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August 2015 Canadian Economic Fundamentals

Ally

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Latest Housing forecast document from RBC Economics giving mixed reviews to Canada’s housing markets. Better check out your region

  • Canada’s housing market is poised to post one of its best years on record in 2015 despite the Canadian economy being hit by a significant negative shock (plunge in oil prices) and a spike in condo completions. Low interest rates continue to provide substantial stimulus for housing demand at this stage.
  • Strong momentum is not equally shared across the country, however, with home resale activity plummeting in oil industry sensitive markets (Alberta and Saskatchewan) contrasting with record or near-record levels in Ontario and British Columbia.
Read the full report here.
 

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Ooops, CMHC changes/updates its math for mortgage qualifying under the coming new rules on secondary suite properties

In its original notice on July 24 (which CMT covered here), the insurer said property taxes and heat would have to be included in a customer’s debt ratios when applying for a mortgage on an owner-occupied property with a rental suite.

But when we did the math shortly after running that story, the numbers didn’t make sense. The new policy actually made it harder to qualify than the current policy, which isn’t too logical for a measure meant to spur secondary suite formation.

Read the full article here.
 

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Canada rates highly again: Which economies have the most developed financial systems?

Hong Kong’s financial system is the best in the world for supporting economic competitiveness and growth, according to the World Economic Forum’s Global Competiveness Report 2014-2015.

The report evaluates the level of development of 144 of the world’s financial systems, based on their efficiency and levels of trustworthiness and confidence, as part of its overall competitiveness ranking.

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Darn, facts get in the way of rhetoric again: Are Canada’s newly-created jobs part-time, precarious and low-paid?

In speeches last week, NDP leader Tom Mulcair criticized Stephen Harper’s economic record. On August 12, he said, “Mr. Harper boasts of job creation, but you know what? The jobs that are being created are mostly part-time, precarious, low-paid jobs.” He made the same point again Friday morning.

But is it true? Let’s examine each point in turn.

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O'Leary: No cracks in Canada's housing market

Watch the video here.
 

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Canada is freer than the U.S.: Fraser Institute

TORONTO - Canada is outranking the United States when it comes to personal, civil and economic freedoms, according to a new Fraser Institute report.

The Human Freedom Index, released Tuesday by the public policy research group, shows Canada ranks sixth, while the U.S. lies many spots back at 20th position. The index, which ranks 152 countries worldwide, is based on information taken from 70 different data sources from 2008 to 2012.

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The hunt for yield continues in 2015

Oh yes, the Baby Boomers are at it again. Being the largest cohort of the population in North American history, we baby boomers have changed every industry and every financial vehicle we have touched. We witnessed it changing the dynamics of the automobile industry (yes, you can blame us for the mini-van), you witnessed us change the food industry (yes, blame us for the industrialization of food), and you even witnessed us changing the real estate industry.

Now we are changing the demand curve in the financial world. We baby boomers are aging, looking to slow down or even retire; however, it is at the exact time that interest rates are at record lows, returns on bonds and GIC’s are below inflation and our income replacement plans aren’t turning out quite as we expected. In previous generations, the retirement income plan seemed rather simple - take your savings, put it in a nice 7-10% yielding bond, and live off the avails of your hard work.

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Will the Bank of Canada be moved by GDP, jobs data?

There are really just two dates worth circling on the economic calendar in the coming weeks. And both will be crucial to any decision by the Bank of Canada to move the dial on interest rates. Ordinarily, readings on gross domestic product - the direction, depth and momentum of the economy - would carry a lot of weight with policy-makers and privatesector analysts. So, too, would monthly employment numbers and how they translate into jobless rates across the country.

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CMHC goes from insuring 90% of mortgages to only 50% - and that's as low as it plans to go

Canada Mortgage & Housing Corp. Chief Executive Officer Evan Siddall said that after years of cutting its share to reduce taxpayer risk to the $1.2 trillion mortgage market, the agency plans to hold firm. CMHC’s stake of the new mortgage-insurance business has dropped from about 90 per cent during the 2008 financial crisis, and a pre-crisis low of 57 per cent.

“We’re very comfortable with our market share around 50 per cent,” Siddall said at Bloomberg’s Toronto office May 22. “It’s important for us to have a substantial presence in the marketplace so that we can give access and information to Canadians, we can give good policy advice to government” and can act as a shock absorber in case of a financial crisis.

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Loonie sinks to 11-year low as speculation of Bank of Canada rate cut rises

TORONTO — The Canadian dollar sank against its U.S. counterpart on Monday, to its lowest level in 11 years, as crude prices fell 4 per cent after Chinese stock markets took their biggest one-day hit since the financial crisis.

