June 2012

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This article appeared in the Financial Post on June 21st, 2012.

OTTAWA — Without the tool of interest rates to temper the housing craze and with the threat of Europe still overhanging the sector, Ottawa had to use other means to slow things down and, at same time, lessen consumers’ exposure to the market.

For that, it chose once again to tighten the screws on mortgage lending, a move that surprised many, but one that Canada’s finance minister characterizes as the government’s role in providing a “prophylactic function” — helping average Canadians save themselves from themselves.

Jim Flaherty, who had insisted it was up to commercial banks to take the lead on mortgage lending, on Thursday took that action himself ­— reducing the amortization period for government-backed mortgages and limiting home equity loans, among other measures.

“The government doesn’t necessarily need to be, at the end of the day, in the mortgage-insurance business,” Mr. Flaherty told reporters. “But we are in the business, so we have to ensure that the exposure to the taxpayers of Canada is reasonable.”

Mr. Flaherty said he wanted to “avoid the kind of issues that have happened in other countries in recent years. And I’m satisfied we are and our market is OK.

“But I think there’s a prophylactic function for government on this with respect to insured mortgages and it’s our job to try to be ahead of things and act — and act in a measured way, listening to the market. And I have been listening to the market and, quite frankly, I don’t like what I hear, particularly in the condo market.”

Thursday’s announcement marked the third time in four years that Ottawa has gone this route to head off over-zealous borrowing by homeowners, many of whom might not be able to carry their debt load.

The new rules, which take effect July 9, will see the maximum amortization period for government-insured mortgages fall to 25 years from 30 years. The limit for borrowing against the value of a home drops to 80% from 85%, while the maximum gross-debt ratio is fixed at 39% and the total debt-service ratio will be 44%.

The biggest surprise, however, was a new rule to limit government-backed mortgages to homes purchased for less than $1-million.

“At long last, the Canadian government is coming to the realization that the ball was in its camp all along,” said Louis Gagnon, a finance professor Queen’s University.

Mr. Flaherty has been “reluctant over the past several weeks to further tighten these rules, arguing it was up to the banks to stop people at the gate,” he said.

“In fact, what we’re dealing with is a systemic issue. It’s really in the government’s hands,” Mr. Gagnon said. “It’s always going to be important for the government to be pro-active on this front.”

Mr. Gagnon added: “These new rules are long over due. We know the pace of growth of consumer loans is not growing, it has actually come down a bit, but not on the mortgage side.”

The Bank of Canada has reluctantly been waiting on the sidelines — even as household debt ballooned — waiting to see how the European fiscal crisis plays out, and what impact that will have on the Canadian economy and that of its struggling neighbour to the south.

The central bank’s trendsetting lending rate, its lever for guiding monetary policy, has been stuck at a near-record low of 1% since September 2010.

The initial intention was to get consumers and businesses spending again as Canada edged out of recession. That indeed worked — too well, as it turns out.

Debt-to-income ratio of Canadian households has reached a record high of 152%, once again raising alarm bells that consumers were getting in way over their heads.

Just last week, the Bank of Canada warned consumers to brace for a possible shock wave from a worst-case scenario — a European banking collapse followed a housing crash and a jump in unemployment.

For his part, Bank of Canada governor Mark Carney also welcomed the tighter mortgage-lending rules, calling them “prudent and timely measures” in a speech in Halifax on Thursday.

Mr. Carney said the measures “support the long-term stability” of the housing market and “mitigate the risk of financial excesses.”

And while Canada’s “favourable economic performance” has relied on strong household spending, growth cannot “depend indefinitely on debt-fuelled household expenditures, particularly in an environment of modest income growth.”

Speaking later to reporters, Mr. Carney once again stressed the “No. 1 domestic risk to the Canadian economy is the potential for household finances to evolve in an unsustainable fashion.”

“These measures reduce the No. 1 domestic risk.”

