What you need to know about Ottawa’s overhaul


The federal government is throwing some cold water on Canada’s overheated housing market, hoping to keep Canadians out of unaffordable debt and slow down foreign investment in Toronto and Vancouver’s real-estate markets. Here’s a guide on what has happened so far, what it means and what’s next.
What’s changing?

On Monday, Finance Minister Bill Morneau announced a major shakeup of Canada’s mortgage and foreign-ownership rules for real estate to take effect this fall. There are four big changes involved, The Globe’s Bill Curry explains:

1 Expanding stress tests to all insured mortgages, not just high-ratio mortgages in which the buyer has put down less than 20 per cent of the purchase price. This may make it harder for some buyers to get insured mortgages, even if they make a larger down payment, because it ends a two-tier system where some mortgages were weighed differently against the buyer’s income to see whether the mortgage is affordable.

2 Closing a tax loophole that some foreign buyers have used to claim exemptions in capital-gains tax for selling properties that they falsely claim as their primary residences. Now, home buyers must file taxes in Canada, as a resident, the same year they buy a home, before they can later claim the principal residence exemption on any gains for that year.

3 Launching consultations to see if banks can take on added lending risks, which would lighten Ottawa’s obligations to pay for insured mortgages in the event of a housing crash – but could also lead to higher mortgage rates. (Here’s David Berman’s analysis, for subscribers, on how bankers feel about this.)

4 Changing the restrictions on portfolio insurance, a type of bulk insurance for mortgages with down payments of 20 per cent or more.

Why are they doing this?

To crack down on foreign real-estate speculation: Investigations by The Globe and Mail over the past year have also shed light on how local and foreign buyers have been flipping Vancouver-area homes for profit, buying and selling properties in the names of relatives or corporations and collecting tax windfalls in the process. In B.C., fears of wealthy foreign buyers inflating Vancouver’s sky-high housing prices have led to tougher restrictions on how the market is regulated and taxed provincially (more on this below); now Ottawa is hoping to close the federal tax loopholes too, a move met with cautious optimism on Monday by the B.C. government.

To keep Canadians out of debt: Mr. Morneau hopes that applying the same stress test to all high-ratio mortgages will make prospective home buyers think twice about taking on more debt than they can pay for. “We want to ensure that we have measures in place to help them to take on risks that they can afford, especially in the situation where mortgage rates go up or their family income goes down,” Mr. Morneau said in an interview with The Globe.

To keep Ottawa off the hook: The federal government currently assumes the full cost of insured mortgages in the event of defaults. Mr. Morneau’s changes would mean Ottawa would pay less, and banks might pay more – costs that the banks might pass on to homeowners by raising rates. The changes to low-ratio mortgage insurance would put the government in less risk in markets with lots of residential mortgages worth $1-million or more, such as Vancouver and Toronto.
The federal government is part of a task force along with the B.C. and Ontario governments that is looking at housing prices in the Toronto and Vancouver areas. Here’s what those provinces have been up to in their own jurisdictions:

British Columbia: This summer, Premier Christy Clark’s government began more rigorous tracking of home buyers’ nationalities and instituted a 15-per-cent tax on home purchases in Metro Vancouver that involve foreigners. The number of foreign-involved transactions plummeted once the tax took effect on Aug. 2; more Vancouver housing numbers released on Tuesday showed a further drop in property sales in September.
B.C. real estate reform: What you need to know
Here are other ways the province is shaking up the rules of real estate.

Ontario: Premier Kathleen Wynne says the province needs more information about the factors behind Toronto’s red-hot real estate market before adopting a foreign-buyer tax like B.C.’s.
What else has Ottawa already done?

The federal government’s most recent measures come after years of fine-tuning Canada’s housing laws in the aftermath of the 2008-09 financial crisis. Here’s what Justin Trudeau’s Liberal government and the Harper Conservatives before it have already done so far:

Feb. 15, 2016: The minimum down payment for new government-backed insured mortgages increases from 5 per cent to 10 per cent for the portion of a house price over $500,000.

July 9, 2012: The maximum amortization period for new government-backed insured mortgages drops to 25 years from 30 years. Ottawa lowers the maximum amount Canadians can borrow when refinancing to 80 per cent from 85 per cent and stops offering insurance on mortgages for homes worth more than $1-million, instead requiring borrowers for such homes to make a minimum down payment of 20 per cent.

April 18, 2011: Ottawa withdraws government insurance backing on lines of credit secured by homes, such as home equity lines of credit.

