April 2010

[Ally]

Attending trade shows critical software developer`s success

North Vancouver software developer Neil Osborne believes attending trade shows is absolutely critical for entrepreneurs trying to sell their product.

The 68-year-old president of Investit Software Inc., who now markets 80 per cent of his business software in the U.S., had no contacts south of the border when he started the company 12 years ago.

"When I launched, the Internet had just started and I didn`t know one American," Osborne said in an interview. "It started out with having booths at important trade shows. My first one was 11 years ago at the National Association of Realtors` annual convention in Orlando, Florida. It attracted 25,000 people. I realized very quickly that attending these shows was critical to developing my business. I generated a lot of sales out of those shows.

"But [at first] I nearly went bankrupt."

Osborne said he also utilizes real estate boards across North America as marketing channels. Osborne, who launched his company with $20,000, has two primary software programs: Investit Pro, which services the real estate industry through real estate investment analysis; and Investit Decisions, which provides cost-benefit analysis for any industry or non-profit agency.

Read the full article here.

 

[Ally]

New rules for rental properties could squeeze first-time home buyers

VANCOUVER, B.C. - Buying a house in the hot housing markets of Vancouver, Toronto and other major cities in recent years has been a possible dream for some first-time homebuyers only because many of those houses had suites they could rent out.

But new rules coming into effect April 19 will all but wipe out that advantage in the eyes of banks handing out mortgages.

"It makes it much more difficult for people with rental properties to qualify for their own mortgage on their personal residence," said Vancouver mortgage specialist Patrick Mulhern.

The new regulations are designed to prevent speculation in the market, said Jack Aubrey, of the Canada Mortgage and Housing Corporation.

But Vancouver mortgage agent Mike Averbach said the new rules will do little to prevent investors from gambling in the housing market.

"They haven`t decreased risk," he said. "They`re just not allowing you to use the income."

Read the full article here.

 

[Ally]

CIBC Weekly Market Insight

NORTH AMERICAN & I>NTERNATIONAL ECONOMIC HIGHLIGHTS
1. It seems that the Bank of Canada is signalling that it will begin raising rates in the summer, if not sooner. What is the expectation for the overnight rate for the next 24 months?
!--fontc-->By now it is clear that the Bank will move by June or July. However, we expect that the first leg of tightening will be moderate (only 75 basis points in Q3 of 2010) and the bulk of the tightening will be in 2011. Look for the overnight rate to reach 2% within 24 months.
2. How do you see the Canadian yield curve reacting to that forecast?
We expect some flattening in the yield curve in the next six months as short-term rates catch up with-long term rates. But we also expect to see a steeper yield curve down the road; the need to raise short-term rates will be limited by a softening economy in the second half of the year, deleveraging by consumers and government policies that will start acting as a negative for the economy. At the same time, we expect some upward pressure on long-term rates due to fiscal consideration and some inflationary fears.
3. Some of your peers have commented on the Bank of Canada raising the overnight rate while the Federal Reserve Bank maintains a near-zero target for the federal funds rate. Is this really a sustainable course of action for the Bank of Canada and how do you see this playing out?
No. That`s why we expect the first wave of tightening to be limited. There is a limit to what extent the Bank can fly solo without the Fed. Note that it happened in the past—1992 and 2002—where the Bank moved independently of the Fed only to reverse these moves a few months after. We think that most of the increase in rates will be in 2011 when the Fed starts moving.

Read the full article here.
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[Ally]

Financial Post Interviews Don:
Tighter Mortgage rules may lead to more cheating

Mortgage fraud may not be the most serious crime in the grand scheme of things, but it`s not something the government should be helping. But that`s exactly what real estate professionals say is a likely result of the new mortgage rules being put into place on April 19.

"There`s going to be a dramatic increase in mortgage fraud again," says Don Campbell, president of the Real Estate Investing Network, a Calgary-based association of investors who collectively own more than $3 billion in property. "You watch this thing start to take off."

The reason? It`s virtually impossible for investors to buy a third rental property without putting 20% down because the new Canada Mortgage and Housing Corp. rules use a 50% add-back policy instead of an 80% offset for rental income. Essentially, that means investors get less mileage from the rent that is typically used to pay off the mortgage.

