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Bill 197 condo owners needs to know

Will Bill 197 make condos more expensive for Ontario home buyers?

Clayton Jarvis
Mortgage Broker News

Ontarians may still be wary of going back to the office, but the provincial legislature has had a very busy July. After passing the controversial Bill 184 on July 6, and the far less contentious Bill 159 eight days later, the Ontario government passed yet another bill last week that should be of interest to the province’s realtors, mortgage brokers, and home buyers.

While Bill 197 is unlikely to make headlines for its real estate components – it is an exceptionally broad piece of legislation – it could lead to increased costs for developers. Anyone who has dabbled in the new construction space will know what that means.

“At the end of the day, when they say ‘The developer has to pay this, and the developer has to pay that,’ there’s only one person who pays for that – that’s you and me who buy the house,” says Leor Margulies of Robins Appleby Barristers and Solicitors. “The developer doesn’t pay for anything. If the cost is too high, he doesn’t do the project. If the cost can be passed on in a purchase price, then the purchaser pays for that.”

Essentially a companion piece to the province’s much-touted Bill 108, aka the More Homes, More Choices Act, Bill 197 tweaks Bill 108 in three ways that could lead to higher prices in much of Ontario.


Increased development charges

In the mid-1990s, under Mike Harris’ Progressive Conservative government, developers were given a minor break on the development charges associated with new projects. While they were required to pay 100 percent of the expected hard costs – the infrastructure costs forced onto cities because of local population growth – developers were only asked to pay 90 percent of the expected soft costs – the money a municipality would require to provide services to that growing population, like social housing or libraries.

Bill 197 puts an end to that 10 percent discount.

“Now, developers pay 100 percent of the soft cost component of the development charge, which means that gets added to the cost, and that gets passed on to purchasers,” Margulies says. “That’s a big change.”


Section 37

Section 37 of Ontario’s Planning Act, which essentially allows cities to ask for benefits in exchange for density-increasing amendments to a development’s zoning, received a significant tweak.

Prior to Bill 197’s passing, Margulies says there was no formula in place to calculate what a developer owed a municipality under Section 37. The municipality may ask for money, day care facilities, art – whatever it wants, really, with no pre-set limits.

“There’s historical precedent, but it really is the wild west,” Margulies says, adding that the city of Toronto alone is currently sitting on around $600 million worth of unspent Section 37 collections.

Under Bill 197, 60 percent of the money collected must be spent or designated for spending every year. The bill also implements a formula for calculating what developers owe municipalities if their zoning needs change – a set percentage of the site’s total land value.

“What we don’t know is what that percentage is,” says Margulies. “We think it will be under 10. I think the industry feels two percent is correct.”

Either way, prices are likely to increase, particularly in municipalities where Section 37 funds were not previously being collected.


Parkland dedication fees

Once change contained in Bill 197 may actually benefit buyers.

Bill 197 contains significant changes to the province’s approach to calculating parkland dedication fees. In Ontario, developers are required to dedicate a certain percentage of the area they are developing to green space. For residential projects, it’s equivalent to five percent of the land in question. Because few developers in densely populated areas have the luxury of having that much extra space to play with, they have been given the option of paying cash instead.

But the cash option is by no means a lifeline for developers. Because of the formula used by the province to calculate the rate of parkland dedication fees, the equivalent of one hectare of land per 500 units, they tend to be brutally expensive. Margulies explains that in the 905 area code, parkland fees have ranged between $20,000 and $60,000 per unit.

“Developers have been fighting very hard with municipalities to cut them back,” he says.

Their calls for a more realistic formula for determining parkland fees are not reflected in Bill 197. But developers now have the option of appealing fees they find to be arbitrary and egregiously expensive – a definite win. Going forward, parkland development fees will need to be justified by a background study that explains a municipality’s future parkland needs.

But what form those studies take, and their eventual cost implications for developers and buyers, are anybody’s guess.


Copyright © 2020 Key Media

1 out of 10 Canadians thinking to move back home

One million adults plan to move back home

Western Investor
Western Investor

1 out of 10 Canadians thinking to move back home

One million adults plan to move back home

Western Investor
Western Investor

At least 1.5 million adult Canadians have already or plan to move back home with their parents, according to a national survey by Finder.com released July 24.

B.C is among the provinces seeing the biggest  boomerang back home.

The findings could have ramifications for the multi-family rental sector, since the vast majority of those seeking shelter at home are renters.

Survey results reveal an estimated 2.8 million, or nearly 1 in every 10 Canadians, have seen their living situation change due to the COVID-19 crisis.

Approximately one million Canadians (4 per cent) said they are thinking of moving in with family. 

Of those moving, by far the biggest trend are grown adults moving back in with their parents. About 1.5 million Canadians have said they have moved home due to the COVID-19 crisis, and 860,917 parents have said their kids have already moved back in. 

