June 3, 2014

It’s Not Something That’s Going To Happen

News 1130 reports from Canada. “Canadian Association of Accredited Mortgage (CAAMP) Professionals president Jim Murphy says housing prices in Vancouver, Calgary and Toronto have jumped 8.2 per cent over the last year, yet 55 per cent of homes bought across Canada were by people buying for the first time. Murphy says that’s largely due to record-low mortgage rates, which should continue for the short term. ‘We saw one of the major banks… for example, this week announcing a five-year fixed for less than three per cent. These are unheard of numbers.’”

“‘I don’t think any economist is predicting that rates are going to rise any time soon,’ he tells us. But Murphy notes nationally, there are storm clouds on the horizon, with the report stating housing starts will have dropped 20 per cent by the end of next year compared with 2011 and 2012.”

The Regina Leader Post. “The federal housing agency, Canada Mortgage & Housing Corporation (CMHC) recently announced that it is launching a study to better understand how much the Bank of Mom and Dad is backing the purchases of young home buyers. Ted Tsiakopoulos, a regional CMHC economist, stated, ‘It may explain some of the gap between what’s fair market value and what people are paying, especially in the Toronto market where bidding wars and fierce competition continue to drive up house prices,’ Tsiakopoulos went on to say, ‘It’s hard to get at, but it could explain a lot on the overvaluation front.’”

“Traditionally, economists have tended to focus on house prices compared to income, prices compared to rents, and the impact of low interest rates to better understand the ups and downs of the real estate market. According to CIBC deputy chief economist Benjamin Tal, ‘The data is critical. It could be a market driver we’re not aware of. This transfer of wealth may be generating demand that otherwise wouldn’t be there.’”

The Canadian Press. “About half of Canadian homeowners recently polled believe they’ll still be in debt by the time they retire. Doug Conick, president and chief executive of Manulife Bank of Canada, says those who are not confident that they’ll be able to pay off all their debts by the time they retire should put a plan in place sooner rather than later. ‘Debt is a tool that Canadians can use to improve their standard of living and purchase assets over the long-term,’ said Conick. ‘Still, people need a strategy to manage debt.’”

The Star Phoenix. “Low interest rates and favourable economic circumstances are keeping substantial numbers of first-time home buyers entering the Canadian housing market. But the market is slowing in most of the country. ‘While the national market may look healthy, activity in the Greater Toronto Area (including Hamilton), the Greater Vancouver Regional District and the Calgary area is skewing the numbers high,’ said Will Dunning, CAAMP chief economist. ‘In the rest of Canada sales activity has weakened and house prices are flat, and even falling in some communities.’”

From Yahoo Canada. “Despite warnings of bubbles about to burst in Canada’s major real-estate markets, there’s another side to the story: in some parts of the country, prices are actually falling. Saskatchewan has been the hardest hit lately, according to the Canadian Real Estate Association’s MLS Home Price Index. Markets in other parts of the country have seen drops in home prices as well.”

“‘We have seen price increases only in major cities and not in smaller markets,’ says Oswald Jurock, real-estate investor. ‘In the Okanagan, the Koonetays, Vancouver Island, and the Sunshine Coast, there’s been between 20 and 30 per cent for last three years in price decline. It’s not something that’s going to happen; it’s already happening.’”

“Each market has unique reasons to explain decreases in index and prices, but in Regina, analysts say overzealous developers take some blame: they’ve built too much, too fast. Jurock says it’s no surprise that some markets have cooled. ‘Markets have gone up relentlessly for a long period of time, and there always comes a time of equilibrium,’ he says.”

Daily Commercial News. “According to Canada Mortgage and Housing Corporation, total housing starts in the Saskatoon Census Metropolitan Area are forecast to moderate to 2,880 units in 2014 before declining further to 2,835 units in 2015. ‘With an elevated volume of complete and unabsorbed homes in inventory, local home builders will be reluctant to quicken the pace of housing starts this year. In addition, a moderating pace of employment growth and net migration will move housing starts lower this year and next,’ said Goodson Mwale, CMHC’s Senior Market Analyst for Saskatchewan.”

“‘Given that spec homes comprise more than 90 per cent of single-detached units in inventory, this will prompt a slower pace of starts this year and next,’ noted Mwale.”

The Province. “This summer the enormous flow of Chinese money into Vancouver real estate could quickly reverse with wealthy investors rushing to sell, according to the controversial analysis of an expert from Hong Kong. In a recent analysis, Ian Young noted that in March 2014, just weeks after the federal government announced cancellation of the Immigrant Investor Program (IIP), average prices for detached homes in Greater Vancouver dropped by a monthly record of 11 per cent from February 2014.”

“Young says the IIP was ‘the most popular scheme in the world for millionaire migrants’ from China to protect their wealth against fears of social and political upheaval at home. ‘The fear among Chinese realtors is that people will just liquidate their assets,’ Young said. ‘Last year one of the top real estate agents in the city, who is Chinese, told me when this program ends she won’t be selling homes in Vancouver anymore.’”

“Brent Toderian, Vancouver’s former top planner, says the city should be gathering data and ‘asking the right questions’ about real estate investment. ‘I have had (condo) developers say to me frequently that projects are as high as 90 per cent purchased by investors, but there is a disconnect with what (the city and developers) tell the public,’ Toderian said. ‘It’s a mistake to get fixated on whether the investment is foreign or not.’”

The Globe & Mail. “Montreal’s downtown is getting a big booster shot of new condominium development. Maybe too big a shot. Following the pattern in Toronto, Montreal is now a city with far more sellers than buyers for condo units. And the downtown could be reaching saturation levels. The latest statistics, from March, indicate there were 3,000 units under construction in the downtown, said Hélène Bégin, senior economist with Desjardins Economics.”

“The ratio of sellers to buyers in the area has reached 17:1 and condo prices stagnated in the first quarter, she said. ‘There are a lot of construction cranes. The downtown is the hot spot,’ she said.”

“Mathieu Collette, who heads a research team focused on the condo market at Altus Group, said downtown condos in Montreal tend to attract two demographic types: baby boomers, including empty nesters, and young professionals. It’s important to make the distinction between different zones in the downtown, said Mr. Collette. The eastern part is not as hot as the western sector, he said.”

“‘Some projects have been for sale for a long time and they have not attained the 60-per-cent threshold [generally viewed as the go-ahead to build]. They’re at risk of not being built,’ he said.”

Bits Bucket for June 3, 2014

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