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Archive for January, 2013

Bank of Canada signals no rate hikes anytime soon

Wednesday, January 23rd, 2013

OTTAWA — While the Bank of Canada acknowledges the economic outlook here and elsewhere “is slightly weaker” than thought, policymakers are also offering up some hope for the near future.

In a nutshell, Canada’s economy is growing at a slower pace than expected — although a pickup is likely later this year —and inflation remains weak at near recession levels, for now, while consumer debt and the housing market appear to be stabilizing, if not cooling. At the same time, the global outlook has also slowed, while fiscal and debt concerns in the United States and Europe have dissipated slightly.

The bottom line for Canada: Interest rates aren’t going anywhere soon.

Related

On Wednesday, for the first time, policymakers combined their regular-rate decision announcement with the bank’s Monetary Policy Report, a closely-watched quarterly reading on domestic and global factors affecting the economy.

As expected, the Bank of Canada kept a lid on borrowing costs, with its trendsetting overnight rate — the main instrument used to guide inflation toward the bank’s 2% target — remaining at a near-record low 1%, unchanged since September 2010 and now the longest dormant stretch since the early 1950s.

The only wrinkle in its usually pact statement accompanying a rate announcement was to highlight “the more muted inflation outlook and the beginning of a more constructive evolution of imbalances in the household sector,” adding that “the timing of any such withdrawal is less imminent than previously anticipated.”

That represent presents a slightly more dovish view of current monetary policy than previously. Given the still-hesitant outlook for Canada and other countries, most forecasters now see little chance the bank can begin raising rates again until late this year or early 2014.

By the numbers, the Bank of Canada on Wednesday pegged global economic growth slowed in 2012 to 3% from 3.9% the previous year. In 2013, that growth will slow to 2.9%, before picking up next year at a rate of 3.5%.

For Canada, growth will be limited to about 2% this year, down from the bank’s October forecast of 2.4%, following estimated growth of 1.9% in 2012, which is below the previous outlook of 2.3%. The bank is calling for a 2.7% advance in 2014, with full economic capacity kicking in in the second half of next year, later than previously thought.

“External demand for Canada’s manufacturing exports remain quite modest relative to its pre-recession level, largely because of the still-low level of activity in the U.S. housing sector,” the bank said.

As for the U.S. economy overall, the bank’s outlook is for growth of 2.1% this year and 3.1% in 2014. “The economic expansion in the United States is continuing at a gradual pace, restrained by ongoing public and private deleveraging, global weakness and uncertainty related to fiscal negotiations.”

The eurozone will likely remain in negative growth this year, down 0.3%, after a contraction of 0.4% in 2012. However, the currency region is forecast to post a positive performance in 2014, with growth of 0.8%

“The economic expansion in the United States is continuing at a gradual pace, restrained by ongoing public and private deleveraging, global weakness and, more recently, by uncertainty related to fiscal negotiations,” the bank said.

“Europe remains in recession, and recent indicators point to a somewhat more protracted downturn than expected in October,” it said. “While growth in China is improving, economic activity has been slowing further in some other major emerging economies.

Still, those estimates assume the eurozone debt crisis “will remain contained and that a severe tightening of U.S. fiscal policy will be avoided,” the bank said. “Overall, recent developments support these assumptions.”

Also in its report, the bank said near-historic low lending rates has slowed the growth in household credit to 5.5% last year to slightly more than 3% in the first quarter of 2013.

“This is the lowest rate of growth since 1999, and reflects a slowdown in the growth of both residential mortgage and consumer credit,” it said. “Even with the recent slowing, household credit still grew slightly faster than disposable income in the third quarter.”

The latest reading by the bank puts the ratio of household debt to income at 165%.

Bank of Canada governor Mark Carney — who steps down on June 1 to take the top position at the Bank of England — will hold a news conference later on Wednesday to provide more insight into the bank’s most recent domestic and global outlooks.

© Copyright (c) National Post

Calgary best performing real estate market in Canada

Tuesday, January 15th, 2013

CALGARY — Calgary was the only major Canadian market to see a year-over-year rise in MLS residential sales in December as the national market plunged and the city finished 2012 with the best annual sales growth in the country, according to the Canadian Real Estate Association.

In releasing a report Tuesday, the association’s data indicated Calgary MLS sales in December of 1,343 were up 7.2 per cent from December 2011 while Canada saw a decline of 17.4 per cent to 20,538 sales.