Canada’s youngest generation (aged 18-24) are most likely to have already moved home (13 per cent), with men more likely to move in with their parents as compared to women.

Men are also 141 per cent more likely to be contemplating moving home, compared with women,

The provinces hit hardest by COVID-19, and with higher costs of living, saw the most moves with Ontario, Quebec and B.C. in the top spots. Ontario is the epicentre of Canada’s ‘Generation Boomerang’ with 10 per cent of people in the province saying they’d moved back in with their parents or had adult children move home with them. 

In British Columbia 10 per cent of those surveyed said they are experiencing a change in their living situation and another 5per cent are thinking about it.

Just 11per cent of those in the prairies are in a new living situation or thinking about it. Just 5 per cent of those in the Atlantic provinces are living in a changed living situation, with another 5 per cent thinking about moving back with family.

While young people moving back home with parents make up the bulk of this trend, it also works in reverse, just on a smaller scale, with 278,532 Canadians who have already moved in with their adult children and another 455,780 seriously considering it. 

Scott Birke, Publisher at Finder.com, a Toronto-based data research platform, said that Canada’s young adults are facing an uphill battle when it comes to establishing themselves during an uncertain recession.

“Between the high cost of rent in Canada’s big cities and a recession with record levels of unemployment, young people trying to launch or grow careers while paying the bills are now faced with challenges that may seem insurmountable, making returning home to their parents the most attractive option for many of Canada’s young adults.”  

“Our data reveals about a million Canadians who haven’t yet moved home with their parents are still seriously considering it, which tells us this trend is not just confined to the pandemic and could be a longer-term setback when it comes to young Canadian adults building wealth and establishing their careers”, said Birke.

He noted the reverse trend of Canadians parents moving in with their grown children could prove to be a silver lining to a stressful situation.

“It is safe to assume that many of the parents who moved in with their adult children are also grandparents who are helping to provide childcare for exhausted working parents of young children, who have limited or no childcare options until school begins.”


© Copyright 2020 Western Investor

Teranet-National Bank data report that housing market will slowdown

Despite recent sales activity, fresh Teranet-National Bank data points to decline in home prices

David Kitai
Mortgage Broker News

Despite prices swelling in a number of Canadian markets, the most recent Teranet-National Bank National Composite House Price Index, released yesterday, claims Canada’s housing market has hit a slowdown.

The Index says that nationwide, house prices in June were up 0.7% from May – half the average increase posted in June for the past decade. The report’s correction for seasonal pressures turns that 0.7% rise into a 0.1% drop. Halifax (2.7%), Winnipeg (1.8%), Hamilton (1.7%), and Ottawa-Gatineau (1.5%) led the price increases. Calgary and Edmonton both saw drops in real numbers, at minus-0.1% and minus-0.7% respectively. Montreal was up 1.4% and Toronto was up 0.8%, while Vancouver prices only grew by 0.2% in June.

“Last month’s advance in the Composite index was the lowest for a month of June since 2004,” wrote Teranet in a press release accompanying the data. “This adds to other signs already witnessed in May of a slowing of activity on the housing market due to COVID-19,” including two consecutive months of decline in the seasonally adjusted raw Composite index, which fell in June in six of the 11 metropolitan areas studied.

Conflicting views

John Lusink, president of Right at Home Realty, told MBN that the Teranet-National Bank report runs counter to some more positive reports he’s seen from the Canadian Real Estate Association and Toronto Real Estate Board. While he doesn’t dispute the numbers in the Teranet-National Bank report, he says that a nationwide sampling, and even a single-market summary of Canada’s largest urban real estate markets, makes Canada’s housing market appear more languid than it is. As well, he says the unprecedented circumstances of 2020 make comparisons less meaningful.

“I think part of the challenge is that too many of these organizations are still also comparing year-over-year, and I don’t think you can do that,” Lusink says. “I think you have to compare today compared with yesterday compared with last week compared with last month. Looking at internal numbers, if I were to compare incoming and closed numbers with last year, we’re down 33% and 38% respectively. But if I compare week-over-week, we’re up 10% on incoming deals and we’re up on closed deals by 56%. It’s about how you balance the information.”

Lusink says the pause that was hit on virtually all market activity through March and April has augmented the typical yearly real estate cycle: Late summer would usually be a time for closings, but many markets are still in the showings/offers stage of the process. He says that represents an ongoing pent up demand, especially in the GTA and Ottawa, where he’s seen strong growth. While numbers pointing to a drop are inevitable, he says, there remains a base resilience in Canada’s key housing markets.

Teranet addressed the optimism shown in other reporting data. The organization remained cautious, however, about the state of Canada’s housing market.

“According to CREA, overall Canadian home sales returned to a more normal level, and this should be soon reflected in land registries,” the release reads. “But question marks still lie ahead. We expect the Canadian unemployment rate to remain elevated for a while. In this context, demand for housing may decrease due to a reduction in immigration and would-be first-time homebuyers not being able to qualify for a mortgage loan.”

