In general terms, market value is the price expected if a reasonable amount of time is allowed to find a purchaser and if both seller and prospective buyer are fully informed. For assessment purposes in British Columbia, market value is the most probable price that an unencumbered property would sell for on the open market on July 1st.

The annual assessment process is often a confusing one for many commercial and residential property owners.  Typically there is a difference between the property value assessment on the assessment notice and the current market value as determined by a REALTOR®.

This difference is a result of two factors.  The first factor involved BCA’s mass appraisal system, which calculates property value by evaluating prices for homes sold in each neighborhood or for units in a strata complex and then applies the information to arrive at an assessed value.  This information is typically obtained from MLS sales, NOT by visiting the properties in question.  The variables BCA uses to calculate this value include house type, square footage, age, heating, property classification or use, and additions or demolitions of features such as garages, sheds, pools and spas.

The second factor depends on the time at which a property is assessed.  Normally, a 2012 assessment notice is BCA’s estimate of a property’s market value as of July 1, 2011, whereas a REALTOR®’s market value reflects the current state of the market, not the market six months ago.

 “Market value assessment” is widely considered to be the fairest system for distributing the property tax burden.  As the real estate market can change very quickly, depending on an historical assessment (July assessment for next year’s tax purposes) to be an accurate indicator of market value can be erroneous.

BCREA ECONOMICS NOW

Canadian Real GDP Growth - October 31, 2011

The Canadian economy expanded 0.3 per cent in August following an upwardly revised 0.4 per cent gain in July. Economic growth was led by a 2.8 per cent increase in output in the energy sector as projects re-started from temporary shutdowns in the summer. Excluding the energy sector, monthly GDP growth was flat.

Through the first two months of the third quarter the Canadian economy is growing at about a 2.0 per cent rate – an improvement from the recession fears of the summer, but far from robust. We anticipate the economy will continue to grow at about a 1.5 to 2.0 per cent rate for the second half of the year. Slower than potential economic growth will put moderate downward pressure on inflation and keep the Bank of Canada in a holding pattern.

For more information, please contact: 

BCREA represents 11 member real estate boards and their approximately 18,000 REALTORS® on all provincial issues, providing an extensive communications network, standard forms, economic research and analysis, government relations, applied practice courses and continuing professional education (cpe).

Copyright British Columbia Real Estate Association. Reprinted with permission. BCREA makes no guarantees as to the accuracy or completeness of this information.

At 9:00 am EST, September 7th, 2011, the Bank of Canada did what we expected them to do… they maintained their overnight rate.  What this means to you is that the prime rate on your mortgage or line of credit will not change and remains at 3.00%.  This is great news as you still have a great low rate and so continue to make the most of the low payments

Here is an excerpt of the announcement from the Bank of Canada and what they had to say about their decision:

“The global economic outlook has deteriorated in recent weeks as several downside risks have been realized. The European sovereign debt crisis has intensified, a broad range of data has signalled slower global growth, and financial market volatility has increased sharply. Recent benchmark revisions show that the U.S. recession was deeper and its recovery has been shallower than previously reported.   Canadian net exports are now expected to remain a major source of weakness, reflecting more modest global demand and ongoing competitiveness challenges, in particular the persistent strength of the Canadian dollar.”

April 12

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As suspected rates have held steady this morning, meaning no change to variable rate mortgages or lines of credit with the current payments. Fixed interest rates (which are tied to the bond market) have been on the rise over the last week on average 30 basis points.  With a strong Canadian dollar, low inflation levels and an election imminent, it’s almost certain that the Bank of Canada will wait until later in the year to raise interest rates. While time is taken to digest the results of the election, watch for variable rate mortgages to remain mostly unchanged during this period.

An anticipated increase in Government of Canada bond yields due to improving economic conditions and higher inflation should eventually lead to higher fixed rates by the end of the year. Vist our "Mortgage Broker" page for more information !

If you have been sitting on the fence about whether now is the right time to refinance, you may not want to delay.  This morning, Jim Flaherty announced three changes to mortgage financing in Canada that will affect you if you are purchasing or refinancing your home.

There are three areas that they are considering at this point:

1.       They are reducing the maximum allowable amortization period from 35 to 30 years for government-backed insured mortgages with Loan to Values of more than 80%

2.      Ottawa will lower the maximum amount Canadians can borrow in refinancing their mortgages to 85 per cent from 90 per cent of the value of their homes.

3.      Ottawa will withdraw government insurance backing on line of credit secured by homes.

Maximum Amortization

This one seems to be something that has really bothered the Bank of Canada for certain.  Reducing the amortization if you believe the stats from the Canadian Association of Mortgage Professionals that only 30% of new mortgages happen at 35 years then it will have a moderate effect on Canadians.  Overall, I believe this is going to mean less qualified buyers and first time buyers will be priced out of the market with current prices and trying to qualify at reduced amortizations. 

Maximum refinance to 85%

This one is going to force Canadians to retain some sort of equity in their properties rather than using them to consolidate debts and be used as a proverbial ATM machine.  This is a key strategy for the government to say to Canadians to keep their spending under control and to try to keep their debts under control.  The options to consolidate debts into equity are going to be less and less 

Withdrawal of government insurance backing on line of credit secured by homes

This point won’t affect very many people and is a very minor change. 

Implications: Although the above changes are not expected to impact a large number of Canadians, personally I believe that  the big loss is for those who are trying to refinance their mortgages into lower rates. Many clients opt to add the penalty to their mortgage and accelerate their payments, thereby reducing their principal balance over the term, saving back both the penalty, and extra thousands by benefiting from the lower rate.   This strategy has saved many clients thousands of dollars over the remaining term of their mortgage. For many, the penalty added to the mortgage will be higher than 85% of the property value.   PLEASE NOTE:  CMHC purchases with 5% down are not affected by these rules.  A purchase is treated differently than a refinance. 

Certainly, if you are thinking of having your mortgage analyzed for a lower rate, or thinking about consolidating your debts, call me today. The changes will take effect in April, so it’s best to call now.

You may pass this along with my contact information should you think this would be informative to a friend, family member or business associate.

It is our commitment to continue to educate our clients and assist them with the best mortgage strategies in any market.

Interest Rate Outlook