March 18, 2011: The maximum amortization period for government-backed insured mortgages is cut to 30 years from 35 years and the maximum amount Canadians can borrow in refinancing their mortgages is reduced to 85 per cent from 90 per cent of the value of their homes.

April 19, 2010: Ottawa introduces a requirement that all borrowers meet the standards for a five-year fixed rate mortgage even if they choose a mortgage with a lower interest rate and shorter term. The government also lowers the maximum amount Canadians can withdraw in refinancing their mortgages to 90 per cent from 95 per cent of the value of their homes and requires a minimum down payment of 20 per cent for government-backed mortgage insurance on non-owner-occupied properties bought for speculation.

Oct. 15, 2008: The maximum amortization period for new government-backed mortgages is fixed at 35 years and a requirement for a minimum down payment of 5 per cent is introduced. Ottawa also establishes a consistent minimum credit-score requirement and introduces new loan documentation standards.

What happens next?

Here are some important dates to watch out for as the changes come into effect:

Oct. 17: The new stress-test rules come into effect for borrowers.
Nov. 30: The new rules for low-ratio mortgages come into effect.
April 30: For most Canadians, this is the deadline day for filing taxes. The new housing rules affect when you have to declare the sale of your home to the government.

Source: Globe and Mail


Trying to Create a Bidding War on Your House

By Matthew Rizzo

Under-pricing your house in hopes of creating a bidding war is a risky move. However, in a desirable neighborhood and with the right realtor, you could receive multiple offers and get over market value for your home.

The most important thing is the comparable houses that have sold in your area. Look at how many days the house sat on the market. What the house was listed for in comparison to the sold price. Lastly, probably most obviously, but often overlooked is the type of house. (i.e. bungalow, two-storey, hi-ranch, split-level, etc.). A great way to know whether those sellers tried to setup a bidding war is if it says in the description “Offers not accepted until said date”.

One problem you may face is that you did not attract enough interest to create a multiple-offer situation. Your first couple of days on the market are critical and will be a strong gauge of whether you will achieve your goal. Realtors and developers look at the Multiple Listing Service everyday; therefore, if you don’t have a flurry of activity surrounding your property the same day it was listed, it is unlikely you will receive multiple offers.

This leads to an even bigger problem in that you have now undervalued your home on the open market. You may wish to cancel the listing and re-list at a more appropriate price, but realtors can see past activity on the house and will see what you tried to do and did not accomplish. Unless you have a prime property and playing with the list price will have little affect on the value of the house, this could be very damaging to the marketability of the house.

Discuss all the possible outcomes with your realtor, make sure you understand the risks involved and know the bottom line number you are willing to accept for your home.

Sales stay hot through May heat wave

Members of the Ottawa Real Estate Board sold 1,921 residential properties in May through the Board’s Multiple Listing Service® System, compared with similar sales of 1,923 in May 2015. The five-year average for May sales is 1,864.

“As the weather warmed, the Ottawa resale market continued its steady pace upwards, continuing an above average trend for the month of May,” says Shane Silva, President of the Ottawa Real Estate Board. “Units sold are up 207 since April, increasing in both the residential and condominium property class.”May sales included 307 in the condominium property class, and 1,614 in the residential property class. The condominium property class includes any property, regardless of style (i.e. detached, semi-detached, apartment, townhouse, etc.), which is registered as a condominium, as well as properties which are co-operatives, life leases and timeshares. The residential property class includes all other residential properties.

“In May, 3,635 homes were listed, keeping pace with listing numbers in April, but down slightly by 4.4 per cent compared to May 2015,” says Silva. “With the number of sales since the beginning of the year on a steady incline, coupled with increased inventory, Ottawa is riding a strong and steady spring market.”

The average sale price of a residential-class property sold in May in the Ottawa area was $406,063, a decrease of 1.3 per cent over May 2015. The average sale price for a condominium-class property was $264,801, a decrease of 0.8 per cent over May 2015. The Board cautions that average sale price information can be useful in establishing trends over time but should not be used as an indicator that specific properties have increased or decreased in value. The average sale price is calculated based on the total dollar volume of all properties sold.

“The hottest segments in our market for May were sales in the $300,000 to $400,000 price range, followed by the $200,000 to $300,000 price range,” says Silva. “Residential two-storey and bungalows have the highest concentration of buyers in May. In addition to residential and condominium sales, OREB Members have assisted clients with renting 1,213 properties since the beginning of the year.”

Buying a Tenanted Home

By Matthew Rizzo,

Many people rent out their basements or even just a room in their home to have some extra money coming in every month. It is very common so you should know what your options are when you are interested in buying a home with a tenant living there as well.

