Month: April 2017

28 Apr

Canada’s Largest Non-Bank Mortgage Lender Is Collapsing Before Our Eyes

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Posted by: Frederic Pichette

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The largest non-bank lender of mortgages in Canada is in the midst of an unparalleled existential crisis, and some are wondering whether the lender’s troubles are the canary in the coal mine for a Canadian housing bubble.

Home Capital Group’s shares fell by 65 per cent on Wednesday, on news the company had secured a $2-billion line of credit to keep it running. The very fact it needed such a loan appeared to spook investors.

The same day, credit rating agency DBRS downgraded Home Capital’s debt to BB, from BBB (low), saying that $2-billion loan is too expensive for Home Capital to handle.

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home capital stock priceHome Capital’s share price recovered a small part of its previous day’s losses on Thursday, but is down some 78 per cent since the start of the year.

Investors are heading for the exits. The company has lost nearly $600 million in deposits in recent weeks, the Financial Post reports. Its shares saw some bounce-back on Thursday, trading at $6.82, up 14 per cent from the previous day’s close, as of 11:30 am ET. But the company’s stock price is down more than 78 per cent since the start of the year.

Began with mortgage fraud

Home Capital’s public troubles began in 2015, when the company announced it had severed ties with 45 mortgage brokers who had allegedly falsified information on mortgage applications.

The company later estimated some 10 per cent of the value of the loans on its books were linked to brokers accused of falsifying information.

But that investigation led Home Capital into hot water. The Ontario Securities Commission earlier this month accused the company’s leadership of issuing “materially misleading statements” about its investigation into the alleged mortgage fraud.

The company’s chief financial officer, Robert Morton, was removed from his position following the OSC’s allegations, and the company’s founder, Gerald Soloway, will be stepping down from its board.

Will it infect the whole mortgage market?

But more worrying may be the chatter among market observers, some of whom are wondering whether this might be a sign of bigger problems in Canada’s overheated housing markets.

Some blogs declared that this is the first sign that Canada’s housing bubble is about to pop.

“It doesn’t take a lot to topple a house of cards,” wrote former Member of Parliament-turned-housing market blogger Garth Turner.

“Or in this case, a nation of toppy houses floating on a foundation of debt. Maybe it’s just another week of excess borrowing and undisciplined spending…. Or, perhaps, this is it. The moment of capitulation. Over the cliff.”

garth turner housing crea
Former MP Garth Turner has suggested that Home Capital’s decline may be a sign Canada’s overheated housing markets are headed “over the cliff.” (Photo: The Canadian Press)

Investors took out those concerns on Canada’s other mortgage lenders. Equitable Group Inc. shares fell nearly 32 per cent on Wednesday, despite strong earnings and positive outlooks from analysts.

“I think our company is demonstrably different” from Home Capital, Equitable CEO Andrew Moor told The Globe and Mail. “Nonetheless, investors tend to see things correlated. That’s sort of what happens.”

Canada Mortgage and Housing Corp., the government-run mortgage insurer, worked to reassure investors.

“We have no significant concerns about the quality of the mortgages in the Home Capital portfolio,” it said in a statement. “We are not concerned about either the current state of our financial exposures nor with the Canadian housing finance system in general.”

The panic calmed down a little on Thursday, with most lenders recovering some (though not all) of their losses from Wednesday. The Globe and Mail reported Home Capital is now exploring selling itself, retaining RBC Capital Markets and BMO Capital Markets to advise on “strategic options.” Some analysts speculated the company may have attractive assets for Canada’s big banks.

“It won’t take long to get more clarity on Home’s viability,” wrote Rob McLister, founder of RateSpy.com, on the Canadian Mortgage Trends blog. “Expect a series of major announcements from the company, and perhaps regulators, in the next few days and weeks.”