The average sale price in Calgary in December rose by 6.9 per cent from last year to $419,811 while Canada’s average jumped by 1.6 per cent to $352,787.

On an annual basis, Calgary sales of 26,634 were up 18.6 per cent year-over-year while they fell by 1.1 per cent throughout the country to 453,372.

The average annual sale price in Calgary rose by 2.3 per cent to $412,315 in 2012. It was up by 0.3 per cent in Canada to $363,740.

“Calgary bucked the national trend in 2012 as the market began to come alive, while others began to enter a long sleep. This occurred because of two main influences,” said Don Campbell, senior analyst and founding partner of the Real Estate Investment Network. “Over the previous three years, Calgary had not over-performed its underlying economic fundamentals like many other major markets across the country, especially Toronto and Vancouver. A lack of new housing being poured into the market also helped to keep the average sale price in check.

“Population growth in Alberta neared a record high in 2012 as many moved here to take advantage of the job growth. This expansion of the number of citizens who call Calgary home, whether temporarily or permanently, put upward pressure on the rental market in the city. This increase in (rents) pushed many into the purchase market and therefore began the upward demand on the home-purchase market. This trend will continue, and inevitably get stronger, in 2013.”

Calgary’s market is showing no signs of letting up in January. According to the Calgary Real Estate Board, month-to-date from January 1-14, there have been 375 MLS sales in the city, up 9.97 per cent from the same period last year while the average sale price has jumped by 11.75 per cent to $428,063.

In December, sales in Alberta fell by 1.9 per cent to 2,855 transactions and the average sale price went up by 4.8 per cent to $363,340. Over the year, sales in Alberta in 2012 rose by 12.3 per cent, the highest of any province, and the average sale price increased by 2.8 per cent to $363,208.

CREA’s Home Price Index in December, of seven major Canadian markets, saw the average benchmark price increase by 3.32 per cent in Canada. Regina led the country with 10.53 per cent growth followed by Calgary at 7.37 per cent.

“Similar to what we saw in September, December sales had fewer business days compared to the same month last year and most other years,” said Gregory Klump, CREA’s chief economist, about the national picture. “It factored into December’s year-over-year decline in sales activity.”

But he also said that “successive rounds of tightening mortgage regulations have kept the housing market in check during what has become an extended low interest rate environment.”

Sonya Gulati, senior economist with TD Economics, described 2012 as a lacklustre year for the Canadian housing market.

“With the whopping 17.4 per cent year-over-year change in sales seen in December, we suspect that the impacts from the mortgage rule tightening in July are now fully priced in,” she said. “We expect the Canadian housing market to stabilize at current levels over the next few months. When looking at previous mortgage rule tightening episodes, the housing market impacts have been temporary in nature. There is no reason to think that this time will be any different.”

mtoneguzzi@calgaryherald.com

Twitter: MTone123

© Copyright (c) The Calgary Herald

Read more: http://www.calgaryherald.com/business/Calgary+best+performing+real+estate+market+Canada/7821400/story.html#ixzz2I3p3RrBX

Experts warn about real estate as retirement savings

Thursday, January 10th, 2013

With RRSP season upon us, some financial advisors have some words of caution when it comes to real estate.

Don’t count on your home to bankroll your retirement.

Laura Parsons, a mortgage expert with the Bank of Montreal, says many of her clients tend to think of real estate as a sure bet in retirement.

The bank recently put out a report with advice on saving for your golden years.

“There’s a lot more weight on the value of our homes, so a lot of in fact, 41 per cent are considering that the equity on their home is really going to be the supplement for their retirement. So, that’s a little bit concerning,” Parsons said.

Calgary financial planner Tim Faunt agrees it’s a dangerous assumption considering the impact retiring baby boomers could have on the real estate market.

“There’s all of these folks looking to downsize and at the same time, there isn’t another group of similar size coming up through the demography to purchase those properties — well then, those folks have a problem,” Faunt explained.

The housing market in Calgary may be in good shape now, but Faunt says it’s always wise to diversify.

“They need to be developing their own retirement savings and not be counting on the vagaries of the real estate market to provide for their retirement income.”

Brady Layton, BComm, CFP, Remax Landan Real Estate
#102 279 - Midpark Way, Calgary, Alberta, T2X 1M2
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