Earlier today, Finance Minister Jim Flaherty announced changes to mortgage lending standards for mortgages.  He said that while the housing market is healthy and there’s no real evidence of a bubble, the moves are needed to “help prevent negative trends from developing.”

The changes are designed to bring stability to the lending market and head off potential problems such as those experienced south of the border with the sub-prime mortgage crisis.  With interest rates almost certain to rise in the months and years ahead, the government is trying to ensure Canadian borrowers will be able to carry higher debt loads created by higher rates.

Having said that, the changes are far less than rumoured and are likely to have little impact on the average home buyer.  Yes, people can still buy a home with a down payment of 5%.

The new rules are made up of three changes:

1. Borrowers will need to meet standards for five-year fixed-rate mortgages regardless of whether they’re seeking a loan with a lower rate and shorter term. Right now, borrowers may qualify for mortgages based on lower rates as a percentage of income.  Under the new rules, only the 5 year rate will apply.  Why it’s not so bad:  In 2009, over 85% of mortgages were for fixed terms and of those, 70% were for5 year terms.  All of those would still qualify under the new rules.
2. The maximum amount Canadians can withdraw when refinancing their homes changes from the current 95% to a maximum of 90% of the value of their homes.  In many cases, refinancing options are used to transfer high credit card balances to lower rate mortgages.  Under the new rules, mortgagees will have to build up at least 10% equity in their homes in order to do so.
3. The down payment for government-backed mortgage insurance on speculative, non-owner occupied investment properties increases from 5% to 20%. This is intended to discourage real estate speculation often seen in rising markets driving house prices artificially high.

It would appear to me that the government has taken a balanced approach to this issue in a way that should neither spur a run-up in pricing or dampen the real estate market.  What they’ve done is put rogue lenders on notice that the government is watching.

The new regulations take effect on April 19, 2010.

Ralph Waldo Emerson once said, “For every benefit you receive a tax is levied.”  How very true.

As municipalities across the Province struggle to establish budgets and tax rates, I can’t help but wonder how they ever arrive at a decision.  There are so many factors to consider and endless demands to entertain.  Councilors and staff need to consider reserves, debt ratios, debenture levels, user fees, development charges,  capital needs, infrastructure needs and future planning for capital repair IN ADDITION TO a long laundry list of ratepayers wants and needs.

When I read local blogs, letters to the editor or listen to conversations around town, there is a big disconnect in the public thinking about getting what you want but not wanting to pay for it.

Everyone is complaining about government spending.  Naturally, we all feel we are paying too much in property taxes and every time there is another expenditure approved, you can hear the howls of protest.  But at the very same time, you can watch the parade of people with hands out… more money for the animal shelter, hospital, CAS.  More fire fighters.  A roof over a rink or a second ice surface, a wellness centre, a new library, street repairs, free parking and more affordable housing.  Fix the sidewalks, plow the snow faster, build more trails. 

How is it that the very same people making monetary demands are often the very same people whinging about tax increases?  Don’t they get it?  This stuff costs money!

Every year, a consulting firm does a municipal comparison of tax rates for 81 municipalities in Ontario.  I found a copy of the complete study on the city of London website and if you take the time to actually scan through all 402 pages of this document, you might get a sense of just how complex taxation in Ontario proves to be.

You may be surprised to learn that Collingwood has the LOWEST relative tax burden for the Industrial class of all 81 municipalities surveyed.  You might not be surprised to learn that Wasaga Beach has one of the lowest relative tax burdens for residential taxes as a percent of household income.  Some other areas that caught my eye included the fact that Collingwood has average expenditures per capita ABOVE the average for fire and police services ( that is before the recent request to expand the number of firefighters) and, we have the HIGHEST expenditures per capita of all 81 municipalities for park operating costs.  The average is $40 per capita.  Wasaga Beach spends $45.00 and Collingwood spends $87.00.

My first reaction would be that I hope councilors read these reports before they make budget decisions.
My second reaction is that we spend too much on parks and, we tax industry too little.
My third thought is that perhaps this is all wrong.  Perhaps we spend more on policing and fire because we have a wider geographic area.  Perhaps we spend more on parks because we demand it to be so.  Perhaps having the lowest industrial tax rates helps in our economic development strategies and maybe that is why we are getting a big new industrial park.

The only thing I know for sure is that it must be incredibly challenging to set a municipal budget.  And I want my taxes to stop climbing.  And I want everything around town to be nothing short of perfect.

