February 2011 Canadian Economic Fundamentals

[Ally]

China grain hoard fears help lift wheat





OTTAWA - Wheat prices hit a 30-month high Monday on weather worries and increased demand from the politically volatile Middle East and North Africa, with one analyst suggesting China's massive stockpile of grains has become an "aggravating concern" in the global food market.




The continued upward pressure on food prices -- which helped trigger the upheaval in Egypt -- could become a hot political issue, starting this week in Paris as Group of 20 finance ministers and central bankers gather. As head of the G20 this year, France wants policymakers to tackle the issue of taming commodity prices.




"When food is scarce in the world, food becomes more important than money," said Carl Weinberg, chief economist at High Frequency Economics of Valhalla, N.Y.




Read the full article here.

 

[Ally]

Housing market heats up before rule change





OTTAWA ` Canadian home resales rose 4.5% in January to the highest level since April 2010, the Canadian Real Estate Association said Tuesday.




The gains during the month were led by Vancouver and Toronto, CREA said.




`National sales activity has improved steadily since last summer, and now stands almost 25% above the low point reached in July 2010,` the industry body said.




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[Ally]

CREA urges more caution over mortgage rule changes





The Canadian Real Estate Association has cautioned the federal government to stay out of the mortgage market until the effects of recent changes can be gauged, as it suggested buyers are racing to secure 35-year mortgages before they are banned in late March.




The federal government recently announced the end of insurable 35-year mortgages, leaving new buyers to take on amortization periods of 30 years or less. The move was made to help lower household debt in Canada, and makes it more expensive on a monthly basis to own a home.





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[Ally]

Commodities put Canada in the driver's seat




The Canadian stock market is in a sweet spot with exuberance about gold, oil and agriculture stocks poised to push its benchmark index to record highs, says the author of a new book on the Toronto Stock Exchange.




The S&P/TSX composite index will more than double from its current level and hit 30,000 points in 10 years as demand for commodities continues to grow, predicted Bob Haber, who spent 12 years as chief investment officer at Fidelity Investments Canada before launching Haber Trilix Advisors LP of Boston last year.





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[Ally]

Home sales pace hits 9-month high





Home sales in Canada increased 4.5 per cent in January over the previous month, their highest seasonally adjusted point since last April.




The Canadian Real Estate Association said Tuesday the Vancouver and Toronto markets led the way, but there were gains in more than half of all local markets during the month.




"We anticipated the recent announcement of tighter mortgage regulations, which will come into effect this March, would pull forward sales activity into the first quarter of 2011, particularly in some of Canada`s more expensive housing markets,` CREA chief economist Gregory Klump said.




`The sharp rise in sales activity in Toronto following the announcement provides early evidence confirming this."




Klump was referring to Finance Minister Jim Flaherty's announcement in January that Ottawa will no longer insure mortgages of longer than 30 years.




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[Ally]

Resale housing market shows further improvement in January






OTTAWA ` February 15th, 2011 ` National resale housing activity climbed further in January 2011, according to statistics released today by The Canadian Real Estate Association (CREA).






Seasonally adjusted national home sales activity rose 4.5 per cent in January 2011 compared to the previous month, reaching the highest level since April 2010. Led by Vancouver and Toronto, seasonally adjusted sales activity posted monthly gains in more than half of all local Canadian markets in January. National sales activity has improved steadily since last summer, and now stands almost 25 per cent above the low point reached in July 2010.




We anticipated the recent announcement of tighter mortgage regulations, which will come into effect this March, would pull forward sales activity into the first quarter of 2011, particularly in some of Canada`s more expensive housing markets,` said Gregory Klump, CREA`s Chief Economist. `The sharp rise in sales activity in Toronto following the announcement provides early evidence confirming this,` said Klump.



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[Ally]

Dramatic housing gains of past decade unsustainable, analysts say




OTTAWA ` The dramatic, decade-long run-up in house prices reported Tuesday by Re/Max will become a distant memory in the years ahead, possibly even calling into question the postwar mantra that buying real estate is a surefire investment, analysts said Tuesday.







Realtor Re/Max issued a report Tuesday that showed house prices climbed an average of 6.82 per cent every year from January 2000 to December 2010, a pace of growth that BMO Capital Markets economist Robert Kavcic described as unsustainable.







