Mortgage Rate Forecast: Set to Rise Again in 2018

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Strong Economy Supporting Elevated Housing Demand

Vancouver, BC – December, 2017. The British Columbia Real Estate Association (BCREA) reports that a total of 7,731 residential unit sales were recorded by the Multiple Listing Service® (MLS®) in November, an increase of 20.4 per cent from the same period last year. Total sales dollar volume was $5.59 billion, up 39.1 per cent from November 2016. The average MLS® residential price in the province was $723,112, up 15.5 per cent from November 2016.

“November was the third consecutive month that BC home sales were above 9,000 units, on a seasonally adjusted basis,” said Cameron Muir, BCREA Chief Economist. “Elevated consumer demand is being supported by strong employment growth, rising wages and favourable demographics.”

BC employment increased 3.8 per cent over the last 12 months, totaling over 90,000 jobs. Over the same period, average hourly wages in the province climbed 5.7 per cent to $26.82. Against this backdrop, a large cohort of millennials is entering their household-forming life stage. In addition, some buyers are likely completing purchases now in advance of tighter conventional mortgage qualifications, scheduled for the new year.

Year to date, BC residential sales dollar volume was down 6.8 per cent to $69.4 billion, when compared with the same period in 2016. Residential unit sales declined 8.8 per cent to 98,024 units, while the average MLS® residential price increased 2.2 per cent to $708,150.

For more information, please contact: Gino Pezzani.

Landlords’ and Tenants’ Rights and Duties

This article by FirstService Residential explains the rules that you and your tenant need to follow —

If you have purchased or are considering venturing into the investment and ownership of the very stable asset class of residential rental real estate, professional property management becomes critical. This holds true for purpose built multi-family buildings as well as an individual owner-investor of a condominium unit or single-family home.

There is considerable federal, provincial and municipal legislation governing a residential rental property. Some, but not all of these are: The Residential Tenancy Act (RTA),WorkSafe BC, The Privacy Act, Human Rights Code, The Real Estate Services Act (RESA) ,The Personal Information Protection Act, The Strata Property Act along with a multitude of Municipal Building Codes and By-Laws.

Under The Residential Tenancy Act, both landlords and tenants have very specific rights and responsibilities in a tenancy. Property managers are all licensed under the Real Estate Services Act, which involved comprehensive study in many fields of law, construction, human resources and contract management. A licensed property manager works to protect the landlord’s interests in ensuring that all Residential Tenancy Act Rules and Regulations are followed and that the covenants in the Residential Tenancy Agreement are strictly adhered to. The terms and conditions of the Tenancy Agreement are very specifically dictated by the act down to the wording and clauses that may or may not be used.

Resolving Disputes

A landlord and tenant are always encouraged to resolve any disagreements before they become bigger issues and before the matter is ever brought before a Residential Tenancy Branch arbitrator. Professional property management involvement is essential in helping clarify issues on site for building staff and tenants to help resolve disagreements or misunderstandings. Excellent Rental property managers are able to quickly resolve issues to the satisfaction of both parties.

Any disputes that cannot be resolved must be directed through dispute resolution at the Residential Tenancy Branch. When an Application for Dispute Resolution is submitted to the Residential Tenancy Branch a formal legal process begins. Neither the landlord nor tenant is required to be represented by legal counsel. Residential tenancy issues do not generally involve courts or the police.

In order to avoid disputes in the first place, it is well worth both the landlord and tenant to have an in depth understanding of the Residential Tenancy Act. A property manager works to educate building staff to ensure the tenancy agreement is enforced and that the landlord’s rights and asset are protected and to ensure that they do not overstep the tenant’s rights and thereby put the landlord at the risk of liability or stain the reputation of the landlord. The property manager will often call the tenant’s attention to government resources that will help them understand their rights and obligations.

In simplified terms, some of the basic obligations of the tenant are to:

• Pay rent and all other fees on time;

• Maintain reasonable health and sanitary standards within the rental unit and the residential property as a whole;

• Ensure that they and/or their guests do not damage the property, do not disturb neighbours within the building or neighbouring property or endanger the life and safety of others;

• Adhere to all covenants in the Residential Tenancy Agreement including any reasonable additional terms and addendums that may be included;

• Carry tenant’s insurance. Even though a tenant may think they do not own a lot, if a catastrophic loss occurs, the landlord has no responsibility for the tenant’s belongings or alternative housing; and

• Make themselves available for the move-in condition and move-out condition inspection process.

