Investment report ranks Calgary #1 in Canadian real estate markets
Investment report ranks Calgary #1 in Canadian real estate markets
CALGARY – Calgary is the best place in Canada to invest in the residential real estate market, according to a new report released today.
The Real Estate Investment Network’s report said that Calgary experienced one of its best economic and real estate periods in Canadian history a couple of years ago but then entered a strong, and needed correction.
“During the economic downturn, Calgary’s market is making a predictable correction resulting in slightly more affordable housing compared to recent years passed,” said the report. “It was economically impossible for the market to continue at the pace at which it was heading and now finds itself adjusting to market realities.
“This adjustment period, as the market searches for its new foundation from which to build, should continue in 2010 as the provincial economy is poised for another growth spurt.”
The REIN report said the in-migration pace in the city continuing to lead the country combined with the “renewed affordability” will help propel the local market over the coming years.
“We, fortunately, should not see the massive over-boom situation we previously witnessed as the market remains more in line with the fundamentals,” said the report.
Following Calgary as the top Canadian real estate investment cities are Kitchener-Waterloo-Cambridge, Edmonton, Surrey, Maple Ridge, Hamilton, St. Albert, Simcoe Shores (Barrie-Orillia), Red Deer, Winnipeg and Saskatoon.
“Successful real estate investing is all about identifying a town or neighbourhood that has a future, not a past,” said the report. “Sadly, many investors like to invest based on past performance; thus, they are constantly chasing the market. This is called speculating – not investing.”
Canada’s banking system healthiest in the world
Canada’s banking system healthiest in the world
| Tuesday, 1 June 2010
Canada’s banking system is a model for the United States and European countries struggling to cope with mountains of debt accumulated through a series of market crises, massive bailouts and recession according to a report in the Washington Post this morning.
The International Monetary Fund and World Economic Forum (IMF) is showcasing Canada for having the healthiest banking system in the world. . The IMF, in probing what made Canada’s mortgage lending system so resilient during the crisis, concluded that it was “boring” compared with the complicated, sophisticated and expensive financing system in the U.S., but nevertheless effective and safe.
Canada and its banks were barely touched by the 2008 financial crisis that nearly brought down the U.S. banking system and led to the biggest recession since the Great Depression.
Canadian bank losses were so low, and their cushion of reserves so high, that the banks managed to post profits for months in the aftermath of the 2008 crisis while major U.S. banks were teetering on the brink of insolvency and getting $250 billion in Treasury bailouts to cover burgeoning losses on bad mortgage loans.
“The Canadian experience showed that more prudent lending and borrowing played a big part in preventing the housing bubble that proved the near-undoing of the American banking sector,” said Robert Elliott, a Canadian banking lawyer at Fasken Martineau.
Though major U.S. banks have been recapitalized by the government and are posting profits again, “all the fresh capital in the world may not prevent another cycle of misery down the road” unless the U.S. also adopts more prudent lending practices, he said
Housing in Canada not to collapse like the USA did
U.S.-style housing market collapse not likely in Canada, CREA says
Canadian homeowners are unlikely to experience a U.S.-style decline in the value of their homes, says a report released today by the Canadian Real Estate Assocation.
Photograph by: Reuters, Reuters
CALGARY – Canadian homeowners are unlikely to experience a U.S.-style decline in the value of their homes, says a report released today by the Canadian Real Estate Assocation.
Instead, home prices will stabilize and will remain stable for some time, said the report.
“The relationship between average price and income has recently been cited as portending a U.S.-style correction in Canadian home prices,” said Gregory Klump, chief economist with CREA. “However, such warnings ignore the longer-term relationship between prices and income, and disregard typical Canadian housing market cycle dynamics.”
Just yesterday a report by CIBC World Markets Inc. said that on average Canadian home prices are now around 14 per cent over their “fair” value. The report also said that higher interest rates will likely lead to a “modest” decline in prices of between five to 10 per cent in the coming year or two.
CIBC said at least 1.5 million houses in Canada are now overvalued and this represents just over 17 per cent of all dwellings. Of those homes, about 760,000 are overvalued by more than five per cent. The report said 17.4 per cent of Alberta homes are overpriced.
But CREA’s report said home prices tend to rise in cycles, characterized by periods of sharp growth and periods of stability. By contrast, income generally follows an orderly upward trend over time.
“For home prices to keep pace with incomes, they must rise faster during housing booms to make up for periods of little or no price growth. Canadian home prices were stagnant throughout most of the 1990s, while incomes continued rising, making housing more affordable. Over the past decade, home prices have climbed sharply as mortgage interest rates declined,” said the CREA report.
Klump said that the Canadian housing market is now widely thought to be at, or very near, the top oaf a cycle and the ratio of home prices to incomes is high, but he said the ratio will revert to its long-term average as it always does as part of a normal housing market cycle.
“History suggests, however, that it will not do so by means of a significant correction in home prices. The more likely scenario is that home prices will stabilize, giving incomes a chance to catch up again,” he said.
Klump said conservative lending practices in the mortgage industry combined with “prudent borrowing and accelerated payments among Canadian mortgage holders” will help Canada avoid a U.S.-style housing crisis.
“The correction in U.S. home prices is set against a massive oversupply of homes due to distress sales, combined with a drop in housing demand due to unemployment. The unwinding of the housing boom in Canada will be more orderly, characterized by softening sales activity and stable prices,” said the CREA report.
mtoneguzzi@theherald.canwest.com