APARTMENT SALES ENLARGEMENT

Mondo condo sales for 2011
Lisa Van De Ven,
National Post, Sept. 10, 2011

If you ask Ben Myers, 25,000 is the magic number. There may still be a few months left of 2011, but Mr. Myers, executive vicepresident and editor at real estate research firm Urbanation, already has his forecast for the year. He expects there will be 25,000 new condominium sales by the end of 2011. If he's right, it'll be a new record, surpassing 2007's previous record of about 22,500 new condo sales.

"We're certainly on pace to have the most condominium sales in any one year in 2011," Mr. Myers says. And with the Toronto new-condo market coming off a busier-than-normal summer and a record-setting second quarter, he's not surprised.

Urbanation recently released its second-quarter results. From April to June, Mr. Myers says, 9,455 new condo units were sold in the Toronto CMA. That's a record in itself; the previous best quarter was 2007's second quarter, when 6,997 units were sold. That wasn't the only Q2 number to be beat, though. The quarter also set records for the number of active projects, the number of active units, the number of new condominium launches and the number of projects and units under construction.

"There was a huge number of new projects coming on line," Mr. Myers says. "And surprisingly, even with all of this extra supply, they had the highest absorption rate ever of new product. Even in the face of all this additional supply, they sold better than any other new release that we had in a quarter."

But Mr. Myers is quick to dispel any talk that the Toronto market might be in the middle of a real estate bubble. Prices, he says, have remained "pretty consistent" over the past five years, with 7% to 9% increases in the new condo market from year to year.

"A bubble is characterized by rapid increases in prices, and we haven't seen that," he says. "That's the type of thing you obviously saw in the United States and you even saw in Calgary a few years ago, where you saw 20% and 25% increases year over year, and in our market in the '80s where we saw prices double in three years."

Developers, he says, have been doing their homework and "setting fairly moderate pricing." They're also, it seems, paying less attention to the sales seasons of the past. Whereas spring and fall are still the prime selling times, more developers decided to release their projects in the summer this year. Since the market is being driven by investors more than ever, Mr. Myers says, there was less need to wait out the summer season, when end users are typically on holiday and less focused on condo buying.

According to the Building Industry and Land Development Association (BILD, using data provided by RealNet Canada), 1,490 new condo units were sold throughout the Greater Toronto Area in July, up almost 20% from last year. "Forget the old conventions of a spring and fall market," says Stephen Dupuis, BILD's president and CEO. "The market's that much bigger now - it's active all the time."

Photo By: GalleryLoftsCA

REACH FOR A GREAT GRADE!

Homebuying 101
Take into consideration all of the costs
By Marnie Bennett
Postmedia News September 6, 2011

Perhaps you are one of those fortunate first-time homebuyers for whom making the big decision to buy came easily. And then again, maybe you aren't. For many, the decision is difficult.

It's a decision that requires careful consideration. You may have concerns about financial obligations, the responsibility of upkeep or even the idea of being "tied down." Maybe you've just landed your first significant job and the idea of home ownership has only recently taken root in your imagination.

Or, like many people, you've been renting for what feels like forever and dread the thought of writing yet another cheque to help pay down your landlord's mortgage.

Numerous factors will influence your decision, but I'd encourage the fence-sitters among you to consider two overarching questions.

First, how strongly do you feel about owning your own home? While it's possible to live perfectly well while renting a good space, many of us find home ownership important to our sense of comfort, security and identity.

Certainly, there's also a sense of satisfaction in watching your home equity increase with every mortgage payment. As a solid investment, a home is hard to beat: How many investments provide shelter and comfort to the investor?

There is a big payoff - ultimately, you will own your home outright and monthly payments will be a distant memory. That is a luxury renters simply do not have.

This brings us to the second, more crucial, question: Can you afford it?

Remember, your first home need not be a palace. Assuming that you're steadily employed and do not plan to move again in the near future, the purchase of a modest home or condominium is nearly always a smart move. You may even find mortgage payments surprisingly affordable and not a far cry from your monthly rent.

