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By Paul Vieira, Financial PostFebruary 16, 2010 7:03 AM
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On Tuesday, the Department of Finance announced three changes to the standards governing government-backed mortgages, that come into force April 19. Here are a summary of the changes. QUALIFYING FOR A FIVE-YEAR RATE The adjustments to the mortgage framework will require mortgage insurers to ensure that new borrowers qualify for a five-year fixed rate mortgage when calculating the gross debt service and total debt service ratios. The measure is intended to protect Canadians by providing them with additional flexibility to support mortgage payments at higher interest rates in the future. LIMIT THE MAXIMUM REFINANCING Borrowers seeking financial flexibility can currently refinance their mortgage and increase the amount they are borrowing on the security of their home up to a limit of 95% of the value of the property. The adjustment will lower the maximum amount of the mortgage loan in a refinancing of a government-backed high-ratio mortgage loan to 90% of the value of the property, consistent with the principle that home ownership is a tool for savings. DISCOURAGING SPECULATION This measure will require a minimum down payment of 20% for government-backed mortgage insurance on non-owner-occupied properties purchased for speculation. At present, borrowers may purchase a residential property with a 5% down payment. The change will require a 20% down payment for small non-owner-occupied residential rental properties. Borrowers purchasing owner-occupied residential properties which also include some rental units (such as a duplex) will still be able to access government-backed mortgage insurance with a 5% down payment. © Copyright (c) National Post
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On February 16th Finance Minister Flaherty, announced some changes to “insured” mortgage lending in Canada. These changes affect mortgages insured by CMHC, Genworth and AIG United Guarantee. From the Globe and Mail: Finance Minister Jim Flaherty Tuesday announced tighter lending standards for mortgages, saying that while the housing market is healthy and there's no solid evidence of a bubble, the moves are needed to “help prevent negative trends from developing.” The intent of the changes is to preserve the integrity of the Canadian Housing Market and to ensure Canadians will continue to find housing affordable despite the increases in interest rates which we must be prepared for. Gentles Comment: From sixteen economists we could hear twenty opinions and some suggest that fixed rates could begin to rise before the end of June 2010 in anticipation of increases to Prime beginning in the third quarter. Others suggest that based on the growth in GDP, employment rates, money market and bond yields, exchange rates and analysis of past recessions -- that the rise in rates will not be before mid 2011. Sorry – no crystal ball on this one. How high will rates go? There seems to be some consistency of opinion that rates will peak 3-4% higher than rates today. So if the 5 year is 3.89% today then rates could double. What does that do to a mortgage payment in 5 years? Here is a rule of thumb: $300k mortgage, 35 years. At end of 5 years on the outstanding balance, if interest rates double then payments increase by 50%. We don’t have all the details yet but here is a summary of the changes and my comments on how these changes will impact borrowers. The effective date of the changes is April 19th, 2010. There will apparently be exceptions granted after April 19th where they are needed to satisfy a binding purchase and sale, financing, or refinancing agreement entered into before April 19th, 2010. Change: The debt servicing or “affordability ratios” will now be calculated using the 5 year fixed rate even if the mortgage is to be for a shorter term or if the mortgage is going to be on a variable or adjustable rate. Gentles Comment: In Canada the affordability or debt service ratios have been calculated using the 3 year rate for many years. The intent was to make sure that even as rates changed that our Canadian homeowners would not be subject to large “payment shock”. So this change is fairly minor. It was in the United States that borrowers were qualified on very low rates for floating rate mortgages. The Canadian Government has not yet clarified whether they expect lenders to use the 5 year posted or the 5 year discounted rate. As a benchmark those rates today are 5.49% and 3.89%. The three year rates are 4.5% and 3.5% respectively. It was not uncommon for lenders to use the 3 year posted rate for qualification purposes. Many Canadians did their pre-approvals based on the 5 year fixed rate anyways; even if they did choose a floating rate mortgage once they had selected the home they wished to purchase. Before the housing crisis in the US the “90 days arrears rate”, counting mortgages with payments 90 days overdue was 2 in 100. At the same time in Canada the 90 Day Arrears Rate was 2 in 1,000. Today the Canadian rate is only 3 in a 1,000 but the US rate has increased dramatically to 9 in a 100. So clearly, the level of concern in Canada is nowhere near the level of concern in the US. Change: Refinances will be limited to 90% of current market value vs. 95% of current market value. Gentles Comment: 95% refinances of insured mortgages have only been possible for a short period of time in my experience very few people have refinanced to 95%. Change: The minimum down payment for investment or revenue properties has increased from 5% to 20%. This does not apply to someone buying two sides of a duplex or all three or four units in a tri-plex or four-plex where they will be occupying one of the units. Gentles Comment: The high ratio (CMHC) insurance premiums have always been considerably higher on revenue property as compared to owner occupied property. As a result we have used strategies such as equity takeouts on principal residences or other revenue property, or 2nd mortgages, to achieve 20% down payments on revenue property and avoid the CMHC premiums altogether. Certainly these changes will impact some borrowers. It may take some first time buyers a little bit longer to become prepared for their first purchase, their first mortgage. As mortgage professionals we are pleased that the Government did not increase the minimum down payment to 10% and did not reduce the maximum amortization to 30 years. These ideas had been on the table for discussion. I encourage existing mortgage borrowers to look at strategies to pay down their principal faster. Always happy to share ideas. If your current mortgage rate is 5% or higher and your renewal is within the next 2-3 years then it may make sense to pay the penalty now to renew for a new 5 to 10 year term at today’s rates. Again, we are always happy to walk through the analysis with you. If you, or other homeowners are carrying non-mortgage debt at rates 8% to 18% to 28% then it could certainly be worthwhile to look at a refinance. We’ve helped people achieve significant reductions in interest expense, we’ve improved cash flow and some of that cash flow has gone into paying off principal faster. The market is excellent for buyers also. Adjustable rate mortgages at Prime minus .35% with 120 day rate holds and the opportunity to “lock in” for 5 years or longer at any time without cost or penalty; based on the 5 year rate in effect on the day you make the decision to “lock in”. We look forward to your call. Thank you. Brian Gentles AMP Alberta Broker - Alberta Regional Manager Mortgage Sub-broker – British Columbia Home n Work Mortgages Inc. Licensed Mortgage Originator in Alberta and British Columbia Direct Calgary 403.216.8302 Toll Free 1.866.273.6192 Fax Calgary 403.398.1401 Toll Free 1.866.273.6194 Alternate Fax 403.238.2240 Mark Attn: Brian Gentles e: brian.gentles@telus.net e: brian@briangentles.com w: www.briangentles.com
