READING THE SIGNS

Alberta housing market most affordable in Canada: RBC
Resale activity picking up in Calgary
By Mario Toneguzzi
Calgary Herald May 29, 2012

CALGARY — Housing market activity in Alberta is showing increasing signs of strength as it benefits from attractive affordability and nation-leading economic growth, according to the latest Housing Trends and Affordability Report released Tuesday by RBC Economics.

RBC’s housing affordability measures for Alberta, which capture the province’s proportion of pre-tax household income needed to service the costs of owning a home at market value, remained among the lowest, if not the lowest, in the country in the first quarter of this year.

And RBC said the “long-awaited resurgence” of the Calgary-housing market appears to have been launched in recent months as home resales advanced by a “sizable” 7.4 per cent in the first quarter relative to the fourth quarter of last year, and April activity showed even greater strength.

In fact, Calgary bucked the national trend and showed improved affordability in the first quarter.

“Homebuyers in the Calgary area are motivated by a booming provincial economy, strong job creation, and attractive housing affordability,” said the report. “Despite higher resales lately, home prices so far have remained flat for the most part, with some weakness observed in condominium apartments. This has kept housing affordability in check at some of the better levels among Canada’s largest cities.”

It said affordability improved modestly in the first quarter in Calgary. RBC housing affordability measures show the proportion of median pre-tax household income that would be required to service the cost of a mortgage payment. RBC said that in Calgary measures compared with a year ago edged lower for condominium apartments (0.4 per cent) and two-storey homes (0.3 per cent), and stayed unchanged for detached bungalows.

“We expect the market resurgence to continue for the remainder of this year,” it said.

According to the Calgary Real Estate Board, MLS sales in Calgary so far this month from May 1-28 are up 27.90 per cent from the same period a year ago with 2,104 transactions and the average residential sale price in the city has increased by 3.03 per cent to $445,120.

Ann-Marie Lurie, CREB’s chief economist, said the city has experienced positive economic growth with the expansion in jobs, full-time jobs in particular.

“And this really has encouraged some demand into housing. We’ve had low interest rates . . . We’ve had a signficantly strong spring season compared to other years,” she said. “It’s also important to note that we’ve been pretty slow to recover in the first place. So there was a lot of hesitation out there.

“But as things have started to improve in the economy, people are starting to re-invest.”

Lurie said she doesn’t expect to see any change in the demand for housing in the city in the near future.

Robert Hogue, senior economist with RBC, said attractive affordability and a strong provincial economy are playing significant roles in driving Alberta’s home resale activity, up 11.5 per cent year-over-year in the first quarter and showing no sign of easing in April.

“We expect that, going forward, Alberta’s housing market will remain on this bright path, particularly as the province continues to lead the country in economic growth,” he said.

The measure for benchmark detached bungalows in Alberta rose by 0.1 percentage points to 32.2 per cent, while the measure for condominium apartments marked a small improvement, decreasing 0.3 percentage points to 20.2 per cent. The two-storey home category was the only measure that remained unchanged at 35.3 per cent.

RBC’s housing affordability measure for the benchmark detached bungalow in Canada’s largest cities is as follows: Vancouver 88.9 per cent (up 3.1 percentage points from the previous quarter), Toronto 53.4 per cent (up 1.2 percentage points), Ottawa 41.8 per cent (up 0.9 percentage points), Montreal 41.4 per cent (up 1.2 percentage points), Calgary 36.7 per cent (unchanged) and Edmonton 32.4 per cent (down 0.4 percentage points).

The following are average prices in the first quarter of this year, affordability measure, and year-over-year change in the affordability measure:

Detached Bungalow

Canada, $360,500, 43.1 per cent, 1.5 per cent.

Alberta, $347,900, 32.2 per cent, 0.1 per cent.

Calgary, $423,000, 36.7 per cent, 0.2 per cent.

Standard Two-Storey

Canada, $403,600, 48.7 per cent, 1.2 per cent.

Alberta, $372,800, 35.3 per cent, 0.2 per cent.

Calgary, $418,200, 37.5 per cent, 0.1 per cent.

Standard Condominium

Canada, $235,800, 28.8 per cent, 0.3 per cent.

Alberta, $212,300, 20.2 per cent, — 0.6 per cent.

Calgary, $248,100, 22.2 per cent, — 0.4 per cent.

Photo By: woody1778a

MORTGAGE INSURANCE NEWS

CMHC could be pulled out of mortgage insurance business, Flaherty says
By Garry Marr
Financial Post Apr 27, 2012

Finance Minister Jim Flaherty would consider taking Canada Mortgage Housing Corp. out of the mortgage default insurance business he told the National Post’s editorial board.

“Over time, I don’t think it’s essential that a government financial institution provide mortgage insurance in Canada. I think what’s key is that mortgage insurance is available at a reasonable cost in Canada. I think there is a role to regulate but whether we, the Canadian people, have to be the owners and shareholders of a financial institution to do this is a question. I don’t think it’s essential in the long run.”

He offered no timetable on when the government could get out of mortgage default insurance business, just offering it up as a possibility. “We have a list of Crowns, Crown agencies that are being reviewed,” said Mr. Flaherty.

In a wide-ranging discussion on the housing market, he said he has no plans to increase CMHC’s current $600-billion loan limit, ruled out any possibility of regulating foreign real estate investment and made it clear his focus is on the governance of Crown corp. which controls about 75% of the mortgage default insurance business in the country.

“For some time now I’ve had concerns about the large commercial role that CMHC now plays. CMHC has become a significant Canadian financial institution. As you know, historically it was created with a mandate post-war to advance housing in Canada. It’s become much more that.”

The finance minister moved this week to tighten control of CMHC, placing it under the authority of the country’s banking regulator, the Office of the Superintendent of Financial Institutions. Previously, it fell under the watch of the Department of Human Resources and Skills Development.

