A Blossoming Spring Market

Home sales for February were up for the first time in 5 months, while the national average home prices continued their marginal upward trend.  In Vancouver, prices and sales have made a strong comeback, Calgary continues to break all-time price records, and Toronto single-family homes are in favor of the seller, with bidding wars pushing prices in some cases $100,000 over asking.

With the usual busy Spring Market upon us, Bank of Montreal released their no-frills 5-year fixed mortgage rate (2.99% with restricted options) in hopes to capture a strong market share for a second year in a row.  This time, they had no push back from the Canadian Government. The newly appointed Minster of Finance, Joe Oliver is ready to leave the mortgage market to its own devices, leaving it well enough alone – for now.  Overall, mortgage rates have dropped, but no big rate wars have materialized. With the continued low fixed rate options, consumers are trending to the security of a fixed rate over floating.

There are still conflicting opinions on Canada’s housing market and if prices are substantially over valued or if the country is undergoing a slow softening to a balanced market.  If over valued, it’s been suggested that the housing roll over will take effect by the end of 2014.

More highlights from the March headlines:

OVERALL

• More Canadians are willing to enter a bidding war and fight it out to secure a property, according to a home buying report released by Bank of Montreal. It says 34% of Canadians surveyed are willing to enter a bidding war when it’s time to buy a home, an increase of six points, or 21%, from a year ago.
• Anyone applying for a variable rate can qualify based on the five-year posted rate. The qualifying rate is based on an average of the six big banks’ posted rate for a five-year closed mortgage. Declining bond yields have lowered that qualifying rate to 4.99%. The decline may not sound like much but Rob McLister, editor of Canadian Mortgage Trends, says it means a consumer with a $300,000 home and 5% down needs 2% less income than they did just a few months ago.
• Mr. McLister says the general rule is when the gap between the five-year fixed and variables reaches 100 basis points or one percentage point, people start to shift to a floating rate.
• Canadian home prices rose 0.3% in February, pushing the Teranet-National Bank national composite price index to a record high for a second month in a row.
• Home prices were up in all five markets surveyed in Western Canada and were down in all five metropolitan eastern markets except Montreal.
• Over the last 12 months, the index has increased by 5%, with prices in Calgary rising 9.6% and Vancouver by 7.7%. Toronto was up 6.1%, followed by Edmonton (5.3%) and Hamilton (five%). Winnipeg was below the average at 3.5% and Montreal was up 1.9%.
• The dream of an affordable single-family detached home is fading fast. Affordability issues are driving developers to look for accommodations that can make housing more financially accessible and a key strategy is increasing the density of the pricey land parcels they are acquiring.
• Nationally, home sales are up 1.9% from a year ago, but BMO senior economist Robert Kavcic says markets vary widely across the country with half of Canada’s largest cities reporting a sales dip from a year ago.
• Canada’s housing market still looks balanced overall, but conditions vary widely across regions and for even segments within regions. National price momentum has picked up, but gains have not been widespread across markets—and that should provide some solace to policymakers.”
• “In Toronto and Vancouver, we’re starting to see bidding wars that we haven’t seen in two or three years,” says Ross McCredie, president and CEO of Sotheby’s International Realty Canada.
• CREA released results for February sales, which were up 0.3% from a January. The increase ended five straight months of declines but sales are still off 9.3% from the peak.
• The average home sold for $406,372 in February, which was a 10.1% increase from a year ago. CREA emphasized the year-over-year gain was impacted by the lack of activity in some of the country’s most expensive markets in 2013, in particular Vancouver.
• Mr. Oliver seems in no mood to quarrel with Bay Street and ready to largely leave the mortgage market to its own devices. “There’s a market and the bank made its decision, and the chief executive officer of the Bank of Montreal informed me about it,” Mr. Oliver told reporters in Ottawa. “I listened to his explanation, his reasons. I reiterated what I’ve just stated — the government is gradually reducing its involvement in the mortgage market.”
• “Sellers’ conditions continue to dominate the undersupplied single-family market (largely in Toronto and Calgary), lifting already high prices even higher.” That shortage, “combined with strained affordability for first-time buyers will buoy resale condominium demand in the year ahead,” says Scotiabank economist Adrienne Warren. While construction is likely to pick up in Calgary to better meet demand for single family homes, taking some of the pressure off prices, Toronto faces a longer-term problem, Warren said in an interview. That’s because new-home construction has plummeted over the last few years in the wake of the provincial Places to Grow policies, which have pushed most new construction into higher density condo towers.

