Good Economic News for Canada
Good news in Canada easily goes unnoticed. Below is some good stuff:
• Canadian 10-year bond yields touch 2.00%, marking an 8-month high. = MORTGAGE RATES will have pressure to creep up! This is one of the indicators I watch.
• TD Economics has pushed back the first Bank of Canada rate hike to the first quarter of 2014.
• November GDP surprises markets on the upside, growing by 0.3%.
• Small business owners were more optimistic in January, with near-term hiring intentions at a post-recession high.
Prospective homebuyers in Alberta confident in the market
22% are first-time purchasers in the next two years
CALGARY — A national survey of prospective homebuyers, who intend to buy within the next 24 months, indicates nearly one-in-five in Alberta are single people.
The RE/MAX Canadian Homebuying Trends Survey 2013-2014, released on Tuesday, said 42 per cent are couples and 38 per cent are families.
The report also indicated 22 per cent of them are first-time buyers, 32 per cent second-time buyers and 47 per cent multi-time buyers.
“Today’s real estate consumer is more experienced and financially prudent than in the past,” said Elton Ash, regional executive vice-president with RE/MAX of Western Canada. “Recent global events — in concert with new mortgage finance rules — have fuelled a more conservative mindset that will serve Canadians well moving forward. It seems the lessons of excess are being heeded.”
In Alberta, the survey found that prospective homebuyers fell in the following age categories — 18 per cent are 55 plus years old; 40 per cent are 18-34 years old; and 42 per cent are 35-54 years old.
The survey said 50 per cent of them are looking to buy in an urban area, 24 per cent suburban and 10 per cent rural.
The vast majority intend to buy in the $250,000 to $500,000 price category at 58 per cent, followed by 21 per cent in the under $250,000 range and 17 per cent in the $500,000 to $1 million range.
The survey also found that 32 per cent of Albertans intend to have a down payment of more than 30 per cent.
“Serious equity gains have bolstered the level of down payment homeowners can put forth,” said Ash. “As a result, they’re clearly in a stronger financial position.”
The survey also said that 50 per cent of Albertans believe housing values will rise in their area while 34 per cent believe they will remain the same. Seven per cent believe housing values will decline.
“Canadians remain confident in the future of housing — and this was demonstrated nationally across all demographics — regardless of income, gender, age, or location,” said Ash. “The level of enthusiasm bodes well, as a substantial barometer of market health. The outlook is positive.”
Twitter: MTone123
© Copyright (c) The Calgary Herald
Calgary house prices forecast to increase 2.5% this year!
Calgary house prices forecast to increase 2.5% this year: Royal LePage
Most of Canada expecting price appreciation to flatten
CALGARY — By the end of 2013, average house prices in Calgary are expected to increase 2.5 per cent, while most of Canada is expecting price appreciation to flatten, according to the Royal LePage House Price Survey and Markey Survey Forecast released Tuesday.
And while Calgary will see a nine per cent hike in sales activity this year over last year, nationally the resale housing market will experience a decline of five per cent.
Ted Zaharko, broker and owner of Royal LePage Foothills, said market activity in Calgary is completely dependent on whether sellers bring listings to market since the buyer demand is there to have strong sales in the spring.
“Market activity could increase significantly in 2013, however, the listings are not materializing,” he said. “A possible solution is that buyers who wanted to sell after 2007, when the market softened, may be holding on to their properties for better market conditions. If those units come online, it may provide some additional inventory for buyers.”
By the end of 2013, Royal LePage expects the average national home price to be 1.0 per cent higher compared to 2012.
In the fourth quarter of 2012, detached bungalows in Calgary posted the largest year-over-year price increases, rising 5.8 per cent to $440,600. Prices for standard two-storey homes rose 4.8 per cent year-over-year to $434,667, while prices for standard condominiums increased slightly by 0.6 per cent year-over-year to $250,078.
Nationally, the average price of a home increased year-over-year between 2.0 and 4.0 per cent in the fourth quarter of 2012. In the fourth quarter, standard two-storey homes rose 4.0 per cent year-over-year to $390,444, while detached bungalows increased 3.6 per cent to $356,790. National average prices for standard condominiums increased 2.0 per cent to $239,374.
“Employment created by the oilpatch continues to drive migration to Calgary and it’s difficult for this group to even find rental units let alone their dream home,” said Zaharko. “Detached bungalows performed the strongest because they are the preferred housing type for Baby Boomers who are typically looking to downsize the size of their home, but not necessarily the price.”
Compared with 2012, fewer homes are expected to trade hands in the first half of 2013 throughout Canada, which should slow the pace of home price growth.