According to the Residential Tenancies Act, 2006, the new buyer can terminate the tenancy if they require the rental for their own use, intends to demolish the apartment or do extensive renovations to the area. As the buyer, be aware the Act also requires that the the tenant be provided a minimum of 60 days written notice if they decide to terminate the tenancy. This is a must whether the tenant is on a long-term lease or on a month-to-month arrangement.

If you want to keep the tenant, make sure to familiarize yourself with their current arrangement/lease (utilities, parking, maintenance, etc.). If you are a rookie landlord, make sure to do your research about the exact requirements of a landlord in Ontario.

April home sales set record, Canadian Real Estate Association says


Posted May 16, 2016 6:28 am PDT

Last Updated May 16, 2016 at 12:40 pm PDT

A for sale sign displays a sold home in a development, in Ottawa, on July 6, 2015. The number of homes sold in Canada last month hit a record as supply tightened, particularly in the Toronto area, where a fiercely competitive market is dissuading some homeowners from putting their properties up for sale, the Canadian Real Estate Association said Monday. THE CANADIAN PRESS/Sean Kilpatrick

TORONTO – The number of homes sold in Canada last month hit a record as supply tightened, particularly in the Toronto area, where a fiercely competitive market is dissuading some homeowners from putting their properties up for sale, the Canadian Real Estate Association said Monday.

There were 57,669 homes sold nationwide over the Multiple Listing Service in April, a 10.3 per cent increase from the same month last year, the industry organization said.

The rise in sales came as the number of new homes put up for sale slipped 3.7 per cent from a year ago to 103,028.

That trend was even more pronounced in the Toronto area, where new listings were down 10.3 per cent compared to April 2015.

“While significant home price gains may entice some homeowners in these markets to list their home for sale, the issue for many is that the decision to move means they would also be looking to buy while competition for scarce listings is fierce,” CREA chief economist Gregory Klump said in a statement.

“As a result, many homeowners are deciding to stay put and continue accumulating capital gains. That’s keeping listings off the markets at a time when they are already in short supply.”

Still, CREA says sales in April were up year-over-year in about 70 per cent of all local markets compared with a year ago, boosted by B.C. and the Toronto region.

Compared with March, sales were up 3.1 per cent in April, while new listings declined 0.2 per cent.

Month-to-month figures for Vancouver and Toronto suggest the two frothy markets may be starting to cool, CREA president Cliff Iverson said.

In the greater Vancouver area, April sales were virtually flat from the previous month — up a meagre 0.1 per cent — while in greater Toronto sales climbed 3.2 per cent on a month-to-month basis.

That comes on the heels of a tepid March, when Vancouver and Toronto saw sales fall 0.3 per cent and 1.8 per cent, respectively, from February.

TD economist Diana Petramala says the data suggests that new federal rules that came into effect in mid-February and require larger down payments for homes between $500,000 and $1 million have had some impact on the two markets.

“Activity was down or flat in both for the second consecutive month, suggesting that a soft-landing may be in store for these red-hot markets,” Petramala said in a note.

“Nationally, the effect of the new rules appears to be more than offset by low interest rates. After edging up in the early part of the year, Canadian mortgage rates came back down to record low levels again by March.”

The national average price for homes sold in April rose 13.1 per cent from a year ago to $508,097.

Excluding the greater Vancouver and greater Toronto markets, the average price was $369,222, up 8.7 per cent from April 2015.

The national sales-to-new listings ratio rose to 64.5 per cent in April, the ratio’s tightest reading since October 2009.

To Rent or Buy?

By Matthew Rizzo

Home ownership is not for everyone, there is a lot of work and responsibility involved. If you want worry free living and/or are in a position financially where you can afford to pay someone else to live on their property, then renting may be for you.

Others believe they can’t afford the down payment; I would suggest to them purchase something less expensive to be able to cover the 20% down payment and at least you will be paying into something you own instead of putting your money in someone else’s pocket and being left with nothing to show for it. If, after a few years pass and you are ready to move on and you have accrued some equity in the house, you then have a tangible asset to sell; or, if you are fortunate enough, you can hold on to your original house and let it become an income property.

What if the home does not increase in value in the next 3-5 years? There is risk involved in all facets of life, the key is minimizing it. If you have the right realtor, who did their research, you should be confident that you are making a wise investment.

Some think they can’t afford the mortgage payments. This is true if you are looking at homes you can’t afford on your current income. For most people, there are levels to home ownership. Most of us do not start off purchasing million dollar homes; but with today’s low interest rates and a realtor who is knowledgeable and informed, you can climb the latter of home ownership. There are no sure things in real estate and if someone is telling you that, they are probably lying; but one thing I can say with some certainty is that you will get ahead quicker by owning as oppose to renting.


