Notes slowing global economic growth
The Bank of Canada increased the target for its trend-setting overnight lending rate on July 20, 2010, raising it by a quarter of a percentage point to 0.75 per cent. The increase follows on the heels of an equal interest rate increase in June 2010, when it was raised for the first time since 2007. The Bank rate now stands at one per cent.
In its most recent interest rate announcement, the Bank marked down its outlook for economic growth globally, emphasizing the uneven economic recovery in the U.S., and weakening prospects for European economic growth.
In the Bank’s view, Canada’s domestic economy is evolving largely as expected in recent months, but trimmed its forecast for economic growth this year and next by 0.2 per cent to 3.5 per cent in 2010 and 2.9 per cent in 2011. While the Bank raised its forecast for Canadian economic to 2.2 per cent in 2012, it nonetheless left the easing trend for growth intact.
The Bank indicated, “[this] revision reflects a slightly weaker profile for global economic growth and more modest consumption growth in Canada. The Bank anticipates that business investment and net exports will make a relatively larger contribution to growth.
Where the domestic recovery had previously been led by housing and consumer spending it is now guided more by government stimulus.”
The Bank also reaffirmed its view that housing activity and household expenditures was pulled forward into the first half of 2010, causing to soften in the second half. It also recognized that business investment has been weaker than it previously expected, “held back by global uncertainties.” The Bank anticipates “that business investment and net exports will make a relatively larger contribution to growth” over its forecast horizon.
As of July 20th, the advertised five-year conventional mortgage rate of 5.79 per cent was down 0.06 per cent from one year earlier, and 0.2 per cent below where it stood when Bank made its previous interest rate announcement on June 1, 2010. However, it is 0.3 percentage points higher than it was at the beginning of the year.
The Bank has signaled to financial markets that it is leaving its options wide open as to whether it will raise interest rates further when it makes its next rate announcement on September 8th.
“As it did with its previous announcement in June, the Bank messaged financial markets that further interest rate increases are not pre-ordained,” said CREA Chief Economist Gregory Klump. “The strength of recent economic indicators have prompted the Bank to raise interest rates, but the Bank has signaled that may keep rates on hold should the economic recovery begin to show signs of loosing steam.”
The Bank’s July MPR will be published on July 22. The Bank will make its next scheduled rate announcement on September 8th.
http://creastats.crea.ca/natl/interest_rate_trends.htm
(CREA 07/20/2010)
The Canadian Real Estate Association forecast Wednesday that home prices will fall by 2.2 per cent next year. The agency expects the average price of a home in Canada to be $325,400 by the end of 2010, a 1.6 per cent increase over 2009's level. Though still a gain, that's well below the 5.4 per cent increase the agency was previously expecting for 2010.
But by 2011, the agency expects a 2.2 per cent decline in the average price. That's because a slowdown in Ontario and British Columbia, the two largest housing markets in the country, will drag the national average down. All other provinces are forecast to post gains, CREA said.
"With interest rates soon expected to rise, Canada is widely believed to be entering a typical demand-driven downturn due to recent price increases and rising interest rates,” CREA chief economist Gregory Klump said.
Sales activity overall is forecast to slow. CREA now forecasts that 490,600 homes will be sold on its Multiple Listings Service this year. That's 5.5 per cent higher than the level in 2009, but much lower than the agency was originally forecasting for 2010.
In 2011, an 8.5 per cent drop to 448,700 is expected.
New mortgage rules unveiled by Finance Minister Jim Flaherty in April aimed at curbing speculation are expected to "marginally impact" activity, the agency said.
Although mortgage rates have gone up and are expected to rise further, the association says the higher cost of borrowing will have a minimal impact on the market this year.
"Interest rates are expected to rise slowly and at a measured pace during a new era of government spending restraint, so home financing will remain within reach for many homebuyers," CREA president Georges Pahud said.
Source: CBC News
OTTAWA – June 2, 2010 – The Canadian Real Estate Association (CREA) has lowered its forecast for home sales via the Multiple Listing Service® (MLS®) Systems of Canadian real estate Boards and Associations. The revision reflects a weaker than expected start to the year in British Columbia, and recent developments that pulled forward the timing as to when sales are expected to ease in other provinces.
