Home Capital’s Troubles

As you may have heard, Home Capital Group is in a bit of pickle (or jam!) and has had to find a 2 billion dollar line of credit (yes a billion with a big B) to fulfil their mortgage commitments. You may better know Home Capital Group by it’s subsidiary, Home Trust, which is one of the largest lending trust companies in Canada.

To refresh your mind, back in 2015 due to some questionable lending practices, Home Capital ran into issues with the regulatory bodies. As a result, Home Capital suspended relationships with dozens of brokers after an external source tipped the company off that the brokers were falsifying borrower incomes.Their CEO was let go earlier this year too. The company witnessed more problems when the Ontario Securities Commission alleged that several company executives broke securities laws and misled shareholders in their handling of a scandal involving falsified documentation for a bunch of mortgages two years ago. All of these unsettling news has led to investors feeling uneasy and therefore pulling their money out of Home Capital’s high interest savings account which was used to fund mortgages. So Home Capital’s stock took a nose dive.

Let’s be clear. People are not defaulting on their mortgages. The Banking system is not going down. This is not the end of the world in my opinion. What you may hear through the grapevine may  not be all accurate. This issue with Home Capital is a classic case of cause and effect where now a Lender cannot fund mortgages due to insufficient funds caused by the Lender’s alleged malpractices. This matter however is now somewhat fixed by Home Capital borrowing some very expensive money from Healthcare of Ontario Pension Plan.

For the next few months we may see higher interest rates for borrowing money from Trust companies. They may also up their down payment criteria  just to be cautious (or they may not). Will the major Banks tighten their lending criteria? I can’t imagine so but let’s wait and see. I say this will all be history in a few months.

A Knee Jerk Reaction!

I am sure by now you have heard the news. For months we’ve been anticipating changes at the Ontario level to cool the hot Toronto real estate market. Now, as part of the Fair Housing Plan, some 16 measures were announced to help people find more affordable homes. These measures really have no meat and potatoes and will not address the affordability crisis. You can read more about them here

Will this plan crash the market? Will prices go down drastically? Will it be the doom and gloom of Toronto Real Estate market we’ve been hearing for years? The answer in my humble opinion is a big no. It may spook some buyers, it may press the pause button on some buyers for a while but that’s about it

Few things to point out:

Non Resident Speculation Tax (NRST)
Going forward, a Non-Resident Speculation Tax (NRST) of 15% will be applied to home purchases by non-Canadian citizens, non-permanent residents and non-Canadian corporations.  Now, 
Skilled workers in Ontario Immigrant Nominee Program and Refugees, anyone obtaining permanent residency within 4 years after purchasing, and International students enrolled full time for a minimum of 2 years you are eligible for a NRST rebate. The NRST  does not apply to commercial properties. Are non-residents buying a large portion of the Toronto Real Estate market? Nope, this is a small percentage of the market.

Rent Control For All Buildings
This is irrespective of construction date. Currently, buildings built after 1991 aren’t subject to a maximum annual rent increase. Rent increases for all buildings will be set by the province and capped at 2.5%. They also announced a standardized lease document for all tenants and more rules for landlords.  In my opinion, landlords can still increase their rent beyond the allowable 2.5%. Just more work … but doable!

Regulating Assignments
As assignment sale is when a buyer of a pre-construction condo or house, assigns their agreement of purchase and sale to another buyer before occupancy or closing. This is usually for a profit. Not much clarity on this yet, but most probably the new buyer now has to pay land transfer tax on the full new purchase price amount and the original buyer selling his or her assignment has to claim capital tax gains on their profit. More details to come on this later.

Developer Incentive To Build Rental
The government will be providing tax breaks to developers to encourage them to  build more rentals. More data to come later.

Vacant Property Tax
Not much data on this yet. 

Developing Existing Provincially Owned Lands
This could be used for affordable and rental housing development.

etc …

In summary, the Ontario government wants to be seen as having done something in order to gain more popularity and hence more votes in near future. What they have introduced is really not an affordability solution to the housing crisis. Let’s wait and see how this plays out. 

Provincial Government’s “Fair Housing Plan”

Earlier today the Provincial Government introduced the “Fair Housing Plan” which we have attached. In this Plan, the government has not really addressed the real challenge we all have been facing, which is supply. What was addressed was the issue of collecting their fair share of taxes and making a political statement.