Phil Soper, president and chief executive of Royal LePage, said the national housing market is well into a cyclical correction and that fears of a sharp or drawn out collapse are unwarranted. Home prices have risen faster than salaries and wages for three years and the market requires time to adjust, he said.
“A helpful comparison is to reflect on the beginning of 2009 when the country was in the grips of a very grim global recession,” said Soper. “It was a bleak time, with plunging consumer confidence driven by rapidly spreading unemployment. The meltdown of the American banking and finance sector had sent their housing market into a downward spiral and our own real estate market saw home sale transactions fall dramatically.
“Price appreciation in Canada ground to a halt, but home values dropped only slightly. With economic fundamentals such as employment levels improving, we expect this cyclical correction to be short-lived.”
Twitter: MTone123
© Copyright (c) The Calgary Herald
Alberta’s economy has outperformed the national economy
CALGARY — The vast majority of signals on Alberta’s dashboard are sending the same message, says TD Economics.
“Things are good.”
That’s the year it’s been in the province and the year it’s expected to continue to be into 2013.
And there’s no surprise why Alberta’s economy has outperformed the national economy by a wide margin this year.
The Conference Board of Canada says most of the key economic indicators for the province have been positive this year including labour markets, investment indicators and consumer demand. This has led to the province being a magnet for foreign and interprovincial migrants with the expanding energy sector the principal driver of overall growth.
After an expected 3.4 per cent gain this year, real GDP is forecast to advance by three per cent in 2013 and 3.3 per cent in 2014, just behind Saskatchewan’s pace, according to the board.
“For the first half of 2012, we were moving gangbusters. All the indicators were strong … right up until June,” says Ben Brunnen, chief economist with the Calgary Chamber of Commerce. “And then June hit and we started seeing some of those more substantial challenges coming forth through Greece and Europe and that’s when oil prices really took that hit down toward $80 (a barrel). I would say we geared down in June.”
“We are by far in a better position than anywhere else in North America. And our net migration numbers are showing that. People continue to be moving here. I think that trend is going to continue.”
But there are some issues which could impact Alberta’s economic growth. A skilled labour shortage could be a major impediment. And of course, global economic challenges in Europe and the United States in particular could slow down the Alberta machine.
Brunnen is forecasting provincial economic growth of 3.5 per cent to 3.8 per cent in 2013.
Todd Hirsch, senior economist with ATB Financial, says Alberta will be one of the country’s economic growth leaders with “nice moderate” growth of three to 3.5 per cent next year.
“We’re seeing a little bit of softness on those energy prices, just enough to kind of temper things a little bit. The energy companies would like to see those energy prices a little bit stronger but on the other side we’re seeing very, very good results in agriculture, in construction and the retail trade,” says Hirsch.
“Wages are still rising in Alberta and that’s supportive of the overall economy. And we’re still seeing interprovincial migration. I think that will continue into 2013. Even though there’s a little bit of softness on the oil side. The other sectors of the economy are actually doing quite well.”
Doug Porter, deputy chief economist with BMO Capital Markets, says one of the dominant stories, in not just the last couple of years but the last decade, has been the relative outperformance of Alberta and Saskatchewan versus the rest of the country.
“And I think that will continue in 2013 and even 2014. But having said that, the gap with the rest of the country is narrowing,” says Porter. “I still think Alberta is one of the strongest growing economies but its lead won’t be as dominant and of course one of the stories there is just simply the softening we’ve seen in oil prices relatively recently. We see a bit firmer prices next year but not much different from where we are today.”
Warren Jestin, senior vice-president and chief economist for Scotiabank, says the near-term outlook for the province is pretty good.
“Even with some downsizing of big projects, the big issue is more supply constraint with labour than an absence of projects that will be moving forward,” he says. “Growth that we have in our forecast next year of just a little under three per cent doesn’t sound that hot by historical standards but it’s nearly double what you’re seeing for all Canada.
“The near term looks relatively good and certainly if you’re in Alberta you’re feeling a whole lot more cheerful than if you’re in Greece, Spain, Portugal, Italy and wide variety of other countries around the world.”
In 2011, Alberta led the country with an estimated real GDP growth of 5.2 per cent which was also the fastest rate in the province in five years.
mtoneguzzi@calgaryherald.com
Twitter:@MTone123
Alberta homes lead Canada for 2013
Alberta resale housing market tops Canada in annual sales growth
Forecast to lead the country again in 2013
CALGARY — Alberta will lead the country this year and in 2013 in the pace of growth in the resale housing market, according to a new forecast by the Canadian Real Estate Association.
