Housing affordability worsens in Canada: RBC

CTV News, June 22, 2016 - OTTAWA -- The affordability of a home in Vancouver has hit the worst level ever recorded in Canada following an "epic surge" in house prices in the first quarter, according to the Royal Bank.

In a report Wednesday, the bank said its aggregate affordability measure for a home in Vancouver climbed 6.5 percentage points to 87.6 per cent, while the same measure for a single-detached home in the city climbed 9.9 percentage points to a whopping 119.5 per cent.

The measure is the proportion of median pre-tax household income required to pay the mortgage, property taxes and utilities based on the average market price.

"Owning a single-detached home at market price in the Vancouver area has become out of reach for all but just a minority of higher-income households," the Royal Bank (TSX:RY) said in its quarterly examination of housing affordability.

The increase in Vancouver and a smaller gain in Toronto helped drive the national average cost of home ownership higher. Toronto saw the bank's aggregate affordability measure climb 1.1 percentage points to 60.6 per cent and increase 1.2 percentage points to 71.7 per cent for a single-detached house.

Meanwhile, the increases relative to income were modest in most other areas.

Royal Bank said nationally its aggregate affordability measure, which includes single detached houses, condominiums and other types of homes, rose by 0.8 percentage points to 47.1 per cent in the first quarter, the highest level since the second quarter of 2010.

The index for single detached house nationally was 52.0 per cent, up one percentage point.

"Other than in parts of British Columbia and southern Ontario, housing affordability is not a major obstacle to home ownership in Canada," the bank report said.

"There was broad-based deterioration across the country in the first quarter of 2016; however, the extent of it was minimal for the most part and the generally constructive picture remained little changed."

Royal Bank noted that Winnipeg, Regina and Saskatoon saw an improvement in affordability for some or all housing categories in the quarter.

Rising home prices in Vancouver and Toronto have raised concern among policy-makers.

The Bank of Canada has warned that housing prices in those two cities are rising at an unsustainable pace that is beyond local economic fundamentals.

Prime Minister Trudeau has also said the federal government is concerned about the cost of housing in Vancouver, but that Ottawa needs to ensure any action it may take doesn't hurt other markets.

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Renovation spending expected to rise in 2016 as people just can’t afford to move

Financial Post, June 21, 2016 - Housing gridlock — that’s what realtors call it. Affordability issues leave you stuck in your existing home, but looking for a better living space. About the only move left for Canadians demanding a better home has been to renovate the one they have, which has led to record levels of spending on home improvement. A new survey from Canadian Imperial Bank of Commerce out Wednesday suggests that Canadians are now turning their attention to landscaping — a renovation that doesn’t do much for the appreciation of home values.

The findings from the bank might be another clear sign that Canadians are settling into their current houses because of the state of the market, which is increasingly being choked by a lack of affordability.

“The shift in focus from indoors to outdoors is surprising,” said Barry Gollom, vice-president, mortgages and lending, with CIBC.

Between May 19 and 25, 2016, Angus Reid surveyed 2,129 people online about their renovation plans. The top project was basic maintenance, cited by 54 per cent of respondents, down slightly from 55 per cent in 2015. The big jump was in landscaping, with 42 per cent of respondents planning some type of project, up from 25 per cent a year ago.

Gollom said “landscaping, patio and deck,” is a growing phenomenon and might indicate that people have spent so much money inside their house, that they are now turning their attention to the outside.

Separately, Altus Group has noted that renovation spending in 2014 was $20 billion more than was spent on new homes that year. In 2015, Canadians spent $70.1 billion on renos and Altus forecasts that figure to climb to $71.4 billion this year.

The CIBC survey backs that up, with the average renovation project coming in at $13,017, up from the $12,293 average in 2015, although the bank says only 37 per cent of Canadian homeowners plan to renovate this year versus 40 per cent in 2015.

Bathroom renovations were cited by 33 per cent of respondents, down from 40 per cent in 2015. Only 26 per cent plan to update a kitchen in 2016 versus 31 per cent who said they would in 2015.

“I think the shift has gone from seeing renovation as an investment — the return you see from a bathroom or a kitchen tends to be much higher than on landscaping,” said Gollom. “I think there is focus on quality of life versus the return.”

Interestingly enough, renovation spending is highest in struggling Alberta, with the average homeowner planning a project worth an average $22,951, up from $13,520 a year earlier. In British Columbia the average project is expected to drop to $15,522 from $16,639, while in Ontario panelists said their spending would drop to $13,878 from $15,487 a year earlier.

Benjamin Tal, the deputy chief economist with CIBC, says renovation spending has “mostly stabilized” at this point but at a “very high level” he doesn’t expect to decline very soon.

“At first you had a lot of pent up demand from the recession in 2000 and that was behind much of the activity in the first half of the last decade, but in the second half after 2008-2009 you had the beginning of a new trajectory,’ said Tal, adding that the current renovation market is driven by housing prices. “Basically, people are unable to buy what they want.”

