Amendments to the Strata Property Act Concerning Rentals Announcement

General Angela Calla 11 Jan

Re: Amendments to the Strata Property Act Concerning Rentals Announcement
January 11, 2010

There has been a shortage of rental units for years in British Columbia. In order to address this, the Provincial Government recently passed legislation dealing with the rental provisions of the Strata Property Act (“SPA”).


Under the old section 143 of the SPA, a rental restriction bylaw passed by a Strata Corporation did not apply to that strata lot until the strata lot was conveyed by the first owner after the developer or until the date that the rental period disclosed in the RDS expired, whichever was earlier. Essentially the first owner was always able to rent out the strata unit until the expiration of the rental period disclosed in the RDS, but not subsequent owners.


Pursuant to the amended Section 143 of the SPA, for a new RDS filed after December 31, 2009, a rental restriction bylaw will not apply to that strata lot until the date that the rental period disclosed in the RDS expires. This expiration is usually a long time away: perhaps 99 years or even indefinite.


Therefore, practically speaking, starting January 1, 2010, a new RDS will benefit every subsequent owner of that strata lot rather than just the first owner after the developer. All future owners will be able to rent the strata lot without being subject to any rental restriction bylaw for as long as the rental period disclosed in the new RDS allows them to.


This does not apply to strata buildings where the RDS was filed prior to Dec. 31, 2009.


Real estate market expected to remain strong in first half of 2010

General Angela Calla 8 Jan


TORONTO – Canada’s residential real estate market is expected to remain unusually strong through the first half of this year after a strong finish to 2009, according to a survey published Thursday by Royal LePage.

The Royal LePage analysis is consistent with other recent reports on the state of the Canadian real estate market, which has rebounded over the past 12 months after sales dried up in late 2008 and hit a multi-year low in January 2009.

The Canadian market’s sudden plunge was sparked by a credit crunch that originated in the U.S. housing and lending industries – eventually spreading globally, causing a worldwide recession in the late summer and early fall of 2009.

However, the Canadian real estate market has been much quicker to recover than its American counterpart, in part because of a more stable banking industry, historically low interest rates and improving consumer confidence.

Royal LePage executive Phil Soper says Canada’s real estate market enters 2010 with “considerable momentum from an unusually strong finish to the previous year.”

The stimulus effect of low borrowing costs has contributed to a sharp rise in demand that has driven activity to new highs, he said in a statement.

Royal LePage says house prices appreciated in late 2009, with fourth-quarter price averages higher than in the fourth quarter of 2008.

The average price of detached bungalows rose to $315,055 (up six per cent), the price of a standard two-storey home rose to $353,026 (up 5.2 per cent), and the price of a standard condominium rose to $205,756 (up 6.4 per cent).

Regions that saw the strongest declines during the recession are now showing marked gains. Those regions include Toronto and the Lower Mainland, B.C.

Vancouver, which is frequently Canada’s most expensive real estate market, experienced a particularly robust quarter, with home prices rising across all housing types surveyed.

“No other sector of the economy has been as highly affected by economic stimulus as housing,” said Soper.

“As consumer confidence has improved, Canadians have shown a lingering reluctance to acquire depreciating assets such as consumer durables, but have embraced the opportunity to invest in real property.”

Royal LePage estimates that Vancouver’s real estate prices will rise a further 7.2 per cent this year, although February may be soft because of the Olympic Winter Games that will be held in the city and nearby Whistler, B.C.

Detached bungalows in Vancouver sold for an average of $828,750 in the fourth quarter, up 11.4 per cent from the same period last year. Standard condominiums in Vancouver went up 11.8 per cent year-over-year to an average of $452,750. Prices of standard two-storey homes in Vancouver rose 9.6 per cent year-over-year, selling at $917,500.

In Toronto, the average price of a standard condo rose 2.9 per cent to $309,316, detached bungalows rose 9.9 per cent to $446,214 and standard detached homes increased 3.5 per cent to $564,175.

In Montreal, the average price of a detached bungalow rose to $245,125 (up 3.1 per cent; a condo increased to $216,667 (up 16 per cent) and a two-storey house increased 12.3 per cent from a year earlier to $345,789, Royal LePage said.

The Greater Montreal Real Estate Board reported Thursday that the number of sales last year increased 41,802, up three per cent from 2008. The median price of a single-family home was $235,000 last year, up four per cent from 2008.

“Although sales decreased the first four months of 2009, Montreal’s real estate market rebounded and finished the year on a positive note,” said Michel Beausejour, the Montreal board’s chief executive.

