HST "Less Of A Burden" Than Expected

THURSDAY, 17 MARCH 2011 

Some of Canada’s biggest banks are lowering some of their fixed rate mortgages to counteract the effect of jittery investors moving to bonds, which causes a drop in long-term interest rates.

Investor's nerves have been shaken by the recent tragic events in Japan and fears that a potential nuclear disaster could create serious problems for the Global economy.

Some of the banks making mortgage rate change announcements are TD Bank, CIBC, Desjardins and National Bank, who are dropping their fixed five-year closed rates to 5.34 per cent (effective Thursday 17th March) while Scotiabank’s will be 5.29 per cent. In addition, RBC and BMO made similar announcements earlier in the week. 

In February, many of Canada’s big banks moved to raise their fixed mortgage rates as investors grew more confident about investing in equity markets and the global economy appeared stronger

Canadian Governments Cautioned To "Rein In Spending" Or Risk Financial Ruin: CFIB

WEDNESDAY, 16 MARCH 2011

A report released today by the Canadian Federation of Independent Business (CFIB) warns Canadian governments that continuing their current spending habits is risking following in the footsteps of countries like Greece & Ireland that have found themselves in dire financial circumstances in the last 12 months.

"The good news is that many governments appear to be putting the brakes on spending growth, but the margin of error is razor thin - any backsliding could push the debt balance in the wrong direction," said CFIB's chief economist, Ted Mallett. "Even tying government spending to the rate of growth in the economy would push today's $1 trillion in government debt to $1.8 trillion in the next 10 years."

To capture the varied picture at provincial level, CFIB has created three categories to group the provincial governments: the 'good', the 'bad', and the 'ugly'. 

Saskatchewan and Newfoundland & Labrador, both with balanced budgets and stavle spending-to-GDP ratios, are carrying the distinction of being in a 'good' financial position, whilst BC, Alberta, and Manitoba are all falling into the 'bad' category. All are currently running deficits that may be overcome with the aid of economic growth. For the rest, a huge effort will be required in order to post surpluses by decade's end, without even look at making progress on debt.

Regardless of current status, CFIB recommends that all governments embrace the following principles to demonstrate good "fiscal fitness" in their own backyard:

1.    Implement legislation that focuses on controlling expenditures, not just balancing budgets;
2.    Be specific enough to ensure the spirit of the legislation is followed without creating loopholes; and
3.    Ensure the legislation focus on the long-term sustainability of government finances.

"If we think we're fiscally infallible, we're actually being fiscally delusional. The sooner we act, the sooner we can take the necessary steps to ensure we live within our means and avoid having to make dire choices later," concluded CFIB vice president, Satinder Chera

CREA Statistics Show February An Average Month For Canadian Home Sales

The Canadian Real Estate Association (CREA) today released their statistics report that shows that national resale housing activity in February 2011 ran close to the five-year average for the month, continuing a theme that has characterized the past four months.

Actual (not seasonally adjusted) national sales activity via the Multiple Listing Service® (MLS®) Systems of Canadian real estate Boards came in 5.9 per cent below levels reported last February. This marks the smallest year-over-year decline in nine months, and the fourth consecutive month in which sales activity was on par with the five-year average for that month.

Seasonally adjusted home sales activity edged down 1.6 per cent in February 2011 compared to the previous month on a national basis. Sales activity eased in almost two-thirds of all local markets from the previous month, offsetting monthly increases in activity among other markets including Vancouver and Calgary.

Nationally, new listings in February edged up 1.5 per cent from the previous month on a seasonally adjusted basis, which builds on the 4.3 per cent monthly increase in January. The rise in new listings is consistent with CREA's expectation that many sellers, who shied away from listing their home last summer when the national housing market softened, would list their home in early 2011, having by now observed improved demand and stable prices.

With both sales activity and new supply little changed in February, the housing market remained firmly in balanced territory. The national sales-to-new listings ratio, a measure of market balance, stood at 53.5 per cent in February. This is little changed from the previous four months.

"Most local housing markets in Canada are well balanced, but there are still a number of buyers' and sellers' markets," said Georges Pahud, CREA's President. "Housing market trends often evolve and diverge from national trends due to local factors, so buyers and sellers should consult their local REALTOR® to understand how the housing market is shaping up where they live."