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 The Apple 'iPad,' a new tablet computing device, sits on display after its launch event in San Francisco on Wednesday.Photograph by: Kimberly White, ReutersAfter weeks of speculation, Apple unveiled its iPad tablet computer Wednesday, marking the company's most breathlessly anticipated product debut since the iPhone. So will Apple's latest offering live up to the hype? "I do think it's a game-changer," says Sidney Eve Matrix, a media professor at Queen's University in Kingston, Ont. "I think it's going to be more exciting than the iPhone because I think it will enable us to do more than the iPhone could do for us. This will take the lid off a whole new world of third-party applications and ways to connect socially." The iPad won't simply replace our laptops or smart phones, she says, but will instead carve out its own distinct category as a "companion device" that takes mobile social computing to the next level. Weighing less than 1 kilogram and measuring just 1.5 centimetre thick, the iPad operates with a touch-screen keyboard on a 25-centimetre multi-touch screen. Prices will range from $499 (U.S.) for the 16-gigabyte version to $699 for the 64-gigabyte model, and 3G mobile Internet access will cost an extra $130. They're scheduled to begin shipping in 60 days. "iPad creates and defines an entirely new category of devices that will connect users with their apps and content in a much more intimate, intuitive and fun way than ever before," Apple CEO Steve Jobs said at the launch in San Francisco. Alfred Hermida, a journalism professor at the University of British Columbia, believes the true impact of the iPad will only become evident over the long term. When a new technology emerges, it's often difficult to know how it will be used, he says, and many of the technologies that stick — including the Internet — end up being used for purposes other than what was intended. When he got an iPhone, he says he didn't make his first phone call for four days because there were so many other options to explore before he got to the device's purported reason for being. "That's the beauty of what the iPhone does," Hermida says. "It's like a blank slate and what I find exciting about these types of devices is that it's hard to predict what they're going to be used for because they can be used for so many things." Apple essentially creates "objects of desire" that can be customized to any purpose or target market with the content loaded onto them, he says, and there's no "killer app" that's going to make or break it. The iPad could become a mobile, 24-7 digital photo frame, he suggests, or a mobile music laboratory that allows people to mix and share elements of songs they buy on iTunes. "With Apple devices and a lot of new technology, we tend to underestimate the long-term impact," he says. Several companies unveiled new tablet computers at the Consumer Electronics Show in Las Vegas earlier this month, says Richard Smith, a professor at the school of communication at Simon Fraser University, but they didn't generate any of the hype the iPad did, and that's Apple's genius. The iPad is "good, but it's not shockingly outlandish," he says, but he believes it will end up changing the game in the same way the iPod did. Both debuted after other MP3 players and tablet computers hit the scene, but Apple produced a beautifully designed product that operated more smoothly and quickly dominated the market, he says. "It's not like they invented this scenario; they've just done it right," he says. Even the tantalizing bits of iPad information that leaked out of famously secretive Apple before the big reveal fed the company's carefully calibrated marketing machine, Smith says, but that carries hefty expectations, too. "You have to follow through," he says. "If it isn't as good as what they imagine, they'll just trample all over you."
© Copyright (c) Canwest News Service read original article
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Unlock the Vault
...7 Secrets to RSP Investing
Every Investor Must Know ... Plus, An Exclusive Interview, Very Special Economic Updates, CMHC Insider Info and Exclusive January Guest Offer! Greetings, Glen
Hopefully you had a great Holiday Season with plenty of time to relax and be with family. We all need that down time every once in awhile to recharge, but now it's back to business. In just a few short days the massive REIN™ All Day Conference is coming to Calgary, do whatever you can to come out in person. Before I get into the complete details of the Workshop, here is the info-nugget if you don't have time for the whole story. Mark it in your calendar:
REIN™ Members' Only Workshops **Calgary All Day Workshop** Date: Saturday, January 23rd, 9:00am (arrive at 8:30am for networking)
Location: Telus Convention Centre, 120 9th Avenue SE Map Here
Subjects: - A Behind the Scenes Look at the Canadian Mortgage and Housing Corporation (CMHC) - REIN™'s Own Insider...Get Your Deal Done
- Don R Campbell Delivers Key Insights into the 2010 Market. See What's Coming and Plan Accordingly.
- Where is Alberta Headed and Will You Have Tenants? Alberta Minister of Employment and Immigration in the Flesh.
- 7 Secrets to RSP Investing - How To Access the Hundreds of Billions Trapped in RSP Funds to Your Advantage
- Winnipeg - All Hype Or Real Opportunities? Discover the Truth Around the Winnipeg Real Estate Market, Residential and Commercial!
- What's Truly Behind The Economic Curtain for 2010 - Don R. Campbell
- And Much Much More
Special Offer
A Great Opportunity to Bring a Guest
The Calgary All Day is a fantastic opportunity to share your REIN™ education with a fellow investor or interested family member. Every month we have very limited guest seats available for those that would like to get a feel for REIN™, and for the All Day we're just about sold out. However, your guests do have a special opportunity this month - not only is it a full day of learning...but this month they get more: Buy One Get One Free. If you have a guest that is interested in attending the All Day event they too can bring a guest for no additional charge OR they can split the cost and come for half price. The lineup of speakers is huge, the topics of utmost importance and what a great networking opportunity to boot. Please feel free to forward this email to any interested parties and they can sign up for one of the remaining guest seats before they're gone.