Aberdeen Kamloops Home For SaleGreat family home in a cul-de-sac in Aberdeen. Beautiful city and valley views from the kitchen and living room. 3 bedrooms on the main floor. Maple hard wood floors in the living room with a nice gas fire place. the basement features arched entries to kitchen and living room, central a/c, B/I vac. The kitchen leads to a partially covered deck with a gas hook-up, a low maintenance fenced yard that backs to a slope offering privacy and a wooden garden shed. 2 car garage with lots of storage.

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Sahali Townhouse for SaleCentrally located townhouse. Close to shopping, recreation, transportation, and schools. Is within walking distance of TRU. Nice open design with lots of natural light. Kitchen and dining room area are open to living room below with high ceilings. Main floor lining room has French doors leading to the deck. 2 bedroom and 2 full 4 pc. bathrooms. There is potential to put a 3rd bed/den (where weight room is located). 1 covered parking spot (garage) and 2 outside parking spots. This is an end unit and is located in a quiet area of the complex. Pets and rentals are allowed. All appliances a/c unit and window coverings are included. Flexible possession and easy to show.

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This article appeared on the CBC on June 18th, 2012.

Kamloops Water Front Homes PropertyLower prices are powering a large increase in cottage sales across the country, one of Canada’s largest real estate companies said in a report Monday.

Re/Max said sales of recreational properties such as cottages are higher in 70 per cent of 33 markets the agency tracks.

Forty-nine per cent of markets showing “downward trending” in prices, and 33 per cent showing no change. Only 19 per cent of markets that Re/Max tracks showed higher prices this year compared to last.

“Affordability has provided some serious stimulus,” Re/Max Atlantic region vice-president Michael Polzler said.

Activity is especially strong on the low end of the market, the report said, with many markets showing inventory shortages for properties priced at $400,000 and under.

“While buyers are still cautious, they’re motivated,” Re/Max’s Western Canadian vice-president Elton Ash said. “Current market conditions have placed them firmly in the driver’s seat.”

The mild winter weather brought purchasers out earlier in the year in many parts of the country, Re/Max said.

The recreational property market is also witnessing a demographic shift. Sales among baby boomers are much weaker compared to previous years, in part because lower prices for vacation homes in the southern U.S. are enticing some older Canadians to become snowbirds.

But younger families and first-time buyers have stepped in to fill the void in most markets, Re/Max’s report says.

The company singled out several markets as being “value markets” at the moment. They include:

Atlantic Canada, the Laurentians and Eastern Townships in Quebec,
More than half of Ontario — including the iconic Muskoka area
Lake Winnipeg, Canmore, Harrison Lake and Comox Valley/Mt. Washington in Western Canada.

“Opportunity does exist,” Ash said. “Canadians love a good deal, and there’s no question that there are still some to be had in recreational property markets across the country.”

This article appeared on the Vancouver Sun on June 19th, 2012 and was written by Jeff Lee.

Tobiano Real Estate PropertyOne of Canada’s best golf courses, the Tobiano Golf Course on Kamloops Lake, has been put up for court-ordered sale for $5.5 million.

The Thomas McBroom-designed 18-hole course, ranked as the sixth best public course in Canada and No. 16 in SCOREGolf’s Top 100 courses in Canada, was seized by the Business Development Bank of Canada last year after developer Mike Grenier was ousted by two banks that placed his overall Tobiano Resort complex into receivership.

The adjacent resort continues to be administered by a receiver acting for BMO. But in May B.C. Supreme Court allowed the Crown-owned BDBC to proceed with a sale of the golf course because it had specific guarantees tied to the golf course lands. .

Vancouver-based NAI Commercial Real Estate, which just listed the golf course on Multiple Listing Services, says the 231-acre golf course includes a clubhouse, pro shop and licensed 120-seat restaurant, course maintenance facilities, paved roads and parking.

© Copyright (c) The Vancouver Sun

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