Month: April 2019

If you follow Canadian real estate news closely, you can be forgiven for being a little confused about the state of the housing market.

Depending on whom you ask, Canadian markets — particularly Toronto and Vancouver — are either on the cusp of a major correction, or have achieved the hoped-for “soft landing” and will be back to rapid price growth soon enough.

Count Swiss bank UBS as among the pessimists. The bank’s annual Global Housing Bubble Index has ranked Toronto and Vancouver third and fourth, respectively, in a survey of housing bubble indicators. Only Hong Kong and Munich are ranked as having bigger housing bubble risks.

“Price bubbles are a regularly recurring phenomenon in property markets,” the UBS report stated. “The term ‘bubble’ refers to a substantial and sustained mispricing of an asset, the existence of which cannot be proved unless it bursts.”

For Toronto, the third-place finish is actually an improvement from last year’s first-place ranking.The slowdown in price growth over the past year and a half has reduced the city’s bubble risk, slightly. Vancouver’s ranking has stayed steady.

UBS noted that price growth among the major cities surveyed has slowed in the past year.

“The first cracks in the boom’s foundation have begun appearing: house prices declined in half of last year’s bubble risk cities,” the report stated.

Watch: The extreme measures some people take to buy a home (story continues below)

In Toronto, house prices are still 50 per cent higher than they were five years ago, UBS noted, but last year’s provincial Fair Housing Plan, which introduced a foreign buyers’ tax and stricter rent controls, “probably contributed to the cooling” seen since the spring of 2017.

In Vancouver, inflation-adjusted house prices have doubled in 12 years, and “already strained affordability will become an acute issue if mortgage rates rise further, one that may halt the local market boom,” the report stated.

The report offers up an explanation for the housing boom seen in many major cities around the world in recent years, one that might sound familiar to Canadians:

And it offers a warning: The biggest killer of housing bubbles is now on the prowl.

“Historically, investors have had to be alert to rising interest rates, which have served as the main trigger of corrections. Most such downdrafts in the past 40 years have been preceded by an increase in rates,” UBS noted.

That’s a far cry from the recently optimistic sounds coming from Canadian real estate insiders, many of whom are pointing to the upturn in Toronto home sales in the past few months as a sign that worst is over. In reports this week, Re/Max and Sotheby’s both declared the city’s housing market is returning to growth.

Worst home affordability levels in 28 years

But economic analysts aren’t quite as certain as realtors about this rosy scenario.

Rising mortgage rates “will limit how much home resale activity will rebound from its recent cyclical low,” Royal Bank of Canada chief economist Craig Wright wrote in the bank’s latest housing affordability report, issued Friday.

RBC found the average monthly cost of owning a home in Canada ate up 53.9 per cent of an average income in the second quarter of this year, up from 43.2 per cent three years ago. Over the past year, all of the increase has been due to rising mortgage rates, not rising prices.

The report found home ownership costs in Canada are now at their worst levels since 1990. Fun fact: That was also the year that a massive housing bubble peaked and burst in Toronto, leading to seven straight years of price declines.

Will history repeat itself? Your guess is as good as anyone’s, but it’s clear we’re not out of the woods just yet.

It’s the Canadian way these days: Land a reasonably well-paying job in a major city, move there, and contend with a lifetime of high living costs and stressful commutes.

But a new study suggests we may not be doing ourselves any favours living like this. Researchers at McGill University and the University of British Columbia’s Vancouver School of Economics carried out a detailed analysis of happiness surveys across Canada, and came to a clear conclusion: People in rural areas are happier than urban dwellers.

They took responses from 400,000 Canadians in two major surveys, and arranged them according to 1,215 identifiable communities across the country. They found that the population density among the least happy fifth of communities was eight times higher than the density of the happiest fifth of communities.

In other words, “life is significantly less happy in urban areas,” the authors wrote.

Watch: Canada’s best cities for job-hunters

Given the rapid densification Canada’s largest cities are undergoing, those results should give us pause for thought.

There are other things the happiest communities have in common, including shorter commute times, more affordable housing costs, a lower share of foreign-born population, and a larger share of the population that identifies as religious.

But that doesn’t mean the key to happiness is moving to the country, staying away from immigrants and attending church.

The researchers note that “many of the variables are correlated with one another” — for example, population density, foreign-born populations and high housing costs are all just realities associated with cities, so “it is premature and misleading to think in causal terms.”

And the data showing that religious people and locally-born people tend to be happier squares with other research showing that strong social circles are an important element of happiness.

And yet, there might be something to this notion of moving out of the city. As house prices have soared in Toronto and Vancouver, some priced-out buyers have started looking further afield, to the more affordable cottage country beyond the suburbs.

A new study from realtor Re/Max, released last week, found that in the cottage country of southern Ontario, “many owners of recreational properties actually rent their principal residences in Toronto, where they live most of the year.”