PREDICTIONS

• Pacific Investment Management Co. forecasts Canadian home prices falling as much as 20% in the next five years, removing the boost from household spending that contributed to faster-than-expected growth last quarter. “Canadian housing is overvalued,” Ed Devlin, the London-based head of Pimco’s Canadian portfolio, said by telephone. “I would expect to see it happening at the end of this year, we’re going to start to see housing roll over.”
• Jim Murphy, chief executive of CAAMP, says the easier qualification and low rate might push a few people back into variable but a fixed rate of 3% is tempting to lock down. “You look at the news and it just seems the Bank of Canada is unlikely to raise rates,” said Mr. Murphy, who doesn’t think overnight rates will go up this year or possibly next year.
• Record Canadian housing construction led a faster-than-expected gain in building permits in January, government data showed one day after the central bank predicted a soft landing in the country’s real estate market.
• The Bank of Canada affirmed its forecast for a housing market “soft landing” with the ratio of household debt to income stabilizing around current record levels. Governor Stephen Poloz kept the benchmark overnight interest rate at 1%, citing balanced risks from stretched consumers and sluggish business spending.
• Economist Will Dunning argues neither Toronto nor Vancouver probably needed the latest rule changes, which included the reduction of the maximum amortization length from 30 years to 25 years — something that increased monthly payments and lowered how much debt consumers could get. The meddling has created a “dangerous” situation that might ultimately derail the housing market which will impact jobs and at the end of the day gross domestic product, says Mr. Dunning,
• “Calgary’s market continues to see the strongest fundamentals; Vancouver has rebounded from a soft patch; while Toronto’s market remains relatively balanced overall, though the condo market is more amply supplied,” said Robert Kavcic, senior economist with BMO Capital Markets, in a statement. “Overall, sales are expected to hold relatively steady in the year ahead, with price growth in the low single-digit range, below the rate of income growth.”
• Real estate brokerage Rock Advisors Inc. is predicting that the number of purpose-built apartments will grow in 2014 as developers look elsewhere for income. “Purpose-built rental apartments give such developers an ongoing revenue stream if they hold onto a building and rent out the units rather then selling the building for a quick buck,” Derek Lobo, chief executive of Rock Advisors
• “The heated housing markets are why apartments will do better in 2014,” says Mr. Lobo. “More and more Canadians are finding the high cost of home ownership isn’t what it’s cracked up to be. Even with condominiums, the cost of maintaining a mortgage and paying condominium fees presents an ownership premium of 10% over what it costs to rent an apartment.” Mr. Lobo does have an interest in promoting the apartment sector. His company is hosting a symposium on purpose-build apartments in May 6 to 7 in Toronto.
• The Ottawa-based Canadian Real Estate Association says sales are forecast to reach 463,700 in 2014, which would represent a 1.3% increase from 2013. The national average home price is forecast to be $397,000 in 2014, a 3.8% increase from a year earlier.
• “I expect fixed mortgage rates will edge marginally higher in the second half of 2014 as evidence confirms an anticipated pick-up in economic growth,” said Gregory Klump, chief economist with CREA, in a statement. “Marginally higher mortgage rates are likely to counterbalance that lift provided by stronger economic and continuing job growth and restrain the momentum of sales activity.”
• CREA: By 2015, sales are expected to reach 469,400 units, which would be a 1.2% increase from earlier. By 2015, the national average price is forecast to be $401,400, which would be another 1.1% increase.
• Benjamin Tal, deputy chief economist with Canadian Imperial Bank of Commerce, said all the mortgage changes amount to a 125 basis point increase in rates for first-time buyers. A shorter amortization payment means a higher monthly payment while decreasing size of a loan for consumers. “The market will slow, the only question is how quickly,” says Mr. Tal, who expects prices to fall nationally 10% to 15%. But in his view that’s not a bubble bursting. “The debate about overshooting is over, the question is the magnitude. At 10% to 15% that’s a market finding its footing.”
• But both the U.S. and Canada are expected to see “some release of weather-induced pent-up demand this spring,” says  Scotiabank economist Adrienne Warren.

VANCOUVER

• The Real Estate Board of Greater Vancouver said 2,530 homes were sold in February, a 40.8% increase from a year ago and a 43.8% increase from January. The board’s benchmark composite index reached $609,100 last month, a 3.2% increase from a year ago.
• February sales were close to the 10-year average for the month, while new listings were down 2.8% from a year ago and 12.1% from January, 2014.
• The Real Estate Board of Greater Vancouver said its benchmark price for a detached home in the region reached $932,900 in February. The area’s most expensive place to buy a detached home was West Vancouver with the average home selling for $2,145,200 last month.
• “Vancouver is unique across Canada in the severe mismatch between earning potential and cost of living. … Our business and industrial base simply does not provide the same number of high-paying white and blue collar jobs one might find in Alberta or Ontario.” Blair Mantin, VP of Sands & Associates, B.C.’s largest bankruptcy trustee
• Mantin reports B.C. is the only province west of Quebec that, in the past year, has not registered a decline in bankruptcies and consumer proposals (the latter involves a proposal for partial repayment of debt). “B.C. consumers are extremely over-extended.” A recent Sands & Associates study revealed consumer debt loads of $25,000 to $49,000 reflect a fiscal tipping point at which adult debtors start exploring bankruptcy or consumer-proposal options.