It is paramount to consider the additional costs of ownership. Things like property taxes, utilities, condo fees, insurance and mainte-nance can add up and force you way over your budget. I strongly suggest you speak with a mortgage broker or bank representative for help designing a realistic home budget.

If home ownership is close to your heart, you'll find a way.

Marnie Bennett is a leading broker with Keller Williams VIP Realty in Ottawa, with more than 30 years' experience in real estate.

LOCK IT OR FLOAT IT? THAT IS THE QUESTION.

Is it time to lock in mortgage?
Garry Marr
Financial Post · Aug. 31, 2011

The gap between short-term and long-term rates has shrunk enough that it might be time for anyone renewing a mortgage to consider locking in.

Moves last week by the major banks to reduce the discount on variable-rate mortgages comes as the discounts for long-term mortgages have gotten as steep as they have ever been.

"What seems to be happening is they are focusing their attention on fixed rates. We are starting to see some aggressive competition on four-and five-year products," says Gary Siegle, a mortgage broker and Invis Inc. regional manager in Calgary.

How aggressive? Try as much as 190 basis points. A five-year, fixed-rate mortgage with a posted rate of 5.39% is now being offered for 3.49%.

For whatever reason, the four-year, fixed-rate mortgages are being priced even more aggressively.

Mr. Siegle says he can lock consumers into a four-year, fixed mortgage for as low as 3.09%.

The discounting comes as variable-rate products, linked to prime, have become more expensive. Short-term money has become more expensive in the bond market, forcing banks to reduce discounts.

The banks traditionally move their prime rate with the Bank of Canada rate. With no flexibility there and existing customers getting huge discounts based on old deals, banks are forced to raise rates for new loans as short-term money gets more expensive.

The trend began in April when FirstLine Mortgages, a subsidiary of Canadian Imperial Bank of Commerce known for its low rates, cut its discount on variable rates.

Others banks were slow to follow, hoping to make money on volume. But refinancings have dried up under tougher mortgage rules and sales have slowed, creating the need to tighten profit margins on variable-rate products.

Today, the discount on a variable-rate mortgage is about 55 basis points off the prime rate of 3% - in other words, 2.45%. Compare that to 3.09% on a four-year mortgage and the premium to lock in is not that much.

"This gap is about as narrow as it goes," says CIBC deputy chief economist Benjamin Tal. "It reflects a flat yield curve, which makes it difficult to make money in this business."

Mr. Tal says variable-rate mortgages tend to be more attractive when there are inflation expectations not yet expressed in short-term rates. This time, he says, the bond market is depressed, anticipating recession, and that has shrunk spreads dramatically.

The one thing keeping people in short-term money is the sense that there is no urgency to move because the U.S. Federal Reserve Board has pledged not to raise rates for two years, which also effectively ties the hands of the Bank of Canada.

"We know the five-year rate is attractive, but we also know short-term rates are not raising," Mr. Tal says.

What does that mean on a practical, dollars-and-cents basis?

Let's use the Canadian Real Estate Association's 2011 average sale price forecast of about $360,000 and assume a 20% down payment and a $288,000 mortgage.

At 2.45%, your monthly mortgage payment based on a 25-year amortization would be $1,282.98. At 3.09%, your monthly payment rises to $1,376.28.

But even at the gap, you would pay about an extra $7,000 in interest to lock in over four years.

Ultimately, the $7,000 amounts to an insurance policy. You get payment certainty for four years, but at a price.

If rates climb 200 basis points on your variable-rate mortgage, it could cost you $22,000 more in interest over four years. The reality is that rates wouldn't jump at once and, therefore, increases would likely be gradual.

Moshe Milevsky, the York University finance professor who wrote the oft-quoted study that variable-rate mortgages do better than fixedrate mortgages 88% of the time, said if you start thinking about it like insurance, it comes down to your risk tolerance.

