Georgia Investor Group

What is so surprising is the housing market in Canada bounced back sooner than expected. In the spring of 2009, Canada saw the about face of the housing market, then sales figures rocketing in the summer. When we analyze the winter months we observe an even larger increase with reports of over a 100% jump. At the same time the housing prices even overtook the pre-crash property prices.

Studying the Canadian market against the rest of the world, looks like Canada doing much better and there are several possibilities why. Most experts think the main reason can be connected to extremely low interest rates, introduced by the Bank of Canada, which slashed rates down to a record low 0.25%. This low rate helped the Canadian housing market and even though the US endeavoured to do the same thing, they didn’t see the same results:

High risk lending for mortgages was common in the US unlikeCanada. In the region of 5% (potentially upwards of 10%) of loans in Canada can be assigned to the sub prime category, while sub prime loans in the US took a 22% share of all loans during the critical years, 2006-2008.

Canadian banks are over and over again held up as as the solid in the world by the World Economic Forum. The way the banks and other financial institutions dealt with the hard times is another reason why Canada deflected the credit crunch for the most part.

Though jobs were lost and the unemployment figures rose, the figures were not as bad as they were in the US and recovery has been seen since Summer 2009. Personal bankruptcies are lower due to the social system in Canada

In conclusion the Canadian housing market is certainly very solid. It is so great, in fact, that there are people in the background whispering of a new and more dangerous real estate bubble ahead. I don’t think this is the case, for several reasons.

Interest rates are being kept stable until at the summer, said the Bank of Canada. Obviously we have already seen mortgage rates starting to rise and many experts say we will see the rates increasing as the summer approaches. The First Time Home Buyers’ Tax Credit is going to finish soon, despite there is no official date it finishes it can’t stay for ever. We also have seen, the shortage of new properties listed, which we have been experiencing since the autumn of 2009, is slowly letting up. As Jay Banks from Vancouver Lofts, adds: “There has been an enlarging influx of new listings over the last 2-3 months, which has helped to stabilize the inventory level.”

More levelled sales and prices of properties settling at tolerable figures, is probably going to be the outcome of all these points starting to come together.

Technorati Tags: Canada, market, USA

Wall Street takes its 2nd biggest plunge ever, Georgia and Russia can’t work it out, and a conservative win in Canada. Marta Costello hosts the gnooze (the g is silent) - today’s top stories in about 3 minutes.

Bloopers, t shirts and more at http://gnooze.com !

Music by Pistol Youth: http://www.facebook.com/profile.php?id=19522968720 and Special Thanks to Lettuce for the t-shirt/logo design - http://www.lettuceoffice.com

Duration : 0:2:47

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Technorati Tags: Canada, comedy, conservative, crash, dow, Georgia, gnooze, harper, investors, market, nasdaq, news, russia, st, stephen, talks, wall

First Time Home-Buyers Tax Credit was one of the governments action promotions to help with the real estate depression. In comparison to the USA tax incentive plan, the Canadian scheme seems to come a meagre second. But does anyone find it remotely amusing?
First, let’s analyze the two tax credits. The Canadian First-Time Homebuyer’s Tax Plan, proposed by the Federal government, is based on a $5,000 deductible. Using the deductible and multiplying it by the lowest income tax rate, for a real estate owner this will amount to less than $800 net if you haven’t owned a property within the last four years.

On the other hand, the American tax credit can be as big as 10% of the property’s value, to a maximum of $8,000. There is one meaningful difference – this sum is not removed from the tax base (like ours), but deducted from the customer’s income tax owing. When the tax owing doesn’t exceed the maximum credit then the new property owner can look forward to the money being cashed back to them. If a US citizen wants to take advantage of this tax incentive then they can’t have owned a home in the previous 3 years.

The Canadian and US real estate market recovery is down to very different things; in the US its down to these enormous tax incentives whilst in Canada it is believed to be down to interest rate cuts. This greatly reduced the restricting pressure of a down payment and thus put a lot of purchasing power into the hands of the first time home buyers. The question of whether the Canadian economic action plan shouldn’t take the tax credit more seriously comes normally, but the answer is more involved.

What Canadians should ask themselves, is “do we need it”? There has been a entirely different consequence when you examine the recession in both Canada and the USA. Lots of short sales and foreclosures have been observed in the US which flooded the market, although in Canada the hardest hit were real estate agents and investors due to the quick rebound.

