Home ownership costs soar across Canada

The Canadian Press

Date: Monday Sep. 27, 2010 8:43 AM ET

TORONTO — The cost of owning a home continues to rise, according to a quarterly report on housing affordability by Canada's largest banking group.

The latest housing report by RBC Economics Research says the costs of owning a home increased the most in Ontario and British Columbia.

The higher monthly costs for owning a home were driven by increased mortgage rates and further appreciation in home prices, the report said.

The report said home ownership costs in B.C. neared the all-time highs reached in 2008.

The RBC report also says it expects a temporary easing in housing affordability because of the recent drop in mortgage rates and signs that home prices are stabilizing in many markets.

Click here to read the Report

The Hidden Costs of Moving

May 7, 2010 -- In the last five years an average of more than 80,000 homes per year have changed hands in the Greater Toronto Area. While our reasons for changing the scenery are as diverse as the city itself, there’s no doubt that a different space or lifestyle can offer new inspiration and more importantly, an opportunity for a fresh start financially.

The key to ensuring that you begin your next chapter with a solid financial footing is careful budgeting of all costs associated with the transaction.

While many homebuyers plan for the most apparent expenses such as the deposit and down payment, mortgage insurance costs, appraisal and inspection fees, land transfer taxes and legal costs; there are a number of less obvious expenses that should also be taken into account.

Transporting your belongings is one such expense. Professional moving costs can range from hundreds to thousands of dollars so it’s best to be sure you’re comfortable with the company you’ve chosen by seeking referrals from family and friends. Even if you only plan to rent a truck, be sure that you fully understand the agreement and account for extra gas and mileage costs. Include packing supplies like tape and bubble wrap in your budget as well.

When it comes to moving, it’s wise to expect the unexpected. Since delays can happen at either end, budgeting funds for accommodations, storage facilities and additional rental fees is a must. Given that settling in doesn’t happen overnight, you should also expect the additional costs of eating take-out food for a few days. Anticipate a higher than normal grocery bill at the outset as well, as you restock staples that may have been discarded prior to your move and replenish much-needed cleaning supplies.

To make your new house a home you’ll want to set aside some funds for furniture, window treatments, light fixtures and area rugs. Even minor assorted hardware items can add up. Utility, phone, television and Internet service providers typically charge to establish a connection. As well, to provide for better security, plan to have your locks re-keyed or replace the entire lockset yourself.

As a condition of your mortgage you will need to obtain home insurance. Since premiums can vary widely, be sure to get a number of quotes. Remember as well, that if the seller has prepaid utility bills and taxes beyond closing, you will be required to reimburse them. If you’re moving into a larger space, higher ongoing utility costs should also be considered. Account for the fact that property taxes could also increase significantly if you’re a move-up buyer.

While the preparation might seem a little daunting, the benefits of your new investment far outweigh the inconveniences of moving. A home after all, is not only the sole type of investment in which you can live while it appreciates; it’s also a place to build memories that last a lifetime.

To ensure you’re well prepared for your next move talk to a Greater Toronto REALTOR® and visit www.TorontoRealEstateBoard.com where you’ll find available properties, neighbourhood profiles and the latest market statistics. Be sure to follow TREB on www.Twitter.com/TREB_Official, www.facebook.com/TorontoRealEstateBoard and www.youtube.com/TREBChannel .

Tom Lebour is President of the Toronto Real Estate Board, a professional association that represents 29,000 REALTORS® in the Greater Toronto Area.

Department of Finance Mortgage Measures

The Honorable Jim Flaherty, Minister of Finance, today announced a number of measured steps to support the long-term stability of Canada's housing market and continue to encourage home ownership for Canadians.

"Canada's housing market is healthy, stable and supported by our country's solid economic fundamentals," said Minister Flaherty. "However, a key lesson of the global financial crisis is that early policy action can help prevent negative trends from developing."

The Government will therefore adjust the rules for government-backed insured mortgages as follows:

QUALIFYING AT A FIVE-YEAR RATE

Current interest rates are at record low levels, which has improved the affordability of housing for Canadians. It is important that Canadians borrow prudently and are able to manage their debt loads when interest rates rise.

Lender and mortgage insurers look at two key ratios when assessing the ability of a borrower to make payments on a mortgage loan:

Gross Debt Service (GDS) ratio—the ratio of the carrying costs of the home, including the mortgage payment, taxes and heating costs, to the borrower's income.
Total Debt Service (TDS) ratio—the ratio of the carrying costs of the home and all other debt payments to the borrower's total income.
Currently, the interest rate used to determine the mortgage payment for these calculations is either the rate fixed for the term of the mortgage or, in the case of a variable-rate mortgage and mortgages with terms of less than three years, the greater of the contract rate and the prevailing three-year fixed rate.