The national association of realtors said Monday that Alberta MLS sales this year will finish up 13.1 per cent from last year to 60,800 transactions and sales will lead the country next year as well with 1.3 per cent growth to 61,600.
Nationally, sales are forecast to decline by 0.5 per cent this year to 456,300 and fall by another 2.0 per cent in 2013 to 447,400 transactions.
The average sale price in Alberta is expected to rise by 2.7 per cent this year to $363,100 and by another 2.3 per cent in 2013 to $371,300.
Across Canada, the national average sale price is forecast to increase by 0.3 per cent this year and next year to $363,900 and $365,100, respectively.
In November, Calgary MLS sales of 1,831 were up 10.6 per cent compared with last year while on the national level sales dipped by 11.9 per cent to 30,573.
The average sale price in Calgary rose by 3.8 per cent to $413,921 but fell by 0.8 per cent across the country to $356,687.
In Alberta, sales increased by 3.2 per cent to 4,034 transactions and the average price was up 4.3 per cent to $365,999.
“National sales activity has remained fairly steady at lower levels since mortgage rules were changed earlier this year, but that stability masks some real differences in trends among local housing markets,” said Wayne Moen, CREA’s president.
CREA on Monday also released its MLS Home Price Index of seven major Canadian markets. Regina’s annual price growth of 11.58 per cent led the nation followed by Calgary at 7.13 per cent.
The national aggregate price rose 3.5 per cent year-over-year, the seventh time in as many months that the year-over-year gain shrank and it marks the slowest rate of increase since May 2011.
Twitter:@MTone123
© Copyright (c) The Calgary Herald
Calgary – #1 for Real Estate Investment
Once again, Calgary has been ranked as the top real estate investment market in the country followed by Edmonton by the Real Estate Investment Network Ltd.
In its Top Alberta Investment Towns report, REIN said that Alberta’s economy has come out on top after a few years of economic turbulence.
The report identifies towns and regions poised to outperform other regions of the province over the next three to five years.
And none is better than Calgary.
“After a couple of roller-coaster years, Calgary is back on a roll. The return of jobs to the city, as well as greatly reduced office vacancy rates show us that the city’s short slump has come to an end,” said the report. “Recording a GDP growth of three per cent in 2011, and one of the lowest unemployment rates in the country, it’s no wonder Calgary is sitting as one of the top places in North America for property investors. When you combine the economic fundamentals, the population growth, and a burgeoning provincial economy, it is easy to see why so many businesses and people have come to call the city home.
“The market is hot. With the pressure on the resale housing market, there is similar pressure on the rental market. Inventory has dropped for rental accommodations while monthly rents have increased. Real estate investors and real estate agents are reporting that rental listings are being pounced on. Savvy investors purchasing units and advertising them for rent upon close are receiving calls from anxious tenants wanting to see the unit before the investor has possession and/or has done any improvements to the property. Rental sites are reporting difficulty in compiling statistics become some communities have nothing for rent.”
REIN said housing affordability will begin to be an issue in Calgary, with rents increasing and a high average sale price. But when you look at that price versus average income it shows that other cities in Canada have a much larger problem on their hands.
“Calgary has the long-term economics to support long-term market strength while other cities do not,” said REIN.
The Top Alberta Investment Towns ranked in order are: Calgary, Edmonton, Airdrie, Red Deer, St. Albert, Fort McMurray, Lethbridge, Grande Prairie, Okotoks, Leduc, Sylvan Lake and Lacombe.
The report said Airdrie has been one of the fastest growing communities in the province.
“Its proximity to the economic engine of Calgary and the growth of the surrounding economy will push the physical and economic growth limits of the city in the next decade,” said REIN.
“With increasingly easy access to many areas of Calgary via the ring road as well as the growth of job centres in and around the city, Airdrie property owners should continue to feel upward pressure on both rents as well as home prices. As affordable housing becomes a growing problem in Calgary, Airdrie will benefit from lower average house prices. As the office centre of the west, Calgary may offer employment opportunities that Airdrie does not, but much of the labour force will turn to Airdrie as a place to call home.”
REIN’s top Canadian investment cities ranked in order are: Calgary, Edmonton, Hamilton, Surrey, Maple Ridge and Pitt Meadows, Airdrie, Kitchener and Cambridge, Red Deer, St. Albert, Waterloo, Winnipeg, Saskatoon, and Halifax.
According to a research note by Scotia Economics, Alberta remains a key economic engine for Canada, with the highest provincial real GDP growth rate forecast for 2012 and 2013 at 3.4 per cent and 3.0 per cent respectively.
