November 2011 Volume 02 Issue 03
ACE Heard Of It?
>> Find out on Page 17
GOVERNMENT OF CANADA TAKES ACTION TO STRENGTHEN HOUSING FINANCING
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>> More on Page 8
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CONTENTS December 2011 Volume 02 Issue 03
FEATURED CONTENT
ACE - Heard Of It?
pg 17 pg 18
Market Watch Update - Healthy Fall Market Continues in November
pg 19
December Mid-Month Resale Market Figures
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Stricter Credit Score Guidlines Strandling Clients
pg 08 Canada’s Real Estate Market Both Competitive And Secure, National Survey Of REALTORSŽ Finds
pg 20
When A Detached Home Is Not A Detached Home
pg 22 Average House Prices a Misleading Gauge of the Health of the Canadian Real Estate Market: CIBC
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Royal LePage Meadowtowne Realty™ is a licensed franchise to Royal LePage and is Independently Owned and Operated. :KLOVW HYHU\ FDUH KDV EHHQ WDNHQ LQ SUHSDULQJ WKLV PDJD]LQH 7DQ‡JD]LQH DQG DOO YHQGRUV FRUSRUDWLRQV EXVLQHVV DQG DIILOOLDWHV JLYH QR ZDUUDQW\ IRU WKH LQIRUPDWLRQ FRQWDLQHG KHUHLQ 3RWHQWLDO SXUFKDVHUV VKDOO VDWLVI\ WKHPVHOYHV DV WR DOO PDWWHUV DQG VHHN LQGHSHQGHQW DGYLFH LI QHFHVVDU\ 7KH LQIRUPDWLRQ FRQWDLQHG KHUHLQ GRHV QRW IRUP DQ\ SDUW RI DQ\ FRQWUDFW RIIHU RU UHSUHVHQWDWLRQ $GGLWLRQDOO\ WKLV PDJD]LQH LV QRW LQWHQGHG WR VROLFLW SURSHUWLHV FXUUHQWO\ contracted and/or already listed for sale.
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Tan.gazine NEWS
Stricter Credit Sco rokers may have to shift Realtor referrals to the point of sale, instead of the point of purchase, said an industry veteran, identifying a spike in home sellers blocked from buying new homes because of a rigid adherence to credit score guidelines.
score on high ratios. What I’ve also seen is a number of clients referred to me just after they’ve sold their home and are about to buy a new one but because their credit score has taken a hit, there’s nothing I can do for them. They’re stranded.”
“I haven’t had a single client with a Beacon score of less than 600 get a (A) mortgage approved this year,” Nick Tassone, broker-owner of Midtown Mortgage Service in Sault Ste. Marie, Ont., told MortgageBrokerNews.ca. “We’re seeing either the lenders or CMHC stick to that recommended 600
The observations reflect those of two other high-volume veterans of the industry, both working Vancouver’s Lower Mainland. They’re also grappling with now-rigid credit score guidelines for clients, regardless of how solid their incomes.
S
Tan.gazine NEWS
ore Guidlines
trandling Clients Vernon Clement Jones November 14, 2011
It means that CMHC recommendations are now being adhered to more strictly, with most lenders declining deals that fail to meet those standards. The few willing to submit them to CMHC are finding it all but impossible to win the insurer’s backing, said Tassone. Under the Crown corp. “recommended” guidelines, homebuyers should have a Beacon score above 600 in order to win CMHC insurance on a loan to value of 80 per cent or higher. It jumps to 610 for LTVs of 90.1 per cent to 95 per cent and falls to 580 for conventional loans with an LTV of 60 per cent to 80 per cent. Realtors are largely unaware of just how closely lenders and default insurers are now sticking to those recommendations, Tassone, also a real estate agent, told MortgageBrokerNews.ca. “As a result, they’re not advising clients who may have taken a hit to their credit scores to not sell their homes, because they may not be able to buy a new one. “We as brokers have to educate Realtors about the credit score rules now.” Part of that may be brokers actively inserting themselves in the selling process, with Realtors referring clients to mortgage professionals even as they look to sell their existing homes. Calling a broker in early would effectively save both the broker and the real estate agent’s time at the same time give the client time to repair credit. It also creates the kind of goodwill needed to win that client’s future business, says Tassone, largely supportive of the stricter interpretation of credit guidelines. “Those with good credit should be rewarded,” he said.