The shift comes with CMHC closing in on the $600-billion limit the government has for how much of its portfolio will be backstopped by the taxpayer. Three years ago it was $450-billion.

By law, consumers must buy mortgage default insurance if they have less than a 20% down payment on a home and are borrowing from a federally regulated financial institution.

But CMHC has not been insuring just those loans, it has agreed to step in and insure loans — with the premiums paid by financial institutions — for lower-ratio mortgages, or what is called “portfolio” or “bulk insurance.”

He said the head of OFSI will now have the power to look at the books of CMHC the way she looks at the books of other private financial institutions in Canada. Already, the government has placed the deputy minister of finance on the board of CMHC.

“We have quite a bit of information about what the banks do and don’t do. [Superintendent] Julie Dickson had to go to some of them in the last year and say ‘you must ensure that your board policies on residential lending mortgages are carried through,” he said. “She’s quite a strict supervisor which is good for our country.”

OSFI has already been looking into CMHC and established one of the key issues for the organization is governance. “OFSI are certainly of the view there are necessary governance improvements we can do,” said Mr. Flaherty.

He made it clear there are no plans to extend CMHC’s $600-billion limit. “For a while,” said Mr. Flaherty, about how long the Crown corporation would have to exist under that limit. It was at $541-billion at the end of the third quarter of last year but business has slowed as the agency culled its portfolio business.

Mr. Flaherty’s own opinion on the housing market is that has been fuelled by low interest rates which he says he does not control. “Cheap money,” he said, noting he did talk to the banks about being unhappy about their mortgage rate wars earlier this year which had reduced the rate on a five-year closed mortgage to below 3% — an all-time low.

As to whether the market has been in part fueled by foreign buyers, as many in the real estate industry have suggested, Mr. Flaherty said his government will not get involved in that aspect of the market. “No,” he said, pausing to emphasize the point. “I don’t think there is [a role]. They key in housing from my point of view is to get the best information on housing.”

MORTGAGE FIX

Flaherty calls on banks to ‘fix’ mortgage market
Reuters
April 4, 2012

Canada’s finance minister said on Wednesday he would rather not tighten mortgage rules again to curb high household debt and that banks themselves are taking on that job by becoming more strict with their lending criteria.

Jim Flaherty said he has seen signs of moderation in the Toronto condominium market and expects to see a similar trend in Vancouver, one of the country’s hottest real estate markets.

“Part of that is based on what I’m being told by people who build condominiums, and also what I’m being told by some of our banks about their standards becoming more stringent with respect to their loans for condominium development,” Flaherty told reporters in Vancouver after making a speech there.

Flaherty said it was up to markets to “fix” the housing and debt problem, not the government.

“I’ve tightened up the mortgage insurance market three times … I really don’t want to do it again,” he said.

“And I’m glad that some of the banks – at least one of the bank executives yesterday indicated that he agreed that actually the banks should exercise prudence and not rely on government to do it for them,” he said.

Bank of Nova Scotia Chief Executive Rick Waugh said on Tuesday that the simmering housing market gives reason for caution, but that it’s up to the country’s banks, rather than the government, to manage the risks of their massive mortgage portfolios.

Several other bank executives – Toronto-Dominion CEO Ed Clark in particular – have said they would welcome further government moves on mortgages.

The government and central bank have been warning Canadians of the dangers of taking on too much debt, particularly through mortgages, at a time of historically low interest rates and high housing prices. The ratio of debt to personal disposable income hit a record high last year and has moderated somewhat since then.

Despite some resemblance to the U.S. housing market prior to the crash, most economists expect a soft landing in Canada.

Flaherty has tightened rules three times since 2008 in the mortgage insurance market but left them untouched in the federal budget last week, to the surprise of many.

The budget did propose enhanced supervision of the federal housing agency that issues mortgage insurance. Flaherty said the banking regulator, the Office of the Superintendent for Financial Institutions, was studying the matter.

ON GUARD FOR THEE?

Canada stands ready to tighten mortgage rules: Flaherty
By Randall Palmer
Reuters Mar 22, 2012

STITTSVILLE, Ontario – The Canadian government, dealing with signs of an overheated property market, is ready to tighten mortgage insurance rules again if necessary, Finance Minister Jim Flaherty said on Thursday.

Mr. Flaherty also chided bank executives for asking the government to impose more restrictions, noting that the banks are the entities that offer mortgages.

Canada’s banking regulator, trying to curb risks posed by record-high levels of household debt, said this week it wanted lenders to be more transparent about their mortgage businesses.

Mr. Flaherty has imposed tougher requirements for government-backed mortgages three times since 2008.

“With respect to tightening up the mortgage insurance market we’ve done it three times … and we watch, we monitor the market, and if we have to tighten it some more we will,” he told reporters in Stittsville, Ontario.

“The new housing market produces a lot of jobs in Canada so there’s a balance that needs to be addressed. I’d like the market to correct itself, quite frankly, if it can.”

Mr. Flaherty said he had noted indications of softening in the Toronto condominium market, which he said was a good sign.

Canada’s household debt-to-income ratio hit a record high of 151.9% last year, largely the result of mortgage borrowing. The ratio dipped slightly in the fourth quarter but at 150.6% was not far off the record.

Mr. Flaherty said “it was a bit odd” that some banks were pressing him for tighter rules.

“We have bank executives in Canada saying ’You know, really the rules on insured mortgages should be tightened up’. They must forget that they are actually the ones that issue the mortgages — it’s their market, it’s not my market,” he said.

Since 2008, Mr. Flaherty has lowered the maximum amortization period for new mortgages to 30 years from 40 years, raised minimum down payments required to qualify for government insurance, and required all borrowers to qualify for a five-year fixed-rate mortgage to get insurance.

If he decided to act again, Mr. Flaherty could announce new measures in his March 29 budget.

Mr. Flaherty, who has promised to cut spending to eliminate the federal government’s budget deficit by the 2015-16 fiscal year, said he would be proposing moderate cutbacks in the budget.

