April 2010

[Ally]

Yes, there`s a housing bubble in Canada - but only in three cities

Looking for a tidy little bungalow on Vancouver`s west side, close to Kits Beach?

You`ll need a big bank account. The average price in the first quarter topped $1.1 million, according to Royal LePage.

A tad steep for you? No problem. Let`s head over to the grittier east side of town, where prices are more, uh, reasonable.

For just $674,000 you could buy the same bungalow, and for $402,000 -- $150,000 more than you`d pay in Edmonton -- you could own a typical condo.

Yes, there is a housing bubble in Canada, even if Bank of Canada Governor Mark Carney is reluctant to use the `B` word.

Read the full article here.

 

[Ally]

Will members benefit from national credit unions?

British Columbians love their credit unions with Canada`s two largest -- Vanity and Coast Capital Savings -- in the province along with about 50 other smaller ones.

The attraction is they are member-owned and community driven. Vancity started in 1946 and became the first financial institution willing to provide mortgages on homes in Vancouver`s working-class east end, east of Cambie Street. Coast Capital`s roots stem from the Depression in the 1930s when banks refused to lend money to those in trouble.

Most members think the best thing about credit unions is that they aren`t banks, which have the reputation in Canada of charging exorbitant fees and reaping high profits that aren`t given back to customers.

But now that the federal government has said it plans to introduce legislation to amend the Bank Act so that credit unions can operate inter-provincially, members may wonder whether their credit union is going to start looking just like a bank.

Mark McLoughlin, chair of the Case for Progress committee, a group started by Canadian credit unions to lobby for the change, said members need not worry.

Read the full article here.

 

[Ally]

Banks raise interest rates for third time in a month

A new survey says more than four out of five home buyers feel comfortable with their debt but another hike in interest rates might get Canadians squirming next time they`re polled.

Canada and Mortgage and Housing Corp. surveyed 2,503 recent mortgage consumers between Feb. 11 and Feb. 28 and found 81 per cent were comfortable with their current debt levels. However, the survey was done before three successive hikes in interest rates that have seen the five-year fixed-rate closed mortgage climb from 5.25 per cent to 6.25 per cent in less than a month.

"Rates were low throughout most of the time [of the survey]]," said Pierre Serre, CMHC vice-president, insurance product and business development, adding it was unclear whether the 81 per cent figure might fall because of the hike.

Based on an average Canadian home sale price of $340,920 in March and a five-per-cent down payment, the minimum allowed, mortgage payments for a five-year fixed rate product have climbed almost 10 per cent.

As it has throughout this rate hike cycle, Royal Bank got the ball rolling Monday by adding another 15 basis points to its fixed rate product. Toronto-Dominion Bank was next, with most of banks expected to follow shortly.

Read the full article here.

 

[Ally]

Overtaxed? Tale of rising tax burden just isn`t true

Are we being crushed by the taxman? With the income-tax deadline looming and the dreaded HST just around the corner, the Fraser Institute report released last week that shows taxes gobbling up more of our income than food, shelter and clothing combined is falling on fertile ground.

The conclusion of the attention-grabbing study is that "The average Canadian family`s tax burden has been rising steadily for the better part of 48 years."

Feel the pain.

That conclusion fits with the Fraser Institute`s theme that we are generally overtaxed and our governments spend too much. It intuitively feels right, especially when we`re in the middle of figuring out how many thousands of dollars the %&$@$! government is going to take from us this year.

Unfortunately, it just isn`t true.

Even using the Fraser Institute`s own self-serving method of calculating tax burden, the facts don`t support the argument. Our tax burden has not been rising steadily since 1961, as advertised. In fact, over the past five years it has been steadily falling and it is now back to a level that it reached first in about 1972.

Read the full article here.

 

[Ally]

Consumer confidence tumble in April: Survey

OTTAWA — Consumer confidence took a steep dive in April, wiping out all the gains made in March, according to the Conference Board of Canada`s index of consumer confidence released Tuesday.

Nationally, consumer confidence fell 7.8 percentage points to 84.8 in April, according to the report.

"The national index has been bouncing up and down since the start of the year, and now stands significantly below its post-recession peak of 96.6 recorded in January," the report stated.

Consumer confidence levels varied greatly depending on the region, but all regions are lower compared to the start of the year. British Columbia — which hosted the Winter Olympics in February — dived 28.3 points to 92.8, and the Prairies dropped 17.5 points to 93.7. Quebec fell 14 points to 69.4, bringing it back to last place.