penghocktan.com | 5
Tan.gazine NEWS
Bidding wars Heat Up Housing Market
After years of slumping prices, power sales and houses sitting on the market for months, it seems unbelievable, but it’s true — bidding wars are returning to Windsor real estate. Claire Brownell, The Windsor Star December 01, 2011
fter years of slumping prices, power sales and houses sitting on the market for months, it seems unbelievable, but it’s true — bidding wars are returning to Windsor real estate. “It’s interesting how this is developing along. Some of my salespeople are hard pressed to explain why it happens when it does,” said Frank Binder, the founder of Royal LePage Binder Real Estate. “We’re happy the demand is there and it’s returning to a balanced market.” Not just any home is attracting multiple offers, however. The ones that do tend to fall into two categories: houses that are in excellent condition and houses that are staggeringly cheap. There may be a lot of real estate on the market, but updated, move-in condition homes are in short supply. When one does come up for sale, frustrated buyers who have already passed on dozens of deteriorating properties pounce. Mary Morrison, an agent with Valente Real Estate, said she’s been involved in four multiple offer sales since September. 6 | penghocktan.com
At a brand new subdivision of semi-detached houses on Cobblestone Crescent in east Windsor, she said two houses next door to each other sold on the same day, with one getting two offers and $500 more than the asking price. “There are a lot of homes on the market, but a lot of those that are on the market, they’re just not good. So any builder that’s building a nice home, they’re going to sell it. Basically, the supply’s not there of nice homes,” she said. At the other end of the spectrum, Morrison said the real estate office is inundated with calls from people looking for fixer-uppers at rock-bottom prices so they can renovate and flip for a profit. For example, a house on Louis Avenue close to Caesars Windsor recently received multiple offers and sold for about $32,000, she said. “We are getting constant calls from out-of-towners, a lot of investors from Toronto, constant calls from people asking for houses under $40,000. They’re grabbing them,” she said. Morrison said many of the people looking for nice Windsor homes at a good price are retirees attracted by the climate.
Tan.gazine NEWS “For the last three years we saw everybody leaving and now new people are coming back,” she said. “A lot of people who are moving here are snowbirds, basically going down to Florida in the wintertime and staying in Windsor in the summer.” As people return to the city, they have to contend with the damage done by the poor economy over the last few years. People in financial trouble tend to delay expensive home repairs and by the time they have to sell, their house can be in dire condition. “A lot of people have lost jobs. Windsor’s gone through a lot of that. Where do you put your money? You don’t put your money in your house. You just try to make do with what you can and try to suffer through,” Binder said. “Then suddenly you’re faced with an economic downturn and now what do you have to do? Well, you have to sell the house you’ve been in for a long time and it’s not in the best shape.”
Binder said real estate statistics show Windsor is moving away from a buyer’s market and returning to a balance, with realtors selling roughly the same number of homes as are put up for sale in a given time period. Extremely low interest rates are also coaxing people to jump in and buy, he said. It may still be a far cry from the climbing values and fast-paced sales common in other Canadian cities, but Binder said the return to multiple offers is an encouraging sign. “You’ve got cheaper financing, you’ve got an adequate supply and you’ve got good demand. I think people are coming back to the real estate market with some confidence now and that’s a good thing.”
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Tan.gazine NEWS
– REALTORS® polled in a recent cross-Canada survey indicated that the country’s real estate market is both highly competitive and provides the necessary safeguards to protect consumers. Eighty-six per cent of real estate professionals said they worry that severe deregulation in the real estate industry would erode standards of customer service for Canadians who are buying or selling a home.
“Our company was founded on principles of client service and consumer protection. Our agents welcome competition in the industry, but are very concerned that the severe deregulation of the residential real estate brokerage industry would hurt, not help, Canadian home buyers and sellers,” said Phil Soper, president and chief executive, Royal LePage Real Estate Services. “To state that there is a lack of competition in the Canadian real estate industry is simply incorrect. Every day, the one hundred thousand men and women in the profession compete vigorously with each other and with unlicensed, unregulated alternatives. The range of services available from licensed REALTORS® is vast, with fees on the low end that extend downward to a small fraction of one percent of a home’s sale price.”
According to the online poll of 1,726 REALTORS® by Royal LePage Real Estate Services, the proposed changes to the Multiple Listing Service (MLS®) will do little to improve an already competitive industry. In the survey, REALTORS® were asked to comment on the potential impact of ‘unbundling’ real estate services and limiting the extent to which accredited real estate professionals manage the MLS® system, a listings database which holds detailed property information and is used by licensed agents in purchase and sale transactions. Eighty-six per cent of agents surveyed said they are “concerned that the push to foster increased competition in the industry will result in lower customer service standards.” When asked about the state of the marketplace currently, 76 per cent of respondents said the industry is “highly competitive.” 8 | penghocktan.com
The Royal LePage survey revealed the extent to which real estate professionals counsel buyers and sellers during the negotiation and completion of a sale transaction. When asked how often they help clients avoid financial or transactional mistakes, more than 88 per cent of REALTORS® surveyed said “very often” or “often.” The poll also found that real estate agents’ primary consideration when advising clients is to optimize and protect clients’ financial well-being. “Entering into a real estate transaction is often the largest financial decision a person or family will make, and government regulators and we in the profession have a responsibility to Canadians to
Tan.gazine NEWS ensure that the marketplace has proper safeguards in place,” Soper said. “The critical elements in maintaining a fair and efficient real estate market include the need to ensure REALTORS® meet ethical and educational standards, to protect our clients’ sensitive personal data, and to ensure the integrity of listings information.” While almost all advisors surveyed use the MLS® system (98 per cent), they commonly use other tools to promote listings, including an open house (90 per cent), newspaper advertising (89 per cent), and their website (87 per cent).
"We surveyed our agents’ opinions on these important issues because we feel it's critical for those in the profession – real estate professionals from across Canada working with home buyers and sellers every day – to have a voice in this matter," added Soper. Royal LePage advisors responding to the poll had an average of more than 15 years of experience in the industry. Results from the Royal LePage Real Estate Advisors Survey, conducted online in April 2010, can be found below.
