January 21, 2016

Fear From The Seller’s Side And From The Buyer’s Side

Bloomberg reports on Canada. “In Canada, one of the first corners of the financial markets to start going haywire in the lead-up to 2008’s financial crisis is acting up again. The difference between a measure of the rate at which Canadian banks are willing to lend to each other and short-term instruments reflecting expectations for the Bank of Canada’s benchmark spiked to the widest in seven years. It suggests Canadian banks may find it harder to pass on the benefits of a central-bank rate cut with the country in the center of a global panic over slowing growth and collapsing oil prices, according to David Rosenberg, chief economist at Gluskin Sheff & Associates Inc.”

“‘The markets are telling you there could be some risk of financial contagion,’ he said. ‘And Canada certainly has a ‘For Sale’ sign on the front lawn.’”

From CBC News. “The Canadian Association of Petroleum Producers said in its most recent update that 40,000 jobs have been directly lost due to plummeting oil prices, and tens of thousands more have been affected indirectly by less money being spent in the wider economy. Fort McMurray’s once-hot housing market has also taken a hit. For sale signs dot residential streets and have become much more frequent — particularly in a new subdivision recently built in the north end of the city.”

“‘Everybody is complaining. Barber. Flooring guys. People that work on the sites. Everybody is complaining,’ said Nabil Abadi. Abadi installs flooring in homes, and when money is tight people don’t build new properties or invest in renovations, he said. ‘It is pretty scary right now,’ he said. ‘If it stays slow, I am packing up and leaving.’”

The Calgary Sun. “The buzzsaw of collapsing oil prices will shave 31,000 construction jobs in Alberta over the next three years, says a national industry advocate. In yet another hammer blow to Alberta’s wounded economy, 9,000 of those jobs are expected to come in the residential construction sector, said a report issued Monday by BuildForce Canada. A flock of construction cranes hovering over Calgary’s downtown and inner city are deceiving, said Executive Director Rosemary Sparks. Once those projects are completed, those construction workers are likely to pick up and join the exodus out of Alberta and may not return for some time, she added.”

“‘People coming in from other provinces are now not coming in as often,’ said Sparks. ‘You’re going to see that in housing starts.’”

From News Talk 650. “As signs for low and free rent speckle Saskatoon street corners, and the city remains a buyer’s market, small-time landlords are struggling to fill vacancies. Executive officer Chanda Lockhart blames unsold new homes being turned into rental properties. ‘There was a lot of house builds that went on in 2015, and those house builds have been flipped into renters because the builders were not able to sell them,’ she said. ‘General rule of thumb is 30 per cent of condos turn into rental stock, but it’s probably 50 or 60 per cent right now.’”

“Low prices and plenty of options is good news for the average renter, but bad news for small-time landlords. ‘When you’re talking about some of these smaller guys who maybe only have one to five houses, they usually don’t have a corporate name or signage,’ Lockhart said. ‘It’s very frustrating because a lot of them pay their mortgage with their rent payment; they’re not making an excess of money. So they’re having to pay that mortgage payment out of their pocket.’”

“A monthly rent of $17,000 wouldn’t fit most budgets, but the owner of a property management company that caters to high-end income earners says it does for some — and it’s getting cheaper. ‘The high-end rental market is still relatively active in terms of tenancies we are putting together for large homes and high-end condominiums,’ said Lisa Hamielec, who runs Citysearch rental network in Calgary. ‘However rents have dropped over the past six to 12 months in the order of about 30 to 35 per cent.’”

“David Bee leases properties with Citysearch and works with a lot of corporate relocations. He says numbers are down. ‘Anybody who’s going to rent a place for eight, nine, $10,000 a month either runs a company or owns a pretty significant company, and there’s less of those coming to town,’ Bee said.”

The Western Wheel. “It’s a buyer’s market moving into 2016, and sellers are urged to be realistic in a struggling economy. The Calgary Real Estate Board (CREB) released its annual forecast report on Jan. 13, which indicated sales in Okotoks declined by 27 per cent in 2015 over the previous year. It’s a common trend in the region, as sales in Calgary dropped 26 per cent. In Okotoks, this has resulted in a five-months’ supply of inventory in the housing market and a much slower real estate industry than previous years, according to Jacky van der Ven, a realtor with CIR Okotoks.”

“‘Some buyers are waiting for prices to come down more, but others are waiting because they’re worried about their jobs,’ she said. ‘They’re scared. There’s a lot of fear out there.’ However, she said the market is ‘not entirely doom and gloom.’”

“CREB predicts increased inventory and decreased activity throughout the Calgary region will decrease benchmark prices of single detached homes by 3.2 per cent as supply outweighs demand. Don Campbell, senior analyst with the Real Estate Investment Network, said this is the result of a real estate market riddled with fear. ‘Fear from the seller’s side, hence the increase in properties for sale, and fear from the buyer’s side thus limiting the number of sales,’ said Campbell. ‘This situation will get worse before it gets better.’”

“He said buyers are likely to remain on the sidelines through much of 2016, as they wait out the effects of oil prices and see what the provincial government does with the industry. Buyers began awaiting a market correction in 2015 while sellers held on to their expected prices, he said, and the skewed inventory level will impact the market in 2016. ‘We will see the fear increase and thus begin to see sellers making more dramatic cuts in their expected sell price,’ said Campbell. ‘The average sale price will move downwards more quickly than we witnessed in 2015.’”

Bits Bucket for January 21, 2016

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