CREA’s previous national forecast was heavily influenced by British Columbia and Ontario forecast trends, and this remains the case in the revised forecast. While sales activity is unfolding as expected in Ontario, the decline in affordability in British Columbia impacted sales in the province during the first quarter.
Additionally, changes to mortgage regulations announced in February are expected to marginally impact activity. The changes prompted some homebuyers to finance their home purchase before the new regulations took effect in April, which pulled forward a number of sales that would have otherwise taken place at a later date.
April also saw the Bank of Canada drop its conditional commitment to keep interest rates on hold until at least July, opening the door to an interest rate hike before then. Indeed, on June 1st, the Bank announced its decision to raise its trendsetting overnight lending rate by 25 basis points to a ½ a per cent, and indicated it expects the rate of growth to slow for consumer spending.
“Interest rates are expected to rise slowly and at a measured pace during a new era of government spending restraint, so home financing will remain within reach for many homebuyers,” said CREA President Georges Pahud.
CREA had previously forecasted sales would remain at elevated levels through the first half of 2010 before easing in the second half of the year and over 2011. While the forecasted trend for activity has not changed in CREA’s revised forecast, it has been pulled forward, with the fourth quarter of 2009 marking the peak of national activity. This has had the effect of lowering the forecast for national activity over the rest of the year and in 2011.
National activity is forecast to reach 490,600 units in 2010, up 5.5 per cent from 2009 and the second highest annual level on record. Lower expected activity in British Columbia accounts for more than half of the downward revision in national sales activity. Annual activity in Alberta was also revised downward due to weaker than expected activity in the first quarter. Ontario is still expected to see a record number of sales in 2010, but by a smaller margin than previously forecast.
Interest rate increases will contribute to weaker national sales activity in 2011. Transactions via the MLS® Systems of Canadian real estate Boards are forecast to decline 8.5 per cent to 448,700 units in 2011. Although this is a similar percentage decline compared to CREA’s previous forecast (-7.1 per cent), the downward revision in national activity levels for 2010 means that the forecast level for sales activity in 2011 has also been revised downward.
The national average home price is forecast to climb 1.6 per cent in 2010, reaching a record $325,400, with average price gains forecast in all provinces. The downward revision from the previously forecast 5.4 per cent gain reflects lower forecast sales activity in British Columbia, where most transactions are priced well above the national average.
All provinces are forecast to post modest average price gains in 2011, except British Columbia and Ontario. The forecast decline in activity is sharpest in these two provinces, with higher-priced transactions weakening most. Average prices are forecast to sag in these two provinces in the second half of 2010 before stabilizing next year. As the Ontario and British Columbia shares of national activity edge lower, there will be fewer higher priced properties in the calculation of the national average price. The national average price is forecast to decline by 2.2 per cent in 2011 as a result.
“With interest rates soon expected to rise, Canada is widely believed to be entering a typical demand-driven downturn due to recent prices increases and rising interest rates,” said Chief Economist Gregory Klump. “A downward trend in national sales activity combined with an increase in listings will result in a more balanced market.”
“In keeping with the return of a balanced housing market and typical demand-driven housing market cycle dynamics, prices will remain stable,” he said. “Canada’s solid mortgage market trends, conservative lending practices, and prudent borrowing by homebuyers means that Canada will avoid the massive realignment in housing supply and demand being experienced in the United States. Accordingly, Canada will avoid a U.S.-style housing price correction.”
(CREA 06/02/10)
The process of selling in Canada is effectively controlled by Multiple Listing Service. Over 80% of sales transactions take place though this medium. The CREA, Canadian Real Estate Association, owns the MLS® trademark, has proprietary ownership of the REALTOR trademark. CREA sets up the rules for using their trade mark and only the members of Canadian Real Estate Association, primarily Real Estate Sales persons, brokers and other professional affiliates can use the trade mark. Under MLS, the members of the service, share the information among each other to expedite the process of selling. The access to the important data is not open to the public.
The process of selling a property through the services of MLS can be divided in 5 different stages.
This includes things like, collecting the pertinent information about the property, such as measurements, legal description, zoning, liens if any, Title, Insurance, property taxes and converting this to the format that the board accepts and then processing it through the MLS system. The important information about the property is then made available to the consumers by CREA’s on its website however, it does not carry the names of the owner, his contact information or any thing that would help the consumer to contact the seller directly. He must contact the broker representing the seller to get more information and to see the property.