The more difficult financing multiple properties becomes, the more tempting it is to cheat the system. One way to get around the rules is to not claim properties as investment vehicles. "People are going to start signing documents and say, `Ah, yes, I`m moving in," or `This is my principal residence,` just to get a mortgage that doesn`t require 20% down, but is 5% down," says Campbell.

The worst, though, is that there`s very little to stop people from committing mortgage fraud. Credit bureaus do not report existing mortgage debts to financial institutions performing credit checks – although that is starting to change – and unscrupulous brokers, bankers and lawyers sometimes turn a blind eye to get the deal done.

"It`s almost like an honour system," says Peter Kinch, a mortgage broker based in Vancouver under the Dominion Lending Centres umbrella. "It`s not just brokers. I`m shocked by the number of bankers who will say, `Let`s call this owner-occupied so it`ll be easier and we won`t have to go through the hassle.` They`re getting around the rules through a lack of disclosure."

Read the full article here.

 

[Ally]

Interest rates to remain low through 2011: CIBC

OTTAWA — With the Canadian economy doing surprisingly well over the past six months, many see higher interest rates from the Bank of Canada in the not so distant future, but according to a report released Thursday from CIBC`s chief economist Avery Shenfeld, rates are likely to remain at a very low 2.5 per cent through to 2011 — not the seven to eight per cent forecast by some.

In CIBC World Markets` latest Global Positioning Strategy report, Shenfeld lists several reasons for Bank of Canada Governor Mark Carney to keep interest rates subdued after July. He points out that the U.S. will probably have a more gradual approach to raising rates and if Canada gets too far ahead, that could send the Canadian dollar soaring.

"While factories are recovering in Canada alongside a global industrial revival, output remains nearly 20 per cent below the pre-recession peak, and wages are now substantially above those stateside without the productivity gains to match. There`s only so much of a competitive challenge that non-resource exporters can take in short order," Shenfeld said.

He also pointed out that inflation is not expected to rise much further and stimulus spending is expected to be reigned in by governments — including Canada`s — which will slow growth.

Read the full article here.

 

[Ally]

Economy adds 18,000 jobs in March

OTTAWA — Canada`s employment rolls continued to rise in March, but at a slower pace than expected, as the country`s economic recovery maintained its momentum.

Statistics Canada said nearly 17,900 jobs were created last month, with the unemployment rate remaining at 8.2 per cent. Economists had expected between 20,000 and 26,000 new positions in March and a jobless rate of 8.1 per cent.

The federal agency said the March number brings total job gains since July 2009 to 176,000. In February, 20,900 positions were created and 43,000 were added in January.

"Part-time employment was up by 32,000 in March, more than offsetting full-time losses," the agency said. "Despite the gain in March, part-time employment has fallen by 0.6 per cent since July 2009, while full-time work has grown by 1.4 per cent."

BMO Capital Markets economist Benjamin Reitzes said "despite the below consensus gain, Canadian employment has risen in the first three months of 2010, the best string since late 2008."

Read the full article here.

 

[Ally]

Softwood tariff slashed by one-third

Download the report below.

 

[Ally]

Scotiabank sees rates at 3% by end of 2011

The Bank of Canada is set to embark on a series of interest rate hikes, starting in June, that will see its benchmark rate climb from its historic low of 0.25% to 3% in little over a year, Bank of Nova Scotia`s chief economist said Friday in his latest outlook.

Warren Jestin said the move away from short-term "emergency level" rates is necessary due to inflationary pressure that is expected to emerge from stronger-than-expected growth. By the end of next year, the central bank`s target rate should be 50 basis points higher than the comparable rate set by the powerful U.S. Federal Reserve, he said in his latest update to Scotiabank`s economic forecast.

The increase of 275 basis points, to 3% by the end of the third quarter of 2011, is bigger than what Mr. Jestin had previously anticipated. His earlier forecast had the central bank target rate climbing by a cumulative 200 points.

A Bloomberg survey of economists anticipate the Bank of Canada rate hitting 1.25% by the end of this year.

The Bank of Canada is set to release its latest interest-rate statement on April 20, at which time it is expected to upgrade its forecast for economic growth – which for the first three months of the year is expected to be 5%-plus on an annualized basis. The central bank had forecast expansion of 3.5%.

