Housing market conditions put lenders at financial risk regulators need to take “proactive action”

Housing bubble fears spur Canada to weigh tighter mortgage rules

Mortgage Broker News

Canada’s bank regulator is proposing tighter mortgage qualification rules to make it more difficult for home buyers to secure financing, a move aimed at cooling the nation’s booming real-estate market.

The Office of the Superintendent of Financial Institutions said it will setup a new benchmark interest rate used to determine whether people can qualify for uninsured mortgages. Home buyers will have to show they can afford a minimum rate of 5.25%. The current threshold, based on posted rates of Canada’s six largest lenders, is 4.79%.

“Sound residential mortgage underwriting is always important for the safety and stability of financial institutions,” Jeremy Rudin, head of the Ottawa-based agency, said in a statement. “Today it is more important than ever.”

The move comes amid a surge in housing prices that’s raising concern among policy makers and economists. Cheap mortgages and new remote-working conditions have spurred a frenzy of demand for more spacious homes, with house hunters bidding up prices across the country.

The Canadian Real Estate Association calculates prices are up 17% nationally over the past 12 months. Twelve major markets — or about one quarter of the total — have posted price gains of more than 30%.

Royal Bank of Canada Chief Executive Officer Dave McKay lauded the regulator’s move.

“I’m encouraged that that is an implementable, short-term policy that does withdraw some borrowers who are stretching themselves too much with low rates into too large of a house,” McKay said on BNN Bloomberg television.

The tighter qualification restrictions will reduce the buying power of households by about 4.5%, according to estimates by Derek Holt, an economist at Bank of Nova Scotia.

OSFI said housing market conditions “have the potential to put lenders at increased financial risk,” forcing regulators to take “proactive action.” The regulator said it will revisit the calibration of the qualifying rate at least once a year to ensure it remains appropriate. The plan is to implement the changes on June 1, after consultations.

In the meantime, it’s watching how banks handle the increased mortgage demand. “We are looking for heightened vigilance from lenders on collateral management, income verification, and debt servicing,” Rudin said at a news conference. “We will also be monitoring for institutions extending amortization periods and increasing debt servicing limits.”

The move impacts the uninsured mortgage space that is overseen by OSFI. The federal government is in charge of mortgage qualification for insured mortgages. There was no indication in the statement that the government planned to follow the move, and requests for comment from the finance department weren’t immediately returned.

One unintended consequence could be to temporarily accelerate the market as buyers rush in before the changes are implemented.

“We may well see an even hotter spring housing market as a consequence to OSFI’s move,” Holt said by email. “We’ll get more pulled-forward demand.”

Paul Taylor, head of Mortgage Professionals Canada, an industry group, said he’s skeptical the move will make much of a difference given high levels of investors entering the market who won’t be impacted.

“Even with these measures in place I don’t think you’re going to see the housing market really calm down,” Taylor said.

–With assistance from Shelly Hagan, Kevin Orland, Erik Hertzberg and Ari Altstedter.


Copyright © 2021 Key Media

2 major Banks in Canada are giving employees an extra paid day off this year

RBC to give staff extra day off

Kevin Orland
Mortgage Broker News

Royal Bank of Canada and Toronto-Dominion Bank are giving employees an extra paid day off this year, as a lengthy pandemic shows signs of worsening in Canada.

RBC Chief Executive Officer Dave McKay acknowledged that staff are more exhausted now than at any time during the Covid-19 pandemic. The bank needs to “eliminate the stigma associated with asking for time to focus, concentrate, and in some cases, log off and recharge,” McKay said in a companywide memo on Thursday.

Toronto-Dominion also told employees they would get an additional day off, with Chief Executive Bharat Masrani encouraging staff to take it when they need it most. “After a year of sacrifice and disruption, we must all endure these challenging circumstances for a bit longer,” Masrani said in a memo. “I know that this has not been easy, and everyone is tired.”

Burnout has become a more pressing issue for financial firms as the pandemic moves into its second year and some lines of business, including mergers and acquisitions, see a sustained boom in activity.

Last month, Goldman Sachs Group Inc. CEO David Solomon said the firm would improve enforcement of a rule designed to ensure junior bankers don’t have to work on Saturdays. His memo came after junior analysts gave managers a presentation showing that some worked 100 hours in a week.

RBC, Canada’s largest lender, is also giving its roughly 86,000 employees worldwide a free, one-year subscription to Headspace, a meditation and sleep app. An annual subscription costs $69.99, according to Headspace’s website.

“Beyond this extra day off, we recognize the ongoing pressures of the pandemic, especially for those in regions that have reverted back into lockdown,” McKay said in the memo. Those regions include RBC’s home province of Ontario, which declared a statement of emergency on Wednesday for the third time since the beginning of the pandemic.

The CEO encouraged the bank’s employees to take their vacation time and to book the extra off day with their managers. He said that during the pandemic, he has taken a couple of vacations and used them to spend more time outside, learn new songs on his guitar and read more than he has in years.

“I encourage all of you to prioritize your personal time and continue to be mindful about work-life boundaries wherever possible,” McKay wrote.


Copyright © 2021 Key Media

Commercial Development Site sells for $6.75 Million located at Hastings Street, Burnaby, B.C.

Two adjacent N. Burnaby commercial lots sell for $6.7 million

Goodman Commercial Inc.
Western Investor

One-third of Canadian professionals currently working from home due to the pandemic

Hard core of work-from-homers won?t return to office

Wl Staff
Western Investor

 — More than half want to work only part time in the office. |CBRE

About one-third of Canadian professionals currently working from home due to the pandemic would quit and look for a new job if required to be in the office full time, according to a new survey by global staffing firm Robert Half.

