October 30, 2012
No exemptions - Company workers need to adhere to strata bylaws
Our company owns three corporate suites in a highrise building in Vancouver. We have used them for housing for our employees who are transferred to the city for short-term periods of three months to a year.
The strata council has notified us that we have to apply to be able to rent them in accordance with the strata bylaws and that we must provide a Form K for tenants.
When we purchased the units, we were told by the realtor that as a corporate owner, the rental bylaws did not apply to our units. Is that not the case? We cannot seem to get a straightforward answer from anyone.
John, ACL Industries
Employees of a company, residing in a strata lot, are tenants and not owners, and as a result, the strata bylaws do apply.
There are no special exemptions for corporate owners of residential strata lots, other than those that apply to all owners under the legislation or the strata corporation's bylaws.
The Strata Property Act and Regulations provide for three possible exemptions if a strata corporation adopts a bylaw that limits the number of rentals or prohibits rentals.
1. Family members, as defined by the regulations as children or parents of an owner or owner's spouse; 2. Hardship rental application exemptions; and 3. Exemptions created by an owner/developer's rental disclosure statement (RDS).
Family rentals would be a complicatedly and unlikely argument and hardship would require a specific application for an exemption. The likely exemption would be, if the owner/ developer filed an RDS that applies to your strata lots.
The conditions are different depending on when the statement was filed. Rental disclosure statements filed before Jan. 1, 2010, apply to the first purchaser for the period of time prescribed on the form, and rental disclosure exemptions filed from Jan. 1, 2010 forward apply to the identified strata lots until the date of expiry on the form.
When your strata corporation was created, and if you were the first purchaser are factors which will determine if your company is exempt from the bylaws.
If an RDS exists, the strata corporation should be able to provide you with a copy, or you may contact the office of the Superintendent of Real Estate to obtain a copy.
Even if you are exempt, anyone renting their strata lots must still provide a copy of a Form K, Tenant's Responsibilities, as required by section 146 of the Act.
One other option to check is the registry of rentals. Family, hardship, and RDS exemptions are not included in the count of strata lots being rented, for the purpose of their application to rental bylaws.
They are simply added to the total number of units being rented on a Form B Information Certificate. This requires the strata corporation to maintain active inventories of strata lots being rented, and whether they are captured by the rental bylaw or not, for the purpose of applying the bylaw.
The strata corporation must disclose, on the request of an owner or tenant, a list of names of tenants.
This would obviously have to include whether the strata lot is exempt or not, for the purpose of applying a rental bylaw.
October 29, 2012
Don't fret or freak out, says homes veteran
Peter Simpson wants to offer reassurance to new Lower Mainland homeowners worried about the shrinking value of their houses.
Don't be dazzled or depressed by price changes. They go down, then they recover and rise over time, he says.
Simpson has seen more than a few housing cycles in his 24 years running Canada's two largest home builders' associations in Vancouver and Toronto.
Simpson, 68, retires Wednesday as CEO of the Greater Vancouver Home Builders' Association, the country's second largest. The Vancouver group's membership has grown to 750 from 250 when he started 19 years ago.
The Vancouver association CEO says it's natural for first-time owners to see the latest real-estate statistics and fret about shifting values.
In his early 20s, Simpson sold his Corvette convertible to help scrape together a $10,000 down payment on a $38,500 house in the Toronto suburb of Scarborough. He was earning $138 a week as a compositor at The Toronto Telegram newspaper.
"I woke up for three nights in a cold sweat wondering what the heck I had done," he says. "It worked out. It always does work out. The sun comes up the next day."
Greater Vancouver home prices will likely fall by an average of 5.9 per cent this year to $734,000, the B.C. Real Estate Association says in its latest forecast. The average price should drop by another 1.9 per cent next year.
In the Fraser Valley, prices are expected to drop 3.1 per cent this year and eke out a 0.2-per-cent increase next year, the association predicts.
Simpson believes people only hurt themselves if they become obsessed with tracking week-by-week house price changes.
"They should not consider their home and its value as a pork belly future," he says. "That causes a lot of people angst.
"Live in it, enjoy it and if you have to move somewhere else, sell it and move on."
If you must worry about something, worry about the resistance from some people to letting their neighbourhoods evolve into a mix of single and multi-family housing, Simpson says.
Densification is the key to providing affordable housing choices as the Vancouver region grows, he says.
"We have to start building more high-density housing along arterials and even up side streets in existing neighbourhoods," he says.
Single-family homeowners who oppose multi-family housing in their neighbourhood should ask themselves two questions, he says: Where will their children live who can't afford their neighbourhood?
And where will aging homeowners go when they can't climb the stairs of their current house but want to continue living nearby?
"People who want to keep their neighbourhoods exactly as they are should be careful what they wish for," he says. "They may not be able to live in their house as long as they anticipate."
Affordability, of course, is a challenge that's not unique to Vancouver. Simpson's youngest daughter, who lives in Toronto, has told him she doesn't expect to ever be able to afford a house there. "That saddens me," he says.
