Leela & Sarah : Latest Blog Posts

Variable rate may no longer win

Wed, 01 Sep 2010 11:35:00 GMT

Garry Marr, Financial Post · Tuesday, Jul. 27, 2010

Not that there are a lot of people buying houses these days, but the answer to the age-old question of whether to go long or short on your mortgage is unclear yet again.

The Bank of Canada’s second quarter-of-a-point rate increase in the past two months is likely not going to do much to boost a real estate market that saw sales drop almost 20% across the country in June from a year ago.

The popular variable-rate product tied to prime that helped people buy a lot more house with more debt is going up too. The prime rate at the major banks, which tracks the Bank of Canada’s rate, is now at 2.75%.

But a funny thing happened as the Bank of Canada was raising rates. With much of the credit crisis seemingly behind us, the discounts on short-term borrowing are increasing as the cost of funds for banks also fall. Instead of borrowing at 100 basis points above prime, it’s now 70 basis points off prime.

At 2.05%, a variable-rate product today may look as attractive as ever, but the five-year fixed-rate

closed mortgage is falling fast. It can now be had for a shade under 4%, says Rob McLister, editor of Canadian Mortgage Trends.

“Bond yields have fallen out of bed and nobody expected that,” said Mr. McLister, adding the spread between the five-year Government of Canada bonds and five-year mortgages is still large enough that the banks may reduce long-term rates even more. However, at about 4%, the five-year closed fixed-rate mortgage isn’t far off its record low.

Bank of Montreal senior economist Sal Guatieri does agree that variable-rate products have worked out better than fixed-rate mortgages throughout history, but says the tide may be turning.

“Given that the central bank has already raised rates a couple of times now and will likely continue to raise rates, it probably is a correct assumption to make,” says Mr. Guatieri, noting variable usually works in a declining interest-rate environment. “The next five years might not quite follow the past. You could probably argue it’s wiser to lock in now. It’s a close call.”

Bank of Montreal is forecasting another 25 basis point move in September and says rates will climb another 1.5 percentage points by the end of 2011. If Mr. Guatieri and others are right, by 2012, the variable-rate products out today would clock in at just above 3.75%, if the discounting remains the same.

“If you are still in that variable-rate product then, you’d have to sweat out the next three years because there would still be possibly more increases,” says Mr. Guatieri, who adds his bank sees the overnight rate eventually going to 4% in the following three years. Based on the present gap between the Bank of Canada and prime, that would place the variable-rate product you get today at 6% by around 2015.

Fears of such a scenario are driving people into fixed-rate products again. That, plus new mortgage rules that make it easier to qualify for a mortgage if you go for a fixed-rate product with a term of five years or longer.

“The Bank of Canada is doing what it said — it’s going ahead with rate increases. If I was counselling someone, the prediction is rates are going up, so now is a good time to consider locking in for a term,” says Don Lawby, president of Century 21 Canada.

It makes sense, but with variable rate still at around 2%, it’s easy to see why people wouldn’t want to lock in. Even Mr. Guatieri says if you are secure in your financial situation and don’t need to fix your mortgage payments, “you might just want to let it ride.”

There just never seems to be a clear answer on whether to lock in or stay variable.

Rental Restrictions Have Changed

Mon, 26 Apr 2010 16:15:00 GMT

TIP: When purchasing property, buyers and their Realtors should always review the Rental Disclosure Statement (RSD), filed under the Real Estate Development Marketing Act. Focus on the DATE this statement was filed with the Superintendent of Real Estate. The right to rent out your unit may be effected.

Rental rules have changed as of: JANUARY 1, 2010.

PRIOR to this date, only the original owner can be guaranteed ‘no rental restrictions’ as promised by the developer. Subsequent owners may not be granted this right, if the Strata Corporation changes the building’s rental bylaws.

If the RDS was filed AFTER December 31, 2009, the number of subsequent owners is irrelevant. The ability of all subsequent owners to rent will continue, regardless of any building bylaw changes, until period set out in the RDS expires.

For more information, please feel free to contact us directly. (vancityproperty@gmail.com)

effective July 1, 2010, BC will adopt a Harmonized Sales Tax (HST), combining the 7% Provincial Sale

Fri, 12 Mar 2010 20:10:43 GMT

What is the Harmonized Sales Tax (HST)?

On July 23, 2009, Premier Gordon Campbell and Finance Minister Colin Hansen announced that, effective July 1, 2010, BC will adopt a Harmonized Sales Tax (HST), combining the 7% Provincial Sales Tax with the 5% federal Goods and Services Tax for a single sales tax rate of 12%. The federal government will provide BC with $1.6 billion in transitional funding.

For consumers, goods and services (with some exceptions) will be subject to the HST in the same manner as they are currently subject to GST. Therefore, all items on which GST is not payable, such as basic groceries, prescription drugs and medical devices, would also not be subject to the HST. (Source: BC Government website, www.gov.bc.ca/hst/faq.html, accessed September 28, 2009)
British Columbia Real Estate Association

How does HST effect real estate specifically?

1. HST will affect the purchase of NEW homes. Currently there is only a 5% federal tax for the purchases of new contruction. This tax will be replaced by th 12% HST as of July 2010.

2. The government has announced that any new properties costing up to $525,000 will be exempt from the new tax. The original government proposed amount was $400,000. This represents a 30% increase in the exemption amount.

3. For new construction costing more than $525,000, the government has announced a provincial tax rebate program for the HST paid on a new home purchases. This amount has increased to $26,250 from the original $20,000 rebate announced when the proposed HST was originally released to the media. Again, this represents a 30% increase.

4. HST will be applicable to the costs and fees associated with a Real Estate transaction. This will include fees regarding any home inspections, legal work, comissions and any other closing costs that are part of a Real Estate purchase.

