Mortgage, housing agency says home prices won’t recover from COVID for years

Mortgage, housing agency says home prices won’t recover from COVID for years

By David Paddon

THE CANADIAN PRESS

TORONTO _ Canada Mortgage and Housing Corp. officials said Tuesday they expect real estate prices won’t return to pre-recession levels until late 2022 at the earliest.

The housing agency also cautioned that the impact of the COVID-19 pandemic is unpredictable and beyond its worst-case estimates prior to the outbreak.

CMHC routinely does stress tests to estimate what could happen under various severe conditions, but chief executive Evan Siddall said the stress tests focus on what’s considered to be “plausible” scenarios.

“We did, back in January, look at a pandemic scenario that was not as severe as this,” Siddall said in a teleconference to discuss CMHC’s annual financial report for 2019.

“And I’m sure that you’d understand that the realm of plausibility has expanded significantly as a result of all the experience we’ve had.”

Siddall said the federal Crown corporation which provides market analysis for housing-related industries, mortgage insurance for lenders and funding for public housing projects is now revising its estimates on an expedited basis based on experience during the spring and summer.

He said preliminary figures indicate that about 10 per cent of homeowners across Canada have chosen to defer their mortgage payments, although the rate seems to be higher in parts of the country that rely heavily on the oil and gas industry.

“Tens of thousands of Canadians are having trouble meeting their mortgage commitments,” Siddall said.

Canadian Mortgage and Housing has given lenders the flexibility to extend mortgage deferrals by a further six months, he said, but the deferrals will mean that missed payments will be added to the total mortgage amount owing on terms determined by contractual agreement between lender and borrower.

CMHC chief economist Bob Dugan said that reliable forecasts are difficult to make because there are so many unknown variables, including how much income levels deteriorate because of unemployment, the timing of future immigration and how the construction industry responds.

“But for Canada and for Ontario, I think, the best case we’re looking at … house prices getting back to their pre-recession levels, at the earliest, by the end of 2022,” Dugan said.

The CMHC presentation came shortly after the release of April statistics for Canada’s largest real estate market.

The Toronto Regional Real Estate Board said April home prices in the Greater Toronto Area fell 11.8 per cent from March, when COVID-related shut-downs including open houses began to be put in place mid-month as Canada stepped up its fight to control the health impact of the coronavirus.

Prices for GTA renters were also down for the month, with the average one-bedroom rent falling 2.7 per cent to $2,107, and the average two-bedroom rent falling 4.1 per cent to $2,705 _ still high in comparison with many Canadian cities.

On Monday, Greater Vancouver’s real estate board said its composite price benchmark index was up 0.2 per cent from March, but that the number of sales hit the lowest levels in nearly 40 years  62.7 per cent below their 10-year average.

Other major cities will be releasing their local and regional figures ahead of a national tally to be published by the Canadian Real Estate Association on May 15.

Siddall said that recent federal emergency legislation will ensure CMHC gets the financial resources it requires to perform its functions which, for the first time, include assisting small businesses through a rent-assistance program announced last month.

However, he said, CMHC had ended 2019 with a strong financial position and said it continues towards a 2030 goal of ensuring all Canadians can get the housing they need at affordable prices.

In the meantime, he said, it’s likely that both incomes and home prices will “sag.”

“And it’s how those move relative to each other that will define the gap between where we are now post-crisis and where we will be.”

Canada must expose hidden company owners to end ‘snow washing,’ inquiry hears

By Laura Kane

THE CANADIAN PRESS

VANCOUVER _Canada must urgently create public registries that reveal the true owners of corporations in order to shed its international reputation as a destination for laundering the proceeds of crime, an inquiry has heard.

A coalition of tax fairness groups told British Columbia’s money laundering inquiry Wednesday that hiding ill-gotten cash behind shell companies is so widespread in Canada it’s known globally as “snow washing.”

“It is no wonder criminals set their sights on Canada, which has some of the weakest corporate transparency laws in the world,” said James Cohen, representing Transparency International Canada, Canadians For Tax Fairness and Publish What You Pay Canada.

“There are more rigorous checks to obtain a library card than there are to set up a shell company.”

B.C. launched the provincial inquiry amid growing concern that illegal cash was helping to fuel its real estate, luxury car and gambling sectors. Prime Minister Justin Trudeau’s government is participating and says it is committed to tackling the national problem.

Three days of opening arguments concluded Wednesday. The inquiry will reconvene in May to quantify the extent of money laundering in B.C. before main hearings in September through December delve into specific industries.