Even with the new proposed regulations surrounding their installations,  the debate about wind turbines continue to rage in Ontario and certainly here in the Blue Mountain area.  Recent letters to the editor such as this one and this one highlight the divergent opinions that exist.  Coalitions of citizens have formed groups such as the Blue Highlands Citizens Coalition and the Coalition on the Niagara Escarpment to examine the issues and lobby government.

A recent column by Bob Aaron in the Toronto Star caught my attention as he described the case of a taxpayer who challenged the Municipal Property Assessment Corporation (MPAC) in September, 2008. (How did we miss that!?) 

This case set a landmark precedent attaching a dollar value to potential impacts of industrial wind installations on surrounding land owners.

A fellow by the name of Paul Thompson of Amaranth Township in the Shelburne area, appealed the assessed value of his home on the basis that it was located opposite a hydro substation that served an area wind farm.  His appeal was not actually based on the existence of the turbines but rather, on the noise produced by the substation.  He entered evidence that showed it emitted noise at a decibel level exceeding the normally acceptable  range.

In its ruling, the board member wrote that, “The Board finds that the constant hum alleged by Mr. Thompson does exist and significantly reduces the current value of the subject property.”  They also said, “Having heard this nuisance, apparently sanctioned by the Municipality, the Board accepts Mr. Thompson’s testimony that the stigma of noise contamination has a negative impact on the value and marketability of the property, and that after learning of the hum, prospective purchasers will quickly lose interest in purchasing the property. The Board is satisfied that a very substantial reduction is warranted.”
 
The Board cut Mr. Thompsons assessed value of his property in half from $255,000 to $127,000.  What I find troubling about this case is that the number was not quantified and I read no evidence to suggest what the new property value should be.  Does this mean that a property affected by noise is impacted by $127,000 in that location?  Is that the new number?  If the house were originally valued at $150,000 or at $750,000, how would the value have changed?

Only time will answer the question as the free market adjusts for new conditions emerging in a new world.

The map featured here comes from the Canadian Wind Energy Association website which lists on the site, all of the current wind farm operations in Canada.

Current local discussion:
Enterprise-Bulletin article about plans in Clearview (Stayner/Creemore): Citizens Rally To Put Halt To Turbines
Blue Mountains Courier Herald:  Grey County Wants Wind Turbine Moratorium

The warnings are come out rather loud and clear.  Interest rates will head up in 2010.

In reference to monetary and fiscal stimulus, Bank of Canada Governor Mark Carney warned consumers on December 17th, that they need to watch their debt levels as interest rates rise in the coming months.  “Although we expect the recovery to be gradual and protracted, these measures are working.  Ordinary times will eventually return and, with them, more normal interest rates and costs of borrowing.”  He expressed concern about consumers ability to carry their debts when rates inevitably go up.

It would appear he is not the only guy up there in Ottawa thinking about this.  Finance Minister Jim Flaherty said during CTV’s question period that he may soon impose measures that make it harder for Canadians to get a mortgage.  He said he is considering a few options to cool down the heated housing market including legislation to shorten permitted amortization periods down from the present 35 years to something less and, to increasing the minimum required down payment over the current  5% level.

Clearly, he is worried that people will not be able to manage their debt obligations WHEN interest rates rise as the recession fully subsides.

Sadly, I suspect Mr. Carney and Mr. Flaherty don’t have to worry too much.  Once July 1st and the HST kick in, things will right themselves quickly and more dramatically than they  may expect.  Yes, 2010 will be an interesting year.

Related Post
Early Mortgage Renewal May Beat Rising Interest Rates

Collingwood, Blue Mountain and Area Real Estate Prices Rising Again

First, a disclaimer:  Statistics can be dangerous things if they are not carefully and accurately assessed.  For example, our MLS® system uses average sale prices rather than median sale prices.  Neither is an exact science but when used comparatively, it gives us a general sense of trends only.  For example, the absence or presence of very low or very high-end sales can dramatically alter averages within small sampling groups. 

Now having said that, I think we have a fairly safe picture emerging.  I’ve taken a look at the average sale prices of residential properties in six areas including Blue Mountain, Clearview, Collingwood, Grey Highlands, Meaford and Wasaga Beach.  Using the MLS® data provided for those areas by the Georgian Triangle Real Estate Board, here’s what I found:

• The 12-month average residential sale price at the end of December 2009 was $298,150
• This was 2.6% higher than at the end of December 2008 but 4.9% below December’s 2007 record high
• The highest average sale price continues to be in the Blue Mountains which ended the year at $453,258 while the lowest was in Clearview Township with a 12 month average ending at $$251,213.
• The average sale price of a condominium in 2009 was $216,697 which was up 3.4% over 2008 and up 6% from 2007.