"Over time, house prices tend to follow the rate of income growth, which is a little faster than inflation but certainly not seven per cent a year," Kavcic said.







"Over that period we saw income growth on a per-capita basis of about half that rate. That's fine if you have offsetting factors like falling mortgage rates and longer amortization periods like we saw over the past 10 years."







But looking ahead, Kavcic warned, the exact opposite is taking shape ` mortgage rates are rising and amortization periods are shrinking.



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[Ally]

Tighter inventory levels propped up Canadian housing markets over past decade, says Re/Max



The real estate industry has enjoyed some of its` healthiest conditions during the last decade, thanks in part to larger inventory levels.





According to the RE/MAX Housing Barometer Report, which examines the monthly sales-to-new listings ratios in 18 major centres across the country from January 2000 to December 2010, balance in the buyer/seller relationship was widely present throughout the market- which also pushed forth notable price gains.





The one major exception was when the market fell noticeably into buyer`s territory, during late 2008 and early 2009. This blip on the map was stabilized by a decrease in the overall number of listings.





Looking across the country, the report says, "Average price increases from 2000 to 2010 ranged from an annually compounded rate of return of 4.82 per cent in London-St. Thomas to a high of 9.56 per cent in Regina. The national average was 6.82 per cent.





By far the tightest market in the nation was Winnipeg, where seller's ruled the roost for 85 per cent of the decade, followed by Hamilton-Burlington (67 per cent), Regina (63.6 per cent), Kitchener-Waterloo (59.8 per cent) and Edmonton (57.5 per cent)."



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[Ally]

Energy demand to triple by 2050: Shell





OTTAWA - Global energy demand will triple by the year 2050, leaving the world in a gaping shortfall equal in size to the industry`s total output in 2000, Royal Dutch Shell cautioned Monday in a report on the future of energy use.




The report warns broadly of an uncertain and volatile period ahead, both for oil prices and for global politics as demand from emerging nations like China and India intensifies and supply fails to keep pace.




`We believe that the world is entering an era of volatile transitions and intensified economic cycles. The recession interrupted the oil and commodity price boom but it may return,` the British energy giant states.




Emerging nations are now entering their most energy-intensive phase of economic growth as they industrialize, build infrastructure and increase transportation use, and will continue to put upward pressure on prices, Shell said.




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[Ally]

Home-sale finder's fee leads to real deal





A Tsawwassen man looking to avoid paying a big real estate commission instead offered a $10,000 finder's fee to help sell his house ` and it worked better than he ever hoped.




Rob Dale handed out 300 flyers to friends and neighbours, with the promise to pay the cash reward to anyone bringing them a successful buyer.




Dale assumed the market was hot enough that he could do without an agent and save much of the standard real estate commission on the sale of his $739,000, four-bedroom home, which would have been about $25,000.




"One of the things that really surprised us is that it wasn't just our neighbours and friends that were interested," said Dale. "We started getting calls from realtors."




Ironically, the man who found him the buyers was a real estate agent.




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[Ally]

Canada's growth rate raised





Canada's economic growth rate will accelerate after the biggest jump in exports in almost three decades, which will support the country's dollar and increase pressure on the central bank to increase borrowing costs, analysts said.




Charles St-Arnaud at Nomura Securities International increased his estimate of fourth-quarter growth to a 3.9% annualized pace from 2.2% Monday, citing the trade report. Benjamin Reitzes at BMO Capital Markets raised his estimate to 3% from 2.3% and Mark Chandler at RBC Capital Markets boosted his outlook to 2.8% from 2.3%.




Canada reports fourth-quarter growth Feb. 28, and the Feb. 11 report suggests trade may support a quickening of growth after six months when trade subtracted from growth. The Bank of Canada has kept its key lending rate unchanged at 1% since September and said Jan. 18 it would be cautious about future moves in part because currency strength threatens growth.




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[Ally]

Commerical real estate investment picks up in Calgary





CALGARY - A stronger economy and "surging investor confidence" triggered a 48 per cent increase in Canadian commercial real estate investment volume in 2010 to $18.9 billion, says CB Richard Ellis.




Toronto finished the year with $7.4 billion in trades, up from $3.8 billion in 2009, according to the 2010 National Investment Report released Monday by CBRE.