TORONTO

• In Toronto, the average detached home sold for $955,314 in February. But even in the suburban ring around the city, the average detached home $640,405.

CALGARY

• Calgary Real Estate Board, said that sales growth slowed in February from January but the total amount of activity was still up 8.68% from a year ago.
• “Demand growth in the single family sector has been restricted by the availability of product,” says Ann-Marie Lurie, chief economist with the Calgary Real Estate Board,
• The unadjusted single family benchmark price reached $482,800 in Calgary last month, a 1.28% increase from January and 9.1% jump from a year ago.
• February established all-time highs for MLS sale prices as well as luxury home sales as nearly one in five transactions turned into bidding wars in the marketplace due to a continued low inventory of available properties.
• Calgary Real Estate Board indicates all-time records, for any month, were set in the average city sale price ($482,530) and the median city price ($424,900) as well as in the single-family sale price ($550,312) and the single-family median price ($480,000).
• “Inventory’s facing a double whammy: new listings are well below average, and sales are well above. We haven’t seen inventory this low since the 2006 boom. And people are wondering: how long will that last,” said Scott Bollinger, broker with the ComFree Commonsense Network.
• Total sales in the city reached 1,854, up 8.68 per cent. The median price rose by 7.58 per cent and the average price was up 5.51 per cent. New listings increased by 1.54 per cent to 2,711 but active listings at the end of the month dropped by 18.28 per cent to 2,892.

Building & Sales Leveling, Prices Notch Small Gains

Canadian existing home sales and housing starts declined in most markets, while prices continued to rise in 8 out of the 11 major markets.

It’s expected for the market to cool over 2014, but there might be a surge of purchases prior to the Mortgage Insurance Premium increases set for May 1, 2014.  Genworth Financial and Canada Guaranty followed CMHC’s lead and will adjust mortgage insurance premiums from a range of 0.05%-2.75% to a range of .06%-3.15%.

Even with the softening of the market, it’s still surprising to see what your money will buy in various Canadian markets.  My cousin Shirley who lives in Windsor, Ontario often comments on the property listings included in my newsletters each month.  She shocked to see how costly our homes are in Vancouver in comparison to theirs.   In Canada’s housing market here’s what $500 K buys: A lake in Edmonton … a condo in Toronto is a good article showing the price comparables on home listings across our nation.

This month, there were also a number interesting graphs worth sharing:

More highlights from February’s headlines:

Overall

• The loonie fell to its lowest level in 4 1/2 years against the U.S. dollar on Jan. 22 after the Bank of Canada kept its benchmark interest rate unchanged.
• Re/Max surveyed 16 Canadian markets and found sales of what it calls “upper end homes” higher in 75% of those markets.
• CREA: reported January sales through its multiple listings service totalled 457,893 homes for 2013, up eight-tenths of a percent from 2012.
• The national average price for homes sold in December was US$389,119, up 10.4% from the end of 2012. Excluding Greater Vancouver and the Toronto region, the year-over-year increase was 4.6%.
• Last year was a pretty remarkable year for negotiating a good deal. The Canadian Association of Accredited Mortgage Professionals said the average five-year fixed rate mortgage was 3.06% in 2013, while the average posted rate was 5.21% in 2013 for the same term.
• This week the Federal Court of Appeal ruled that a competition tribunal erred in dismissing allegations by Ottawa’s former competition commissioner that the country’s largest real estate board is abusing its market dominance. But in ruling the tribunal should reconsider the complex case on its merits, the court has really reopened a critical question: How much industry controlled Multiple Listing Service (MLS) data should be made available to consumers online? “One of the key things I tell our people is that your role is not to be a house finder. That was a 1990s job. Today’s consumers grew up on Google — no one is more excited about finding a house in a particular neighbourhood than they are…What they need you to be is an interpreter of data, a consultant, an adviser and a professional negotiator who ensures that not just the price, but the terms and conditions of this complex deal are well managed. That’s where all our focus should be.” Royal LePage president and CEO Phil Soper said.
• Canadian existing home sales fell for a fifth month in January on fewer transactions in Toronto and Vancouver, adding to evidence the nation’s housing market is cooling.
• CREA: Sales declined 3.3% in January from the previous month. The average price of a home sold in January rose 0.3% from the previous month and 9.5% from a year ago.
• Canadian home prices rose to a record high in January as Vancouver prices surged, the Teranet-National Bank Composite House Price Index showed. Prices rose in most of the 11 markets surveyed, led by a 1.1% rise in Vancouver and a 0.5% rise in Toronto and Quebec City. Prices were up 0.4% in Calgary, 0.3% in Hamilton, and 0.2% in Montreal and Winnipeg.
• Year-over-year price gains were seen in eight of the 11 markets, led by a 7.5% gain in Vancouver and a 7.1% rise in Calgary compared to January 2013.
• CMHC: Canadian housing starts fell twice as fast as expected in January, led by a drop in multiple-unit projects. Work on new homes fell 3.7% to a 180,248-unit annualized pace, the third straight decline. Permits for dwellings such as apartments and condominiums fell 6.0% to 102,289 units and single-family homes rose from the lowest since July 2009 in January, gaining 3.4% to 60,869 units.
• Prices continue to rise across the country. The Canadian Real Estate Association said December average prices were up 10.4% nationally from a year ago to $389,119.
• The cost of mortgage default insurance is about to go up for most consumers after competitors moved quickly to follow Canada Mortgage and Housing Corp.’s decision to raise premiums.
• CMHC announced it is increasing premiums across the board, effective May 1. The change does not impact existing homeowners and is expected to raise up to $175-million for CMHC. “The higher premiums reflect CMHC’s higher capital targets,” said Steven Mennill, CMHC’s vice-president of insurance operations, in a release. “CMHC’s capital holdings reduce Canadian taxpayers’ exposure to the housing market and contribute to the long term stability of the financial system.” Prior to the announcement, the premiums ranged between 0.5 per cent and 2.75 per cent. Under the new rules, they will range from 0.6 per cent to 3.15 per cent.