Agree or disagree – I am concerned that the push to foster
Indicate which methods you have used to promote a listing
increased competition in my industry will result in lower
and help clients sell property:
customer service standards: www.mls.ca or www.realtor.ca: 1,688 responses (97.8 per cent) Agree: 1,482 responses (85.9 per cent)
Open house: 1,559 responses (90.3 per cent)
Disagree: 244 responses (14.1 per cent)
Newspaper advertising: 1,534 responses (88.9 per cent)
Describe how competitive the real estate market in Canada is:
Broker website: 1,504 responses (87.1 per cent)
Highly competitive: 1,313 responses (76.1 per cent)
Personal website: 1,322 responses (76.6 per cent)
Competitive for a mature industry: 331 responses (19.2 per cent)
Email marketing: 1,097 responses (63.6 per cent)
Moderately competitive: 75 responses (4.3 per cent)
Direct mail: 934 responses (54.1 per cent)
Not competitive: 7 responses (0.4 per cent)
Kijiji: 591 responses (34.2 per cent) Craigslist: 454 responses (26.3 per cent)
How often do you feel like you have helped clients avoid
Facebook Marketplace: 397 responses (23 per cent)
financial or transactional mistakes during the purchase or sale
Other: 392 responses (22.7 per cent)
of a home?
How long have you been with Royal LePage? Response average: 15.5 years (Response total: 26,728 / Response
Very often: 887 responses (51.4 per cent)
count: 1,726)
Often: 640 responses (37.1 per cent) Occasionally: 174 responses (10.1 per cent)
How often do you participate in ongoing education through
Seldom: 14 responses (0.8 per cent)
formal conferences, seminars or courses?
Never: 11 responses (0.6 per cent) Four or more times per year: 738 responses (42.8 per cent)
Rank your top considerations when advising a client on a
One to three times per year: 796 responses (46.1 per cent)
transaction (one is highest, five is lowest):
Once every two years: 92 responses (5.3 per cent) Less than once every two years: 72 responses (4.2 per cent)
Optimizing and protecting your client’s financial well-being: average
Never: 28 responses (1.6 per cent)
rank = 1.5 Completing the transaction in a timely manner: average rank = 1.8 Providing the full package of brokerage services: average rank = 1.9
penghocktan.com | 9
Tan.gazine NEWS
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anada’s largest real estate brokerage company is expanding, as Brookfield Residential Property Services pays $131-million to absorb U.S.-based rival Prudential Real Estate and Relocation Services. The company – a unit of of Toronto-based Brookfield Asset Management Inc. (BAM.A-T28.500.471.68%) and best known in Canada for its Royal LePage brand – said it would take over its rival in a deal that will make it the third largest brokerage in the world, with more than 80,000 agents spread through North America. The takeover also gives it a foothold in nine other countries, including China, Brazil and India. It’s the third time the company has taken advantage of a weaker U.S. rival. In 2009, it took over both GMAC Financial and Real Living, merging the two companies into single entity with some 15,000 agents and $20-billion in annual sales. Last year, it moved 85,000 families in and out of 125 countries. Prudential – a financial services company – stepped into the real estate market in 1987. While Prudential said in a statement that “proceeds of the sale� would be $110-million, it added that the net book value of the real estate division was $25-million.
10 | penghocktan.com
It didn’t sell the division out of desperation – in its last quarter it reported a profit of $1.5-billion ($3.06 a share), up from $1.1-billion (or $2.46) a year ago. Prudential’s Earl Lee will continue to lead the U.S. real estate business, and said now that it is untethered from its massive parent it can more aggressively pursue global growth. “Prudential’s real estate and relocation services businesses join a global company with a track record of over 100 years of success,� he said. “We’re excited to become part of a company that is focused on and deeply immersed in the real estate sector and is in the business for the long-term.� Brookfield operates its residential brokerage businesses through a franchising model. In Canada it operates as Royal LePage and La Capitale Real Estate Network and Johnston & Daniel. It franchises the Real Living Brand in the United States, and will continue to licence the Prudential brand as well. Brookfield Residential has benefited from a strong Canadian real estate market, with a steady royalty flow from its franchises generating a steady stream of cash. But its stock has been beaten back in 2011, with investors pushing its shares down 13 per cent.
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f so you'll want to enlist the services of a REALTORÂŽ to help you navigate through this complicated business transaction from start to finish. Your REALTORÂŽ has what it takes to help you every step of the way to achieving your home ownership dreams. And, he or she will be the top player on a team of experts who will protect your interests and ensure your real estate transaction goes smoothly.
The team Depending on your needs, the other experts on your team will likely include a lender, a lawyer, and insurance agent and a home inspector. Your REALTORÂŽ will offer guidance as to how to proceed with your purchase or sale and when it's time to bring in the other experts and professionals on your team.
REALTORSÂŽ role A REALTORÂŽ has vast amounts of real estate knowledge and the experience required to stay cool, even in a hot real estate market. In Ontario, a REALTORÂŽ is a licensed real estate professional who is a member of a local real estate board as well as the Canadian Real Estate Association (CREA) and the Ontario Real Estate Association (OREA). When you work with a REALTORÂŽ, you can expect strict adherence to provincial law as well as 12 | penghocktan.com
to a code of ethics ensuring you'll receive the highest level of service, honesty and integrity. If you are buying a home, your REALTORÂŽ can help you determine how much house you can afford, offer advice on choosing the right neighbourhood and ensure your interests are best served during negotiations. If you are selling a home, your REALTORÂŽ will help you determine a fair and accurate asking price for your home, develop a marketing plan, offer advice to help make your home more "saleable," screen potential buyers, show your home and, of course, negotiate on your behalf.