Canadian commercial real estate transaction volumes in 2010 increased from $12.7 billion in 2009 to $18.9 billion in 2010, approaching pre-recession 2005 levels when $19.8 billion of commercial property traded in Canada. By year-end, the number of commercial transactions reached 4,589, compared to 3,872 transactions completed in 2009.




In Calgary during 2010, 332 real estate transactions took place, totalling nearly $1.6 billion in transaction volume. That was slightly up from 382 deals for just under $1.4 billion in 2009.




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[Ally]

Opinion: Encana deal sign of things to come






Encana's joint venture deal with PetroChina should be seen as a leading indicator for the North American natural gas business.




The $5.4-billion transaction, which will see PetroChina buy a 50 per cent interest in the Cutbank Ridge assets that contain an estimated one trillion cubic feet of natural gas reserves, is not just another signal of Asia's voracious appetite for the commodity. It has to be seen as one more step in the direction that will see natural gas exported from these shores.




It is Encana's second such deal in less than a year; last March it inked an agreement with the Korea Gas Corp. to develop a portion of its assets in the Horn River and Montney regions of northeast British Columbia.




Read the full article here.

 

[Ally]

More Euro trouble brewing in Portugal, Ireland




Political and economic danger signs flashing in Portugal and Ireland threaten to punch a hole in the European Union's attempts to contain a financial crisis that has gripped the continent for more than a year.




Europe has already provided billions in bailouts to keep the Irish and Greek governments from going bankrupt. With Portugal now teetering on the edge of financial catastrophe, and Ireland's upcoming election unsettling financial markets, an ominous new phase in the biggest emergency in the 17-nation euro's history could be opening up, menacing the livelihoods of millions of Europeans.



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[Ally]

Five reasons investors are going crazy for farmland




It may seem a radical investment made by those who believe the end times are coming, but with food prices soaring, farmland could be on the brink of a serious bull market.




It's not just investors like Jim Rogers in the market, but countries too seeking to secure their food future.





Of course farmland investment comes with its own challenges. It requires a long-term commitment. Weather is volatile, and could slam your investment in the short-term.



Read the full article here.

 

[Ally]

House prices for major Canadian cities




Teranet-National Bank House Price Index measures house prices in six Canadian cities, and eliminates variations based on the type of properties sold (for example, during downturns, smaller properties tend to trade more, pulling down the average price more quickly than house prices are actually decreasing). It includes only houses that have been sold more than once.





Read the full article here.

 

[Ally]

China's food inflation leaving a bad taste




That inflation in China has hit 4.9 per cent ` and that food alone is up more than 10 per cent ` is no surprise to the co-owners of the Floating Fragrant Pagoda food stall.




From cramped one-room quarters, co-owners and cooks Cui Jicheng and Zhang Huawei dish out rice and vegetables, noodles and dumplings to hungry customers sitting at plastic tables along the adjacent sidewalk, or into plastic bags for takeaway. Their most expensive dish is 12 yuan, or $1.82 (U.S.); the cheapest is six.



Read the full article here.

 

[Ally]

Financial advice - without the preaching





What`s all this information got us? A level of national indebtedness that some think is dangerously high and a recent report from a national task force on financial literacy that says `too many people remain under-equipped when it comes to understanding money matters.`




Author Bruce Sellery believes the problem is that there`s too much focus on pure information, and not enough emphasis on how it relates to real people.




`We have given everybody more information than they can ever possibly consume, without giving them insights,` said Mr. Sellery, author of a new personal finance book called Moolala: Why Smart People Do Dumb Things With Their Money (And What You Can Do About It). `Insight drives behaviour.`



Read the full article here.

 

[Ally]

The West in Canada project







Canada is a wonderfully diverse country with its people spread across the second largest nation-state in the world. There are many things that tie us together as Canadians, but there is no doubt that each part of the country is unique and brings a different set of characteristics and perspectives to the national table. Understanding and integrating this diversity is a challenge as big as Canada itself.



Read the full article here.

 

[Ally]

Housing price hits record




The resale housing market in Canada continues to defy all skeptics.




The average home price reached a record high last month and, with room yet to move, has renewed worries that a major correction looms.




For months, the predicted pullback in real estate has failed to materialize. But the market`s peak might finally be in sight, turning attention to the depth of the downside ahead.




`In the back half of this year, we`ll see the real estate market cool quite materially,` said Derek Holt, vice-president of economics at Scotia Capital.



Read the full article here.