Predictions

• Toronto-Dominion Bank Chief Executive Officer Ed Clark said Canada’s economy is in danger of underperforming the U.S. as consumers become increasingly “fragile” amid rising household debt and home prices. “Canada could well undergrow the United States for the next three or four years, which means we’re going to have lower interest rates for longer,” Clark, 66, said this week in an interview at the bank’s Toronto headquarters. “There’s a risk that people are going to keep borrowing.”
• Re/Max says there is “upward trajectory” for home values in Vancouver but expects modest growth this year for prices.
• CMHC: housing starts will be in a range of 176,600 and 199,800 in 2014, with a point forecast, or most likely outcome, of 187,300 units, relatively unchanged from 187,923 units in 2013. That is up slightly from CMHC’s October estimate of 184,700 starts. The agency said there will be 163,200 to 206,600 units started in 2015, with a point forecast of 184,900. Both forecasts represent a sharp slowdown from the 214,827 starts of 2012, when the market was at record highs and the government intervened to tighten mortgage lending rules.
• CMHC: homebuilding and sales leveling off, with prices continuing to notch small gains.
• CMHC: home sales will range from 436,000 to 497,000 in 2014, with a point forecast of 466,500 units. That’s down slightly from October’s forecast of 468,200 but up from 457,485 in 2013.
• CMHC: For 2015, it expects a move up to a range of 443,400 to 506,000, with an increase in the point forecast to 474,700. Price gains are expected to slow in 2014 and 2015. CMHC’s point forecast for the average price calls for a 2.1% gain to $390,400 in 2014, and a 1.7% gain to $397,100 in 2015.
• Canadian home prices are overvalued by 10% according to two new reports issued by Toronto-Dominion Bank and the International Monetary Fund. The TD report, authored by economist Diana Petramala, also notes the overvaluation in markets like Toronto, Vancouver, Montreal and Ottawa is likely more significant than in others across the country. “Overvaluation depends on the definition of income,” Ms. Diana Petramala, a TD economist, said. “A more encompassing definition of income, including government transfers and investment income, suggests the housing market is only 8% overvalued.” She arrives at the 10% figure, however, by also looking at affordability and taking into account interest rate trends over the next few years. “Home prices have weakened in the second half of 2013 as a result and we expect that softness to persist in 2014,” Petramala said.
• CIBC Deputy chief economist Benjamin Tal said now that the federal budget has closed a loophole offering a shortcut to wealthy investors, he thinks it could have an even greater impact on housing markets in Vancouver and, to a lesser extent, Toronto. “They basically had stopped the program,” said Mr. Tal, about the Immigrant Investor Program which fast-tracked permanent residency for people who could come up with $800,000. The money ultimately served as a interest-free loan to the government that was paid back to the immigrant in five years. Mr. Tal says his own research shows there has been a “significant softening” in activity in high-end home sales in Vancouver, Canada’s most expensive city.