The adjustments to the mortgage framework will require mortgage insurers to ensure that borrowers qualify for their mortgage amount using the greater of the contract rate or the interest rate for a five-year fixed rate mortgage when calculating the GDS and TDS ratios.

This measure is intended to protect Canadians by providing them with additional flexibility to support mortgage payments at higher interest rates in the future.

LIMIT THE MAXIMUM REFINANCING AMOUNT TO 90 PER CENT OF THE LOAN-TO-VALUE RATIO

Borrowers seeking financial flexibility can currently refinance their mortgage and increase the amount they are borrowing on the security of their home up to a limit of 95 per cent of the value of the property. This type of refinancing lowers the borrower's equity in their home. The adjustments today will lower the maximum amount of the mortgage loan in a refinancing of a government-backed high ratio mortgage loan to 90 per cent of the value of the property, consistent with the principle that home ownership is a tool for savings.

DISCOURAGING SPECULATION BY REQUIRING A MINIMUM DOWN PAYMENT OF 20 PER CENT FOR NON-OWNER-OCCUPIED PROPERTIES

This measure will require a minimum down payment of 20 per cent for government-backed mortgage insurance on non-owner-occupied properties purchased for speculation. Currently, borrowers may purchase a residential property with a 5 per cent down payment. Today's change will require a 20 per cent down payment for small (i.e., 1- to 4-unit) non-owner-occupied residential rental properties. Borrowers purchasing owner-occupied residential properties which also include some rental units (e.g., borrowers purchasing a duplex to live in one unit and rent out the other) will still be able to access government-backed mortgage insurance with a 5 per cent down payment.

Moving to the new framework:

These adjustments to the mortgage insurance guarantee framework are intended to come into force on April 19, 2010. Exceptions would be allowed after April 19 where they are needed to satisfy a binding purchase and sale, financing, or refinancing agreement entered into before April 19, 2010.

"There's no clear evidence of a housing bubble, but we're taking proactive, prudent and cautious steps today to help prevent one. Our Government is acting to help prevent Canadian households from getting overextended, and acting to help prevent some lenders from facilitating it," said Minister Flaherty. "If some lenders aren't willing to act themselves, we will act. These measures demonstrate the Government is committed to taking action when necessary to support the long-term stability of a sector that is so vital to our economy and the financial well-being of Canadian families." The Honorable Jim Flaherty, Minister of Finance

My Take:

Qualifying at a Five Year rate: this is good for the stability of our Real Estate Market, but will discourage rapid growth in prices as those looking to enter into the market will find it a little more difficult to qualify. Those who can afford to buy will be the ones buying.

Refinancing Limit of 90% Loan-to-Value(LTV): I also see this as positive. In the past few years I have seen a number of people refinance to the point that they then owed more than their home is worth. Thus, in most cases, leading to forclosure by the lender. It is important for people to have equity in their home and by lowering the refinancing limit from 95% LTV to 90% LTV it will protect a lot of people from being forclosed on and maintaining equity on thier home.

20% minimum down payment for non-owner occuppied: I'm a little torn with this one as I have a goal of owning many rental investment properties, so this make it a little harder to grow a large portfolio since I will be required to have more money into the property. I see this really as a way for the government to protect their insurance premiums they recieve from CMHC. With more money down by speculators, and investors, it lessens the probabblility of the lenders who are financing these types of deals from having to make insurance claims when there is a deficit from what is owed and what a property is worth... I can see this part changing down the road to say 15% down required.

GTA REALTORS® REPORTING JANUARY MID-MONTH HOUSING STATISTICS

TORONTO, January 18, 2010 - Greater Toronto REALTORS® reported 1,749 existing home sales on the Multiple Listing Service (MLS®) during the first two weeks of January. This resultwas almost double the 888 sales reported for the same period in 2009,when sales had dipped to a recessionary low.

“We have had a strong start to 2010,” said Toronto Real Estate Board President Tom Lebour. “Widespread sales growth in terms of geography and housing type indicates that many households remain confident in their ability to purchase and pay for a home over the long-term.”

The average price for transactions in the first two weeks of January was $395,307, compared to an average of $332,495 for the same period in 2009.

