Tuesday: Canadian Real Estate in the News

A quick list of today’s articles from different news sources.

The Calgary Herald seems to be quite busy reporting for Canada and the US.

• Housing is too expensive - The Montreal Gazette
• Calgary home prices fall 8% - Calgary Herald
• Home sale prices fall in July - CBC.ca
• Housing market dodging worst of US meltdown -Calgary Herald
• Albertans’ household finances in decline - Calgary Herald

Ottawa is tightening mortgage insurance rules

The federal government said Wednesday that it is tightening the rules relating to government-guaranteed mortgages.

The new rules, set to take effect Oct. 15, are a “responsible and measured approach … to reduce the risk of a U.S.-style housing bubble developing in Canada,” the Department of Finance said in a news release.
The measures will apply to new, government-backed, insured mortgages. “Canadians who already hold mortgages will not be affected,” it said.

The changes include:
• Cutting the maximum amortization period to 35 years from 40.
• Requiring a minimum down payment of five per cent, whereas loans for 100 per cent of the price are possible now.
• Establishing a requirement for a consistent minimum credit score.
• Introducing new loan-documentation standards.

The government acknowledged that the proportion of bank mortgages in arrears is stable at 0.27 per cent, “near the lowest levels experienced since 1990 and well below the highs of 0.65 per cent experienced in each of 1992 and 1997.”

Source: CBC News

More Listings on the Market Slows Canadian Price Increase

The Canadian Real Estate Association (CREA) reported Friday that the price for resale homes rose only 4% in April compared with the same month a year earlier, the slowest rate of increase in six years.

The slowdown in price increases resulted from a sharp increase in listings and a slower growth in sales, the report showed. Two new properties were listed for sale for every home that sold through the Multiple Listing Service (MLS) system across Canada in April.

The number of new listings of homes for sale on the MLS of real estate boards in Canada reached its highest level ever in April 2008 at 77,248 units, the report showed. Meanwhile, the number of homes sold during the month came in at 36,614 units in April

The national MLS residential average price rose 4% year-over-year to $317,619 in April 2008. This is the smallest year-over-year price increase in over six years.

Source: CEP News

Sunday Morning Suggested Reading

• 10 Questions to Ask a Seller’s Agent Before You Hire Them - Vancouver Reflections
• Is a 40-Year Mortgage Hazardous for your Financial Health? - Move Smartly
• Underground contractors can cost you everything - St. John’s Real Estate Blog
• How long should it take to sell? - Toronto Real Estate Intelligence
• Variable rate versus fixed rate mortgages, what is the way to go? - Mississauga Real Estate

Interest rate cut will help Canadian home owners and buyers

The interest rate cut announced today by the Bank of Canada will help Canadian home owners and buyers, according to The Canadian Real Estate Association. The Bank of Canada cut its benchmark overnight lending rate by one-half of one percentage point to 3 1/2 per cent on March 4th, and signaled further cuts in the near future. The trend-setting Bank rate, which is set 0.25 percentage points above the overnight lending rate, now stands at 3.75 per cent.

“The threat of inflation is being eclipsed by concerns about slower economic growth, so the Bank of Canada cut its trend-setting bank rate to boost growth,” said CREA Chief Economist Gregory Klump. “Financial market turmoil will remain a downside risk to growth for some time. This means the Bank will probably continue lowering interest rates.”

Lower lending rates will help offset the effect of tightening credit conditions and allow homeowners to obtain better mortgage terms. This will also benefit Canadian homeowners dealing with variable rate mortgages. [Read more]

Study shows economic benefits of MLS® home sales

Average home sale yields $32,200 in additional consumer spending.

OTTAWA – June 12, 2007

The resale housing industry in Canada generated more than 158,000 jobs and an average of $15.3 billion annually in the period from 2004 and 2006, according to a study prepared for The Canadian Real Estate Association by Altus Clayton.

The report says each residential MLS® transaction generated an average of $32,200 in additional consumer spending in the period from 2004 to 2006. This included the purchase of furniture and appliances, moving costs, renovations, services, and taxes. From 2002 to 2004, the average transaction yielded $24,697 in additional consumer spending. In the period from 2000 to2002, it was $19,760.

The new study says the economic impact of each MLS® sale varies by province or region, from a high of $40,450 in British Columbia to $20,325 in Atlantic Canada. The report notes the spending relates to the cost of moving from one home to another and for renovations after moving in – it does not include any renovation expenditures by sellers to prepare properties for sale.

“Real estate continues to be one of the major engines driving Canada’s economy,” said CREA President Ann Bosley. “This study shows the tremendous contributions Canada’s resale housing industry makes to the economy above and beyond the actual cost of the home. When Canadians move, they typically buy new appliances or furnishings, and renovate in various ways to tailor their home to their specific requirements.”

“Purchases and sales of homes trigger additional expenditures that have broad economic impacts,” said CREA Chief Economist Gregory Klump. “Job creation is also a major factor of the sale of a home. The study shows that more than 94,000 jobs are created in Canada each year as a direct result of resale housing transactions.”