The group that represents Toronto-area realtors reported Wednesday that there were 87,308 transactions last year through the Multiple Listing Service, a 17 per cent increase over 2008.

In December, there were 5,541 sales in the Greater Toronto Area (average price $411,931), up from 2,577 sales in December 2008 (average price $361,415), according to the Toronto Real Estate Board.

The Toronto board also said the number of sales of existing homes rebounded in the latter half of 2009 after a slow start at the beginning of last year.

Royal LePage’s average price estimates for other Canadian cities include:

-St. John’s, N.L.: Detached bungalow, $217,167 (up 14.3 per cent); standard two-storey house $298,833 (up 14.1 per cent).

-Halifax: Detached bungalow, $238,000 (up 10.7 per cent); standard two-storey homes, $265,333 (up 1.8 per cent).

-Charlottetown: Detached bungalow, $160,000 (up 1.9 per cent); standard two-storey $195,000 (up 3.7 per cent).

-Saint John, N.B.: Detached bungalow, $228,000 (up 1.3 per cent); standard two-storey $299,000 (up 1.5 per cent).

-Moncton, N.B.: Detached bungalow, $152,300 in the fourth quarter (up 1.5 per cent); standard two-storey home, $131,000 (up 4.0 per cent)

-Fredericton: Detached bungalow, $182,000 (up 12.3 per cent); standard two-storey, $210,000 (unchanged).

-Ottawa: Detached bungalow, $332,417 (up 3.4 per cent); standard two-story home $331,917 (up 3.7 per cent).

-Winnipeg: Detached bungalow, $241,650 (up 9.9 per cent); standard two-storey home $275,500 (up 10 per cent).

-Edmonton: Detached bungalow, $299,286 (down 0.7 per cent); standard two-storey home, $340,557 (down 1.2 per cent)

-Calgary: Detached bungalow, $412,478 (up 0.5 per cent); standard two-storey home, $427,067 (up 2.3 per cent).

Bond Market Waiting for Jobs Reports

General Angela Calla 7 Jan


Traders are treading cautiously ahead of Friday’s big U.S. and Canadian jobs reports. Bond yields are hovering just under their 15-month high.

Most lenders are holding off on further mortgage rate increases ahead of the report. 

Interestingly, only a few lenders chose to raise mortgage rates following December’s big spike in yields. (Why spoil the holidays, eh?)

Looking forward, this Friday’s employment report could be a huge catalyst for rate direction.  It should be:

  • Positive for mortgage rates if employment gains are dismal; or
  • Negative for mortgage rates if job gains are strong.

Mortgage planners will probably want to have their rate locks ready in case yields happen to explode higher.

Canadian and U.S. employment reports will be released Friday, January 8, at 7:00 a.m. and 8:30 a.m. ET respectively.

Common Financial Terms

General Angela Calla 5 Jan

There are many financial terms that are commonly used in daily discussions, however it may be difficult to define some of them if asked. Here are a few simple definitions to assist you with the daily Financial Update

Basis Point
One-hundredth of a percentage point. For example, the difference between 5.25% and 5.50% is 25 basis points.

Bear Market
A market in which stock prices are falling. The rule of thumb seems to be at least 20 percent. However, a lot depends on how long the drop lasts. The quicker the rebound, the less likely that investor psychology will turn from optimism to the pessimism that usually accompanies a bear market. 

Bull Market
A market in which stock prices are rising for a length of time. Prices need not rise continuously. There can be days, weeks and even months in which prices fall. What matters is the long-term trend.  When it comes to people, bullish describes one who is optimistic.


Dow Jones Industrial Average (DJIA)
There are thousands of investment indexes around the world for stocks, bonds, currencies and commodities however the DJIA is one of the best known and most widely quoted stock market averages in the media. It contains an average made up of 30 actively traded blue chip stocks spanning many different industries that trade on the New York Stock Exchange. The Dow, as it is called, is a barometer of how shares of the largest U.S. companies are performing.. The DJIA is calculated by adding the prices of each of the 30 stocks and dividing by a divisor. The average is quoted in points rather than dollars.  It is price weighted, meaning that a $2 change in a $100 per share stock will have a greater affect than a $2 change in a $20 per share stock.


Gross Domestic Product

GDP is the value of all goods and services produced in Canada in a calendar year. The gross domestic product includes only final goods and services, not goods and services used to make another product. Changes in the gross domestic product are an indication of economic output.


