June 2010

[Ally]

New rules cuff some mortgagees to banks

A headlock would be the wrestling term to describe the hold Canadian banks will have on some consumers because of new, more strict mortgage rules.

We are already seeing the impact of the changes that came into effect on April 19, but were put in place well in advance by Canadian financial institutions. Consumers are increasingly selecting fixed-rate mortgages of five years or more because it`s easier to qualify for them.

On mortgages for terms of four years or less, including variable-rate mortgages, consumers must be able to pay based on the five-year fixed posted rate, which is now 6.1%. Go longer and you can use the rate on your contract, as low as 4.6%. No more than 32% of your gross income can cover principal and interest, property taxes and heat.

Peter Vukanovich, president of Genworth Financial Canada, the largest private provider of mortgage-default insurance, says only 5% of new high-ratio mortgages are going variable versus 15% just six months ago.

But there is another wrinkle to the new rules. Anybody shopping around for a better rate has to requalify based on their current credit situation. Stay with the same bank and there`s no check.

Read the full article here.

 

[Ally]

Your bank may have you in `headlock` with new mortgages

A headlock would be the wrestling term to describe the hold Canadian banks will have on some consumers because of new, stricter mortgage rules.

We are already seeing the impact of the changes that came into effect on April 19, but were put in place well in advance by Canadian financial institutions. Consumers are increasingly selecting fixed-rate mortgages of five years or more because it`s easier to qualify for them.

On mortgages for terms of four years or less, including variable-rate mortgages, consumers must be able to pay based on the five-year fixed posted rate, which is now 6.1%. Go longer and you can use the rate on your contract, as low as 4.6%. No more than 32% of your gross income can cover principal and interest, property taxes and heat.

Peter Vukanovich, president of Genworth Financial Canada, the largest private provider of mortgage-default insurance, says only 5% of new high-ratio mortgages are going variable versus 15% just six months ago.

But there is another wrinkle to the new rules. Anybody shopping around for a better rate has to requalify based on their current credit situation. stay with the same bank and there`s no check.

Read the full article here.

 

[Ally]

A tale of two reports

Does Canada have a problem with access to affordable housing? Apparently so, judging by the press coverage that accompanied the Conference Board of Canada`s recent report, "Building From the Ground Up: Enhancing Affordable Housing in Canada." "Some 67% of Metro Vancouver households struggle with the high cost of housing," the Vancouver Sun reported, in much the same vein as other media outlets.

But the Conference Board report itself -- just about everything but the executive summary and the recommendations-- tells a different tale.

The Conference Board report confirms that housing is "one of the most highly regulated and taxed goods" in the economy, and draws on research from Canada Mortgage and Housing Corporation (CMHC) showing that "government-imposed charges are a very significant cost component of any new construction project."

The report well documents and analyzes the roots of the housing affordability problem in Canada. It shows clearly that the private sector does an excellent job of delivering housing to the vast majority of Canadians, but that generally-high shelter construction costs, primarily linked to government policies and taxes, have left some proportion of Canadians in housing need. The analysis and recommendations are pretty clear: What should governments do? "Move away from micromanaging individual projects." Why? Because existing government approaches to homelessness and affordable housing have been inefficient, ineffective or "stymied by gridlock among the various layers of government."

Read the full article here.

 

[Ally]

Housing prices set to fall: CIBC

A new report from one of the country`s major banks says house prices in Canada are sitting 14 per cent over their "fair" value.

The report from Canadian Imperial Bank of Commerce says the average price of a home has risen 23 per cent since reaching its cyclical low in January 2009.

British Columbia and Alberta homes are the most overpriced, at 25 per cent above their fair value. CIBC establishes what it calls fair value from market fundamentals that include income, rent and demographic changes.

"This doesn`t mean that house prices are going to crash tomorrow," said Benjamin Tal, senior economist with the bank. "I`m saying they probably will go down by five per cent or 10 per cent."

The CIBC survey came out the same day as a new report from Royal Bank of Canada that shows affordability eroded in the first quarter.