25 Apr

Buy now or risk saying bye-bye to affordable Montreal home ownership

General

Posted by: Frederic Pichette

Bert Archer, Special to the Montreal Gazette Bert Archer, Special to the Montreal Gazette

18 Apr

Toronto real estate talks set stage for market cooling policies

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Posted by: Frederic Pichette

Jeff Lagerquist, CTVNews.ca
Published Monday, April 17, 2017 2:22PM EDT
Last Updated Monday, April 17, 2017 5:07PM EDT

Federal Finance Minister Bill Morneau will meet with Ontario Finance Minister Charles Sousa and Toronto Mayor John Tory on Tuesday to discuss the city’s break-neck housing market, laying the groundwork for possible policy measures to control surging prices.

The gathering of the three politicians is set to take place as agents and sellers gear up for what is expected to be an especially frenzied spring housing season marked by bidding wars and multiple above-asking offers.

The cost of a detached home in Toronto roared to a new record high of almost $1.6 million in March, a 33 per cent climb over prices last year, according to the Toronto Real Estate Board (TREB). While new listings have risen over the past 12 months, even stronger sales continued to tighten the market.

See more here

13 Apr

Montreal’s top neighbourhoods

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Posted by: Frederic Pichette

Montreal’s market continues to be hot, even after last year’s mortgage regulation changes, which were introduced to slow activity in Canada’s hotter real estate markets. By the end of the first two months in 2017, sales of $1-millon+ homes had increased in Montreal by 13% and the trend doesn’t seem to be stopping. Not surprising, property prices increased most on the Island of Montreal, which is why we were excited to see a suburban island neighbourhood make it to the top of our ranking this year.

While average prices in Pointe-Claire can be twice as much as homes in surrounding north or south shore communities, this gem may just be the answer for commuters who want to avoid bridge and tunnel commuting. As in previous years, our ranking found good, solid value in downtown neighbourhoods as well as in commuter communities on both the south and the north shore. For those in the market to buy, the key right now is to find a neighbourhood that can withstand a potential correction in this hot housing market.

Montreal at a glance…

Average Neighbourhood Price $386,454 $396,774
Median $314,010 $314,010
Max $1,607,439 $1,218,582
Min $188,084 $188,084
Below $500K 76% 92%
Average 1-year return 3.0% 5.1%
Average 3-year return 6.1% 9.3%
Average 5-year return 11.9% 15.5%
Realtor grade (out of 5) ★★★ ★★★½

Montreal’s top five neighbourhoods

1. Pointe-Claire (2 : Ouest de l’île sud)

This is simply the “heart of Montreal west,” explains Peter Rawski, realtor with Londono Group. While a suburb of Montreal, this neighbourhood is still on the island which makes it a popular community for commuters, particularly those with families who want a little outdoor space and a larger home to call their own. While most homes are two-storey, there are bungalows and other housing types, such as condos. One big attraction is the revitalization project that was approved last year for the village centre on Cartier Avenue. While the history of the three-century-old village will be maintained, the revitalization will update recreational and commercial facilities to meet the growing community needs.

2. Mont-Royal (12 : Centre)     

Despite the high average home price Mont-Royal is still considered a jewel in Montreal’s downtown, says Rawlski. “Many come to this neighbourhood while going to university and then never leave.” That’s because this is a community that’s close to downtown, with easy access to students (to help you lease that mortgage helper). As for location, the large urban Parc du Mont-Royal is a big plus, and the homes are often quite large. If they are lucky, buyers might find a semi (also known as a side-by-side) for around half a million.

Photo gallery: Top 25 Montreal neighbourhoods »

3. Brossard (39 : Brossard/Saint-Lambert) 

Just across the Champlain bridge is the community of Brossard. Almost 80,000 people live in this community with a range of ethnic backgrounds. One reason for its popularity is the more accessible price point, due in large part to the overwhelming number of semi-detached houses in this community. Almost half (44%) of the housing stock is classified as a semi, while less than a third of the dwellings are made up of low-rise apartment buildings where units are sold much like condos.

