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Canadian home prices rose in January: CREA
Feb 6, 2012 – 2:23 PM ET | Last Updated: Feb 6, 2012 4:50 PM ET
TORONTO – Canadian house prices rose in January on a monthly basis for the first time in three months, led by gains in Montreal, Toronto and Vancouver, according to a report from the Canadian Real Estate Association.
The newly launched MLS Home Price Index, which monitors housing prices in five major urban markets, rose 0.27% in January to 149.3 from a month earlier. It was up 5.2% from January 2011. The report did not provide any actual prices.
Last month’s CREA data showed the average December sale price was $358,480.
“While home prices remain up compared to one year ago, price growth from one month to the next has been slowing, causing year-over-year gains to shrink, and prices are generally expected to continue to stabilize this year,” Gary Morse, the industry group’s president, said in a statement.
January price gains were strongest in Montreal, which edged up 0.7% compared with a 0.14% dip in the Fraser Valley, British Columbia market – the biggest decline of any of the five metropolitan centers covered by the index.
Prices in Toronto and Vancouver rose 0.3% and 0.06% respectively, while Calgary slid 0.12%.
All markets reflected a trend of slowing townhouse and apartment prices, while single-family dwellings remained steady. In January, townhouse units fell 0.4% and apartment units slumped 0.2%. Those declines were offset by a 0.5% increase in prices for both one- and two-storey single family homes.
A cooler property market would be welcomed by Canadian policymakers, who fear the market’s post-recession boom, combined with a long run of low lending rates, could create a fresh asset bubble.
Those fears intensified last month after the country’s major banks dropped their five-year fixed mortgage rates to a historic low of 2.99%.
No rate hikes until late 2014: Fed
Jan 25, 2012 – 10:46 AM ET | Last Updated: Jan 25, 2012 1:16 PM ET
WASHINGTON – The Federal Reserve on Wednesday said it will likely not raise interest rates until at least late 2014, much later than it had said previously, as it nurses a still-sluggish U.S. economic recovery.
The Fed, after a two-day policy meeting, repeated its view that the economy faces “significant downside risks” but if offered little to suggest it was close to launching another round of bond-buying to prop up growth.
It did say, however, that it would maintain a “highly accommodative” monetary policy stance. Economic conditions “are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014,” the central bank said in a statement.
Many investors had expected the Fed to push its expectations for the first rate hike into 2014, but few had thought it would be late in the year. After every previous policy meeting dating back to August, the Fed had said rates were not likely to rise until mid-2013.
Prices for U.S. government debt rose after the announcement, pushing long-term interest rates lower, while the dollar fell against the euro. Stocks initially moved into positive territory, but quickly gave up those gains.
Aside from the 2014 rate pledge, the Fed’s statement hewed closely to its last policy pronouncement in mid-December.
It described the unemployment rate as still elevated and said it expects inflation to remain at levels consistent with stable prices. In a slight shift, it acknowledged signs that business investment has slowed.
“I think what they are seeing is that the rate of growth is not sufficient to bring down the unemployment rate,” said Brian Dolan, chief strategist at FOREX.com in Bedminster, New Jersey.
Richmond Federal Reserve Bank President Jeffrey Lacker, an inflation hawk who rotated into a voting seat this year, dissented against the decision. He preferred to omit the description of the time period for ultra-low rates.
NEW TRANSPARENCY STEPS
As part of an effort to provide more insight on its thinking to financial markets and the public, the Fed later on Wednesday will begin publishing individual policymakers’ projections for the appropriate path of the benchmark federal funds rate. That release is scheduled for 2 p.m. (1900 GMT)
The central bank appeared to meet with some immediate success in what many analysts saw as a bid to push long-term interest rates lower by delaying the date of the eventual first rate hike.
In response to the deepest recession in generations, the Fed slashed the overnight federal funds rate to near zero in December 2008. It has also more than tripled the size of its balance sheet to around US$2.9-trillion through two separate bond purchase programs.
The policy is credited with having prevented an even more devastating downturn, but it has been insufficient to bring unemployment down to levels considered normal during good economic times.
In December, the U.S. jobless rate stood at 8.5%, and some 13 million Americans were still actively looking for work but could not find it.
While forecasters expect the U.S. economy grew at a 3% annual rate in the last three months of 2011, they look for growth of just around 2% this year.
Fed officials appear likely to bide their time in determining whether more monetary stimulus is needed. Many economists expect they will eventually decide on another spurt of Fed bond buying – probably one focused on mortgage debt.
There is a possibility officials will announce an explicit inflation target later on Wednesday, perhaps a hard marker of 2% or a range of 2% or a bit below. The Fed has been debating a statement on its long-run goals, but whether one will be released is unclear.