"Looking ahead, further erosion in affordability is likely to take place in Canada in the coming 12 to 18 months," said the report, written by Robert Hogue, senior economist with the bank.

Read the full article here.

 

[Ally]

CREA lowers housing sales forecast

Rapidly changing market conditions have led the Canadian Real Estate Association to lower its forecast for housing sales this year.

The Ottawa-based group, which represents 100 boards across the country, now says 2010 sales will not be as strong as previously forecast and by next year prices will begin falling.

CREA expects 490,600 sales through the Multiple Listing Service in 2010, a 5.5% jump from a year earlier and the second-best year on record. However, by 2011, sales are expected to fall by 8.5%.

"The revision reflects a weaker-than-expected start to the year in British Columbia, and recent developments that pulled forward the timing as to when sales are expected to ease in other provinces," the group said in a statement.

A major factor pushing people into the market earlier has been new mortgage rules that went into effect on April 19. Canadians buying homes with mortgage default insurancemustnowqualify based on what is called the benchmark rate for a five-year fixed-rate closed mortgage, if they opt for terms of under five years.

Read the full article here.

 

[Ally]

Banks banking on newcomers

When Jagdeep Walia arrived in Canada last month, waiting for him was a chequing account and credit card at Bank of Nova Scotia. And the bank offered him a safety-deposit box for one year, free of charge.

The paperwork had already been completed before he left India, where he attended a pre-immigration workshop, part of the bank`s Start-Right program for those planning a move to Canada.

The engineering professor was told the transition to Canadian life, both financial and otherwise, would probably require some patience.

"They told me what I can do to make myself a real part of Canadian society. They made me prepared for the situation, that it will take time to settle in Canada," he said, adding that while he has yet to land a job, he is on his way to getting accustomed to the nuances of Canadian finance, thanks to Scotiabank.

"I won`t open any other bank account," he said. "I`m satisfied."

That`s the kind of brand loyalty banks are eager to build among a fast-growing new Canadian customer base that must make quick decisions about where to put its money. On average, immigrants choose a bank and open their first Canadian account within two days of arriving, said Rania Llewellyn, vice-president of multicultural banking at Scotiabank.

Read the full article here.

 

[Ally]

National resale nearly sets record

So close.

Resale housing activity in Canada last month came up short of the record for the month of April -- but the inventory of available homes continues to climb, says the Canadian Real Estate Association.

Sales through the Multiple Listing Service (MLS) numbered 52,042 units in April, less than one per cent short of a national record set in 2007.

But compared to April 2009, national activity was up 20 per cent, says the association.

In terms of seasonally adjusted numbers, national home sales activity in April marked a decrease of 2.6 per cent compared to March -- and 6.8 per cent below the peak reached in December 2009.

More than half of the decline in activity during the first four months of 2010 resulted from fewer sales in B.C., while activity in Ontario and Quebec remained at or near record levels.

Read the full article here.

 

[Ally]

Illusory activity inflates official accounts of U.S. recovery

EDMONTON - Builders in Las Vegas are busy slapping up new homes in a market that`s already crowded with thousands of empty houses.

In Cleveland, recruiters from the University of Phoenix, a private for-profit college, are showing up at shelters and pitching the homeless to sign up for courses.

In Detroit, home of the U.S. auto industry, Mayor Dave Bing plans to bulldoze thousands of derelict houses to make way for urban farming, not assembly plants.

When the economy implodes, desperate times often lead to desperate measures as companies, schools, governments and workers alike scramble to survive.

But once a typical V-shaped recovery takes hold, and job growth kicks in, the economy usually bounces back rapidly. Alas, that`s not what`s happening now.

Read the full article here.

 

[Ally]

Companies sound upbeat note on hiring

Confidence about hiring has jumped to a two-year high as Canadian employers trust the recovery is taking root.