Residents are well serviced here: Much of the south shore’s commercial and retail space is located in the Brossard community. “This neighbourhood is undervalued by many investors,” says Rawlski. “Yet, it has a number of housing options, including new development, and it’s only a 10- or 15-minute commute to downtown.”

4. Les Coteaux (35 : Soulanges sud)

Located on the North Shore, Les Coteaux is often considered by local Montrealers as not being part of the city. But as more and more families and buyers look for larger homes, this municipality just over the Mgr Langlois Bridge is looking more and more appealing. A somewhat dated but solid four-bedroom will cost less than a condo in the city centre. That’s appealing to families who want enough space for two cars, a backyard and a chance to get out of an urban setting.

5. Gore (33 : Saint-Jérôme)      

A little further south from Les Coteaux, but still on the North Shore is Gore—the urban equivalent of Barrie, Ont. to Toronto, explains Rawlski. While the average price point for homes—which sits at less than $200,000 for a single-family detached home—is one draw to this community, so are the mountains. Gore sits at the foothills of the Laurentian Mountains and is only an hour’s drive to Mont-Tremblant, one of the biggest ski resorts in Quebec. For those who love the outdoor lifestyle and don’t mind a commute, Gore offers good deals in real estate.

Photo gallery: Top 25 Montreal neighbourhoods

Top 25 neighbourhoods ranked

Click here to see the full ranking of Montreal neighbourhoods.

12 Apr

More than 200 condo buyers may lose homes after development fails

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Posted by: Frederic Pichette

On the Go Mimico development was heralded by politicians, planners as first of its kind

10 Apr

Canadians ready to cash in on their property, poll finds; problem is, where to go next?

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Posted by: Frederic Pichette

Garry Marr | April 10, 2017 8:10 AM ET
More from Garry Marr | @DustyWallet

A new poll finds 41 per cent of Canadian with plans to sell their property are doing so to cash in and make a profit.

But the problem, according to the survey released Monday by Canadian Imperial Bank of Commerce, is 62 per cent say the cost of buying another house is making them “reluctant to sell” and move out of their current home.

“In today’s market, homeowners are facing a conundrum as to whether to buy, sell or stay put,” says David Nicholson, vice-president of CIBC Imperial Service.

The survey, conducted March 16-20 online with a margin of error of plus or minus 1.7 per cent points, 19 times out of 20, comes as the Greater Toronto Area housing market shows very few signs of slowing down.

The Toronto Real Estate Board reported  last week that overall prices for the GTA were up 33 per cent in March from a year ago with the average detached home in the city of Toronto selling for $1.56 million.

Rising values, which comes as some parts of the country are still watching their housing markets struggle, has policy makers grappling for a solution. Finance Minister Bill Morneau has pledged to speak with provincial and municipal officials in Canada’s largest city to work on a joint solution.

The poll finds that Canadians are worried about what the so-called solutions to the housing market might be with 48 per cent of homeowners, who are planning to sell, concerned that government tax and policy changes will lower housing prices.

Tougher rent controls continue to be discussed in the province, supported by a New Democrat private members bill, and the CIBC poll finds 28 per cent think that renting is a better option given current house prices.

More housing product could find its way into supply as the polls also finds 67 per cent of baby boomers, those 55 and over, plan to sell their homes with the top reason being to downsize at 63 per cent. Buying is also making baby boomers nervous about selling.

“Your home is where your heart is, but it’s also likely your biggest financial asset, so there is a lot to consider as you enter or near retirement that can affect your decision to sell or not,” said Mr. Nicholson.

In the millennial category, 39 per cent of those aged 18-34 are now homeowners, the rest renting or living with family. Another 23 per cent of millennials believe they will never own a home.

Overall, 62 per cent of those surveyed were homeowners, 31 per cent rented and seven per cent lived with parents or family.

gmarr@postmedia.com
twitter/dustywallet

2 Apr

Open House event highlights ‘booming’ real-estate market in Montreal

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Posted by: Frederic Pichette