“This is not an austerity program,” he said, adding the focus would be on long-term growth, prosperity, innovation and sustainable social programs.

RLP PREDICTS RISE IN 2012

Expect home prices to keep rising in 2012: Royal LePage
By Derek Abma
National Post Jan 12, 2012

OTTAWA — Canada’s housing market will continue to be strong this year, with rising property values expected in all major markets, real estate brokerage firm Royal LePage said Thursday.

The company’s forecast called for prices across to country to rise 2.8% by the end of 2012, after stronger gains last year.

It said in the fourth quarter of 2011, the average price of a standard two-storey home was $375,427, up 4.2% from a year earlier. The average rate of a detached bungalow was up 6.1% to $344,392, while condominiums gained 3.6% to $234,680.

“Widespread calls for a major real estate correction in 2012 simply can’t be justified,” Royal LePage CEOPhil Soper said in a statement. “The industry has significant momentum entering the year, and buoyed by the stimulative effect of very low interest rates, we expect the market to continue to expand — albeit at a slower pace.”

Statistics Canada reported Thursday that its new housing price index rose 0.3% in November, following on a 0.2% increase in October, and was up 2.5% year-over-year.

Price increases in Toronto, Oshawa and Montreal offset declines in Calgary, Vancouver and the Ontario metropolitan regions of Sudbury and Thunder Bay, the agency said. Builders in all four areas reported lowering prices in order to stimulate sales and remain competitive, while price increases elsewhere were attributed to higher material and labour costs.

The Canada Mortgage and Housing Corp. has forecast the average price of a listed homes for resale to be $363,900 this year, up 1.2% from 2011. The Canadian Real Estate Association predicted that the average price would be relatively flat at $362,700. Both forecasts were made in November.

Royal LePage said even pricey housing markets in Vancouver and Toronto — where standard two-storey homes averaged $1.1-million and $629,188, respectively, in the last quarter — will see continued price appreciation in 2012.

However, it said stronger gains will be seen in cities benefiting from commodity-based economies, such as Calgary, Regina and Winnipeg, where price gains will be in the range of four to five per cent.

Photo by: Nkuku Fairtrade

CLIMBING HIGHER!

Canadian house resale prices climb higher
By Eric Lam
Financial Post · Dec. 15, 2011

Canada’s housing market is still chugging along steadily as sales activity nudged higher and prices continued to climb in November, data from the Canadian Real Estate Association said Thursday.


Sales activity rose a seasonally adjusted 0.5% in November, compared with the month before, as about 35,000 houses changed hands.

The national average price increased 4.6%, but that is the smallest increase since January.

Year-to-date sales remained in line with 10-year averages as 432,048 homes have been resold so far in 2011, up 2.1% from year-ago levels.

The sector is showing some signs of slowing down, however, as the number of newly listed homes declined 3.4% between October and November.

That said, actual national home sales figures (not seasonally adjusted) in November actually moved 7% above the 10-year average, the fourth-highest level on record for the month.

“National sales activity picked up late last year, and November’s results suggest that a similar trend may be playing out again this year,” Gregory Klump, chief economist with CREA, said in a release.

Interest rates are expected to remain low for the foreseeable future, so the housing sector will be closely watched for signs of excess, he said.

“That said, current trends for resale housing and new home construction suggest that tightened mortgage regulations are working as intended and fostering economic stability,” he said.

Photo By: Travis Atwood

PAID, STAMPED, FILED!

Canadians paying off mortgages early: CMHC
Financial Post Staff  
Nov 29, 2011

OTTAWA — Canadian homeowners are doing a good job of paying off their mortgages early, according to the Canada Mortgage and Housing Corp., which released its third-quarter results Tuesday.

While mortgage repayments can be spread out over 30 years, the CMHC reports that the average amortization period for mortgages insured by the national housing agency is under 25 years, and the loan-to-value ratio of those homes was 80% or less. As of Sept. 30, the outstanding loan amount per household for all homeowner loans was $159,740, slightly above the figure for the previous year.

“CMHC analysis shows that a substantial percentage of CMHC-insured high ratio borrowers are ahead of their scheduled amortization,” the agency said in its report. “Accelerated payments shorten the overall amortization period, reduce interest costs, increase equity in the home at a faster rate and lower risk over time.”

The agency says its mortgage arrears rate is 0.42%, in line with industry trends.

Rules brought in by the federal government in March, in response to historic levels of household debt, which reduced amortization periods on certain mortgages, and limited the amount that can be borrowed when a house is refinanced, cut refinancing activity by 31% from last year, the CMHC said. The agency’s homeowner purchase mortgage insurance showed a year-over-year decrease of 12%.

“The level of household debt remains a concern but there are encouraging signals,” it says. “There has been a significant deceleration in the growth of mortgage credit since March, particularly in recent months, impacting the growth rate of total household credit. Growth in personal loans, lines of credit and credit cards has levelled off in recent months.”

The agency notes general economic conditions have been favourable in 2011, with stable mortgage rates, a healthy housing market and a declining unemployment rate.

“Overall arrears levels and arrears rates have been improving and (mortgage insurance) claims volumes have been lower than expected,” it said. “Given current economic forecasts, it is expected that trends will improve moderately going forward, although both downside and upside risks remain.”

While housing sales have slowed since January, the CMHC expects sales for the year to fall within a range of 423,600 to 470,100 units, and next year’s sales to be somewhere between 406,100 and 509,000 units. Prices should “modestly grow as market conditions are expected to remain in the balanced market range,” it said.

The agency notes it keeps an eye out for bubbles, but so far it sees “little evidence of over-valuation” in the Canadian housing market.

Photo By: *_Abhi_*

THE LOGICAL SONG

Housing market to continue to defy logic
Garry Marr
Financial Post,  Dec. 6, 2011

Even one of Canada’s leading real estate companies agrees the rising housing market may not appear to make much sense.