Analysts said the Fed’s shift in communications will put an even greater emphasis on a post-meeting news conference by Fed Chairman Ben Bernanke set for 2:15 p.m. (1915 GMT).
“The chairman is likely to remain non-committal to any additional policy easing, but he is likely to reinforce the Fed’s commitment to ’review the size and composition of its securities holdings’ and be ’prepared to adjust those holdings as appropriate,”’ said Millan Mulraine, senior macro strategist at TD Securities
Historic Statistics
TORONTO Sales and Average Price
Year Sales Average Sale Price
1966 13,428 $21,360
1967 12,432 $24,078
1968 12,245 $26,732
1969 12,493 $28,929
1970 10,498 $29,429
1971 13,085 $30,426
1972 14,613 $32,513
1973 16,335 $40,605
1974 17,318 $52,806
1975 22,020 $57,581
1976 19,025 $61,389
1977 20,512 $64,559
1978 21,184 $67,333
1979 23,466 $70,830
1980 26,017 $75,694
1981 29,625 $90,203
1982 25,336 $95,496
1983 30,046 $101,626
1984 31,905 $102,318
1985 45,509 $109,094
1986 52,919 $138,925
1987 43,475 $189,105
1988 49,381 $229,635
1989 38,960 $273,698
1990 26,779 $255,020
1991 38,144 $234,313
1992 41,703 $214,971
1993 38,990 $206,490
1994 44,237 $208,921
1995 39,273 $203,028
1996 55,779 $198,150
1997 58,014 $211,307
1998 55,344 $216,815
1999 58,957 $228,372
2000 58,343 $243,255
2001 67,612 $251,508
2002 74,759 $275,231
2003 78,898 $293,067
2004 83,501 $315,231
2005 84,145 $335,907
2006 83,084 $351,941
2007 93,193 $376,236
2008 74,552 $379,347
2009 87,308 $395,460
2010 85,845 $431,276
2011 89,347 $465,412
Three things to look for in the BoC rate decision
Jan 16, 2012 – 10:35 AM ET | Last Updated: Jan 16, 2012 10:41 AM ET
Bank of Canada governor Mark Carney.
Economists will be paying close attention to the Bank of Canada’s interest rate announcement Tuesday, but not because they’re looking for a rate hike.
The main focal point will be changes to the bank’s growth and inflation outlook, as well as the balance of risks. Below we outline three things economists will be looking for during the bank’s announcement.
Dovish or hawkish?
As far as the overnight lending rate, which is currently at 1%, the likelihood of a surprise hike (or cut) on Tuesday is nearly nil, said Avery Shenfeld, chief economist with CIBC Economics.
But Tuesday’s announcement will likely bring a change of tone, he added.
“Given developments since the prior issue, Governor Carney’s team has no choice but to alter its message and, in the process, sound just a shade less dovish,” Mr. Shenfeld said.
Diana Petramala, economist at Toronto-Dominion Bank, expects the language to signal that the bank will keep rates unchanged for the rest of the year.
“The Bank of Canada is also unlikely to cut rates with domestic demand accelerating and with inflation at the Bank of Canada’s 2.0% target,” she wrote in a recent note. “Rather, the Bank of Canada is likely stay the course through 2012.”
Economy and risks :
The past year has seen the Bank of Canada note the ongoing risks that the eurozone crisis and a tepid U.S. recovery pose to Canada. Economists will be dissecting its latest language to see whether the bank has spotted any silver lining, or whether it continues to maintain a gloomier outlook.
“We expect greater consternation with respect to Europe, Asia, and the United States as well as continued concern about domestic households,” economists at U.S.-based Citigroup said.
That will also impact the country’s businesses, Citi economists said.
“The bank probably will also note modest tightening in credit conditions for firms and softening in sales expectations.”
Inflation:
Economists don’t expect the Bank of Canada to signal a warning on inflation, despite economic pressures weighing on all sides this year.
“The bank probably will indicate that risks to the inflation outlook, though elevated and myriad, remain roughly balanced,” economists at Citi said.
Inflation hit 2.9% in November, the most recent data from Statistics Canada showed, although those levels are still within the 1-3% target the Bank of Canada maintains. Food and gas prices were the biggest factors in inflation growth.
Citi does foresee some positive inflationary effects for the economy, however. With geopolitical risks in Asia and the Middle East, in particular Iran, higher oil prices could conspire to boost some aspects of the Canadian economy this year, Citi economists said.
Mortgage rates dropping due to cheap bonds
BMO, TD lower some fixed rate offerings to 2.99%
Jan 13, 2012 3:26 PM ET
People view properties advertised for sale in the window of a real estate agency in 2009. Low borrowing costs for banks are translating into falling mortgage rates.
5 reasons why a fixed-rate mortgage could be your best bet
Are record-low mortgage rates tempting you to buy?