Mr. Jestin has penciled in growth of 3.3% in Canada for 2010.

Read the full article here.

 

[Ally]

Back off mortgage market, Waugh warns

OTTAWA -- Global financial reforms under consideration threaten to unravel Canada`s unique mortgage market and force lenders to package and sell residential loans much as their U.S. peers did, to great detriment, Bank of Nova Scotia chief executive Rick Waugh warned yesterday.

This represents the latest volley from Canadian banks, which are growing increasinglyuncomfortable with global efforts to fix flaws in financial markets to prevent another credit crisis. But this time, Mr. Waugh has delved into specifics, suggesting what Canadian consumers and the marketplace stand to lose.

The problem is the new standards, being developed by the so-called Basel committee, fail to take into account that insured Canadian mortgages are guaranteed by the federal government.

Under Canadian law, mortgage insurance is mandatory if the down payment is 20% or less, in an effort to protect lenders from default. As it happens, the dominant provider of coverage is Crown-owned Canada Mortgage and Housing Corp. Further, the federal government backstops the coverage in the event of a default.

"But there is no credit given to that under the proposed rules," said Don Drummond, senior vice-president and chief economist at Toronto-Dominion Bank. "That`s got all the Canadian banks agitated."

Read the full article here.

 

[Ally]

CIBC sees rates staying low into next year

OTTAWA - With the Canadian economy doing surprisingly well over the past six months, many see higher interest rates from the Bank of Canada in the not so distant future, but according to a report released Thursday from CIBC`s chief economist Avery Shenfeld, rates are likely to remain at a very low 2.5% through to 2011.

In CIBC World Markets` latest Global Positioning Strategy report, Mr. Shenfeld lists several reasons for Bank of Canada Governor Mark Carney to keep interest rates subdued after July. He points out that the U.S. will probably have a more gradual approach to raising rates and if Canada gets too far ahead, that could send the Canadian dollar soaring.

"While factories are recovering in Canada alongside a global industrial revival, output remains nearly 20% below the pre-recession peak, and wages are now substantially above those stateside without the productivity gains to match. There`s only so much of a competitive challenge that non-resource exporters can take in short order," Mr. Shenfeld said.

Read the full article here.

 

[Ally]

Interest rates unlikely to soar: CIBC

Canadian interest rates will probably begin rising from July but are unlikely to soar as significant uncertainties remain in global economies, a new report by CIBC World Markets found.

Interest rates are likely to remain low by historical standards at no more than 2.5% at least until the end of 2011, CIBC Chief Economist Avery Shenfeld in the report.

Canada`s strong economic recovery, with growth expected to be three times the G-7 average in the first quarter, has led to expectations the Bank of Canada will begin moving aggressively to raise rates in coming months to tame the risk of inflation.

Core inflation is now just above the central bank`s 2.1% target rate and many other economic indicators have exceeded the bank`s forecasts. Expectations for a rate rise have attracted investors to the loonie, which on Tuesday hit parity with the U.S. dollar for the first time since July 2008.

"While markets may be aggressive in their expectations for rate hikes after the first increase expected in July, a gradualist approach is more likely," he said.

Shenfeld cites several reasons for his forecast that rate rises will be gradual, including continuing uncertainty about the strength of the U.S. recovery.

Read the full article here.

 

[Ally]

Sound advice for property investors

The biggest mistake a real-estate investor can make is to buy on a tip, property expert Don Campbell says.

Investors must back up their decisions with hard facts, treating exuberant gab from a friend with healthy skepticism, says Campbell, president of the Abbotsford-based Real Estate Investment Network.

Potential investors should seriously question advice flowing from conversations in a pub.

"They go out and buy a rental property because their uncle`s son did really well in real estate," Campbell said in an interview. "Or they hear about a new golf course or airport expansion and they run out and buy.

"That`s just not sensible."

Campbell explores these and other pitfalls of investing in his new book, 81 Financial and Tax Tips for the Canadian Real Estate Investor (Wiley, $36.95).

Campbell and his co-authors, Navaz Murji and George Dube, begin their book with a little avuncular advice: Don`t make the mistake of linking tax-avoidance tactics with business success.

Read the full article here.