But appearances are deceiving and Re/Max says both sales and average prices will continue to climb in 2012.

“Canadian residential real estate defied conventional logic and outperformed expectations in 2011,” the company said in its year-end report on the market.

Re/Max expects 2011 to finish with prices up 7% and the average home across the country selling for $363,000. The market won’t be as robust in 2012 but consumers can still expect another 2% jump in prices.

Sales figure for 2011 are forecast to climb by 3% from a year earlier with 460,000 homes having changed hands by year end. For 2012, expect less than a 1% increase in activity with only an additional 4,500 sales.

“The Canadian housing market has demonstrated tremendous resilience in recent years but 2011 stands out,” said Michael Polzler, executive vice-president of Re/Max Ontario-Atlantic Canada. “Instead of responding to economic concerns both here and abroad with a retreat in sales and prices, residential real estate markets actually experienced an upswing in the volatile third and fourth quarter.”

Re/Max looked at 26 markets across the country and predicts 23 will show an increase in average price for the year. Sales were up in 22 of those 26 markets. The company says 81% of markets studied will see price increases in 2012.

Among the reasons cited for the Canadian housing market’s continued strength against the odds has been population growth which has gone up by 11% since 2000. Re/Max notes by 2031, the country will have 42 million people.

“Population growth and immigration are major factors expected to prop-up housing demand and household formation in the coming years,” says the company.

Condominiums are expected to continue to garner a growing share of the housing market with investment and income-producing properties in high demand. Low vacancy rates are said to have driven those markets in 2011 and those conditions are expected to continue.

Photo By: Bru76

OIL SANDS OUTPUT PROJECTIONS!

Canada oil sands output to triple by 2035: report
Reuters
Nov 23, 2011

Production from the oil sands will more than triple over the next quarter century, to 5.1 million barrels per day, Canada’s national energy regulator said in a report released on Tuesday.

In a look at energy production and consumption through 2035, the National Energy Board said output from the oil sands, the largest source of U.S. oil imports, will continue to expand from around 1.5 million bpd currently as new mining and thermal projects tap the resources.

The oil sands of northern Alberta are the world’s third biggest crude reserves, behind only Saudi Arabia and Venezuela, but the largest open to private investment.

The NEB said its forecast also assumes oil prices will rise slowly through to 2035, reaching $115 a barrel in 2010 dollars, a level that provides a reasonable profit even for expensive new mining and upgrading projects such as those operated by Suncor Energy Inc, Royal Dutch Shell and Canadian Natural Resources Ltd.

The board also estimates that Canadian oil exports will rise to 5 million bpd by 2035 from about 2 million currently, with most of the additional supply coming from oil sands projects.

However the board cautioned that its forecast assumes markets and infrastructure will be available to handle the additional production. That outlook comes despite a U.S. decision delaying the approval of TransCanada Corp’s Keystone XL pipeline from Alberta to Texas by as much as 18 months.

The NEB said total production of Canadian crude oil would rise to 6 million barrels a day by 2035, double current levels. Though most will come from the oil sands, output from oil shale reserves like the Bakken field in Saskatchewan will also help bolster the total.

Photo by: Luuk van Beek

A BRIGHT SPOT!

Resale home sales seen as bright spot
Garry Marr, Financial Post 
October 18, 2011

Existing home prices in Canada continued to increase last month, although the gains recorded were the smallest since January.

The Canadian Real Estate Association said the average price of a home sold in September was $352,581, a 6.5% jump from a year earlier.

The continued strength of the market in the face of a battered world economy was on display last month as sales rebounded from August, increasing by 2.7% on a seasonally adjusted basis. For the first three quarters of the year, existing home sales are now 1.2% ahead of last year's pace.

The Ottawa-based group, which represents about 100 boards across the country, said new listings have been flat for two months and markets have tightened but all signs indicate most jurisdictions are still in balanced territory.

The group says nationally the sales-to-new-listings ratio was 52.8% in September, up from 51.6% in August. CREA says almost two-thirds of Canadian markets have a sales-to-new-listings ratio of 40% to 60%, which is considered balanced.

"The Canadian housing market remains a bright spot against a backdrop of mixed headline news about the global economy," said Gary Morse, CREA president. "Low mortgage rates continue to draw buyers to the housing market, while recently tightened mortgage regulations are working as intended."

Adrienne Warren, an economist with Bank of Nova Scotia, noted that even as Canadians spend less on retail purchases, those low interest rates are enticing home buyers.

"Continuing uncertainty over the global economic outlook and highly volatile financial markets have yet to contribute to any notable slowing in Canada's housing market," says Ms. Warren.

Last month's numbers were boosted by a strong contribution from the country's largest market. Toronto average sales prices rose 8.9% last month from a year ago to $465,369 while sales activity was up 21.3% during the same period.

"It's pretty clear Toronto is the star of the national real estate scene at least in this act," said Phil Soper, chief executive of Royal LePage Real Estate Services. "The reality is while the world may be on shaky economic footing and there are scenarios where it would cause hardship to business in Toronto, the current reality is we got jobs back from the recession quickly and there has been some slight upward pressure on income and salaries."

The market also appears to finally have adjusted to new mortgage rules. The latest round of changes saw amortization periods lowered to 30 years from 35 years, reduced refinancing limits to 85% of a home's value from 90% and removed government insurance on homeequity lines of credit.

Mr. Soper said those moves, combined with rule changes in 2010 that forced condominium investors to have a minimum 20% down payment, had slowed down the market. "What we didn't want to see was speculative house flippers and that's been tightened up," he said.

Gregory K lump, chief economist for CREA, noted housing has remained stable in face of market volatility, which has contributed to Canadian confidence in the economy.

"Interest rates are expected to remain low for longer, and evidence suggests that recent changes to mortgage regulations are preventing the kind of excesses they were designed to avert. Both of these developments are good news for the housing market," he said.