Mortgage advice: A strong international demand for bonds from Canada's biggest banks is trickling through the system and pushing mortgage rates to record lows at the consumer level.
The Bank of Montreal moved its five-year fixed mortgage rate to 2.99 per cent late Thursday — the lowest posted rate from a major bank in Canadian history. BMO announced the rate cut late on Thursday and TD followed suit by lowering their four-year fixed rate to 2.99 per cent on Friday afternoon.
Fixed rate: A fixed-rate mortgage features an interest rate that is fixed for a specific period of time, such as five years. During this period, also known as the term, the mortgage interest rate will not change even if prevailing interest rates do. The penalty for breaking a fixed-rate mortgage before the end of the term can be substantial – especially if the difference between your mortgage’s interest rate and current rates is large and there are several years remaining in the mortgage term.
Variable rate: A variable-rate mortgage features an interest rate that floats with any change in the prime interest rate. Depending on the lender, the mortgage payment may stay the same even if the prime rate changes, but the actual interest charged will change. So if the prime rate rises, less of the payment will go to the principal and more to interest. Most variable-rate mortgages allow borrowers to switch to a fixed-rate mortgage at any time. The penalty to break a variable-rate mortgage is usually three months interest.
BMO's offer, which ends Jan. 25, states that lump sum payments are limited to 10 per cent of the principal each year. The mortgage is also based on a 25-year amortization period. TD's offer is open until Feb. 29, 2012. It's also for a four-year term, much less common than the standard five-year.
The slow fall of Canada's mortgage lending rates: Other banks are expected to follow suit. On Wednesday, Toronto-Dominion Bank reduced its posted six-year rate 132 basis points to 3.79 per cent and lowered the posted seven-year fixed rate 91 basis points to 3.99 per cent.
Access to capital: Borrowers can often negotiate a better rate from a bank based on their credit history, but the posted rate at a bank is seen as the benchmark for its mortgage offerings. The five-year rate is by far the most common term for a first-time homebuyer.
Lower mortgage rates are the results of a broader trend in which international bond investors are gobbling up Canadian offerings at record levels because they're generally perceived as being safer than bonds from other countries.
"It's not surprising given that mortgage rate declines have actually been lagging behind falling bond yields," Queens University real estate expert John Andrew said. "[It's] driven by global economic uncertainty." Earlier this month, BMO was able to sell $1.5 billion worth of five-year bonds at a rate of 2.544 per cent. Contrast that with the government of Italy, for example, which sold an offering of bonds with a 4.83 per cent yield on Friday.
Essentially, the bond market considers BMO a better bet than Italy. A lower yield is a sign investors have more confidence in that lender's ability to live up to the terms of the loan. "Right now Canada is a function of what's happening in the global environment," Mark Kerzner of The Mortgage Group said. "And mortgage consumers are able to benefit from the noise in the rest of the world." As Europe's debt crisis unfolds, investors are fleeing for safety. Canada is seen as a beacon in the financial world, so bond offerings from Canada's biggest lenders are in strong demand. Cheaper borrowing for the banks has in turn allowed them to seek new customers by cutting their consumer rates.
'Mortgage consumers are able to benefit from the noise in the rest of the world'—Mark Kerzner of The Mortgage Group: "There's a risk premium," said Nick Mitskopoulos, president of mortgage broker Verico Mortgage For Less in Toronto. "The three-to-five year money is cheaper [but] their short term costs have gone up." "Their cost of capital is going up for the short term, but not for the long term. "Mitskopoulos said other lenders will be hard-pressed to match BMO's rate, although most will likely lower their rates a bit to compete. At that level, he suggests, BMO might be at a break-even level and is hoping to make gains from new customers through lines of credit.
Fixed-rate mortgages are closely tied to what's happening in the bond market, as that's how the banks finance their lending. Variable rate mortgages are more closely linked to the Bank of Canada's rate.
While 2011 proved to be a rocky road in the economy, there is much to look forward to in 2012 in the housing market- according to Dave Liniger, Chairman and Co-Founder of RE/MAX.
Speaking about the recovery of the US housing market, Liniger says that the key to activity lies in the continuation of low interest rates.
“Interest rates will remain at or near historic lows and home prices will stabilize and start to rise by the end of the year,” said Liniger “There’s no question, the housing recovery will be slow and steady, but for many cities the turn-around is already happening.” “Informed and savvy consumers and investors recognize there’s great opportunity in this market and they are leading the way to recovery,”Liniger added.