Income Trust
Trusts structured to own debt and equity of an underlying entity, which carries on an active business, or has royalty revenues generated by the assets of an active business. By owning securities or assets of an underlying business, an income trust is structured to distribute cash flows, typically on a monthly basis, from those businesses to unit holders in a tax-efficient manner. The trust structure is typically utilized by mature, stable, sustainable, cash-generating businesses that require a limited amount of maintenance capital expenditures. An income trust is an exchange-traded equity investment that is similar to a common share

Index or stock price index
A statistical measure of the state of the stock market, based on the performance of stocks. Examples include the S&P/TSX Composite Index


Two consecutive quarters of contraction in the gross domestic product

TSX Composite Index
Comprises the majority of market capitalization for Canadian-based, Toronto Stock Exchange listed companies. It is the leading benchmark used to measure the price performance of the broad, Canadian, senior equity market. It was formerly known as the TSE 300 Composite Index

Update on HST and Real Estate: How It Works

General Angela Calla 24 Dec

HST and Real Estate: How It Works

By Clark Wilson LLP’s Commercial Real Estate Group

While the BC government is getting out of the sales tax business, the province’s residential real estate developers will have more taxes to cope with than ever before.


On July 23, 2009, the BC government announced that it had reached an agreement with the federal government to combine the 7% BC Provincial Sales Tax with the 5% federal Goods and Services Tax to create a single Harmonized Sales Tax. The new tax will come into effect on July 1, 2010.

Following the announcement, several industry associations, including the Urban Development Institute, held discussions with relevant tax administrators within both the provincial and federal governments. Generally, industry was told to expect transitional provisions similar to those in Ontario, and industry suggested various departures from the Ontario rules.

On October 14, 2009, the BC government announced general transitional rules for the implementation of HST; however, the general rules contained little information regarding real estate. On November 19, 2009, the government announced transitional rules for new housing and proposed to increase the previously announced limit for the BC HST new housing rebate from $400,000 (the Ontario figure) to $525,000.

With the transitional provisions now in place, we can examine with some certainty the effect of the HST on the real estate industry.


  • The HST rate will be 12% (5% federal component + 7% provincial component).
  • The PST will be eliminated completely.
  • There will be a partial rebate of the provincial portion of the HST of up to $26,250 on new housing.
  • Input tax credits will be available for HST in the same manner as under the current GST.

New Housing

Currently under the GST, new housing is taxed while used housing is not. No housing sales are directly taxed under the PST, although the BC Ministry of Finance states that there is currently an average of 2% PST embedded in the cost of new homes from PST charges on construction materials. Under the HST, there would be no embedded tax but the full 12% HST would apply to new housing.

An HST partial rebate on new housing will be provided to purchasers in an amount equal to 5% of the purchase price up to a maximum rebate of $26,250. The Ministry’s rationale is that because purchasers currently pay 2% embedded PST, the rebate would eliminate any tax increase on new housing sold for a purchase price of up to $525,000. The embedded PST aside, homes under $525,000 will be subject to a tax 2% higher than under the current system. Homes over $525,000 will be taxed at a rate 7% higher than under the current system, less a flat $26,250 rebate (in addition to the currently available GST new housing rebate currently available for prices up to $450,000).

Price of Eligible New Home (not including GST or HST) GST Portion – New Housing Rebate1 British Columbia Portion – New Housing Rebate2 Total Rebates
$350,000 $6,300 $17,500 $23,800
$400,000 $3,150 $20,000 $23,150
$450,000 $0 $22,500 $22,500
$525,000 and above $0 $26,250 $26,250

1. New home buyers may be eligible for the federal GST new housing rebate, which generally equals 36% of the tax paid on the first $350,000 of the purchase price. The amount of the GST rebate is phased out on a straight-line basis for homes priced between $350,000 and less than $450,000.

2. British Columbia proposed rebate for new housing is equal to 5% of the purchase price up to a maximum rebate of $26,250 (71.34% of the provincial component of the HST).

In order to avoid the increased tax burden on homes priced over $525,000, vendors and purchasers may consider, wherever possible, completing the sales of new homes prior to July 1, 2010 when the new HST comes into effect. See transitional rules below for more details.

Buyers in the market for a home may be considering purchasing resale properties in order to avoid the increased tax burden on new homes. While the tax on resale properties is not directly affected by the new HST, the cost to the purchaser of these homes may still increase slightly because services associated with the purchase may be subject to increased tax. For example, home inspection charges would be subject to HST.