The Highlights of the Provincial Plan:

Non Resident Speculation Tax for an individual who is not a Canadian Citizen or permanent resident of Canada – if you fall under this category, you will be taxed 15% in addition to the now current Land Transfer Tax. This tax is not retroactive but applies to any transaction going forward. This measure will impact a very small group of buyers within our industry and will have very little long term impact on our market.

It is important to realize that this speculation tax only applies to residential units from one to six units – excludes commercial and agricultural land.

Actions to Protect Renters:

The government will introduce legislation to cap any rental increase at the rate of 1.5% + inflation. This may impact future investors looking to get into the residential rental investment market.

Vacancy Tax:

Provincial government will allow municipalities to impose a vacancy property tax on residential units. The intention of this Vacancy Tax would be to increase resale supply and to add to the rental pool of housing stock – only time will tell.

The Provincial Government has indicated their concern with the practice of contract assignments. Look for the government to implement plans upcoming to deal with tax avoidance through Canada Revenue Agency.

The Provincial Government has indicated their willingness to work with the Real Estate Industry to ensure fair representation for consumers. We at RE/MAX Hallmark have already introduced policy directives concerning “double ending” and fair representation at the offer table and encourages this measure by the government.

For additional information please CLICK HERE

For questions, Please contact me.

Crazy Market!

Here’s a great article by my good colleague Glenn McQueenie:

Why does the media always get our industry wrong? I watch the news, read newspapers and stay up on current events. But now I am getting skeptical about any news I consume…. Whenever anything is written about the real estate market, I just shake my head, and say ” how can they get it so wrong?”

With 27 1/2 years of helping great families find a property, and now with 2 brokerages over 360 agents, who happily help thousands of people buy or sell a home, here are my two cents…

The Toronto market is being driven by these major factors:

The first factor is restricted supply.

1) 11 years ago, the Liberal government froze development on 1.4 million acres, across 325 km of land from the Niagara River through Hamilton( Golden Horseshoe area), all across the north of the GTA and over to Lake Scugog and Rice lake, under the Greenbelt Act 2005. Effectively creating undevelopable land or a “lake” that I will call “Lake Greenbelt”. This had the effect of creating an Island called ” GTA Island”, and like Manhattan in New York City, if you cant afford to buy there, you will commute 1-2 hours to get to the “island”.

The second factor is rapid population growth that increases demand.

2) The population of G.T.A and surrounding area has grown from 3.7 million people in 1986, to 5.5 Million in 2005,6.3 million now,and will be 7.3 million people in 2021…and 9.1 million in 2036!!

3) If you remember taking an economics course, you will recall a concept called Supply and Demand. If there is an increase in demand, there must either be a price or quantity adjustment. Right now, we have no capacity to increase the quantity of land available in G.T.A, and as a result land prices have soared for building lots and condo development sites.

4) Record low interest rates. A $500,000 mortgage carries for $2,117/mo at today’s interest rate. The same mortgage at 10% interest is $4,472/mo.
A $1,000,000 mortgage at today’s rates carries for $4,234/mo!
The last time we had 10% interest rates was 20 years ago, and they have been falling ever since. In the last 20 years, there has only been 2 quarters where prices dropped in Toronto…see the correlation between prices and interest rates?

5) Increased “revenue tools” by Government. These are not Revenue tools, they are flat out taxes and development fees. Lets call them what they are. They can add to an extra 100-200k to the price of a home through fees, taxes, land transfer tax, development charges.

6) Labour and material costs. They keep going up and will never come down.

7) International movement of capital. Canada is seen as a safe haven for money, because we have a stable government, clear rules and we are governed by the rule of law and not by whim…
There has been a huge influx of capital from China, Russia, Iran and host of other countries.
From mainland China, over 1 trillion dollars has left that country in the past 12 months, and I am told we have a few more years of this( plus their currency has gained a lot against the Canadian dollar) transfer.

8) Increased Immigration. Now over 300,000 people move to our country every year, and there is a line up of millions of other people who would love to come to our great country.

What factors are not causing prices to go up?

It’s not the Real Estate Agents!

With the exception of some of the shady practices that some agents are doing in Vancouver( they should be booted out of the business and never allowed to trade again), we do not cause prices to go up. We have a legal obligation to get the most money for the Seller when we list their property. We explain that you can price it three ways:
1) At Market value
2) Above market value-to leave room to negotiate
3) Below market value to get multiple offers.

We discuss the pros and cons of each approach and they decide. Guess what? Most of them decide to price it below the market in order to get more bids and sell for a high price. They look around their neighbourhood and see that the approach works!!
Which is exactly what I would do in today’s market… because it works for Sellers.