Photo By: Fiona Katherine

LATE SUMMER BUILDING PERMIT BOOM

Developers give Calgary 'a vote of confidence'
By Mario Toneguzzi,
Calgary Herald October 7, 2011

A burst of late summer construction put Calgary among the country's biggest gainers in building permit values last month.

Statistics Canada reported Thursday that local building permit values soared to $461 million in August, an increase of 23.6 per cent from July and 77 per cent from a year earlier.

Susan Thompson, business development manager for real estate for Calgary Economic Development, said the numbers indicate "developers are giving Calgary a vote of confidence. It takes time to build a building, but they're thinking there's going to be the demand there.

"By the time they're complete, we're going to need these buildings," said Thompson.

Half of the 14 permit applications valued at more than $20 million this year have been for multi-family housing projects, said Thompson.

Building permits are a good indicator of the city's economy going forward, she said.

"It speaks to intention," she said. "They wouldn't build them if they didn't think there was going to be demand. They obviously feel the economy is going to keep growing and the demand's going to be there."

Building permit values through August in Calgary now top $3.4 billion, an increase of 36.8 per cent from the same period a year ago. The total is almost equally split between the residential and non-residential sectors. The residential sector has increased by 9.5 per cent and the non-residential sector is up 84.1 per cent.

Ben Brunnen, director of policy and government affairs and chief economist for the Calgary Chamber of Commerce, said the numbers reflect renewed confidence in the Calgary economy.

"When we see building permits in Calgary increase that's for the construction sector and that tends to be the sector that falls off first in a recession and comes on last in a recovery," he said. "So the fact that we're seeing these increases in Calgary particularly relative to the other cities suggest that there's a vote of confidence for Calgary's economy moving forward."

TELL ME A STORY

What's the real story of Canada's housing market?
Financial Post · Oct. 5, 2011

OTTAWA — Home prices rose during the third quarter of 2011, but the raw numbers may not be telling the whole story of the Canadian housing market, a new survey says.

The Royal LePage House Price Survey released Wednesday found that the average price of a home in Canada increased between 5.7% and 7.8% in the third quarter of 2011 compared with the same period last year.

The average price of a detached bungalow was $349,974, a standard two-storey home was $388,218 and a standard condominium was $239,300, according to the survey.

Royal LePage said that the rise in price defied expectations and suggested that record-low interest rates and a fairly stable Canadian economy have bolstered consumer confidence.

However, the third quarter of 2010 was a relatively weak period for housing prices, which makes the increase this year appear rosier than they are and may mask a decline in prices in the months ahead, it said.

“The strength in Canada’s national housing market conceals signs of predictable softening in some regions,” Phil Soper, president and chief executive of Royal LePage Real Estate Services, said in a statement.

“A broader slowdown is expected in the months ahead, but fears of a U.S.-style correction are completely unfounded.”

Vancouver had the highest priced homes in the country during the third quarter of 2011 and was the only city in the survey where the average bungalow or two-storey home cost more than $1 million.

Halifax, Montreal, Toronto, Saint John, N.B., and Ottawa all saw prices increase between 4.4% and 10.4%.

In Alberta, the volume of homes trading hands increased, but prices stayed soft, the survey found: Detached bungalows in Calgary fell 1% in the third quarter.

Victoria was similarly weak, with detached bungalows and standard two-storey homes falling two and 1.1% respectively.

LOCK IT OR FLOAT IT? THAT IS THE QUESTION.

Is it time to lock in mortgage?
Garry Marr
Financial Post · Aug. 31, 2011

The gap between short-term and long-term rates has shrunk enough that it might be time for anyone renewing a mortgage to consider locking in.

Moves last week by the major banks to reduce the discount on variable-rate mortgages comes as the discounts for long-term mortgages have gotten as steep as they have ever been.

"What seems to be happening is they are focusing their attention on fixed rates. We are starting to see some aggressive competition on four-and five-year products," says Gary Siegle, a mortgage broker and Invis Inc. regional manager in Calgary.

How aggressive? Try as much as 190 basis points. A five-year, fixed-rate mortgage with a posted rate of 5.39% is now being offered for 3.49%.

For whatever reason, the four-year, fixed-rate mortgages are being priced even more aggressively.

Mr. Siegle says he can lock consumers into a four-year, fixed mortgage for as low as 3.09%.

The discounting comes as variable-rate products, linked to prime, have become more expensive. Short-term money has become more expensive in the bond market, forcing banks to reduce discounts.

The banks traditionally move their prime rate with the Bank of Canada rate. With no flexibility there and existing customers getting huge discounts based on old deals, banks are forced to raise rates for new loans as short-term money gets more expensive.

The trend began in April when FirstLine Mortgages, a subsidiary of Canadian Imperial Bank of Commerce known for its low rates, cut its discount on variable rates.

Others banks were slow to follow, hoping to make money on volume. But refinancings have dried up under tougher mortgage rules and sales have slowed, creating the need to tighten profit margins on variable-rate products.

Today, the discount on a variable-rate mortgage is about 55 basis points off the prime rate of 3% - in other words, 2.45%. Compare that to 3.09% on a four-year mortgage and the premium to lock in is not that much.

"This gap is about as narrow as it goes," says CIBC deputy chief economist Benjamin Tal. "It reflects a flat yield curve, which makes it difficult to make money in this business."

Mr. Tal says variable-rate mortgages tend to be more attractive when there are inflation expectations not yet expressed in short-term rates. This time, he says, the bond market is depressed, anticipating recession, and that has shrunk spreads dramatically.

The one thing keeping people in short-term money is the sense that there is no urgency to move because the U.S. Federal Reserve Board has pledged not to raise rates for two years, which also effectively ties the hands of the Bank of Canada.

"We know the five-year rate is attractive, but we also know short-term rates are not raising," Mr. Tal says.

What does that mean on a practical, dollars-and-cents basis?