Transitional Rules for Pre-Sales

On July 1, 2010, many homes in BC will be partially constructed or the subject of incomplete transactions. Transitional rules for new housing were announced by the BC government on November 19, 2009 as follows:

  • 5% GST will apply to sales where title and possession of new housing is transferred prior to July 2010.
  • 12% HST will apply to sales where title and possession of new housing is transferred after June 2010 unless grandfathered. After June 2010, the HST would generally be payable on the earlier of the day on which ownership or possession of the property is transferred to the purchaser. The transitional provisions further provide that where the property is a residential unit in a residential condominium building and possession of the unit is transferred after June 2010 and before the condominium has been registered under the Strata Property Act, the HST would become payable when ownership of the unit is transferred, or 60 days following the date of the registration of the condominium, whichever is earlier. This latter provision was taken verbatim from the Ontario provisions and makes little sense in the context of BC closing procedures (where “registration of the condominium” is not a term of art). As it is likely to lead to confusion we would expect further amendment.
  • Sale agreements entered into on or before November 18, 2009 where title and possession of new housing is transferred after June 2010 will be grandfathered, meaning that the provincial portion of the HST will not apply at closing.
  • Where a sale is grandfathered and the building is wholly or partially completed after June 2010, the builder will be liable to pay a transitional tax intended to ensure the building has a tax content equal to what it would have had if constructed wholly prior to July 2010 (i.e. PST paid on all materials) and may also be eligible for a PST transitional new housing rebate. In the case of residential condominiums, the transitional tax adjustment would be calculated at 2% of the value of consideration for the condominium unit or building as established for GST purposes. In cases where the value of consideration for the sale of the grandparented home is less what the fair market value of the home would have been if the home had been substantially completed on July 1, 2010, the consideration for purposes of calculating the transitional tax adjustment will be deemed to be equal to the fair market value of the home as if the construction was substantially completed on July 1, 2010.
  • BC has adopted an approach to dealing with condominiums whereby the builder must pay 2% of the selling price of the unit (the government’s estimate of the PST content) and then claim a PST transitional new housing credit for the estimated PST paid on materials prior to July 2010 to provide relief in respect of the PST embedded in the price of the home. For newly constructed residential condominiums, the PST transitional new housing rebate would be available to the builder rather than the purchaser. Eligible applicants would be permitted to calculate the estimated embedded PST by choosing one of the following methods: (1) estimated PST content calculated at a prescribed amount of $60.00 per square metre of floor space or (2) estimated PST content calculated based on selling price or fair market value of the home, calculated at 2% of the total value of consideration or fair market value established for GST purposes.
  • Where a sale is subject to HST and construction commenced prior to July 2010, the builder will be entitled to a formula based PST transitional credit for the estimated PST paid on materials prior to July 2010.
  • Detailed information on the British Columbia transitional rules for new housing is available here.

What To Do Now: Important Provisions for Strata Presale Agreements

For purchase and sale agreements entered into after November 18, 2009 the developer is required to disclose in its purchase and sale agreement whether the provincial portion of the HST applies to the sale or whether the developer pays, and, if so, whether the stated price in the agreement includes the applicable provincial portion of HST. This requirement must be stated in the purchase and sale agreement and not just in the disclosure statement and, to be safe, should be stated expressly and not, for example “if the HST applies, then…”. If the developer does not meet these requirements, the stated price in the purchase and sale agreement would be deemed to include the provincial portion of the HST and the purchaser would not be required to pay the provincial portion of the HST in addition to the stated price in the purchase and sale agreement.

For developers wishing to credit purchasers with a rebate, as they may have traditionally done with the GST new housing rebate, the process is virtually identical, but with different percentages and limits. The GST new housing rebate will continue to be available while the new HST housing rebate will be available in addition.

It is important to note that the HST new housing rebate only applies, and is only assignable to the developer, where purchaser is purchasing it as the purchaser’s principal residence.

There is a new rental housing rebate available where the first use of the housing would be for occupancy or use by an individual under a rental arrangement or for occupancy by the developer as a primary place of residence for a period of at least one year. However, this new rental housing rebate is not assignable to the developer. Landlords would be able to apply for the rebate by filing a rebate application with the Canada Revenue Agency.

Rental Apartment Buildings

Residential landlords will face increased costs under the HST, since some goods and (especially) services not currently subject to the PST and necessary in the operation of apartment buildings will be taxed under the HST. As is currently the case with GST, landlords will not be able to claim input tax credits for HST paid and will not collect HST from tenants. Expenses such as maintenance, electricity and other services required by landlords will be taxed at 12% starting July 1, 2010.

Building Lots

Builders of new homes will be entitled to claim input tax credits for most HST paid on their inputs, such as raw land, just as they currently do with the GST. However, new homes in BC that are currently subject to the GST will become subject to HST as described above under the New Housing heading.