Cohen, executive director of Transparency International Canada, said it joined forces with the other two groups in 2016 after the Panama Papers shed new light on wealthy individuals’ use of offshore companies to evade taxes.

The leaked documents from Panamanian law firm Mossack Fonseca also revealed that Canada was being marketed as a location to bring dirty money and have it cleaned like the  “pure white snow,” he said.

There are a number of gaps in Canada’s anti-money laundering law but a key problem is its weak beneficial ownership regime, which allows company owners to remain anonymous, Cohen said.

He proposed adding owner information to existing business registries already in place in provinces and territories. This addition would deter money laundering while still respecting privacy rights, he argued.

Cohen noted that the United Kingdom gathers information about owners that is available to authorities but limits the details that are posted publicly on its registry. For example, an owner’s month and year of birth are posted but not the date.

He praised B.C. for creating a land ownership registry that identifies those buying real estate, as well as the federal government for consulting with provinces and territories on a possible national registry, but he urged swifter action.

“The extent of secrecy granted to companies has come at a high cost to Canadians, particularly in British Columbia,” he said.  “Bad actors have exploited Canada’s stable economy, leading to crime, housing unaffordability and increased corruption.”

The organization representing real estate agents in British Columbia told the inquiry that it has taken action since several government-commissioned reports found the housing market had become a hotbed for dirty money.

A lawyer for the B.C. Real Estate Association said it supported the province’s land ownership registry and it also struck a working group with others in the sector to make anti-money laundering recommendations.

Chris Weafer asked commissioner Austin Cullen to accept those recommendations, including that the provincial and federal governments create a “comprehensive, efficient enforcement regime” that avoids duplication of reporting practices.

He also pushed back on the idea that mortgage brokers or others in the industry regularly accept cash deposits. This practice has never been common except in extenuating circumstances and even then amounts were modest, he said.

“The regulation of Realtors and the real estate industry is in a state of flux in this province, through taxes, new regulations and legislation,” Weafer said.

“As a participant in these proceedings, BCREA can provide a practical lens to give the inquiry a boots-on-the-ground perspective of the current and past state of the industry, and provide insight as to what the industry may look like following proposed changes.”

Another key issue is to what extent lawyers should be included in the national anti-money laundering regime, given that they are involved in large purchases of assets and the creation of corporations, partnerships and trusts.

Kevin Westell, representing the Canadian Bar Association and Criminal Defence Advocacy Society, said the regime should not apply to the legal profession. Requiring lawyers to report suspicious activity to the Financial Transactions and Reports Analysis Centre, or Fintrac, would violate solicitor-client privilege, he said.

It would also add to a “disturbing” trend of the B.C. government undermining the work of lawyers, he said, pointing to policies including proposed changes to its public auto insurer that would ban injured people from suing at-fault drivers.

Both the bar association and defence advocacy society recognize the inquiry is important, Westell said.

“At the same time, both organizations are wary that the zealous search for solutions to the money laundering problem will lead to investigative and regulatory overreach that could endanger the independence of lawyers, the privacy of private citizens and the rights of all Canadians to a free and just society.”

Canadian Real Estate Association says home sales hit record last month

The number of homes sold throughout the country last month hit a record for October, the Canadian Real Estate Association said Tuesday, November 15, 2016.

There were 42,473 residential properties sold last month through the association’s Multiple Listing Service, up two per cent year-over-year.

Sales were up from October 2015 levels in about 60 per cent of all Canadian markets, with gains in the Greater Toronto Area and surrounding communities, though that was offset by declines in B.C.’s Lower Mainland.

The actual national average price for a home sold in October was $481,994, up 5.9 per cent compared with a year ago. Excluding Greater Vancouver and Greater Toronto, the average price was $361,012.

The figures coincide with changes brought in by the federal government aimed at stabilizing hot housing markets.

New measures introduced last month require stress tests for all homebuyers in need of mortgage default insurance in order to ensure they can repay their loans if circumstances change, such as a job loss or an increase in interest rates. Previously, stress tests were not required for fixed-rate mortgages five years and longer.

“Early evidence suggests that the influence of tighter mortgage regulations on sales activity has been mixed,” said association chief economist Gregory Klump in a statement.

“The federal government will no doubt want to monitor the effect of new mortgage regulations on the many varied housing markets across Canada and on the economy, particularly given the recent rise in uncertainty about economic growth prospects following the U.S. presidential election.”

 

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