 Vancouver

• The escalation of east-side property values is raising fears that speculators are buying land at inflated prices. An industrial part of Mount Pleasant near Main Street and Broadway had the highest increase – about 30 per cent, as calculated by the B.C. Assessment Authority on the basis of recent sales.
• Vancouver, the priciest market in the country, saw an increase of 36% in sales in 2013 from 2012 in homes selling for $2-million and up.
• The Real Estate Board of Greater Vancouver: there were 1,760 sales through the Multiple Listing Service in January, a 30.3% increase from a year ago. But sales were down 9.9% decline from December.
• Last month’s sales figures remain 7.2% above the 10-year average for the month of January. Prices have inched up a bit too. The board’s composite benchmark price for all residential properties in Metro Vancouver stood at $606,800 last month, a 3.2% increase from a year ago.

Toronto

• In Toronto, where a luxury home is said to start at $1.5-million, sales were up 18% in 2013 over 2012.
• The shortage of new listings is being blamed for a 2.2-per-cent decline in home sales across the GTA in January and a more than 9-per-cent surge in prices, year over year, according to figures released by the Toronto Real Estate Board
• TREB: The average sale price of a home in January was $526,528, up more than 9 per cent from $482,080 in January of 2013.

For the month of January:

• Sales of detached homes were down 4.3 per cent in Toronto and 6.5 per cent in the suburbs, in large part reflecting the shortage of those most sought-after properties for sale.
• The average sale price of a detached house in Toronto hit $888,210, up almost 15 per cent, according to TREB. That compares to a 10.5 per cent price jump to an average sale price of $620,654 for a detached home in the suburbs.
• Semi-detached sales were down 5 per cent in the 416 region and almost 9 per cent in the 905 area, with average sale prices up 6.1 per cent (to $622,319) in Toronto and 6.3 per cent (to $416,441) in the suburbs.
• Townhouse sales were up 7.4 per cent in the 416 and flatlined in the 905, with prices up 4.6 per cent (to an average $439,401) and 10.4 per cent (to $396,320), respectively.
• Active listings also plummeted by 16.4 per cent, down to 11,903 properties still for sale across the GTA in January, compared to 14,231.
• TREB: Some 2,767 properties were sold during the first two weeks of February, up just 1.3 per cent from the same period a year ago. But the average sale price was up 7.8 per cent to $547,107 from the $507,474 recorded in the first two weeks of February 2013.
• New listings remained down about 6.1 per cent as of mid February, year over year. But that’s a significant improvement from the 16.6 per cent decline in new listings in January which was blamed, along with the unrelenting polar vortex, for a 2.2 per cent drop in sales across the GTA.

Calgary

• A luxury home starts at $1-million. Sales of upper end homes in Calgary climbed 34% in 2013 from 2012. Edmonton is a little less pricey for a luxury home with the starting price $750,000 but sales jumped 32% over the same period.
• CMHC: first quarter 2014 Housing Market Outlook said housing starts in the Calgary census metropolitan area will reach 14,100 units in 2014 before declining to 13,500 in 2015. They were at 12,584 last year.
• CMHC: record level of migration in 2013 will help lift MLS sales from 29,954 in 2013 to 31,300 units in 2014 and to 32,100 in 2015 and the high level of demand is expected to be met by more supply which will help lift the average price from $437,036 in 2013 to $449,000 in 2014 and to $460,000 in 2015.
• CMHC: In Alberta, after reaching 18,431 units in 2013, single-detached starts are projected to increase to 19,100 in 2014 and remain near this level at 18,800 in 2015. After increasing to 17,580 units in 2013, multi-family starts in Alberta are projected to rise further to 18,000 units in 2014 and then moderate to 17,600 units in 2015.
• CMHC: In the resale market, MLS sales are projected to rise from 66,080 units in 2013 in Alberta to 68,500 in 2014 and to 70,100 in 2015. The average MLS price in the province will increase from $380,969 in 2013 to $391,100 in 2014, and then rise to $401,000 in 2015.
• CMHC: The Calgary and Alberta housing markets will be buoyed in the coming years by strong net migration numbers. CMHC estimates net migration to the province in 2013 will be 103,000 people followed by forecasts of 71,000 in 2014 and 63,000 in 2015.

RRSPs: Should you be investing before March 3, 2014?

It’s that’s time of year again – RRSP season is upon us, yet the majority of Canadians are not properly educated on this investment vehicle and if it’s the best option for them.  Everywhere we turn, we are constantly bombarded with advertising messages telling us to buy, buy, buy, and RRSP’s are no exception.  How many of us take the time to really understand what we are purchasing?