“Double-digit average annual price growth will continue through the first quarter of 2010 as sales remain high relative to listings and we continue to make comparisons to last year’s winter downturn,” said Jason Mercer, TREB’s Senior Manager of Market Analysis.

No Sense of Harmony.... HST to hit Ontarians Hard

September 25, 2009 -- Starting July 1, 2010 Ontarians can expect to pay a harmonized sales tax (HST) rate of 13% on a long list goods and services that were previously exempt from the 8% Provincial Sales Tax (PST). While the impact of the tax will be felt by all Ontarians, the province’s 3 million homeowners and the thousands who buy and sell a home every year will be hit particularly hard by this latest tax grab.

As real estate professionals, REALTORS® know how important the dream of homeownership is to Ontario families. Unfortunately, thanks to the forthcoming HST, that dream is going to become much more expensive. After July 1, 2010, every residential real estate transaction in Ontario will face a significant tax increase. Specifically, home buyers and sellers can expect to pay 8% more on legal fees, appraisals, real estate commissions, home inspection fees, moving costs and the provincial government’s forthcoming system of mandatory home energy audits. According to the Ontario Real Estate Association (OREA) Ontarians will pay, on average, an additional $1,449 in new taxes on their next residential real estate transaction.

If it’s not bad enough that the new tax will increase the cost of buying a home, then consider the impact on the costs of owning and living in that home after it’s been purchased. Specifically, a HST will add hundreds, potentially thousands of dollars in additional tax on utility bills, such as gas, electricity and home heating fuel, on home renovation labour, the cost of lawn upkeep or landscaping and the cost of snow removal. Moreover, a HST will increase the cost of living with 8% more tax on gasoline, personal and professional services, meals under $4, dry cleaning, cab fares, magazine subscriptions, plane tickets, vitamins and cell phone charges.

When added together, the impact of a HST on Ontario family’s disposable income will be considerable. In short, a HST will reduce the people of Ontario’s quality of life by taking more of their hard earned money.

While the Government of Ontario plans to compensate homeowners by offering sales tax transition cheques and modest income tax reductions, these measures will in no way offset this new tax. A onetime payment of $1000 (for a family of four) and a modest $368 reduction in income taxes will do very little to offset the burden of an 8% tax increase on a litany of items in perpetuity.

Certain basic needs, like groceries, prescription drugs, and children’s clothing, would be exempt from the new tax. Unfortunately, the provincial government is not proposing to provide a similar exemption for home purchasing costs. Having a roof over one’s head is about as basic as needs get, and the government should recognize this by ensuring that the costs associated with purchasing a home are exempt from the new tax.

Help oppose this latest tax grab. Visit www.TorontoRealEstateBoard.com where you will be able to access a link that will make it easy for you to write to your MPP and tell them that Ontarians do not need higher taxes on homeownership.

Tom Lebour is President of the Toronto Real Estate Board, a professional association that represents 28,000 REALTORS® in the Greater Toronto Area.

Vertical City – The GTA is growing up and going green

September 18, 2009 -- In a recent column I talked about how the Greater Toronto Area is becoming a vertical city, with almost one in every three homes that changes hands being a condominium.

There’s no doubt that homebuyers are drawn to the luxury and in many cases, affordability, that condominiums offer. As a result, the GTA’s population is booming; it currently ranks as the fifth largest city region in North America behind Mexico City, New York City, Los Angeles and Chicago. And it’s interesting to note that as the GTA grows up, it’s also going green.

From schools to office buildings, municipal facilities to retail outlets, buildings throughout the GTA are working to earn Leadership in Energy and Environmental Design (LEED) certification.

It is a rating system in which points are awarded for environmentally friendly building characteristics in five key areas: sustainable site development, water efficiency, energy efficiency, materials selection, and indoor environmental quality.

An internationally accepted third-party certification program, it provides building operators with tools to have an immediate and measurable impact on their buildings’ performance.

According to recent reports, the Canadian Green Building Council (CaGBC), the non-profit organization that implements LEED, has more than one thousand projects registered, with approximately one-third of all projects located in Ontario.

In Canada for only five years, the LEED program has been widely embraced and certainly by no one more than condominium developers.

To qualify for this coveted status today’s condominiums are built with energy efficient heating and cooling systems, low VOC paints and finishes, and low-E argon-filled windows.

You’ll also find innovative energy-saving ideas like rainwater collection facilities, motion sensor lighting in stairwells, and two-chute disposal systems for convenient recycling on every floor.

LEED condos feature individual suite controls that allow you to monitor and limit energy usage, all off switches, programmable thermostats and energy-efficient appliances.