 

[Ally]

Subprime mortgages alive here

Rod and Joyce Marentette bought their house in Chatham, Ont., a month before getting married in 2005. The economy was booming and credit was plentiful, so even though they didn`t have a down payment and Rod had recently gone through a bankruptcy, there were plenty of mortgage companies willing to lend to them.

The house was $98,000 and with the additional legal fees the total price came to $100,000, all of which they were able to borrow from the mortgage company.

Things took a turn for the worse when Rod, who is 39, suffered a workplace injury and had to leave his job as a factory supervisor. But Joyce, 40, was determined to hold on to the house, taking on extra work to make ends meet. When Rod finally recovered two years later, he found a new job with a construction company. While the paycheque was lower, it took the financial pressure off.

That`s when they got the call from the mortgage company. It was the year the credit crunch hit. The economy was in a tailspin and lenders around the world were scrambling for liquidity. The mortgage, they were informed, could not be renewed and as the company was closing its subprime business, they would have to find another lender.

Read the full article here.

 

[Ally]

Reform must not change our mortgage market: RBC

Any changes to global financial rules that would force Canada to adapt a U.S.-style mortgage market would be "absurd," said Gordon Nixon, chief executive of Royal Bank of Canada.

Mr. Nixon, head of Canada`s largest bank, threw his weight behind warnings issued this week that global financial reforms under consideration could force Canadian banks to do more mortgage securitization, much like U.S. lenders did with great fanfare last decade but ultimately led to the financial crisis. This is because the new rules would not recognize that the mortgages are government-backed, and force Canadian banks to either move the mortgages off their balance sheets or issue fewer residential loans in order to maintain sufficient capital levels.

In an interview with BNN, he said it is crucial that "Canada`s mortgages don`t get caught up in international regulation such that we end up having to move our mortgage market to a U.S. style system which was the source of this problem to begin with. It would be absurd to say the least."

However, Mr. Nixon said he believed that the mortgage provisions, along with a number of other regulatory "inconsistencies," would eventually be settled and worked through by global policy makers.

"Ultimately, reasonable logic will prevail," he said, adding there are many stakeholders involved in trying to piece together new rules aimed at preventing another crisis – among them politicians, who are dealing with the fallout of having to use taxpayer money to bailout the financial system. (Ottawa did not have to offer direct aid to prop up Canadian banks during the crisis.)

Read the full article here.

 

[Ally]

The high price of mortgage loyalty

Bank of Montreal has put a price, or mortgage rate, on loyalty.

The financial institution raised the stakes in its battle with mortgage brokers -- it doesn`t use them -- by offering a new five-year fixed-rate mortgage for 3.75%, which it is advertising as the lowest among the banks. Even with interest rates on five-year terms rising by 60 basis points last week, BMO has so far stuck with its now steeply discounted rate. The posted rate on a five-year mortgage is 5.85% at most banks, while the discounted rate is in the 4.25% range.

BMO could raise the rate soon, however, so consumers should get pre-approval for the product, which guarantees the rate for the next 90 days.

But like all things too good to be true, BMO`s new product has some drawbacks. In return for the low rate, consumers will not be able to get out of the mortgage, even if they are willing to pay a financial penalty.

"The other feature of the product, and it`s a straightforward product, is the only way the customer can get out of the mortgage is to sell the property," says Frank Techar, president and chief executive of personal and commercial banking in Canada for BMO Financial Group.

Read the full article here.

 

[Ally]

Surge of new listings takes pressure off a hot market

A jump in new property listings last month should help keep the pressure off Lower Mainland home prices which, during the past year, have been fuelled by historic-low mortgage rates.

An additional 7,004 listings were added to the Multiple Listing Service in the region covered by the Real Estate Board of Greater Vancouver during March.

That figure was up 60 per cent from the same month a year ago, the organization reported Tuesday.

Benchmark prices, the average for typical homes sold, also reached a new all-time high of $584,435 across all property types.

That was up 20 per cent from a year ago and almost three per cent above the previous peak in May 2008.

"We were expecting to see listings increase," Robyn Adamache, senior analyst with Canada Mortgage and Housing Corp., said in an interview.

"Certainly any time you see prices rising is generally when you see more listings coming on line."

Read the full article here.