This includes all those steps the broker takes to expose the property to the prospective buyers to bring in the sale. This includes, but is not limited to, activities like, advertising, in papers, sign on the property, holding open houses, face to face meetings with prospective buyers, sending flyers, advertising on the net, canvassing, etc. etc.
Encompasses answering questions and queries of consumers, brokers, lawyers, mortgage broker, building inspectors, appraisers, providing answering desk, making appointment and keeping a log of the activities to facilitate the sale and seeing it through the closing.
This is the most important phase for the sale of the property. This is where the knowledge, expertise and experience of the agent shines and can have a huge impact on the final outcome. It includes representing the Seller in negotiations with the buyer / buyer’s agent. The goal here is to promote and protect the interests’ of the seller and maximize his returns from the sale of the property.
During any of the stages stated here above, there may be situation where the seller needs the advice concerning any issue effecting the sale of the property.
So if one wants to use the services of MLS, he has to contact a member of the CREA and hire him to process the listing of their house/property through CREA’s MLS system. The standard agreement does not allow, except few basic amendments, any changes to the listing agreement. CREA’s approach is take the MLS agreement as it is or leave it, no exceptions.
Under the current MLS rules and regulations, the consumer must keep the services of the broker through all stages of selling and the broker must stay involved. There is no provision for the consumer to hire the broker just for posting the property on MLS, servicing the listing, marketing or have the broker represent him in negotiations. Currently it is all or none for the consumer.
This is where the government feels that CREA has a monopoly. Government wants that the consumer should be able to hire only those services that the consumer needs rather than being forced to take the full bundle. Government wants to see more competition for the benefit of the consumer. Competition should help to bring the cost of selling down for the consumer as he will be able to choose only the services that he needs.
In the long run, it should be a win-win scenario for the consumer and the people in the real estate brokerage industry. Brokers will get more freedom and will be able to custom tailor the services according to the needs of the consumer. It will bring down the selling costs for the consumer and will also lower the costs of doing business for the brokerages. Currently to comply with CREA’s rules and regulations, brokerages must have the infrastructure to see the sale through all the stages of the selling process. The restrictions imposed by MLS are unproductive and ultimately the consumer pays.
Only time will tell who will benefit more, the consumer or the brokerages.
TORONTO, April 13 /CNW/ – Whiterock Real Estate Investment Trust (TSX:WRK.UN) announced today that it has acquired three high quality, flex office assets with significant below market leases in Regina, Saskatchewan. In keeping with its active acquisition program, Whiterock and a co-owner acquired the three business centers for $17.7 million before closing costs. The in-place AFFO from the properties will add approximately $0.03 per unit, or 2%, to Whiterock’s annualized AFFO.
Whiterock’s partner on these acquisitions is Return on Innovation Capital Inc. (“ROI Capital”), an investment firm based in Toronto that specializes in private placement investments, including a focus on high quality properties with visible growing cash flow streams backed by solid covenants and longer term leases. With over $700 million in assets, ROI Capital is one of the fastest growing investment firms in Canada.
The portfolio includes three multi-tenant flex office buildings located in Regina, Saskatchewan. The assets are based in the prominent Ross Industrial Park, which is the primary industrial park in Regina, and includes the McDonald Business Centre, the Henderson Business Centre and the Imperial Business Centre. Access to the properties is provided by the close proximity to the Trans-Canada Highway and major arterial roads, Ring Road and Highway 1. The portfolio has been maintained to institutional standards with over $900,000 in capital upgrades in the past four years.
Collectively, the centres are 96% occupied and comprise approximately 183,000 square feet of rentable space on over 12 acres of land with an excellent mix of office, industrial and retail space. Each property contains ample surface parking.
Whiterock’s 40% equity investment in the properties, net of debt, totals approximately $3.1 million, with an in-place AFFO return of approximately 13%. Whiterock used cash on hand to finance its investment in these properties.
Whiterock’s owned and managed portfolio totals 5.6 million square feet across 56 properties, with a weighted average lease term of approximately 7 years. 52% of the portfolio consists of government and investment grade tenants. 100% of distributions made in prior years were classed as a return of capital for tax purposes. At the close of market on April 12th, 2010, Whiterock’s units provided a yield of 11.1%.
