The Housing Bubble

A report from Canadian Mortgage Trends. “Last month the Canadian Mortgage and Housing Corporation (CMHC) formally asked the Canada Revenue Agency to take a more active role in verifying income claimed on mortgage applications in an effort to clamp down on mortgage fraud. The CMHC says the move is necessary given that ‘the industry’s current detection tools have not kept pace with the increasing sophistication of threat we face,’ according to its plan. Data backs this up, with a 2017 Equifax study finding that a full 13% of Canadians would be comfortable lying in order to get a mortgage approval. The study also noted a 52% rise in suspected fraudulent mortgages since 2013.”

“But not everyone is behind CMHC’s request for direct involvement from the CRA. Rena Malkah, owner of CYR Funding, has been a mortgage broker for 44 years and thinks this is an issue best left to underwriters. ‘Their job is to verify the claims. If they can’t they should be fired and replaced by someone who can,’ she said. She adds that credit rating is more important than income verification anyway. ‘If someone has a high credit rating, it shouldn’t matter what their income is. If they fight and scrap for under-the-table money to pay their bills on time, then it should be of no interest to the insurance company where the money comes from. And besides, involving CRA opens more people up to audit.’”

“Helen S. is a 61-year-old retired public accountant from Oakville, and the mother of a 26-year-old, and she agrees with Malkah. Her son earns just under $40,000 a year as a baker and she wants him to buy a home. She’s prepared to pay a percentage of the mortgage payments but she wants the mortgage in his name. ‘How I choose to set my son up for success is none of CRA’s business. I know he won’t default,’ she says. ‘My broker knows too. The CRA doesn’t have to be involved. We already give them enough money.’”

From the Georgia Straight in Canada. “The latest numbers from the B.C. Real Estate Association raise questions whether the B.C. government will achieve this year’s revenue target for property-transfer taxes. The BCREA revealed that there was a 23.9 percent decrease in Multiple Listing Service sales across B.C. in July, compared to the same month of 2017. The total dollar volume was $4.9 billion, down 24.2 percent from July 2017.”

“Earlier this month, the Real Estate Board of Greater Vancouver reported that detached homes on Vancouver’s West Side and in West Vancouver experienced the biggest annual price drops over the past year. They fell 8.4 percent and 8.3 percent, respectively, over a 12-month period. These areas have the most expensive homes.”

The Calgary Sun in Canada. “Calgary’s resale housing market remained firmly in buyers’ territory in July, according to the July report from the Calgary Real Estate Board. ‘Recent struggles in the job market, accompanied by yet another interest rate increase, are piling on to the decisions potential purchasers have to make in the housing market,’ says the report.”

The Leader Post in Canada. “June was a bad month for building permits across Canada, but Regina saw a bigger percentage drop in value than any large city in the country. Regina issued only $27.5 million worth of building permits in June of this year, compared to nearly $100 million the same month last year. That’s a drop of 72.4 per cent. Compared to May, the value of permits fell 44.5 per cent, more than any other census metropolitan area.”

“Jason Christbason, builder relations coordinator for the Regina and Region Home Builders’ Association, said part of the pressure comes from nationwide trends, like stricter mortgage rules put in place by the federal government. ‘Turn the clock back five years, you could go in and any day in any time and any bank and you had a mortgage,’ he said, explaining that a so-called ’stress test’ has made it much more difficult.”

“Mayor Michael Fougere said the city has a surplus of housing stock right now, something that might be keeping developers from moving forward with new projects. ‘I think we have an oversupply of housing,’ the mayor said. ‘That’s pretty obvious when you look at the vacancy rate.’”

From Domain News on Australia. “Marketers, vendors and agents are rushing to bring their sales campaigns forward rather than wait for September or October, spooked by reports of falling property values and auction clearance rates hovering at little more than 50 per cent. ‘There’s a lot of media attention about the market getting worse and people want to move now while they still have a bit of certainty,’ said Jim Larcan, a director of ​boutique property styling company Vitus Lee Chan. ‘There’s not much confidence out there right now.’”

“Coco Republic’s senior property stylist Jenny Conroy said business had been quiet in the first half of winter, with tighter lending practices putting the brakes on sales, but things had changed dramatically a few weeks ago making this one of the busiest periods the company has seen in years. ‘We are at capacity right now and it doesn’t look like this will end any time soon,’ she said. She said clients were also asking about extension rates for furniture if a property didn’t sell quickly.”

“However, chief executive of one of the largest property marketing providers CampaignTrack, Stefan Williams, said just because there was a bit more stock on the market to be sold doesn’t mean agents will be able to sell it, which is a big turnaround on market fortunes from this time last year. ‘It’s always busy at this time of year, but whereas last year was a case of agents struggling to source listings, now it’s a matter of selling it,’ he said.”

“Properties with redevelopment potential in top-notch positions, and sub $750,000 homes performed better than other real estate categories at weekend auctions. But stand-offs over asking prices are continuing to instill price uncertainty in Melbourne’s $1.5 million-plus housing market.”

“A buyer’s advocate at the auction, Kate Vines from Melbourne Property Advisory, said a sale price of just over $3 million represented a good purchase. ‘If you go back six months, that would have been an easy $3.2 million to $3.3 million property and it would have sold under competition,’ she said. ‘There is just no urgency. There is no panic out there. Buyers are taking their sweet time, because they can.’”

“Frank Valentic, of Advantage Property Consulting, said other townhouses and villa units in the northern suburbs had recently been passed in, or attracted only one bidder, before selling for prices below or just above their reserves. He said buyers were prepared to wait, and were putting in offers only if the price was right. ‘They’re not chasing the moving, runaway train at the moment,’ he said.”

The New Zealand Herald. “Tomorrow we will get a fresh update on the local housing market when REINZ releases it’s data for July. While winter is traditionally slow for the real estate sector, a slump across the Tasman has heightened concerns that we may see price falls here for the first time in several years. In Auckland, where prices have been flatlining for more than a year, the prospects of prices slipping in to negative territory looks increasingly real.”

“Sentiment in Sydney has turned fast. You’ve only got to scan the media coverage to see that stories about crash-risk and a buyers market are getting all the headlines. Even Reserve Bank Governor Adrian Orr has warned of the possibility. ‘We’re within a wisp of that happening in Auckland housing prices at the moment,’ Orr told TVNZ’s Q+A.”

“Stating in last week’s Monetary Policy Statement that rate rise was unlikely until 2020 has already helped to put downward pressure on mortgage rates. Regardless, the fact is that the Auckland housing market in 2018 looks very different to the one we have grown accustomed to. We need to brace ourselves for an economy that is no longer underpinned by the ‘wealth effect.’”

“As an infrastructure report (released today) by Chapman Tripp points out, house price growth has outstripped income growth in this country every year since 2003, producing one of the worst house price to income ratios in the OECD. Many homeowners simply won’t remember a time when the market wasn’t a one way bet.”