(416) 410-8223 Ext. 228 or (905) 841-0000 ISO 9001: 2008 Registered 15105 Yonge Street, Suite 100 Aurora, Ontario, Canada L4G 1M3 1-888-727-8223 Fax (905) 727-2230 Website: www.hallmarklindrealty.com Email: lenard@hallmarklindrealty.com Lenard Lind, FRI, CRES, SRES Broker of Record/Owner Registered Mortgage Broker, FSCO MVA - Residential (Market Value Appraiser) Certified Luxury Home Marketing Specialist CERC Relocation Specialist - Level || CRS Certified Residential Specialist Registered New Home Builder - BILD and TARION “SERVICE WITH PROFESSIONALISM” (416) 410-8223 Ext. 228 or (905) 841-0000 ISO 9001: 2008 Registered 15105 Yonge Street, Suite 100 Aurora, Ontario, Canada L4G 1M3 1-888-727-8223 Fax (905) 727-2230 Website: www.hallmarklindrealty.com Email: lenard@hallmarklindrealty.com Lenard Lind, FRI, CRES, SRES Broker of Record/Owner Registered Mortgage Broker, FSCO MVA - Residential (Market Value Appraiser) Certified Luxury Home Marketing Specialist CERC Relocation Specialist - Level || CRS Certified Residential Specialist Registered New Home Builder - BILD and TARION “SERVICE WITH PROFESSIONALISM” Downgrading one’s accommodations to take an assignment in a more expensive market can be a tricky proposition for an employee, regardless of the opportunity on offer. Trickier still the fact that some relocating employees may not even qualify for a mortgage if and when they accept the move. This past January, the Office of the Superintendent of Financial Institutions (OSFI) introduced new mortgage application rules that require would-be home owners to qualify for an interest rate that’s two per cent higher than the Bank of Canada interest rate (1.25 per cent as of January 17, 2018) in order to be considered for a mortgage. First-time buyers with mortgage insurance were already subject to the so-called “stress test,” but the new rules apply to anyone who places a down payment of 20 per cent or more on their house (often known as ‘move up’ buyers). According to Elton Ash, RE/MAX of Western Canada regional executive vice president, the new stress test conditions are likely to make some assignees think twice before accepting a new role that involves relocation. “There’s going to be some negative effect on relocations when it comes to employees having the ability to move into the kind of home they’re anticipating,” he says. “If they’re porting their mortgage across the country, it won’t make much of a difference. But if they’re paying out an old mortgage and applying for a new one, that’s where they’ll likely feel the impact.” The ripple effect of the new rules has yet to form, but RE/MAX estimates that 10 per cent of people who would have purchased a house will no longer find themselves able to do so. As a result, says Soper, “Some of those subject to the stress test will downsize expectations and buy a less expensive home, and some will reject the relocation opportunity because they see the career move forward as a step backwards for their family. Clearly, this is an important consideration for employers working through deploy- ment strategies and senior leadership succession planning where a relocation is required.” THE RENTAL SOLUTION Higher housing prices and stricter mortgage rules can make temporary accommodations and rentals more appealing. That said, that segment of the real estate market is facing its own drawbacks. Rental prices are climbing out of reach in hotspots like Vancouver and Toronto, and rent controls in some markets are making the search more challenging. In Ontario, for example, the recent implementation of rent controls is likely to make it even more difficult to find rental accommoda- tions in the province’s already tight rental market. “A 2017 Royal LePage Advisors study indicated a 65 per cent increase in multiple offer situations for a rental property in Toronto. Bidding wars have arrived in the rental market,” Soper reports. “Before province-wide rent controls were introduced, there was relief in sight,” continues Soper. “A large number of purpose-built rental projects were working through the approval process. They would have brought significant new housing stock into a supply- constrained market. Some projects are moving ahead, but many have been cancelled or reborn as condominiums as owners face the prospect of owning real estate that cannot appreciate in step with a booming economy. We will have to turn to condo units purchased by entrepreneurs intent on renting them out.” Shared economy options such as Airbnb are another option. The problem what that, however, is that they lack the customer protec- tion controls that govern professional providers, as well as the level REAL ESTATE of service and maintenance that top-level transferees require. To add to the challenges, new regulations will subject these short-term rentals to more red tape and additional registration fees – factors that may very well drive prices upwards. “Airbnb and similar ‘shared economy’ options represent a poten- tially affordable alternative for transferees, particularly those on lump-sum style relocation packages where the company has less involvement,” says Soper. “Yet employees and employers alike typically want more consistency and protection in place than this business model can promise. Regulators are starting to implement controls which may be helpful, or it may kill the goose that laid the affordable egg. As we well know, regulation has a tendency to go one way: more regulation.” SWEETENING THE DEAL Businesses are responding in several ways to Canada’s real estate challenges. Some are re-evaluating their relocation strategies to determine if they are selecting the right candidates, and others are exploring alternative options such as allowing assignees to work remotely or housing them outside of major cities and supporting their commute. Yet others are “sweetening the pot” when it comes to convincing candidates to downgrade their housing for an assignment. “We’re seeing a return to strong relocation packages and incentives like spousal support to make sure the entire family is taken care of. Those are often big factors in people looking for relocations, and it’s going to be critical for companies to ensure their relocation packages are meeting their requirements of today,” says Ash. Indeed, adds Soper, “If the person you’re moving is strategically important to your organization, it’s critical that the company allo- cate the resources necessary to ensure they accept the new career challenge. Remember, employers are facing a Canadian labour market with the lowest unemployment levels in 40 years.” From “stress tests” to tight markets, and rental regulations to employee reluctance, it’s not an easy time to find a place to stay in relocation. As real estate challenges continue to mount, employers will need to decide for themselves how to balance market chal- lenges with the need to remain mobile. Spring 2018 PERSPECTIVES 29