Real estate industry prepares for a battle

Seven years ago, an advertising executive wanted to experience the bright lights and excitement of competing in a boxing match. So he launched Agency Wars – an event specifically for ad execs who wanted to show off their pugilistic skills.

This year, that same man is bringing the sweet science to the real estate industry.

“Over the period of those years, we’ve perfected the methodology. We have two teams, red and blue; we train the boxers as a team. For a lot of these people it’s the first time they’ve ever been in a boxing ring or gym,” Michael Clancy, founder of Agency Wars and now Toronto Real Estate Rumble, told CREW. “It’s reality show stuff; it’s amazing the transformation and drama they go through. You get in a ring, people throw punches at you, and it’s a transformative experience. We want it to be a really rewarding experience.”

A total of 24 amateur boxers – all from the real estate industry – have been chosen, following a rigorous tryout period, to take part at the event, which takes place Wednesday, November 22 in Toronto.

Clancy, who got into boxing at the age of 50, founded the events as a way for industry professionals to experience the allure of a big ticket boxing event.

“We want you to have that feeling. It’s like the ultimate fantasy. It’s a fantasy camp for boxing – you are going to work and train like a boxer for 12 weeks. We’re going to give the whole experience of the fight as well; the entourage, the robes, 600 spectators, ring card girls, cameras,” he said. “When I first put the show on I wanted to feel how Floyd Mayweather feels. We carefully put together something that gives the full experience that you’ll want to tell your grandkids about.”

The chosen boxers are currently embarking on a 10-week training program, which includes numerous weekly training sessions, nutritional counselling, and world-class coaching from elite-level boxers and trainers.

The real estate combatants will become legitimate amateur boxers, and the event is properly sanctioned by the Boxing Canada to ensure the utmost safety.

Boxers wear headgear and oversized gloves and, according to Clancy, the worst injuries that have occurred over seven years of running Agency Wars were bloody noses.

As for the real estate industry’s own iteration of the event, Clancy says those particular professionals will make perfect boxers.

“It’s very metaphorical for real estate guys: It’s a hard, competitive business and you don’t win every day,” he said.

The event is also raising money for two good causes: The We Foundation and imagine1day. It’s supported by a number of industry partners, incuding Garrison Hill Developments, Foundry Mortgage Capital, Concrete Mortgage Capital.

To find out more about the event, to purchase tickets, or to become a sponsor, check out the website here.

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RBC raises fixed-term mortgage rates

Royal Bank of Canada has increased the interest rates on its fixed-term mortgage products.

RBC’s mortgage rates were all boosted by 20 basis points, up to 2.54 per cent (two-year rate), while 2.64 per cent (three-year rate), and 2.84 per cent (five-year rate). Said rates are for products with amortization periods not exceeding 25 years.

The rise came amid rising bond yields and enduring expectations that Canada’s central bank will hike its benchmark interest rate, which currently stands at 0.5 per cent. Should the Bank of Canada push through with the increase on Wednesday (July 12), it will be the first such movement in 7 years.

Manulife Asset Management senior economist Frances Donald told CBC News that the move by RBC is “another signal that economic and market agents are preparing for a rate hike next Wednesday… It also opens the door to a Bank of Canada rate hike because it implies that the economy is already going to absorb higher interest rates via the banks themselves.”

“We import higher rates via our bond curve from the United States, and the more we see higher rates around the rest of the world, the more the costs are going to rise for Canadian banks as well,” she explained, alluding to the recent boost in the U.S. Federal Reserve’s rates. More hikes are anticipated to come this year.

“We are clearly in the beginnings of a tightening cycle and these are not just influences from the Bank of Canada but from global sources as well.”

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Qualifying rate to increase?

This is when one association is predicting the qualifying rate might jump.

A potential Bank of Canada benchmark rate increase has been the talk of the industry for the past few weeks, with many invested parties speculating on when the government will make the move.

For its part, the British Columbia Real Estate Association is predicting the Bank will hold off until 2018.

“While the likelihood of the Bank raising its target rate by the end of 2017 has certainly increased, we still expect the Bank to hold off until early 2018, particularly if oil prices remain low and inflation fails to pick up,” Cameron Muir, BCREA chief economist, wrote in his latest Mortgage Rate Forecast Report.

As a result, the association is also predicting the five-year qualifying rate will jump from 4.64%, as it stands today, to 4.74% in Q1 2018.

The average five-year mortgage rate, meanwhile — which sits around 2.61% — will jump to 2.79% by the end of Q3 2017, and then to 2.9% in Q4 and 3.05% in Q1 2018.