Many believe that 2012 may the year of turnaround for the beleaguered US housing market, but Liniger draws on several factually based elements to make his predictions for the year to come.It has been stated by the Federal Reserve that homeowners can expect low interest rates to continue through the next few quarters. A move like that has been unprecedented, and provides a unique opportunity in the housing market.With interest rates low, of course, there will be more buying activity- which will in turn bring some life to housing prices that have remained depressed throughout the recession, and afterwards.He believes as well, that inventories will continue to rise, as foreclosures will continue to rise too.
There will be great buying opportunities on the market.He also sees the rate of homeowners fall, perhaps suggesting that those who may have been on the fringes of homeownership prior to the subprime crisis are now removed- and that those who continue to be homeowners have healthier financial situations, which contributes overall to economic health.With prices continuing to be low, there will likely be a continued interest from foreign property investors. Liniger puts 25% of purchases next year in the hands of investors. Canadians lead foreign property investment in many pockets of the country, in appealing areas like Arizona and Florida.Linger also thinks that 2012 will be the year that will see the resurgence of the real estate agent. In times of trouble, people need guidance and support that training and experience provides. He thinks that more homebuyers will be seeking this in the coming months.
Why Real Estate Investing Makes Sense
Statistics show that investing in real estate makes a lot of sense. More people have become millionaires owning real estate than any other investment. Many of us know someone who invested in real estate and have become wealthy. Real estate is one of the safest and most profitable means of creating wealth. Banks will even lend money for the purchase of real estate because they know it is one of the safest and most profitable investments available. Here is just some simple reasons why real estate makes sense.
1. Proven Track Record
If you look at the average real estate prices you will see a trend where real estate prices continue to go higher. If one examines real estate prices five years ago compared to today you will see that prices are much higher. The same can be said if one looks back 10, 15 and 20 years back, you will find real estate prices have always increased. Just look at the value of your own home. Most likely it has increased from when you last purchased the home. There is an old saying,” invest in real estate and wait, not wait to invest in real estate.” A smart investor once said, "do whatever it takes but buy one property a year and soon you will be wealthy". Real Estate has always been the greatest wealth-builder in history, unlike the volatile stock market where it’s difficult for the average person to make money. Also as the population continues to grow and more immigrants settle in our great country than the demand for real estate will only continue to grow and push real estate prices higher.
2. Ownership
Real Estate is a tangible asset and you control when to sell. Obviously the longer you keep your investment the great your profits.
3. Leveraging
With a small down payment you have the ability to own a property with little money down that carries. Leverage, plain and simple, is debt; it's using other people's money to buy, which actually allows you to use less of your own money to get more property. This is what is referred to as the “Power of Leveraging”.
4. Capital Appreciation
Appreciation is the increase in value of a property over time due to inflation, supply and demand, capital improvements and other factors. When rents or occupancy rates increase it translates into higher property values. Occasionally we have hot real estate markets which further push real estate prices higher.
5. Mortgage Reduction
While you are receiving rent each month from your tenant you are actually building equity as your mortgage is being paid down. Over time your cash flow is increasing because your rent is increasing but your mortgage is being paid down.
6. Good Overall Returns
The power of Real Estate investing provides investors with stable rents, increased property values, and tax savings.
7. Predictable Revenue
In the long run the cash flow from the real estate investment provides consistent income during our retirement years.
8. Operating Capital
Real Estate provides monthly cash flow to give the investment the ability to withstand economic downturns or temporary shortfalls.
9. Refinancing Opportunities
The power of refinancing allows real estate investors the ability to borrow against the equity in their properties to purchase additional properties. This simple strategy has made many average people become millionaires.
10. Tax Efficiency
Owning real estate has many tax advantages. Investors should speak to their own accountants to determine the best tax strategy for their particular situation. Real Estate is treated more favorable than other investments and taxes are deferred until property is sold.
11. Diversification
Real Estate is a great way to diversify and you still have security, liquidity, and long term appreciation. Which are all the basics of good investing?
12. Efficient & Synergistic
Investing with Invest@Ease provides investors with cost savings and efficiency which is usually unattainable to individual investors if they went at it alone.
13. Flexibility
With Invest@Ease investors can start at their own comfort level, and buy additional investments as they become more comfortable.
14. Bottom Line
Real Estate has a great track record of providing cash flow, tax advantages and appreciation over the long term.
Ford will struggle for votes on land transfer tax
Published On Thu Dec 15 2011
Mayor Rob Ford says the tax could go down by 25 per cent.
Mayor Rob Ford now says the land transfer tax will be reduced next year, perhaps by 25 per cent. But he may not have the votes to fulfill the new pledge.
Several centrist swing voters, such as Councillor Josh Matlow, and council’s left-leaning bloc are vehemently opposed. Even some of Ford’s staunch allies are reluctant to endorse a proposal that would require the city to relinquish tens of millions in revenue.
