Demographics make big city condos hot

Housing starts (Photo credit: Wikipedia)

Jason Heath

On average, a home in Canada costs 84% more than in the United States right now. The national averages are $372,762 at home versus $203,100 south of the 49th parallel. One might argue that something has got to give.

By analyzing housing starts in Canada, we can get a good indication of future trends in real estate. Warm weather throughout most of Canada was credited with being the catalyst for a very strong month of March in new homes. April was expected to be lacklustre, but those expectations were blown out of the water with 244,900 housing starts last month, compared to an estimate of 204,000. This was the best month in about five years, well prior to the onset of the 2008 recession. These numbers have some questioning the sustainability of starts as well as eliciting further calls for a housing bubble here in Canada.

Of particular interest was that nearly two-thirds of new homes last month were multifamily units, which includes condominiums — a 27% increase year-over-year on a seasonally adjusted basis.

Canadian housing also topped a recent global list published by the Economist for 12-month price change, increasing 7%, while ranking high on a comparison of home prices to both rents and average incomes. Overall, the Economist suggests that Canadian homes are 54% overvalued relative to a 19% undervaluation in the U.S.

So clearly it doesn’t take a statistics degree to read the numbers and unequivocally declare the Canadian housing market is overheated and in particular, the condo market, right? Wrong.

First off, CMHC’s recently released annual report stated: “Clear evidence of a bubble is lacking [and we] continue to monitor very closely housing prices and underlying factors such as demographic and economic fundamentals and financial conditions across all major urban centers, including condominium markets.”

Furthermore, averages can be deceiving and may not be representative of a particular local market. A lack of supply in posh parts of the Greater Toronto Area, for example, has been driving bidding wars and pushing prices considerably higher in some neighbourhoods. Perhaps people are keen to lock in today’s low mortgage rates and are willing to buy a house in their desired neighbourhood regardless of the cost. In the short run, this drives up average prices. In the long run, does this really matter?

The big question based on Canada’s relatively high prices and April’s enormous inventory of new condos is whether the condo market is really experiencing a bubble? One of the key considerations for the purchase of any home has always been location. And location is one of the main reasons the condo market is not in a bubble.

What are many Baby Boomers going to do in coming years? Many will be selling the two-storey houses where they raised their families and buying condos, both for lifestyle reasons and also to bank some money to fund their retirement.

What are many young families going to do in coming years? If they want to live in Canada’s big, expensive cities like Vancouver, Toronto and Montreal, they’ll do what’s been done in the likes of New York, London and Tokyo for years — they’ll buy a condo.

What are many new immigrants going to do in coming years? In recent years, about 70% of Canadian immigrants end up in the big three — Vancouver, Toronto and Montreal. And they don’t buy houses in the suburbs. They rent condos in the city, so they can be close to jobs, resources and cultural centres until they are established.

Demographics (Baby Boomers), family finance (big city housing affordability) and global mobility (immigration to the world’s new “America”) make condos the location of choice for tomorrow’s Canadian home buyers. I live in a big house in the country, northeast of Toronto, so condos aren’t for me. Am I selling my rural house to buy a condo in the city? No. But prices of goods and services, homes included, are all about supply and demand. Therefore, my feeling is that big city condo values will continue to rise in general and that house prices in some urban areas will fall as a broad trend, with average home prices across the country potentially flat in the years to come.

Jason Heath is a fee-only certified financial planner (CFP) and income tax professional for Objective Financial Partners Inc. in Toronto.

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Amendments to the Protecting Canada's Immigration System Act

OTTAWA, ONTARIO, May 09, 2012 (MARKETWIRE via COMTEX) -- Minister of Citizenship, Immigration, and Multiculturalism Jason Kenney today announced that the Government is proposing amendments to Bill C-31, the Protecting Canada's Immigration System Act.

"Over the past few weeks, I've listened to parliamentarians and witnesses," said Minister Kenney. "We have always said that we were open to amendments that make Bill C-31 stronger and help us to fight human smuggling and to protect Canada's immigration system. These amendments do just that, and make for a stronger bill."

For example, some critics feared that the measures originally proposed in Bill C-31 with respect to the cessation of permanent residence status might be used in a way never intended by the Government. Others speculated that the Government would seek to remove permanent residence status from refugees who have become well-established in Canada, but whose rationale for refugee status ceases to exist due to improved conditions in their country of origin. The Government is introducing an amendment to clarify this section and to explicitly limit the application of this section of the legislation.

The proposed amendment would make it clear that where the Immigration and Refugee Board of Canada (IRB) determines that an individual's protected person status has ceased to exist solely due to a change in country conditions, that individual would not automatically lose permanent resident status. This was the original purpose of the provision in the bill, and the new language should make that purpose clearer.

Under the Balanced Refugee Reform Act, individuals with a final negative decision from the IRB were barred from applying for a pre-removal risk assessment (PRRA) for 12 months. This is because a PRRA is duplicative of the IRB decision, and a core purpose of the bill was to reduce redundancy and unnecessary delays in the removal process for failed asylum seekers.

The government is proposing to amend this provision so that the 12-month bar will apply as soon as Bill C-31 receives Royal Assent. There is no reason to delay the application of this provision, and the proposed amendment ensures there will be no such delay. The effect of this proposed amendment will be that individuals who received a negative decision from the IRB, or abandoned or withdrew their refugee claim, or received a negative PRRA decision within the 12 months prior to the date of Royal Assent would be barred from applying for a PRRA until 12 months after that decision.

The proposed amendment would also increase the temporal bar from 12 to 36 months for those from designated countries of origin who have received a previous negative decision from the IRB, abandoned or withdrew their refugee claim, or received a negative PRRA decision. This change will discourage failed asylum seekers from going underground and evading removal for 12 months, and recognises that country conditions and the threat of real persecution in a presumptively safe country are not likely to change in the course of 36 months. There is, however, a provision in the Balanced Refugee Reform Act that would allow the Minister to make exceptions to the bar on PRRA to quickly respond to sudden changes in country conditions.

Under the Protecting Canada's Immigration System Act, the Government had initially proposed mandatory detention without review for up to 12 months for those who arrive as part of a designated irregular arrival. This would allow for the determination of identity, admissibility, or any other investigations to take place before members or irregular mass arrivals are released into the community. Persons would, however, be released from detention before 12 months, if they are found to be genuine refugees.

Opposition members have asked for amendments to this detention review schedule, so that these individuals would receive a review of their detention much sooner than initially proposed. They have, for example, suggested that a first detention review should occur within 14 days of detention, with subsequent reviews every 30 days. Other witnesses and critics of this provision of Bill C-31 have suggested other time periods, including an initial review shortly after detention, followed by subsequent reviews at least every 6 months.

After listening to parliamentarians, the Government is proposing a compromise, which would see a first detention review within 14 days and subsequent reviews after every 180 days. As before, a person would be released before this time, upon being found to be a genuine refugee. As an additional safeguard, the government will also propose an amendment to allow the Minister of Public Safety, on his own initiative and at any time, to release a detained individual when grounds for detention no longer exist.

"I believe that these amendments show that the Government is open to reasonable suggestions that improve our Bills," said Minister Kenney. "We have listened to parliamentarians on Bill C-31 and, as a result, we have a stronger bill that will continue to protect genuine refugees, while ensuring that bogus asylum seekers are detained, processed, and swiftly removed, and sending the message to human smugglers that targeting Canada will no longer pay."

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SOURCE: Citizenship and Immigration Canada