Let's use the Canadian Real Estate Association's 2011 average sale price forecast of about $360,000 and assume a 20% down payment and a $288,000 mortgage.

At 2.45%, your monthly mortgage payment based on a 25-year amortization would be $1,282.98. At 3.09%, your monthly payment rises to $1,376.28.

But even at the gap, you would pay about an extra $7,000 in interest to lock in over four years.

Ultimately, the $7,000 amounts to an insurance policy. You get payment certainty for four years, but at a price.

If rates climb 200 basis points on your variable-rate mortgage, it could cost you $22,000 more in interest over four years. The reality is that rates wouldn't jump at once and, therefore, increases would likely be gradual.

Moshe Milevsky, the York University finance professor who wrote the oft-quoted study that variable-rate mortgages do better than fixedrate mortgages 88% of the time, said if you start thinking about it like insurance, it comes down to your risk tolerance.

"There are people who pay a lot for protection on their portfolio; there are people who pay a lot for life insurance," Prof. Mr. Milevsky says. "If the premiums are low enough, you might say, 'Sure, I'll pay.' But if you have a tight budget, every basis point counts, and it might not be worth it."

To me, he still has the ultimate answer for the tough decision whether or not to lock in.

"I still don't get why more Canadians don't split their mortgage," Prof. Milevsky says. In other words, locking in half of the mortgage and floating with prime on the other half.

"When is a bank going to come to the realization Canadians hate making this choice?"

He's right. Even with rates this low and the gap between short-term and long-term rates this narrow, it is still a tough call.

Photo By: Accretion

DROP IT LIKE IT'S HOT

Canada home affordability drops, Vancouver pricier
REUTERS
Monday August 22, 2011

TORONTO (Reuters) - Housing in Canada became harder to afford in the second quarter, with Vancouver's pricey market playing a major role in the deterioration, according to a report by Royal Bank of Canada on Monday.

It was the second straight quarter in which the bank's quarterly Housing Trends and Affordability Index dropped. The cost of housing rose nationally across all the housing types the index tracks in the second quarter.

The index measures the proportion of pretax household income needed to service the cost of owning a home. A rise in the measure indicates a loss of affordability.

For a detached bungalow, the measure rose 1.7 percentage points to 43.3 percent. For a standard condominium, it edged up 0.8 percentage points to 29.2 percent, and for a standard two-storey home it climbed 1.8 percentage points to 49.3 percent.

Vancouver, which has long seen exceptional growth in home prices compared with other Canadian cities, directly accounted for up to one-third of the deterioration in affordability on the national score, the RBC report said.

"Vancouver's housing market is without a doubt the most stressed in Canada and is facing the highest risk of a downturn," said chief economist Craig Wright.

Other local housing markets were reasonably affordable or at worst, slightly unaffordable, the report showed.

Housing sector observers generally see the overall pace of housing activity, from starts to resales, slowing in the coming months, partly due to tighter mortgage regulations introduced earlier in the year and as pent-up demand gets absorbed.

(Reporting by Ka Yan Ng; editing by Peter Galloway)

OH, CANADA!

Housing market defies expectations

Garry Marr, Financial Post
Aug. 17, 2011

July proved to be a another strong month for Canadian home sales with the Canadian Real Estate Association now predicting 2011 will see an increase in sales as opposed to a previous forecast for a drop.

Actual sales last month were up 12.3% from a year ago while year-to-date sales are 1.6% lower than the same period for 2010.

Prices also continue to have some upward movement, al-beit some of the increase year over year being attributed to the introduction of the HST in British Columbia and Ontario, and tighter mortgage regulations in 2010.

The national average price for homes sold in July 2011 was $361,181 - the lowest level since January - but rep-resented a 9.3% increase from a year ago.

Greg Klump, chief economist at CREA, cautioned not to read too much into the average price statistics.

"Changes in the national average home price are open to being misinterpreted," Mr. Klump said. "They often signify changes in the mix of sales activity across and within local markets, rather than a rising or falling price trend for typical homes in a specific market."

However, the Ottawa-based group, which represents 100 boards across the country, says the scales have now tipped modestly in favour of 2011 outpacing 2010.

CREA is predicting 450,800 sales in 2011, just under a 1% increase from a year ago. The group had been forecasting a decline of 1%. Sales are expected to drop less than 1% in 2012.

Prices in Vancouver continue to affect the country, as they helped push CREA's forecast for the average sale price in 2011 to $363,500, a 7.2% increase from a year ago. This was also an increase from a previous forecast. Next year, prices are expected to be flat.

The group noted longtalked-about increases in interest rates have failed to materialize in the market.

"While there had been some talk of potential interest-rate increases, that hasn't happened," said Gary Morse, president of CREA. "In fact, rates have actually come down, and are now expected to remain low for the remainder of this year and into 2012."

Douglas Porter, deputy chief economist at Bank of Montreal, said the housing market just seems to keep surprising everybody.

"In a world seemingly awash in negative economic surprises in 2011, one positive surprise has been the resiliency of Canada's housing market," said Mr. Porter, adding few analysts were predicting the kind of price increases the market has seen.

"Canadian housing remains surprisingly robust, thanks to still-low interest rates and solid job growth. While the recent financial market turmoil may temporarily weigh on activity, sales should ultimately find support from continued exceptionally low borrowing costs."

Phil Soper, chief executive of Royal LePage Real Estate Services, said his company's recent forecast was for a 2% decline in sales and 3% increase in price for 2011. He doesn't anticipate that changing.

"I think we're going to start to see it's not so much the strength of the market but the weakness last year. The market had run out of steam at this point last year," Mr. Soper said. "I think we are seeing a more normal curve to the market, with the exception of the Vancouver market."

WANT TO GO STEADY?

Canada property results improve on deals, leasing
Reuters August 5, 2011
By Ka Yan Ng and Amruta Sabnis

TORONTO/BANGALORE — Canada’s biggest office and retail landlords reported strong quarterly results on Friday, boosted by acquisitions and long-term leasing renewals.