Lender As you and your REALTORÂŽ begin looking for a home, it is wise to also begin looking for a mortgage lender. Your REALTORÂŽ can help you review various mortgage options to ensure you get the best rates and terms available. Although most buyers will start their search with their own bank or financial institution, it pays to shop around for more competitive rates. Often, your bank will match or beat a competitor's rate to keep you as a customer.
Lawyer It is recommended that you have a lawyer waiting in the wings, preferably one who specializes in real estate transactions, to review complicated
Tan.gazine NEWS documents such as the Agreement of Purchase and Sale. If you are selling, it's wise to have a lawyer review an offer to purchase before you sign it. As a buyer, your lawyer will also ensure you receive clear title to the property and calculate the amount of land transfer tax you will be required to pay.
Home inspector Having a home professionally inspected before you seal the deal to buy can help you avoid costly surprises after you move in. A home inspector will report any minor problems as well as major ones such as structural deficiencies that could affect your decision to buy at all or at what price.
Insurance broker In order to secure financing, mortgage lenders require insurance on the home. Just like when you shopped for your mortgage, do your homework with insurance companies too. Insurance coverage and rates vary and you will want to be sure you get the coverage you want at a fair price.
Your MVP Having the right team of experts on your side can mean the difference between a successful real estate transaction and a personal and financial nightmare. When you select your team, start with a REALTOR® - he or she will be your Most Valuable Player. REALTOR® is a registered trademark of REALTOR Canada Inc., a company owned equally by The Canadian Real Estate Association and the National Association of REALTORS® and refers to registered real estate practitioners who are members of The Canadian Real Estate Association. Used under license.
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Tan.gazine NEWS
GOVERNMENT OF CANADA TAKES ACTION TO STRENGTHEN HOUSING FINANCING KƩĂǁĂ͕ &ĞďƌƵĂƌLJ ϭϲ͕ ϮϬϭϬ
ANADA'S HOUSING MARKET REMAINS STRONG Canada's housing market remains healthy and stable. According to the International Monetary Fund, our housing market is fully supported by sound economic factors, such as low interest rates, rising incomes and a growing population. Moreover, mortgage arrears—overdue mortgage payments—have also remained low. Today's announcement is part of the Government's policy of proactively adjusting to developments in the housing market that could take root and cause instability. These steps are timely, targeted and measured, and will reinforce the importance of Canadians borrowing responsibly and using home ownership as a savings mechanism.
MORTGAGE INSURANCE Mortgage insurance (which is sometimes called mortgage default insurance) is a credit risk management tool that protects lenders from losses on mortgage loans. If a borrower defaults on a mortgage, and the proceeds from the foreclosure of the property are insufficient to cover the resulting loss, the lender submits a claim to the mortgage insurer to recover its losses. The law requires federally regulated lenders to obtain mortgage insurance on loans in which the homebuyer has made a down payment of less than 20 per cent of the purchase price (also called high 14 | penghocktan.com
loan-to-value ratio loans). The homebuyer pays the premium for this insurance, which protects the lender if the homebuyer defaults. The Government ultimately backs most insured mortgages in Canada. It is responsible for the obligations of Canada Mortgage and Housing Corporation (CMHC) as it is an agent Crown corporation. In order for private mortgage insurers to compete with CMHC, the Government backs private mortgage insurers' obligations to lenders, subject to a deductible equal to 10 per cent of the original principal amount of the loan. In October 2008, the Government adjusted its minimum standards for government-backed, high-ratio mortgages, including: )L[LQJ WKH PD[LPXP DPRUWL]DWLRQ SHULRG IRU QHZ government-backed mortgages to 35 years. 5HTXLULQJ D PLQLPXP GRZQ SD\PHQW RI ILYH SHU cent for new government-backed mortgages. (VWDEOLVKLQJ D FRQVLVWHQW PLQLPXP FUHGLW VFRUH requirement. 5HTXLULQJ WKH OHQGHU WR PDNH D UHDVRQDEOH HIIRUW to verify that the borrower can afford the loan payment. ,QWURGXFLQJ QHZ ORDQ GRFXPHQWDWLRQ VWDQGDUGV to ensure that there is evidence of reasonableness of property value and of the borrower's sources and level of income.
