The annual survey about global home affordability is out (click here) and as usual it has created a lot of attention and discussion in our fair city. This year, Vancouver is the second-least affordable city to buy a home based on average home price compared to average household income. No doubt, buying a home in the most desired neighborhoods of Vancouver is expensive - and for good reasons, we might add. Premium products command premium price points, and on the lists of best places to live in the world, Vancouver ranks in the very top (for instance quality of living; click here or global reputation; click here).

But more importantly, the ranking is based on income, not wealth. Vancouver has may attractions, however high income jobs is not one of them. Top paying jobs are not in abundance here. Rather, it’s a place that attracts and retains people with wealth, either from other provinces or countries, or saved up in local real estate over the last few decades, or inheritance, etc. People who seek world-class quality of life - and that’s the demand that supports and justifies Vancouver’s expensive real estate market. It will never, and arguably should never, be an inexpensive place to buy a home.

That’s why this heavily quoted annual survey is somewhat misleading when it comes to Vancouver; the key parameter is income. If the survey focused on wealth, the affordability of homes in Vancouver would be a different story.

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I have listed a new property at 202 1266 13TH AVE W in Vancouver.
Completely renovated corner unit. Solid building. Great location. Exceptional studs-out renovation incl. kitchen with quartz counters, stainless steel Miele and Sub-Zero appliances, beautiful bathrooms, new oak hw floors, double layeredwindows/sliding doors and sound insulated walls and ceilings.Wood burning firepl. w. opt. for gas. Large balcony facing quiet street and peek of mountains.A solid, well-maintained, Landmark building with a pro-active strata and healthy contingency fund.Two side-by-side underground parking stalls and locker.Walk to South Granville shops and restaurants. No pets or rentals. First Open House Sat & Sun, Jan 26 & 27 from 2 - 4 pm.
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(Answered by Dave Lacusta – Dominion Lending)

 

 

There seems to be a lot of confusion about how mortgage rates are set in Canada. Every time the Bank of Canada announces a change to its target for the overnight rate (formerly the bank rate), which is every 6 weeks, my phone rings off the hook with people inquiring about the latest changes to mortgage rates. When I explain to them that there is no correlation between changes in the overnight rate and changes in fixed mortgage rates in Canada, there is a long silence on the other end followed by confusion. 

 

Fixed residential mortgage rates are determined by changes in the bond market and the competitiveness of the chartered banks in Canada. The Bank of Canada has very little, if any, influence on them. If you compare changes to the overnight rate with fixed mortgage rate trends, you will notice that sometimes mortgage rates went up, sometimes they went down and sometimes they stayed the same, regardless of which way the overnight rate was adjusted.

 

The chartered banks set their mortgage rates based on yields in the bond market. A Government of Canada bond represents a risk free investment to the banks. If the banks choose to invest in a mortgage, they are taking on added risk and incurring costs to set up and service it. The banks will set their mortgage rates high enough above the equivalent bond yield to cover their costs and provide some sort of profit margin for the added risk they are taking on.

 

As an example, a 5-year Government of Canada bond is yielding about 1.39% today and most 5-year discounted mortgage rates are set at about 3.09%. This means that the chartered banks are only earning a risk premium of 1.70% before expenses.

 

So now you might be asking, how are bond yields determined? By investors' expectations for interest rates in the future. These expectations are arrived at by assessing the state of the Canadian economy and predicting where it is headed relative to other world economies. There is no science to such predictions (although some economists spend a lot of time trying to make it into a science). At best the markets make their best guess and keep updating their guess every day.

 

The best way to try and predict when mortgage rates will rise and fall is to track Government of Canada bond yields daily. It is normal for yields to change slightly from day to day, but if you start to see consistent increases or decreases then you can expect that the banks will be adjusting their mortgage rates accordingly. If you are interested in a 5-year mortgage rate then track the equivalent 5-year Government of Canada bond; if you are interested in a 1-year mortgage rate then track the equivalent 1-year Government of Canada bond, and so on.

 

Now that I have told you that the Bank of Canada does not have an impact on mortgage rates, there is one exception to this rule. Most variable rate mortgages are affected by changes to the prime rate as set by each of the chartered banks. The prime rate will change, in the same direction and by the same amount, as any change to the overnight rate. So if the Bank of Canada announces a decrease in the overnight rate by one quarter of 1% (or "25 basis points" in financial parlance), then you can expect most variable rate mortgages to also drop by one quarter of 1%. Please note that the chartered banks add 2% on the overnight rate of 1% to offer Canadians the bank prime rate of 3% on a variable rate mortgage. 

 

So unless you have a variable rate mortgage, don't pay attention to the hype surrounding interest rate announcements by the Bank of Canada. If you want to know where fixed rate mortgage rates are headed, follow changes in the bond market.

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Why is the city assessed value not reflective of true market value?

 

The city’s mandate for valuating properties revolves solely around calculating taxes based on fair approximate market value.  True, up-to-date market value is constantly shifting, and can vary somewhat even between seemingly similar homes.  As the city’s purposes are satisfied by ‘approximate value’, and as calculating accurate market value for every property would be a prohibitive and unnecessary expense of tax dollars, the city uses an ‘electonic appraisal’ based on raw MLS data, simple parameters, and a two year average. Therefore, the city’s assessed value of any given property can certainly be an indicator of ‘ballpark’ value, but should not be relied on at all in any situation demanding accurate market valuation.  This number can be used to effectively ‘spin’ the marketing of properties… but buyers and sellers would hopefully not, in the end, rely on it to any substantial degree when making a transactional decision.

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I have listed a new property at 3231 3RD AVE W in Vancouver.
Kitsilano back ? duplex CHECK! North of 4th Ave CHECK! Garage and good storage CHECK! Generous private outdoorspace CHECK! That's a VERY nice checklist. Bonuses include bright, dramatic 25' ceilinged foyer, open plan on the main inclisland kitchen, powder room and french-door access to yard, 2 bdrms and lrg 5pce bath on 2nd floor and light-filled,flexible big den/office/playroom/3rd bedroom on top-floor, complete with N. Shore mountain-view large balcony. Recent updates include full exterior and interior paint and new carpets throughout. Jericho and Kits Beaches are a stroll away, shops off W. 4th are blocks away, downtown and UBC are minutes away... Dare we say, 'check' it out! 1st Open Houses Sat/Sun Jan 12/13 from 2-4pm.
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I have listed a new property at 702 1468 14TH AVE W in Vancouver.
Exclusive, Quality, No Compromise. Welcome to Avedon! This 46 suite development is located in vibrant South Granville. This beautifully finished N/W corner suite has fantastic views of English Bay and the North Shore mountains. Some of themany features of this contemporary designed home are walnut hardwood flooring throughout, floor to ceiling windows, spa like master bathroom, custom closet organizers, top of the line appliances as well as customs built-ins all tied together by a well laid out floorplan perfect for entertaining. Two parking spots and a huge storage unit locker included. 1st showings at the Open House Sat Jan 13 from 2-4pm. Visit the realtors website for video tour and floorplan.
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A slowing housing market and uncertainty over the shape of a deal on the U.S. “fiscal cliff” are putting a lid on projections for economic growth and stock market gains in 2013.

 

Click here for more information

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