When Simpson says homeowners should be glad they have a roof over their heads he means it.
In a benign irony, this voice of the building sector invests a lot of time serving on committees to help people at the other end of the spectrum - the homeless.
Simpson's younger brother lived on Toronto's streets and in its flop houses for 30 years before his death in 2009.
"It's a huge challenge we all face," he says. "The challenge is not just the homeless but the people who are at risk of homelessness."
By Paul Luke
October 26, 2012
Victoria leads housing price decline
Home prices dipped in September from August and year-over-year price gains slowed for a 10th straight month in another sign that Canada's housing market is cooling, the Teranet-National Bank Composite House Price Index showed on Wednesday.
The report showed prices dropped in September from August in six of the 11 metropolitan markets surveyed, led by a 1.3-per-cent drop in Victoria and a 1.2-per-cent drop in Vancouver. Vancouver, which had the hottest market last year, is now rated a buyer's market, according to the Real Estate Board of Greater Vancouver.
Year-on-year prices dropped 2.6 per cent in Victoria and 1.4 per cent in Vancouver, but were higher in all of the other markets. Toronto prices were 7.8 per cent higher than a year earlier, while prices were up 8 per cent in Halifax, 6.9 per cent in Hamilton, 6.3 per cent in Winnipeg, 3.8 per cent in Montreal and Quebec City, 2.5 per cent in Ottawa, and 2.2 per cent in Calgary and Edmonton.
Nationally, the index, which measures price changes for repeat sales of single-family homes, showed overall prices fell 0.4 per cent in September from a month earlier, the third September drop over the past 13 years.
The index was up 3.6 per cent from a year earlier, for a 10th consecutive month of deceleration in 12-month inflation.
The index tracks repeat sale prices, so properties with at least two sales are required in the calculations.
It lags other home resale data by about six weeks.
October 25, 2012
10% drop for 2013: expert
For Sale signs provide a barometer for current real estate sales on the west side of Vancouver. The average home price could drop to $720,000 next year, according to the B.C. Real Estate Association.
That's the view of University of B.C. real-estate economist Tsur Somerville, who was asked to respond to new market forecasts released by the B.C. Real Estate Association.
On Tuesday, BCREA chief economist Cameron Muir said tighter mortgage rules implemented by Ottawa this summer triggered a 20.5-per-cent drop in Vancouver home sales, in a market that was already softening.
The plunge in sales will cause a six-percent price decline in Vancouver's average home price, Muir said, to $734,000.
The association sees sales rebounding by 13.7 per cent in 2013, but predicts prices will slide by another two per cent, to $720,000.
But these declines should be seen in the context of unrealistic gains in 2011, Muir said, when Vancouver's average home price surged by 15.4 per cent, to $780,000.
Realtors say that last year wealthy Chinese buyers drove prices in Richmond, West Vancouver and Vancouver's west side to heights that skewed regional aver-ages upwards, but the reverse has happened in 2012, as these markets deflate and pull regional averages lower.
Right now, buyers seem content to sit on the sidelines in Vancouver, but people expecting to win massive discounts a few years down the road will be disappointed, Muir says.
"We don't see a recession on the horizon, and we don't see interest rates going up any time soon, so what kind of financial calamity is going to happen in Vancouver to get people to sell for 75 cents on the dollar?" Muir asked.
Employment is tepid but stable in B.C., so it would take an unlikely "external macroeconomic" shock to cause a market crash in Vancouver, BCREA economists believe.
Muir acknowledged, but discounted, potential dangers put forward by more pessimistic analysts, including a severe "double-dip" recession in the U.S., which is politically deadlocked due to a massive debt load, a breakup of the economically-depressed European Union, or an accelerated decline in China's economy.
In an interview, Somerville said Vancouver's market is definitely weakening, but he expects prices to be more or less flat in 2014.
"If over the next year prices fell by 10 per cent I wouldn't be shocked, but I think [prices] would rebound," Somerville said.
"China slowing down dramatically and causing dropping commodity prices would be dramatic for B.C. But I don't see anything out there right now, to push us into major price declines."
At the same time, the gaudy gains that Vancouver's real-estate market has enjoyed may be a thing of the past.
"I heard a great anecdote from a realtor on Vancouver's west side," Somerville said.
"During the boom, the sign of victory for people from overseas was winning bidding wars. But now, it's saying you are getting a good price."
October 22, 2012
The Pro's and Con's of different types of Home Heating Systems
Your home may have one of several types of heating systems. They can range from blowing hot air through ductwork to piping hot water through your floor.
Whatever type of heating system you have, it will have advantages and disadvantages. So it's worth a quick review of the most popular types of home heating systems, how they work, and their pros and cons.
Let's review the following systems:
- Forced Air
- Radiant Heat
- Hydronic (Hot Water Baseboard)
- Steam Radiant
Forced Air Heating and Cooling System
Forced Air System
This system is by far the most common type of home heating and cooling system.