Building amenities include lush rooftop gardens, individual storage units, covered parking for bicycles, close proximity to transit lines and direct access to car sharing company services.

If you’re drawn to the idea of owning a green home you’re not alone. In a Nielson Canada-wide survey of attitudes towards green homes 85 per cent of respondents claimed that certification of the home would play an important role in their buying decision and 82 per cent said they would be willing to invest more money in a home purchase if it was certified.

Beyond helping the environment, there are a number of other benefits to buying a LEED certified condominium. You’ll enjoy better indoor air quality, lower costs for water and electricity usage and likely, a more active lifestyle. You might even enjoy a lower home insurance premium and achieve higher resale value.

If you’re interested in finding out about the many benefits of LEED-certified condos, talk to a Greater Toronto REALTOR®.

Toronto Real Estate Board Members not only have access to up-to-the-minute data on resale housing, they also have special access to a database that contains detailed information on 95 per cent of all new construction developments in the GTA that are greater than 15 units in size.

Some REALTORS® have even pursued special training offered by the National Association of Green Agents and Brokers. Look for the ACCREDITED GREENAGENT™ and ACCREDITED GREENBROKER™ designations.

For more information on the home buying and selling process, neighbourhood profiles and the latest market statistics visit www.TorontoRealEstateBoard.com
Tom Lebour is President of the Toronto Real Estate Board, a professional association that represents 28,000 REALTORS® in the Greater Toronto Area.

President's Message - More Co-Op on Grow Ops

June 12, 2009 -- In recent years, the Greater Toronto Area has seen the rise of indoor marijuana grow operations: illegal activity that uses innocent-looking properties to grow millions of dollars worth of marijuana. Often, these are sophisticated operations, run by organized crime, right in the middle of average middle and upper middle class neighbourhoods. According to the Ontario Association of Chiefs of Police (OACP), indoor marijuana grow operations can, and have been, set up in a wide variety of buildings including detached homes, apartments, and industrial warehouses.

While the vast majority of homes are never used as marijuana grow operations, it is important for homebuyers to be aware of this potential because the effects of these operations can have serious health and safety impacts that persist even after the illegal activity has ended. For example, the humid environment associated with the growing can create toxic levels of mould. Also, stresses and alterations to the electrical system could increase future risk of fire.

REALTORS® have worked hard to help address this issue. Efforts by the Toronto Real Estate Board (TREB) have included:

• creating standard clauses that can be inserted into agreements of purchase and sale to help provide legal assurance for both homebuyers and sellers;

• educating REALTORS® and their clients about these properties;

• organizing forums to bring together government and law enforcement to find solutions;

• participating in a provincial government task force on this issue through our provincial association, the Ontario Real Estate Association; and,

• lobbying governments at all levels for action.

Fortunately, some government action has been taken. Most notably, the provincial government enacted a law that requires municipalities to inspect these properties, once they have been dismantled by police, and ensure that they meet building code requirements. This was a good step, but more is needed.

REALTORS® have called on the provincial government to implement a province-wide registry of former grow operations, which would help prevent unsuspecting homebuyers from being victimized. REALTORS® are not the only ones calling for this. Toronto City Council has also asked the Province to implement a grow house registry.

Grow house information is already being provided in some municipalities. For example, Ottawa Police recently announced that they will make this information available to the public. The London, Ontario Police also provides this information to the public. While this shows that this action can be taken, a province-wide rather than a patch-work approach , would better protect consumers.

When shopping for a home, it is not fair to expect homebuyers to guess about something as serious as potential criminal activity. The Toronto Real Estate Board and REALTORS® will continue to press the provincial government to provide homebuyers with the information they deserve.

Maureen O’Neill is President of the Toronto Real Estate Board, a professional association that represents 28,000 REALTORS® in the Greater Toronto Area.

President's Message - Investing in Real Estate

June 5, 2009 -- As our market has demonstrated, there is no better long-term investment than real estate. While many people choose to invest in additional property for personal use, it can pay to take the road less travelled.

Commercial real estate is a complex business that can be intimidating to first time investors but with the help of a commercial REALTOR®, the pay-off can be substantial. The benefits of owning commercial real estate are unique.

For example, commercial property is valued differently than residential real estate. Rather than being determined by market comparables, commercial values are based on the income that a property produces. This means that you have more control over the property’s value by increasing its income or adjusting operating costs.

As well, unlike many residential properties, commercial real estate can sometimes be divided into multiple units, allowing you to collect several rental incomes. This mitigates risk because rental income is spread over several tenants rather than just one.