“My advice to the mayor has been, rather than eliminating a portion of the land transfer tax, direct a portion of it towards capital, building the city — building subways or dealing with our backlog of road repairs or parks and recreation facilities,” said right-leaning Councillor Peter Milczyn, a member of Ford’s executive committee.
Ford’s latest comments on the tax were the most specific of his mayoral tenure. During his campaign, Ford promised to repeal it in less than a year. As election day approached, he said he might have to wait until 2012. He has hedged further as mayor, promising to eliminate it by the end of his term.
In a Thursday interview with CP24’s Stephen LeDrew, he said, “We’re going to start working on that this year.”
“I can’t say we’re gonna wipe it out this year, but it might be a quarter this year, a half next year, or — you know, but we’re gonna do it piece by piece. You’re gonna see a portion of the land transfer tax, I don’t know how much right now, be gone by the end of next year,” Ford said.
The tax, imposed in 2008, adds $5,351 to the cost of a $481,305 home, the city average. A 25 per cent cut would save the buyer of such a home $1,338. But it would also cost the city about $75 million: the tax is expected to generate about $300 million in 2011.
Matlow called Ford’s suggestion “fiscally irresponsible,” saying it would necessitate painful cuts to valued services. Left-leaning Councillor Gord Perks noted that Ford has insisted all year that the city is in dire financial shape.
“On Mondays, Tuesdays and Wednesdays he tells us we’re broke. On Thursdays and Fridays he tells us to cut our income. He doesn’t know how to govern,” Perks said.
In the interview, Ford said he believed work on a Sheppard subway extension could begin rapidly. “We're gonna get shovels in the ground, hopefully this year or next year, on Sheppard,” he said.
That timeline, however, appears extremely improbable. A preliminary business plan, originally expected by Christmas, has not yet been completed because of a lack of money. Ford’s point man on the project, Gordon Chong, said Tuesday that it would take a year, and between $5 million and $10 million, just to do the work necessary to craft a complete business plan.
Ford’s critics say the $4.7 billion Sheppard extension will never be built at all. While Ford once claimed that the private sector would cover its cost, Chong said companies would only pay for 10 to 30 per cent; governments would have to contribute at least $3.3 billion.
LeDrew also asked Ford whether he would attend any Pride events in 2012. Ford, who controversially skipped this year’s Pride parade to take part in an annual family weekend at a Muskoka cottage, declined to commit even when LeDrew asked whether he would attend events that did not conflict with family obligations.
“Everything depends on my schedule,” Ford said. “Like I said, I get 30, 40 invitations a night. If I can make it, I’ll make it. But I can’t commit to saying what I’ll do tomorrow or even the next day, so going six months down the line? I don’t want to commit to anything right now.”
Toronto house prices hit new record
The Toronto housing market slipped back into sellers’ territory in November, helping propel prices even higher to a record average of $481,305.
That’s a 2.1 per cent increase from October and, when adjusted for seasonal fluctuations, almost 10 per cent more than the average GTA home was worth a year ago, according to figures released Thursday by the Canadian Real Estate Association.
In fact, November sales across Canada were 7 per cent above the 10-year average for the month, resulting in the fourth highest level of sales on record for what’s typically the slow season, CREA noted.
While no one is uttering the dreaded B-word — bubble — as did Britain’s venerable magazine The Economist when it recently warned Canada’s housing market may be 25 per cent overvalued, the warning is clearly of concern among the country’s housing experts.
“With interest rates expected to remain low for longer, the housing sector will no doubt be closely watched for signs of excess,” say CREA’s chief economist Gregory Klump.
“That said, current trends for resale housing and new home construction suggest that tightened mortgage regulations are working as intended and fostering economic stability in Canada.”
A record November of sales in Halifax-Dartmouth, up a seasonally adjusted 34.7 per cent, helped offset a 10.5 per cent decline in sales in Toronto where 7,773 homes changed homes.
New listings across the GTA were down 4.4 in November while prices climbed by 9.7 per cent.
Despite economic turmoil in the rest of the world, Canadians continue to see real estate as a sure thing: A total of 432,048 homes have traded hands across Canada between January and the end of November, up 2.1 per cent from the same period last year, CREA says.
Canadian banks shine amid darkening clouds
Dec 1, 2011 – 5:50 PM ET
The headquarters of Canada's largest banks are seen in downtown Toronto.
TORONTO • The likelihood of a eurozone collapse is growing by the day and sending shock waves through the global economy, but Canadian banks continue to power ahead, mostly unaffected by the gathering storm clouds.
Toronto-Dominion Bank and Canadian Imperial Bank of Commerce kicked off fourth-quarter earnings season Thursday with strong performance from most of their core operations driving double-digit earnings growth, well ahead of analysts expectations.
TD, the second-biggest bank by assets, posted a profit of $1.57-billion, or $1.69 a share, up 58% from last year as it benefited from solid loan growth in domestic personal and commercial banking as well as stronger capital markets results.