Click Here To Grab a Seat For Your Guests
Now on to the January REIN Workshop Details:
Behind the Scenes Look at CMHC... Just What Does It Take??
It's no secret that funding investment properties has become more difficult over the past year and a half. The pendulum went way into the red and has yet to come back from the massive knee jerk we all experienced. But with that said, deals can get done...you just need to know how.
If you invest in real estate then you've heard of Canadian Mortgage and Housing Corporation, CMHC, especially if you've attempted to go the road of smaller down payments. For some, CMHC is simply out of the question - "why would I spend thousands for CMHC insurance?" But in the end, most investors just don't understand enough about CMHC to move forward confidently...causing many investors to walk away from great deals (and losing money).
This month we have REIN™'s very own insider from CMHC out to dispel the myths, bring you the real facts and provide you the confidence and knowledge you need to get the deal done. The truth is CMHC can help you get deals done that would otherwise cost a lot more with private money or wouldn't get done at all... now you'll have the confidence and knowledge to move forward.
The Money Trap... Solved! Unlocking Hundreds of Billions for Your Investments.
Let's talk RSP's...and before you shrug it off, before you say "RSP's are just too complicated" hear me out. Right now there are hundreds of billions of dollars, yes billions, if not more, tied up in RSP's - sitting there earning average Canadians below average returns. You may even have a sizeable RSP portfolio of your own...that probably took quite a hit over the past year. And I'd bet you've wondered just how you could access that money for a down payment. We brought in RSP expert and long time real estate investor Greg Habstritt to demystify the RSP world, to give you the real goods. There are secrets to RSP investing that all investors must know, especially if you've hit that money wall, and some of the strategies out there you should flat out run away from! It's Time to Take Control of Your Future & Tap Into
Hundreds of Billions of Easy Investment Capital Discover the Exact Tools You Need to Unlock the RSP Vault Click Here for Your Exclusive Interview There are myths, misconceptions and downright lies when it comes to RSP investing which is why so many investors have shied away. Don't be fooled...be informed! Greg answered a lot of questions during our interview and shed some real light on the world of RSP investing...and that's only a preview to his brand new presentation that you'll see at the Calgary All Day. A brief list of answers you'll get at the All Day: · What is the approximate size of money sitting trapped in people's RSP's and how you can you tap into these locked funds · Why the mutual fund industry may be designed to keep Canadians from maximizing their ROI - What are the advantages and disadvantages of using RSP money to invest?
· What are some of the risks with raising money from other people's RSP's? · Can I use my own RSP's to invest in my own Real Estate, how about family and friends? · Do I need to be an experienced Real Estate investor to raise money from other people? · The 'magic words' to instantly increase your cash flow · How many different strategies are there to using other people's RSP's? · What are some of the first steps we need to take to get started? Click here for the exclusive interview...
Be sure to come out in person the get the first glimpse of this brand new presentation. If money has been your limiting factor this just might be your silver bullet!
Winnipeg - Fact or Fiction?
There is no doubt you've heard about investment opportunities coming out of Winnipeg. "I hear Winnipeg is the next big boom" "You can get properties for nothing" "Every property cash-flows" and the list goes on. No matter the season someone is always trying to find that next "it" town...is Winnipeg the one?
It's time to get the facts on the Winnipeg market and whether or not it should be on your investment radar. We're bringing in two of Winnipeg's most connected and long term investors to give you the goods on where the market is headed and where the opportunities are...both residential and commercial. Before you follow the hype get the facts!
Immigration and Employment...Where Does Alberta Stand?
I don't know about you, but having tenants is a wonderful thing in this business...and employed tenants are even better. This month we have Alberta's Minister of Immigration and Employment out to give us the facts surrounding these two key fundamentals. Will Alberta's population continue to grow and will that growth be supported by new jobs? As an investor you must stay up to date on this information and what better way than right out of the horses mouth?? What's Behind The Curtain For 2010 and Beyond?
And of course, let's not forget the 'Real News' with Don R Campbell. This month Don goes the distance as he covers not only the Alberta and Canadian economies, but he also dives head first into key insights for the upcoming year. Expanding on the key fundamentals surrounding Alberta's market Don will explain in detail just what's going on, both micro and macro, and how it all ties into your bottom line. You don't have to be a researcher or an economist...we walk you through everything you need to know to make 2010 a great year. It is a FULL day of investment training and learning with a huge dose of power networking thrown in...You can't afford to miss. Plus, we have other key presentations not mentioned, including a huge surprise for all REIN™ members...let's just say it's another REIN™ only deal this time involving medicine - hint hint. Do whatever you can to come out in person and start your year off in a big way
Hope to see you there!
See you there,
Ray Reuter
Client Service Manager
Real Estate Investment Network
P.S. Don't forget to claim a seat for your special guest, there are only a few guest seats left. And remember, for the Calgary All Day if you purchase one guest seat you can bring a second guest for no charge - it's buy one get one free OR split the cost and save half!
Here's an idea - bring two of your neighbours who have hefty RSP's...they just might fund your next deal (or deals)!
Click Here Now to Grab Your Guest Seat Or forward this email on to someone you care about.