"There are people who pay a lot for protection on their portfolio; there are people who pay a lot for life insurance," Prof. Mr. Milevsky says. "If the premiums are low enough, you might say, 'Sure, I'll pay.' But if you have a tight budget, every basis point counts, and it might not be worth it."

To me, he still has the ultimate answer for the tough decision whether or not to lock in.

"I still don't get why more Canadians don't split their mortgage," Prof. Milevsky says. In other words, locking in half of the mortgage and floating with prime on the other half.

"When is a bank going to come to the realization Canadians hate making this choice?"

He's right. Even with rates this low and the gap between short-term and long-term rates this narrow, it is still a tough call.

Photo By: Accretion

SPELLING CHA-CHING!

It's Official: America's Most Expensive Home Has A Brand New Billionaire Owner

By Morgan Brennan
 
Well folks, it’s official. The Spelling Manor, America’s most expensive home for sale, officially has a new owner. The sale of the $150 million Los Angeles, Calif. estate closed today and FORBES has the exclusive interview with co-listing agent Sally Forster Jones of Coldwell Banker Previews International. Forster Jones, who has more than $1 billion in sales to her name over the past decade alone, shared the listing with Rick Hilton and Jeff Hyland of Hilton & Hyland, an affiliate of Christie’s International Real Estate.

“We are sold, it is closed,” says Forster Jones. “It’s the highest broker sale in Southern California in the history of Southern California and Los Angeles.”

As with many other ultra luxury home sales, the brokers signed Non-Disclosure Agreements on the property, meaning they can’t divulge the final sales price or confirm the identity of the buyer. But we have good reason to believe it is Petra Ecclestone, heiress to the Formula One racing empire and daughter of British billionaire Bernie Ecclestone. Representatives of Ecclestone, 22, announced she was in contract on the 56,500-square foot mansion last month. Today The Wall Steet Journal reports that the opulent estate sold for $85 million, or at a steep 43% discount off the $150 million asking price.

The Spelling Manor, built by Candy Spelling and late TV producer husband Aaron Spelling, was on the sale block for two and a half years, maintaining that hefty nine figure asking price the entire time. Forster Jones says the sale transaction went very smoothly. Deals of this magnitude tend to be all-cash — something we strongly suspect to be the case with this transaction. The high-end home broker could not confirm the nature of the sale but she did assert that sales of trophy properties like this one, “tend to be cash-type buyers because they [the home buyers] are the ultra wealthy part of population.”

Forster Jones also notes that the property enjoyed a “tremendous amount of interest” and that, unlike for sale homes at lower price points, two and a half years is not a long time on the market. “This is a glitzy Hollywood property, but it is also very homey – all the potential buyers could picture themselves calling it home,” remarks the Realtor.

The Spelling Manor, originally named L’Oiseau, is situated on about 4.7 acres in tony Holmby Hills, an exclusive Los Angeles neighborhood. The three-story, seven bedroom estate boasts every outrageous amenity a celebrity or billionaire could imagine. Among the offerings are a dog grooming room, five bars, a wine cellar and tasting room, a China room for displaying ritzy server ware, a “gift-wrapping” room, a flower-cutting hall with professional florist fridge, a projection room, game and billiards rooms, a bowling alley, and a beauty salon. An elevator runs between the floors.

The lavish estate’s grounds encompass expansive gardens, an orangery, a koi pond, lamp posts imported from Paris, a pool complex and tennis courts. The fountain-studded motor court holds up 100 cars in front of the limestone mansion.

Ecclestone is said to be moving into the palatial pad following her August nuptials to James Stunt, a businessman and London nightclub fixture. It’s been reported that the couple will split their time between London and and their new SoCal digs.

Candy Spelling, mother to actress-turned-reality star Tori, was the home’s seller. She snapped up a $35 million penthouse apartment in Century City, a luxe L.A. high rise owned by billionaire Stephen Ross‘ Related Co. in December and relocated there shortly after. Forster Jones has represented the Spelling family on six real estate transactions and says Spelling is “wonderful to work with.”