Like other types of investment though, it’s important to be clear on the costs you will face before realizing a return.

Appraisals, engineering, improvements, environmental reports, etc., can add thousands of dollars to the cost of even a small commercial property.

As well, securing a mortgage may not be as simple as the process you experienced when buying a home, as lending practices are much more stringent when it comes to commercial property.

Lenders will not only want to ensure that you are purchasing a quality property, they will want to substantiate that there is sufficient cash flow after operating expenses to cover the mortgage, property taxes, maintenance, utilities and vacancies.

You will also find that commercial mortgages are generally priced considerably higher than residential mortgages.

Once you have overcome these challenges though, you will find that purchasing Commercial real estate can be an excellent long-term investment.

To get started, visit the Toronto Real Estate Board’s commercial property website, TREBCommercial.com

On this site you can access the latest news on the market, search for properties and find a REALTOR® who specializes in Commercial real estate.

The Members of TREB’s Commercial Division must meet a strict set of admission criteria and only those who have reached the standards established by their peers are eligible to become Members. Commercial REALTORS® know the intricacies of buying and/or selling property, from space planning, zoning information, dealing with municipal government, environmental issues, architecture, offer preparation, tax assessments, appraisals, financing and market values, to detailed paperwork and closing procedures.

Be sure to have one on your side before you begin to build your real estate portfolio.
Maureen O’Neill is President of the Toronto Real Estate Board, a professional association that represents 28,000 REALTORS® in the Greater Toronto Area.

When Disaster Strikes, is your Family Prepared?

Written By: Georgette McCulloch - Our Homes Magazine

Submitted by Joshua Kearley - Continuity Inc.

Steve Carter, his wife and two children were on their way home to Mississauga, Ontario last summer after a fun, relaxing weekend at the family cottage in Haliburton when his cell phone rang.......

“It was my neighbour telling me there was smoke coming from our upstairs window and the firemen were on the way,” Carter recalls. “We returned home to see three fire trucks and firemen pumping water into our home to contain the fire.”

For Carter (his last name has been changed), panic and fear set in. “All I could think about was ‘what did I leave on my desk in my office upstairs?’” The good news is that no one was hurt. However, most of the family’s possessions were either destroyed or damaged and they had no real record of what was inside.

It took about three weeks to identify 65 per cent of what we actually lost in the fire,” Carter says. “We then learned that we were under insured because of the unique furniture and art collection that was lost in the fire. Trying to remember the make and model of the things we had only made this disaster worse. Not only could we not remember what we had, the ability to prove to the insurance company that we actually owned those items was another headache.”

If a disaster struck your home, would you be prepared?

"Since the dawn of time, people have been taking pictures of their stuff,” says Joshua Kearley, Director of Home Recovery Planning, a company based in Richmond Hill. “But what happens is, they take pictures, and then put them in a binder on a shelf. Good that you did it, but it’s not much help when a fire destroys your home.” Kearley’s company takes digital photos and videotapes the contents of your home. You get a copy and a copy is stored on Home Recovery Planning’s secured server. If and when you need access, Kearley’s company will send the inventory directly to the insurance company for you.

But that’s just one part of the overall strategy to protect your family and your home. Kearley also advises clients to complete an on-line Family Emergency Plan, which includes emergency contacts for the whole family, escape plans, medical information, prescriptions and a pet plan.

Every family should also have an emergency survival kit with food, water and solar power products – enough for a family of three to survive for 72 hours.

Michael Freeman, President/CEO of Insurers Financial Group, urges families to be pro-active and implement a plan.

“We realize our clients have spent a lot of hard-earned money to create homes for their families,” says Freeman. “It’s important to understand the need to take the time to create a plan to protect what you value. As an insurance broker, we continually tell our clients they need to inventory their possessions. However, it is only a suggestion – the rest is up to them.”

The Carters learned their lesson the hard way. “Once I heard about the concept, it was a no brainer for me,” Carter says. “I don’t recommend anyone put themselves through what we had to go through as a family.”

We now have an accurate depiction of all the items in our home, stored off-site, a family response plan so we don’t sit around wondering what to do, and an emergency survival kit, in case something like this happens when we’re at home. Heaven forbid this ever happens again, but I sleep better knowing we have all the right tools in place.”

For more information on how you maybe able to protect your self from the Terrors of Disaster, contact:

Joshua Kearley

Director of Continuity

Continuity Inc.

jkearley@continuityinc.ca

http://www.homerecovery.ca/