More than half of all employees surveyed (51 per cent) said they prefer a hybrid work arrangement, where they can divide time between the office and another location. Professionals, however, also expressed the hesitations about working from home full time, citing loss of relationships with co-workers, fewer career advanced opportunities and decreased productivity.

In addition, workers may not be ready to return to the office, without some incentives to sweeten the welcome back.  Professionals surveyed said the top ways their company can support them include allowing greater freedom to set office hours, employer-paid commuting costs, a relaxed dress code and providing childcare.

“After more than a year of uncertainty and pandemic-induced remote work, there is a growing desire among some business leaders to return to business as usual, including welcoming employees back to the office once it is considered safe,” said David King, Canadian senior district president of Robert Half. “However, companies should be prepared for a potential disconnect between their ideal work structures and that of their employees.”

The online survey was developed by Robert Half and conducted by an independent research firm from March 9-16, 2021. It includes responses from more than 500 workers 18 years of age or older at companies in Canada.



© Copyright 2020 Western Investor

Toronto average price of homes sold CA$1.1 million during the month, up 21.6% from last March

Toronto home prices surge as debate rages

Ari Altstedter
Mortgage Broker News

 Toronto home values continued to swell in March, bringing annual average price gains to more than 20% and adding fuel to a raging debate about whether policy makers should try to cool the market.

New listings were up 57% from March 2020, when the onset of the pandemic temporarily caused a freeze in real estate activity. But the new supply was not able to keep up with demand spurred by low borrowing costs and demand for bigger homes, especially in the suburbs, a report from the Toronto Regional Real Estate Board said Tuesday.

Across the metropolitan area, the average price of all homes sold was CA$1.1 million during the month, up 21.6% from last March. Detached homes in the 905 area code, which surrounds the city’s core, sold for 31.4% more, an average of CA$1.32 million.

“The potential for double-digit price growth could continue without a meaningful increase in the supply of homes available for sale,” Jason Mercer, the Toronto real estate board’s chief market analyst, said in a news release. “This will become more apparent as population growth resumes over the next year.”

Cheap mortgages and new remote-working conditions have spurred a frenzy for more spacious homes, with house hunters bidding up prices in Canada’s largest cities and then looking further afield when they’re priced out. The resumption of more normal levels of immigration, which was slowed by the pandemic in 2020, is another source of demand.

The rapid price appreciation has spurred a debate among prominent economists at Canada’s largest banks over whether Prime Minister Justin Trudeau’s government or other policy makers should step in.

Canada, on Thursday, March 11, 2021. The buying, selling and building of homes in Canada takes up a larger share of the economy than it does in any other developed country in the world, according to the Bank of International Settlements, and also soaks up a larger share of investment capital than in any of Canada’s peers.

The chief economist of Bank of Nova Scotia, Canada’s third largest lender, said policy makers should not rush to act because price gains are being driven by a lack of homes for sale. Many sellers were sidelined by the pandemic last year, but that problem could take care of itself as the traditional spring selling season gets underway, Jean-Francois Perrault said in a report released Sunday.

That came after Toronto-Dominion Bank’s top executive, Bharat Masrani, told Bloomberg that governments should be cautious in taking action. Meanwhile, economists at Royal Bank of Canada and Bank of Montreal are calling for more urgent action to keep prices from becoming completely unaffordable for first-time buyers and head off the possibility of a destabilizing crash later.

Policy makers so far have not signalled plans to take action, but some have expressed concern. Canada Mortgage & Housing Corp., a federal agency that monitors the market, last month raised its assessment of Toronto’s vulnerability to a sudden drop in prices to high, citing the rapid climb in prices. There are five markets in Canada with that designation.

Toronto’s benchmark price index, a measure that takes into account the mix of types of properties sold, has posted a 10.8% gain in the first three months of 2021, the fastest period of appreciation the city has seen since early 2017. Back then, the Ontario government stepped in with a number of measures, including a tax on foreign buyers.


Copyright © 2021 Key Media

Raised $10 million funding to use laser scans and AI to identify errors prior construction process

Platform that uses AI to flag construction mistakes raises $10 million

Kelsey Pudloski

Mistakes happen, but when it comes to new construction, even minor blunders can cost builders untold amounts of time and money. Enter Avvir, a startup that uses laser scans and artificial intelligence to identify errors during the construction process. 

Last week, the company announced that it had raised $10 million in a round of funding led by Trust Ventures, a venture capital firm that counts Koch Industries among its investors. Avvir plans to use the money to add more employees and enhance its software.

Founded in 2017 by Raffi Holzer and Tira Odhner, Avvir asserts that its platform can locate problem areas within one-eighth inch of accuracy. The software compares Building Information Modeling (BIM), essentially a high-tech version of traditional blueprints, with laser scans to flag any discrepancies.

The company claims their mobile scanners can be used by anyone to examine 30,000 square feet per hour even if construction is ongoing. Once a problem has been identified, the construction team is able to take action and the BIM is updated automatically. Another useful feature is the topographic maps that are generated from the scans. These can be inspected after a concrete pour to determine whether slabs are level.

The software can also track the progress of a project, measuring it against the estimated schedule to “highlight where the timeline is off target” and readjust completion dates if necessary. Understanding what work has been completed helps subcontractors get paid in a timely manner, too, reducing delays from months to weeks.

New York-based Avvir is currently valued at $40 million and raised an additional $5 million in previous rounds of funding. In a recent interview with VentureBeat, CEO Raffi Holzer noted that Avvir has amassed roughly 12 customers and partners in the past year and expects its valuation to grow to $4.4 million by 2022.


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