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Very interesting article in CBC New/World written by Neil Macdonald.

 

 Although there are some similarities to the US experience, there are some fundamental differences as well.

 

Certainly Canadian debt level is a concern (I did blog about this earlier in the month), as it should be... the Toronto/Vancouver housing markets are soft and are undergoing a correction that is expected as a result of the Harper governments policies over the last several years to control the Toronto/Vancouver condo market specifically (as quoted by the Right Honourable Finance Minister), as well as decreased demand from Asian buyers.

 

The other similarities to the US crash as suggested by Neil Macdonald may be more "doom and gloom" than reality. Bad news sells more than good news.

 

"The US Government through Fannie Mae and Freddie Mac encouraged malinvestment and speculation. It was the Government guaranteeing home loans through these agencies such as Fannie Mae and Freddie Mac that eliminated risk as the lender would have the ability to make loans while the Government guaranteed its potential losses. As such there was no incentive to lend money conservatively (125% mortgages) as doing so would restrict the number of transactions while not minimizing potential losses since these losses were absent due to the Government guarantees. To make matters worse, Republicans and Democrats alike voted several times to increase the FHA loan limit during the housing bubble. This allowed people to take on greater debt and perfectly illustrates that government subsidies do not lower the price but make the underlying assets more costly. By raising the FHA(Federal Housing Administration) loan limits the Bureaucrats in Washington voted to extend the housing bubble, raise prices, and delay the inevitable correction.

While many self-proclaimed conservatives blame the Democrats for the social programs and anti-free market policies it was President Bush in 2002 who stated that a high down payments are a big barrier to first time owners. During “A Home Of Your Own” conference on May 17, 2002 President Bush urged Congress to use taxpayers money to interfere in the market place by lowering down payments for those that cannot afford to buy a home. During that speech President Bush also explained how the guarantees of home loans by the Government Sponsored Enterprises would streamline the underwriting process and basically neglect the risk variable. President Bush made it clear that his and Congress’ vision is to make homeownership a right and not a privilege."

 

The "delusion" Mr. Shiller and Drummond suggest Canadians are suffering from mirror the US crash.....that "it will make them rich" is not a valid argument. As pointed out is the article, the subprime mortgages to unqualified buyers was a significant reason for the crash....which we don't have and hopefully never will. Not to mention allowing these agencies to bundle and sell packages to Wall Street when they all knew it was going to fail and in fact bet on the investment to fail.

 

The underlying Canadian economic indicators are nothing like the US....and the delusion Canadians have is to simply own a home and build some equity.

 

At the end of the day, it was the irresponsible public agencies, investment bankers and  banks that created the conditions and allowed the US bubble to grow and ultimately burst in their lap. They were greasing the slide while blowing up the balloons.  Canada has nothing similar that would cause a US like crash. To say "The same sort of thing might well happen in Canada" is speculation at best and is just as easy to say the same sort of thing might well NOT happen in Canada.

 

So after the thunder clouds clear from the overall tone of the article, they predict a 10 - 15% correction in Canada....ya likely...but maybe not. Aside from Toronto/Vancouver, just about every other market in Canada is performing as it should....quite reasonably thank you very much.

 

That’s my 2 cents.  :)

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Condo owners and buyers should be aware of a significant change that will affect strata properties beginning December 14, 2013.

Depreciation Reports will be required with some exceptions. For example, stratas with less than 5 units are automatically exempt, but they may choose to have reports prepared anyway.  Other exemptions require a 3/4 vote from it's members. This is great idea and will provide added confidence to purchasers that are considering buying a strata property.

The reports will not only inform buyers, but also current Strata owners of maintenance issues that may have been avoided by Strata Boards until "next year". It should significantly change the way Strata Corporations are managed and issues prioritized. The intent of the reports are to help Stratas better plan for future repair and maintenance costs. They also provide valuable information to purchasers considering your strata unit.  Purchasers would get a copy of the latest depreciation report as part of the Form B.

I strongly recommend that potential buyers and strata owners read the full report provided by BC Office of Housing and Construction Standards.

A depreciation report must contain:

    • a physical component inventory and evaluation of those components, such as
      – the building structure
      – the building exterior including the roof, decks, doors and windows
      – building systems such as electrical, plumbing, heating, fire, protection and security
      – parking facilities and roadways
      – balconies and patios;
    • a summary of the anticipated maintenance, repair and replacement costs for common expenses projected over 30 years;
    • a financial forecasting section that contains at least three cash flow funding models for the Contingency Reserve Fund;
    • the date of the report, the qualifications of the author(s), their relationship (if any) to the strata corporation and details on any errors and omissions insurance; and
    • information on the common and limited common property (if any), that individual owners are required to repair and maintain.

 

If you have any questions please don't hesitate to call me directly.