The next question is of a fiscal type. Billions of dollars in lost tax revenue doesn’t support the already struggling budget shortage when 1.5 million taxpayers are claiming this tax credit.

To study the rest, please follow our original article “Is the First Time Home-Buyers Tax Credit Really as Good as It Sounds?” Thank you.

Technorati Tags: Canada, Real Estate, tax

The present level of interest rates is to hold at 0.25% after the last rate publication in October by the Bank of Canada. This verdict was exactly what specialists accept to be the way forward for Canada.

The bank is hoping to keep the current level until at least June 2010 which will mean the level will have been low for over a year. As any real estate agent would tell you, one of the major reasons why the Canadian real estate market has seen a good rebound from the recession, is the attractiveness of these low interest rates, which is allowing buyers to buy properties.

However, there are already voices crying out for an interest rate hike. Gigantic bubbles around the world made individuals cautious. Rather than risk the bubble bursting, many think it can be headed off by increasing interest rates. Many specialists still believe that in spite of increasing prices and these bubbles forming it would be a mistake to increase interest rates at this moment in time.

We need to look at the logic of why the experts don’t believe the interests rates should increase and the main reason is that although the BoC predicted a 2% rise in the third quarter of 2009 the actual GDP growth is completely different. One of the other considerations concern the domestic industry which is still observing very high levels of trade deficit and therefore a slower improvement.

The use of leverage, which is a means of using debt to increase investment, is still poor and there are no signs of it growing. Inflation is close to -1%, leaving all concerns behind for the time being. The other consideration, is all this is the housing market, which doesn’t seemed to have crashed as predicted. Prices are growing, but the stock flow remains constant. With the housing downturn last winter there was a hoard of properties which are now selling, as the demand is larger so the prices rise.

It is very improbable that the BoC will retreat on its commitment to keep interest rates low till at least June 2010. Reassuring news for condo purchaser!

Technorati Tags: Canada, interest rates

As in the best part of the countries internationally, Canada has enabled a special set of policies to cope with the economic slowdown. These policies whilst known under many different names internationally, in Canada it is known as the Economic Action Plan. With 90% of the initiatives of the fiscal year 2009-2010 being implemented, it is time to have a closer look at it, concentrating on the Canadian housing sector.

Economic Action Plan is a assortment of hundreds of lesser projects giving fiscal stimulus to our economy. This stimulus accounts for over 4% of Canada’s economic performance, otherwise known as GDP, and is one of the largest in the planet.

Tax strain and how to cut it

Perhaps the most important part of the Plan is tax cutting. Property related tax reductions: - $2.5 billion Property improvement tax credits over the period 2009-10. - $15 million to be put aside for the increase in Home Buyers’ Plan withdrawal limits. - First-time Real Estate Buyers’ Tax Credit to see a $175 million lure.

Millions of Canadians have made savings from these tax reduction initiatives already. From every part of the country we have noticed a very swift property rebound due to the First-Time Buyers’ Tax Credit lure. Furthermore, the house renovation credit has helped people to increase the value of their property and strengthen their position in the very aggressive environment of the resale housing market and improved the overall quality of housing stock.

Provoke property construction

New construction is crucial for a flourishing housing market and real estate agents themselves though many are not excited by it. Including the tax relief mentioned earlier to rouse and encourage the construction industry and private house ownership, direct spending on construction has further added stimuli which benefits the whole economy.

There are around 7,000 housing and infrastructure projects spawning from the plan, of which more than 4,000 have already begun. There is more than 1 billion dollars (for the fiscal year 2009-2010) being allocated for approximately 300 social housing projects.

There is just about $10 billion budgeted for this area alone. These actions are indeed appealing for realtors because of the consequences on the local real estate market. In one of our previous articles Move Ontario we discussed the details on how infrastructure projects alter values of properties in their vicinity. Affordable housing for low income families is implemented by social housing, which also expands the the supply of homes and influences the resale and rental market.

Realtors that deal largely with a housing market changed by the closeness of these types of projects will find them vital. Projects that require builds help the labor market, supplying jobs, therefore money in your pocket, which leads to the capacity to purchase your own home, which leads to more housing needed; a profitable circle alround.

The Action Plan and its success

The slump is now seeing an upward turn with the housing market being one of the first areas to see a revival. The kick start to the property market is believed to be caused by the monetary policy according to many real estate agents. Nonetheless, monetary stimulation also plays a part. A flourishing property market gives you an idea of the health of the economy, therefore, even though these plans are steep they can only have a positive effect.