Commercial Sales and Leasing

Commercial sales and leases will not be materially impacted by the new system. The 12% HST will apply on commercial sales and leases just as the 5% GST does under the current system and input tax credits will be available to tenants and purchasers for the full amount paid.

Real Estate Commissions

Commissions will be subject to HST in the same manner as they currently attract GST. Commercial vendors will be able to claim input tax credits on HST paid to agents, while individuals selling personal use property will not.

New tools for the goverment to cool housing and the real numbers on how it could affect a borrower

General Angela Calla 22 Dec

The housing market that led Canada out of recession is now so hot that Ottawa is talking about doing something to cool it off, a move economists say carries risks for the economy.

Fuelled by record low interest rates, residential real estate prices have gained 20 per cent this year. And Finance Minister Jim Flaherty is now warning he will step in if prices get too high by tightening the rules for borrowers, by increasing the minimum down payment and shortening the maximum length of mortgages.

Such a move would have to be done cautiously, economists say, because the real estate market touches all parts of the economy, and anything that caps its growth could also temper the recovery.

Policy makers are concerned homeowners will take on more debt than they’ll be able to afford when interest rates rise again, possibly leading to a painful correction later.

The Bank of Canada has vowed to keep lending rates low into the middle of next year, limiting its options for taking the pressure off a hot market.

But since the federal government dictates rules around down payments and amortization periods, it can effectively dampen the housing market without increasing borrowing costs for businesses.

Mr. Flaherty said in an interview with CTV the government would consider raising the minimum down payment from 5 per cent “to a higher figure” and reducing the amortization period of 35 years to “something less.”

But the minister stressed that the government has not yet made that decision.

“If there is, in the future, evidence of a residential real estate bubble, the tools we have are the tools we’ve used before, relating to insured mortgages, lending standards, amortization periods and down payments, which is what we acted on in the summer of 2008,” Mr. Flaherty said in an interview with The Globe and Mail. In the summer, the government said it would no longer insure zero-down-payment mortgages or mortgages with an amortization period of more than 35 years.

Tougher requirements could price out first-time buyers such as 28-year old Michael Maynard, who are vital to a healthy market as they buy entry-level homes and allow others to trade up to larger and more expensive properties.

The Oshawa, Ont., law clerk has been looking for a house with his wife Angela for most of this year. They intend to make a 5-per-cent down payment, which they managed to save while Angela was on a maternity leave.

“If the requirement went up, I’d be out of the market right now,” he said. “There’s no way. We’d cool our heels. We’d come back eventually, but there’s no way we’d be able to stay in the market. And we want to take advantage of low interest rates, so that would be a shame.”

Buyers like the Maynards, who rely on low down payments and extended repayment periods to afford their homes, are becoming more common. In a November report, the Canadian Association of Accredited Mortgage Professionals found 18 per cent of mortgages were amortized over more than 25 years – a gain of 100 per cent in two years.

Sonia Baxendale, the head of Canadian Imperial Bank of Commerce’s Canadian lending operations, said Mr. Flaherty’s interest in this issue is both “pro-active and prudent.”

“This is not about there being an issue today, it’s about thinking through a potential issue down the road,” she said. “This is consistent with the long-term view we are taking on behalf of our clients so we support the minister in reviewing this now to ensure consumers are not taking on more debt than they can handle in a more normalized rate environment.”

This is the rare instance where government has an obvious tool it can use to deal with a potential bubble in a specific market, Toronto-Dominion Bank chief economist Don Drummond said.

“When you have a targeted regulatory instrument, you use that instead of the dull instrument of raising interest rates,” he said.

“Housing is the only market where you do have a tool with almost surgical precision.”

Any change to mortgage regulations is potentially dangerous, warned CIBC World Markets economist Benjamin Tal, because the government could “overshoot” its goal. While Mr. Tal agrees the market is showing signs of overheating, he said prices should “stagnate” in the coming months as pent-up demand is satisfied and new housing starts alleviate a shortage of listings for older homes.

“My message to the government is to be careful not to overshoot,” he said. “You do not kill a fly with a hammer. Housing is a very important part of the economic recovery, which is still very fragile. You do not want to ruin that market.”


One mortgage, three scenarios

The mortgage: Five-year fixed rate mortgage at 4.19 per cent, monthly payments, for $300,000.

