative affordability compared to Toronto, particularly in Kitchener-Waterloo where the new supply of condominium apartment product experienced strong demand in 2018,” reads the Altus Group report. “Both markets benefit from markedly better pricing compared to the GTA.”

Montreal has seen activity pick up steam for the past three years, but this persistent strength is starting to weigh on what has become one of the country’s hottest housing markets. “Given the growth in sales, many of the challenges seen in the other large markets have started to impact Montreal — rising costs, elevated inventories of under construction product and increased investment activity,” notes Altus Group.

New condo sales in the Ontario markets of Kitchener-Waterloo and Hamilton are expected increase this year, while Altus Group anticipates Montreal transactions will trend lower. “Montreal had a tremendous sales year in 2018 and 2019 volumes are expected to decline as the market returns to more normal conditions,” says Altus Group.

Calgary new condo sales increased 1 percent annually as suburban sub markets showed signs of recovery. Real estate transactions in the city have been depressed in recent years as lower oil prices have led to worse employment prospects and, as a result, fewer potential homebuyers.

The suburban markets in Calgary have been picking up the slack for inner-city and downtown neighbourhoods where sales continued to trend lower. “The strongest new home sales in the suburbs have been occurring in regions near employment centres,” says Altus Group in the report.

Edmonton, the other Albertan city that Altus Group monitors, posted the second-greatest annual decline in new condo sales last year, with activity plunging 48 percent. Only the Greater Toronto Area, were activity fell 49 percent, was hit harder.
“The GTA market came off a record new condominium apartment sales year in 2017; however, the impacts of mortgage rule changes and new development charges contributed to a decline in project launches and lower sales to start the year,” says Altus Group, noting demand picked up in the second half of the year. Of all Canadian markets, the consultancy suggests those in southern Ontario’s Greater Golden Horseshoe, including the GTA, have the brightest prospect for higher new-home sales tallies this year.

New condo sales were down 19 percent in Vancouver last year, but that is a more modest decline than the 31 percent drop in 2017.

“The Vancouver market, which is currently exhibiting the most potential for downside risk, is expected to see a modest decline in sales volumes as consumers react to higher borrowing costs and developers react to escalating construction costs in the face of lower revenue opportunities,” says Altus Group, noting activity should still track around the Vancouver market’s 10-year average for new home sales.

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“No more detached homes for you,” economist tells Canada

In the not so distant past, Canadian contractors were building more single-family homes than multi-family homes, such as condo apartments.

It’s a very different story today — so much so that an economist with one of Canada’s biggest banks recently said “no more detached homes for you” in a note to clients.

In the note, BMO Senior Economist Robert Kavcic charts construction trends since 1990, painting a picture of just how much the new-housing landscape has changed in the past three decades.

From the 1990s until the mid-2000s, builders were consistently constructing more single-family homes than multi-family homes. Since the Great Recession, however, there has been parabolic growth in the multi-family segment, and Kavcic doesn’t expect the single-family segment to catch up.

“The difference in new supply between these two segments couldn’t be starker, and various factors such as urban job growth, intensification requirements and greenbelts will likely keep this theme in play,” Kavcic writes.

How wide is the gap between the pace of single- and multi-family home construction?
According to the Canada Mortgage and Housing Corporation (CMHC), homebuilders began work on 54,220 detached houses in 2018, down from the already historically low total of 63,490 in 2017.

Last year’s tally is “the lowest annual total for detached-home construction since the depth of the mid-1990s downturn,” says Kavcic.

Across all other housing types, including purpose-built rental apartments, condos, and townhomes, workers started construction on 142,492 units, down from 138,884 in the previous year.

“Keep in mind that 2017 was the strongest year in a decade so, despite somewhat softer momentum to close out the year, the pace of residential construction activity was still very solid heading into 2019,” Kavcic points out.

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The Bank of Canada is wrong. Canadian bankruptcies aren’t on the rise, says Scotiabank

An executive with one of the biggest Canadian banks is questioning the judgement of the Bank of Canada’s governor over his comments about bankruptcies in the country.

When Stephen Poloz announced this week that the central bank was maintaining the overnight rate at 1.75 percent, signalling mortgage rates should remain consistent for the time being, he noted bankruptcies are on the rise.
But that’s not the case, says Derek Holt, vice president of Scotiabank Economics, and it’s one of the things that differentiates our banking system from America’s.

“I don’t see consumer bankruptcies the same way as the Governor and was somewhat surprised by how the Governor is viewing bankruptcies given the importance of tracking how they are responding to higher rates and other developments,” writes Holt in a Scotia Flash report.

“Poloz says consumer bankruptcies have gone up. They have not,” he adds bluntly.

Recently, the Office of the Superintendent of Bankruptcy reported that consumer insolvencies were up 5.2 per cent in November on a year-over-year basis.