Technorati Tags: Action plan, Canada, Real Estate

Among all the government actions taken in Canada to ease last year’s real estate depression, the tax credit was one of those most accentuated. Even so, considered next to the first time home-buyers tax credit granted by the US government, the Canadian one seems like a joke. Nevertheless does anyone find it remotely jocular?
Let’s commence by investigating both the tax credits on display. The Canadian First-Time Homebuyer’s Tax Incentive, offered by the Federal government, is based on a $5,000 deductible. If you want to buy property in Canada and haven’t owned property in the last four years, then this deductible is multiplied by 15% - total net of $750.

On the other hand, the American tax incentive can be as big as 10% of the property’s value, to a maximum of $8,000. There is one important difference – this sum is not removed from the tax base (like ours), but deducted from the customer’s income tax owing. When the tax owing doesn’t top the maximum credit then the new property owner can look forward to the money being cashed back to them. This tax credit is open to those who haven’t owned housing in the three years prior to taking advantage of the tax incentive.

The American property market has entered a shaky but definitive recovery due to these gigantic tax credits, while in Canada the recovery of the property market is believed to be due to the interest rate cuts. First time buyers in the US are now in a position of power when purchasing real estate due to reduction in pressure to find large down payments. The question of whether the Canadian economic action plan shouldn’t take the tax credit more intently comes naturally, but the answer is more involved.

First, there is a question of necessity. The force of the Canadian recession vs the US recession on our respective property markets has been radically different. While falling prices, lost jobs and a flood of inventory drove many Americans right into short sales or foreclosures, the Canadian market bounced back within a few months, with any impact hitting investors and real estate agents more than normal homeowners.

The next question is of a fiscal kind. In the US there is a gigantic budget deficit and with greater than a million taxpayers claiming this aid it impacts on lost tax revenue.

To study the rest, please follow our original article “Is the First Time Home-Buyers Tax Credit Really as Good as It Sounds?” Thank you.

Technorati Tags: Canada, Real Estate, tax

The Canadian property market looks positive according to an report in the Scotia Capital. The report talks about why the housing market around the world rates second to the Canadian market. Does this mean that Canadian housing is on its way up or the rest of the world is on the way down?

The housing market in Canada is being helped by a few factors. A big improvement in listings stock from the spring was expunged within a very short time scale. Slumps in developers’ margins on houses helped the stock of newly built homes lower. There is little in the way of hidden stock of foreclosed houses. These hidden listings symbolize the largest headaches in the US market.

The principal motivation for the overall good health of the Canadian real estate sector is debatable, but most of the experts accept it’s based on the encouraging efforts of the last year. The main diversity between the USA and Canada with scrutiny to the tax incentive packages are in the USA they are time restricted.

People in Canada have seen their RRSP withdrawal limit increased, home buyers’ and renovation tax credits as well. There are also tax motivations and rebates for energy and upgrading your home and that doesn’t even cover the local incentives. Analyzing the Canadian housing market against the rest of the world, Canada has always held its own. The Bank of Canada with its powerful dynamic attitude has made it a front runner.

The upward flow of the housing market are what are displayed with these points. With this in mind you do need to be conscious there are still some situations to avoid. Scotia Capital experts worry particularly about the Canadian condo area. Thirteen per cent of housing construction is condo builds. This market for some reason is not selling as well forging a build up of unsold properties. Some professionals are not very happy with CMHC estimated stats for unabsorbed condos and believe there may be rising pressure for a price drop in the condominium sector.

Real estate investors should continue to look at the Canadian housing market as a brilliant investment. Investors still need to look at the market indicators diligently particularly in the condominium sector. Queries about the upward or downward current of the housing market comes down to the federal government. The results of all these housing incentives are not going to go on endlessly. Trying to get everyone to take up these incentives now could lead to a problem with listings at a later time. Therefore these policies should be withdrawn cautiously and gently.

Technorati Tags: Canada, housing market, Real Estate

A report focusing on the Canadian housing market conditions of 2008 and the 1st half of 2009 was recently published by The Canada Mortgage and Housing Corporation. It deals mainly with the housing starts and with the affordability to rent & buy.

According to the report the Canadian housing market is slowly getting better from the shock it suffered in the past year. While new home market actual starts decreased from January to June 2009 by over 43 per-cent compared to the same period in 2008, the MLS sales increased by over 17 per-cent in confrontation to the July 2008 numbers.