1. 35 year am: Monthly payment is $1,356.16

2. 30 year am: $1,458.99

3. 25 year am: $1,609.12

Flaherty urges Canadians to get finances in order before rates go up

General Angela Calla 22 Dec

Ottawa consders tighter mortgage rules

Flaherty and Carney getting nervous

Last Updated: Monday, December 21, 2009 | 10:17 PM ET Comments360Recommend111

Ottawa is considering new measures to tighten mortgage standards and prevent would-be homebuyers from taking on more debt than they can afford.

Finance Minister Jim Flaherty said in an interview with CTV he’s worried about people piling up debt while interest rates are low and then getting into trouble when interest rates rise, as they inevitably must.

Finance Minister Jim Flaherty says he worries about Canadians taking on too much debt.Finance Minister Jim Flaherty says he worries about Canadians taking on too much debt. (CBC)

As a result, the Conservative government is considering increasing the minimum down payment from five per cent “to a higher figure,” he said, and Ottawa may also reduce the amortization period from a maximum of 35 years “to something less.”

Twenty-five-year mortgages used to be the norm, until lenders started making 30-, 35- and 40-year mortgages available to stimulate demand. In mid-2008, the Department of Finance moved to trim the maximum paydown period to 35 years and to require a minimum five per cent down payment for new federally insured mortgages.

Even so, 18 per cent of Canadian mortgages are for terms longer than 25 years, and 10 per cent are amortized over 35 or 40 years, a recent Scotiabank report estimated.

The average price of a resale home in Canada hit $337,231 in November, the Canadian Real Estate Association said last week. That’s 19 per cent higher than the depressed levels of a year earlier.

Flaherty’s comments echo Bank of Canada governor Mark Carney, who last week urged consumers to get their financial houses in order to prepare for when the central bank inevitably raises its key policy rate from its current emergency record low of 0.25 per cent.

Proceed with caution: CIBC

Word that Ottawa might step further into the red-hot real estate market had housing watchers buzzing Monday.

“You could basically shut down 25 per cent of the market,” CIBC economist Benjamin Tal told CBC’s The Lang and O’Leary Exchange. “It’s going to be significant because we’re talking about a lot of money that took advantage of those rates.”

“What the Bank of Canada and Finance Department are saying is that people are abusing these rates, but they need to be careful not to risk this fragile recovery.”

Though he admits more lending caution would be prudent, he advocates Ottawa be wary of anything as drastic as a hard cap of 30-year amortizations, or minimum 10 per cent down payments, for example.

“If you want to do it, do it in a gradual way that you do not kill housing [because] housing is the only thing ticking in this market,” he said. “The timing is tricky.”

Canada Housing Resales Climbed to Record in November

General Angela Calla 16 Dec

Canada Housing Resales Climbed to Record in November

By Alexandre Deslongchamps Bloomereng

Dec. 15 (Bloomberg) — Canadian home resales rose to a record 46,450 units in November, as the housing market helped to pull the economy out of recession, a realtor group said.

Seasonally adjusted sales in November climbed 67 percent from a year earlier, the Canadian Real Estate Association said in a statement.

“The Canadian housing market remains on fire as the combination of low mortgage rates and still favorable buying conditions continues to spur buying activity,” Millan Mulraine, an economist with TD Securities in Toronto, said in a note to clients.

The Bank of Canada has predicted growth in housing investment will stay “brisk until early 2010,” and then slow as pent-up demand is satisfied and affordability declines. The bank lowered its benchmark lending rate to a record 0.25 percent in April to spur domestic demand and pledged to leave it there through June unless the inflation outlook changes.

Canada’s five-year mortgage rate was 5.84 percent for most of November and fell to 5.59 percent by the end of the month, near the 58-year low of 5.25 percent set in April, according to Bank of Canada data.

The rebound has prompted some analysts, including Gluskin Sheff & Associates Inc.’s David A. Rosenberg, to question whether a bubble is forming in the housing market.

‘Next Closest Thing’

“Housing values are anywhere between 15 percent and 35 percent above levels we would label as being consistent with the fundamentals,” Rosenberg said in a report before today’s report. “If being 15 percent to 35 percent overvalued isn’t a bubble, then it’s the next closest thing.”

The average nationwide price rose 19 percent from last year to C$337,231 ($317,700), the association said in the statement. Seasonally adjusted listings fell 4.8 percent to 79,953 in November from a year ago.

Without adjusting for seasonality, home sales rose to 36,383 units in November, up 73 percent from a year earlier, CREA said.

“The rebound in resale housing activity led the overall Canadian economy out of recession,” CREA President Dale Ripplinger said in the statement.