The qualifying rate is expected to hit 4.84% by Q4 2018 and the average five-year mortgage rate is predicted to reach 3.35%.

That’s the not-so-good news for those who plan to delaying buying a home until then. However, the rate increases will be the result of overall economic recovery.

“The Canadian economy has finally returned to good health following the rapid and dramatic decline of oil prices in late 2014 and the consequences of wildfires in Alberta last year. Since the third quarter of 2016, the Canadian economy has expanded at an average rate of 3.5 per cent, well above the Bank of Canada’s estimate of 1.7 per cent sustainable long-run growth,” Muir wrote. “After posting nearly 4 per cent growth in the first quarter of this year, we expect that real GDP growth will slow slightly to around 2.4 per cent in the second quarter with the economy ultimately growing 2.5 per cent this year and 2 per cent in 2018.

“If the economy continues to accelerate, and growth in real GDP is higher than currently expected by the Bank, slack in the economy could be eliminated by as early as the end of this year, which could push up the timetable for monetary tightening.”

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Mortgage rule change effects extend to small market

Last year’s mortgage rule changes are being blamed for dwindling activity outside the areas they were intended to target, according to a recent report.

“The impact of the new mortgage stress test is impossible to ignore. It has effectively caused a knee-jerk reaction in (Winnipeg), impacting activity and contributing to declining house prices,” Michael Froese, managing partner, Royal LePage Prime Realty, said. “However, given that our region is home to a very stable, diverse economy, which has helped insulate the housing market from significant downward price adjustments over the long term, we expect to see market factors bounce back as the year progresses.”

According to Royal LePage’s Q1 housing report, the aggregate home price in Winnipeg dropped 0.9% year-over-year to $274,844.

Still, the brokerage remains optimistic about the market’s future.

“Winnipeg is the most affordable major city centre in Canada, offering prospective homeowners – particularly first-time buyers – a great deal of value for their dollar,” said Michael Froese, managing partner, Royal LePage Prime Realty. “The region’s real estate market is coming off its best year on record. Although home values dipped slightly in January and February, March saw a surge of activity, helping to buoy prices in Winnipeg. Sales in the first quarter of 2017 also remain consistent with the same time last year, and are above the 10-year average for the quarter.”

Last October, the federal government released a suite of mortgage rule changes – which included tougher qualification requirements – that were widely regarded as a move to address affordability in major markets such as Toronto and Vancouver.

However, the spill over effect has been felt in smaller markets, such as Winnipeg.

And just six months later, the industry and politicians remain concerned about the Toronto and Vancouver markets.

“The overall Canadian market is healthier in 2017 than it has been in years, yet the downside risks are greater too,” concluded Soper. “Our economy, which has recovered nicely from the 2014 oil crisis, is sadly dependent on moves by an unpredictable U.S. federal government and can be swayed by unforeseen global events, such as fallout from Europe’s restructuring. Still, housing activity is strong and prices are rising at a healthy mid-single-digit rate across the land. The trend in Alberta, Quebec and Atlantic Canada is particularly encouraging. Our concerns with the state of Canadian real estate begin and end in Toronto and Vancouver.”

Related stories:
CREA releases latest stats, warns against further housing policy
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A look-ahead: Trends that could impact the industry this year

These are the major storylines brokers will want to keep an eye on in 2017, according to one mortgage lender.

All eyes on Trump
Those sick of seeing the President-elect’s shenanigans pop up in their news feeds won’t be treated to a reprieve anytime soon — and that includes mortgage brokers.

“It could be just the overall economy; what Trump does with NAFTA – is he going to intimidate companies that have dealt in Canada extensively and may want to set up additional operations in Canada to repatriate and come back to the US? He’s certainly showing that already with Mexico,” Robert Goodall, president and CEO of Atrium Mortgage Investment Corporation said when asked what the biggest industry story will be this year.

“We lenders with diverse portfolios in commercial and residential, the thing we worry about more is a macro event more than a micro event.”

Relief to Alberta
At least that’s the hope. Lenders have been scaling back their offerings in the hard-hit province, making it more difficult for brokers to find mortgage solutions for clients.

“In Alberta, we want to see the price of oil continue to strengthen,” Goodall said. “We haven’t been active there in the last 18 months but we’re hoping to dip our toe in (again) in 2017 but it will depend on whether … oil prices get to a point where the economy starts to recover.”

Interest rates
Many have predicted higher mortgage rates in the coming months and Goodall is no different.