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The seasonally adjusted annual rate1 of housing starts reached 174,500 units in December 2009. This is an increase from an annual rate of 164,800 units in November, according to Canada Mortgage and Housing Corporation (CMHC). Actual housing starts for 2009 are being verified and will be reported in the January edition of Monthly Housing Statistics. They are expected to be lower due to low monthly rates earlier in the year. “The improvement in housing starts was broad based in December,” said Bob Dugan, Chief Economist at CMHC’s Market Analysis Centre. “Solid increases occurred in both single and multiple starts to end the year.” The seasonally adjusted annual rate of urban starts increased by 6.6 per cent to 157,100 units in December. Urban multiple starts increased from 72,800 units in November to 77,700 units in December. Single urban starts increased by 6.4 per cent to 79,400 units in December. December’s seasonally adjusted annual rate of urban starts increased by 17.8 per cent in Quebec, by 15 per cent in Atlantic Canada, by 8.7 per cent in British Columbia and by 2.9 per cent in Ontario. The rate of urban starts decreased by 3.8 per cent in the Prairies. Rural starts were estimated at a seasonally adjusted annual rate of 17,400 units in December2. As Canada’s national housing agency, CMHC draws on more than 60 years of experience to help Canadians access a variety of quality, environmentally sustainable and affordable homes. CMHC also provides reliable, impartial and up-to-date housing market reports, analysis and knowledge to support and assist consumers and the housing industry in making vital decisions. 1. All starts figures, other than actual starts, are seasonally adjusted annual rates (SAAR) — that is, monthly figures adjusted to remove normal seasonal variation and multiplied by 12 to reflect annual levels. 2. CMHC estimates the level of rural starts for each of the three months of the quarter, at the beginning of each quarter. During the last month of the quarter, CMHC conducts the survey in rural areas and revises the estimate. View original article
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Although perhaps not a visible as the issue of snow removal, which appears to be the concern du jour, the seemingly innocuous issue of secondary suites has emerged as one of the more lengthy debates down at City Hall. Often providing an affordable housing alternative for new Calgarians, students or just those on a tight budget, secondary suites (also referred to basement suite, mother-in-law suites or granny suites) can be found in many of Calgary’s more established communities. However, due to a council which finds itself rather divided on the topic, and the tragic death of three Calgarians who died when a fire erupted in the secondary suite they were renting, the issue of secondary suites and the regulations surrounding their application and permission is not one that appears to be going away anytime soon. Much of the difficulty, at least in Calgary, when it comes to homeowners gaining proper permission from the city for secondary suites they have installed in their homes surround the fact that, as it stands, most applications requite the rather onerous process of changing the land-use designation for the residence. “It’s certainly a much simpler approach in most North Canadian cities,” said Ward 7 Ald. Druh Farrell, who sits firmly on the pro-secondary suite side of council. “We’ve been discussing this for some years now, and I believe one of the reasons it’s so complicated is council. We’ve made the rules so difficult that it’s virtually impossible to get [secondary suites] through.” The result of this complication, according to Farrell, is that many of the owners that may have otherwise gone about securing the proper permits for the suites in their homes simply operate them on an illegal basis. Although the city is quick to point out that illegal suites (those which are not properly permitted) and unsafe suites (the type evidenced in the three deaths last January) are completely different entities, the trend for owners to not even attempt to gain permission for suites in their properties is rising. “With the message that we’ve been giving, it’s burying the issue again,” said Farrell. “It’s pushing these units underground, because why would anyone want to go through the process of legitimizing their unit when you’re pretty much guaranteed a failure at council?” Proof of just how tricky it is to gain permission for a suite can be seen in the votes down at City Hall. In a process that requires each individual suite needing to be approved by council, a December vote on three applications saw two of them (including a proposal from city-owned Calgary Housing) rejected, largely on the basis that allowing the quite would create a secondary suite in a neighbourhood where only single family homes exist. One of the biggest supporters of that very argument is Ward 2 Ald. Gord Lowe. During his time on council, Lowe has been very vocal on the issue of secondary suites, and believes that the surrounding community should be consulted before any secondary suite is given the go ahead by the powers that be. “The biggest single commitment most people make in their lives is their house,” said Lowe. “In the established communities, people buy a house doing the due diligence knowing what’s going to happen around them, and I don’t think that government should change that without consulting the community.” One of the ways that Lowe believes secondary suites can be implemented into more communities is through the use of area redevelopment plans (ARPs). In the city’s newer communities, ARPs are introduced in the planning stages, but in established communities where everything is already in place, altering zoning laws and designations is a far more arduous process. Lowe suggests that a more streamlined ARP process could take the concerns of community residents into account while proving to be far less restrictive than the measures currently in place. In addition to the city’s concerns of zoning and land use designation, Lowe says that the more tangible concerns of those residents already in place must be taken into account when contemplating allowing secondary suites in a given area. One the applications turned down by the city in December was for the community of Rundle, where 72 per cent of the homeowners on that cul-de-sac signed a petition against it. “Very often in the developed communities, because of the way they’re laid out, you can have parking and traffic problems. Plus the fact that if you built your house anticipating living in a single-family area, before we change that, I think government has a duty to ask what you think about it.” However, Farrell believes that the concerns stated by Lowe are simply masking the same “not in my backyard” mentality that arises amongst some Calgarians anytime a change, however small it may be, is proposed in any community. “Council is having a very knee-jerk reaction to a very small group of people who don’t want [secondary suites], and the people who don’t want them usually aren’t very specific about what concerns them.” Citing a recent poll that suggests that as much as 85 per cent of Calgarians support legal secondary suites, Farrell says that by making it so difficult for homeowners to gain permission for secondary suites, the city has encouraged the growth of the those very same illegal suites that draw the ire of community residents. “The community in Rundle has a lot of illegal suites that are in very poor condition, so that’s the issue for Rundle. How do you solve it? You can’t shut all those suites down. If we’ve got an affordable housing problem now, it would be exacerbated [by doing so], but we should shut them down, because they’re not safe. But we must replace them with something. There’s a need for them, and somebody’s filling the need.” Whatever the cause for all the complication and confusion, from the standpoint of those who actually enforce the laws down at City Hall, it’s up to council to figure it out. “The decisions really rest with council,” said Laurie Kimber, land use bylaw coordinator for the City of Calgary. “Council looks to us for advice and recommendations, and certainly administration is going to respond to that.” | | | View Original Article by Cody Stuart |