 

[Ally]

Dollar flirts with parity as investors seek new haven

The Canadian dollar reached parity with its U.S. counterpart Tuesday, as investors looked to park their cash in the fundamentally sound Canadian currency amid troubles in Europe, but backed down later to end the day just short of par.

The dollar closed Tuesday at 99.88 cents US, but analysts indicated that the day`s earlier highs were only the start for the Canadian dollar`s trade above the $1 US mark.

Parity was first achieved briefly at about 4 a.m. Pacific Time in London markets, when the dollar hit $1.0001 US, achieving a level last touched in July 2008, before straddling parity for much of the day`s trading.

"The Canadian dollar`s underlying fundamentals are still a strong story, and that`s what`s supporting it," said John Curran, senior vice-president of Canadian Forex.

Among the factors causing a ripple in foreign-exchange markets are Greece`s fiscal problems. The euro sank again -- down about 200 basis points since Friday -- on reports that Germany wants higher interest rates on loans to Greece. There are also suggestions Greece wants to change the proposed wording in the recently announced framework for assistance.

Read the full article here.

 

[Ally]

Flat-fee realty firm aims to open range of services

METRO VANCOUVER - So far, Surrey-based realtor Mayur Arora has one client and the hope of establishing a flat-fee based business in real estate services that capitalizes on the Canadian Real Estate Association`s relaxation of its rules for access to its proprietary Multiple Listing Service system.

"This has opened a door of opportunity for me to do this, and I really wanted to try," Arora said in an interview. "That`s exactly where we`re at."

At the least, Arora`s launch will help propel the debate over MLS that has raged since February when the federal Competition Bureau filed a complaint with the Competition Tribunal on charges that CREA was being restrictive about who can access the service and what other services consumers have to buy from realtors in order to sell properties through MLS.

Arora said he wants his company, One Flat Fee, to be a cheaper alternative on the seller`s side for listing and advertising properties.

For a flat $649, he will simply list a property on MLS, post an ad on its website and on free advertising sites such as Craigslist and Kijiji, then forward all contacts from prospective buyers directly to the sellers, who have to handle the rest of the process themselves.

Read the full article here.

 

[Ally]

Metro Vancouver posts steepest housing price gains

Metro Vancouver saw the steepest increase in home prices of Canada`s major markets in the first quarter of this year in a sales rebound characterized as an "irrational" response to market conditions that won`t be sustainable, according to national realtor Royal LePage.

The average price of a detached bungalow on Vancouver`s east side hit $674,180 in the first quarter of 2010, a 25-per-cent jump from the first quarter of 2009, realtor Royal LePage reported Thursday in its quarterly survey of major-market housing prices.

A standard Vancouver east-side condominium saw an even steeper gain of 29 per cent to hit an average $402,000.

An average Vancouver west-side bungalow, which dipped as low as $950,000 in the first quarter of 2009, had roared back to an average $1.15 million, a 21-per-cent gain, in the first quarter of this year.

"Both the precipitous decline [in house prices] that occurred during the recession and the very sharp recovery have been steeper and happened quicker than expected," Royal LePage CEO Phil Soper said in an interview.

The concern now, Soper added, is whether or not the housing rebound, which was heavily influenced by the stimulus of low mortgage rates, will be matched by real economic growth and significant employment gains.

Read the full article here.

 

[Ally]

Waiting for the other shoe to drop in the U.S. Housing Market

In its early days, the Obama administration argued over whether the financial system or the real economy should be the economic priority. Critics disputed the premise. They argued that no lasting recovery would be possible until housing markets were healthier.

Yet the housing-market recovery has almost run out of steam. Sales of new and existing homes have fallen for three consecutive months. As a result inventories have grown, putting downward pressure on home values. According to some measures, prices are dropping again: the Federal Housing Finance Agency reported national declines in December and January.

Things looked rosier last autumn. An $8,000 homebuyer tax credit helped stabilise both prices and sales, while Federal Reserve purchases of mortgage-backed securities held down mortgage rates. House values climbed across the country, and existing-house sales hit levels not seen since the end of the boom in early 2007. By September building-industry confidence had more than doubled from January`s all-time record low, generating optimism about new employment. Anxious to keep the recovery going, Congress extended the tax-credit programme to the end of April this year. But the magic has not survived the winter.

Read the full article here.