“I think a small increase is likely in the stakes. That means bond yields will probably increase here even though the Bank of Canada has strongly indicated they’re not going to increase short-term rates, they can’t control long-term rates,” he said. “That will depend, in part, on what the US does. They’ve been clear they’re going to be raising rates. That means mortgage rates will move up a bit.

“I’m not expecting they will move up much. I’m expecting a half-point or something like that.”

An end to regulation (at least for now)?
Mortgage regulation was undoubtedly the hottest topic in 2016, with British Columbia’s government bid to crack down on foreign buyers and the federal government placing higher barriers in front of insured mortgage holders.

The worst, however, may be behind us.

“My guess is they’ve finished. I think BC is still trying to figure out the impact that the 15% (foreign sales tax) will have. I think the federal changes have been so late in the year that they’re going to wait and see the effect they will have,” Goodall said. “Most economists think it will have a material impact.”

What stories do you think will define the mortgage industry in 2017? Have your say below.

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Investor payments delayed

Investors in Calgary’s Orchard project have been told of delays to interest payments.

“Funds raised to date have been appropriately utilized towards project costs keeping the development moving forward. Orchard has surpassed 60% in sales on the first tower, with discussions already in place to have tower 2 purpose built rental. This would reduce timelines, increase cash flow, and allow for a more flexible development plan,” Building & Development Mortgages Canada Inc., the broker offering the syndicated mortgages, said in a memo to investors. “This allocation has resulted in the payments due April 16th and July 16th to be delayed, as there have been a lack of funds closing into the project’s interest reserve (IR) as originally anticipated.

“Brokers are actively raising money for the project to bring the development budget up to date, and top up the IR for current and future payments.”
The memo, which was shared with CREW by a lawyer who represents one of the project’s investors, also states further delays could happen.

“Funds will continue to be used for project costs to ensure the current momentum is kept, until such funds can be moved towards soft costs such as interest payments,” the broker said.

Despite this, both developers of the project – Lamb Development Corp. and Fortress Real Capital – remain unconcerned about the health of the project.
“Orchard is an incredible project at a fantastic location. It is no secret that the housing market in Alberta has changed quite a bit over the past few years,” Brad Lamb said. “LDC and Fortress are completing and occupying one tower called 6th & Tenth in spring 2017, and plan to break ground on Orchard shortly afterwards.

“All lenders will be paid out on 6th & Tenth upon completion, and I anticipate the same for Orchard when it finishes also.”

A rep for fortress added: “Fortress is very pleased that 60% of the Orchard project is sold. Consultants and the development team are working on detailed design drawings and the project will be advancing to the construction financing stage next year.”

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CREA releases latest stats

The Canadian Real Estate Association says the number of home sales edged higher in September compared with August, ending a streak of month-over-month decreases.

Sales through the association’s Multiple Listing Service were up 0.8 per cent nationally last month compared with August.

Sales were up in the Toronto region were up, while they continued to fall in and around British Columbia’s Lower Mainland region, which includes Vancouver.

“The Finance Minister’s recent changes to regulations affecting mortgage lending has added to housing market uncertainty among buyers and sellers,” said CREA President Cliff Iverson. “For first-time home buyers, the stress test for those who need mortgage default insurance will cause them to rethink how much home they can afford to buy.”

CREA has concerns that first-time buyers will be priced out of certain markets.

“First-time home buyers, particularly in housing markets with a lack of affordable inventory of single family homes, may be priced out of the market by the new regulations that take effect on October 17th,” said Gregory Klump, CREA’s Chief Economist. “First-time home buyers support a cascade of other homes changing hands, making them the linchpin of the housing market. The federal government will no doubt want to monitor the effect of new regulations on the many varied housing markets across Canada and on the economy, particularly given the uncertain outlook for other private sector engines of economic growth.”

Compared with a year ago, the number of home sales was up 4.2 per cent from September 2015.

The national average price for a home sold in September was up 9.5 per cent compared with a year ago at $474,590.

Excluding the expensive Greater Vancouver and Greater Toronto regions, the average price was $358,884 last month.

With files from Canadian Press

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Toronto area housing prices, sales volume soar in September: real estate board

By David Paddon

TORONTO _ Housing sales in the Toronto area continued to soar last month, with the average price rising 20.4 per cent from September last year to $755,755, the Toronto Real Estate Board reported Wednesday.

The price increases came as the number of transactions in the Greater Toronto Area rose 21.5 per cent, a stark contrast to a big drop in the number of transactions last month in Vancouver’s residential real estate market.