Last year, a new way of measuring price changes was developed that showed results that could be quite different from traditional measurements.  The Teranet–National Bank House Price Index uses a house pairing methodology which I think is a more reliable indicator of market change than using average sale prices.  The index shows that as of October 2009, average residential sale prices in Toronto were up by 2.3% over the same period in the previous year.
 
Given that our market is substantially impacted by the GTA market, we tend to follow similar trends.  The index showing a 2.3% increase as of October combined with our 12 month average price having climbed 2.6%, I think it is fairly safe to say that prices in the Georgian Triangle rose between 2-3% in the last year compared to 2008 but are still slightly below the record highs of 2007.

As always, there were certain pockets of activity where values climbed more than in others.  One example would be in the Heritage Corners development near Blue Mountain where prices for a 3 bedroom unit climbed by over 10% in a three month period this past summer and fall.  In Lighthouse Point, not a single unit with two or more bedrooms is currently for sale under $350,000; a situation not seen in many years.  On the other hand, there were certain subdivisions where virtually nothing sold all year despite a strong supply of inventory.

Here are charts highlighting average price trends over the last three years in the six principal communities of the Georgian Triangle:

All MLS® data and/or statistics obtained from the Georgian Triangle Real Estate Board.

Related Post:
2008 Year End Real Estate Report for the Georgian Triangle

Well, maybe that is a big first step.  But it is true indeed that one persons junk is another persons’ treasure.
A few years ago, we had a yard sale and among other things, there was an old iron bed headboard.  The lady who bought it told me she was going to give it a fresh coat of black paint and it would become a garden gate.  What a great idea!

Now, I am the least creative person I know when it comes to decorating ideas.  If it weren’t for my friends, I can’t imagine what our home might look like.  But somehow over the years, we’ve been able to create a nest that we think is cozy and beautiful without spending much.  Believe it or not, after over 30 years of home ownership, we don’t own any new furniture.  Even our bed was a wedding gift!  Recently it occurred to be that the golden pine cannonballs were very “retro” now but in need of some updating.  Rather than buy our first bed, we shipped it off for refinishing (with VOC-free paint of course) and voila – the now linen-cream coloured posts and frame look new and chic.

We had an old chair that was SOOOO comfy but sadly, the stuffing didn’t survive our kids teen years.  Rather than cart if off to become land-fill, we had it recovered and it’s gorgeous if I say so myself.  We splurged on exquisite quality upholstery when Three Herons had a sale on downtown and now, it sits proudly in our living room as a focal point of the room.

We have a lamp made out of an old knitting spool.  In one house I sold, the headboard of their frameless bed was made of a piece of driftwood with small glass vases affixed for dried flowers.  I’ve seen framed children’s art that look like gallery pieces.

When it comes to home decorating, I’m trying harder to see what I can alter, reclaim, adapt and reuse before rushing out to buy new.  How about you?

It looks like a large number of new home builders are missing out on some real opportunities to attract new home buyers.  According to a survey released earlier this month, less than half of new home buyers were offered energy-efficient features for their new homes yet, 90% of buyers state they value energy efficiency when making a new home purchase.

Energy efficiency is quickly becoming a major factor in home buying decision making, according to the survey.  1,638 homebuyers in the Toronto and Ottawa areas were surveyed by energy-efficiency consultancy EnerQuality Corp..  The study found that homebuyers were willing to pay an average of $13,183 in additional costs for a “green” home. While last year only 20% of homebuyers were willing to spend $10,000 or more extra, that figure has quickly doubled to 40% of people who were willing to spend so much extra if it meant lowering energy costs over the long term.  More than 70% would be willing to spend $5,000 or more.

I heard a term once that referred to a house having two purchase prices; one to buy the home and the second price tag being the cost to carry and operate the home.  As this second price tag takes on increasing prominence for homeowners with declining disposal incomes, a net decrease in the cost of owning a home to the tune of hundreds of dollars per year can have a significant impact on a buying decision.

Under the new Ontario Green Energy and Green Economy Act, buyers will soon have the right to ask for a mandatory home energy audit from the seller.  As consumers become ever more aware in rapidly increasing numbers about the benefits of an energy efficient home, I can see the day when all homes have ratings and indicators as part of the standard listing.  People buying energy efficient homes today will already be one step ahead of older homes with no energy-saving retrofits.