The number of months of inventory represents the number of months it takes to sell current inventory at the current rate of sales activity, and is another measure of the balance between housing supply and demand. The seasonally adjusted number of months of inventory stood at 5.7 months at the end of February on a national basis. This is little changed from the 5.5 months reported in January, when it reached the lowest level since last April.

The national average price for homes sold in February 2011 rose 8.8 per cent year-over-year to $365,192. "The average price has been skewed higher nationally and in British Columbia recently by a record number of multi-million dollar sales in a couple of areas in Greater Vancouver," said Gregory Klump, CREA's Chief Economist.

"When you take Vancouver out of the equation, the year-over-year increase in the national average price drops to 3.4 per cent," added Klump. "While that's still stronger than in the past six months or so, national average price gains may recede after tighter mortgage regulations take effect in March."

Government Fees Threaten Affordability in GTA

FRIDAY, 11 MARCH 2011 12:10

Home prices are on the rise in the GTA and, according to the Residential and Civil Construction Alliance of Ontario and the Residential Construction Council of Ontario, much of this push in prices can be traced back to high fees and taxes from the municipal and provincial governments.

Separate reports, released jointly by the two groups, suggest that “Housing prices in the Greater Toronto Area have more than doubled since 1998...provincial and municipal governments have fuelled much of this increase through a myriad of fees, charges and regulatory costs that ultimately are borne by new homebuyers.”

The worry is that, with the likelihood of rising interest rates, coupled with increases in prices- which they attribute to government levies- home ownership and affordability may move beyond the reach of the average homebuyer.

According to the findings of the report, "Up to 30% of the cost of new housing in the GTA is now attributable to direct and indirect government charges.” And “Regional and municipal development charges alone now add $30,000 to $50,000 to the price of a new home.”

Breaking down the numbers in the GTA, total development charges for single and semi-detached homes ranged from $27,212 in Oshawa at the low end to the high end of $50,458 in Oakville; these costs place development costs for the GTA among the highest- not only the country- but all of North America.

In Canada, the next highest is Vancouver at $ 23,418, followed by Calgary at a much lower $ $7,475.

These associations believe that the municipal and provincial governments are being less than transparent in their tax collection. “Government-imposed costs on housing have doubled, and in some cases tripled, over the last decade. The reason? Faced with mounting fiscal pressures, governments have increasingly looked to housing for additional revenue because often these charges are not transparent to consumers, unlike property tax increases.”

The common fear here is that this benefit of cash flow into governmental coffers now, will have long term negative impact both on the market itself, and on the overall affordability of housing for homebuyers in the GTA.

Also, the two bodies are concerned about the impact affordable housing will have on employment, land use policies, urban density and a possible slowing of demand.

Speaking exclusively to Propertywire.ca, Toronto Realtor, Steven Fudge, Sales Rep, Bosley R.E. Ltd., Brokerage has seen evidence of upward pricing in his market; "Market conditions have already begun to push the threshold of affordability out of reach for first time buyers. If affordability exists it will be on the outer reaches of the GTA or in smaller infill housing developments with a higher density."

It is important to remember though, that the local governments deem these to be development fees- so if they are being used to properly enhance infrastructure, they do ultimately increase the value of the property- and the value of the homeowner investment.  Says Fudge; "Costs for public transportation, schools and community services are costly to build, but having any of these items in proximity to your residence will enhance the value of the property."

CMHC Reports Housing Starts Increased In February

WEDNESDAY, 09 MARCH 2011 12:49

Led by an upswing in numbers in both Ontario and the Prairies and an increase in condominium construction, the seasonally adjusted annual rate of housing starts went up in February, according to CMHC.

While this upward movement is good news, there is expectation from analysts that this will not last.

In February, there were 181,900 units, up from 170,600 units in January 2011.

“Housing starts moved higher in February because of increases in Ontario and the Prairies,” said Bob Dugan, Chief Economist at CMHC’s Market Analysis Centre. “The bulk of this increase was felt in the multiples segment. From last month, multi-family starts were up in Saskatchewan and in Toronto.”

In February, the seasonally adjusted annual rate of urban starts went up by 9.4 % to 161,000 units. Urban multiple starts rose by 14.5 % to 94,900 units, compared with single urban starts that rose by 3.0 % to 66,100 units. Looking at starts, region to region, February’s seasonally adjusted annual rate of urban starts fell in a number of areas- notably-  Atlantic Canada (24.7%) , Québec (7.1%), and B.C. (5.9%). Conversely, urban starts went up by 29.3 % in Ontario and by 26.1 % in the Prairies.