- Air heated in a furnace
- Air distributed from furnace through ductwork and into room by registers
- Furnaces may heat air using various fuel sources such as natural gas, propane, oil or electricity
- Only distribution method that can used for cooling
- Air may be filtered
- Air may be humidified
- Air may be dehumidified
- Furnace can attain highest AFUE
- Requires ductwork and takes space in walls
- Furnace fan can often be heard
- Moving air can distribute allergens
- Air requires filtration and regular maintenance.
Radiant Heating System
This system is known to provide the most natural and comfortable heat in a home. It can come in a number of forms, from a pot belly stove to in-floor hot water tubing. It works through the process of radiation or direct transfer of heat from a hot to a cold surface.
- Most commonly provided via hot water tubing embedded in the floor or directly below the floor surface
- Radiant panels may be used in ceilings
- Heating stoves
- In-floor systems use hot water heated by a boiler
- Boiler may be fueled by natural gas, propane, oil or electricity
- Heating stoves may use wood or coal
- Comfortable, even heat
- Boilers can be energy efficient
- Slow heating up cycle since surrounding materials must warm
- Expensive installed cost
- Difficult access to hidden piping if maintenance problems emerge.
- Air conditioning requires a separate ductwork distribution and cooling system
Hydronic (Hot Water Baseboard)
Hot Water Baseboard System
Similar to radiant heat, this system uses hot water heated by a boiler to heat a space by a combination of radiation and convection.
- Hot water heated by boiler and piped to "fin-tube" baseboard units mounted along walls. The fins increase the surface area of heat dissipation making the unit more efficient.
- Air is distributed by convection as air rises and is heated by the baseboard unit.
- Boiler may be fueled by natural gas, propane, oil or electricity
- Energy efficient
- Close temperature control
- Baseboard radiation / convection units must remain unobstructed and can provide challenges in furniture placement and drape design.
- Slow temperature increase.
- Air conditioning requires a separate ductwork distribution and cooling system.
Steam Radiant Heating System
Steam radiators are nostalgic and not often used today. They are characterized by cast iron upright radiators radiating heat with steam.
Steam systems come in two varieties, one-pipe and two-pipe systems. With one-pipe systems the water and steam travel in the same pipe but in opposite directions. In two-pipe systems steam flows in one pipe and water condensate returns in another set of pipes.
- Heat is distributed with steam piping and radiator units
- Steam boiler may be fueled by natural gas, propane, oil or electricity
- Efficient and warms spaces quickly
- Radiant heat is comfortable
- Old hot water system radiators can now be replaced with smaller convection units or vertical wall panel radiators
- Radiators can be unsightly
- Radiator locations may limit furniture placement and window coverings
- Air conditioning requires a separate ductwork distribution and cooling system
A boiler is the heating plant used to create hot water or steam for hydronic baseboard, radiant heat or steam radiator heating systems. Boilers can use a variety of fuels including natural gas, propane, oil or electricity.
Steam boilers are more complex than hot water boilers and have special gauge glass, pressure gauges, blow off valves and automatic feeds.
Hot water boilers can be small, compact, energy efficient and low maintenance
The newest home heating (and cooling) technology is called a Geothermal Heat Pump (GHP). Heat pumps work like a refrigerator that can run in reverse. Heat is taken from one source and deposited in another location. With ground loop geothermal systems, heat is taken from or deposited to the earth by use of a ground loop pipe.
The EPA states that a Geothermal Heat Pump can save 30 to 70 percent on home heating and 20 to 50 percent on home cooling costs over conventional systems. But these systems are not cheap.
An excellent overview of Geothermal Heat Pumps including cost, manufacturers and details on this technology can be found at Toolbase.org Geothermal Heat Pumps.
October 18, 2012
Choosing the Best Materials to Roof Your Home
Replacing a home’s roofing is an experience shared by many Canadians. Damp spots on attic insulation and crumbling shingles are indicators that roofing needs attention. Broken roof tiles must be replaced to prevent water damage. There are many types of roofing from which to choose, and this article will help you select the best type for your house and pocketbook.
The earliest known roof tiles (from China and the Middle East) date back to about 10,000 B.C. These tiles were made of clay, and their use subsequently spread throughout Asia and to Europe. The buildings of the ancient Egyptians, Babylonians, Greeks, and Romans were roofed with clay tiles. Europeans brought clay tiles to the New World in the latter 1500’s. Massive fires in London in 1666 and Boston in 1679 resulted in municipal requirements for clay tiles because of their fireproof quality.
Wood shingles were often used outside of cities. Compared to clay roof tiles, wood shingles were less expensive, and because of their lighter weight, they required less roof framing. In many countries during the 19th century, slate, copper, iron, tin-plate, zinc, or galvanized iron were used. Most metal roofing weighed a fraction of clay tile and costs significantly less to install. Many homeowners today choose wood shingles or metal roofing for the same reasons.