Behold the new class of homeowner: the cottage-owning city renter. These people are reversing the age-old model of owning a home in the city and renting a vacation property in the country. And they’re doing so for economic reasons.

But this doesn’t really count as moving to the country; after all, cottage-owning city renters still rely on the income generated by city jobs to afford their lifestyle.

Do they need to, though? Among the more interesting findings in the happiness study is what doesn’t correlate with happiness: Income levels, the unemployment rate and education. They’re about the same in the happiest communities as they are in the least happy.

So maybe that high-paying job in downtown Toronto isn’t actually getting you any closer to happiness. And these days, with housing costs being where they are, the alternatives may well be worth considering.

MONTREAL — The telecommuting revolution envisioned by futurists, in which vast numbers of workers eschew their daily commute in favour of working remotely from home, never quite turned out as predicted.

However, a growing number of Canadians are taking the term “working remotely” literally, leaving the hustle and bustle of city life behind to work from their cottage or winter home down south, says a real estate expert.

“To the extent that that expands further, I think it will further enable the larger trend of working from places that you like,” said Brad Henderson, president and CEO of Sotheby’s International.

For many, that means avoiding the summer commute to cottage country.

“My place of pleasure is in Naples, Fla., not even in my country,” he said in an interview.

It is especially suited for consultants and senior executives with the flexibility to work remotely from anywhere with little need to visit a corporate office, said Henderson.

Many are choosing to take their profits from selling their home in the city and relocating to a property near a lake while perhaps maintaining a condo in the city.

He’s seen interest across the country from Montrealers relocating to the Laurentians or Eastern Townships, Torontonians heading to Muskoka, Collingwood and the Kawarthas and western Canadians choosing Banff, Canmore, Whistler and Kelowna.

When Vancouver home prices were especially crazy, Henderson said there was a trend of people selling and moving to Victoria.

“They could telecommute for most of what they needed and if they really needed to be in Vancouver, it’s a half an hour helicopter ride from harbour to harbour.”

Chris Van Lierop and his husband and business partner, Tim Wisener, took it a step further by relocating their home and design business to Fenelon Falls in Ontario’s Kawartha Lakes area.

The pair has changed their focus from designing city homes to helping city folks build cottage retreats.

They made the move last September after constantly prolonging the time they spent at the cottage.

“Eventually we just decided that we think we can make a go of our business up here and why not just stay at the cottage,” he said.

Communication challenges

Internet service can be a challenge when they visit clients in areas where signals are harder to come by.

It’s the number one issue people ask about when planning to work from a cottage, says Jim Pine, chief administrative officer of Hastings County and co-lead on the non-profit Eastern Ontario Regional Network.

The network has spent $175 million to upgrade service in Eastern Ontario and is working on further changes to reach more homes and improve access and speeds.

“There’s still areas where there are challenges for people to either get a line of sight signal even on satellite. When you’ve got trees and stuff in the way, it makes it a bit of a challenge.”

A boost for rural communities

Enticing people to conduct their business from the cottage is a way to ensure more services are available in rural areas by increasing tax revenues, said Denise Williams, acting manager of economic development for the city of Kawartha Lakes.

Rural communities need to attract new people to open businesses and provide the local services required to maintain a quality of life, said Terry Rees, executive director of the Federation of Ontario Cottagers’ Associations.

“There’s a ton of small businesses in rural Ontario that have no transition plan and no succession plan and many of them are in the sunsetting kind of phase and that’s got to be worrisome to everyone who’s concerned about the rural economy across Canada,” he said.

The federation recently sponsored a survey that found that 28 per cent of respondents currently work from their waterfront communities. Nine per cent work remotely full-time and 70 per cent do so occasionally.

Of those who don’t work from their waterfront communities, 37.5 per cent would consider doing so.

The three largest barriers they identified were access and cost of internet service, distance to clients and the lack of social infrastructure.

About one million of Canada’s 12.6 million households owns a second home.

Statistics Canada doesn’t track the number of people working from their cottages, but the share of non-farming Canadians working at home has remain unchanged since 1996 at just over six per cent.

Realtor Dean Michel moved with his young family to a family owned cottage because he was tired of the “Toronto rat race.”

“I thought if I can make it work up here, then I’m going to do it,” he said.

Michel said moving to the tranquility of the cottage is part of a societal shift for those near retirees or retirees.

“They just look at the end of their life and say, ‘I’ve got 20 to 30 years left or whatever, do I want to spend it in the rat race?'”

TORONTO — A consortium led by Air Canada has reached a deal to acquire the Aeroplan loyalty program from Aimia Inc.

The group, which includes TD Bank, CIBC and Visa Canada Corp., has agreed to pay $450 million in cash and assume the approximately $1.9-billion liability associated with Aeroplan miles customers have accumulated.