The lack of available product has been cited by real estate boards in both Toronto and Vancouver, which have been the driving forces of the housing boom in Canada. In May, detached home prices rose 36.9 per cent from a year earlier in Metro Vancouver to $1,513,800 and in the Greater Toronto Area detached home prices rose 18.9 per cent during the same period to $986,691.

Brad Henderson, chief executive of Sotheby’s International Realty Canada, said he can’t say exactly how directly this housing gridlock is leading to renovation, but it’s part of what is driving home repairs.

“Whilst people are fascinated by the price of homes, more and more people are not selling because, by the time I sell, pay commissions, pay land transfer tax, and go through the hassle of moving I may not be any better off than I am. So, what I’ll do is renovate and just stay where I am,” he says. “As more and more people choose not to put homes on the market it just encourages upward pressure on prices.”

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Saskatoon celebrities say homelessness challenge humbling experience

CBC News Saskatoon, June 20, 2016 - A few people in Saskatoon got to experience a world they've never been forced to experience before — homelessness.

This weekend, ten local celebrities participated in the Sanctum Survivor Homeless Challenge. Sanctum Care Group president Dr. Morris Markentin and musician Jay Semko were two of the people who participated in the challenge. The weekend involved a variety of tasks from sleeping outside to doing laundry.

"We had a brief glimpse into this, and there are people dealing with this reality every day," Semko said.

Both men were given a variety of tasks to complete over the 36-hours. These proved more difficult than they originally thought.

Semko had to try to get an I.D., which turned out to be so difficult, he was never able to get one. He also discovered how difficult it was to get services without a health card. He was unable to see a doctor to be tested for HIV, and he was unable to fully access the Food Bank.

• Markentin had to do his laundry. He was able to use the free laundry service at the Central Urban Métis Federation (CUMFI), but discovered the extra challenge of doing the laundry that was already on his back. CUMFI gave him a sheet to cover up while he did his laundry.
• Markentin said one big challenge was simply travelling from one location to another. He had to pick up his prescription in the Mayfair area of Saskatoon. "Then I had to basically sprint back to get to the food bank before it closed at 4:30 on Friday," he said. He made it with two minutes to spare.
• Different groups were given different locations to sleep. Some got to spend the night at the Salvation Army, but Markentin was told he had to spend the night outside. "We didn't sleep at all, I mean we slept about an hour total."

Both men said they hope they're able to raise awareness through their experiences.

"In my opinion, there's no reason why anybody in our country should be outside sleeping, should be homeless. It really opened my eyes that way," Semko said.

Markentin, a doctor, said it will change how he operates his practice.

"It taught me that being homeless is more than a full time job. As a physician, when I'm seeing patients, if I'm making them wait and take more time, I'm actually interfering with them trying to survive the rest of their day."

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Galleries . Average Canadian house price rose 13% to record $509,460 in May

CBC News, June 15, 2016 - The average price of a Canadian home sold in May was $509,460, a 13 per cent increase in the past year and the highest figure on record.

The strong gains are largely tied to hot markets in Ontario and British Columbia, according to the numbers released Wednesday by the Canadian Real Estate Association.

Stripping those two markets out of the calculations, the average price of a house sold in May declined 0.7 per cent in the past 12 months, and sold for $310,007 in May.

After rising to a record sales volume the previous month, sales volumes fell sharply.

"Sales activity dropped in May from the previous month in about 70 per cent of all markets, led by those in British Columbia and Ontario where the number of homes listed for sale has fallen to multi-year or all-time lows," CREA said.

"There are housing markets where sales continue to reflect a cautious mood among homebuyers and uncertainty about the local economy," CREA president Cliff Iverson said.

As has been the case for more than a year, the realtor group singled out hot markets in Toronto and Vancouver for skewing the numbers higher.

The drop in sales and new listings in those cities are of grave concern for policymakers, because they could be a sign that high prices are convincing would-be buyers not to bother, and would-be sellers to stay where they are since they can't afford to move up after they sell.

The numbers for Vancouver are eye popping. According to CREA's house price index, housing costs in Greater Vancouver increased 29.7 per cent in the year to May, and in nearby Fraser Valley they were up 31.7 per cent.

Both those figures are more than 17 times Canada's current inflation rate of 1.7 per cent.

'The warnings are piling higher on the Canadian housing market.'- Bank of Montreal

"The warnings are piling higher on the Canadian housing market," is how Bank of Montreal economists Doug Porter and Robert Kavcic put it in a separate report on Canada's housing market on Wednesday.

"While record low borrowing costs are the most obvious factor behind lofty home prices, the fact that the surge in prices is so heavily concentrated in just two cities (and their environs) means that there are other important factors at play as well," BMO said.

Among the factors the bank cites are foreign buyers, who many watchers claim are driving prices out of reach. While BMO says more hard data is needed on the topic, the bank makes it clear that foreign money is a factor.

"Excess global savings sloshing around have driven many asset prices rocketing higher in recent years, and now that wave has washed upon Canada's biggest cities."

Moreover, recent changes to downpayment rules requiring 10 per cent minimum up front will make it harder for locals to buy, while doing little to curb foreign buyers, the bank warns.

The new rules "will simply crowd out the domestic buyer and leave the field wider open for foreign capital inflows."

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