When your roofing needs to be replaced, there are a number of factors to keep in mind, including budget, location, type of roof, framing, and style and colour. Let’s take a closer look at each of these factors:
You may love the Spanish look of clay roof tiles, but their cost may be beyond your budget. The expense of roofing is comprised of two elements: installation cost and lifetime cost. The installation cost of composition (i.e. asphalt) shingles tends to be the least of all types of roofing, but they last only 10 to 30 years, depending on the grade/quality. Clay tiles cost much more to install, but have minimal lifetime costs since they last for 50 years or more. Obtaining quotes from roofing contractors will give you a good idea of what different types of roofing cost. Establish a budget that works for you.
The roof of a house in Vancouver will be exposed to much more rain and less snow than a home in Calgary, Toronto, Montreal, etc. You need to consider the type of weather to which your roof is subjected when selecting roofing. For example, clay and slate tiles can be damaged by hail; metal roofing works well for many vacation homes in ski country. Talk with a contractor to find out the types of roofing that would be appropriate for your house, given its location and the climate in your area.
Type of roof
House roofs are either flat or pitched. Materials for flat roofs include tar and gravel, EPDM rubber roofing, metal, modified bitumen roofing, roll roofing, and PVC membrane. For pitched roofs, there are composition and dimensional shingles, cedar shakes, tile, metal, slate, and synthetic materials. Each type of roofing is guaranteed for a certain number of years. Roofing contractors can provide you with warranty information for the different types of roofing, as well as their installation work.
Not only is the cost of installing slate roof tiles significant, but so is the framing required to support them. A house with asphalt shingles probably does not have the framing required to sustain the weight of clay or slate tiles over several years. If you’re thinking of installing a heavier type of shingle, shake, or tile, first check with a house architect or roofing contractor to confirm that your home’s framing is adequate for the greater weight. If you really want clay tiles, for example, you may need to reinforce the framing, at least in the roof.
Style and colour
A house with a roof covered with cedar shakes has a significantly different look than the same type of house with an asphalt shingle roof. Before re-covering your roof, think about the look that you want, and consider different colours. If you have a digital camera and graphics software such as Adobe Photoshop, you can take a picture of your home, download it to your computer, and re-colour your roof. Some roofing contractors offer this “virtual renovation” service, which gives homeowners an idea of what their house will look like before making a final colour selection.
When it comes time to re-cover their roof, most homeowners in Canada choose composition shingles, which are made from fiberglass/asphalt or polyester/asphalt and covered with a granular substance. There are different grades of composition shingles, which come in a wide variety of colours. Shingles are rated by how long they are designed to last; increased longevity equals greater cost.
Cedar shakes give a home a high standard of appearance and offer an environmentally-friendly roofing option. Good-quality cedar shakes will last up to 30 years if they are properly installed. Because of the fire hazard, many municipalities require cedar shakes to be pressure-treated with fire retardant. Contact your town or city hall for more information.
Other types of roofing include dimensional shingles, metal roofing, clay tiles, and slate tiles. Dimensional shingles are similar to asphalt shingles, but are thicker and give a more textured look. They cost about twice as much and last up to 40 years. Metal roofing is lightweight, fairly easy to install, lasts 20 to 50 years, costs up to ten times more than asphalt shingles, and comes in a variety of colors. Clay tiles are usually half-tube-shaped and terra cotta in color. Newer ones contain synthetic materials, making them lighter. While installing clay tiles is expensive, slate roofing costs the most, up to thirty times more than asphalt shingles. Despite their cost and weight, slate tiles are elegant and last more than a century.
Whether you live in a modest house or a castle, proper roofing is essential to a comfortable home life. When it comes time to replace your roofing, explore your options, speak with the experts, and enjoy having a quality roof overhead for many years.
October 17, 2012
Vancouver's lower home prices a drag on national average
A slowdown in real estate sales numbers in Vancouver, particularly in single-family homes worth more than $1 million, dragged down the country's average home price in September, the Canadian Real Estate Association said Monday.
In Metro Vancouver, the average home price was down 3.8 per cent in September from a year earlier, which CREA said skews the national average price, which was up 1.1 per cent. Excluding Vancouver, the national average price was up 3.4 per cent from a year ago.
Gregory Klump, CREA's chief economist, said the drop in Vancouver was caused by fewer really expensive sales this year compared to last year.
"Last year, the average was pitched higher by a whole bunch of high-priced sales, while this year, those sales haven't recurred, so it's lower." Klump said. "I like to use the following analogy: If you line the kids up in class from shortest to tallest and take the average height, and then you excuse the 10 tallest kids and recalculate the average, then the average height will have shrunk, but none of the kids have."
For this reason, average house prices are not the most consistent information to use, Klump said.
"It's like looking in a funhouse mirror," Klump said. "It doesn't really give you a true picture of what's going on with regard to price, which is why you really want to look at the home price index, which keeps the quality of homes constant over time."
