Toronto Income Property Newsletter – November 2016
I’d like to thank all of you who regularly read my monthly newsletters and take the time to provide me with feedback. I have been offering my thoughts on the Toronto income property market for many years now and it is nice to know that many of you are still interested in what I have to say. Admittedly, with a hot Sellers’ market in Toronto that has been going on for far too long now, it seems that there is not a lot new to write about, but I’m glad that many landlords (and potential landlords) still find my newsletter useful.
If you would like to get an idea of how the income property has been faring, please click here to see some October sales in and around the GTA.
We’re getting close to the end of the year. Where does the time go? For the first time TFC may be going to the MLS conference finals – and maybe even further. I wish the Reds every success in their upcoming campaign.
New Mortgage Rules Intended to Slow Down Market
Last month new changes to mortgage regulations were announced by Canadian finance minister Bill Morneau. These changes apply to CMHC insured mortgages only - borrowers with less than a 20% down payment on purchases. The two biggest adjustments were the maximum amortization period dropping to 25 years and all mortgages having to qualify based on a benchmark rate set by the Bank of Canada (currently 4.64% - effectively double the current lending rates). This would mean people will qualify for much lower mortgage amounts than they would have previously, thereby forcing them to pay less. These changes definitely took the industry by surprise and the entire industry as a whole was left trying to determine how these changes would be implemented and how they would be responded to by lenders.
Some non-bank lenders (excluding credit unions), insure pretty most of their mortgages anyway, regardless of how much you have for a down payment. Often the lender covers the premium in these cases. This would mean that all non-bank lenders would have to follow these new regulations on all of their mortgages. Some non-bank lenders who will still be maintaining the previous mortgage regulations on conventional mortgages (those with 20% or greater down payment). This means, 30 year amortization and qualifying based on the contract rate (the rate you are paying) will still be available through some non-bank lenders. These lenders will no longer be insuring these mortgages, which has absolutely no effect on you as a borrower. Major lenders typically do not insure mortgages with 20% or a greater deposit.
Is the 15% Foreign Buyers’ Tax in BC Working?
It has been a few months now since BC adopted a 15% tax on all real estate purchases made by foreigners. Early reports suggest that this tax is having its intended effect as the market has indeed started to slow down.
The plunge in real estate sales and deceleration in price increases in the Vancouver area last month were exactly what the government was trying to manoeuvre, and Premier Christy Clark says there will be no changes to the foreign-buyers tax. Clark told reporters on Tuesday that her government will not reconsider the 15-per-cent tax that is intended to calm what she called a “distorted market.” Many foreigners were treating real estate as a commodity (to be bought at all costs) rather than a place to live which was making the real estate sector somewhat over-inflated.
The Real Estate Board of Greater Vancouver announced last Friday that September sales were down by 26 per cent compared with last year, signalling a return to more typical levels. The largest drop in property sales last month was among detached homes, with a decrease of 44.5 per cent.
There has been rumblings of a similar tax coming into effect here in Toronto but it seems that the decision-makers are looking closely at the Vancouver situation before they take the plunge.