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A break in gasoline prices and a few deals at the mall drove inflation down in Alberta again in November, with consumer prices inching up 2.1 per cent from a year ago. While deals were sure to be had at the gas pump, where prices were down 12.4 per cent, consumers did have to dig a lot deeper for necessities such as fresh fruits and vegetables, natural gas and shelter costs. ATB Financial senior economist Todd Hirsch attributed the price jump in fruits and veggies in part to a weaker Canadian dollar. However, he noted November's overall inflation rate is a continuation of a downward slide that started in June, when inflation in Alberta was 4.4 per cent. "Alberta's inflation figures are being swept lower by falling commodity prices, especially crude oil and gasoline, but also by softer consumer demand," he said. Still, Canada's inflation was two per cent in November, the first time in two months that Alberta's inflation edged higher than the nation's. Released Friday, Statistics Canada's Consumer Price Index for November showed that the price of food in Alberta was up 7.3 per cent on a year-over-year basis, led by a 29 per cent jump in fresh vegetables and an 18.8 per cent jump in fresh fruit. The price of cereal puffed up 15.2 per cent, and meat, excluding poultry, rang in 12.6 per cent higher. Natural gas rose 6.4 per cent. Shelter costs were also up, 4.3 per cent. Calgary saw a 2.4 per cent rise in consumer prices in November on a year-over-year basis, while Edmonton had 2.2 per cent. Yellowknife was the highest at 4.7 per cent, and Saint John, N. B., the lowest, at 0.7 per cent. Regionally, still-booming Saskatchewan experienced the greatest price pressure with the annualized rate rising to 3.2 per cent. Last week, the Bank of Canada cut its trendsetting lending rate by 75 basis points to 1.5 per cent in an effort to stimulate the economy. "Overall, this somewhat complicates the Bank of Canada's outlook, as by our calculations it seems as though core CPI could remain above the two per cent level for several months to come," said Charmaine Buskas, economics strategist at TD Securities. "That said, the bank is still going to focus on alleviating the strains on the economy due to the global economic recession and ongoing turmoil in the credit markets," she added. Gina Teel, Calgary Herald; With Files From CanWest News Service;Published: Saturday, December 20, 2008 http://www.canada.com/calgaryherald/news/calgarybusiness/story.html?id=3f43f4a6-1268-4633-ad74-c6abd84f5450
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Headlines continue to inform us rather harshly that housing sales are down. According to Canadian Real Estate Association figures, Alberta experienced a year-over-year decline in MLS sales of almost 35 per cent, while prices dropped by 4.2 per cent to $338,354. And new construction is also drastically down. That means a big increase in the number of people renting accommodation. Bob Dhillon, president and CEO of Calgary-based Mainstreet Equities has a good handle on the rental market--his company owns more than 5,600 units across Canada; 1,300 of those in Calgary and 1,800 in Edmonton. Mainstreet serves the mid-market range and Dhillon says that his business has been very good over the past while. But the majority of his renters are due to a continuing in-migration of people from Ontario and Quebec where the economy is causing some to seek their fortune further afield. Dhillon says that sector has been particularly strong over the last quarter but yet has been far outweighed by foreign contract workers. The majority of his new renters are from Mexico and the Philippines; they find it easier to rent for the time they are working in Canada. He has 17 men from the Philippines working for his own company, which includes a construction division. Mainstreet specializes in purchasing apartment blocks and upgrading to today's high environmental standards. Although he owns units from the coast to Ontario, Dhillon says he is concentrating on the Alberta market, where he finds a good amount of rental stock for sale. His latest acquisition is a 48-suite block in Cochrane--one of Canada's fastest growing cities. Cash position is excellent and Mainstreet is taking advantage of the decrease in share value to buy back its shares for $6.25 (they currently sit at $5.83). City Search caters more to the executive renter and it also reports a thriving business. Canada Mortgage and Housing Corp. says that Calgary is the most expensive city in Canada for rental properties. Our average is $1,148 per month for a two-bedroom apartment (the same apartment would be $1,095 in Toronto). But that figure is low according to the type of accommodation that City Search leases and manages. It does have condos in the $1,200 to $2,000 range, but most of its properties are in the west downtown and Eau Claire districts, which fetch quite a bit higher. Most newer condos in those areas can ask between $1.75 to $1.90 per square foot, which is down about 30 cents from last year. Furnished units rent for around $2.50 per square foot but in today's market, there is a fair amount of negotiating going on. Armelle Kilpatrick, associate/vice-president property management, says most of its clients are executives and engineers on contract to Calgary companies, generally for two to three years. She says employers today encourage contract workers to rent rather than buy, which avoids having to help sell homes should they want to relocate them to another area. Many come from the U. K., France and India, and those from the U. S. are happy to rent instead of trying to sell their homes back in the States during this depressed time. The company currently has around 250 condos, town houses and houses in its portfolio, with most of the single family homes being in the Mount Royal, Rideau/Roxboro, Britannia and Elbow Valley communities. Its 15 homes in the Mount Royal area are rented out for monthly costs of between $6,000 to $8,500 unfurnished, but partially furnished houses realize from$8,500 to $12,000. Kilpatrick says people owning property in the more exclusive areas of Calgary are shying away from selling right now, so using an agency like City Search to lease, collect rent and manage makes such good sense.