The Multiple Listing Service home price index is down 0.8 per cent to $606,000 in Vancouver year-over-year in September, while it is up 3.9 per cent nationally.
"Stricter high-ratio mortgage regulation further exacerbated a moderating trend in consumer demand," said Cameron Muir, BCREA chief economist. "Reducing the maximum amortization from 30 to 25 years had the equivalent impact to affordability as a 100 basis point increase in mortgage interest rates."
In Metro Vancouver, the dollar volume of sales was down 35.7 per cent in September, year-over-year, figures released Monday by the B.C. Real Estate Association show.
Robyn Adamache, Canada Mortgage and Housing Corporation's senior market analyst for Vancouver, said sales of single-family homes are down 29 per cent for the first nine months of 2012 compared to the same period last year, while townhouse sales are down 20 per cent and apartment sales are down 16 per cent.
Although the overall average home price is down seven per cent, single-family home prices are down five per cent on average, while townhouse prices are down one per cent and apartment prices are down three per cent. Because more apartments and fewer houses are selling this year, the decline in average price is larger than the drop in price for any particular property.
Adamache also said there is a shift in sales volume away from very expensive single-family homes in areas such as the west side of Vancouver, West Vancouver and Richmond and toward more affordable homes in places such as Maple Ridge.
Adamache said sales numbers are expected to remain flat until the middle of 2013, when they are expected to increase, not to the lofty levels seen in 2011, but approaching those levels. She said prices are expected to decline overall this year, with a smaller decline next year.
Muir also said demand is expected to be on the rise.
"An expanding population, strong full-time employment growth and persistent low mortgage interest rates are expected to bolster housing demand in the months ahead," Muir said.
Sales volume numbers are a lot more volatile than prices, Klump said.
"If you're not forced to sell at a price you're not willing to accept, you don't sell," Klump said. "If you're getting offers below what you're prepared to sell for, you take it off the market."
Nationally, home sales in September fell 15.1 per cent from a year ago, CREA reported, adding that sales in September were up 2.5 per cent from August - the first month-to-month gain since March.
"While some first-time homebuyers may no longer qualify for mortgage financing under the new rules, it is likely that many others are stepping back and reassessing how much house they can realistically afford, which is one of the things new mortgage rules were designed to do," Klump said.
While Vancouver's home price index was down slightly, Calgary had a 6.5-per-cent increase in the index, the Toronto area was up 5.7 per cent, the Montreal area was up 2.2 per cent and the Fraser Valley was up 2.1 per cent.
Regina had the biggest increase among markets measured by the HPI, with a gain of 14.2 per cent from September 2011.
TD Bank economist Francis Fong said the month-over-month gain only partly offset August's drop, with sales off their peaks in most markets across the country.
"The Canadian housing market has clearly lost some of its lustre," Fong wrote in a note to clients.
"That being said, with interest rates remaining sufficiently accommodative, we do not anticipate any precipitous decline in housing activity in the near term. Rather, we expect a gradual unwinding of the imbalance in both sales and prices over the next few years."
The sales report came as the Conference Board of Canada said that most Canadian cities are facing lower housing starts in the coming years as markets slow, with only 10 of the 28 cities showing positive long-term expectations.
Construction is going strong in Metro Vancouver, with housing starts on pace in September to reach 20,000 units by year's end, mostly driven by multifamily developments, Canada Mortgage and Housing Corporation reported last week.
CREA said Monday there was still a balance between the number of homes for sale and the number of buyers in September, but conditions have eased.
The national sales-to-new listings ratio, a measure of market balance, stood at 49 per cent in September 2012, remaining near the midpoint of a balanced market.
With a file from The Canadian Press firstname.lastname@example.org Blog: vancouversun.com/yourmoney
October 16, 2012
Surrey to consider 'Micro suites'
The City of Surrey will consider allowing developer Tien Sher to develop 'micro suites' in Whalley.
Photograph by: Submitted , for Surrey NOW
Surrey will be home to Canada's smallest condominium if city council gives the OK to a new housing project by property developer Tien Sher.
The 290-square-foot "micro suite" will be the smallest of 56 tiny condos inside Balance, a four-storey wood frame building yet to be built at the corner of Whalley Boulevard and Grosvenor Road in the city centre. Thirty-three of the suites will be 305 square feet or smaller and the largest will be a 653 square foot single bedroom condo priced under $180,000.
Tien Sher expects to begin selling the micro condominiums in January if council gives the green light this fall.
"It's all in the hands of the city," said Charan Sethi, president of Tien Sher. "It's a very niche market."
The price of these "functional homes" will start at $109,900 but "may come down," he added.
"If you can afford the $6,000 down payment, and you make a salary of $17 per hour, we have a home for you."
Sethi said the homes are aimed at people who earn annual salaries of $22,000 to $55,000 and haven't been able to break into the real estate market. Young professionals, retail employees and single parents are the anticipated buyers.