Hiring intentions for the July-September period are the most positive since 2008, led by expansion plans in mining and construction, Manpower Canada`s quarterly survey to be released Tuesday shows. About a fifth, or 22 per cent, of employers plans to add staff in the next quarter; 6 per cent see a decrease; and 69 per cent anticipate no change.

The report comes amid a recovery in Canada`s jobs market. The economy created 24,700 jobs in May, on top of the record 108,700 positions that were created in April, Statistics Canada said last week. Still, the jobless rate remains at 8.1 per cent as more people rejoin the labour market in search of work.

On the hiring front, "things are definitely getting better, though we`re not where we used to be a couple of years ago," said Lori Rogers, vice-president of staffing services at Manpower Canada.

Read the full article here.

 

[Ally]

Housing starts unexpectedly fall

Housing starts unexpectedly eased last month as builders broke ground on fewer single and multiunit dwellings, the latest sign of cooling in the market.

The seasonally adjusted annual rate of housing starts ebbed to 189,100 units in May from a revised 201,800 units in April, Canada Mortgage and Housing Corp. said Tuesday.

The report comes amid signs the country`s resale market is slowing. Most economists expect house prices will fall next year, after a blistering first-quarter for Canada`s real-estate market, as interest rates rise and demand ebbs. CMHC itself believes the pace of housing starts will ease later this year.

"Housing starts decreased in both the singles and the multiples segments in May," said Bob Dugan, chief economist at CMHC`s market analysis centre. "The decrease in housing starts in May is consistent with our forecast that housing starts for 2010 will reach 182,000 units."

Read the full article here.

 

[Ally]

Building permits up 5.4% in Canada

The value of building permits across Canada rose by 5.4 per cent in May thanks to increases in commercial projects.

As the economy gains momentum the non-residential sector is picking up the slack as demand for retail, industrial and commercial space picks up, according to figures released by Statistics Canada Friday.

However, residential development was markedly down, another indication that the sector might be cooling off.

In the non-residential sector the value of permits rose for a third consecutive month in April, up 32.2 per cent to $2.8 billion.

The value of permits fell by 8 per cent from March to $3.9 billion, mostly due to declines in building of homes in Ontario, Quebec and British Columbia

Read the full article here.

 

[Ally]

Forum Notebook

Global policymakers, including Jim Flaherty, Canada`s Finance Minister, are gathering at the International Economic Forum of the Americas in Montreal this week to discuss the "New Global Market," or the global economy in the post-financial crisis world. Paul Vieira of the Financial Post reports from the conference.

CANADA `PUNCHING ABOVE ITS WEIGHT`

Canada got quite the endorsement yesterday from the head of the U.S. Conference Board, who said the country is "punching above its weight" given the size of its economy and should capitalize on this by "cajoling" its peers on their restructuring efforts.

Jonathan Spector, chief executive of the board, told delegates at the 16th annual International Economic Forum of the Americas that this is Canada`s "moment," as its banking sector emerged largely unscathed from the global recession, its economy is set to lead the developed world in GDP growth, and the amount of debt it is carrying is well below its peers. All in all, Canada`s economic model incorporates strong growth and a strong dose of fiscal discipline, he said.

Read the full artilce here.

 

[Ally]

Canada presses its bank agenda

MONTREAL - Having successfully led the charge against the global bank tax, Canadian policymakers are aggressively pushing their Group of 20 peers to accelerate the pace at which they can strike a deal on banking reform -- and are gaining some key allies in the process.

Both Jim Flaherty, the Minister of Finance, and Mark Carney, the Bank of Canada governor, delivered similar messages here yesterday at a key economic policy conference, while the head of the Organization for Economic Co-operation and Development said it was time to put the global bank tax to rest and focus on how much capital is on lenders` balance sheets.

"It is all about capital, capital, capital," said Angel Gurria, OECD`s secretary-general.

Mr. Flaherty was more blunt, suggesting the bank-tax debate has delayed crucial talks.

"Quite frankly, we ought to look at accelerating the financial reforms," he said. "Uncertainty is the enemy here and banks, other financial institutions, need to know as soon as reasonably possible what the quality and quantity of capital standards are going to be and what the cap on leverage is going to be."

