A home is the most expensive thing most of us will ever buy. But the true cost of homeownership is even steeper than many of us realize, according to a new survey commissioned by Intact Insurance.

About 20 per cent of homebuyers in Canada forget to factor in the cost of home insurance and maintenance fees, shows a poll conducted by Angus Reid for Intact.

 

The study also suggests that many current and prospective homeowners likely got a rude awakening when the Bank of Canada decided this summer to start hiking interest rates, as 17 per cent of Canadians fail to take into account the possibility of climbing interest rates when buying a home.

Other unexpected costs include home inspection and legal fees, mortgage insurance, as well as GST/HST, land transfer and property taxes, according to RateHub.ca, an online rates-comparison site.

Increasingly, though, homeowners also will also have to contend with another factor that could significantly impact their bottom line: climate change.

According to Intact, a whopping 60 per cent of Canadians say that they do not factor the impact of things like flood and wildfire risk.

 

Here’s a closer look at many of the line items homebuyers often forget to include in their home-buying budget:

Home insurance

If you own a home, you need to have home insurance. Your premiums will depend on a number of factors, such as the value of the property and its contents, its location, as well as its structural condition and specific features, said Intact Property claims manager Marc Barbeau.

Barbeau advises homebuyers to turn to an insurance broker to get the best deal on a home insurance policy that fits their needs. It’s also a good idea to ask the seller about the property’s claims history, which might uncover hidden issues that might not be immediately apparent.

Also, be sure to let your insurance know about any renovation work, which could affect the value of the property, said Barbeau.


Maintenance costs

A home requires constant upkeep. Many homeowners take up two maintenance projects per year, said Barbeau: It’s important to budget for those ongoing costs.

And whether you just replaced an aging furnace or the shingles on your roof, let your insurance know, he added.



Home inspection costs

Speaking of maintenance costs, you don’t want to walk into your new home and find a number of urgent fixes for which you didn’t budget.

That’s one of the reasons why you should pay for a professional home inspection, which will add $500 to your budget, according to RateHub.

You might also need additional, issue-specific inspections, such as a termite check if you know you’re buying property in an area where other homeowners have had to battle the infesting insects.

 

Legal fees

Legal fees include the cost of a real estate lawyer, who will take care of most of the paperwork and also ensure that whoever you’re buying from has full ownership of the property, with no competing claims on the title deed. That will add a minimum of another $500 plus tax to your costs, according to RateHub.

Mortgage insurance

If you can’t make a downpayment of at least 20 per cent of the value of your home, you must buy mortgage default insurance. This protects your lender (not you) in case you default on your mortgage payments.

The cost of mortgage default insurance depends on the price of your property, and premiums have climbed a bit since Ottawa introduced new mortgage rules in 2016. According to RateHub, if your downpayment is between 5 per cent and 9.99 per cent of the value of your home, the insurance costs 4 per cent of the purchase price. If the down payment is between 10 per cent and 14.99 per cent, mortgage default insurance is 3.1 per cent. And for a down payment of between 15 per cent and 19.99 per cent, you’ll pay 2.8 per cent. This is a one-time cost: You can pay it in a single lump sum or add it to your monthly payments.

 

Also, beware of the difference between mortgage default insurance, which is mandated by the government and generally sold by Canada Mortgage and Housing Corp., and another type of mortgage insurance that is sold by the banks. The latter is widely regarded as a bad deal by personal finance experts, as Global News has previously reported.


Taxes, taxes, taxes

Buying a home invariably comes with a steep tax bill.

A chunk of your money will go to the provincial government (and sometimes the municipal government) for what is known as the land-transfer tax (LLT), which is calculated as a percentage of the purchase price of your home. “Much like income tax, the LTT is progressive. You pay a marginal rate depending on the value of the home,” according to RateHub.

Thankfully, some jurisdictions (Ontario, P.E.I., British Columbia, and the City of Toronto) offer a rebate of the LTT for first-time homebuyers.

Once you own a home, you’ll have to pay property taxes every year. These are generally between 0.5 per cent and 2.5 per cent of the assessed value of your property, according to RateHub.

If the home you’re buying or building is new, you’ll need to pay GST or HST on it.

Climate change, aka more home insurance and/or maintenance costs

Changing climate conditions are making flooding and fires ever more frequent, with the former, in particular, becoming a bigger and bigger risk even for a home 

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Condominium sales drive August activity

     

 

Competition for condominiums and townhomes pushed Metro Vancouver* home sales above typical levels in August.