Sethi said the name Balance reflects the concept that people in their 20s generally "don't like to be bogged down" with doing a lot of work around the house. "They like to have all the facilities at their fingertips."
Each suite will contain five stainless steel appliances, hardwood floors and a balcony. They won't come with a parking stall, Sethi said, "but they are available for purchase.
"A 2012 parking study we commissioned showed most purchasers will forego car ownership and its associated costs, in favour of an affordable home purchase," he said. There will also be a "car-share" vehicle on site, he noted.
Sethi said this project follows in the footsteps of similar ones in New York, Tokyo and Paris.
Peter Simpson, president of the Greater Vancouver Home Builders' Association, said he expects to see more micro condos built in this area. "With mortgage amortization periods capped at 25 years, coupled with the high cost of developable land in the Lower Mainland, micro suites are a sensible and cost-effective option for single people looking to purchase their first home," Simpson said.
October 11, 2012
Mortgage-Related Trends on Google
Canadian Mortgage Trends, October 4, 2012
Almost one-third of Canadians do all of their mortgage research online, according to CMHC. That indicates how important Google has become to consumers, lenders and mortgage brokers.
To get a better sense of mortgage trends on the world’s biggest search engine, we spoke recently with David Resnick. Resnick is Head of Industry – Financial Services at Google and he offered up some intriguing insights into Google’s mortgage-related searches.
It turns out that mortgages are a red hot topic on Google. “Mortgages are the fastest growing (search) sector in financial services by far,” says Resnick. “The number of Canadian queries related to mortgage products and services is up 60% year-to-date.”
We asked Resnick for his thoughts on a range of topics, including:
Are High-Ranking Brokers Better?
Does a high ranking in Google mean a broker is reputable and well qualified? Resnick says, “Those who have got to the top of Google probably take their line of business quite seriously. But that’s not to say they’re the best mortgage broker out there.”
He added: “They’re probably very dedicated to online marketing. I wouldn’t necessarily place more weight on them as a consumer.”
Frequently Searched Terms
These are mortgage terms that were heavily-searched in 2012:
“Mortgage calculator” (This one overtook the search term “Lady Gaga” earlier this year.)
“First-time home buyer”
“New mortgage rules” (one of the fastest growing terms this year)
The term “BMO 2.99%” saw a major volume spike in January 2012. That coincided with BMO’s headline-making 2.99% mortgage special. Its heavy search volume persisted until March/April, when the promo ended.
Google AdWords is an auction-based pay-per-click advertising service. It “levels the playing field between large and small advertisers,” says Resnick, because advertisers can spend as much or as little as they want, on targeted search terms, with no commitment.
Mortgage ads are highly competitive, though not as much as auto insurance advertising, which is the most competitive category of all.
The number of consumers searching Google for mortgage information is growing faster than the number of advertisers paying for mortgage ads. Given that AdWords is governed by supply and demand, this has ensured a “very good return on investment” for those buying mortgage keyword ads.
The ranking of an AdWord ad depends on the:
Relevancy of your ad to a user’s search term(s)
Click-thru rate is “the most important factor,” says Resnick
“Bid” size (i.e., the amount you’re willing to pay)
Quality of your landing page
Relevancy of the landing page i.e., did visitors stay on the page or leave and come back to Google immediately? Google gives a better relevancy score when visitors hang out on your site for a bit.
“Ads that typically do well incorporate mortgage rates or a call to action (like ‘Contact us now’),” says Resnick.
10-20% of all mortgage-related queries are now occurring on mobile devices.
Google’s Traffic Estimator predicts how your Google Adwords ad will rank based on what you spend and the keywords you choose.
Keywords like “best mortgage rates” have many bidders, which isn’t surprising since 86% of those who research mortgages online search for rates. (Source: CMHC)
If you’re a broker or lender who has never tried Google AdWords before, here’s a $75 free trial.
#1 Tip for Brokers Wanting to Rank Higher
“Make sure you’re doing everything the Webmaster site tells you to do,” says Resnick. Specifically, see these guidelines.
October 11, 2012
What’s wrong with leveraging?
Financial Post, October 9, 2012
Every once in a while a client walks into my office and asks me about a borrow-to-invest strategy that their uncle/friend/neighbour has gotten themselves into. The usual story is how this person borrowed a sum of money against the equity in their home, invested the money into stocks, mutual funds, or an insurance policy, and wrote off the interest payments on the loan against their personal income taxes. It seemed like a fool proof plan when the “advisor” presented the data.
The problem is in the execution of the strategy
When approached with a typical borrow-to-invest strategy investors are presented with quite a compelling story. Advisors will show how, over the long run, a modest $100,000 investment can grow to millions of dollars over a 30-year period. Couple that with the fact that one can now borrow against their home at historically low rates, then potentially write-off the interest charges against their personal taxes at year end, one would wonder why everyone isn’t doing this. The fact of the matter is that it is not that simple, and while the strategy works perfectly in the marketing brochures it can turn into a disaster in real life.