British Columbia poised to recover from sharp downturn in 2009: RBC Economics

General Angela Calla 14 Dec

Positive economic growth likely in 2010 and 2011, says RBC Economics

The Canadian Press  – After a challenging year, the economy is set for a recovery in 2010, according to a new forecast by RBC Economics.

It says although the economy contracted at an average of 2.5 per cent this year, the stage is set for positive growth in 2010. RBC predicts real gross domestic product will rise by 2.6 per cent next and will continue to expand in 2011, at a 3.9 per cent clip. The report suggests the peak of stimulus spending will occur in 2010, with improving credit conditions fuelling growth next year and in 2011.

In addition, consumer spending is projected to increase by 2.3 per cent next year before accelerating to 2.7 per cent in 2011.

However, the bank says the jobless rate is expected to remain high at about 8.7 per cent in 2010 before falling to 7.8 per cent in 2011.

“With the financial crisis behind us and the U.S. economy on the mend, Canada’s economic growth is expected to rise steadily throughout the next year,” said Craig Wright, RBC senior vice-president and chief economist.

“While challenges remain, a peak in stimulus and infrastructure spending across the federal, provincial and municipal governments, along with low interest rates, should result in a sustained recovery.”

Flaherty notes stimulus money flowing as recovery kicks in

By Nelson Wyatt

MONTREAL — Federal stimulus projects are starting to snowball just as the economy is recovering from the global financial meltdown, Finance Minister Jim Flaherty said Friday.

Flaherty says cash will flow faster in 2010 for federally funded construction projects, now that numerous engineering studies and environmental assessments are being completed.

“They are snowballing, if I can put it that way,” he said in Quebec City.

“They are gathering momentum as we go forward, as engineering studies are done, as environmental assessments are done. So there’ll be a lot of cash flow next year into the Canadian economy.”

Earlier this year, in the depths of the recession, Ottawa earmarked billions for infrastructure projects.

The opposition spent months warning that the money wasn’t going out quickly enough, while the government made procedural changes to speed up the delivery process.

The Liberals say Flaherty’s comments now prove the stimulus process encountered hiccups.

“He’s admitting that we were right all along,” Liberal critic John McCallum said in an interview. “Very little of the money has gotten out.”

He drew parallels with the government’s treatment of allegations of prisoner abuse in Afghanistan.

“This is a dishonest government,” McCallum said. “They told Canadians lies about (Afghanistan) detainees and about the infrastructure money.

“And then when irrefutable facts came out to demonstrate these were lies, they spin the story in a different way. In both cases, the facts now show that they were not telling the truth on infrastructure just as they were not telling the truth on detainees.”

He said it would have been possible to get the money out faster if the government had followed a Liberal plan to transfer gas taxes directly to municipalities, who would have been able to move ahead with already approved projects.

The finance minister, meanwhile, said there are encouraging signs that the recession is petering out.

“We have seen improvements in business confidence, certainly. We are seeing an increase — some increases — in private-sector investment, although we are not comfortable yet that we’re at a place where we can stop the stimulus measures,” Flaherty told a news conference.

“The job situation has also stabilized in the last several months, which is always encouraging.”

Dale Orr, a Toronto-based economic consultant, said Flaherty had “put a bit of flesh” on earlier statements which left the impression projects were going forward and there was immediate economic growth.

“The starting point for a lot of these programs is exactly what he’s now mentioning,” Orr said.

Douglas Porter, deputy chief economist with BMO Capital Markets, said Flaherty seemed to be sticking to his message “that there isn’t going to be a whole lot of new measures next year.

“In fact, next year’s budget may be extremely thin.”

Porter said one of the biggest criticisms of fiscal policy is that by the time the problem is identified and the money starts to be spent, the economy has already started to recover.

“This may well be a case where the maximum effect of the fiscal stimulus actually hits after the economy has started to emerge from recession.”


Transmitted by CNW Group on : December 14, 2009 05:00

British Columbia poised to recover from sharp downturn in 2009: RBC Economics

Strong demand for natural resources and staging the Winter Olympics should boost B.C. economy in 2010

TORONTO, Dec. 14 /CNW/ – As British Columbia gets ready to host the 2010 Winter Olympic and Paralympic Games, the province’s economy is preparing for a burst of economic activity, according to a new RBC Economics report.

“The Games should give a big boost to tourism, retail trade and a variety of other services that will help move B.C.’s economy into recovery mode in 2010,” said Craig Wright, senior vice-president and chief economist, RBC. “This economic tonic could not come soon enough for B.C., which is ending 2009 with its worst performance since 1982.”