5. HST will also be applicable to many monthly costs associated with running a household. These costs include monthly strata fees, cable, internet, gas and electricity just to name a few.

For more information on how HST effects real estate, please contact us directly.

Canada's new Housing Price Index rose 0.4 per cent for the third straight month in January.

Thu, 11 Mar 2010 22:13:17 GMT

Ottawa — The Canadian Press
Published on Thursday, Mar. 11, 2010 9:15AM EST
Last updated on Thursday, Mar. 11, 2010 12:43PM EST

Canada's new Housing Price Index rose 0.4 per cent for the third straight month in January.

Statistics Canada reports St. John's, N.L., led the way at 1.7 per cent growth, followed by Winnipeg (0.7), and Toronto and Oshawa (0.6).

Ottawa–Gatineau, Saskatoon and Calgary all registered 0.5 per cent increases.

The largest monthly decrease in new housing prices was recorded in St. Catharines–Niagara, at a 0.4 per cent drop.

Charlottetown as well as Saint John, Fredericton and Moncton, N.B., all registered 0.2 per cent declines.

Year over year, the New Housing Price Index was up 0.1 per cent in January, the first year-over-year increase since December 2008.

-The Globe and Mail

Have the Olympics effected Vancouver's Real Estate?

Thu, 04 Mar 2010 00:36:06 GMT

March 2, 2010
REBGV Stats

Home sales activity strong through Olympic period

The Greater Vancouver housing market continued to experience strong demand from homebuyers and an increase in total property listings in a month where the eyes of the world were focused on the region.

The Real Estate Board of Greater Vancouver (REBGV) reports that residential property sales in Greater Vancouver totalled 2,473 in February 2010, an increase of 67.1 per cent compared to February 2009 when 1,480 sales were recorded and a 28.6 per cent increase compared to the 1,923 sales recorded in January 2010.

More broadly, last month’s sales totals marked a 7.6 per cent decline compared to the 2,676 sales recorded in February 2008 and were 13.5 per cent behind February 2007 when 2,859 residential sales were recorded on the Multiple Listing Service (MLS®) in Greater Vancouver.

Over the last 12 months, the MLSLink® Housing Price Index (HPI) benchmark price for all residential properties in Greater Vancouver increased 19.7 per cent to $581,911 from $486,054 in February 2009. This price is 2.4 per cent above the previous high point in the market in May 2008 when the residential benchmark price sat at $568,411.

“We don’t know at this point what long-term impact the Olympics will have on our housing market, but we do know that activity in our market remained steady through all of the excitement and distraction of the last few weeks,” Scott Russell, REBGV president said.

“In February, for example, 110 sales were recorded on the MLS® in downtown Vancouver. That’s higher than 2009 and slightly lower than the mid-2000s, which is consistent with data from the overall market. It’s too soon to say whether that’s an Olympic effect,” Russell said.

New listings for detached, attached and apartment properties in Greater Vancouver totalled 4,606 in February 2010. This represents a 17.6 per cent increase compared to February 2009 when 3,916 new units were listed, and a 10.5 per cent decrease compared to January 2010 when 5,147 properties were listed on the MLS® in Greater Vancouver.

At 11,346, the total number of property listings on the MLS® increased 11 per cent in February compared to last month and declined 21 per cent from this time last year.
“Two months into 2010, we see the total number of homes listed for sale on the rise and demand in the market strong, but less frenzied than we saw in the latter part of 2009,” Russell said.

Sales of detached properties increased 67.5 per cent in February 2010 to 983 from the 587 detached sales recorded during the same period in 2009. The benchmark price, as calculated by the MLSLink

Housing Price Index®, for detached properties increased 22.5 per cent from February 2009 to $800,796.
Sales of apartment properties in February 2010 increased 65.2 per cent to 1,074 compared to 650 sales in February 2009. The benchmark price of an apartment property increased 17.3 per cent from February 2009 to $390,899.

Attached property sales in February 2010 are up 71.2 per cent to 416, compared with the 243 sales in February 2009. The benchmark price of an attached unit increased 16.2 per cent between Februarys 2009 and 2010 to $495,496.

Click here to download the complete stats package.

Click here to listen to REBGV President Scott Russell's podcast.

The Real Estate industry is a key economic driver in British Columbia. In 2008, 24,626 homes changed hands in the Board's area generating $1.03 billion in spin-offs. The Real Estate Board of Greater Vancouver is an association representing more than 9,400 REALTORS®. The Real Estate Board provides a variety of membership services, including the Multiple Listing Service®. For more information on real estate, statistics, and buying or selling a home, contact a local REALTOR® or visit www.rebgv.org.

For more information please contact:
Craig Munn, Assistant Manager of Communications
Real Estate Board of Greater Vancouver
Phone: (604) 730-3146
cmunn@rebgv.org

copyright© real estate board of greater vancouver. all rights reserved.

Rate increase expected in coming months

Wed, 03 Mar 2010 16:09:30 GMT

This news release was from yesterday.
To summarize the Bank of Canada kept it's benchmark interest rate at the record low and gave guidance suggesting that inflation and economic indicators signal rate increases in the coming months. Economists expect a 0.50% rate hike in the third quarter and possibly another 0.50% hike by the end of the year.
http://www.bloomberg.com/apps/news?pid=20601068&sid=aqo3FufkOC7o

We are still in the midst of the lowest interest rates in history and with the expected changes to government-backed insured mortgages and the upcoming rate increases now is the time to take advantage.

Changes in rules
for government-backed insured mortgages:
April 19
BOC key interest rate announcements:
April 20
June 1
July 20
September 8
October 19
December 7

http://www.vancityproperty.com