Let’s review the basics: despite what we are often led to believe, RRSPs are not the actual investment; they are simply the registration of the account.  It is the registration of the account that dictates how it will be taxed both when the money goes in, and when it comes out. The account itself can hold a variety of different types of investments, such as GIC’s, mutual funds, stocks, or savings accounts, to name a few.  There are several rules surrounding RRSP’s that it is important to be aware of:

RRSP’s basic tax and withdrawal rules are:

1. You are eligible for a tax deduction for the amount of money you contributed to your RRSP in that year. This can be up to 18% of our previous years income, to a maximum of $23, 820 for the 2013 tax year. For example, if someone earned $50,000 before taxes in 2013 and purchases $5,000 worth of RRSP’s on or prior to the deadline on March 3, 2014, they will pay income tax as if they earned $45,000 in 2013. (*allowable contribution amount will differ for someone who is contributing to a pension plan already).
2. The growth within the RRSP is tax deferred.  That is, no taxes are payable on the growth that may be earned until you start to withdraw your funds.
3. When it does come time to take RRSP’s out, the amount withdrawn is taxed at your marginal tax rate at the time of withdrawal. Many retirees expect to earn less in retirement than they did during their working years, so the funds would hypothetically be taxed at a lower tax bracket.  However, in reality, this is not always the case – some retirees find themselves in the same or higher tax bracket during retirement than they did during their working years by the time they consider all sources of income.
4. When the account holder passes away, the RRSP’s will transfer one-time to a surviving spouse (if applicable) who can then access the investment as the new owner.   Upon the death of the second spouse, the entire amount left in their RRSP portfolio is deemed to have been liquidated or withdrawn during the year of their death.  This means that the full amount is then added to their income for the year, and therefore is subject to further taxation prior to the estate being fully settled.  Unfortunately, if a financial plan is not structured properly, up to 50% of the funds could be handed over to the government in the form of taxes and fees.

For some people, it might make sense to purchase an RRSP loan. This strategy can help maximize the tax deduction for those in a high income tax bracket or catch-up on unused contribution room.   Lenders offering the RRSP loans can typically amortize the loan over up to a 10-year period.  However, in most situations the best way to make the loan work for instead of against you is to choose an amount that can be paid back within 12 months.  This lowers the chances of creating a constant cycle of debt, as most people do not want to be paying for their 2013 RRSP’s in 2016!  In addition, applying the tax refund immediately once it’s received towards the outstanding loan balance should be done to help keep things manageable.

It is worth nothing that regardless of where the RRSP is invested and even if a RRSP loan isn’t purchased, once the tax refund is received it ideally should be re-invested or used to pay down debt instead of spent on the newest toy or gadget, or annual vacation.  This will help maximize the growth potential, and play a role in achieving greater financial success. Today and especially in the Vancouver area, fewer people have company-held pensions, therefore, investing and reinvesting your income tax returns in your RRSP’s can be a great avenue to grow your wealth to enjoy your retirement or later years.

What about TFSA’s?

While RRSP’s are a wonderful vehicle for many Canadians, for others they are not necessarily the best option.  An alternate or complimentary investment strategy consideration for many Canadians is the Tax Free Savings Account (TFSA).  TFSA’s are simply another investment vehicle, but the taxation rules are different.  Interestingly, many people are surprised to learn that despite having the words “savings account” in its title, their TFSA can hold the exact same investments that their RRSP can, such as GIC’s, mutual funds, or stocks, amongst other choices. TFSA’s can be a phenomenal tax shelter, when used properly and invested wisely. Here are the basics that everyone needs to know:

TFSA’s basic tax and withdrawal rules are:

1. As of 2014, the maximum available contribution room in the TFSA’s for Canadians over the age of majority is $31,000.  The funds are invested after-tax, and no income tax deduction is given.  In the same example given above with RRSP’s, someone who earns $50,000 annually and invests $5,000 into their TFSA will pay income tax on the full $50,000.
2. Any growth that may be accumulated within the TFSA is tax-free.
3. Since the tax was paid up front, when it comes time to withdraw the funds it is done tax-free.  There is no tax payable!
4. Upon death of the account holder, the proceeds of the account are given to a named beneficiary without any tax implications.

Canadians in the lower tax brackets may find a TFSA makes more sense over investing through an RRSP as they are perhaps not as concerned with receiving tax deductions. For others, a combination strategy could provide a better long-term outcome. Please speak to a financial professional to determine what investment vehicles and strategies will make your money work as hard for you, as you do for it.

Please don’t hesitate to contact me if you have any questions about RRSP’s or TFSA’s and what might make the most sense for you, or if you’d like a complimentary no-obligation review of your current portfolio.

To your financial success,

Jaclyn Carmichael Financial Coach & Educator email: jcarmichael01lsxc@wfgmail.ca phone: 604.888.4934 or 604.220.5719 web: worldfinancialgroup.com/Canada

Steady and Healthy Momentum

For the most part, economists are expecting the national prices to maintain a healthy momentum.  Lower gains over previous years will be realized with the exceptions of Calgary, Edmonton, Toronto and Vancouver.

