RateHub Roundup: August 2016

by Jordan Lavin August 1, 2016 / No Comments

British Columbia’s provincial government got to work and made significant changes that are expected to have a major impact on the housing market. Those changes, as well as the usual excitement about real estate, made up the majority of this month’s stories, but there are a few other stories from this month that you might have missed. Read on for our roundup of July’s biggest (and smallest) news items:

British Columbia passes tax

People who want to buy a house in Vancouver, but who don’t enjoy Canadian citizenship or permanent residency, will soon have to pay a 15% land transfer tax in addition to the regular taxes already levied by the provincial government. Announced last week, the whopping tax will increase the amount payable on the average Vancouver home price of $1,026,207 from $18,524 to $172,455 for foreign nationals. Premier Christy Clark said the tax is intended to make sure British Columbians have “first crack” at homes in the Lower Mainland, and it may well achieve the desired effect. Or, the wealthy foreigners who have been investing in Vancouver real estate could just see it as another cost of doing business, like the sales tax you paid the last time you bought a car.

Realtors in British Columbia will now answer to the provincial government

The new tax isn’t the only measure the B.C. government used to take control over the housing market this month. Premier Christy Clark announced the province will adopt 28 recommendations from an independent advisory panel that include more stringent licensing requirements for realtors, increased fines for agents and brokers who break the rules, and better education for consumers. She also announced the Real Estate Council of B.C. will no longer be permitted to self-regulate. Across the country, the province that’s home to Canada’s second-hottest housing market will not be taking the same steps. The Real Estate Council of Ontario has already made many of the changes being recommended in B.C., and has stayed out of the sights of the provincial government, at least for now.

ATB Financial puts an Alberta spin on GICs

A few hundred kilometres east of Vancouver, the largest Alberta-based financial institution is putting a homegrown spin on Guaranteed Investment Certificates. ATB Financial has announced the “Choose Alberta GIC,” a 27-month GIC product that pays a guaranteed 1.65% interest rate, plus a bonus at maturity that’s directly tied to Alberta’s unemployment rate. The lower the unemployment rate, the higher the bonus – up to 0.75%. To get the full bonus, the Alberta unemployment rate will need to fall below 4.5% by the time the GIC matures (November 2018 if you buy today).

There are a few issues with this. First, the unemployment rate in Alberta has only fallen under 4.5% a handful of times in the last five years, most recently in October 2014 (it’s currently at 7.9%). Second, the best two-year GIC rates in the market are currently around 2.40%, equal to the full potential payout of the Choose Alberta GIC without any risk. That said, ATB is promising the GIC will be used to “support Alberta businesses, families and communities,” so if you’re keen to help your neighbours through low stakes gambling, this could be one to check out.

The best companies for customer service are financial institutions

Banks and insurance companies are the Canadian institutions that offer the best customer service, making up eight of the top 10 rated companies, according to a recent survey by J.D. Power. On the banking side RBC, TD, and Scotiabank made the top 10 (CIBC and BMO failed to make the top 20), as well as digital bank Tangerine and Alberta-based GIC innovator ATB Financial. Intact, State Farm, and The Co-operators represented insurance companies in the top 10, while the insurance category dominated the 11 to 20 spots as well. The only companies on the list that weren’t financial institutions happened to make the top two, however. Lexus and Napa Auto Parts took the #1 and #2 spots, respectively, so you can rest assured the people who are responsible for handling your money know there’s still room for improvement.

No news on Home Buyers’ Plan expansion

One of the promises the Liberals made during the election was an expansion to the Home Buyers’ Plan (HBP), the incentive that allows first-time homebuyers to withdraw up to $25,000 from their RRSP tax-free to buy a home. Currently, the HBP can be used by Canadians who haven’t owned any interest in a home in four years to buy or build a house for themselves or a relative with a disability. Not only has the value of the HBP been diminished by the changes to down payment rules–a couple buying together and withdrawing a combined $50,000 now only has a sufficient down payment for a $750,000 home, whereas the same down payment would have satisfied the minimum requirement for a $999,999 home this time last year–but the expansion promised by the Liberals during the election has yet to materialize. The proposed changes included opening up the program to people who move for work, and those who buy a home to accommodate an elderly relative, two situations that are becoming increasingly common. But it’s starting to look like this is an election promise that won’t be kept. Making it easier for people to empty out their retirement savings to fuel the flames of an unpredictable housing market probably won’t make the government’s list of things to do anytime soon.

What do you want to be when you grow up?

Here’s one we missed last month. If you want to make a lot of money, you might want to become a judge. Or if you don’t want all the hassle of going to law school, you could just be a house in Vancouver. Aaron Hutchins at Maclean’s discovered that the average yearly house price increase of $193,000 in Vancouver out-earned pharmacists, university professors, and even aerospace engineers. In fact, judging is the only vocation whose professionals earned more on average than homes did. In Toronto, where the year-over-year increase was only $103,000 for house prices, you’re still better off being a dentist, but school principals, registered nurses, and investment managers are no longer better paid than single-family homes.

RateHub Updates

RateHub founder Alyssa Furtado was quoted in the news last week about the new B.C. land transfer tax. Read what she had to say about it in the Toronto Star and Financial Post.

The Points Guru is back! Read up on how the Marriott Rewards program works, and enter to win a $50 Marriott Hotel gift card!

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