Tan.gazine NEWS MEASURES ANNOUNCED The Government announced three changes to the standards governing government-backed mortgages. QUALIFYING AT A FIVE-YEAR RATE Current interest rates are at record low levels, which has improved the affordability of housing for Canadians. It is important that Canadians borrow prudently and are able to manage their debt loads when interest rates rise. Lender and mortgage insurers look at two key ratios when assessing the ability of a borrower to make payments on a mortgage loan: *URVV 'HEW 6HUYLFH *'6 UDWLR³WKH UDWLR RI WKH carrying costs of the home, including the mortgage payment, taxes and heating costs, to the borrower's income. 7RWDO 'HEW 6HUYLFH 7'6 UDWLR³WKH UDWLR RI WKH carrying costs of the home and all other debt payments to the borrower's total income. Currently, the interest rate used to determine the mortgage payment for these calculations is either the rate fixed for the term of the mortgage or, in the case of a variable-rate mortgage and mortgages with terms of less than three years, the greater of the contract rate and the prevailing three-year fixed rate. The adjustments to the mortgage framework will require mortgage insurers to ensure that borrowers qualify for their mortgage amount using the greater of the contract rate or the interest rate for a fiveyear fixed rate mortgage when calculating the GDS and TDS ratios. This measure is intended to protect Canadians by providing them with additional flexibility to support mortgage payments at higher interest rates in the future.
LIMIT THE MAXIMUM REFINANCING AMOUNT TO 90 PER CENT OF THE LOAN-TO-VALUE RATIO Borrowers seeking financial flexibility can currently refinance their mortgage and increase the amount they are borrowing on the security of their home up to a limit of 95 per cent of the value of the property. This type of refinancing lowers the borrower's equity in their home. The adjustments today will lower the maximum amount of the mortgage loan in a refinancing of a government-backed high ratio mortgage loan to 90 per cent of the value of the property, consistent with the principle that home ownership is a tool for savings. DISCOURAGING SPECULATION BY REQUIRING A MINIMUM DOWN PAYMENT OF 20 PER CENT FOR NONOWNER-OCCUPIED PROPERTIES This measure will require a minimum down payment of 20 per cent for government-backed mortgage insurance on non-owner-occupied properties purchased for speculation. Currently, borrowers may purchase a residential property with a 5 per cent down payment. Today's change will require a 20 per cent down payment for small (i.e., 1- to 4-unit) non-owner-occupied residential rental properties. Borrowers purchasing owner-occupied residential properties which also include some rental units (e.g., borrowers purchasing a duplex to live in one unit and rent out the other) will still be able to access government-backed mortgage insurance with a 5 per cent down payment. MOVING TO THE NEW FRAMEWORK These adjustments to the mortgage insurance guarantee framework are intended to come into force on April 19, 2010. Exceptions would be allowed after April 19 where they are needed to satisfy a binding purchase and sale, financing, or refinancing agreement entered into before April 19, 2010.
penghocktan.com | 15
Tan.gazine NEWS
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anadian housing numbers released Thursday suggest that the market is getting tight and inching closer to a sellers' market as sales and prices jumped again in November. Figures released by The Canadian Real Estate Association (CREA) shows that sales activity rose by a slight 0.5 per cent in November on a month over month basis, while year-over-year sales also rose. However, in the Greater Toronto Area listings in November fell 4.4 per cent, while the average selling price was $479,302, up 2.9 per cent from October.
told CTV News. "They are competing in multiple offer situations and prices have risen to the point where we are seeing new home buyers move further and further north." And Lusink said now might be the right time for a seller to put a "for sale" sign on their front lawn. "You buy and sell in the same market, so I would suggest that it's a good time for a seller to put their homes on the market," Lusink said. The market is expected to remain tight for the next few months before loosening up in the spring and creating a more balanced market. Overall, the national average price increased 4.6 per cent year-over-year to $360,396. And while prices continue to rise, CREA noted that November's increase was the smallest jump since January. Meanwhile, the number of newly listed homes was down 3.4 per cent from October to November. A total of 432,048 homes have changed hands on CREA's MLS system so far this year, about 0.7 per cent above the 10-year average.
"It is very much a seller's market at the moment," John Lusink, a Royal LePage broker in Newmarket
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Meet Peng Ann
Member of the ACE Board of Directors
Meet Tan Peng Ann, your trainer from Singapore. He is a retired Colonel with more than 30 years of leadership experiences in the Singapore Armed Forces, He currently conducts training for the government and lectures for a Human Resource Institute. Peng Ann also runs a cafe business, He is the author of a book “Create Your Rainbow� on how to prepare for a successful retirement. In Singapore, he has been a Town Councilor and Chairman of a Community Club; He uses his experiences to assist in humanitarian projects in Cambodia. Peng Ann graduated with a Bachelor of Arts Degree from the National University of Singapore and also holds a Master of Science in Training. He has been presented national awards by the president of Singapore; the Efficiency Medal and the Public Administration Medal for his excellent work in the Public Service and the Public Services Medal for his contributions to the community in Singapore.
Tan.gazine NEWS Healthy Fall Market Continues in November In November, the median price was $480,421 from the $437,494 recorded during November of 2010. Toronto, December 6, 2011
Greater Toronto REALTORS® reported 7,092 residential transactions through the TorontoMLS® system in November – up 11 per cent in comparison to November 2010. At the same time, the number of new listings was up by 14 per cent in comparison to last year. “We have seen strong annual sales growth through the 2011 fall market. The increase in transactions has been broad-based, with strong growth across low-rise and high-rise home types throughout the Greater Toronto Area,” said Toronto Real Estate Board (TREB) President Richard Silver. “The market has also become better supplied, with annual new listings growth outstripping that of sales. As this trend continues into 2012, we will see more balanced market conditions.”