“The economy is growing strongly with contributions from consumer spending, business investment, particularly in the oilsands, and exports, which is encouraging given the strong Canadian dollar and soft global demand,” it said. “Provincial government spending also will continue to support growth, albeit at a slower pace than over the decade prior to the recession.”
In the second quarter of 2012, Alberta had a year-over-year population growth rate of 2.5 per cnet, the highest in the country.
“At this juncture, the federal government’s recent tightening of mortgage and home equity financing standards appears to have had a limited impact on Alberta’s housing market,” said Scotia Economics. “It continues to be supported by strong employment growth, significant wage gains and ongoing resource development.”
mtoneguzzi@calgaryherald.com
Possible Mortgage Rate Increase from these 112.7 year lows?
We are able to watch some indicators that drive mortgage interest rates. This is how we can guess what rates are going to do over a 10 day or so period.
Right now the spread on Canadian 5 year mortgage bond is 1.795%. This is WELL BELOW the comfort zone of 1.90% and 2.10%. Can we potentially see a rise in interest rates?
Hard to say as the spread has be bouncing all over the last few days, but it could trigger a small rise in rates if it does not bounce back soon.
What does this mean?
- If you are going to buy a home, or are planning on moving up or
- have a mortgage that is up for renewal in less than 120 days from now, or know someone who does, then
- CALL for a rate hold at today’s super low rates ASAP. We answer the phone from 9 am to 10 pm every way, holidays and weekends included.
Other Key Points about Mortgage Brokers:
- We have access to all the banks.
- The banks pay us for doing their work for them so there are no fees to clients for our services.
- The rates and terms & conditions are better than the Big 6 offer.
- We offer unbiased, expert advice; we only do mortgages and nothing else; and have been 1 of the top-10 brokers in Canada for the last 5 years.
Please feel free to call or reply with comments or questions.
These are exciting times,
Mark Herman, AMP, B. Comm., CAM, MBA-Finance
1 of the Top-10 brokers of 1,700 at Mortgage Alliance
Direct: 403-681-4376
Accredited Mortgage Professional | Mortgage Alliance – Mortgages are Marvelous
Toll Free Secure E-Fax: 1-866-823-1279
E-mail: mark.herman@shaw.ca | Web: http://markherman.ca/
A study conducted by Maritz Canada showed customers renewing or renegotiating with a mortgage broker’s help reported a rate decrease of 1.40%, compared to a decrease of 1.00% among all mortgage renewals.
Brokers are your best choice for seeking home financing advice and assistance.
NO Condo Bubble in Calgary nor Toronto!
These comments below are in addition to the report last week that said that because Toronto has:
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lots of in-migration,
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New to Canada migration and
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no other kinds of homes being built in the inner city
they do need all of these new condos and it is not a bubble. Interesting.
Economists to condo investors: Smile!
Written by Vernon Clement Jones
Condo investors in Toronto have every reason to be keep smiling, with two separate bank reports suggesting their assets are almost certain to retain their value at the same time their cash flow gets buoyed by rental demand.
“As CMHC… mentioned, capital return for investors who bought new condominiums and decided to rent them once the construction was complete, could earn superior returns than on other investment products,” reads Laurentian Banks’ July economic outlook. “Furthermore, condominiums rents are generally 40% more expensive than apartments of same dimensions in the Toronto CMA, the most important spread in the whole country.”
Smiling yet?
There’s more.
RBC is also weighing in on the future of Canada’s most controversial housing market, suggesting there’s no indication condos, despite what most see as a glut of inventory, are in a bubble.
Far from it.
“Based on market activity to date,” say economists for the heftiest of Canada’s big banks, “the total number of new housing units (condos) completed by builders has not exceeded the GTA’s demographic requirements and is unlikely to do so by any significant magnitude in the next few years.”
Phew!
That dual analysis effectively counters concerns that T.O.’s high-rise properties are primed to fall in value as renters find themselves spoiled for choice and investors are forced to slash prices. The naysayers are also worried that even new construction will be subjected to a major price correction and in the short-term, a phenomenon directly tied to mortgage rule changes making it harder to win financing.
That could, in fact, still happen, although not likely on the scale many analysts had predicted earlier this year, says Laurentian in its analysis.
Rates to hover for 1 year; till June 2013.
This is good news. But remember, the market is smart and will start to increase bank and lending rates before in anticipation of the Band of Canada’s rate increase.
AND this does NOT mean that fixed rates will not increase. They are set by the prices of the bond market not the government. This only says the government will leave the Prime rate as is, which as been at 3% for about 2 years now.