“We are pleased to see that an agreement in principle has been reached as Aeroplan members can continue to earn and redeem with confidence,” Air Canada chief executive Calin Rovinescu said in a statement on behalf of the consortium Tuesday.

“This transaction, if completed, should produce the best outcome for all stakeholders, including Aeroplan members, as it would allow for a smooth transition to Air Canada’s new loyalty program launching in 2020, safeguarding their miles and providing convenience and value for millions of Canadians.”

The price is up from an initial offer of $250 million in cash and the assumption of the reward point liability in July that was rejected by Aimia.

The deal is expected to close this fall.

The agreement, which is supported by Aimia’s board and Mittleman Brothers, Aimia’s largest shareholder, is subject to shareholder approval and other closing conditions.

Mittleman Brothers holds approximately a 17.6 per cent stake in Aimia and agreed to vote in favour of the proposed transaction.

Aeroplan created as in-house program for Air Canada

The future of the program has faced questions since Air Canada announced last year that it planned to launch its own loyalty rewards plan in 2020 when its partnership with Aimia expires.

Air Canada created Aeroplan as in-house loyalty program, but it was spun off as an independent business as part of a court-supervised restructuring of the airline. At the time, CIBC was Aeroplan’s main bank partner.

Since 2014, TD has been Aeroplan’s main Visa card partner although CIBC continues to offer cards that earn Aeroplan points that can be redeemed for Air Canada flights and other rewards.

Also On HuffPost:

OTTAWA — The federal government will appeal an Ontario Superior Court decision that opened the door for registered charities to devote significantly more time on non-partisan political activities, HuffPost Canada has learned.

Justice Ed Morgan found in July that efforts by the Canada Revenue Agency to limit the ability of registered charities to speak out on public policy issues ran counter to the right of freedom of expression and could not be justified in a free and democratic society.

CRA had restricted charities from spending more than 10 per cent of their resources on what they called non-partisan political activity.

But Wednesday, officials in Minister of National Revenue Diane Lebouthillier’s office told HuffPost Canada that Ottawa will appeal the decision because the department’s lawyers believe the ruling contained “significant errors in the law” that need to be “clarified.”

The ruling was a big win for Canada Without Poverty, the applicant in the court case, who launched the constitutional challenge in 2016. The group was one of many organizations audited by the CRA under the previous Conservative government.

After spending years under CRA’s audit lens, Canada Without Poverty says it was told it was devoting more than 10 per cent of its time on political activities by recommending changes to federal laws and policies on living wages, homelessness, and poverty alleviation. The group was told its charitable status would be revoked.

Federal Liberals had pledged to stop what it saw as the Tories’ politically motivated witch hunt against charities whose goals did not align with their own, including: Equiterre, Environmental Defence Canada Inc., the David Suzuki Foundation, Tides Canada Initiatives Society, Pen Canada, Amnesty International Canada, and United Church of Canada.

During the 2015 election campaign, the Grits pledged to “allow charities to do their work on behalf of Canadians free from political harassment.” The party also pledged to “modernize the rules governing the charitable and not-for-profit sectors” including “clarifying the rules governing political activity,” with an understanding that charities make an important contribution to public debate and public policy.

“A new legislative framework to strengthen the sector will emerge from this process,” the Grits promised.

Three years later, no changes have been made. Finance Minister Bill Morneau, however, is expected to announce a bill will be introduced this fall.

The legislation, the government said, will reflect one of the recommendations an expert panel made in 2017 saying charities should be allowed to fully engage without limitation on non-partisan public policy dialogue and development — as long as it fits in their charitable purpose.

In a draft statement, provided to HuffPost, Morneau is quoted saying that while the appeal will seek clarification on important issues of constitutional and charity law, the case “will not change the policy direction” the government intends to take to remove the 10 per cent threshold on political activities.

Morneau also adds the legislation will apply retroactively, including to the CRA audits currently suspended.

Group ‘shocked’ to hear Ottawa’s decision

Leilani Farha, the executive director of Canada Without Poverty told HuffPost that the Liberals actions are “nothing to celebrate and that the group is “shocked” to learn Ottawa intends to appeal.

The government is basically saying, Farha said, that this isn’t an issue of fundamental rights and that it will restore some provisions as a matter of “good public policy,” while forcing “a small anti-poverty organization to defend those rights.

“Ultimately, their position is that what happened to Canada Without Poverty under the previous [Conservative] government does not violate the Charter,” Farha said. “If they win on appeal, any future government would be free to re-introduce the same legislative provisions and the same thing could happen to the charitable sector all over again,” she said.

NDP finance critic Peter Julian called the Liberals’ decision to appeal “outrageous” and a “real betrayal to the folks who believed Prime Minister Justin Trudeau when he promised to stop [former prime minister Stephen] Harper’s witch hunt against charities.”

Julian dismissed the upcoming government legislation as a sideshow, saying the Liberals “are not very credible” when it comes to making commitments and following through.