Housing starts experienced the slowest year since 2009, and the slowest year in more than a decade, not counting the recession year.  Further cooling is expected throughout 2014, but should help to balance the market.

Interest rates have dropped by 10 basis points or more, and could continue downward, but the long-term forecast is for the Bank of Canada to begin raising its main policy rate in the second quarter of 2015.

Alberta experienced a record-breaking 2013 with sales activity and benchmark prices for single-family homes especially in Calgary and the surrounding communities. Toronto rounded out the year with a 14% increase in sales and a 9% increase in prices for the month of December over 2012.  Finally, for the sixth consecutive year, Vancouver has ranked among the top three least affordable markets. At a median home price of $670,300, 10.3 times the gross annual median household income, Vancouver is second behind Hong Kong who’s median home price rose to 14.9 times income.

More highlights from January’s headlines:

OVERALL

• Royal LePage: housing survey shows average price of a home in Canada increased between 1.2% and 3.8% in the fourth quarter of 2013. Standard two-storey home rose 3.6% year-over-year to $418,282, while detached bungalows went up 3.8% to $380,710. Price of a standard condominium rose 1.2% during the quarter to an average of $246,530. CEO Phil Soper says late 2013 saw the housing market transition to “buoyant sales volumes“ and above-average growth.
• Building permits fell by a sharper-than-expected 6.7% in November, more than double the 3.0% pullback expected by analysts, while housing starts dropped to 189,672 units in December, shy of economists’ forecasts for 190,000.
• Statistics Canada: Canada’s new housing price index did not change in November, after a 0.1% rise in October, with prices rising in eight metropolitan areas, unchanged in eight and declining in five.
• Prices in Toronto-Oshawa region were up 0.1% on the month and a tame 1.4% on the year. Vancouver fell 0.2% on the month and 1.3% on the year. Calgary was up 0.4% since October.
• Starts for all of 2013 slowed to 188,200 units, down sharply from 215,000 in 2012 and the lowest full-year tally since 2009, according to Robert Kavcic, senior economist at BMO Capital Markets.  “In fact, outside of that recession year, it was the slowest year for starts in more than a decade. We expect further cooling to about 180,000 units this year, which would reflect balanced overall building activity,” Kavcic said
• Residential construction intentions sank by 7.6% with both single- and multi-family dwellings declining, while the nonresidential sector dropped by 5.2% as institutional and industrial building plans decreased. Commercial building intentions, however, were once again robust, with the value of permits hitting a record level over the past 12 months, according to Kavcic.
• Stephen Poloz, central bank chief: The Bank of Canada should keep its key interest rate on hold until economic data persuades it otherwise. “For us, minimizing the risks of making a big mistake here is what we’re trying to do, and that tells us that we should be holding rates where they are until the data flow changes our mind.”
• The CBC cited Poloz as saying he was not worried by international calls for rate hikes and that his decisions would be based on Canadian economic factors. In November, he disagreed with the OECD’s assessment that rate hikes could start in 2014.
• Poloz: there would be upward pressure on rates this year, but he referred specifically to long-term market rates, not the rate set by the central bank, as the U.S. and global economies strengthen and stimulus is curbed. Adjusting the central bank’s target for the overnight rate, on the other hand, is a tool that is available “but we have to consider in the broader context what impact would it have,” he said. He suggested higher rates would have a negative impact on highly indebted Canadian consumers.
• Canadian Real Estate Association: prices across the country rose 10.4% in December from a year ago to an average of $389,119. Once you hack out Toronto and Vancouver, the increase drops to 4.6%.
• “For the year as a whole, existing home sales rose 0.8%, a pace that is neither too hot, nor too cold but largely in line with our view of a soft landing in the Canadian housing market,” said Diana Petramala, an economist with the Toronto-Dominion Bank.
• Royal Bank lowered rates 10 basis points on two-, three- and five-year fixed rate terms. “Rates were lowered to match competitor pricing. Competitors have been pricing at lower rates for several weeks, and this rate change now puts us in line,” said a spokesperson.
• Canada’s economy, once the envy of developed countries following the global recession, is struggling to gain momentum as households deal with record debts. Low interest rates pushed the nation’s ratio of debt to disposable income to a record 163.7% in the third quarter, according to Statistics Canada, surpassing levels in the U.S. “We’ve learned around the world that when you make the consumer indebted like that, their ability to withstand shocks is dramatically less,” Toronto-Dominion Bank Chief Executive Officer Ed Clark said. “So the economy as a whole is more accident prone, more fragile. Over time, the consumer becomes more fragile and the Canadian economy becomes less competitive,” he said. “That’s worth worrying about.”