Brookfield Office Properties and RioCan Real Estate Investment Trust REI said funds from operations, the most closely watched performance measure for REITs, rose in the three months to the end of June.

Even so, activity for the Canadian companies could slow if a flagging global economy makes it more difficult to raise capital and complete deals. “We’ve had a ton of acquisition activity and capital raising going on over the last two years,” said Karine Macindoe, an analyst at BMO Capital Markets.

“This market environment is probably going to slow some of that down because … share prices are far more volatile and declining.”

Canada’s resilient economy, rising rents and easy borrowing are fueling a buying spree among real estate investment trusts, highlighted last month by the largest office property deal ever by a Canadian REIT.

STEADY EXPANSION

The second quarter revealed few signs of weakness. Brookfield, a major office landlord in Manhattan and other North American cities, reported a 23 percent jump in leasing activity. It leased 1.6 million square feet of space, compared with 1.3 million square feet leased a year earlier.

FFO rose to $166 million, or 30 Canadian cents a unit, from $156 million, or 30 Canadian cents, a year earlier. FFO strips out the effects of depreciation and other factors from the earnings of property companies, giving a more telling quarterly reading. RioCan REIT, Canada’s largest landlord of retail space, also turned in a strong performance.

FFO rose 12 percent to $93-million, or 36 Canadian cents a unit, from $83-million, or 34 Canadian cents, a year earlier. RioCan has steadily expanded its portfolio in Canada, while looking for opportunities for growth in the United States for more than a year. “RioCan’s acquisition platform remains on track to meet our objectives for the year,” Chief Executive Edward Sonshine said in a statement.

“RioCan has been able to take advantage of historically low interest rates to generate solid growth through acquisitions, development, and increased occupancy and rents.” It renewed 1 million square feet during the quarter at an average rent increase of 13.9 percent, or $1.99-per square foot. It also added five properties in the quarter. In July, Dundee Real Estate Investment Trust said it is buying 29 properties from U.S. private equity giant Blackstone Group for $831.8-million. It was the largest deal ever for a Canadian REIT.

RioCan’s units were up 0.6 percent at $25.05 on the Toronto Stock Exchange. Brookfield shares were off 0.3 percent at $16.80 on the Toronto Stock Exchange, but its New York-listed shares were up 1.35 percent to $17.26.

Photo By: mb17chung

VACATION TIME!

Recreational property markets bouncing back: Re/Max
John Morrissy
Jun 13, 2011

OTTAWA — Canada’s recreational property market appears to be bouncing back from a recessionary lull as buyers seek to capitalize on equity and stock-market gains, Re/Max says in a report Monday.

Demand rose 78% in the 46 markets across the country covered by the realtor’s Recreational Property Report, while sales had risen or were on par in 41% of those centres.

“Buyers who held off during the recession are back in recreational property markets from coast-to-coast,” says Pamela Alexander, chief executive of Re/Max for Ontario-Atlantic Canada. “Their patience has been rewarded with more affordable recreational values and greater inventory levels.”

While prices have remained stable in many markets, values could be found for higher-end properties, pushing luxury sales higher in almost half of the markets examined, Re/Max said in its report.

Opportunities were also to be found in Western Canada.

“Prices are down as much as 20% from peak levels reported in 2006-2007, bringing ownership within reach to many potential purchasers,” said Elton Ash, regional executive vice-president of Re/Max in Western Canada.

On British Columbia’s Salt Spring Island, for example, starting prices for oceanfront properties have fallen to $669,000 today from $1.3-million in 2008.

In the North Okanagan Valley, a three-bedroom, winterized recreational property on a standard-sized waterfront lot — the common measures used in Re/Max’s report — that sold for $1.5-million in 2008 now sells for $995,000.

Starting prices for similar properties on Alberta’s Sylvan Lake are now at $800,000 from $1.25-million previously and in the Rocky Mountain resort town of Canmore, a two-bedroom condo has fallen to $229,000 from $320,000.

“The strengthening oil sector has . . . brought Albertans back into mix, driving demand for both local and coastal B.C. properties,” Ash said.

Another factor influencing the recreational property market has been that Americans who bought when the Canadian dollar was at 65 U.S. cents are now cashing out, boosting inventories.

The report found that there has been some tightening for entry-level properties in about one-third of the markets covered. As well, it noted, the supply of properties has tightened considerably at the lower end in Ontario, Quebec and Atlantic Canada.

It also noted that recreational properties are moving more toward year-round homes, with fewer traditional cottages available for sale.

“These waterfront properties are disappearing from the landscape. Meanwhile, today’s average recreational getaways are truly earning the distinction as the “home away from home,” with many of the bells, whistles and comforts of their residential counterparts.
 

Photos: The Shores In Tofino

For More Information, Check Out http://www.theshoretofino.com/

NEWS FROM THE HILL

Ottawa toughens mortgage rules
By Andrew Mayeda
Postmedia News January 17, 2011

OTTAWA -- Finance Minister Jim Flaherty is cracking down on Canadians' ability to qualify for a mortgage, in the government's latest attempt to rein in consumer debt.

Flaherty announced Monday the government is reducing the maximum amortization period for government-backed mortgages to 30 years from 35 years. The change will affect mortgages with loan-to-value ratios over 80 per cent.

Canadians will only be able to borrow up to 85 per cent of the value of their homes, down from 90 per cent.

In addition, the government is withdrawing backing for lines of credit secured by people's homes.

Flaherty said the changes are designed to prevent the kind of housing bubbles that developed in other countries, most notably in the United States, where the collapse of the subprime mortgage market triggered the global financial crisis.

"The main reason we're taking the action is for the longer term, that we avoid even the beginning of the development of the kinds of issues in some other countries that have been very damaging to families," the minister told reporters after unveiling the mortgage changes.

Flaherty said the decision was based on the long-term goal of protecting household finances and the broader economy, rather than on any particular data on the housing market.

