VOSTNER-BELL ELITE HOME MARKETING
GOOD For Your Wallet
Jason Bell, Tess Vostner-Bell & Associates www.vostnerbell.com
(403) 830-5800 & (403) 689-1199
MaxWell Canyon Creek (403) 278-8899 www.maxwellrealty.ca
3205 380 Canyon Meadows Drive SE
Calgary, Alberta T2J 7C3
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Calgary Real Estate News
Canadian mortgage market not the U.S.
by Sharon Essington
Courtesy www.cren.ca (Calgary Real Estate News)
With falling markets and failed bail out plans taking centre stage in the press, it is reasonable to assume would-be homeowners here in Canada might be leery of getting into the real estate market at this point in time.
Calgary is definitely experiencing a buyer’s market situation, which is evident by the number of houses for sale that just aren’t moving, yet buyers seem slow to take action. Is it the overwhelming inventory that is keeping buyers at bay? Or the lack of a motivational factor, such as the rising costs and bidding wars of the past? Or is it the fear around international real estate markets and a concern that Canada may be heading in that direction too?
Perhaps all of the above are factoring into the reluctancy some buyers are experiencing that has them still sitting on the fence.
The truth is that Canada’s and the United States’ real estate markets are dramatically different in a number of significant ways, but unfortunately that message seems slow to get across to Canadian readers, perhaps because fear mongering headlines tend to sell more papers.
The largest contributing factor to the U.S. mortgage meltdown is the subprime explosion, which according to data released by Benjamin Tal, senior economist with CIBC World Markets, accounted for no less than 33% of American mortgage originations.
Alternatively, Canada’s subprime mortgage count is estimated to have not exceeded 5.4% of total originations while at its peak.
Mortgages such as the NINJA mortgage were common to American lenders, the acronym meaning no income, job or assets were required for approval.
I suppose the beauty of hindsight is always clear, but it does seem quite evident that without income, one might not be in the position to repay the mortgage loan. These types of underwriting guidelines thankfully never occurred here in conservative Canada.
Couple this with the fact that Canadians as a whole tend to carry less consumer debt than their American neighbours, and according to a study recently released by Scotiabank, Canadian home equity on average is almost 70% of the current residential values, meaning on average, Canada’s total mortgage debt is approximately 30% of the total value of Canadian homes. This equity position has in fact increased over the last decade’s percentage of about 66%.
Flip to the south side of the border and we see that home equity has been dramatically decreased to approximately 45% throughout the nation.
Much of this erosion was because of home equity lines of credit, in which homeowners created an unsustainable bubble of spending throughout the American economy.
Employment is also stronger in Canada than in the United States. Our employment-to-population ratio has been rising over the last decade from just below 60% in 1998 to over 63% in 2008, setting new record highs every year from 2003 to 2008, according to Statistics Canada.
With a larger base of employed individuals in Canada, our debt level and credit history is stronger, and as a nation we have more qualified homebuyers to choose from.
It is true we have seen house prices come down in value here in Alberta, but that does not mean we are experiencing a crisis. It simply reinforces that all markets, including real estate, are cyclical in nature.
For those who bought in the peak of 2006 to 2007, it may make sense to not sell right now, but perhaps consider renovating if your needs have changed.
Real estate is intended to be a long term investment and the timing of a sale is important.
For those prospective buyers that were priced out of the real estate market during the past few years, 2008 is a dream come true.
Purchase prices are lower, volume is plentiful, sellers are ready to negotiate and our Canadian real estate market is secure.
Don’t let fear mongering keep you away from what is potentially one of the best times to buy that Calgary has seen in the past few years.
--Sharon Essington is a Mortgage Consultant with Canada Mortgage Direct. Sharon specializes in providing a creative approach to mortgage financing for individuals looking to improve their lives through real estate. For more information on this topic, or to discuss your individual mortgage needs, please call 403.239.8250.
REALTORS® require ID in real estate transactions
by Dan Leahul
Courtesy www.cren.ca (Calgary Real Estate News)
Calgary Real Estate Board President Ed Jensen eagerly welcomed new federal policy now requiring all REALTORS® to obtain identification from their clients when conducting any real estate transaction in the city.
As of Monday, June 23, homebuyers and sellers were required to provide their REALTOR® with a birth certificate, driver’s license or passport, in an effort to help detect and deter money laundering and the financing of terrorist activities.
“This is a good program and simply a minor business adjustment for us,” said Jensen. “A minor inconvenience for the greater good of public safety.”
The new policy (Bill C-25) passed in 2007, comes straight from federal Finance Minister Jim Flaherty and the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC), the federal agency responsible for collecting financial intelligence for suspected money laundering operations.
REALTORS® will now be required to keep client information, including name, address, date of birth and occupation, plus transaction receipts for five years.
The policy also requires REALTORS® to report any real estate transaction deemed suspicious.
Real estate associates must also now track the source of funds received during the course of a real estate transaction, such as the deposit.
Canada is part of a 35-country worldwide agreement (the Financial Action Task Force) that takes strides to combat money-laundering operations.
The International Monetary Fund estimates global money laundering to be between 2% and 5% of the gross domestic product, or half a trillion dollars. Money laundering in Canada alone is estimated to be in the billions of dollars.
REALTORS® will now join frontline ranks of accountants, casinos, banks, insurance companies, mortgage brokers and lawyers in the fight against money laundering.
“We are doing this for the public good,” said Jensen. “I believe that REALTORS® have an obligation as good business practitioners to verify identification. It’s good for all parties to know, whether you are the buyer or the seller, that you are dealing with a legitimate person on the other side.”
Jensen said the regulations are also long overdue, however REALTORS® have been required to report any suspicious activity and any cash transaction over $10,000 to FINTRAC since 2001.
“This is just taking that same system and evolving it one step further,” he said. “You can’t even go to the library and ask for a library card without showing identification, so why in the world would you be able to buy property without showing ID?”
The board president is also taking responsibility in his own hands to insure REALTORS® are clear about the new regulations by conducting seminars throughout the week.
REALTORS® responded generally positive about the changes, he said, and it won’t be a big undertaking for the industry.
Local REALTOR® Jim Sparrow foresees a problem when dealing buyers or sellers who are not in the country during the time of the sale. For situations where the client is not present, the REALTOR® will be required to obtain proof of the identity of the client.
“Most (REALTORS®) in the city don’t want to be doing the government’s work,” said Sparrow. “Especially given the lack of communication the government has given on this new policy.”
REALTORS® will also be required to attain the identity of all buyers or sellers in a transaction, even if the client is a corporation. If the client is a corporation, that information must include corporate documentation, and the names of the corporation’s directors.
They must also ascertain if a third party is involved in the transaction.
For example, if an individual’s parents are providing a down payment on the property, their identities must also be proved.
“It’s just another thing that we have to do,” said Sparrow. “I am sure we will work our way through it.”
However, Sparrow is not sure how some of clients will react, especially those who are already weary of disclosing private financial information.
“The bottom line is people have enough problems with giving you their phone number or email address. I am not sure how they will react to this,” he said.
Jensen doesn’t see a downside, as long as the proper security measures are taken when dealing with the client’s personal information.
“We will follow all the security regulations to secure our clients’ files,” said Jensen. “It does not need to be sent anywhere, it’s kept in our files and if the federal government needs to follow an investigation, they will require a warrant to access the files.”
It is the individual broker office that will be responsible for the safe keeping of the information, and the brokerage that will have to respond to any FINTRAC information request.
The real estate industry will have six months to adhere to the new rules before fees and penalties are brought into effect on January 1, 2009.
—Dan Leahul is a Calgary Real Estate News resident reporter