The real estate board said Wednesday there was strong growth in sales transactions for all major home types in the area but a lack of supply limited growth in the City of Toronto itself.

By comparison, figures released Tuesday by Vancouver’s real estate board showed a 32.6 per cent drop in sales transactions compared with September 2015 _ prior to a new 15 per cent provincial tax on foreign buyers that came into effect in August.

Vancouver prices continued to rise but some analysts expect a prolonged decline in demand will lower the sky-high cost of housing in Canada’s most expensive real estate market.

There’s also been anecdotal evidence that some foreign buyers have shifted their focus from Vancouver to other cities, including Toronto. On Monday, the federal government unveiled measures to tighten rules for prospective buyers and lenders.

“The Toronto Real Estate Board will be closely monitoring how the recent changes to federal mortgage lending guidelines and capital gains tax exemption rules impact the housing market in the Greater Toronto Area,” Jason Mercer, the board’s director of market analysis, said in a statement Wednesday.

“While these changes are pointed at the demand for ownership housing, it is important to note that much of the upward pressure on home prices in the GTA has been based on the declining inventory of homes available for sale.”

The real estate board’s benchmark price index was up 18 per cent from September 2015, after adjusting to various types of housing..

The average sale price for detached houses in Toronto proper rose to $1.29 million, up 23 per cent from a year earlier. The comparable price for detached houses in surrounding areas was $928,414, up 26.6 per cent.

By contrast, prices for condos in Toronto proper grew only 6.5 per cent to $446,729. Condo prices in other parts of the Greater Toronto Area were up 19.4 per cent to $367,260.

THE CANADIAN PRESS

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Community trust bullish on Kamloops

One community trust is establishing a neighbourhood in British Columbia it believes offers great value and the potential for major growth.

“We’re attracting the development community to partner with us on the build, but our pre-approved zoning for up to 7500-8000 residents, 3500 units, and just under 200,000 square feet of commercial,” Finlay Sinclair, president and CEO of TRU Community Trust, told Canadian Real Estate Wealth. “We’re attracting both developers to come and partner with us but also the community to come live here. We think there’s a good local, regional, and provincial opportunity for people to make this the place they want to live.”

TRU Community Trust is trying to establish Kamloops’ newest neighbourhood around Thompson Rivers University.
We asked Sinclair why investing in Kamloops is an attractive option for investors.

“It’s a stable economy, it’s a growing economy, and it’s an affordable real estate opportunity for anybody in this country at any income level,” he said. “We are right on the leading edge of all the service, commercialized land that anybody living in the future on the property is ever going to need.”

And the area is attracting investors from across the country. Many of whom have been priced out of province’s expensive lower mainland markets.

“Absolutely, we’re the affordable alternative. I think it’s pretty clear to people across the country that Vancouver has exceeded any normal, reasonable threshold of affordability for younger families that don’t have an equity position in the market already,” Sinclair said. “You can get in and have a wonderful lifestyle either in our development … but Kamloops as a whole has very affordable housing comparable to Vancouver, Victoria, Kelowna, Calgary. We have weather that unmatched in Canada. We have hot, hot dry summers and short, short winters.”

And the market is expected to experience continued growth.

“We see the real market opportunity is the fact that Kamloops is constantly increasingly land value and an increasing real estate market,” Sinclair said. “It doesn’t spike and go up and down irrationally in ways the larger market does. It’s constantly going up and is a stable environment.”

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In-depth look at BC’s latest housing forecast

It’s home to Canada’s hottest housing market, which is poised to break sales records this year. But how does the future look for the B.C. real estate?

“The BC economy is growing at a strong pace, with the resulting surge in employment inducing elevated consumer confidence,” the British Columbia Real Estate Association said in its latest housing forecast update. “Indicative of provincial economic performance, households are buying everything from apparel to real estate at above average levels.”

Housing market conditions vary in terms of expected performance, accord to CREA, with norther regions continuing to cater to buyers and the southern part of the province favouring sellers.

Overall, the province is expected to see 113,000 total homes sold this year before giving way to softer conditions in 2017, when 104,400 total home sales are forecast. That would represent a 7.8% total drop.

Starts, meanwhile, are expected to see an uptick of 31.1% this year – with 41,300 total homes expected to begin construction – before dropping 13.8% next year (35,600 expected starts).

The average price in British Columbia is expected to increase 11% year-over-year in 2016 to $706,900. Those gains aren’t expected to continue, with 2017’s average forecast expected to come in at $743,700 (+5.2%).

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