The EnerQuality survey found that 92 per cent of homebuyers who participated would seek out energy efficiency for their next home purchase and, most are willing to pay for it yet, many builders have not offered these options or features.  That is a real disconnect and it would be wise for home builders to become educated about the many opportunities and options available today.  I would think this carries over as well to home renovators and contractors.  Educating themselves right now would be good business practice in meeting consumer demand that is sure to continue growing.

I called our bank this week and talked to my favourite person there about our mortgages.  Shudder.  Shake.

I’ll tell you straight up that I’m not much of a risk taker.  I do however try to undertake thoughtful analysis in decision making especially as it applies to money.  In addition to our home, my hubby and I own some other properties with mortgages  and so, I’ve been thinking about interest rates lately.

I don’t have a crystal ball of course nor am I giving anyone else advice but, my sense is that by the time our mortgages come due next year and in 2012, interest rates will be higher.  Quite possibly, they’ll be significantly higher.  With the huge amounts of government spending and ballooning deficits, somebody is going to have to pay the freight.  Strangely, inflation is rearing its ugly head despite a sluggish recovery.  Oil prices are poised to climb.  All of this adds up to rising interest rates in my mind.  Besides, the experts say they’ll head up after the Bank of Canada’s rate hold promise ends next June.  So, what to do, what to do?

On our home mortgage, we have a decent enough existing interest rate of 4.99% but, it’s coming due next October.  That’s the part that I don’t like.  It’s too early to book an early renewal (many banks allow as much as six months with a rate guarantee) and, it doesn’t make sense to pay a penalty to break the mortgage just so we can take a whole new one.  So, here’s what we’ve done.

We have extended, blended and renewed all of our mortgages for five years. The bank applies the rate we’ve been paying all along to the balance of the existing term and then, they apply the current interest rate, which is lower, to the remainder of the five years beyond the current term.  They blend the rates and voila, we’ve just locked in our mortgages for 5 more years for under 4.5% with no penalties.  We could have run a variable rate which often works out well but, as I said before, I’m not much of a risk taker.

With the current Home Renovation Tax Credit (HRTC) and the ecoEnergy grants available, home renovation appears to be alive and well.  It certainly is in our house.

Have you ever wondered what the pay back might be for the money you invest in those renovations? 

The Appraisal Institute of Canada has a handy calculator on their website to assist people in estimating this pay back range on 20 of the most popular home renovation projects.  While it is a guideline only and does not reflect differences in various real estate markets, it will give most people a good sense of what is really worthwhile doing in terms of investment.  You can visit the website here.

I would have to add that renovations have a pay back in more subtle ways as well that are harder to quantify.  Some renovations may not easily have a dollar figure attached however, they will impact the salability of the house.  For example, putting in new carpet is said to have a return value of 50-75% of the original cost.  If however you’ve put in a bold colour that only you and three other people might love, that could drop considerably.  On the other hand, replacing that purple carpet with hardwood flooring might yield a return of greater than 100% and affect how quickly the house will sell.

I’m kind of surprised that in the course of day-to-day business, not too many people are talking yet about the impact of the new Harmonized Sales Tax (HST) on a real estate transaction.  As the July 1, 2010 implementation date draws closer, I’m sure it will become a major issue.

The new tax has its merits in respect to manufacturing in particular but quite frankly, I see it as a real tax grab when it comes to things like real estate.  The government will be generating revenue that did not previously exist.  We already pay land transfer upon the sale of property so really, it’s a form of double taxation and I’m seeing red over it myself.

In a news release issued by the President of our local real estate board, a number of points are made:

“As real estate professionals, REALTORS® know how important the dream of homeownership is to Ontario families. Unfortunately, thanks to the forthcoming HST, that dream is going to become much more expensive…  home buyers and sellers can expect to pay 8% more on legal fees, appraisals, real estate commissions, condo fees, home inspection fees, moving costs and the provincial government’s recently introduced system of mandatory home energy audits. According to the Ontario Real Estate Association (OREA) Ontarians will pay, on average, an additional $1,449 in new taxes on their next residential real estate transaction. “

The release continues, “… HST will add hundreds, potentially thousands of dollars in additional tax on utility bills, such as gas, electricity and home heating fuel, on home renovation labour, the cost of lawn upkeep or landscaping and the cost of snow removal. Moreover, a HST will increase the cost of living with 8% more tax on gasoline, personal and professional services, meals under $4, dry cleaning, cab fares, magazine subscriptions, plane tickets, vitamins and cell phone charges.”

When you consider that real estate and home ownership are major drivers in our economy, I’m shocked that the government has not softened the blow in this sector.  If you are concerned, write to your MPP and tell them that Ontarians do not need higher taxes on homeownership.