However, this measure is based on more than bankruptcies. It also includes proposals for restructuring debt (basically, a proposal for a repayment plan that may include asking a creditor for more time to pay off debt, or offering to pay a certain percentage of the total owed).

“Total insolvencies have risen because proposals have gone up, and they are a very different animal compared to going bankrupt,” Holt explains. “Bankruptcies are still toward record lows.”

In a separate note, Holt suggests the increase in proposals didn’t come out of nowhere. The impacts of rising interest rates and mortgage stress testing introduced a year ago are being felt.

“I would also contend that what we are seeing here is a reflection of one of the great relative strengths of the Canadian banking system versus, say, the US system,” writes Holt.

“Proposals are worked out through a willingness to restructure payments and debt without necessarily forcing the client into bankruptcy and seizing uncertain net asset values minus related costs.”

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Canada 6th in the world at attracting talent

Switzerland once again clinched the top spot in a global survey on fostering and attracting talent, in a top 10 list that includes Canada but not the U.S., and no Asian nations.

The country retained its title for the fifth consecutive year on the World Talent Ranking report published by IMD Business School, a result of its strong emphasis on skills training and education. Denmark and Norway were ranked second and third respectively in the poll, which was dominated by European countries.

While the U.S. didn’t make it to the top 10, it climbed four places to rank 12th. The U.K. slid two spots to 23. Canada was the only non-European country to feature among the top 10.

“Economies placed in the top 10 of the ranking generally share high levels of investment in public education and a high quality of life, which allow them both to develop local human capital and to attract highly-skilled professionals from abroad,” said Arturo Bris, director of the IMD World Competitiveness Center.

Singapore was the highest-ranking Asian economy on the index, coming in at 13th place and outranking Hong Kong, which dropped six places this year to 18th. Both economies continued to excel in attracting professionals from abroad but lagged in terms of investment in education, the report noted.

China was ranked 39th because of its difficulties in attracting foreign skilled workers and because its public spending on education remains below the average of advanced economies, the report said.

Latin American countries were among the least competitive with Mexico in 61st position. Venezuela was last on the list at No. 63. Both countries suffered from a brain drain and relatively low public spending on education, according to the report.

The study surveyed over six thousand executives in 63 economies. Each economy was assessed on various factors including how they invest in developing the local workforce, the extent to which they are able to attract and retain skilled workers and the quality of skills available in their respective talent pools.

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GTA condos saw record-breaking rent rises in 2018

Condo apartment owners in the GTA saw higher returns on their investments in 2018 with rents setting a new record.

Urbanation, which has been tracking rents in the market since 2010, says last year’s 9.3% increase was the largest it has seen, beating the previous year’s 8.3% growth and the 8-year-average of 4.1%.

However, on a year-over-year basis, rent growth moderated in the fourth quarter to 6.7%, representing the slowest annual pace since Q1-2017 with the average monthly cost reaching $2,310.

Although the figures suggest that renters are adapting to higher rents – with total lease activity for studios up 44% and for one-bedroom apartments rising 31% – growth in rents may be limited by new supply and affordability issues.

“Recent housing policy changes, combined with strong demand fundamentals and supply constraints led to record growth for rents in the GTA last year,” said Shaun Hildebrand, President of Urbanation. “These factors should continue to keep upward pressure on rents, but to a lesser degree in 2019 as affordability becomes a bigger issue and more condominium and rental units finish construction.”

Supply set to rise
The total number of purpose-built rental apartments under construction in the GTA reached a more than 30-year high of 11,905 units at the end of 2018, rising by 59% from 7,494 units at the end of 2017 and more than twice the level from two years ago at the end of 2016 (5,429).

This year close to 5,000 purpose-built rentals are expected to reach completion, representing the highest level since the early 1990s. Longer-term future supply represented by the inventory of projects proposed for development reached 40,688 units, up from 34,559 units at the end of 2017 and 27,591 units at the end of 2016.

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Toronto can’t build office towers fast enough

A decade ago, an office landlord might have gone into crisis mode upon learning a tenant as big as Canadian Imperial Bank of Commerce was preparing to flee to a new development down the street. But these days, perhaps nothing says more about demand for office space in downtown Toronto than QuadReal Property Group’s response to precisely that scenario.

While the first tower of Ivanhoé Cambridge’s 2.9-million-square-foot CIBC Square rises next to Union Station, QuadReal, rather than fretting over a huge impending vacancy at its venerable Commerce Court complex next year, is working with city planners to add 1.8 million square feet of space to the complex with a new 64-storey tower.