Read the full article here.

 

[Ally]

Luxury home sales soar in Q1

Luxury home sales soared in the first quarter of 2010 as affluent purchasers moved to take advantage of favourable market conditions across the country, according to a report released Monday by RE/MAX.

The RE/MAX Upper End 2010 Report, highlighting sales and trends in 13 major Canadian centres and five sub-markets, found that improved economic performance, increased personal wealth, immigration and foreign investment all contributed to a serious upswing in sales.

Virtually all areas experienced double and triple-digit increases between January and March of this year over 2009 figures for the same period.

Nine out of the 13 markets examined (69%) shattered existing records -- setting new all-time highs for first quarter activity in the upper end.

Read the full article here.

 

[Ally]

CMHC says 81% of Canadians are `comfortable` with mortgage debt

Canada Mortgage and Housing Corp. said Monday that 81% of recent homebuyers surveyed were "comfortable" with the level of their mortgage debt

Read the full article here.

 

[Ally]

Canada`s dollar plunges as U.S. greenback gains strength

TORONTO - Canada`s dollar suddenly fell more than a cent just before midday Tuesday after a major rating agency downgraded Greece`s debt to junk status.

Currency traders turned to the U.S. dollar — traditionally a safe haven during times of global turmoil — amid ongoing concern about Europe`s economy.

The loonie dropped to as low as 98.47 cents US shortly before noon.

Read the full article here

 

[Ally]

The top small and medium employers in Canada

Business success often stems from employee engagement. Some companies know this particularly well.

The Best Small and Medium Employers in Canada program is a partnership of the Queen`s Centre for Business Venturing and Hewitt Associates LLP. Participating companies are ranked by their employee-engagement scores and other factors, as measured by surveys of each firm`s employees, HR team and executives. The program is open to companies with 50 to 399 employees.

Here are the top rated companies - and how they get employees engaged.

Read the full article here.

 

[Ally]

Worry warts still have time to cushion their mortgages against rate hikes

TORONTO - The prospect of higher mortgage rates and stiffer rules that went into effect this week on qualifying for house loans have left Canadians scrambling for answers to their home financing questions before rates rise.

Many Canadians already faced with growing consumer debt are worried about how they`ll continue to make payments once mortgage rates rise. And many others, who want to get into the market ahead of rate hikes wonder how or if they`ll be able to do so.

Big Canadian banks have hikes their fixed-rate mortgage rates by as much as 0.85 per cent in recent weeks and the Bank of Canada said Tuesday that it could raise its key lending rate from 0.25 per cent as early as June, which brings variable and short-term rates into play.

And as the reality of higher rates creeps closer, mortgage holders face a slew of insomnia-inducing questions.

The answers are different for each homeowner or prospective homebuyer, mortgage experts say, but there are some general rules that wise mortgage holders follow in order to cushion themselves against rate hikes.

Read the full article here.

 

[Ally]

Canada facing `major drag` on 2011 growth: CIBC

TORONTO — With the economic recovery coming in force, Canada`s government will not only cut back on its stimulus spending from last year but swing to full fiscal restraint creating a "major drag" on growth in 2011, a report from CIBC World Markets warned Thursday.

Warren Lovely, government strategist with CIBC, said Canada is the only G7 nation on track to eliminate its deficit by 2015, and will be one of the most aggressive countries in attacking structural deficits.

"Turning (Canada`s) stimulus taps off will take roughly two percentage points out of GDP growth in 2011, removing the fuel that has seen today`s economic fire burn so brightly," he said. "The fiscal restraint won`t be as severe as that witnessed in the mid-1990s, but nonetheless signals downside risk to growth in 2011 and reduced prospects thereafter."

This also means the Bank of Canada will likely go slower on interest rate hikes than the market is expecting, he said.

In 2009, government spending contributed to 1.5 percentage points of annualized GDP growth, almost double the average of 0.8 percentage points in the rest of the decade.

Read the full article here.

 

[Ally]

Mark Carney hits Time`s Top 100

Mark Carney, governor of the Bank of Canada, has been named to Time Magazine`s Top 100 most influential people of 2010.

He was ranked No. 21 on Time`s list of 25 influential leaders. Brazil`s president, Luiz Inácio Lula da Silva, was named No. 1 on that list, with U.S. President Barack Obama coming in at No. 4. Other categories covered by the Time 100 list included thinkers, heroes and artists.