Read the full article here.

 

[Ally]

Parenthood, incomes draw people to the suburbs

One in seven people of prime child-rearing age vacated Toronto, Montreal and Vancouver for the suburbs between 2001 and 2006, a new Statistics Canada report shows, and very few made the move in the opposite direction.

The 25-to-44 age group was the most likely to head for the manicured lawns of the suburbs, the agency found by examining census records, with nearly one in seven people — or 14 per cent of that group — leaving the core city for surrounding municipalities.

In contrast, just five per cent in that age group made the move from the suburbs back to the city in Toronto and Montreal, and four per cent in Vancouver.

"Individuals in this age group form an important demographic group because they are at an age when they are establishing families and buying first homes," the agency says. "As a result, they are a particularly sought-after `clientele` for all municipalities, both central and outlying."

All three cities posted a net loss of people to the suburbs over that five-year period, with 95,700 people in that age group leaving Toronto for the suburbs and 27,500 moving in the other direction — a ratio of more than three to one.

Read the full article here.

 

[Ally]

Privacy czar highlights concerns with `rogue` mortgage brokers

OTTAWA — The personal information of Canadians is still at risk of being exploited by "rogue" mortgage brokers at some firms, an audit by the country`s privacy watchdog has found.

In her annual 2009 report tabled in Parliament Tuesday, Jennifer Stoddart warned her office`s investigation discovered a number of outstanding privacy concerns related to how personal data is handled by some mortgage broker companies.

Stoddart was prompted to investigate five firms in Ontario following reports of a string of data breaches in the span of a few months in 2008.

In 14 cases, a small group of individuals allegedly impersonated a mortgage agent and downloaded credit reports for people who hadn`t even applied for a mortgage. As a result, the personal information of thousands of Canadians was compromised, Stoddart said.

Credit reports can contain dates of birth, social insurance numbers and other information that can be used to commit identity fraud.

The alleged thefts of information are now the subjects of criminal investigations which limits what Stoddart can say.

Read the full article here.

 

[Ally]

Forget market timing, it`s all about life timing

You know, you`re making the biggest mistake of your life. The housing market is going to fall."

I got this great piece of advice from another journalist at the Financial Post, who has since left the newspaper, after buying my first home. Not exactly the type of thing you want to hear after taking on huge debt and making the biggest financial decision of your life.

Lucky for me, I didn`t heed that advice about Toronto`s red-hot real estate market -- in 1998. I`m not going to say I made a shrewd business decision 12 years ago, or even six years later when I bought a larger house.

For me, it wasn`t a case of not following what turned out to be bad advice from a fellow business journalist. Nor was it about trying to time the market.

I was simply following the same pattern as most Canadians: I got married and decided to stop renting and buy something. Later came the need for a bigger home when the second kid was on the way.

Which brings us to today. The supply of housing is rising fast as people try to list their homes for sale before the market "crashes." This is happening at the same time that demand is starting to wane. Economists and even the real estate industry are all predicting a correction, the only argument being how severe it will be.

Read the full article here.

 

[Ally]

Britian uses Canada as model in deficit fight

U.K. Chancellor of the Exchequer George Osborne pledged a "fundamental assessment" of the role of the state and said he will adopt the model used by Canada in the 1990s to slash Britain`s record budget deficit.

The Treasury will appoint outside experts and exert pressure on government departments to find ways to save money while seeking the backing of voters in implementing the deepest cuts in a generation. The deficit swelled to 11.1% of gross domestic product in the year through March, almost four times European Union limits.

"We are committed to carrying out Britain`s inevitable deficit reduction plan," Mr. Osborne told lawmakers in the House of Commons in London Tuesday. "It`s about trying to bind as many people as possible into a collective decision."