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But to get down to our average of $1,148, there must be many apartments, duplexes and houses available for a lot less and a quick check with the Herald's classified section shows a number of suites available for way under that mark. Within walking distance to the downtown office core you can find several in the $750 to $1,000 range and even homes in outlying districts for around the city average. David Parker, Calgary Herald Published: Saturday, December 20, 2008 http://www.canada.com/calgaryherald/news/lifeathome/story.html?id=c6fc35da-8a85-491f-975d-998389a8f1a7
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Each morning, Mike Rogers catches a bus at a stop four doors from his house. "I pay a pretty huge premium," he says of the $240-a-month fee, "but it's worth it." The daily service, operated by local charter bus companies, is offered in several communities surrounding Calgary, including Okotoks, Cochrane, Chestermere and Airdrie. Not only is it convenient for the hundreds of commuters who use the service, it also relieves the pressure on Calgary's congested roadways and crowded C-Train cars. With thousands of residents from outlying centres using Calgary's roads or transit every day, some municipal officials suggest bedroom communities should contribute toward the city's growing infrastructure costs. "Calgary already picks up a disproportionate share -- for example, 12 to 15 per cent of our transit users live outside the City of Calgary,"Mayor Dave Bronconnier has said. "That is being picked up by Calgary taxpayers." This summer, the provincial government announced a$2-billion public transit fund focused on regional co-operation. The plan will be aimed at building public transit infrastructure, including projects such as buying new buses and trains, building regional transit and buying land for rail corridors. Calgary city council will ask the province to pay for the $2-billion southeast leg of the LRT through the new fund, and hopes to improve its chances of getting funding by including commuter buses to neighbouring towns in the plan. Unlike the private buses that Rogers catches each weekday, these ones would be publicly funded and seamlessly connect the bedroom communities directly to the nearest Calgary transit station. Once there is a large enough population, the buses could be replaced by a passenger rail service connecting Calgary with Cochrane, Airdrie, Okotoks, Strathmore and potentially even Canmore. Rick Butler, executive director with the Calgary Regional Partnership, which represents local communities, says the provincial money could go a long way to improving transportation in the region. "The stars are lining up,"Butler says, noting the group had just received a $500,000 grant to explore new transit options when the provincial government announced the$ 2 billion for regional transportation networks. The partnership, made up of 18 communities and one First Nation in the region, is also looking at water usage and land-use planning in southern Alberta. Even companies running the existing private bus service between Calgary and several bedroom centres see a rapid transit commuter system as a good first step. "Any time you put buses on the roads and take cars off the road, it's a good thing for everybody," says Tom Jerersek, general manager of Southland Transportation, which runs the commuter service from Cochrane and Okotoks. Rogers, however, begs to differ. He worries that any attempts to integrate such services will leave more passengers stuck in already crowded C-trains and transit buses. "It would become too convenient," Rogers says. "It will get overused. More people would start to use it. "The fear is that a rail system would probably increase the amount of people in Okotoks." Colette Derworiz, Calgary HeraldPublished: Friday, December 19, 2008 http://www.canada.com/calgaryherald/news/story.html?id=6a4e0f33-a486-46d1-a7db-0c2761e551f8
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Citizens averse to multi-family units in their neighbourhoodsThe LRT line is ugly and in the wrong place. That multi-family building will add too much traffic to the neighbourhood. A highrise near an LRT station doesn't fit, causing cars to cut through the community.
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Similar complaints from Calgarians are heard often as the city attempts to move forward on plans to add more transit and increase the number of people living in established areas. Those already living there --usually in single-family neighbourhoods-- aren't in favour of change and city council sometimes gives in to the dissent. It's a fine line between Nimbyism and legitimate concern about neighbourhood-altering projects. As the city tries to build up, rather than push further out, these battles become increasingly vital. Adding multi-family units to existing community neighbourhoods are almost always accompanied by people worried about esthetics, traffic or access. Getting around initial community disapproval is a barrier the city must overcome as it moves to put more people within its existing boundaries. "It's human nature to get used to what's around you,"says David Watson, the city's general manager of planning, development and assessment. "Another one of our biggest challenges is that although people say they like the idea of (densifying neighbourhoods) it's always somewhere else, seldom next door. "We have to help people through the changes that take place." Even the local poster-development for mixed-use, high density communities--Garrison Woods --was opposed by neighbours in the planning stages. New fire stations, including one downtown, were both met with residents offering "better" locations. Ald. Druh Farrell, a proponent of transit-oriented development, which aims to put high-density residential and retail around LRT stations, says the key to selling often-unpopular projects is good design and more communication with the affected neighbours. "Density is seen as an impediment. The positive aspects are not communicated," she said. Individual alderman have to stop looking at development around LRT stations as community projects, she says"These aren't ward issues. (Transit-oriented development) is a city-wide issue and requires a thoughtful, consistent approach," Farrell points out. Kim Guttormson, Calgary HeraldPublished: Monday, December 15, 2008 http://www.canada.com/calgaryherald/news/story.html?id=f613e4db-0c46-4ce2-988c-a7f444d88989
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Global turmoil takes toll on real estate; Alberta MLS numbers fall 35 per centThe MLS residential market is continuing to reflect the grim economic reality in the country. Sales have plunged from a year ago, average sale prices have dropped and a forecast calls for the housing funk to remain for several more months. According to data released Monday by the Canadian Real Estate Association, sales plunged by 42.2 per cent in November--the second consecutive steep monthly decline -- across the country compared with November 2007. Every province witnessed a sharp drop led by British Columbia at 62 per cent and Ontario at 43.5 per cent. Alberta experienced a year-over-year sales decline of 34.6 per cent.