In turn for fulfilling the obligations above, the tenant has a multitude of rights bestowed upon them by the Residential Tenancy Act:

• The tenant will have expectations that the landlord will protect all personal information collected regarding the tenancy and that the landlord will comply with the Personal Information Protection Act;

• The tenant cannot be discriminated against based on race, place of origin, religion, marital or family status, physical or mental disability, age or legal source of income. The landlord must comply with Section 10 of The Human Rights Code;

• If the landlord decides to sell the individual unit or they wish themselves or a family member to occupy the unit, the tenant has the right to receive at least a full two calendar month notice of the intent along with one full month of rent as compensation for the termination of tenancy. If the tenant vacates under the above terms and the landlord does not, at the end of the day, sell or move into the premises, there can be financial penalties to the landlord for non- compliance;

• A landlord must respond to emergencies as defined in the Residential Tenancy Act or alternatively allow the tenant to make and pay for emergency repairs and withhold that portion of the rent as a reimbursement; and

• The landlord must provide quiet enjoyment to tenants maintaining reasonable privacy, freedom from disturbance and exclusive possession of the rental unit.

How a Professional Property Manager Can Help

Under the Real Estate Services Act, anyone who performs any of the following services for your rental property must either be a professional property manager licensed under the act, a family member or an employee of the ownership of the property (caretaker exemption):

• Collecting rents or security deposits from tenants;
• Making payments to third parties;
• Negotiating or entering into contracts;
• Supervising employees or contractors;
• Managing landlord and tenant matters; and/or
• Showing and renting real estate to prospective tenants.

A professional property manager can mitigate operating and capital costs by managing contracts and projects with care and diligence. The professional property manager will generally perform all duties which should be done in the course of responsible and prudent ownership and management of the property. Some of the many duties include.

• Advertising and showing upcoming vacant units;
• Thorough tenant screening;
• Managing and supervising all tenant requirements;
• Collecting and recording all rents and revenues;
• Annual financial planning and monthly financial reporting;
• Representing the landlord for all Residential Tenancy Branch matters;
• 24-hour emergency response service;
• Managing insurance and insurance claims; and
• Offering expertise in local marketplace rents and changes in legislative requirements.

It can be most rewarding for an investor to own residential rental real estate, be it a single condo, a whole rental building or a single family home. The details and tasks are many, but when managed on a daily basis by a professional property manager, a stable and safe asset is ensured for the years to come.

For more information, please contact to: Gino Pezzani.

Creating a Rental Advertisement

Creating a rental advertisement is a very important undertaking. Poorly constructed advertisements may get little response, making the job of renting a unit all the more difficult. Your advertisement needs to answer as many questions as possible, without being too long and boring, to let you zero in on people who are looking for what you are offering. If it’s a website listing, make sure you include good quality photos.

You want a prospective tenant to circle – or click on – your advertisement when they see it (or better yet, call you right away), not pass you by to see what the next landlord has to offer. The more prospective tenants who see your advertisement, the better your chances of renting your unit to your ideal tenant.

You will have to convey a lot of information with as few words as possible. So keep in mind the following details when you are creating your advertisement:

  • Price: Some landlords do not list the price of the unit in the advertisement at all, though you are strongly advised to do so. If you do not include the price, prospective tenants will likely go on to read the rest of the “for rent” advertisements, ignoring yours.
  • Type of unit for rent: Most prospective tenants know what size of accommodation they are looking for. If you tell them in your advertisement what size of rental unit you have available, you’ll avoid calls from people looking for a three-bedroom house when you are trying to rent a one-bedroom apartment.
  • Location: Stating in your advertisement where the unit you wish to rent is located will also help you avoid unnecessary telephone calls. You may list the exact address, basic area (e.g., downtown area), or something in between.
  • Available facilities: Examples of facilities you could list include: furnishings (or none – see part two of this series), fridge and stove, four-piece bath, coin-op laundry, parking, view of the lake, fenced yard, on-site superintendent, and so on. If a unit shares a bathroom, kitchen or other room, you should say so in your advertisement.
  • Included/not included in the rent: If you pay for the heat and hot water, but the tenant is responsible for paying the electricity, say so in your advertisement. If the tenant pays for heating, list the type of heating system (e.g., electric, forced air, gas, etc.). List in your advertisement either what is included or what is not included in the rent, or both.
  • Preferences: You may prefer to rent to non-smoking tenants or have a no-pets policy. You may prefer to rent to couples only, families only, or one tenant only. If you have specific preferences, say so in your advertisement. And of course, ensure your chosen rules on smoking, pets and other restrictions adhere to your strata bylaws.
  • Telephone number: The telephone number is by far the most important part of your advertisement. If prospective tenants cannot get in touch with you, you may have increased difficulty renting your unit. List all telephone numbers at which you can be reached while your advertisement is running. If you wish to receive calls only at specific times (e.g., evenings or weekends), say so. Many prospective tenants will not leave messages on answering machines, so try to tell them how and when to get in touch with you. Do whatever it takes to be there to answer all calls.

