Monthly Archives: July 2011

RBC: Alberta to Post Strongest Sales & Price Growth in 2012

Posted on July 28, 2011 | 1 Comment

With the plethora of forecasts and research notes being released, I missed the following offering from RBC last week- “Canadian home resale market forecast update: Still heading toward moderation“

Report Highlights

  • Out of the provinces, the Alberta market is expected to record the strongest growth in existing home sales in 2011 and 2012, however the effect on prices will be felt only next year, as property values in the province are expected to appreciate marginally this year.
  • The Alberta market is expected to lead the way with growth rates of 7.0% and 6.2% in 2011 and 2012, respectively. This would, however, represent only a partial recovery from the substantial drop of  13.6%  in 2010.  The forecasted resales levels of 53,200 units and 56,500 units this year and next will pale in comparison to the 72,000 average reached during 2006-2007 at the height of Alberta’s housing boom
  • The combination of attractive housing affordability and the broadening economic recovery in Alberta will support stronger housing demand going forward.
  • The annual average value of a detached bungalow in Alberta to increase 0.5% in 2011 and 3.7% in 2012.   The 3.7% increase is the highest of any of the provinces.

Source: RBC (click to enlarge)

Source: RBC (click to enlarge)

To read the entire report, click here

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FFWD article: “The Economy Is Great”
July 28, 2011

THE REAL REAL ESTATE NUMBERS

Meanwhile, Alberta leads the country in mortgage arrears (not making mortgage payments for three consecutive months or more), almost doubling the national average. “During the boom there was a bit of a frenzy to get in or, ‘I’m going to miss this opportunity,’” says Ann-Marie Lurie, senior economist for the Calgary Real Estate Board. “And it causes people to not make their best financial decisions.”

No kidding. If you were one of the 30,000 Calgarians who purchased a single-family home or condominium during Calgary’s real estate boom in 2007, there’s a very good chance you’re home is worth far less now than when you bought it. Median prices for single-family homes and condos have yet to recover from their frenzied highs.

Meanwhile, TD Bank is forecasting home prices across the country to decline by 10 per cent in the next two years — Calgary homes are predicted to drop 6.4 per cent, with Vancouver topping the chart at 14.8 per cent. A separate presentation by TD economist Derek Burleton deems Alberta’s housing as “overvalued.”

While some experts are calling for a dip in the Canadian real estate market, CREB economist Lurie takes a rosier view of this province’s real estate fortunes.

“There’s nothing that’s pointing to any significant price declines,” she says. “I would be concerned if we had out migration or if employment levels were still really low, but we’re seeing positive growth in employment and migration.”

Read the entire article here

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Calgary to Escape Price Correction
Canadian Real Estate Magazine, July 28, 2011

So now is the right time to invest while house values remain relatively low, said Sano Stante, president of the Calgary Real Estate Board.

“With interest rates still low and prices having been adjusted, affordability is high so it matches what you would pay monthly for a rental in Calgary,” he told CRE Online. 

Read the entire article here

Edit: Not surprisingly, Don Campbell is the first to comment on the above article:

Thursday, 28 July 2011 15:34 posted by Don R. Campbell

What we will witness is a resurgance in demand in 18 – 24 months. This will be as a result of the job growth and population growth trends we have witnessed in the last 3 months.

Speculators and in fact many rookie investors are shying away from the market (due to the focus on housing stats, and their experience of 2007 – 2009). This is keeping a cap on value increases (which is good for the overall market) while at the same time providing opportunities to those who understand that it takes 18 – 24 months for markets to move after job growth begins.

Here is some additional research into the Calgary (and Alberta) market for those interested in digging even deeper before investing:

Report Titled: The Future of Alberta Real Estate 2011 – 2015

http://www.donrcampbell.com/this-past-weekend-changed-my-thinking-about-alberta-real-estate

Hope you find it helpful

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Stop looking at the stats, guys! And don’t learn from any mistakes you made in 2007-2009. That’s for rookie investors and speculators only ;) Who knows, he may end up being right. But “for those interested in digging deeper before investing,” you can read some of his other forecasts.

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Calgary 2011 Civic Census Results

Posted on July 27, 2011 | Leave a comment

The 2011 City of Calgary Civic Census results were released today. Below are some census highlights from the City of Calgary blog:

Population Increases

The 2011 Civic Census results for the period from April 2010 to April 2011 show that Calgary’s population has reached 1,090,936. This is an increase of 19,421 residents from April 2010 when the Civic Census showed the City’s population was 1,071,515. This represents an increase of 1.81%. This volume of population growth is similar to what was experienced in 2001 and 2003.

Over the past 12 months, 9,563 more people moved to Calgary than moved away from Calgary. This is a significant increase over 2010 when Calgary experienced a negative net migration with 4,154 more people moving away from Calgary than to Calgary.

Housing Data

The number of housing units, both existing and under construction, increased to 450,952 up from 445,455. This is an increase of 5,497 from April 2010.

The number of vacant dwelling units in Calgary decreased from 16,929 in 2010 to 16,180 in 2011. The overall vacancy rate in the city is 3.69%, down from 3.93% in April 2010.

There are now 422,290 occupied dwellings. Of this number, 296,020 or 70.1% are owner-occupied. In 2010, the comparable percentage was 70.65%.