For our agents who work with Buyers, it is an incredibly stressful market to be in, for both them and the Buyer. We have entered into crazy time with prices rising 16% so far this year. One of our agents has presented 42 different offers for 7 clients and has yet to get one accepted.
Can you see why Buyers and agents get frustrated??( Please think about this next time you think about how easy it is in Real estate and want to get you license. In fact, at every party I go to, people tell me they are changing careers, and either going into real estate, personal training or Dog Walking…choose dog walking or poop-scooping, they are very profitable businesses…we have too many agents, there is no need for more.)

In conclusion, there is not one or two reasons why this market is going crazy. It is a multitude of factors, and the last thing we need is for the governments to increase more fees and taxes, or impose some silly regulations on the marketplace. It’s called an economic cycle, and what goes up above the historic mean, will eventually adjust back to the long term 4% appreciation that Real Estate has had for centuries.
I have already seen people starting to cool off and not buy a home, because they simply cant afford to move up to the home they want. Just stay put, and the market will come back around to you.

Glenn is the Broker/Operating Principal of 2 Keller Williams Brokerages in Toronto. Thank you Glenn.


Purchasers Undeterred by Rising Values

Please find below a great press release regarding detached homeownership released today by RE/MAX Hallmark:

Detached homeownership at  ‘affordable’ price point, says RE/MAX Hallmark

 Bank of Canada move to lower interest rates expected to accelerate already heated market

Toronto, ON (July 21, 2015) – Affordability continued to be a key driver in the search for detached homes, despite double-digit increases in average price in the 416 area code and York Region in the first six months of 2015, according to RE/MAX Hallmark Realty Ltd., one of the Greater Toronto Area’s (GTA) largest real estate franchises.

RE/MAX Hallmark examined sales and price appreciation in 35 neighbourhoods in the Toronto Real Estate Board’s (TREB) 416 area code and nine communities in York Region and found that the average price of detached homes escalated 10 per cent or more in 63 per cent (22) of 416 neighbourhoods and 67 per cent (six) of York Region districts year-to-date 2015, compared to the same period one year ago.

“Scarcity of product, coupled with low interest rates, served to drive prices of detached homes to new heights during the first half of the year,” says Ken McLachlan, Broker-Owner, RE/MAX Hallmark Realty Ltd. “Virtually all single-detached homes in TREB’s central core have surpassed the million dollar mark, with the average ranging from just over a million dollars in Armour Heights, Bathurst Manor (C06) to close to $3 million in York Mills, Bridle Path, Hogg’s Hollow (C12). Yet, purchasers continue to march forward, adjusting expectations to ever-changing financial realities, broadening their search to include areas bordering hot pockets and beyond.”

Sales figures surged in a number of communities in the 416 and York Region as the trend gained traction in 2015.  Thirteen out of 35 neighbourhoods in the 416 experienced a substantial increase in detached home sales, including Armour Heights and the Bathurst Manor (C06) where the number of homes sold was up 53.8 per cent (123 vs. 80).  For those purchasers intent on remaining within the city’s central core, detached properties north of the 401 offered the “best bang for their buck” with average price sitting at a year-to-date average of $1,010,711 – the lowest in the central core.  Sales of detached homes in High Park, Swansea, Roncesvalles and South Parkdale (W01) jumped 37.5 per cent (72 to 99) in 2015, with heated demand pushing the average price of a detached home over the $1.2 million threshold. York Region also experienced a significant uptick, with detached sales in Aurora, King, Newmarket, and Whitchurch-Stouffville up over 25 per cent compared to one year earlier.

Home buying activity was strongest in York Region, where overall detached sales were up 18.2 per cent in the first six months of 2015, rising from 5,338 one year ago to 6,310 units. The city’s West End experienced a nine per cent upswing, with the number of homes sold climbing to 2,068 units, up from the 1,897 posted one year ago.  Demand in the central core drove sales up to 2,252 units, an 8.2 per cent increase over the 2,081 homes reported sold in the first six months of 2014.  Detached sales rose a nominal 1.5 per cent to 2,358 units in the city’s East End where tight inventory levels during the first six months of the year served to limit activity.