Fitting all this information into your advertisement is an art. Check local publications and websites for examples of rental listings in your area. If publishing in print, don’t be afraid to be creative with your advertisement: the more eyes that are attracted to your advertisement, the better your chance of successfully renting your unit. Try borders, headlines, or anything else that may attract more attention to your advertisement. Avoid listing the negative aspects of the unit, but never be deceitful. Always be honest when advertising and when answering questions about the unit or building.

This article is an edited extract from Landlording in Canada Kit by Michael Drouillard, published by and reprinted here courtesy of Self-Counsel Press. To download the full e-book or for more information, click here

Canadian Housing Starts – December, 2017

Canadian housing starts surged in November, rising 13 per cent from October to 252,184 units at a seasonally adjusted annual rate (SAAR).  The six-month trend in Canadian housing starts jumped to 226,270 units SAAR, the highest its been in ten years.

The increase in new home construction was concentrated outside of BC, which saw starts decline 16 per cent to a still very strong 45,000 units SAAR in November on a monthly basis. Total starts in BC were up about 4 per cent year-over-year. Single detached starts were up 23 per cent on a monthly basis and 31 per cent compared to November 2016 while multiple starts were down 24 per cent month-over-month and fell 6 per cent year-over-year.

Looking at census metropolitan areas (CMA) in BC:

  • Total starts in the Vancouver CMA declined from a 12-month high in October, falling 8 per cent. The market is likely close to full-capacity with close to 40,000 units under construction across the metro-Vancouver area.
  • In the Victoria CMA, housing starts fell 17 per cent year-over-year and were down 71 per cent on a monthly basis after a wave of new multiple units in October.
  • New home construction in the Kelowna CMA were up 32 per cent from October and increased 62 per cent year-over-year due to jump in multiple unit starts.
  • Housing starts in the Abbotsford-Mission CMA jumped from just 20 total starts in November 2016 to 169 in November 2017.  On a monthly basis, starts were 45 per cent higher compared to October due primarily to an increase in single-family starts.

For more information, please contact:  Gino Pezzani.

Bank of Canada Interest Rate Announcement – December, 2017

The Bank of Canada maintained its target for the overnight rate at 1 per cent this morning. In the statement accompanying the decision, the Bank noted that the Canadian economy is evolving as expected, with growth slowing in the second half of the year. On inflation, the Bank expects the continued absorption of economic slack to push core inflation higher in subsequent months. Importantly, the Bank concluded its statement by noting that rate increases will be required over time, though it will proceed with caution as it assesses the economy’s sensitivity to higher rates.

Although the Bank of Canada has a bias toward raising rates over the next 12 months, it is currently sidelined by low inflation as well as concerns over how higher interest rates will interact with elevated household debt levels. We anticipate the Bank will remain on hold in early 2018 as it assesses the impact of the forthcoming mortgage stress test, but will look to raise rates one or two times in the second half of next year.

For more information, please contact: Gino Pezzani.

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Canadian GDP Growth (Q3’2017) and Canadian Employment – December, 2017

The Canadian economy grew 1.7 per cent in the third quarter, a significant deceleration from the over 4 per cent growth recorded in the previous quarter. Growth was led by gains in household spending while exports declined and business investment slowed. Despite the second half slowdown, the Canadian economy is still on track to grow more than 3 per cent this year, which would make it the envy of most advanced economies around the world.

While the economy slowed in the third quarter, employment in November surged. Canadian employment increased by 80,000 jobs while the the national unemployment rate fell 0.4 points to 5.9 per cent, the lowest rate since February 2008. In the twelve months to November, employment in Canada is up 2.1 per cent, or 390,000 jobs. In BC, a string of four straight months of declining job growth was broken as the province added 18,000 new jobs in November. Over the past twelve months, the level of employment in BC is up 3.8 per cent. The provincial unemployment rate ticked 0.1 points lower to 4.8 per cent.

For more information, please contact: Gino Pezzani.