The Spelling Manor joins the ranks of most expensive billionaire homes in the country with Yuri Milner’s $100 million Silicon Valley estate, and industrial billionaire Ira Rennert‘s hulking Fair Field Estate in the Hamptons, valued at $200 million according to tax assessments.

Its sale today sheds light on a growing trend in America’s ultra high-end housing market: foreign buyers. Forster Jones says foreign buyers, primarily from Asia, Russia, Europe and the Middle East, constitute roughly 75% of all showings she gives of her $20 million and higher property listings. Coldwell Banker Previews International’s $10 million and higher listings in the Los Angeles area have been enjoying a rebound this year. Twenty-seven homes worth $10 million or more have sold thus far in 2011, compared to 15 sales in 2010 and 12 in 2009. Many of them were purchased by foreigners.

DROP IT LIKE IT'S HOT

Canada home affordability drops, Vancouver pricier
REUTERS
Monday August 22, 2011

TORONTO (Reuters) - Housing in Canada became harder to afford in the second quarter, with Vancouver's pricey market playing a major role in the deterioration, according to a report by Royal Bank of Canada on Monday.

It was the second straight quarter in which the bank's quarterly Housing Trends and Affordability Index dropped. The cost of housing rose nationally across all the housing types the index tracks in the second quarter.

The index measures the proportion of pretax household income needed to service the cost of owning a home. A rise in the measure indicates a loss of affordability.

For a detached bungalow, the measure rose 1.7 percentage points to 43.3 percent. For a standard condominium, it edged up 0.8 percentage points to 29.2 percent, and for a standard two-storey home it climbed 1.8 percentage points to 49.3 percent.

Vancouver, which has long seen exceptional growth in home prices compared with other Canadian cities, directly accounted for up to one-third of the deterioration in affordability on the national score, the RBC report said.

"Vancouver's housing market is without a doubt the most stressed in Canada and is facing the highest risk of a downturn," said chief economist Craig Wright.

Other local housing markets were reasonably affordable or at worst, slightly unaffordable, the report showed.

Housing sector observers generally see the overall pace of housing activity, from starts to resales, slowing in the coming months, partly due to tighter mortgage regulations introduced earlier in the year and as pent-up demand gets absorbed.

(Reporting by Ka Yan Ng; editing by Peter Galloway)

OH, CANADA!

Housing market defies expectations

Garry Marr, Financial Post
Aug. 17, 2011

July proved to be a another strong month for Canadian home sales with the Canadian Real Estate Association now predicting 2011 will see an increase in sales as opposed to a previous forecast for a drop.

Actual sales last month were up 12.3% from a year ago while year-to-date sales are 1.6% lower than the same period for 2010.

Prices also continue to have some upward movement, al-beit some of the increase year over year being attributed to the introduction of the HST in British Columbia and Ontario, and tighter mortgage regulations in 2010.

The national average price for homes sold in July 2011 was $361,181 - the lowest level since January - but rep-resented a 9.3% increase from a year ago.

Greg Klump, chief economist at CREA, cautioned not to read too much into the average price statistics.

"Changes in the national average home price are open to being misinterpreted," Mr. Klump said. "They often signify changes in the mix of sales activity across and within local markets, rather than a rising or falling price trend for typical homes in a specific market."

However, the Ottawa-based group, which represents 100 boards across the country, says the scales have now tipped modestly in favour of 2011 outpacing 2010.

CREA is predicting 450,800 sales in 2011, just under a 1% increase from a year ago. The group had been forecasting a decline of 1%. Sales are expected to drop less than 1% in 2012.

Prices in Vancouver continue to affect the country, as they helped push CREA's forecast for the average sale price in 2011 to $363,500, a 7.2% increase from a year ago. This was also an increase from a previous forecast. Next year, prices are expected to be flat.

The group noted longtalked-about increases in interest rates have failed to materialize in the market.

"While there had been some talk of potential interest-rate increases, that hasn't happened," said Gary Morse, president of CREA. "In fact, rates have actually come down, and are now expected to remain low for the remainder of this year and into 2012."