A recent string of disappointing data out of China, including a survey on Friday that showed further deterioration in the country’s manufacturing activity, sparked expectations Beijing might take steps to sooth markets.

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Hot real estate markets driving household wealth

Canadians grew wealthier in 2014 as they saved more money while slowing their pace of borrowing, leaving many households better prepared to weather falling oil prices and recent economic downturns.

Household debts climbed 2.9 per cent on average last year while assets grew 5.5 per cent, pushing average household net wealth to $589,511 in Canada, according to the latest WealthScapes analysis by Environics Analytics.

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Canadian cap rate update

With a few notable exceptions, cap rates remained stable or declined for most property types and classes in Canada’s major real estate markets during the first half of 2015. That largely parallels trends in the 46 U.S. markets also analyzed in CBRE’s recently released North American cap rate survey, although Canadian cap rates are generally lower and offer narrower spreads over 10-year bond rates.

Across the 10 surveyed Canadian metros, average rates dropped most steeply in Class AA downtown office, urban multi-residential and neighbourhood/community retail properties compared to the first half of 2014. Class B downtown office and suburban hotels were the only property types with an upward trajectory.

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As a follow-up to the past weekend's @reincanada Conference. Multi-Family continues to rate most stable

Condo-quality purpose-built rental apartments are a growing trend across the nation and the most stable asset class in Canada, according to a new report.

Colliers International’s Multi-family Real Estate Report 2015 examines the state of the market in eight cities: Calgary, Edmonton, Montreal, Ottawa, Toronto, Vancouver, Victoria and Winnipeg.

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See what a $1,200 apartment rental looks like across Canada

TORONTO — New data comparing rental prices from coast to coast reveals how much more, or less, your neighbours are paying every month.

RentSeeker.ca, one of Canada’s largest and most visited online apartment finders, has published the average costs for apartment rentals in cities across Canada.

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Housing demand to surge over next 10 years

The Mortgage Bankers Association believes that between 13.9 and 15.9 million additional households will be formed by 2024, making the next decade one of the strongest in housing in U.S. history.

In their new research paper, titled Housing Demand: Demographics and the Numbers Behind the Coming Multi-Million Increase in Households, the MBA’s researchers conclude that the housing demand surge will be driven by Hispanics, Baby Boomers, and Millennials.

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TransCanada inks Energy East deals with major gas distributors

TransCanada Corp. has removed a key obstacle to its proposed $12-billion Energy East pipeline by agreeing to address the concerns of three big natural gas utilities.

Calgary-based TransCanada and the three gas distributors – Gaz Métro Ltd. Partnership, Union Gas Ltd. and Enbridge Gas Distribution Inc. – said on Monday they have signed an agreement in principle to ensure the natural gas supply in Ontario and Quebec is not threatened by the conversion of a gas pipeline to carry crude oil from Alberta and Saskatchewan to the Ontario-Quebec border .

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Canadian home sales dipped slightly in July

Canadian home sales, as tracked through the MLS systems of real estate boards and associations across the country, dipped 0.4 per cent from June to July. This marks the second consecutive month of reduced home sales activity, reports the Canadian Real Estate Association (CREA). However, CREA adds, sales activity in May, June and July reached its highest levels for those months in more than five years.

About half of all local markets showed sales decreases, which were most pronounced in Hamilton-Burlington and the Durham Region, likely due to an insufficient supply of listings following record sales levels in June. Sales in Newfoundland and Labrador, meanwhile, increased the most on a month-over-month basis.

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Low rates, valuations make Canadian REITs 'look interesting' again

The recent earnings quarter was disappointing for Canada’s real estate investment trusts, with growth below long-term averages. But a pullback in share price and a lower rate environment might be a reason to give them a second look.

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Some vital perspective on the Conservative's economic record

Several years ago, a Report on Business story highlighted this newspaper’s commitment to providing “perspective” in its news stories. I have long considered that a laudable and necessary component of professional journalism. Unfortunately, it’s all too rare in today’s print and electronic media.

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One for the price of two - it could happen to you when you buy Canadian real estate from a non-resident

The first time I broke the news to a New York lawyer that his client would not receive the expected sale proceeds at closing was a memorable experience. He launched into a profanity-laden tirade that culminated in a suggestion requiring a level of flexibility I do not possess. The experience could easily have been more memorable. Had I not taken the necessary precautions discussed below, our client might well have been stuck paying double for his property and I would likely have had to deal with a lot worse than some colourful language.

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