CIBC had said net income jumped 59% to $794-million, or $1.89 a share. The bank was boosted by strong capital markets revenues and higher loan growth at the personal and commercial lending operation.
“I think over the last several months people have gotten pretty negative about banks in general, but the results [of TD and CIBC] were pretty good,” said Paul Harris, who helps manage about $250-million at Avenue Investment Management in Toronto. “We do live in a global world, you have share prices at banks in Europe and the U.S. collapsing, but I think TD and CIBC’s numbers show that things are ok in this country. The loan business is actually not that bad and you’re seeing a good business here on the capital markets side.”
Canadian banks have minimal direct exposure to European sovereign bonds at the centre of the turmoil, however they are exposed to counterparties and corporate clients, and analysts say that’s where the concern lies.
But unlike the United States and Europe, the Canadian economy remains relatively healthy and analysts say that’s the main reason the banks continue to do well.
TD’s domestic lending business had a profit of $905-million, up 17% from the same period last year, driven by growth in mortgages, auto finance and business loans.
Meanwhile, the net interest margin — the difference between what it pays for funding and the interest it charges on loans — declined to 2.71% down from 2.91% last year.
It was a similar story at CIBC, where earnings grew to $580-million, up $75-million as higher loan volumes offset lower net interest margins.
In recent years the Canadian banks have been competing intensely for market share in the mortgage lending business, which according to critics has contributed to the run-up in real estate prices across the country and record household debt levels.
But now many banks including TD and CIBC are cranking back on consumer lending, concerned about the impact of a potential downturn in the economy. Both lenders said they are taking steps that will result in slower consumer loan growth.
TD’s capital markets operation had a profit of $288-million for the quarter, up 203% on the back of stronger performance in equities, foreign exchange and investment banking.
“While the outlook in a number of key international markets remains concerning, we will continue to meet the investment, liquidity and funding requirements of our franchise clients,” said Bob Dorrance, head of wholesale banking.
CIBC’s capital markets business had a fourth quarter profit of $172-million, compared to a loss of $56-million last year as higher revenue from merchant banking and foreign exchange trading offset lower revenue from new equity issues.
What you need to know about Canada’s booming housing market
Along with data on strong sales activity in October, the Canadian Real Estate Association released an upwardly revised 2011 national forecast for resale units on Tuesday.
Nov 15, 2011 – 10:58 AM ET | Last Updated: Nov 15, 2011 11:20 AM ET
With sales of existing homes in Canada rising in October to the highest level since January, the Canadian Real Estate Association boosted its forecast for resale activity for 2011.
The industry group released data on October sales activity as well as a revised forecast for the year on Tuesday.
National sales of existing homes increased 1.2% from the previous month, building on a gain of 2.5% in September. Price gains however cooled to 5.5%, the smallest gains since January.
A total of 397,561 resale units have traded hands so far this year, CREA said, up 1.8% from levels in the first 10 months of 2010.
Here’s what you need to know about the booming Canadian housing market:
Ontario leads the way
Third-quarter sales activity in the province was stronger than forecast, while the rest of the country came in broadly in line with expectations, the CREA said.
It was the strength of activity in Ontario that prompted the CREA to boost its annual forecast for 2011 to 1.4%, up from 0.9%.
The industry group now predicts national sales of 453,300 for the year, compared with 446,915 in 2010.
198,000 of 2011′s residential sales are expected to come from Ontario, with Quebec and British Columbia expected to have sales of 77,000 and 76,600, respectively.
Home prices are still up but showing signs of cooling down
CREA kept its national average home price forecast for the year little changed at $362,700. That’s an annual increase of 7.0% compared with $339,049 in 2010.
Prices are expected to remain flat next year, with the CREA forecasting $362,700 again for 2012.
The industry group pointed to moderating prices in Vancouver in the third quarter compared with the first half of the year, with sales of multi-million dollar properties in that city returning to “more normal levels.”
CREA said the national average price in October rose 5.5% from a year earlier to just under $362,899, the smallest increase since January.
The balance of supply and demand is tight but the market remains on solid footing
October’s monthly rise in sales resulted in a slightly tighter balance of supply and demand, but the national housing market remains “firmly rooted in balanced territory,” the CREA said.
The national sales-to-new listings ratio, a measure of market balance, stood at 53.4% in October, up from 52.8% in September.
Low interest rates continue to bolster the market
CREA also revised its forecast for 2012 upward slightly, predicting a smaller easing than previously expected of 0.5% to 451,200 units.
The uptick is largely due to expectations that Canada’s interest rates will stay low until well into 2012, CREA said.