And, as an exclamation point, no one seems to be questioning the sanity of QuadReal or its parent, B.C. Investment Management Corp. (BCI), to create the new tower that would stand as tall as BMO Tower at First Canadian Place, which has long held the place of Toronto’s tallest office building.
There’s 10.1 million square feet of new office space in the pipeline for Toronto’s core, but with none of it slated to open for more than a year, there’s apparent consensus that demand will further outstrip supply in 2019 – and that’s in a market that has already been North America’s tightest for more than four years.

“Americans I’ve talked to are amazed,” says Daniel Holmes. “I can’t believe this hasn’t been making headlines.”

Thomas Forr, research director points out that while there’s lots of new space coming, just 2.3 million square feet is vacant, much of it in small blocks.

“We’re absorbing about a million square feet a year without new product coming online till 2020,” Mr. Forr says. “So you could soon have a 1-per-cent [vacancy] rate, maybe even 0 per cent with the activity we’re seeing.”

The broader Toronto market has about a 3-per-cent vacancy rate, but it’s already between 1 and 1.4 per cent in the core, depending on whose data you use.

Average asking net rents are up 38 per cent since 2013, and Mr. Forr and Mr. Holmes both say tenants with leases due to expire have learned they now have to search aggressively two or more years in advance to ensure they have much choice if they want new digs.

It’s a sharp contrast to a decade ago, when big new office buildings started to rise again for the first time since the early 1990s recession. That wave of development (2008-2011) brought about three million square feet to market and had some expressing fears about a potential space glut. Now, after another five million square feet was added between 2012 and 2017, there’s the coming 10.1 million, which should all be open by 2024.

“Nobody’s getting reckless,” Mr. Forr at JLL says. “If you look at downtown or even across Canada, there’s still a conservative ownership and development community. You have a lot of pension funds and they’re looking long term. One interesting thing we’re seeing in this cycle is lots of net new tenants coming downtown.”

Five big names on that list include:

– Microsoft, which is moving in 2020 from the airport area, taking 132,000 square feet at Ivanhoé’s CIBC Square.

– Shopify will set up in a new 38-storey tower at The Well, which Allied Properties REIT and RioCan REIT are developing at Front Street and Spadina Avenue (Shopify has taken 253,000 square feet with an option on another 181,000).

– Ontario Teachers’ Pension Plan is moving its head office from North York to a new 46-storey tower that its real estate unit, Cadillac Fairview, is building at Front and Simcoe streets.

– Amazon has taken 113,000 square feet in Scotia Plaza (a building that will eventually lose many of its Bank of Nova Scotia employees to Brookfield’s Bay Adelaide North tower, where construction is set to start this spring).

– Tim Hortons is moving its head office from Oakville to 65,000 square feet in the Exchange Building on King Street.

When asked what factors are driving change most, Mr. Holmes of Colliers replies, “technology and millennials.”

While people recently feared Toronto’s core was overly reliant on financial services, Mr. Holmes says it has diversified, becoming a global player – particularly in tech, which relies on young talent.

“Millennials are choosing first where they want to live and then where they want to work,” he says, adding that Toronto’s core is diverse, welcoming, safe and fun. “Companies don’t want to be further out, even for cheaper rent in a better building. They need to attract and retain top talent and talent is choosing the core.”

Colliers projects that when the coming wave of buildings has opened, Toronto’s vacancy rate will climb to a healthy 6 to 7.7 per cent, which would still be North America’s third tightest, behind Manhattan and San Francisco.

City planners say another 31.9 million square feet are needed by 2041, but industry observers say that’s too far in the future to merit comment. What the golden goose definitely needs, they say, is more rapid transit through downtown, even before the core gets the 200,000 to 300,000 new jobs expected in the next 25 years.

“Transit’s key,” says Mr. Forr, adding Union Station proximity is a big part of Ivanhoé’s success in leasing nearby CIBC Square.

With CIBC, Microsoft, Boston Consulting, AGF and others as its tenants, Ivanhoé’s first tower, scheduled for completion in 2020, was fully leased about 2½ years ahead of Ivanhoé’s usual timeframe. The second tower won’t break ground till 2020, but it is 50-per-cent leased already.

“If we had room for a Phase 3, I think we’d be looking at that very seriously,” says Jonathan Pearce, Ivanhoé’s North American executive vice-president for leasing. He sees transit as so important that it has, in effect, shifted the centre of Toronto’s core south toward Union Station, where all modes of transit converge and where the only certain downtown service expansion is in the works.

As for the prospects of Commerce Court, which began as one tower in 1931, once CIBC starts seriously packing to move down Bay Street, count Mr. Pearce among the optimists. “Toronto is such a strong market that the older-generation product in those iconic towers is still going to lease,” he says.

QuadReal, meanwhile, declined an interview request, but industry people say the planned new tower at Commerce Court, which will replace two shorter buildings to be torn down, will be impressive, is probably six or seven years out, and that there will likely be announcements in 2019.

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