Home Inspectors in Canada, Long Unregulated, Will be Expected to Meet a National Standard.

Home inspectors, long unregulated throughout most of the country, are finally going to be expected to meet national standards for training and education.

A lot of confusion will be lifted in the industry as a home-inspector will either be approved by the Canadian Standards Association (CSA) or not. The National Home Inspector Personnel Certification Program will now be recognized as the standard for home inspectors across the country. 

According to the Toronto Sun:

"To become a certified national home inspector, a candidate must write a qualification exam. Based on the results of this exam and a background review, the candidate will be advised of what, if any, further education is required."

Currently, there are only 500 home inspectors in Canada that hold the certification, but more are certainly going to follow. 

Before being granted certification as a "national home inspector" the candidates will have to undergo a review of previously completed home inspections, be under some supervision, and receive a mentor.  

Of course, there is no guarantee that conflicts of interest and issues of qualification and professionalism within the field of building inspectors will evaporate, but it is definitely a step in the right direction, and it bodes well for future home buyers.  

Ottawa puts CMHC under tighter scrutiny

Ottawa puts CMHC under tighter scrutiny:

Below are some key excerpts from Postmedia's article about the CMHC and its new scrutiny. This is clearly another sign that the federal government is anxious to rein in household debt levels and Canadian home prices.

The federal government is putting Canada's housing agency under tighter scrutiny amid concerns over a red-hot housing market and rising consumer debt.

Finance Minister Jim Flaherty announced Thursday that responsibility for Canada Mortgage and Housing Corp. will be handed over to the country's banking regulator, the Office of the Superintendent of Financial Institutions.

The measure, contained in new legislation tabled Thursday, will ``enhance the oversight framework for CMHC to ensure its commercial activities, particularly its mortgage insurance and securitization programs, play an important role in the housing market and the financial system,'' Flaherty said.

Queen's University finance professor Louis Gagnon said he has also ``been concerned about the CMHC for a long time. ``

``I believe that the federal government's plan to bring CMHC under the direct supervision of the Office of the Superintendent of Financial Institutions is long overdue,'' said Gagnon, who specializes in debt and risk management.

``In fact, the previous oversight arrangement was ill-suited for this important task and I never did understand why the CMHC had been placed under the jurisdiction of the minister responsible for Human Resources and Skills Development. This was a recipe for a disaster.''

Carney said the average home price in Canada is about 4.75 times people's income, while the historic average is closer to 3.5 times. Household debt to disposable income, meanwhile, is running at about 152.9 per cent.

Housing Regulators Forced to Save the Canadian Lenders and Public from their own Hubris and Irrationality. Lines of Credit and Mortgages to Become More Difficult.

Canadian financial regulators are again indicating that they are going to start tightening up on the lending practices of the country's banks. With the housing market still hot in many Canadian cities, many home-buyers are digging themselves into deep financial holes. As they pile on more and more mortgage, credit, and other debt the Canadian consumer is banking on an ever increasing value of their home to save the day.


In particular, the Office of the Superintendent of Financial Institutions wants new rules in place that require lenders to take a closer look at the value of people's homes, and investigate more closely the financial habits of their borrowers. Due-diligence requirements should already be mandatory for employees of these institutions, but lately it is clear that most of Canada's banks are more than willing to lead us down the same path as the United States, Ireland, England, and many other disastrous property markets. Quite simply, people are buying houses that they cannot afford, and then taking out lines of credit on top of it, which they cannot hope to pay back in a reasonable amount of time.


According to the Globe and Mail:

"policy makers and regulators are concerned about the debts consumers are taking on as a result of persistently low rates. The fear in Ottawa is that many borrowers will struggle to keep up their payments once rates rise substantially, posing a threat to banks and the economy. At the same time, economists say that Canada’s housing market – most notably in Toronto and Vancouver – is overpriced. If house prices fall at the same time as interest rates rise, borrowers could find themselves under water."


Ultimately, it should come down to cash flow. We need to start evaluating whether or not borrowers have the flexibility to pay back their debts in a reasonable amount of time based on their current and historical income and expense records. Too much borrowing power is granted simply on a generalized perception of real estate values that are currently at gross multiples to the average buyers annual income.


Will the banks be happy with new rules? Of course not initially, but over-time it will help to save them from their own greed and hubris, and the irrational expectations of the consumer marketplace.

Paying off Your Mortgage Instead of Investing in RRSP.

The Globe and Mail recently highlighted three important reasons why many Canadians should pay off their mortgage instead of investing more heavily in their RRSP. In this brief article, I have listed all three below:

1. Paying off your mortgage will net you a guaranteed return. Basically, whatever interest rate you are paying on your mortgage, you can see that as your "rate of return," or how much money you would be earning by paying it down sooner.

2. Interest rates on mortgages will rise, and when you go to renew your mortgage, it is probably going to be higher than current rates. So, hopefully, you can renew your mortgage soon to lock-in low rates, but if not, you want to ensure that you will owe as little as possible when rates increase in the future.

3. Paying off your mortgage "sets you free." This one is partially psychological, as people tend to enjoy the freedom that not owing debt brings. The dollars that you currently must allocate to your mortgage payments can be utilized to satisfy other needs and wants.

Any questions? Just send me a quick e-mail and I am glad to help.