"Central bankers aren`t often young, good-looking and charming, but Mark Carney is all three -- not to mention wicked smart," the magazine said in its Top 100 issue.

The nomination comes after Mr. Carney, along with Finance Minister Jim Flaherty, scored an international coup at the recent Group of 20 meeting of finance and central bank officials when the alliance failed to endorse the possibility of a global bank tax.

The big European economies and the International Monetary Fund endorsed the universal tax, as a way of containing excessive risk-taking by the banks. However, Canada led a coalition of mostly big emerging economies in opposition to the levy. Further, the G20 directed the IMF to look at other options, including a Canadian idea that would see banks insure themselves through convertible debt -- a proposal first floated by Canadian banking supervisor Julie Dickson, and developed with the help of Mr. Carney.

Read the full article here.

 

[Ally]

Greece canary in fiscal coal mine

Nearly two years after the financial crisis that sank global capital markets and caused a global recession, Greece`s woes are drawing comparisons to the failure of Bear Stearns and Lehman Brothers Holdings Inc. If decisive action is not taken soon, some analysts suggest the risk to financial markets and the global economy could be just as drastic.

"This is like Ebola," Angel Gurria, secretary-general of the Organization for Economic Co-operation and Development, told Bloomberg Television yesterday. "It`s threatening the stability of the financial system."

Having weighed on markets for months now, the Greece crisis hit a new level of panic this week after rating agency Standard & Poor`s downgraded Greek government debt to "junk" status on Tuesday and also cut its rating on Portugal. Yesterday, it moved on Spain, cutting the country`s debt rating to "AA" from "AA+," putting it on par with Slovenia.

Markets were badly rattled on Tuesday but U.S. stocks managed to swing into the black yesterday and many analysts say an exceptional earnings season should be able to keep equities on an upward track.

Still, if Bear Stearns and Lehman epitomized all that went wrong with the financial system, Greece is a prime example of all that is wrong with the state of government finances.

Read the full article here.

 

[Ally]

Fixed mortgage may ease rate rise stress

The good news in the housing market these days isn`t just low interest rates.

Experts say that whether you choose a variable rate mortgage or a fixed rate for a set period of time, the difference over the long run is likely to be minimal.

"Rates have never been this low so Canadians are increasingly looking for advice when it comes to mortgages. The question of fixed versus variable takes on greater importance when you consider where rates are and the possibility that rates will start to increase towards the end of this year," said Collette Delaney, senior vice-president of mortgages and lending at the Canadian Imperial Bank of Commerce.

Experts typically say that a fixed-rate might bring more peace of mind to first-time home owners, and that those who are further into their mortgage payments may like to try a variable rate to save some money.

But that may not be right for everyone.

"There is really no generic answer," Delaney said. "What`s right for me may not be right for you or someone else because we`re all at different stages in terms of financial planning and lifestyle."

Read the full article here.

 

[Ally]

Bank of Canada too hawkish on rates, CIBC report argues

OTTAWA — CIBC is casting doubts on the Bank of Canada`s analysis of the country`s economic performance, suggesting it may be overestimating the potential threat from inflation and is too ready to begin raising interest rates — particularly since the dollar is high and government spending is on the decline.

CIBC chief economist Avery Shenfeld says in an analysis that the central bank`s dependence on the output gap — the amount of unused capacity in the economy — may be an unreliable indicator of inflationary pressures.

Shenfeld adds that the output gap is a notoriously difficult indicator to measure accurately.

"The IMF (International Monetary Fund) judges Canada`s gap as more than half per cent wider than the Bank of Canada estimate," he writes.

"That doesn`t sound like much, but it would make a material difference in how hard we need to slam on the brakes through interest rate hikes in the coming year."

Read the full article here.

 

[Ally]

Bank of Canada expected to raise rates - but not yet

OTTAWA -- The Bank of Canada is not expected to raise interest rates at its scheduled announcement this coming Tuesday, but it might provide clarity on its intentions on whether it will act earlier than previously planned.

The central bank`s overnight lending rate has been set at a record-low 0.25 per cent since last April, when it took unprecedented steps to mitigate the impact of the recession.

Since then, numbers on gross domestic product, employment and - perhaps most important - inflation have come in higher than expected.

This has created anticipation for near-term interest-rate hikes from the Bank of Canada.

When the central bank lowered its rate to an all-time low, it said it would keep it there until - at earliest - the second half of 2010, which starts in July. But this was "conditional on the inflation outlook," it said at the time.