Some of the city’s most coveted  –and affordable – neighbourhoods for detached housing saw a decline in sales as listings dried up during the first and second quarters of 2015.  Perhaps the best example was noted in the East End, where sales in Riverdale, Leslieville, Danforth (E01), Birchcliffe, Cliffside (E06), Milliken, Agincourt North, Agincourt South (E07), and Rouge, Malvern (E11) declined 9.3, 12.1, 6.4 and 14.3 per cent respectively.  Not surprisingly, these areas had an average price of under $1 million, ranging from $621,912 in Rouge, Malvern to $960,837 in Riverdale, Leslieville, Danforth. Competition has been intense in recent months, no more so than in Riverdale, Leslieville and the Danforth where days on market fell to 10 in June and the sales-to-list price ratio hit 110 per cent.

The July 15th Bank of Canada move to cut interest rates a quarter of a percentage point to .5 per cent is expected to further accelerate home buying activity.

“A five-year fixed term now hovers at 2.69 per cent at a chartered bank, even less at a credit union or trust company,” says McLachlan.  “There’s no telling where mortgage rates will drop to in the weeks and months ahead.  The stimulation will create even greater urgency in an already heated housing market.”

The most serious price appreciation in the 416 during the first half of the year occurred in neighbourhoods priced under $1 million. Birchcliffe, Cliffside (E06) led the city with a 25.4 per cent increase in values, bringing the average to $724,187 year-to-date June, up from $577,567 one year ago. The Scarborough community — nestled between the popular Beach area and the Scarborough Bluffs — has experienced a serious upswing in demand due to affordability and close proximity to Toronto’s downtown core. Cliffcrest, Scarborough Village, Guildwood (E08) posted a gain of 23.9 per cent — with average price hovering at $754,437 — an increase of close to $150,000 over the June 2014 year-to-date average of $609,047.  The Rouge, Malvern area (E11) experienced a 19.2 per cent increase in price, rising to $621,912 from $521,643 one year earlier.

Overall, the East End and York Region posted the greatest increases in average detached housing values at 15.5 and 15 per cent respectively during the first six months of 2015, with prices rising to $727,221 and $934,207 respectively.  The Central Core saw a 12.1 per cent increase to $1,616,682 in average price year-to-date 2015, while values in the West End appreciated 10.3 per cent to $822,539 during the same period.

RE/MAX Hallmark Realty Ltd. is one of the largest real estate franchises in Ontario, with more than 700 sales associates operating out of 10 offices throughout the Greater Toronto Area, as well as the Muskoka Region. The team specializes in all aspects of real estate, including residential, recreational and commercial properties.  RE/MAX Hallmark is firmly entrenched in the communities it serves through its involvement in Children’s Miracle Network and grassroots fundraising initiatives. Visit the RE/MAX Hallmark website at: www.torontohomesandcondos.com


Platinum Club Award!

RE/MAX Platinum Club Award

Receiving the RE/MAX Platinum Club Award last night.

A HUGE thank you to all my wonderful clients for your continuous support, trust, and your confidence in me helping you reach your real estate goals.

Looking forward to earning more of your business.


RE/MAX Platinum Award!

Platinum_ClubWhen it comes to the successful buying or selling of your home or business, it makes a great deal of difference who you choose to represent you. RE/MAX International gives achievement awards to active members based upon their performance in the purchase of and resale of real estate.

Dear clients and friends, a HUGE thank you for your continued support and for the confidence that you have placed in me. It is with your support that I have been honored to be awarded the RE/MAX Platinum Award for my sales numbers in 2013.

We work as one team with a common purpose – to provide best-in-class service to our clients. You are at the center of everything we do and we will work tirelessly towards ensuring that we meet and exceed your expectations in a fair and responsible way. There are still several months left to the year’s end, and we look forward to exceeding our own goals.

Thank you for your trust, and we look forward to earning more of your business.

Kory Gorgani, and Team


Low Rates … Over Soon?

Bond-MarketAfter almost 5 years of historically low rates, we are beginning to see some upward movement in the cost of money.

The Bond yields surged to 1.90 this morning, the biggest 4-day up move in the 5yr yield since 2009. The fixed rates will climb higher again in the next few days.  So, if you or someone you know are house hunting or thinking of refinancing and do not currently have a rate hold, contact me. I work with many trusted Mortgage Brokers and can have a low rate secured for you for the next 120 days.

Thank you.

Interview with Enhome

Here’s an interview Estar Media Group’s Enhome magazine did with me on upcoming Condominiums in our city. I hope you can read it it :-).  Enjoy!

Interview with The Epoch Times

Here’s an interview The Epoch Times did with me in August on the Condo market in the town of Richmond Hill.  Hope you can read Chinese.  Enjoy.