Average MLS® Resale Price for Local Markets. Ottawa, Toronto, Halifax Up. Hamilton, Burlington, Vancouver, Victoria Down.

Halifax, Montreal, Toronto, and Ottawa realize housing price increases. Hamilton, Burlington, Vancouver, and Victoria on the downward trend. Average Vancouver property sinks below $700,000.

Average MLS® Resale Price for Local Markets 

City	December 2010	December 2011
Halifax	$ 254,228	$ 273,182
Saint John	$ 162,859	$ 165,770
Quebec	$ 250,880	$ 255,896
Montreal	$ 305,068	$ 319,458
Ottawa	$ 325,031	$ 335,330
Toronto	$ 433,887	$ 451,436
Hamilton/Burlington	$ 324,590	$ 314,940
Winnipeg	$ 239,183	$ 268,977
Saskatoon	$ 300,693	$ 312,834
Regina	$ 251,690	$ 273,919
Calgary	$ 381,308	$ 392,661
Edmonton	$ 310,885	$ 315,658
Vancouver	$ 700,773	$ 689,057
Victoria	$ 496,814	$ 469,484

Scotiabank Plaza Could Fetch $1 Billion for Shareholders. Scotia Decides to Take Advantage of Hot Toronto Real Estate Market.

Finally a Canadian bank is doing something prudent recently for its shareholders. Scotiabank (TSE: BNS) has indicated that it is looking for buyers of Scotia Plaza, the second largest tower in the country. Real Estate analysts think that Scotiabank could fetch $1 billion for its shareholders from the sale of the property. 


In an overheated property market, with low mortgage interest rates, deciding to unload a property for a massive gain is a prudent move for the bank. Scotiabank is currently the only bank in Toronto that actually owns its office building, which it has occupied since 1988. 


Bank spokeswoman Ann DeRabbie stated that "given market conditions, this could be an opportune time to maximize the value from our holdings," and Intelligent Investors should agree. The $1 billion could be better utilized elsewhere, even if it is simply used to reduce the bank's leverage and risk profile. 

Should You Refinance Your Mortgage at Lower Rates? A Little Research and a Couple Questions Should Save Canadians Thousands of Dollars.

The CBC and other news media outlets have been heavily publicizing Canada's historically low mortgage rates. This highlights that fact that many home-owners and real estate investors need to seriously consider whether or not they should refinance their current mortgage. How does someone know if they should cancel their existing mortgage and obtain a new one at a lower rate?

• A little research and simple mathematics. Ask your current lender how much it would cost to pay off your mortgage early. Generally it will be one of two amounts:

1. Three months mortgage interest.
2. The "Interest-Rate-Differential," or IRD.

Three months interest is a simple calculation, but the IRD can be a little more nebulous. It depends primarily on two factors: how many months are remaining on your existing mortgage, and the rate difference between the current lenders rate that you have, and what their current posted rate is. If they would make more money off you than a new customer, they will penalize you accordingly. To get the most reliable amount for a penalty, the lender's head office or mortgage servicing department is best. The representative at the local branch can often be less forthcoming.

• Next you need to take the cost of the penalty, and decide if it is less than the total amount of money saved from obtaining a better interest rate at a different institution. For example, if your current penalty is $2000, but you would save $200 per month for the next 5 years ($200 x 60), or $12,000, if you moved to another lender, financially you would clearly be better off paying the penalty and savings $200 per month. 

It is important to keep a close eye on your finances and ask the important questions to ensure that you are not being taken advantage of as a consumer. So please, question your lender. Ask what your penalty is and see if it would be better for you to move somewhere else. A vibrant and competitive marketplace can only exist with informed customers. 

Condo Risks for Investors. Careful not to get Burned.

Condo risk bubbles up | Economy | News | Financial Post:

According to the Canada Mortgage and Housing Corporation and the Financial Post, housing starts in Canada continue to rise. A huge disconnect, however, has now developed between single family and multi-unit buildings. Condo and multi-unit construction is up over 17% this year, while construction of detached homes has started to fall-off, declining by over 12%.

According to the law of supply and demand, increased supply for condominiums in Toronto and Vancouver, without a requisite demand from new buyers, will undoubtedly result in a price drop for new units in the area. Detached homes, however, may experience a more elongated rise in prices, or at least a more cushioned fall, should prices decline across the board during a down-turn in the economic cycle because construction of them has largely slowed.

“The multi side of the market certainly looks more at risk given the supply situation,” he said. “Prices have been pretty resilient so far, but the concern is if we do get a correction in prices the fact that the supply of condos is looking so much more ample, those will be more at risk. Singles are actually looking pretty tight be historical standards.” (Financial Post).

Both the Royal Bank and the Bank of Montreal have now expressed warnings about an overheated condominium market in Canada's major population centres. Special attention should be paid to "investor-owned" condominium properties. This is because market rents have to be commensurate with the cost to carry the mortgage on over-inflated property prices. Should prices fall, and rent not cover the mortgage, this will be a double edged sword for investors. They could lose money as the sale price of their condo falls, but they could also lose money trying to carry a mortgage on a property that cannot be rented out.

For those who live in their units, the risk is much lower, as there is no imminent need to sell or realize a positive cash-flow from the units, they simply have to wait out the market in their primary residence.

Point of advice: Be wary of buying a metropolitan condominium as an investment property in the current market. A number of warning signs indicate that you might get burned.