Notably, some felt that in B.C. in particular, uncertainty with the HST contributed heavily to the drop.

Rural starts were projected to be at a seasonally adjusted annual rate of 20,900 units in February

Stats Can: New Home Price Index Grows Slightly

THURSDAY, 10 MARCH 2011 11:08

According to the most recent New Home Price Index released by Statistics Canada, new home prices reached record heights in January, but the pace of growth has slowed substantially- suggesting that perhaps the market is beginning to cool.

Led by growth in Oshawa, Toronto and Montreal, modestly outperforming analysts’ predictions, the index grew by 0.2% in January, building on growth of 0.1% in December.

Moving from December to January, prices increased most significantly in Winnipeg : 0.7%, Quebec: 0.5% and Toronto and Oshawa, and Montreal– all increasing by 0.4%

These increases attributed to builders introducing new list prices (Winnipeg), improving general market conditions (Toronto and Oshawa), and higher material costs (Montreal and Quebec).
Decreases were “seen in the Saint John, Fredericton and Moncton metropolitan regions aggregation, as well as in Hamilton (both down 0.2%) and Edmonton (-0.1%).”

Year over year, the New Home Price Index rose up 1.9% in January on the heels of a 2.1% increase in December.

The latest index seems to underscore analyst sentiment, that states that the surging short term price gains of years past have been brought to more sustainable levels- as rising interest rates, and increases to lending restrictions begin to have material impact on the market, bringing a sense of balance between growth in price, and growth in the market itself.

How does that break down to local markets activity? Speaking exclusively to Propertywire.ca, Toronto Realtor Steven Fudge, Sales Rep, Bosley R.E. Ltd., Brokerage (www.urbaneer.com), feels that, recently, there may be decrease in numbers overall, but that business remains steady; "Investors expanding their portfolios with 'long-term hold' properties remain active in the downtown Toronto market, while speculators who were flipping condos have retracted. We're seeing fewer buyers but those buyers still have deep pockets"

Bank of Canada Announcement - Rates Remain Unchanged

W0uld they or wouldn’t they?  This was the question on many Canadian lips for the last couple of weeks.  There has been much talk that a rise in interest rates in inevitable.  That may be so—but not today.
The Bank of Canada “is maintaining its target for the overnight rate at 1 per cent. The Bank Rate is correspondingly 1 1/4 per cent and the deposit rate is 3/4 per cent. “

Despite all the buzz and speculation about interest rates, with reasonable Canadian economic growth, political turmoil in Libya and the price of oil, and a myriad of other factors, the Bank of Canada has held its status quo for interest rates, again.

This latest announcement marks the fourth consecutive time that Mark Carney has left rates unchanged; he is not without his reasons though.

The Global economy is moving along as expected, although “risks remain elevated’; perhaps most the most prominent flag in this regard is the storm that is churning in Libya- and the possible surge in oil prices; This gives Canadian investors and consumers alike an unwelcome taste of déjà-vu- from the pre-recession days—when oil prices were widely forecast to reach between $200-$300/ barrel.

That said, the Canadian economy is  modestly beating growth forecasts;  the US economy continues to chug along, put in sustained motion by government stimulus; similarly, businesses are continuing to spend, and are starting to contribute  to  overall economic growth, through investment partially funded by government stimulus.

In terms of inflation, Canadian inflation levels are moving reasonably, and are keeping in line with what is expected- “Underlying pressures affecting prices remain subdued, reflecting the considerable slack in the economy. “ Global inflation continues to grow—but at a manageable pace.

“Reflecting all of these factors, the Bank has decided to maintain the target for the overnight rate at 1 per cent. This leaves considerable monetary stimulus in place, consistent with achieving the 2 per cent inflation target in an environment of significant excess supply in Canada. Any further reduction in monetary policy stimulus would need to be carefully considered.“

The changes to mortgage lending introduced by Jim Flaherty earlier this winter are set to take affect this month; there has been widespread concern that the combination of tighter lending restrictions, shorter amortizations and higher rates, might cause stress to an already heavily debt burdened typical Canadian consumer.   At least for now, they will get a reprieve from higher rates.

What will Carney’s next move be, and what will the implications be on Canadian borrowers and the economy alike?  Let the speculation begin for the next rate announcement- which comes down on April 12.