Category: National Real Estate News

This article appeared on the Financial Post on October 14th, 2011 and was written by John Greenwood.

Canada’s banks, which emerged from the financial crisis mostly unscathed, stole the spotlight as they were recognized as the world’s strongest, but there’s a good argument to be made that our real estate market deserves some glory, too.

Consider: for the better part of a decade house prices have been on the rise — apart from a brief decline in early 2009 — in most major cities across the country. If you zoom in on certain regions like Calgary or, say, Ontario cities like Windsor that have been hit by troubles in the auto industry, the curve gets a bit bumpy, but on a national basis Canadian real estate looks pretty good. Compared to the rest of the world, it’s a bastion of stability.

The U.S. market is a basket case. Since 2006 prices have tumbled more than 30% across the country and even now distressed sales account for more than one-third of total transactions, according to Moody’s.

In Europe the numbers are even more dramatic. In Spain, prices almost doubled between 2000 and 2006 but over the past three years they’ve fallen as much as 25% in some regions. House prices in Ireland have fallen below the level they were at in 2003, according to Bloomberg. Meanwhile, the U.K. market has been treading water since 2010 with some economists calling for a steep decline as the troubled economy begins to bite.

The Canadian housing market “is like the fountain of youth,” said one analyst. Rising real estate values, he explained, have helped drive consumer spending and provided fuel for the home building industry, a major source of jobs. According to the CMHC, residential development represents about 20% of the domestic economy.

Importantly, residential mortgages are the biggest single asset on bank balance sheets. When the global meltdown that started in 2008 began to threaten the banks in this country, the federal government stepped in by buying up billions of dollars of mortgages from lenders while the CMHC boosted its securitization program. The move effectively moved the risk of default from the banks to the government, providing banks with incentive to increase mortgage lending. Which they did.

But by boosting the level of securitization the government provided a buffer between the housing market and the banks, allowing them to benefit from rising prices but at the same time protecting them from potential losses in the event of a correction.

The good news is that at least for the moment a correction does not appear to be in the cards.

“The housing market is quite healthy,” said Mathieu Laberge, deputy chief economist at the CMHC. “Despite the financial uncertainty in global markets, economic fundamentals remain supportive of the housing market in Canada.”

Indeed, according to Capital Economics, things are about to heat up again. Growth in housing investment “appears to have re-accelerated again in the third [quarter],” the research group said in a recent note, adding that overall residential investment could get a boost for at least one or two more quarters and possibly more.

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This article appeared on Reuters.com on October 5th, 2011 and was written by Andrea Hopkins.

* Low rates fuel Q3 price gains * Slowdown forecast in some regions * U.S.-style correction seen as unlikely

TORONTO, Oct 5 (Reuters) – Canadian house prices rose in the third quarter as very low interest rates supported consumer confidence even as signs of softening in some regions point to a broader slowdown in the months ahead.

The country’s leading real estate broker said on Wednesday the average price of a home in Canada increased between 5.7 percent and 7.8 percent from July through September compared with the same period the previous year, a deceptively big gain because the third quarter of 2010 had been weak.

“The strength in Canada’s national housing market conceals signs of predictable softening in some regions,” said Phil Soper, president and chief executive of Royal LePage Real Estate Services.

“The third quarter saw a return to a normal seasonal business cycle as price appreciation slowed in many areas — with some average values even receding — after the busy spring trading season.”

Soper said a broader slowdown is expected as the economy struggles to gain traction as global growth falters. Even so, he said, “fears of a U.S.-style correction are completely unfounded.”

The average price of a detached bungalow rose 7.8 percent in the third quarter to C$349,974 from a year earlier. Over the same period, the price of a standard two-storey home rose 7.7 per cent to C$388,218, while the price of a standard condominium rose 5.7 per cent to C$239,300.

“Canadian home owners have turned a deaf ear to the negative economic situation shaking housing markets in Europe and the United States,” Soper said.