A number of economic observers, including Bank of Canada Governor Mark Canada, have recently expressed concern about the record-high debt levels of Canadians. Based on the ratio of debt to income, Canadians are actually deeper in the red than American households, which are still struggling to dig themselves out from the debt taken on before the financial crisis.

Flaherty said Canadian families must keep in mind that interest rates will eventually rise from their relatively low levels. Economists have expressed concern that a sharp rise in interest rates could leave Canadians stranded with too much debt.

"I think people need to demonstrate that good Canadian trait of prudence and reasonableness and common sense in terms of their debt assumption," said Flaherty.

Speculation has been building about whether the opposition parties will support the government's upcoming federal budget. The NDP, for example, has outlined a series of proposals, including help for Canadians' home-heating bills and the revival of the home-renovation tax credit. But Flaherty said the government doesn't plan to bring back the popular renovation credit, which was part of the government's economic-stimulus program.

Last Friday, Prime Minister Stephen Harper acknowledged his government was considering changes to the rules governing mortgages. He said the government "remains concerned about growth in the level of household debt.

In February 2010, Flaherty moved to toughen up the mortgage rules amid worries that Canada was in the midst of a housing-market bubble. The reforms, since introduced, compelled borrowers to meet standards for a five-year fixed-rate mortgage, even if the buyer wanted a shorter-term, variable rate loan.

They further required purchasers of rental properties to issue a 20 per cent down payment as opposed to five per cent. The moves played a role, observers say, in slowing down real-estate activity. While the federal government looks to curb borrowing, economists say the Bank of Canada may have to follow by raising its key interest rate sooner rather than later.

The central bank issues its latest rate statement Tuesday and it is expected to hold its benchmark rate at its present one per cent level as signs indicate the economy may be benefiting from renewed business and consumer confidence in the United States.

The tightened mortgage rules take effect March 18, 2011. Under federal law, lenders must obtain mortgage insurance when homebuyers pay a down payment of less than 20 per cent of the purchase price of the new home. The government then backs the insured mortgages. The new changes apply to such government-backed mortgages.

The withdrawal of government insurance on home-equity lines of credit takes effect April 18.

"Taxpayers should not bear any risk related to consumer debt products unrelated to house purchases. Those risks should be managed by the financial institutions that originate and offer these products," Flaherty said.

Changes to take affect this spring

The New Measures:

- Reduce the maximum amortization period to 30 years from 35 years for new government-backed insured mortgages with loan-to-value ratios of more than 80 per cent.

- 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.

- Withdraw government insurance backing on lines of credit secured by homes, such as home equity lines of credit, or HELOCs.

Photo By: Digital Agent

WELCOME TO YOUR NEW HOME

New home prices top pre-recession peak

Financial Post · Wednesday, Jan. 12, 2011

OTTAWA — New-home prices were up more than expected in November, according to data released by Statistics Canada on Wednesday.

The new-housing price index rose 0.3% that month, beating economists’ expectations for a 0.1% gain, which would have matched the rise in October.

The latest data shows new-home prices have more than fully recovered from losses sustained during the recession.

Some of the biggest gains in particular cities were 4.2% in St. John’s, 1.6% in Ottawa-Gatineau and 1.2% in Halifax.

Higher costs for labour and materials were cited as some of the main causes of higher new-home prices in November, and for St. John’s in particular, bigger development fees.

Some areas, such as Victoria, Charlottetown, and Ontario’s Windsor and St. Catharines-Niagara regions saw lower new-home prices in November.

Year-over-year, the new-home price index was up 2.3% in November, down from 2.5% in October.

Photo By: SmartAnnie (Away)

HOT LIKE FIRE!

Canada's on fire
Jacqueline Thorpe
Financial Post · Thursday, Jan. 13, 2011

Three weeks into 2011, Canada has been swept up in a wave of mergers, foreign money and international attention as commodity prices soar, the loonie jumps above US$1.00 and the economic recovery gathers steam. Check out the latest deals putting Canada in the sights of the global economy:

Zellers sells 220 stores to Target

U.S. retailing giant Target Corp. has secured the land needed to make its much-anticipated arrival in Canada. Target reached a deal with Hudson’s Bay Co. that will see it pay $1.825-billion to acquire the leasehold interests in as many as 220 sites now operated by Zellers Inc.

Lundin Mining, Inmet agree to $9B merger

Canadian miners Inmet Mining Corp. and Lundin Mining Corp. have agreed to a blockbuster $9-billion merger to create a leading global copper company that appears poised for even more growth in the future.

Cliffs Natural Resources to buy Consolidated Thompson for $4.9B

In the biggest iron-ore deal in Canadian history, U.S. miner Cliffs Natural Resources Inc. is buying Montreal-based Consolidated Thompson Iron Mines Ltd. for $4.9-billion as it pushes for more scale and enlarges its customer base beyond North America

U.S. bond giant enters retail fray in Canada

The world's largest bond fund is about to make an erratic year on debt markets even more interesting for Canadian retail investors. U.S. investment behemoth PIMCO, which has about US$1.3-trillion under management, plans to introduce to the retail market a suite of funds focusing on Canadian fixed income. With the volatility in bond markets expected to continue throughout the next several months, exposure to credit these days carries a heightened risk component. And returns promise to be modest.

Canada gets 'emerging' label from Merrill Lynch

There is a dichotomy to the analysis of world economies these days. On one hand, there are the struggling developed economies of the West, on the other, ascendant emerging markets, now including Canada. When examining Canada's growth prospects, the country might better be lumped in with emerging market economies rather than its traditional economic peers, said Sheryl King, head of Canada economics and strategy at BofA Merrill Lynch Global Research.

Maple Sales May Double in 2011 on Dollar Rally

Sales of Canadian-dollar debt by foreign companies may double this year as borrowers diversify funding sources and take advantage of the nation’s strengthening currency.