Community Growth

Panorama Hills continued to lead the way in growth with a population increase of 1,952 residents. Four other communities also had an increase of more than 1,000 residents. The communities with a population increase of more than 1,000 are:
· Panorama Hills (1,952 residents)
· Auburn Bay (1,552 residents)
· New Brighton (1,236 residents)
· Cranston (1,186 residents)
· Skyview Ranch (1,093 residents)

Four communities grew by 100% or more. The communities are:
· Mahogany (205% or 530 residents),
· Walden (183% or 384 residents),
· Skyview Ranch (154% or 1093 residents),
· Sage Hill (102% or 718 residents).

For more information, visit the City of Calgary website

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Mortgages in Arrears Decline in May

Posted on July 27, 2011 | Leave a comment

The number of Canadian residential mortgages in arrears dropped in May according to statistics released by the Canadian Banker’s Association.

In Canada, a total of 17,121 or 0.41% of mortgages were behind in payments for 3 or more months in May. This eased slightly from the previous month when 17,550 or 0.43% were in arrears.  The highest arrears level (with data going back to 1990) was recorded in January 2011 with 18,417 or 0.45% of total residential mortgages.

Of the provinces in the survey, Alberta still had the highest ratio with a total 4,123 mortgages in arrears or 0.81%. This was down slightly month-over-month from April’s 4,140. However, that number is up from the previous May’s 3,661 or 0.73%.

Using data going back to 1990, Alberta reached its peak  in January 2011 with 4,240 which made up 0.84% of the total.

% of mortgages in arrears (click to enlarge)

When looking strictly at the total number of mortgages in arrears, Ontario was out front by virtue of also having the most total number residential mortgages as well.

Mortgage Arrears (click to enlarge)

To view data in an excel file, please click here

To view data in a PDF file, please click here

The above statistics includes data from BMO, CIBC, HSBC Bank Canada, National Bank of Canada, RBC Royal Bank, Scotiabank, TD Canada Trust, Canadian Western Bank and Manulife Bank.

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House Price Index (HPI): May 2011

Posted on July 27, 2011 | Leave a comment

Calgary home prices in May were up +0.6% from the previous month, according to the Teranet-National Bank National Composite House Price Index. Year-over-year, Calgary prices were down -4.1%  for an 8th consecutive month of 12-month deflation.

Canadian home prices in May were up 1.3% from the previous month. This rise took the index to a new high of 142.27 (June 2005 = 100). It was the second consecutive monthly increase exceeding 1% and the largest since July 2010. It was also the sixth consecutive monthly rise, coming after three straight monthly declines. As in April, prices were up in all six of the metropolitan markets surveyed.  The 12-month gain of the composite index in May was 4.4%, the same as in April.

Teranet notes that given the time lags between home sales and their entry in public land registries, it is possible that the large April and May rises of the composite index were due to front-loading of sales to beat the March effective date of an announced shortening of the maximum amortization period for insured mortgages. This front-loading was very perceptible in Vancouver, incidentally the market with the fastest price index growth from March to May.

In June, according to seasonally adjusted data from the Canadian Real Estate Association, market conditions were balanced in the country as a whole while appearing tight in Toronto.

Other Highlights:

  •  For Vancouver it was the eighth consecutive monthly increase.
  • The Toronto index topped its recent peak of July 2010.
  • The index for Ottawa was only fractionally away from its August 2010 peak.

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RBC: Home Prices To Be Flat At Best

Posted on July 26, 2011 | Leave a comment

The Canadian landscape is littered with unfulfilled prophecies of imminent housing collapse.  It goes without saying that a housing correction has not yet occurred. How has this been avoided?   A new report entitled, “Economic Compass: Canada’s Debt Threat” by Eric Lascelles, Chief Economist for RBC Global Asset Management, details Canada’s debt  levels and its impact on housing affordability, the economy, and what we can expect in the near future.

Below is an excerpt:

Calgary and Edmonton are often identified as other potential trouble spots for the Canadian housing market.  They have been through classic boom-bust cycles in recent years, in line with the fortunes of oil and gas. Broadly, these cities align with the Toronto findings. Home prices are perhaps a touch too high today, but will be substantially too high once interest rates rise.

Clearly, home prices have limited scope for further appreciation, at least once rate hikes begin. The best case is stagnation for several years as income growth gradually whittles away the affordability gap. Equally likely is a moderate decline in prices of 10% or less, a scenario made even more likely if home prices keep rising until the first rate hike (Exhibit 10).

It is unlikely that the housing market will crack of its own initiative, because current carrying costs on a national basis are manageable, and materially different from the tail end of the 1980s when very poor affordability prompted a multi-year decline. Rising interest rates will be the catalyst, and the longer this is delayed, the nastier the future affordability problem will become. In the meantime, the piecemeal introduction of regulatory reforms to the housing market over the past few years is exerting a slight drag.

Other highlights of the report include:

  • A central risk to Canada’s economic recovery is its record household debt burden.
  • Currently, the load is surprisingly affordable, given very low borrowing costs.
  • Rising interest rates will compromise this, rendering home prices materially too high, and forcing some retrenchment in consumer and housing activity.
  • This will be quite painful for a small subset of households, but does not represent a systemic risk. It will slow economic growth, but not devastate it.
  • The Bank of Canada is arguably tightening monetary policy later than it should be.
  • The reality is that the Bank of Canada cannot afford to delay raising interest rates…the longer the bank delays, the more marginal borrowers will enter the market and be walloped when rates rise, and the further home prices will go above their equilibrium levels, only to tumble later
  • The risk is greater and more immediate for the 35% of Canadian mortgage holders in possession of variable-rate mortgages and greatest for those who have just purchased a home.

Click here to read the report in its entirety

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