“A resilient domestic economy coupled with the stimulative effect of ultra low interest rates has extended the post-recession bounce in house prices, but there is evidence of over-shooting in some markets.”

Royal LePage said prices climbed in Toronto across all three housing types in part because of a supply shortage, while Vancouver prices also rose again. Montreal, Ottawa and Winnipeg showed strong price gains as well, while both Calgary and Edmonton remained little changed for condominiums and notched small gains in house prices.

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This article appeared on the MontrealGazette.com and was written on September 27th, 2011 by John Greenwood.

Canada’s financial regulator is hiking its scrutiny of residential mortgages held by banks, a tacit acknowledgement of the heightened dangers around surging consumer debt.

The Office of the Superintendent of Financial Institutions is “stepping in to increase the monitoring” of home loans and lines of credit secured by real estate, said the head of the organization.

While recent moves by the federal government to tighten the rules around home loans have helped reduce the growth of mortgage lending, Julie Dickson told reporters in Toronto on Monday that the issue remains a significant concern.

The comments come a week after the ratings agency Moody’s Investors Service warned in a report that record household loans pose a threat to the Canadian banking system.

Indeed it was only the latest in a series of admonitions delivered by observers going back as far as 2006 when then-Bank of Canada governor David Dodge tore a strip off the Canada Mortgage and Housing Corp. for bringing in what he felt were excessively loose mortgage lending rules.

Dickson said she is delivering an “early warning” to the banks about problems that could emerge down the road, and that she is working on the issue in parallel with current Bank of Canada governor Mark Carney and federal Finance Minister Jim Flaherty.

The Canadian banks have enjoyed surging profits since the financial crisis, partly on the back of their consumer lending operations which have enjoyed consistent revenue growth largely because of the ongoing low-interest rate environment.

The biggest single asset on bank balance sheets are their residential mortgages, about half of which are insured by the Canada Mortgage and Housing Corp.

However, the worry is that the other half is not protected and in the event of a serious housing market correction, lenders could wind up with losses.

Banks “need to keep an eye on” their uninsured mortgages, Dickson said.

In another speech Monday to business leaders, Dickson said the Financial Stability Board, an international body created by the G20 to promote financial stability, is also working at developing principles for safe mortgage lending.

 

This article appeared in the Toronto Sun on Tuesday, September 27th, 2011.

Canada’s property market is cooling, but still stands out as one of the best performing in the developed world, according to a report by Scotia Economics.

Existing home prices rose 5% in the second quarter, the same pace as gains in the first quarter of the year, the bank’s Global Real Estate Report found. Figures for July and August point to stable sales and a levelling out of prices.

Out of the nine markets studied in the report only Canada, France and Switzerland recorded price gains in the second quarter.

“In the majority of the major markets we track in North America, Europe and Australasia, inflation-adjusted home prices declined on a year-over-year basis in the second quarter of 2011,” said Adrienne Warren, senior economist and real estate specialist at Scotia Economics. “While Canada’s hot housing market also has begun to cool, it remains a notable outperformer.”

Warren said in many markets historically low interest rates coupled with a slump in prices has made homes more affordable. In normal times that would probably be enough to jump-start the market, she said.

However, these aren’t normal times and the ongoing uncertainty created by the financial crisis in Europe and high unemployment have convinced many consumers to save and pay off debt rather than make major purchases.

“Heightened economic uncertainty combined with recent signs of a loss of momentum in Canada’s jobs market could keep some potential buyers on the sidelines for the time being,” she said, adding that the bank is forecasting a slight slowdown in sales and flat prices for the rest of the year.

France so far has managed to buck the trend of slumping property prices in the euro zone, with real estate rising 5% year-over-year in the second quarter. Switzerland’s property prices rose 4%.

Elsewhere the slump showed little signs of slowing in the second quarter, with prices in Spain tumbling 10% after a 9% slide in the first quarter.

Ireland’s property slide also accelerated with a 14% drop in the second quarter following a 12% decline in the first.

In the U.S., second-quarter property prices fell 6%.

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