The government is attempting to strike a balance between preventing the kind of social unrest seen in Greece and Spain while cutting the deficit enough to satisfying investors. The pound fell and U.K. stocks declined Tuesday after Fitch Ratings said the coalition needs to accelerate budget-deficit cuts to protect Britain`s top credit rating.

Mr. Osborne said he plans to follow the Canadian model of engaging with experts and the public so that the most indispensible services are kept.

Read the full article here.

 

[Ally]

Apartments: slow, steady, and sizzling hot

For a few days in May, two near-identical apartment buildings in Cambridge, Ont., were among the hottest commercial properties in Canada.

With their sand-coloured brick and metal-panelled balconies they weren`t particularly awe-inspiring pieces of real estate . But they had owners who were willing to sell for $46.7-million to the right buyer, making them a rarity in a sector that has seen a flurry of expensive deals as deep-pocketed real estate investment trusts scramble to snap up what little inventory is available.

Apartment buildings – there are about 100,000 of them across Canada, with the majority of them clustered along the Windsor-Quebec City corridor – may not return as much to their investors as shopping centres or office buildings, but they offer a lower-risk way to own income-generating properties.

They held their value through the recession for one main reason – there were no distress sales because owners could refinance their debt inexpensively through Canada Mortgage and Housing Corp. This ensured them access to credit at a time when other property owners found debt markets completely closed.

And with mortgage rates almost certain to move higher in coming months, buyers are scrambling to make purchases while rates sit near all-time lows. RealNet Canada, which tracks sales, shows first-quarter sales volumes actually decreased in most of the country at a time when other commercial sectors were showing sharp signs of recovery.

Read the full article here.

 

[Ally]

Housing starts unexpectedly fall

Housing starts unexpectedly eased last month as builders broke ground on fewer single and multiunit dwellings, the latest sign of cooling in the market.

The seasonally adjusted annual rate of housing starts ebbed to 189,100 units in May from a revised 201,800 units in April, Canada Mortgage and Housing Corp. said Tuesday.

The report comes amid signs the country`s resale market is slowing. Most economists expect house prices will fall next year, after a blistering first-quarter for Canada`s real-estate market, as interest rates rise and demand ebbs. CMHC itself believes the pace of housing starts will ease later this year.

"Housing starts decreased in both the singles and the multiples segments in May," said Bob Dugan, chief economist at CMHC`s market analysis centre. "The decrease in housing starts in May is consistent with our forecast that housing starts for 2010 will reach 182,000 units."

Economists polled by Bloomberg had expected the pace of housing starts would be 202,000 units in May.

Canada`s housing market has been booming in recent months as buyers rushed into the market to beat the introduction of a new sales tax in Ontario and British Columbia, and ahead of expected rate hikes, which began last week. However, "the May [housing starts] numbers may suggest that the support from these factors is starting to wane," said Paul Ferley, assistant chief economist at the Royal Bank of Canada .

Read the full article here.

 

[Ally]

Kiss the days of easy interest rate forecasts goodbye

If you thought economists were wrong a lot before, just wait.

After a year of making it easy by telling the market exactly what the Bank of Canada would do with borrowing costs by giving a commitment to keep them at emergency lows, Governor Mark Carney has rapidly switched tacks. The country`s top central banker is now confounding those who would try to predict exactly how fast interest rates will rise by refusing to give explicit guidance.

Yesterday`s quarter-point increase in the benchmark central bank rate and the accompanying statement show that the kind of transparency markets get from Mr. Carney as borrowing costs go up in coming months is going to be very different than what they have become used to over the first part of his tenure, when rates dropped to record lows and stayed there.

In this statement, Mr. Carney is being open but not predictable. He is laying out the parameters he is watching and leaving it to markets to try to figure out what that will mean for rates. It`s an education for investors and analysts, because this is the first time they have seen Mr. Carney raising borrowing costs.

"It`s going to be more fun being the central banker in this environment than being a forecaster," said Mark Chandler, a rates strategist at RBC Dominion Securities who predicts "a whole bunch of angst" before every Bank of Canada rate announcement in coming months.

Read the full article here.