Douglas Porter, deputy chief economist at Bank of Montreal, said the housing market just seems to keep surprising everybody.

"In a world seemingly awash in negative economic surprises in 2011, one positive surprise has been the resiliency of Canada's housing market," said Mr. Porter, adding few analysts were predicting the kind of price increases the market has seen.

"Canadian housing remains surprisingly robust, thanks to still-low interest rates and solid job growth. While the recent financial market turmoil may temporarily weigh on activity, sales should ultimately find support from continued exceptionally low borrowing costs."

Phil Soper, chief executive of Royal LePage Real Estate Services, said his company's recent forecast was for a 2% decline in sales and 3% increase in price for 2011. He doesn't anticipate that changing.

"I think we're going to start to see it's not so much the strength of the market but the weakness last year. The market had run out of steam at this point last year," Mr. Soper said. "I think we are seeing a more normal curve to the market, with the exception of the Vancouver market."

A GOOD BUY IN CALGARY?

Calgary housing among most affordable
By Mario Toneguzzi
Calgary Herald August 23, 2011

Owning a home in Calgary may be expensive for many people but a report suggests housing affordability in the city is among the lowest in the country for major centres.

And with interest rates now expected to remain at a low level, Calgary's affordability will continue to be remain that way, say industry experts.

A report by RBC Economics, released Monday, said Calgary's housing affordability actually deteriorated in the second quarter of this year compared with the previous quarter but affordability in the city is better than the national average for detached bungalows, standard two-storey homes and standard condominiums.

Sano Stante, president of the Calgary Real Estate Board, said prevailing negative economic conditions will restrain any increases in interest rates for awhile.

"Those are increases that we fully expected prior to these events and they've now been abated," said Stante. "That was our biggest risk of deteriorating affordability.

"With an assurance that interest rates are going to stay low for the next 12 months anyway - and there's somewhat of an assurance of that - then it really looks like we're going to lead the nation in affordability especially when we start to get increased employment and in-migration towards the end of this year. That should really lend to a more robust real estate market."

Robert Hogue, senior economist with RBC, said he too expects Calgary's affordability to remain about the same.

"Previous to a few weeks ago we expected higher interest rates would start really putting more and more pressure across the board in Canada including in Calgary on the monthly costs of home ownership," he said. "Now we've pushed everything out to the middle of next year. "

The RBC Housing Affordability Measure, which has been compiled since 1985, shows the proportion of median pre-tax household income that would be required to service the cost of mortgage payments (principal and interest), property taxes and utilities. The higher the measure, the more difficult it is to afford a house. For example, an affordability measure of 50 per cent means that home ownership costs take up 50 per cent of a typical household's pre-tax income.

In the second quarter, Calgary's measures were 37.1 per cent for a detached bungalow, 38.5 per cent for a standard two-storey, and 23.0 per cent for a standard condominium. The measures increased by 0.6 per cent (bungalow), 1.1. per cent (twostorey) and 0.4 per cent (condo).

However, they are lower than a year ago by 3.1 per cent for a bungalow, 2.9 per cent for a two-storey and 1.6 per cent for a condo.

Housing Affordability Q2 2011

Detached bungalow

Legion Avg. price YoY chg. Affordability* Q/Q chg.

Canada $347,600 5.2% 43.3% 1.7%

Alberta $339,500 -2.6% 32.8% 0.7%

Calgary $411,700 -2.0% 37.1% 0.6%

Standard two-storey

Canada $393,100 5.0% 49.3% 1.8%

Alberta $370,300 -1.1% 36.4% 1.3%

Calgary $415,200 -1.6 % 38.5% 1.1%

Standard condominium

Canada $230,000 3.4% 29.2% 0.8%

Alberta $216,200 1.0% 21.3% 0.5%

Calgary $249,000 -1.1% 23.0% 0.4%

*Shows the proportion of median pre-tax household income that would be required to service the cost of mortgage payments (principal and interest), property taxes and utilities. Source: RBC Housing Trends and Affordability report