The overall trend on the housing market is growth now, and this goes also for the new housing price index. From January to May 2009, the average price change has grown from -0.6% to -0.1%. In accordance with the recovering resale market, the new housing price change in Toronto was slightly over zero for most of the time.

Economic conditions: Unemployment

Concerning the general trends in economy, we can see some optimistic developments. Firstly, the unemployment is still rising, but it has slowed down and appears to be at last under control. In July, only 13,000 more people lost their jobs, which is not that many, as in the first three months of 2009, it was 273,000. Second, the Bank of Canada has found out that there is finally some positive outcomes of the various stimulus packages introduced in many countries.

Affordability to rent

When we want to calculate the affordability to rent, we need to know how many hours in a month people need to work in order to earn the average cost of a 2-bedroom flat rent or the average mortgage payment down to 30% of gross monthly income. (The Canadian hourly income average grew by over 5% and reached $23.69 in 2008 (Ontario: $24.65, Toronto: $24.93)).

From 114 to 113 hours per month - that is how the average number of hours needed to bring the average rent for a 2-bedroom flat down to 30% has declined. While St John’s, Brantford and Guelph faced the biggest decrease, Toronto reported decrease from 149 to 146, securing it’s position of the 2nd most expensive city in this regards right after Vancouver.

Affordability of home owner-ship

While the general decline in the hours required to rent was rather paltry, the general decline in the hours required to bring the average mortgage payments down to 30 per-cent of gross income is more significant – from 255 hours in 2007 to 240 hours in 2008. In Toronto, the decline of hours required to own was quite noticeable - from 299 to 286. However, the costs of owned apartments in Toronto are still fourth highest, after Vancouver, Victoria and Abbotsford.

End notes

As an overall effect of housing market cooling from the second half of the year 2008, also new housing made a step towards better affordability, which I really welcome, being a real estate agent in Toronto. In the first six months of 2009, the prices were slightly decreasing and the affordability of renting and also home ownership was becoming better. With ongoing low interest rate, this period of time remains ideal time to acquire a property, before the market will take second breath.

Technorati Tags: buy, Canada, condo, house, housing, property, Real Estate, rent, report

The real estate market in Vancouver BC was very successful for almost seven years in a row. It was one of the Canadian records among market growths, and one of the longest and fastest too. From 2001 to 2007, average house prices nearly doubled, with inflation staying below 14% during the same period. Obviously this situation meant that many people, especially the ones entering the housing market for the first time, were not able afford just to buy a house.

When the notoriously famous problems began on the US housing market, Vancouver real estate seemed immune and continued to grow till the beginning of 2008. But then our market began to get under the influence of the affordability demand pressure. As a result, things slowed down and then in the following few months slowed down even more. The average price got stable at first, but later dropped. As the global economic crisis became a problem during autumn 2008, the sales of Vancouver real estate fell to extremely low values during January and February 2009, which inspired the general panic that we would face the same long and poor crisis period such as in the USA.

In case you are of the same opinion, observe the graphs in detail and you will find out that in February 2009, the sales were actually starting to rise again, not starting to go deeper down! From that time, Vancouver BC housing market is giving us only optimistic news and results. The June 2009 sales numbers exceeded the February ones nearly 6 times and the ones from last summer nearly twice. In concrete numbers, the sales in June 2009 were 75.6% better than in the same month last year. The average prices were falling till December 2008. Then the price level remained about the same until March, when it started to grow again and keeps growing steadily until now. The prices in June 2009 reached again the same level as they were in October last year.

These fact shouldn’t seem so shocking, if we analyze the numbers in detail. The new listings change graph will show us that the inflow of new buildings to the market came to a standstill in October 2008, after this point it started to drop.

This has a simple explanation, which lays in the obvious advantage of residential real estate, which is that people just need a place to stay. People do really need a home, while they can pretty well live without cars, hairdressers or holidays. Even though the demand can drop, it is unlikely for it to reach zero level, even for a limited period of time. The supply side has to keep certain regulations. Your house often is the most expensive item of your whole property. You can hold it and refuse selling during the times of falling prices, on the other hand such attitude stimulates new housing starts. In the end, an agreement has to be achieved at some point both for sellers and buyers, and the sooner the better.