The Real Estate Board of Greater Vancouver (REBGV) reports that residential property sales in the region totalled 3,043 in August 2017, a 22.3 per cent increase from the 2,489 sales recorded in August 2016, and a 2.8 per cent increase compared to July 2017 when 2,960 homes sold.

Last month’s sales were 19.6 per cent above the 10-year August sales average.

“First-time home buyers have led a surge this summer in demand in our condominium and townhome markets,” Jill Oudil, REBGV president said. “Homes priced between $350,000 and $750,000 have been subject to intense competition and multiple offers across the region.”

There were 4,245 detached, attached and apartment properties newly listed for sale on the Multiple Listing Service® (MLS®) in Metro Vancouver in August 2017. This represents a 1.1 per cent decrease compared to the 4,293 homes listed in August 2016 and a 19.2 per cent decrease compared to July 2017 when 5,256 homes were listed.

The total number of properties currently listed for sale on the MLS® system in Metro Vancouver is 8,807, a 3.5 per cent increase compared to August 2016 (8,506) and a 4.2 per cent decrease compared to July 2017 (9,194).

For all property types, the sales-to-active listings ratio for August 2017 is 34.6 per cent. By property type, the ratio is 16.3 per cent for detached homes, 44.8 per cent for townhomes, and 76.3 per cent for condominiums.

Generally, analysts say that downward pressure on home prices occurs when the ratio dips below 12 per cent for a sustained period, while home prices often experience upward pressure when it surpasses 20 per cent over several months.

“Conditions in our detached home market are distinct today from the dynamic in our condominium and townhome markets," Oudil said. "Detached homes have entered a balanced market. This means there's less upward pressure on prices and that buyers have more selection to choose from and more time to make their decisions."

The MLS® Home Price Index composite benchmark price for all residential properties in Metro Vancouver is currently $1,029,700. This represents a 9.4 per cent increase over August 2016 and a one per cent increase compared to July 2017.

Sales of detached properties in August 2017 reached 901, a 26 per cent increase from the 715 detached sales recorded in August 2016. The benchmark price for detached properties is $1,615,100. This represents a 2.2 per cent increase from August 2016 and a 0.2 per cent increase compared to July 2017.

Sales of apartment properties reached 1,613 in August 2017, a 20.1 per cent increase compared to the 1,343 sales in August 2016. The benchmark price of an apartment property is $626,800. This represents a 19.4 per cent increase from August 2016 and a 1.7 per cent increase compared to July 2017.

Attached property sales in August 2017 totalled 529, a 22.7 per cent increase compared to the 431 sales in August 2016. The benchmark price of an attached unit is $778,300. This represents a 12.8 per cent increase from August 2016 and a 1.9 per cent increase compared to July 2017.

 

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House prices in Vancouver have continued to rise a year after the British Columbia government imposed a foreign-homebuyer tax on the metropolitan area – and this has a lot to do with the insufficient supply of housing, according to Toronto-Dominion (TD) Bank.

“We don’t anticipate a significant drop in home prices in any way. Interest rates are going up but they’re going up very gradually, and really what matters is the supply-demand balance,” Diana Petramala, economist at TD Bank, told BuzzBuzzNews.

In July, Vancouver saw a 14% drop in new listings year-to-date. This was the greatest drop in the number of homes for sale in any city across Canada, according to the Canadian Real Estate Association (CREA).

With the benchmark price of a Greater Vancouver home, including condominiums, cracking the $1m mark in July, a supply shortage appears to be behind the price surges.

“The market is still fairly tight, by most measures, which is why prices have rebounded and are still continuing to grow,” Petramala said.

Moderating price growth is in the cards for Vancouver, according to TD Bank’s latest Canadian Regional Housing Outlook, which was published towards the end of August.

In the report, Petramala and Beata Caranci, chief economist of TD Bank, highlighted the key factors impacting market activity in Vancouver and other real estate markets. For Greater Vancouver, policymakers played a significant role in cooling the formerly sizzling real estate market, even though home prices remain elevated there.

The region saw a dramatic decline in housing demand after the BC government announced measures to track foreign investment in February 2016. By the time the tax came into effect in August of last year, three-quarters of the downturn in sales had already occurred, the report said.

Within six to 12 months, markets typically rebound to some extent following government policy modifications, and this was the case in Vancouver.

“We had a bit of a Trump bump in interest rates between November and early 2017, and then that quickly reversed course by March which held for a little bit of a recovery. But sales are still structurally lower because of the amount of government policy that was implemented over 2016,” Petramala said.
 

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