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The average price for November transactions was $480,421, representing an increase of almost 10 per cent in comparison to $437,494 in November 2010. “Despite strong price growth this year, the housing market remains affordable in the GTA,” said Jason Mercer, TREB’s Senior Manager of Market Analysis. “The correct method of assessing affordability is to consider the share of the average household’s income that is dedicated to mortgage principal and interest, property taxes and utilities. Currently, this share remains in line with generally accepted lending guidelines. Given this positive affordability picture, average price growth is forecast to continue in 2012, albeit at a more moderate pace.”
Tan.gazine NEWS Greater Toronto REALTORS® Report Mid-Month Resale Market Figures TORONTO, December 16, 2011 -- Greater Toronto REALTORS® reported 2,699 transactions through the TorontoMLS® system during the first 14 days of December. This result was 11 per cent above the number of transactions recorded during the same period in 2010. On a year-to-date basis, sales amounted to 87,407 – up 4.3 per cent compared to 2010. “We have had the second best year on record for transactions under the current Toronto Real Estate Board boundaries. Households have continued to take advantage of affordable home ownership options across the diverse array of housing types available in the Greater Toronto Area,” said TREB President Richard Silver. The average selling price during the first two weeks of December 2011 was $460,967 – up six per cent in comparison to December 2010. “Strong average price growth, driven by seller’s market conditions, has been largely mitigated by the continuation of very low borrowing costs this year. The share of average household income going toward mortgage principal and interest has increased only marginally and remains in line with accepted mortgage lending standards,” said Jason Mercer, TREB’s Senior Manager of Market Analysis.
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Tan.gazine NEWS
WHEN A DETA IS NOT A DETA Bob Aaron in Legal, Home Selling December 01, 2011
hen you’re selling a house known as a link-semi, is it wrong to advertise it as a detached home?
The property was listed at $320,000, sold for $329,000 through a buyer broker, and closed Aug. 31, 2007.
The link house style was popular in Toronto in the 1970s and 1980s. The only physical attachment that joins two adjacent houses typically consists of one or two short rows of underground concrete block footings, at right angles to the foundation walls. They are entirely unnecessary for structural reasons.
Prior to closing, neither the listing agent nor the buyer’s agent disclosed that the property was a link house, although it could easily have been verified by calling the city’s zoning department or reviewing the R-plan. Had the buyers seen the plan, they would have noticed the dotted lines indicating that the foundations were connected.
Looking at the houses from the street, they are clearly detached, with a few feet separating them. It is impossible to tell that the houses are linked because the only physical attachment is the concrete blocks that are invisible above ground level. In fact, the only purpose of the attaching footings was to allow builders to construct what looked like detached houses on lots which were designated for semi-detached models. One Toronto real estate agent found out the hard way that the Real Estate Council of Ontario (RECO), the industry regulator, takes a dim view of agents who advertise link houses as detached. Back in May 2007, this selling agent listed a house for a client, describing it on the Multiple Listing Service (MLS) as “detached,” which from a street view, it was. 20 | penghocktan.com
More than 18 months later, the buyers complained to RECO about the listing agent, saying that the house was misrepresented as being detached, and that had they known it was technically a link house, their purchase decision might have been affected. (Hindsight is always 20-20.) The agent was charged with violating various sections of the RECO Code of Ethics, including failing to treat buyers with fairness, honesty and integrity, failing to demonstrate reasonable knowledge, skill and competence, failing to determine and disclose material facts, and making an inaccurate representation. He was also charged with failing to use his best efforts to prevent error, misrepresentation, fraud or any unethical practice.
Tan.gazine NEWS
ACHED HOME ACHED HOME To me, it looks like RECO threw the book at the unfortunate agent. Ultimately he agreed to the buyers’ representation of the facts, and that he had breached the RECO code of ethics. He was assessed a rather stiff fine of $8,000, and required to take an ethics course. Having had the experience of sitting on Law Society discipline panels over the last 16 years, it seems to me that a good argument can be made that the anonymous RECO panel reached the wrong conclusion and imposed an unduly severe penalty. Although the property was technically known as a link, it was clearly and obviously detached to anyone standing at the curb looking at the property. Despite the fact that the agent involved admitted to a breach of the code of ethics, it seems to me that he was under no obligation to do so and should have been given the benefit of the doubt due to the ambiguous terminology. Visually, the house was detached, even though it was technically classified as a link house. I’m not sure the agent did anything wrong, or if he did, it was a technicality only, resulting in no loss to the homebuyers. I doubt that it merited an $8,000 penalty.
The RECO panel’s decision fails to discuss the obligations of the selling agent and the buyers’ lawyer to show them the R-plan before closing. Had this been done, I doubt the case would ever have reached the RECO discipline panel. I wonder whether the result would have been the same if one or both of the adjacent owners had dug up the connecting foundations or footings, which serve no physical purpose, and simply demolished a few inches so that the houses were no longer “connected.” Bob Aaron is a sole practitioner at the law firm of Aaron & Aaron in Toronto and a board member of the Tarion Warranty Corp. Bob specializes in the areas of real estate, corporate and commercial law, estates and wills and landlord/tenant law. His Title Page column appears Saturdays in The Toronto Star and weekly on Move Smartly
Need a Mortgage Broker?