So what are the underlying reasons behind Canadian market’s quick recovery, regarding that the US market is still struggling with the crisis? The reason lays in the reality that in Canada, we had no wave of foreclosures, which was the most critical event. The financial situation of both institutions and individual house owners is much better than in the United States. It doesn’t mean we are wealthier; it means we are more prepared to deal with sudden financial problems. The most affected financial sector in USA was the subprime mortgages, which are much less often used in Canada. Now our economic fundamentals could be doing better of course, but they are still quite stable.

So what would be the most likely next situation on the Vancouver RE market? We can expect solid sales and average price increase in the next few months. However, the situation will calm down after getting to the pre-burst level, due to general economic slowdown. Next year will be awesome especially for first time buyers – with record-low interest rates and prices still under the recent peak, properties won’t be so affordable forever!

Technorati Tags: Canada, real estate market, Vancouver

One of the crucial attributes of any large city, therefore Toronto as well, is its transportation system. Population explosion in the last four decades, multiplying almost five times since 1970, has been the primary reason why our transit system is no longer capable to satisfy the demands. The number of minor improvements in past years offered only provisional solutions. A project called The Big Move, starting in the next few years, has been planned to completely improve the transportation in south Ontario.

The crucial part of this overall transit plan is called MoveOntario2020. It has been published in June 2007 (is that a random luck that liberals were reelected just in October after that?) and people are now impatiently anticipating the new reality. There are 52 projects, phased till 2020, with the budget around $17.5 billion ($11.5 billion covered by Ontario). 1. GO Transit upgrades and extensions; 2. Major municipal transit expansions; 3. Cross-boundary subway expansions; and 4. Rapid-rail link between Toronto Union Station and Toronto

Real estate and transit system

The whole functioning of real estate in Toronto is quite complex science. It’s a very sensitive industry, where a huge number of factors have a smaller or bigger impact. It is not always possible to tell how a specific change impacts the local or global economic environment, but we can identify some crucial factors. The transit system is one of the crucial factors.

You probably have an idea about the importance of the transit system for the sufficient quality of living. For instance, the direct expenses on commuting are lower, just as indirect expenses such as time consumption. Moreover, we can mention better accessibility of public facilities or cleaner air and generally healthier environment, while there only a few minor negative short-term aspects.

There are a number of research papers attempting to quantify the effect of various improvements in transit system. One of the papers from Tinbergen Institute, dealing with railways, states a number of 25% - that is how much the positive effect of railway accesibility on home value can be. Every home’s value can increase by 2.5% on average, provided that the public transport frequency is improved twice. This is valid just one year after the works are finished.

MoveOntario impact on the real estate in Toronto in upcoming years

Our expected outcomes can be based on a recent study conducted by REIN Canada. Rail commuting system is one of the crucial ways to decrease the time people need for commuting. In Toronto, we have the underground and GO Train system.

The positively influenced areas lie in about 800m range from each station, with value maximization in 500m range. More areas influenced are older neighbourhoods, similarly areas inhabited by citizens with lower average income are again more. Areas around Spadina and Younge subway lines extensions in Toronto can be introduced as examples of the effect on house prices. For GO Train it’s more complicated; there are 17 projects involving capacity expansion, new lines and/or lines extension and there are 9 additional projects involving GO Bus Rapid. Similar effect will be evoked by new light train transit lines, involving Waterfront and Eglinton neighbourhoods.

Conclusion

In this short article, we cannot analyze in detail the whole mechanism how MoveOntario 2020 will influence the Toronto housing market. According to REIN, the most positive effect will be on areas around Vaughan, Scarborough and Barrie. The second group of highly affected areas comprises of Milton, Brambton and Uxbridge&Stoufville regions. The house prices are expected to rise by 10-20% in these areas. In the third group we can put all Toronto areas in the vicinity of the new lines, or old lines with plans for increasing their capacity. 1-3 years after finishing the specific project, we can expect the positive effect on home prices.

And that was still not the end. Also the quality of life around the old parts should be improved by the new transit system, as more areas should enjoy easier access for citizens. Some 175 000 jobs are supposed to be created thanks to MoveOntario, which may again positively influence the GTA property prices. With well-working transit system we are going to attract more inhabitants, more investors and more business. The whole Toronto is going to profit and property values on the whole Toronto housing market may be positively influenced for the next decades.

Technorati Tags: Canada, MoveOntario, Real Estate, Toronto, transport, transportation