The Canadian Press Jul 3, 2012 – 3:29 PM ET | Last Updated: Jul 3, 2012 3:44 PM ET
TORONTO — The Bank of Montreal predicted Tuesday that the Bank of Canada will keep interests rates lower for longer than it expected.
Economists at the bank now believe the central bank will not raise its key rate until July 2013, six months later than their earlier prediction of January 2013.
Senior economist Michael Gregory said the change stems from the easing policy of the U.S. Federal Reserve, a downgraded Canadian economic outlook and tightened mortgage rules.
The changes, which include a cut to the maximum amortization period for government insured mortgages cut to 25 years from 30, should stem some fears around growing household debt that would otherwise push the Bank of Canada to increase rates sooner.
“The tightening of the government’s mortgage insurance rules does serve to act like higher interest rates specifically for that sector,” Gregory said. “So that takes some of the urgency away from the Bank of Canada to adjust rates any time soon.”
The Bank of Canada has kept its key interest rate at one per cent since September 2010.
The rate affects the prime lending rates at Canada’s major banks and in turn influences all kinds of interest rates including those charged to variable rate mortgages and lines of credit.
Gregory said he expects that the Bank of Canada will change its projections for economic growth when it releases its new monetary policy report on July 18.
“I suspect it will show softer growth in Canada, partly because of global factors and in part because of what’s going on in the U.S,” said Gregory.
How much do you think you’ll get back for that reno?
This is one of the better articles on renovations. We did hear of a client who showed my recipts for $88,000 of back yard landscaping. It was super awesome and he had a massive rock moved in from Golden, BC at at cost of more than $20,000.
Imagine the disappoiontment when he found out that the total maximum that can be added to a home value for “superior landscaping” was $8,000. AND the people that ended up buying the property ended up having to pay $2,000 to have that giant rock moved out of their back yard.
Some people’s gold is other people’s garbage. How true.
How much do you think you’ll get back for that reno?
Shelley White
The Globe and Mail
Ah, the sweet sounds of summer: hammering, sawing, digging, demolition. Well, they’re not sweet exactly, but certainly familiar to anyone who lives in one of Canada’s larger cities. With real estate prices in a state of flux, it seems everyone is eager to spruce up what they’ve got and hopefully be rewarded with an increase in property value. However, as we know, not all renovations are created equal. Just because you’re sinking the money into your home doesn’t mean you’ll see a return on your investment. And just about everyone has an opinion on what you should and shouldn’t be tearing out.
I came across a handy-dandy online tool offered by the Appraisal Institute of Canada, which can help you determine how much of a return you can expect to get out of your home renovation. (The AIC is a self-regulating professional association and the largest property valuation organization in Canada, with 4,800 members in Canada and around the world.)
Choose a reno, plug in your expected cost, and it will tell you how much of your investment you can expect to get back. For example, if you spend $25,000 on a kitchen reno you are likely to get 75 to 100 per cent of that investment back when you sell, or $18,800 to $25,000.
Clearly, these are general guidelines, not hard and fast rules, and how much you spend will affect how much you get back. If you blow $70,000 on a fabulous bathroom job in a house that’s only worth double that, you’re unlikely to ever see a dime of that money again. In addition, choosing a renovation should be about more than just return on investment – it is your home, after all, and any work you do should also be for your enjoyment. But if you’re mulling over one job versus another and you’re looking to sell soon, it might be prudent to go for the basement reno over the swimming pool (see below).
Some of the big winners are obvious (bathroom and kitchen renovations appear to give the biggest bang for your buck), but there were others that were more surprising to me (only 25 to 50 per cent return on landscaping? Say it ain’t so).
Here’s a look at the return on investment you can expect from 25 of the most popular home renovations, according to the Appraisal Institute of Canada:
Bathroom and kitchen renovations are the real winners, providing a return on investment of about 75 to100 per cent, followed closely by exterior or interior painting at 50 to 100 per cent.
Other safe bets include basement renovation, garage construction, window/door replacement, rec room additions and fireplace installation, which return about 50 to 75 per cent, as do exterior siding and upgrades to flooring or furnace/heating systems.
You can expect a slightly lower return on investment (25 to 75 per cent) with concrete paving and roof shingle replacement, as well as installing central air conditioning or building a deck.
The lowest return on investment comes from landscaping, asphalt paving, building a fence or interlocking brick walkways, or even installing a home theatre room, which all return about 25 to 50 per cent. The home renovations that are least likely to increase property value are skylights, whirlpool tubs and swimming pools, which return between 0 and 25 per cent.