Signs of a recovery have been emerging in recent months, with retail sales and housing starts trending higher since the spring. A stunning rally in existing home sales, boosted by low mortgage rates, helped the B.C. resale market fully recover in October. Employment also picked up in the fall, although the unemployment rate remained elevated.

The RBC Economics Provincial Outlook forecasts that B.C.’s key forest products sector should finally begin to move out of its deep slump in 2010, as U.S. demand for building products rises. Stronger global demand for metals and coal, as well as further development of natural gas fields in the province, should contribute to increased exports. The RBC report projects that the B.C. economy will grow by a solid 3.2 per cent in 2010, second only to Saskatchewan in terms of growth rates among the provinces next year, before moving higher to 3.4 per cent in 2011.

The main theme of the RBC Economics Provincial Outlook is that a mild economic recovery is expected to be widespread among provinces in 2010, after a significant contraction spread across the country in 2009 (with only Manitoba and Nova Scotia barely avoiding a decline in activity). The full force of fiscal and monetary stimulus should positively contribute to growth in 2010. The price tag for that stimulus however, will be huge budget deficits. While such deficits might cause some discomfort, the alternative was even less attractive given the severity of the economic downturn. Returning to balance over the medium-term will be a challenge involving difficult choices. Provincial economies are expected to be in solid growth territory in 2011, with most western provinces – led by Saskatchewan – benefiting from strengthening commodity prices and hitting higher growth rates than the 3.9 per cent national average. The exception will be B.C., where the boost from the Olympics will not be repeated.

The RBC Economics Provincial Outlook assesses the provinces according to economic growth, employment growth, unemployment rates, retail sales and housing starts.

According to the report, available online as of 8 a.m. EST today at, provincial forecast details are as follows:



                        Real                Housing             Retail

                         GDP                 starts              sales

                    Y/Y % Change           Thousands          Y/Y % Change

                  09     10     11     09     10     11     09     10     11

                  —     —     —     —     —     —     —     —     —

    N.& L.      -4.5    2.4    1.5    3.0    3.0    3.1    2.0    4.2    5.4

    P.E.I.      -0.1    2.2    3.4    0.7    0.8    0.8   -0.7    3.7    4.4

    N.S.         0.0    2.8    3.8    3.7    4.1    4.1   -0.3    4.4    4.9

    N.B.        -0.3    2.9    3.7    3.6    3.7    3.5   -0.4    3.7    4.1

    QUE.        -1.6    2.2    3.7   41.5   42.0   44.0   -0.9    4.3    5.1

    ONT.        -3.2    2.4    4.0   50.5   65.0   68.0   -2.7    3.8    5.6

    MAN.         0.2    3.0    4.0    4.2    5.4    5.5   -1.3    5.1    5.8

    SASK.       -1.6    3.9    4.6    3.4    4.1    4.4   -2.3    5.5    6.1

    ALTA.       -3.4    2.4    4.4   19.2   28.5   30.5   -8.5    4.9    7.0

    B.C.        -2.6    3.2    3.4   15.6   24.5   27.5   -5.8    5.7    4.6

    CANADA      -2.5    2.6    3.9  145.4    181    191   -3.3    4.4    5.5




                     Employment              rate                 CPI

                    Y/Y % Change               %              Y/Y % Change

                  09     10     11     09     10     11     09     10     11

                  —     —     —     —     —     —     —     —     —

    N.& L.      -2.5    0.6    1.8   15.5   15.7   14.9    0.4    1.8    2.3

    P.E.I.      -1.3    2.1    1.2   12.2   12.0   11.7    0.0    2.2    2.4

    N.S.         0.0    1.3    2.0    9.2    9.4    8.8    0.0    2.1    2.4

    N.B.         0.1    1.3    1.5    8.9    8.9    8.5    0.3    2.0    2.3

    QUE.        -1.0    1.1    2.2    8.5    8.8    8.1    0.6    1.6    2.2

    ONT.        -2.4    1.1    2.5    9.1    9.7    8.5    0.3    1.3    2.1

    MAN.         0.2    1.4    2.2    5.2    5.5    4.9    0.7    1.8    2.3

    SASK.        1.5    1.2    2.7    4.8    5.1    4.5    1.3    2.3    2.9

    ALTA.       -1.2    1.2    3.1    6.6    6.9    5.9   -0.2    1.3    2.0

    B.C.        -2.4    2.1    1.7    7.6    7.5    6.9    0.1    1.2    2.0

    CANADA      -1.5    1.3    2.3    8.3    8.7    7.8    0.3    1.5    2.2