But domestic and global economic headwinds could put pressure on the sector
“A number of factors will keep Canada’s housing market in check as interest rates remain low,” said Gregory Klump, CREA’s chief economist.
He pointed to tightened mortgage regulations, high household debt and slower economic and job growth as possible headwinds.
However, Mr. Klump noted that persistent news of global economic uncertainty has put only minor dents in consumer confidence to date.
“How confidence evolves depends on how global turmoil plays out over the coming months,” he said.
Bank of Canada could slash interest rates in a big way next year
Bank of Canada Governor Mark Carney.
Nov 9, 2011 – 4:10 PM ET | Last Updated: Nov 9, 2011 4:47 PM ET
As the nail biter in Europe continues this week, two economists are predicting the Bank of Canada will move to cut rates in a big way next year.
Sheryl King, an economist at Bank of America Merril Lynch, said in a note that the volatility hitting Europe and the risk of damage to the global economy means the Bank of Canada will move to cut rates from the current 1% to 0.25% by early next year.
“With the Eurozone sovereign debt and banking crisis showing no sign of containment, we think the Bank of Canada will cut rates back to the effective lower bound of 25 basis points early next year,” she said.
Also predicting a lower interest rate were economists at Capital Economics, who forecast a more mild cut of 50 basis points that they expected to occur in April or June. They also added that rates were likely to stay low for years from here on out.
“The Bank might communicate that its policy rate will remain at 0.50% for a lengthy period of time, conditional on its projected outlook for consumer price inflation,” David Madani, Canada economist at Capital Economics said. “Even if we are wrong, the broader message remains that interest rates will remain unusually low for a very long time.”
Most economists, however, are still predicting that the Bank of Canada will move to raise rates rather than lower them. In a recent Reuters survey of 40 economists last month, the consensus was that the Bank of Canada would move to raise rates in the third quarter of 2012.
Canada became one of the first advanced economies to raise its benchmark interest rates following the recession. The Bank of Canada last raised its rate in September 2010, moving it up by 25 basis points to 1%. It has since held the rate unchanged at 1%.
As supply outstrips demand in British Columbia, home prices will decline next year, according to the provincial real estate association.
But by the end of 2011, the average residential price in the province will already be 11.8% higher than a year ago, up to $564,600 this year, according to the British Columbia Real Estate Association (BCREA), which released its fourth quarter housing forecast today.
The association predicts the price will then drop 2.5% in 2012, down to $550,500.
“Moderate consumer demand combined with larger inventories of homes for sale means B.C. housing markets will experience little upward pressure on home prices through 2012,” said BCREA Chief Economist Cameron Muir.
In Vancouver, average home prices have risen annually more than 10% six times in the past seven years. The only exception was 2009, when prices dipped less than 1%. But in 2012, Greater Vancouver will experience its largest drop in more than a decade, slipping 3.5% from $782,000 to $755,000, according to the BCREA’s prediction.
But that decline would come from detached homes, as apartments will gain 1.1% in price in 2012 to reach $462,000, said the report.
An exception to the BC real estate gains in recent years has been Kootenay. The average home price there has declined for two straight years, and the trend will continue for another two years in 2011 and 2012, said the report, noting a deteriorated economic outlook and decline in investor activity. The average Kootenay home price in 2011 will be $270,000, said the report, down 1.9% from 2010.
Victoria is predicted to have the biggest rebound in 2012. Unit sales were down 19.5% in 2010, and will be down 7.2% by the end of this year. But they will pick up 8.3% in 2012 to 6,200, slightly more than the 6,169 in 2010. Prices in Victoria will remain below the $504,561 average in 2010, however, slipping to $499,000 this year, then up to $501,000 in 2012.
“The Victoria market is being impacted by slower growth in employment, reduced interprovincial migration flows and continuing weakness in US tourism,” said the report.
Greeks pull savings from banks as crisis deepens
Nov 9, 2011 – 12:56 PM ET
By George Georgiopoulos and Angeliki Koutantou
ATHENS – Fearful Greeks have withdrawn savings from banks over the past week because of a deepening political crisis and fear of an exit from the euro, banking sources said on Wednesday.
Greeks withdrew as much as 5 billion euros — nearly 3% of total deposits — after outgoing Prime Minister George Papandreou’s shock call last week for a referendum on a eurozone bailout, said one banker, who declined to be named.
“Many people withdrew their money from banks on Thursday and Friday and money couriers had a hard time supplying banks with cash to satisfy the emergency demand,” said another banking source, who declined to be named.
Greece’s central bank governor made a rare public appeal for a new government to take charge and end the dithering and has warned that Greece’s eurozone membership is at stake.
“The (political) uncertainty is hurting the economy and the banking system,” Bank of Greece governor George Provopoulos told Reuters. “There must be a strong government that will work hard to ensure the country’s future in the eurozone.”