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Average sale prices also took a hit during the month, falling by 9.8 per cent nationally to$280,880 compared with$311,485 in November 2007. In Alberta, prices dropped by 4.2 per cent to $338,354 compared with $353,125 a year ago. British Columbia registered the steepest drop in prices--12.5 per cent -- to $395,687 from $451,991 in November 2007. September MLS numbers were higher year-over-year in Alberta and it appeared the market was taking a turn for the better, but October coincided with the elimination of 40-year mortgages and zero-down mortgages, said Richard Corriveau, regional economist for Canada Mortgage and Housing Corp. "With that, we've seen a decline in overall activity. It's not a surprise given the current economic turmoil," he said, adding the province remains in buyer's market conditions. Corriveau said the prospect of further price reductions is helping to postpone people's decisions on buying residential property as they take a wait-and-see approach and are in no rush to buy. "We think this type of market will prevail heading into the first six months of 2009," said Corriveau. "And only when buyers really gain confidence that prices have stabilized, and of course economic conditions are improving as well, only then will we see higher sales. On a year-over-year basis, we don't think that will occur until perhaps the second half of 2009 or even into 2010." New listings across the country were also down by 4.6 per cent compared with a year ago, while in Alberta they were off by 18.8 per cent. "The housing market reflects the economic reality of Canada,"said real estate association president Calvin Lindberg in a news release. The association also said research shows the decline in housing activity so far this year translates into $2.8 billion less in spinoff consumer spending in Canada. On a year-to-date basis to the end of November, sales in Alberta are down by 20.3 per cent from a year ago and national sales are off 16.3 per cent.The average MLS sale price for the period is down by 0.7 per cent in Alberta($353,712) and by 0.3 per cent across the country ($304,462). "These changes in the Canadian housing market reflect a broader and weakened picture of both the economy and buyer sentiment," said real estate association chief economist Gregory Klump in a news release. "National sales activity and price trends will continue reflecting increased cautiousness on the part of lenders and buyers, as the economy works its way." Mario Toneguzzi, Calgary HeraldPublished: Tuesday, December 16, 2008 http://www.canada.com/calgaryherald/news/calgarybusiness/story.html?id=5373cd39-f881-452b-888f-7d0a74c22ca2
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As the country's finance ministers meet to plot an economic course, Premier Ed Stelmach warned Tuesday that deflated energy prices may technically send debt-free Alberta into deficit this fiscal year and force the province to tap its $7.7-billion rainy-day fund. The premier's economic forecast is a startling reversal of fortune for petroleum-rich Alberta, which analysts predicted only six months ago was on pace for a record surplus of nearly $12 billion this year. Stelmach said the provincial treasury is being depleted by crashing commodity markets and loss of tax revenue, which could see spending outstrip revenues for the fiscal year -- technically producing a deficit that is illegal under provincial law. To officially avoid red ink in the books and ensure key programs aren't affected, the province's only option may be to draw cash from Alberta's Sustainability Fund, which is designed to cushion Alberta from precipitous drops in resource revenue. The legislation allows the province to transfer cash from the fund to general revenues for various reasons, including if actual resource dollars are less than what was planned for "fiscal policy purposes." In a year-end interview Tuesday, Stelmach told The Calgary Herald: "We might have to dip into it because that's the purpose it was set up for." Calgary Herald © Copyright (c) The Regina Leader-Post By Jason FeketeDecember 17, 2008 http://www.leaderpost.com/news/todays-paper/Alberta+with+deficit/1085450/story.html
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Federal officials told CMHC it could overburden borrowers Canada Mortgage and Housing Corp. officials ignored warnings from senior Finance Department and Bank of Canada officials during the past two years that its active business in high-risk mortgage insurance could overburden consumers. According to sources familiar with the discussions, CMHC executives did not heed the warnings and continued to underwrite larger volumes of insurance policies for risky home loans with 40-year amortizations and minimal down payments. The sources said the federal agency's executives disagreed about the potential risks and defended the creditworthiness of borrowers who were granted insurance for the riskier mortgage products. One senior Ottawa official said CMHC was such a significant underwriter of 40-year mortgage insurance polices that it currently accounts for two-thirds of the nearly $56-billion of 40-year mortgages that were approved by banks, trust companies, credit unions and other lenders during the first six months of 2008. Unlike the United States, Canada does not publicly release data about different classes of mortgage debt. CMHC does track mortgage data, but its officials have declined requests by The Globe and Mail for information about the volume of 40-year and low-down-payment mortgages. In a statement issued last night, CMHC said it discussed mortgage risks with central bank officials in 2006 after former bank governor David Dodge raised concerns about the new breed of long-term home loans. “CMHC officials took the governor and senior bank officials through the materials and discussed how the product was administered. The Bank of Canada was reassured by the fact that CMHC's product includes no change in mortgage qualification criteria and as such would not be of significant concern to the Bank. We know of no other concerns that the Bank of Canada or the Department of Finance had with our activities that in their view would threaten financial stability,” the statement said. The agency said only a “relatively small” proportion of the $334-billion in mortgages it insures are either 40-year or zero-down-payment mortgages. A spokeswoman declined to put a figure to “relatively small.” Finance Minister Jim Flaherty announced in July that the federal government was cancelling its policy of guaranteeing 40-year mortgages as of Oct. 15 in order to shield Canada from the kind of housing crash that has devastated the U.S. economy. However, according to sources, bank executives had been warning Mr. Flaherty and central bank officials since the beginning of 2008 about a dramatic and unexpected increase in demand from consumers for 40-year mortgages with small down payments. Lenders, insurers and government officials interviewed by The Globe characterized the first half of 2008 as a period of apparent paralysis by federal decision makers. These sources said bank and insurance executives and finance officials disagreed over how to pull the plug on popular and risky mortgage products. One of the few things they did agree about, according to sources, was that there was insufficient monitoring of CMHC, which accounts for about 70 per cent of the total value of mortgage insurance underwritten in Canada. “There is an accountability issue at CMHC,” said one senior Ottawa official, who declined to be identified. CMHC is a federal agency that has been supplying mortgage insurance since 1954, and is currently overseen by Human Resources and Social Development Canada. In response to a question about its accountability, CMHC said in its statement: “The lines of accountability are very clear, like all Crown corporations CMHC is accountable to Parliament through its minister.” When The Globe contacted Human Resources Minister Diane Finley, her spokeswoman replied: “We will have to decline and allow CMHC to respond to the questions applicable.” According to people familiar with CMHC, the agency imported U.S.