Tony D’Avino Mortgage Broker Lic.# M08008849
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Tan.gazine NEWS
Average House Prices a Misleading Ga Health of the Canadian Real Estate Ma he Canadian housing market is becoming highly segmented and multi-dimensional which is making traditional measures, like average prices, increasingly irrelevant in gauging the health and state of the sector, finds a new report from CIBC World Markets Inc. "Glancing at popular metrics such as the price-toincome ratio or the price-to-rent ratio, it is tempting to conclude that the housing market is already in clear bubble territory and a huge crash is inevitable," writes Benjamin Tal, Deputy Chief Economist at CIBC, in his latest Consumer Watch Canada report. "Tempting, but probably wrong. When it comes to the Canadian real estate market at this stage of the cycle, any statement based on average numbers can be hugely misleading. The truth is buried in the details—and there the picture is still not pretty, but much less alarming." He notes that while the average house price in Canada rose 8.6 per cent on a year-over-year basis in May, that number slows to 5.6 per cent if you take Vancouver out of the picture. Remove Vancouver and Toronto and the average price increase drops to 3.7 per cent. By digging into the details on the high profile Vancouver market he found that the gap between average and median prices is reaching an all-time high. While the average house price climbed 25.7 per cent on a year-over-year basis to more than $800,000 in May, he found that by removing properties that sold for more than a $1 million there was a much more moderate price appreciation in the market. It also reduced the average sale price by $220,000 to just over $590,000. 22 | penghocktan.com
"What makes Vancouver abnormal is the high end of its property market," says Mr. Tal. "And in this context many, including Bank of Canada Governor Mark Carney, point the finger at foreign—mainly Asian wealth—as the main driver here." Data on the extent of the role that Asian investors have played in Vancouver housing prices is quite limited. Mr. Tal's analysis of data obtained from Landcor Data Corporation suggests that only 10 per cent of the nearly 4,500 transactions involving foreign money over the past five years were above the $1 million mark, with an average purchasing price of just under $600,000. According to the information provided by Landcor, foreign money accounted for only 2.6 per cent of all sales during the same period. However, Mr. Tal believes that could be a serious underestimate, as it is based on where property tax assessments are mailed, and would exclude offshore buying on behalf of children or other local proxies. "There are many reasons to believe that a significant portion of what is perceived to be buying by offshore investors is, in fact, driven by Chinese immigrants that are integrated into the community but still maintain strong links to mainland China, with many residing and working in China while their family establishes roots in B.C." "Looking beyond the average price numbers reveals a highly segmented and multi-dimensional market that is probably influenced by different forces," says Mr. Tal. "But even a multi-dimensional market can overshoot—and the likelihood is that prices in the Canadian market and its sub-segments are higher than what can be explained by factors such as income growth, rent and household formation. Given that, the housing market will eventually correct. The only question is what will be the
Tan.gazine NEWS
auge of the rket: CIBC
Benjamin Tal, Deputy Chief Economist, CIBC World Markets Inc July 07, 2011
mechanism of that correction." Mr. Tal feels the price correction in Canada will be gradual as the two key triggers for a price crash - a significant and quick increase in interest rates and/or a high-risk mortgage market that is very sensitive to changes in economic factors - are not at play in Canada. "In Canada, a sharp and brisk tightening cycle is unlikely. The market expects a gradual increase in short-term rates in the coming years. The rising number of mortgage holders that carry a variable rate mortgage will be the first to feel the pain. But if history is any guide, they will return quickly to the comfort of a five-year fixed rate the minute the Bank of Canada starts hiking." He also believes that the country is in relatively good shape when assessing the two sub-segments of the mortgage market that traditionally account for most defaults: mortgage holders that carry a debt-service ratio of more than 40 per cent and those with less than 20 per cent equity in their house. Just over six per cent of households have a debt service ratio of more than 40 per cent—a number that has risen by a full percentage point since 2008. "However, this ratio is still well below the ratio seen in 2003, when the effective interest rate on debt was more than a full percentage point higher, and no correction in house prices ensued," adds Mr. Tal.
surprisingly, Vancouver has the highest ratio of households with high debt-service ratio, followed by Toronto." A little more than 17 per cent of the Canadian residential real estate pool is in properties with less than a 20 per cent equity position, a number that has been rising over the past few years. More than 80 per cent of households with less than a 20 per cent equity position are first time buyers. "Digging deeper and looking at the households with both low equity positions and high debt-service ratios, we found that this fragile segment of the market accounts for only 4.6 per cent of total mortgages—a number that has been on an upward trend over the past few years," says Mr. Tal. "Shock the system with a 300-basis-points rate hike and that number would rise to a still-tempered 6.5 per cent. Historically, even in that group, the default rate has been well below one per cent. Thus, short of a huge macro shock, there does not appear to be the risk of large scale forced selling that would typically be the trigger for a precipitous plunge in the national average house price. "As a result, while house prices are likely to adjust as interest rates eventually climb, the national pace of any correction is likely to be gradual. That could still entail a period in which housing underperforms other assets as an investment class, until rising incomes and a tame price trajectory bring the market back to equilibrium."