Regional and sub-regional numbers are key in understanding the state of Canada’s markets, Lusink says. He points to his own internal numbers, which show strong performance in Ottawa and parts of the GTA. Those markets, he says, along with Montreal and Metro Vancouver, are the “engines” of Canada’s real estate market. While the Teranet National Bank report does display numbers for those metro areas, Lusink notes that they don’t give a picture of market subsets which can pose issues.

“I think the challenge with reports that come out from the likes of CMHC and Teranet is, while they’re good information, they need to treat certain markets separately, so that people don’t get a misguided view of what’s going on,” he says.

Opportunity for brokers to prove their value

While Lusink says that things remain busy and active for Right at Home realty, transactions come with a host of challenges that did not exist before the COVID-19 pandemic. Reports like these and broad indices of stagnating or downward-trending prices can raise red flags for buyers and cause new issues as realtors try to close deals. He says that in the wake of this report, mortgage brokers can prove their value as they shepherd clients through closing deals.

“In the wake of this report, brokers should know they are absolutely an invaluable resource,” Lusink says. “They can help realtors and their clients manoeuvre through what is a much more challenging qualification process. They should know, too, that there very much is an active market, but it’s that much harder. It takes that much more effort to get the deal closed. Brokers really are a resource that people should be leaning on even more so now.”



Copyright © 2020 Key Media

Some economist predicting those near zero-rates still continue

Near-zero lending rates will continue

Nelson Bennett & WI Staff
Western Investor

Multi-family financing five-year funding at unprecedented 1.3 per cent and and “we could slide further into uncharted depths” if downturn persists

The Bank of Canada is holding the overnight interest rate to 0.25 per cent, and several economists are predicting those near-zero rates to stay for at least two years.

The BOC also announced it will continue aggressive quantitative easing policies to inject liquidity into the Canadian economy, as it recovers from the shocks of the COVID-19 pandemic. It has been buying Canadian government bonds at a rate of $5 billion per week.

“This QE program is making borrowing more affordable for households and businesses and will continue until the recovery is well underway,” the BOC said in a press news release Wednesday, July 15.

As of July 14, multi-family investors buying buildings worth $5 million or more could access Canada Mortgage and Housing Corp. insured mortgages at 1.3 per cent for five years and 10-year loans at 1.7 per cent, the lowest rates ever offered. 

“This is free money. Buy an apartment building now,” quipped Mark Goodman, of Goodman Commercial Inc., Vancouver.

The Bank of Canada indicated it will likely hold interest rates at near zero until inflation has reached 2 per cent.

“As the economy moves from reopening to recuperation, it will continue to require extraordinary monetary policy support,” the BOC said.

“The Governing Council will hold the policy interest rate at the effective lower bound until economic slack is absorbed so that the 2 per cent  inflation target is sustainably achieved.”

A survey of 16 economists compiled by Finder.com found that roughly two-thirds of economists predict the BOC will hold to its low interest rates until 2022 or 2023 – an indication of just how long it may take for the Canadian economy to recover from the COVID-19 pandemic shock.

It also found that a majority of the economists think Canada’s GDP will shrink by 6 per cent  to 8 per cent in 2020.

The lowest fixed residential mortgage rate available as of July 15, according to rate comparison website RateSpy.com, was the one-year fixed at 1.59 per cent (for those putting down less than 20 per cent for insured mortgages).

Even the 10-year fixed rate is reaching new lows, currently available nationally as low as 2.79 per cent

“Fixed rates are dirt cheap because funding costs keep sliding,” RateSpy founder Rob McLister said July 2. “With a bearish economic report or two, we could slide further into uncharted depths, as soon as next month.”


© Copyright 2020 Western Investor

PM Trudeau announced the extended wage subsidy program

Trudeau extends CEWS program until December

Ephraim Vecina
Mortgage Broker News

The federal government has announced that it will be extending its wage subsidy program – which has proven instrumental to the continued survival of many households and businesses – to companies severely affected by the COVID-19 pandemic until at least December.


Earlier this week, Prime Minister Justin Trudeau said that this extension would provide “greater certainty and support to businesses as we restart the economy.” Trudeau said that more details, including eligibility requirements, will be available in the next few days.


Data from the Office of the Superintendent of Bankruptcy Canada indicated that the subsidy played a large part in insolvencies recently seeing their largest year-over-year decrease since 1988. The OSB’s figures showed that there were 6,111 insolvency filings in May, falling by 8.8% monthly and 51% annually.

However, market players expressed concern that the duration of the federal aid might need to be extended even further, all the way to 2021.


“I don’t think anybody expects that … everything is going to be fine [for affected industries] by December 31,” said Ross Laver, senior vice-president for strategy at the Business Council of Canada. “We need to bear in mind that some of them are going to need help for an extended period of time.”


Copyright © 2020 Key Media