28 Jan

Strong Evidence Of Problematic Conditions Persists In Real Estate Market: CMHC


Posted by: John Dunford

Canada’s federal housing agency says strong evidence of problematic conditions continues to exist in the national housing market.

Canada Mortgage and Housing Corporation says the most prevalent issues it has observed in the 15 markets it monitors are overbuilding and overvaluation, which occurs when house prices outpace economic fundamentals such as income and population growth.

CMHC first raised its overall risk rating for the national housing market to strong last October.

It said there is strong evidence of problematic conditions in Vancouver, Victoria, Saskatoon, Regina, Toronto and Hamilton.

Edmonton, Calgary, Winnipeg, Montreal and Quebec City show moderate evidence of such conditions, the agency said.

CMHC’s housing market assessment is intended to be an early warning system to alert Canadians about problematic conditions developing in the country’s real estate markets.

“Price acceleration in Vancouver, Victoria, Toronto and Hamilton indicates that home price growth may be driven by speculation as it is outpacing what economic fundamentals like migration, employment and income can support,” CMHC’s chief economist Bob Dugan said in a news release.

“For this reason, homebuyers should ensure that their purchases are aligned with their needs as well as the long-term market outlook.”

19 Jan

Bank Of Canada Holds Interest Rate, Singling Out Economic Unknowns Of The Trump Presidency


Posted by: John Dunford

Bank of Canada holds interest rate, begins to bake some Trump risks into outlook.

The Bank of Canada is holding its benchmark interest rate at 0.5 per cent and providing a deeper assessment of the risks associated with the big economic unknowns of a Trump presidency.

The central bank is keeping its key interest rate in place with the Canadian economy showing signs of improvement _ but it also warns of the significant uncertainty tied to potential policy changes by the United States, its largest trading partner.

This is the bank’s first release of its updated forecasts and broad economic assessment since Donald Trump won the U.S. presidential election in November. Trump is to be inaugurated as President on Friday.

For now, however, the bank is offering an optimistic outlook by largely sticking with the growth expectations that it released in October, by predicting the economy to expand by 2.1 per cent in 2017 and 2018.

It says its base-case outlook only factors in the impact of the expected U.S. fiscal boost, which would help Canada through increased demand, and the effects of Trump’s vow to cut corporate taxes, which it notes would hurt Canadian competitiveness.

The bank did not account for the full range of Trump’s promised policy changes _ including his protectionist pledge that it says would have material consequences for Canadian investment and exports.

19 Jan

Mortgage Insurance Premiums Hiked Once Again


Posted by: John Dunford

CMHC announced early Tuesday it is increasing its loan insurance premiums effective March 17.

“We do not expect the higher premiums to have a significant impact on the ability of Canadians to buy a home,” said Steven Mennill, Senior Vice-President, Insurance. “Overall, the changes will preserve competition in the mortgage loan insurance industry and contribute to financial stability.”

According to the Crown Corporation, the average homebuyer will see a $5 increase to their monthly mortgage payment as a result.

The increase is the result of last year’s mortgage rule changes, CMHC claims.

“Capital requirements are an important factor in determining mortgage insurance premiums. The changes reflect OSFI’s new capital requirements that came into effect on January 1st of this year that require mortgage insurers to hold additional capital,” it said in a release.

“Capital holdings create a buffer against potential losses, helping to ensure the long term stability of the financial system.”

This latest hike comes less than two years after the most previous one, which was announced in April 2015.

17 Jan

Morneau Rules Out More Housing Measures For Now


Posted by: John Dunford

Ottawa will continue to monitor the housing market but is not planning to introduce any further measures for now. That was the message from federal finance minister Bill Morneau when he met with private sector economists Friday and later spoke to journalists.

CBC News reports that the minister said the government is keeping an eye on risks to the market in order to “ensure the housing market is stable and that people are protected in their important investment.”

Mr Morneau also said that the government was keen to ensure that the relationship between Canada and the new US president would be of benefit to trade but said that formal discussions have not yet taken place with president-elect Trump.

11 Jan

Insight Into The Future Of Mortgage Rates


Posted by: John Dunford

by Justin da Rosa | 10 Jan 2017

With the release of the Bank of Canada’s most recent Business Outlook Survey came insights into the central bank’s policy position – and, indeed, the future of its benchmark rate.

The outlook brought with it good news – but not enough to force the Bank of Canada to raise benchmark for the overnight rate, according to one big bank.

“The Bank of Canada will likely be pleased to see the continued gains in business sentiment, but is unlikely to be stirred to action,” Brian DePratto, senior economist at TD Bank, said in his analysis. “This is because any improvement in investment will be starting from a much lower level – Canadian business investment has shrunk for nearly two years straight, and it be a long time before previous levels are reached.

“As a result, Governor Poloz will not follow the Federal Reserve, and is likely to instead keep the policy interest rate at its current level of 0.50% for some time to come, helping the investment recovery process.”

The Business Outlook Survey reported improvement in business sentiment in the fourth quarter of 2016, with firms expressing optimism around domestic sales and improving conditions in the oil industry.

Still, uncertainty as a result of the recent US looms.

“Uncertainty about the outcome of the US election, which affected the autumn survey, has given way to uncertainty about the measures that will be put in place by the incoming US administration and their impact on Canadian businesses,” the Bank of Canada said in its survey. “Firms’ views (which in some cases reflect the perspectives of their US customers) are divided: some are optimistic about the prospect of increased infrastructure and military spending as well as changes in energy policies, while others are more pessimistic, often because of the risk of increased protectionism.”

10 Jan

First-Time Buyers Delaying Due To Mortgage Rules


Posted by: John Dunford

The tightened mortgage rules introduced by the federal government last year are having a negative effect on the homebuying plans of first-time buyers.

That’s the finding of a survey for the Ontario Real Estate Association by Ipsos Reid which says that 79 per cent of first-time buyers will delay buying due to the mortgage stress tests.

“Our survey indicates that the new stress test will have a negative impact on first-time buyers’ ability to buy a home,” says OREA CEO Tim Hudak. “It’s important to remember who’s being affected by measures that curb housing demand – a young family looking for more space, a twenty-something trying to get out of his parent’s basement. Just when they’re about to make the leap into home ownership, things get a little less affordable.”

Hudak says that policy should be focusing on helping affordability rather than curbing borrowing. He welcomed the new provincial land tax rebates for first-time buyers which came into force this month which could be followed by a similar move from the City of Toronto.

“More rebate means more money in the pockets of first-time buyers which benefits both home owners and the province,” says Hudak. “The money that home buyers get back either ends up going towards their mortgage or more often they spend it on furniture, appliances, renovations. The economic spin-off that comes with every home sale is immense. In this regard, the City of Toronto stands more to gain from giving its home buyers more rebate, rather than a tax increase.”