"All other things being equal, even a 300-basispoints rate hike by the Bank of Canada would take this ratio to only just over eight per cent. Not
Detailed analysis shows a highly segmented market that will see prices drop over time, but preconditions for a market crash don't exist
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Tan.gazine NEWS
3RW 6PRNLQJ Mark Weisleder - The Star December 02, 2011
everal readers have asked whethe whether ther you can evict a tenant who is smoking ng marij marijuana for mar medicinal purp purposes, purposes poses or o if you can refuse to rent to someone who tells you that they have a license to grow marijuana for medicinal purposes.
solution that either of them could come up with to reduce the danger to the other tenants. The judge agreed with Spelcham and Buchanan was evicted, probably because if you can prove hardship, you usually succeed in defending a claim under the Human Rights Code.
A few B.C. court cases in B.C. shed some light on the issue. The short answer is that it depends. Bill Spelcham owned a condo which he rented to Ryan Buchanan who had a license to grow marijuana for medicinal purposes. Spelcham visited the condo and noticed mould and mildew because of the high moisture in the unit. He evicted Buchanan in 2007, arguing that the marijuana growing damaged his unit, endangered the other tenants and placed him at significant risk.
In a 2008 case, Vancouver Islander Christina Goluch rented an apartment from the Greater Victoria Housing Society and did not disclose that she smoked marijuana for medicinal purposes. The housing association tried to evict her three years later. She fought the eviction claiming discrimination based on her illness. The court refused the eviction because no damages to the unit were proven.
Buchanan filed a Human Rights complaint claiming he was being discriminated against because of his illness. At the hearing, Spelcham was able to show that it would create a real hardship for him to try and accommodate Buchanan, since there was no
In a third B.C. case, tenants in a housing complex complained about the constant marijuana smoke coming from the apartment, claiming it caused harm to themselves, their children and visitors. There was also concern that the presence of the
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Tan.gazine NEWS
plants could damage mage ge the build building. ilding. The judge accepted the evidencee of tthe other ther tenants te and found that Eric Young disturbed rbed rb d th tthe other tenants and could not show how the problem could be solved. Young was evicted. In Ontario, there have been some interesting related cases on evicting tenants who smoke which can be used as a guide. In the first case, the building had a forced air system, so the smoke from one of the units could not be prevented from entering the other tenants’ units. Tenants complained and since the smoker would not agree to stop smoking, he was evicted. In another case, a tenant rented a furnished apartment and agreed not to smoke. The landlord found that the tenant smoked and caused $10,000 worth of damages to the furniture, drapes, bedding and carpets. The tenant was evicted and had to pay $10,000 in damages.
So it seems if you can prove that at the tenan tenant growing marijuana is bothering the other tenants, tena enants, damaging the he building and/or increasing the landlord’s landl ndlord’s risk, they will probably bly be evicted. B But if you can come up with a solution olution to properly ventilate tilate the th unit un at reasonable cost, to minimize the problem, you may ma m not succeed with the eviction. We have a similar Human Rights hts Code in Ontario, so if a tenant presents you with a license to grow on, you should marijuana legally in a tenant application, first consult with your insurer to determine mine if this nsurance will cause adverse consequences to your insurance policy. You may also wish to review the matter er with an electrician and building contractor, to determine mine whether the growing could cause long term damage to your property. If renting the unit would cause this hardship to the landlord, then in my opinion, you could refuse to rent the unit to the tenant. In all cases, legal advice should be obtained in advance.
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$399,883 penghocktan.com | 27
Tan.gazine NEWS
DIY - Winter Holiday Recipes Check out food.chatelaine.com for more cool recipes
December 01, 2011
Ultimate Sh Preparation time: 25 minutes Makes 24 Cookies Ingredients 2 cups all-purpose flour 3/4 cup icing sugar 1/3 cup rice flour 3/4 tsp salt 1 cup cold unsalted butter, cubed Nutrients per Serving 128 calories 1 g protein 13 g carbohydrates 8 g fat 74 mg sodium
28 | penghocktan.com Roberto Caruso
Tan.gazine NEWS
hortbreads
A Holiday Favorite
Let’s Bake! 1. Preheat oven to 300F. Line a 9 × 13-in. non-stick metal pan with parchment, with overhanging edges. 2. Whirl flour with icing sugar, rice flour and salt in a food processor until combined. Add cubed butter through the feed tube while pulsing until dough just comes together. Dough will be slightly crumbly. Transfer to prepared pan. Press dough over bottom of pan. Use the flat bottom of a measuring cup to smooth the top. Score the surface into 24 squares, if desired. Prick dough all over with a fork. 3. Bake in centre of oven until top is just golden, 25 to 30 min. Cut shortbread into squares while still hot. Remove parchment and place on cooling rack. Keep in an airtight container at room temperature for several weeks.
Try Out These Delicious Variations! Skor: Stir 2 chopped 39-g Skor bars into flour mixture. Continue with recipe. Toblerone: Push a piece of Toblerone into each scored square before baking. Lemon: Stir 1 tbsp lemon zest into flour mixture. Continue with recipe. Whisk 3/4 cup sifted icing sugar with 3 tbsp lemon juice until smooth. Lightly brush over cooled cookies, over a cooling rack. Excess icing will drip through the rack. Let stand 1 hour or until dry. Chocolate: Instead of 1/3 cup rice flour, sift together 3 tbsp rice flour and 3 tbsp cocoa powder. Continue with recipe. Drizzle cooled cookies with melted chocolate.
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