Read the full article here.

 

[Ally]

IMF upgrades Canadian economic forecast

OTTAWA - The International Monetary Fund`s latest economic outlook has Canada leading G7 countries in economic growth this year and next, while the organization`s global forecast was upgraded due to a quicker-than-expected recovery from recession.

The IMF - an organization whose mandate is, among other things, to facilitate proper functioning of the world`s financial systems - said in its World Economic Outlook that Canada`s gross domestic product would grow 3.1 per cent this year and 3.2 per cent in 2011.

"Canada entered the global crisis in good shape, and thus the exit strategy appears less challenging than elsewhere," the IMF said in its report. "The main priorities are returning Canada`s debt to a downward trajectory, ensuring that financial stability remains intact - amid rising house prices - and raising Canada`s labour productivity and potential growth."

The IMF`s forecast for Canada for this year was upgraded from the 2.6 per cent growth it expected in January, though the 2011 forecast was downgraded from 3.6 per cent.

The IMF`s expectations regarding Canada trails the Bank of Canada`s latest forecast, released Tuesday, for 3.7 per cent growth this year. Canada`s central bank, however, is slightly more cautious for next year, predicting a 3.1 per cent economic expansion.

Read the full article here.

 

[Ally]

Canada`s economy grows 0.3% in February

OTTAWA — The Canadian economy grew for the sixth straight month in February, led by the manufacturing sector.

Gross domestic product rose 0.3 per cent during the month, Statistics Canada said Friday, in line with economists` expectations.

Fourteen of 21 major sectors advanced in February, the federal agency said. Manufacturing output grew 1.2 per cent and "accounted for nearly half of the overall growth in gross domestic product."

The retail sector added 0.6 per cent, with gains at clothing stores, alcohol outlets, new car dealers and gasoline stations. Construction was up 0.1 per cent on strong residential activity.

"The mining sector, with the exception of oil and gas extraction, also contributed to the growth in February," the agency said.

Read the full article here.

 

[Ally]

A Greek tragedy worthy of Sophocles

The Greek tragedy playing out across the eurozone should serve as a cautionary tale for anyone who still harbours the naive belief that national debt is benign.

Even before Standard & Poor`s cut Greece`s debt to junk status this week, there was talk of a possible default and growing concern that the contagion would spread to other vulnerable European countries, including Portugal, Spain and Italy. And it has. Every marginal member of the European Union is being viewed as a potential credit risk.

Greece is a small player in the global economy but the fallout from its debt mismanagement -- which some have described as a Ponzi scheme, borrowing from new lenders to pay interest on old debt -- has battered the euro and called into question the creditworthiness of other nations where the amount owed approaches or exceeds gross domestic product.

Ernst & Young estimates that government debt as a percentage of GDP will rise next year to 129 per cent in Italy, 120 per cent in Greece, 107 per cent in Belgium, 96 per cent in France and 93 per cent in Ireland. Britain and the United States are not far behind at 75 per cent; in fact, add in their unfunded liabilities for pensions, health care and other commitments, and the figures rise to 103 per cent and 122 per cent, respectively.

Canada boasts the lightest debt burden in the G8, with an official ratio of 35 per cent, although total debt-to-GDP is closer to 53 per cent. However, Europe`s woes have not gone unnoticed at home, where financial markets swooned and the Canadian dollar soared against the euro. Neither will Canada be fully insulated from another global credit crunch, which some observers see as a likely outcome of sovereign insolvency. Besides, Europe is an important export market for Canadian goods and demand could dry up in tight money conditions. International financial institutions that Canadian banks do business with are paying the highest rates ever for credit-default swaps -- a type of insurance against bond defaults -- and these higher costs will ripple through the financial system.

Read the full article here.

 

[Ally]

Greek crisis `serious,` could imperil Canadian economy, says BoC`s Carney

OTTAWA - Bank of Canada governor Mark Carney is warning G20 countries to come to terms with the full implications of the Greek crisis and debt overhangs in other countries, or risk a setback to the global economic recovery.

Canada`s top banker told a Senate committee Thursday that he does not believe the problems emerging in Greece and other southern European countries will lead to a second recession, but they could hamper the recovery.

If markets respond to Greece`s appetite for debt by making borrowing more expensive overall, Carney says there will be an impact on Canada`s growth.

"The situation is serious," he said, adding that if appropriate steps are not taken "one can expect an increase in longer-term interest rates on a global level."

Read the full article here.