The biggest problem I find with this strategy is that many people who enter these investment programs believe that the tactic of front-loading their retirements with a loan means that they no longer have to save their current earnings. This is absolutely incorrect.
Let’s look at a hypothetical example: Suppose you were to borrow $100,000 on January 1st, 1980 against the equity of your home and make an immediate investment in a balanced portfolio of 40% Canadian bonds, 20% Canadian stocks, 20% US stocks and 20% International stocks.
Let’s assume that the loan attracts interest at the average 5-year mortgage rate (as per the Bank of Canada’s records). Ignoring taxes, the portfolio will have grown to $2,197,977 by the end of 2011, and assuming you were to personally pay your interest payments every year this strategy would have attracted interest of $305,700. Your overall investment would have been $405,700, leaving you with a net investment of $1,792,278 or a 6.97% compound rate of return on your investment over the 32-year period, not too bad.
Compare that with the more traditional strategy of simply investing the $100,000 in 32 equal increments over the same period. The traditional strategy would have left you with no debt and no interest, but a total portfolio of only $543,669, less than half of the borrow-to-invest strategy (and this does not even consider the tax benefits of writing off the interest payments). The compound rate of return on this strategy would be 9.29% annually.
So it’s a shoe-in, borrowing to invest is better right? Wrong; or at least in my opinion isn’t. The problem is not in the numbers, as they evidently work out quite neatly on a spreadsheet.
The problem is in the execution of the strategy. The strategy only works when you have the discipline and economic means to make the interest payments yourself over the entire course of the investment horizon. This means that over a very long period of time you cannot lose your job, cannot have a bad year, cannot have any financial hiccups. This is not realistic.
The approach works for the people who have the means to make it work; people who earn a high and consistent level of income, and people with the discipline to set the appropriate amount of money aside to make their interest payments and fully benefit from the tax deductions.
I find that most people who are attracted to this strategy are either families without the means to make the payments themselves or high income earning professionals that spend every penny they make funding a lavish lifestyle. These people fall into the trap of believing that they can simply put their retirements on auto-pilot and forget about financial discipline.
What I see happening to many of these people is that they allow the strategy to run itself. Rather than setting aside enough money to pay the interest, they simply allow the interest to be deducted from the investment portfolio believing that they will achieve a similar result.
This is not the case; if one were to follow the same assumptions as above but deduct the annual interest payments from the portfolio year over year, the ending portfolio would be a modest $231,938 (without paying down the $100,000 debt). This would yield a compound rate of return of merely 2.66%. Compare that to the Canadian inflation rate seen over the same time period (3.38%) and you will quickly see that the only parties benefiting from this strategy are the bank that made the loan and the advisor that scooped up the commissions.
Couple the above situation with the fact that your investments can be locked in for years depending on what type of commission or sales charge your advisor takes, as well as the fact that liquidating the portfolio in the event of financial hardship can lead to hidden fees and taxes the rosy picture painted in the marketing brochures begins to show its true colours. In the end there really is no easy money, what works on paper rarely ever plays out perfectly in real life.
October 11, 2012
Vancouver: The city that acts like a suburb
Vancouver Sun, October 8, 2012
The map of Vancouver city council’s plan for densification, which The Sun ran on its front page last week, looked like arteriosclerosis writ large — all those main thoroughfares thickening under the weight of stacked condos, row townhomes and “affordable” rental units, a citywide network of residential plaque three blocks deep. I’m sure more than a few residents’ hearts stopped at the sight of it.
If anything good could be said about the map, it was its geographic indiscriminancy: The burden of densification was, finally, to be shared by all, east as well as fabulously wealthy west. Comrades, to the bulldozers! Condos on Dunbar! Rental highrises on Southwest Marine Drive! The very fact that they were main arterials made them fair game. At least, that’s the theory, though somehow I have a feeling it won’t play out that way.
If it ever does. The plan’s unveiling was not greeted with a uniform chorus of cheers. The Sun story charitably characterized opinions on it as “mixed.”
Right. Within hours, city hall was backing away from one of the brainier — as in hare-brainier — ideas of its plan, its “thin streets” proposal, the one where residents, in the name of densification, get to live so closely together they’re afforded panoramic views of each others bathrooms.
Residents, the kind who vote, screamed bloody murder. Oops, council announced, thin streets are no longer a priority! No, I would think surviving the next election would be council’s priority.
Antipathy to densification shouldn’t come as a surprise: Residents fear their neighbourhoods will be eaten away at the edges. They like things as they are. And why shouldn’t they?
That they do is something urban planners and the city’s intelligentsia have either misread or, out of a sense of believing they know what is best for the city, have ignored.
In so doing, they’ve failed to appreciate the city’s deeply conservative nature. Vancouver is not, for the most part, a model of urbanity. Vancouver is the city that acts like a suburb.