Home Inspections

By Matthew Rizzo

When I am preparing an offer for a client, I always ask them if they would like to get a home inspection done before the sale closes. In most cases they will ask me if I think an inspection is worth the money. Some people are under the impression a home inspection is a waste of money and others believe you should never close a sale without one.

There are the obvious cases such as buying a heritage home that was built around the turn of the century; I wouldn’t allow my client to close the deal without getting an inspection done, even if it had been professionally renovated.

One reason someone may opt not to have an inspection on a newer house is because of builder warranties and the Tarion Warranty Corporation; or simply that the home was just recently built so nothing could possibly be broken yet. It makes sense, but the problem is there are many builders out there who get away with a lot of shoddy craftsmanship that may not be visible to the untrained eye. The builder may refuse to cover those problems if they go unnoticed for too long. Some people assume the entire house, from top to bottom is covered by Tarion for the first five years so they don’t have to worry, but make sure to read the fine print in the warranty agreement because there are many things that do not fall under that coverage.

One common misconception I encounter is people asking the home inspector if there is mold or asbestos in the house. The inspector will not be able to answer this unless there is a clear indication (which there rarely is). The inspector cannot see through walls and does not run field tests during the inspection and a good inspector would explain this to the prospective buyer before the inspection begins to avoid any confusion. You would have to hire another inspector who specializes in mold or asbestos to identify and remove it.

I tend to err on the side of caution and suggest to have an inspection done. It is a small cost compared to what is may cost to fix the problem after the deal closes. If the inspector finds nothing to write home about, then you can be fairly certain you are buying a quality home.

Flipping a House

By Matthew Rizzo


Flipping a house has been made to look very easy recently by the countless reality television shows that profile development companies who are able to buy, renovate and sell; sometimes within the span of a month. Like most reality shows, they don’t actually reflect reality. Things can get a lot more anxious when there isn’t a television studio covering overages.
The key to success in flipping houses is the team you build around yourself. A realtor who knows the areas where there is still value to be found. Finding the nicest neighborhoods in the city is easy; you need someone who can see the trends and get you in there before the value is maxed out. Also, have the ability to sell your finished product as quickly as possible and get the most out of negotiations. A mortgage broker/specialist who can get you favorable financing terms to minimize your cost during renovations. You need to be able to minimize the amount you pay for the house during renovations as well as the time it takes to re-sell the house.
A General contractor who is reliable, knowledgeable and has a vast network of tradespeople he works with. Many people think they are able to oversee the construction themselves, but the truth is, unless you have experience in this field; it is much harder than it looks. You want to work with a contractor who will negotiate the best price for you with tradespeople. They will know when someone is trying to overcharge for a job and find you the best price. Without someone like that on your side, it will be very difficult to make any significant profit. Make sure to choose wisely when selecting your team because they could be the key to your success or the reason for your downfall.

Income Property

By Matthew Rizzo

I am of the opinion that investing in real estate is one of the safest and soundest investments one can make. That is not to say it is easy or you are guaranteed a strong return on that investment. Like any investment ventures, without the right information and guidance it could lead to, not only losing your investment, but also creating a significant amount of debt.
Investing in a rental property is a route many take, but there are still many aspects that need to be considered before any decision is made. Such as, how much capital are you comfortable investing and how long are you planning to leave it tied up in the property? It doesn’t make much sense to purchase a very expensive piece of property with the intention of renting it out because of how much rent you will have to charge just to cover your expenses. Ideally, you find an affordable property that is renter-ready that turns a monthly profit from the start. Unless you are purchasing a property that was previously rented or is currently rented, there is sometimes work to be done to meet rental standards, which must be assessed before considering submitting an offer. It may be a terrific house, but if it requires significant renovation to be able to rent, than you are behind before you even start.
As for when to sell, if you are able, I suggest holding on to it until the mortgage is paid and then selling. If you are not in that position then I suggest keeping yourself aware of the market activity in the area. If the area booms in the next 3-5 years, then you may want to look to cash-in. If the sales in the area are stagnate or perhaps decreasing, then hold onto it as long as possible. You still have your property and the expenses are being paid for through the rent.
Like any real estate transaction, location is key. Make sure to do your homework on the area. Where is the nearest grocery store, school, post-secondary school, restaurants, shopping mall, what is the parking situation, etc. There are few people who look to rent in remote areas of the city