-style mortgage products to protect its dominant market position from large U.S. insurers who were allowed into the Canadian market in 2006. Canadian laws require borrowers with less than a 20-per-cent down payment to obtain insurance for their mortgages. “They felt they were pushed into to this because of the new competition,” said a person familiar with CMHC. Underlying these concerns, sources said, was a federal internal study launched by the new Conservative government in 2006 to review the possible privatization of a number of agencies, including CMHC. The prospect of privatization, one source said, fuelled concerns that the agency needed to be seen as an effective competitor. CMHC said in its statement that its decision to insure longer-term and lower-down-payment loans in 2006 “reflected the market trends for the period.” Until 2006, the agency and its only rival, Genworth Financial Inc., did not insure mortgages that were amortized beyond 25 years. In February of 2006, several months before four U.S. insurance giants were allowed into Canada, CMHC introduced the country's first 30-year mortgage insurance product. What followed was a ferocious battle for market share between CMHC, Genworth and American International Group, the first of the new insurance entrants. JACQUIE MCNISH AND GREG MCARTHUR From Thursday's Globe and Mail December 18, 2008 at 2:00 AM EST http://business.theglobeandmail.com:80/servlet/story/RTGAM.20081218.wrmortgage18/BNStory/Business/?cid=al_gam_nletter_maropen
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New house prices in Calgary declined by 1.6 per cent in October on a year-overyear basis--the largest decline for the metropolitan area since November 1991, said Statistics Canada. The New Housing Price Index, released Thursday by the federal agency, showed that, on a national level, new home prices year-overyear increased by 1.5 per cent, a slower pace than the 2.1 per cent advance recorded in September and the smallest annual increase since October 1999. On a monthly basis, prices decreased 0.4 per cent between September and October, the first monthly decrease across the country since September 1998. Prices declined by 0.6 per cent in Calgary on a monthly basis. The largest year-over-year increases were in Regina (22.8 per cent) and St. John's, N. L. (22.3 per cent). Edmonton recorded a 12-month drop of 7.7 per cent, which was the largest annual decline since May 1985. Prices declined by 1.7 per cent in Edmonton from September to October 2008. At the national level, the overall year-over-year increase was comprised of a 0.7 per cent rise in the house-only component and a 3.4 per cent jump in the land only component. For the Calgary census metropolitan area, the house-only component dropped by five per cent on an annual basis while the land-only component increased by 5.9 per cent, said Lai Sing Louie, senior market analyst in Calgary for Canada Mortgage and Housing Corp. "Builders are telling us it's a little cheaper to build a new house than a year ago," said Louie. The Calgary CMA includes the city, Airdrie, the Municipal District of Rocky View, Chestermere, Cochrane, Irricana, Beiseker and Crossfield. Statistics Canada said prices were down 0.4 per cent in Vancouver on a year-over-year basis, the first annual drop since April 2001. Vancouver was also down 1.1 per cent on a monthly basis. In Victoria, contractors' selling prices decreased 1.1 per cent year-over-year, down from an annual increase of 0.2 per cent in September. New housing prices year-overyear fell in only three markets in October--Calgary, Edmonton and Victoria. The dip in new home prices has been mirrored in the resale market as well. According to the Calgary Real Estate Board, MLS average sale prices for single-family homes in Calgary metro in November were$435,471,a drop of 5.8 per cent compared with November 2007. In the condo market, the average sale price fell by 8.6 per cent from a year ago to $285,820. Prices have also fallen in other segments of the MLS market in the Calgary area. For towns outside of Calgary, residential properties sold for an average of $359,400 last month, down 6.2 per cent from November 2007. The biggest drop in price in the past year in the Calgary region was in the country residential (acreage) MLS market, as average sale prices have plunged by 30.5 per cent to $565,889. Mario Toneguzzi, Calgary HeraldPublished: Friday, December 12, 2008 http://www.canada.com/calgaryherald/news/calgarybusiness/story.html?id=34d35749-af6c-49e1-9781-3f493e3052a9
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checkCookie(); Pricey plans for the city to acquire the Cecil Hotel have some critics cringing. The Sun has learned the cost for the notorious watering hole is more than $10 million, a deal that aldermen will debate behind closed doors Monday. A tentative deal to acquire the 96-year-old building at 401 4 Ave. S.E. was approved by a city committee earlier this week and the only hurdle is for a majority of council members to sign off on it. But the plan is already under fire. Scott Hennig of the Canadian Taxpayers Federation said with the city paring down next year's tax hike to 5.3% after a wave of taxpayer outrage, it doesn't appear council has learned any restraint when it comes to handling the public purse.
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"I don't think most Calgarians expect that when they pay their taxes the city will use it to buy old hotels," he said. "Most Calgarians expect that money is going to police and fire and transit and that's what aldermen and the mayor told them this money was being spent on in the budget debate. "It's the old bait and switch." The city is considering a number of options for the property, which this week also saw its business licence for the tavern portion suspended following a ruling from the city's chief licence inspector in response to numerous safety complaints. If the deal moves forward, plans for the site would likely include a parkade and a mixed-use development with both residential and commercial facilities. Ald. Ric McIver is anticipating a lively debate when it comes to council and noted with Calgary facing a number of new funding challenges and a faltering economy, getting into business better left to the private sector is a mistake. "To put taxpayers through this at a time when money's an issue and there are other infrastructure needs that need to be financed is a problem," he said. "It's an important corner and it's a building with historic character but this is something that should be led by the private sector." But Ald. Joe Ceci noted the city isn't acquiring a run-down hotel but a strategic parcel of land that will help transform the blighted east side of downtown. "This is an important gateway into the eastern part of the downtown and we have an opportunity here," he said. "The Calgary Parking Authority is always on the lookout for land to do parkades and what better place is there to operate a mixed-use zone?"
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