Mike Alleyne, Real Estate Agent
HomeLife Benchmark
604-785-7066
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Just a gentle reminder to buyers to work with a buyer's realtor and do your homework. I was recently reading that the B.C. Place huge $563 million overhaul was immediatley followed by some minor leaks. With a budget like that you'd think the stadium roof would have been sealed tight with a kiss (and a state of the art vapor barrier that couldn't possible leak in its first months).  Not so, and minor repairs are now underway.  That's not your and my bill, oh wait maybe, because it's publicly owned.  I guess we'll see what is covered by insurance.  But that is exactly my point. Buyers need to know their builders and with the assistance of a realtor, do your homework, before you sign off.

Television programs like Holmes on Homes showing disasters encountered with builders and renovators shed a light on the importance of checking out the builder of a home you are interested in purchasing. In fact, checking out the builder is a very important element of the Buyer's Checklist.  BC has a bit of a history of leaks with it's Vancouver Leaky Condo Fiasco.   It became a rule of thumb for realtors to warn buyers to do their homework particularly on any condos built between 1980 and 2000.

Times changed over the years with formation of the BC Housing division called the Homeowner Protection Office and website which provides a great deal of information.  It is this office that licenses residential builders and also provides a searchable registry of licensees.  It is important to check if your builder is licensed and, if so, are they in good standing.

Also, BC now has mandatory third party insurance on all new residential construction. There is an online guide that assists homeowners to know what is and is not covered under the new home insurance.   

Buying a home is one of the biggest investments of your life. Make sure to do your homework. Your realtor will likely have done their homework on the builder, but I encourage buyers to as well.   

Mike Alleyne, Real Estate Agent
HomeLife Benchmark
604-785-7066
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Barry McKenna wrote an interesting article in the Globe & Mail yesterday.   The crux of the article was that are banking regulations only partially saved us from the effects of the Lehman collapse and subsequent world credit crisis.

Canada is living in a world of artificially low interest rates as a result of the crisis.     Bank of Canada Governor Mark Carney has warned of Canada's household debt being far too high and growing.    When interest rates increase (and they will) there will be a deflation of home values as households struggle with their debt load.    Although analysts expect a correction ... it is still impending, not yet here.   As long as U.S. interest rates stay low, Canada will too.

If you are contemplating selling your house, price it right.   If you are planning on buying a home, I recommend that you get a good mortgage broker (I can recommend several) and negotiate hard for a good long-term rate.

If you would like to read the article n full, here's the Globe & Mail story from September 10, 2012.    

Mike Alleyne, Real Estate Agent
HomeLife Benchmark
604-785-7066
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I often wonder how my children will be able to afford a home in the Lower Mainland if they chose to live here.   More and more our adult children are either moving away from the lower mainland or living at home longer because they just can't afford accommodation here.   My daughter recently rented a room in Yaletown which was actually a kitchen pantry converted to a bedroom.   There was no window, no closet, and definitely not big enough for even a single bed ... just a cot.    I won't even get into how much the monthly rent was.

Surrey's Quattro is tackling the issue of affordability of Surrey condos and townhouses.   They have chosen Surrey, BC's most rapidly growing community for this ambitious project.   You likely heard that Quattro 1 and 2 sold out in record time.    The real estate market has certainly cooled since then, but Quattro is still a very good option for 1st time buyers and downsizing couples or others who are deciding to be a part of the up and coming area at Whalley Boulevard and 108th in Surrey.     The proximity of healthcare of Surrey Memorial and the Jimmy Pattison Pavillion are also very attractive to individuals desiring the convenience of this proximity.

The Quattro area is becoming a new "city centre" area, with significant long term plans for infrastructure, including quaint neighbourhood restaurants, a live performance theatre, a new $86 million civic centre with its crowning glory being "Celebration Plaza" which will accommodate 5,000 people.   Quattro is also walking distance (less than 10 minutes) to Skytrain and close to SFU's Surrey campus.

Given construction is complete Surrey's new Quattro 3 condo and townhouse development re-opened its Discovery Centre over the Labour Day Weekend.    This condo development is the first six story wood frame residential commercial mixed building in Surrey.   It includes studio apartments, 1 and 2 bedrooms, and live work studios - imagine that.

Surrey Mayor Dianne Watts who supports the new construction stated "National business and real estate organizations continue to recognize Surrey as having one of the strongest investment climates in the country, and we've been able to attract over $1 billion in new residential development to City Centre. As we continue to shape growth in our city, we are encouraging new forms of housing stock to meet the needs of our community and are excited to see Quattro pioneering six storey wood-frame construction in Surrey."

The long awaited revitalization of Whalley has begun.  

Mike Alleyne, Real Estate Agent
HomeLife Benchmark
604-785-7066
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