The economic impact of the market for existing homes is also reflected in the sales processed by MLS® systems in Canada in 2006. The 2006 national MLS® report from The Canadian Real Estate Association says there were 483,917 residential properties sold through the Multiple Listing Service® last year.

The complete updated Altus Clayton report here.

For more news on the housing Market Subscribe to the Montreal Real Estate Blog !

Home prices, sales still sizzling

Historically low mortgage rates pave way to record levels in April

Globe and Mail TAVIA GRANT May 17, 2007

Canadian home prices and sales both set records last month, a stark contrast to a wilting housing market south of the border.

The average price of a home jumped 9.5 per cent in April from a year ago to $323,936, the Canadian Real Estate Association said yesterday.

Canada’s real estate market remains hot amid historically low mortgage rates and a jobless rate approaching its best level in 30 years.

It’s a different picture in the U.S., where sales, home prices and builders’ profits are dwindling while mortgage defaults are on the rise.

“The Canadian housing market remains on a roll, in stark contrast to the ongoing woes in U.S. housing,” Douglas Porter, deputy chief economist at BMO Nesbitt Burns Inc., said in a note. “This persistent divide is a key reason why we believe Canadian and U.S. monetary policies will diverge in the year ahead.”

Hot home prices will likely be reflected in today’s release on inflation numbers, with homeowner replacement costs creeping higher.

Home prices hit new records in Vancouver, Victoria, Calgary, Edmonton, Regina, Saskatoon, Winnipeg, Toronto, London & St. Thomas, Ont., Ottawa, Montreal and Halifax-Dartmouth.

Prices haven’t risen everywhere - they’re lower in the Ontario communities of St. Catharines, Durham region, Windsor and Thunder Bay.

Home sales also hit a peak last month, the association said.

“Resale housing activity in the first quarter was far stronger than anybody had anticipated,” said Gregory Klump, the association’s chief economist. “Home buying sentiment remains strong in all regions, and new listings have been unable to keep pace with sales activity.”

Seasonally adjusted home sales in Canada’s major markets rose 1.9 per cent from March to 30,615 units, led by gains in Toronto and Montreal. Year-to-date transactions also set a new record in April.

New residential listings, meantime, rose 3.1 per cent in April, to their second-highest level on record.

Markets remain strong in the West. “There has been anecdotal evidence that resale activity in some Western markets is getting a boost from a shortage of lots and from buyers who don’t want to wait for their new home to be built,” Mr. Klump said.

His association predicts MLS sales will hit a record this year and edge down in 2008.

“The resale housing market will become more balanced as rising prices erode affordability and cause a gradual retreat in sales activity,” Mr. Klump said.

A real estate investment plan

This very complete article was released this morning by the Financial Post. Richard Croft goes on to explain why is real estate a good diversifier in your portfolio: from owning a home to becoming an investor in Real Estate and it’s positives aspects as well as the negative ones.

Richard Croft, Financial Post
Their principal residence is most people’s primary exposure to real estate as an investment vehicle.

“…Real estate is an excellent diversifier within a portfolio, and in the case of real estate investment trusts (REITs), can provide some decent tax-advantaged cash flow to your portfolio. So here’s the question: Is your home a place to live or is it an investment that will at some point be sold to capitalize your retirement years?

If the former, then by all means include real estate in your portfolio. If the latter, then adding real estate to your portfolio would defeat the purpose of optimum portfolio diversification.

Assuming real estate should be in your investment portfolio, the next step is to understand what it brings to the portfolio in terms of performance enhancement and risk reduction.

As an investment, the real value in real estate is its cash flow. If you buy a rental property, for example, you buy it on the basis of some cap rate, which is really just another way of saying the property value is based on some multiple of its cash flow.

Like any other asset, the multiple accorded to that cash flow is determined by the stability of the cash flow. If you are buying a property with a solid, long-term tenant who pays the rent –like a major Canadian bank– the cash flow is stable and the property will fetch a higher valuation.

Another way to look at cash flow is in terms of how real estate is financed. In Canada, you can borrow 75% (sometimes you can borrow even more of the purchase price) of the value of your real estate, usually financed over a 25-year term. If your cash flow is stable, you can use the excess cash flow to pay down the mortgage, and at the end of 25 years, you own the property free and clear.”

Read the complete article at The Financial Post

Rags to Riches to Real Estate

Nouveau riche, not old money driving high-end home sales, Royal LePage report

Good old-fashioned hard work, not birthright, is the key to unlocking fortune and the front door of a new luxury home, according to the 2007 Carriage Trade Luxury Properties Report released today by Royal LePage Real Estate Services. Given that the unit sales of high-end homes in almost all cities surveyed increased significantly year-over-year, Canadians appear to be working harder than ever.