European leaders have warned Athens that the country must show it can get its act together to secure bailout money before the government runs out of money in December.
Resigned to political bickering and a growing sense of chaos, Greeks headed to the banks in droves.
Many fear the Greek bank system could collapse and a sharp loss in the value of their deposits if Greece leaves the euro and is forced to adopt a new, weaker currency.
“We got to the point where customers ordered amounts of up to 600,000 to 700,000 euros in cash to take home — unbelievable,” the first banker said. “This strains the system.”
He said his bank had resorted to offering interest rates of as much as 7% on term deposits to convince Greeks to keep their money in their accounts.
One bank clerk was overheard saying to a co-worker at an Athens branch of National Bank, the country’s biggest bank: “A lot of money was withdrawn on Friday.”
Deposits have fallen more than 21% since January 2010, when Greece’s debt crisis shifted into a higher gear, and the banks have become increasingly reliant on the European Central Bank for their liquidity needs.
Latest figures show banking deposits fell about 3% in September to 183.2 billion, and the first banker said an additional 8 billion euros are likely to have been withdrawn from the system in October.
The latest withdrawals were mainly from retail bank accounts after an initial wave of wealthy private banking clients took their money abroad last year, a Greek private banker said.
Toronto housing market sizzling again
Nov 3, 2011 – 12:36 PM ET
October existing home sales in the greater Toronto area market soared 17.5% from a year ago, the Toronto Real Estate Board says.
The Toronto market numbers have been credited with boosting the national average price at a time when the Vancouver market has slowed.
TREB said the average sale price in GTA reached $478,137 last month, an 8% increase from October 2010.
Jason Mercer, the board’s senior manager of market analysis, says “seller’s conditions” are in place throughout many parts of the GTA.
“Thanks to low interest rates, strong price growth has not substantially changed the positive affordability picture in the city of Toronto and surrounding places,” said Mr. Mercer.
Richard Silver, president of the board, noted the increase in listings has worked to boost sales and provide more product compared to what was available on the market in the spring and the summer.
As expected, the Bank of Canada held its target for the key lending rate at 1% Tuesday.
The prime rate, the basis for variable mortgage rates, is expected to remain at 3%. The key lending rate has remained at 1% for a little more than a year.
The Bank of Canada cited a weakened outlook for the Canadian economy since July, expected slowed growth through 2012, and softer core inflation than expected in making its decision to hold rates.
“Reflecting all these factors, the bank has decided to maintain the target for the overnight rate at 1%,” said press release from the Bank of Canada. “With the target interest rate near historic lows and the financial system functioning well, there is considerable monetary policy stimulus in Canada.”
The bank also lowered its growth forecast of Canada’s economy from 2.6% to 1.9% in 2012. It expected the economy to rebound in 2013 with a growth of 2.9%.
Leslie Preston, an economist with TD Economics, said the Bank of Canada is likely to leave interest rates unchanged until the first quarter of 2013, underscoring the fragility of the economy, and silencing any recent debate about rate cuts.
“All told, today’s statement confirms our view that given the downgraded global growth outlook, and greater economic slack in the Canadian economy than previously expected, interest rates will need to remain accommodative for quite some time,” Preston said.
National real estate prices were up 6.5% in September compared to a year earlier, but the increase was the smallest year-over-year increase since January, according to a monthly report released this week by the Canadian Real Estate Association (CREA).
The average price in September reached $352,600, below record level heights reached earlier this year. The largest year-over-year gains were in Newfoundland and Labrador, up 14% to reach $262,481 in September. Regina was up 13.1% to an average home price of $272,295, while Vancouver, the most expensive market, was up 10.5% to reach $751,042.
All Canadian major markets showed annual price gains in September. Calgary gained the least, up 1.7% for an average of $493,522.
Sales activity was up 2.7% nationally in September compared to August, while actual sales were up 11% compared to a year ago. New listings were up in markets such as Toronto, Montreal, Ottawa, Oakville and Vancouver, while drops were seen in Edmonton and the Fraser Valley.
The fact Canada’s market continues to show price growth and strong sales contrasts to what’s being seen elsewhere around the world, said CREA President Gary Morse.
“The Canadian housing market remains a bright spot against a backdrop of mixed headline news about the global economy,” he said. “Low mortgage rates continue to draw buyers to the housing market, while recently tightened mortgage regulations are working as intended.”
Sonya Gulati, an economist with TD Economics, said the factors of tighter lending rules, economic uncertainty, and growing saturation of first-time homebuyer activity has been balanced by the low mortgage rates throughout the year.
“Going forward, we anticipate a tug-of-war action to take hold in the Canadian real estate market between low interest and mortgage rates, and only most economic, income and employment growth,” said Gulati. “With bot
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