For one thing, it has always valued greenery over dynamism, and space over density. It was the sole Canadian city to shun a freeway, while it now welcomes chickens, bees and wheat fields. It has a 1,000-acre park in its heart, and so mythologizes its green spaces it has the only elected park board in Canada. Its urban forest and citywide program of tree-planting is second to none (including a new initiative to plant fruit trees as a source of food), and it has three full-sized golf courses within its boundaries. Most tellingly, outside of the downtown peninsula and the shores of False Creek, its neighbourhoods are still overwhelmingly single-family residential in character.
Yet to the world, we boast about “Vancouverism” — as if the hip, seagreen towers of Yaletown were the city’s defining character. They aren’t. The city’s defining character are quiet streets lined with cherry trees and modest bungalows. Most of Vancouver is indistinguishable from Burnaby or Surrey.
Many residents, understandably, want to preserve this. Life is good for them. Jane Jacobs would approve.
But there has been this theoretical embrace by urban planners and successive city councils that densification is in itself a good thing.
But I am beginning to think that Vancouver residents have it right. Because what I am beginning to think is that it is not the City of Vancouver that has to densify; it is the suburbs around it, and that the City of Vancouver should be doing all in its power to cause that suburban densification to happen.
We should consider doing away with the old idea of an increasingly densifying inner city and begin thinking of Metro Vancouver as a steady state entity. Spread the growth around.
Cap Metro’s boundaries to contain sprawl. Make ingress into Vancouver more difficult, not easier. Keep the bridge and tunnel bottlenecks as they are. Force the suburbs to urbanize and infill.
Consider: All of our transit problems rest around the idea that too many people are trying to get into the inner city. So, all rapid and mass transit is focused toward Vancouver while, perforce, we beggar transit in the suburbs. It is a never-ending no-win game that keeps the suburbs car-dependent.
We have to begin to blur the difference between urban and suburban, not intensify it.
That may be what the residents of Vancouver are, intuitively, trying to tell their council
October 11, 2012
Insured Buyers are the Majority
Canadian Mortgage Trends, October 7, 2012
Mortgage insurance is typically mandatory for homebuyers without 20% equity.
Putting down 10% on the average $350,152 home, for example, means you’ll cough up a $6,302 insurance premium (given fully documented income and decent credit). Since insurance premiums are tacked on to your mortgage, that adds up to $9,000+ if you amortize it over 25 years.
Of course, you can avoid insurance altogether by plopping down 20% or more. The challenge is, only a minority of buyers have that sort of equity.
According to the latest data from Will Dunning, Chief Economist of CAAMP, less than 4 in 10 buyers have 20% down payments.
For those purchasing from 2010 through spring 2012:
41% had less than a 10% down-payment
21% had a 10-19.99% down-payment
Only 39% put down 20% or more.
(This survey included both first-time and repeat buyers. First-time buyers accounted for 56% of the dataset. Totals don’t add up to 100% due to rounding.)
Given the widespread use of mortgage insurance, it’s easy to see how regulator’s insurance rule changes can rapidly alter home buying trends. In another few months, we’ll get a good sense for how the most recent rule tightening has impacted nationwide mortgage volumes.
October 2, 2012
A careful path will make house dreams achievable
If you could do it all over again, what would you do differently? Most people spend more on their homes than they will on anything else. Experts share strategies on how to avoid costly mistakes and offer suggestions for how to end up with the house of your dreams.
A poll conducted for TD Canada Trust found many homebuyers admit-ted to making rookie mistakes when they bought their first home.
These are the top three things new homeowners would change if they could do it again.
. Make a bigger down payment (61 per cent): "Buying a home is the biggest investment most people will ever make, so it's important to save a sizable down payment and prove to yourself that you are ready to take on the responsibility of a mortgage," says Farhaneh Haque, director of mortgage advice for TD Canada Trust.
. Be more thorough when budgeting (54 per cent): Haque says home-owners should factor in expenses like property tax, insurance, repairs and utilities in addition to the monthly mortgage payments.
. Buy a home sooner (61 per cent): ?"I'm not surprised that even after becoming homeowners, people are split about whether their timing was right," Haque says.
BUYING AND SELLING
The majority of people generally purchase more than one home in their life-time. Each time they do, they incur a variety of costs, including real estate commission fees for the seller, mortgage fees for the buyer and a fee to break a mortgage (if applicable) for the seller.
Nicole Burgess, a six-year veteran with Pemberton Holmes, says people typically sell when their home no longer meets their needs.
To ensure you can sell your home when you need to, it's important to buy a house that appeals to a larger market. The real estate adage of location, location, location also applies, she says.
While some people will buy a new property to get the features they desire, a less expensive way is to renovate an existing house over time.
Steve Copp, president of Steve Copp Construction says, "Half of our business comes from homeowners renovating and upgrading their homes. Some spread out their renovation projects over a span of two to three years, with us returning to work on one room at a time."