According to the 2007 Carriage Trade Luxury Properties Poll (conducted by Ipsos Reid), of high net worth Canadians, almost half (46%) cite hard work as the main driver to attaining wealth, followed by the drive to succeed (27%) and a higher education (18%). Only four per cent (4%) of respondents chalk their success and their financial stability to being born into the right family, while a mere one per cent (1%) attribute it to plain old luck.

The 2007 Carriage Trade Luxury Properties Report includes a market analysis of trends and activity in eight major cities across Canada, combined with a national Ipsos Reid poll that measures attitudes, upbringing and beliefs of high net worth Canadians, as defined as individuals with assets of at least $250,000 (excluding real estate) and a primary residence valued at a minimum of $500,000.

Regional variances were observed across the country with the largest increase in unit sales occurring in the nation’s capital, Ottawa, followed by energy-rich Alberta, as measured by local real estate boards. Increases of more than 200 per cent in Ottawa are due to a large pool of international buyers and local executives and professionals. The number of high-end home sales rose by 71 per cent in Edmonton and 38 per cent in Calgary, fuelled largely by in-migration of executives in the oil and gas sector, as well as homeowners trading up.
“Luxury living is no longer the exclusive domain of a few. Buoyant economic conditions and confidence in the market going forward have ignited a growing passion for investing in luxury property among an increasing number of Canadian families. Consequently, homes in this market niche have been trading briskly, and this has put upward pressure on prices,” said Phil Soper,president and CEO, Royal LePage Real Estate Services. “The poll findings reveal that real estate in the Carriage Trade market is both sought after and attainable for hard working people across the country.”

Rags to Riches

Rags to riches stories are being played out in the kitchens of some of Canada’s best neighbourhoods. The poll results revealed that the majority of the high net worth individuals surveyed started from modest beginnings. When asked, “What was your economic status growing up?” only three per cent (3%) of respondents reported they were raised in wealthy/affluent households, while 79 per cent of respondents came from lower middle class and middle class upbringings. Four per cent (4%) of wealthy homeowners have risen out of poverty and now live in a home worth at least $500,000.

Home Sweet Homes

When it comes to the value of primary residences, 12 per cent of high net worth Canadians live in homes with price tags starting at $1 million, while almost half (47%) of respondents live in properties valued from $600,000 to$999,000.
Added Soper: “Prosperous Canadians see real estate as an important element in their investment portfolios. Demand for well-appointed properties remains strong with a trend of affluent Canadians owning more than one home.
In fact, one-quarter (25%) of wealthy homeowners own two properties, and six per cent (6%) own three residences while two per cent (2%) own more than five properties.”
Success seems to transcend sectors with luxury property owners citing a spectrum of occupations including entrepreneurs (13%), CEOs and senior executives (10%), medicine (10%), sales (7%) and law (3%). The poll found that 32 per cent of high net worth homeowners have already retired and can now enjoy the fruits of their labour.

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REPORT FINDINGS

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                         Luxury Home Market Summary
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                                            Units Sold   Units Sold
          Market              Price           Q1 2007      Q1 2006   % Change
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    Halifax                 $600,000 +           8           10         -20%
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    Montreal                $900,000 +          56           49          14%
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    Ottawa                  $750,000 +          23            7         229%
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    Greater Toronto       $1,000,000 +         434          357          22%
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    Winnipeg                $500,000 +          11            8          38%
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    Calgary               $1,000,000 +         130           94          38%
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    Edmonton                $950,000 +          12            7          71%
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    Greater Vancouver     $1,000,000 +         673          544          24%
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Source: Data obtained from various real estate boards (REBGV, CREB, EREB, WREB, TREB, OREB, GMREB and NSAR)
Note: The price categories listed above correlate to the price criteria for a Carriage Trade home. Carriage Trade is a Royal LePage distinction for the most exceptional homes on the market. In Toronto, Vancouver, Montreal and Calgary, the home’s listing price must also be no less than four times the average residential sales price as determined by the local real estate board, or $1 million. For homes located in all other markets the home’s listing price must be three times greater than the average residential price as determined by the local real estate board.

REGIONAL SUMMARIES
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(…) Strong consumer confidence and a robust economy have contributed to growth in Montreal’s luxury home market with sales of properties priced above $900,000 rising 14 per cent in the first quarter, year-over-year, to 56 units in 2007 from 49 units in 2006. The strong growth seen in the first quarter is expected to persist throughout 2007. Luxury home buyers are typically between the ages of 35 and 60, are highly successful professionals or executives, and have a keen eye for quality and value. Some of Montreal’s most sought-afterareas include Westmount and Mont Royal.

About Carriage Trade
Carriage Trade is an exclusive real estate service from Royal LePage offering the most distinguished homes in Canada to discerning buyers from around the world. For a property to qualify as Carriage Trade, it must meet a series of criteria, the most imperative being location and price. The residence must be situated in a distinctive, prestigious, sought-after and
exclusive neighbourhood or on prized acreage or land and meet minimum price requirements.
For more information visit www.carriagetradeproperties.ca. and www.royallepage.ca.

Find original article here