PREDICTIONS

• Royal LePage: prices are expected to maintain a “healthy momentum“ this year and rise a projected 3.7% over 2013. “We predict continued upward pressure on home prices as we move towards the all-important spring market.“ Phil Soper,Royal LePage CEO says. “We expect no landing, no slowdown, and no correction in the near-term. Conditions are ripe for as strong a market as we saw in the post-recessionary rebound of the last decade.”
•  “The decline (in building permits) is in line with our expectation that residential construction will soften in the coming year in the face of affordability challenges to a pace more in line with underlying demographics,” CIBC World Markets economist Peter Buchanan said.
• With prices stabilizing, economists expect new construction to cool further in 2014.
• Finance Minister Jim Flaherty told CTV television: there would be some pressure to tighten (rates) because of the U.S. Federal Reserve scaling back its bond-purchasing program.
• Falling bonds yields could push mortgage rates lower in coming weeks as banks compete in the spring housing market, traditionally the strongest real estate period of the year.
• Analysts in a Reuters poll have forecast the Bank of Canada will begin raising its main policy rate in the second quarter of 2015.
• Things aren’t holding up quite so well on the new home housing front, however, Canadian housing starts, which started to cool in the latter part of 2013, are expected to continue their decline into 2014 as affordability, and a significant decline in condo construction, continues to impact sales.
• One ReMax realtor, with a respectable record of calling the ups and downs of Toronto’s condo market, in particular, blogged this week that he’s heard from so many buyers fed up waiting for prices to drop, he expects to see 95,000 sales transactions this year across the GTA.
• Royal LePage: the “moderate” price growth that defined the Vancouver market in 2013 is likely to continue through 2014 with prices project to rise 4.4 per.
• Bryan Yu, an economist for Central 1 Credit Union: “You’re not going to see the volatility we saw last year (in Vancouver), though there will be a slight drop off in momentum into the first quarter (of 2014).” Central 1’s forecast is for Metro Vancouver’s property sales to increase by six per cent in 2014, mortgage rates to increase but remain relatively low and employment growth to continue in pace with a stronger economy that will be influenced by improving conditions in the United States. For 2014, Central 1 Credit Union’s forecast is for prices to edge up about 1.5 per cent.
• Shifts in 2014 (Vancouver) real estate prices will also be influenced by the types of properties people are buying, with lower-priced townhouses and condominiums expected to make up a bigger share of the market, according to Lance Jakubec, a senior market analyst for Canada Mortgage and Housing Corp. While Jakubec does not make forecasts for individual communities within the region, he added that it will be interesting to watch how markets along the Evergreen Line rapid transit corridor perform over 2014.
• “It’s very reasonable for prices to ease or even fall,” said Benjamin Tal, deputy chief economist with CIBC World Markets, who rules out doomsday scenarios that would see prices drop 25%.
• Toronto-Dominion Bank issued a note January 14, 2014 with a continued call for a soft landing in the housing market.
• Urbanation: The GTA new condo market is expected to see a slow, steady rebound in sales through 2014 anticipating 15,500 sales in 2014.  They also expect more deals from developers keen to clear the record backlog of 19,004 unsold units that remained as of the end of 2013.
• Brace for much lower gains — or even price slumps — in many of Canada’s major cities by the end of 2014, says Marc Pinsonneault, senior economist with the National Bank of Canada. The notable exceptions will be Calgary, which is expected to lead the country in 2014 with price gains averaging some 3.5 per cent, followed by Edmonton at 3.1 per cent, Toronto at 3 per cent and Vancouver at 2.5 per cent, year over year, says Pinsonneault.
• Richard Cho, senior market analyst in Calgary for Canada Mortgage and Housing Corp., said sales in 2014 are expected to post another increase.
• Fitch’s Global Housing and Mortgage Outlook, mortgage volumes in this country “may fall slightly” as government efforts to tighten mortgage rules since the financial crisis exert downward pressure on demand. One reason Fitch believes Canada is not facing a rough road in 2014 is because it expects unemployment to remain stable at around 7% and the limited use of risky mortgage products, curtailed in this country unlike the U.S. and other jurisdictions by strong government regulation.

VANCOUVER

• Vancouver Real Estate Board:  sales of detached, attached and apartment properties in 2013 reached 28,524, up 14%from 25,032 sales in 2012. The total for 2013 was the third lowest for the region in the last 10 years.
• Vancouver has the second least affordable housing market, according to a recent study that took median home prices in nine wealthy nations and divided them by gross annual median household income. The only city that ranked higher in the Demographia International Housing Affordability survey was Hong Kong. Homes in Vancouver, at a median price of $670,300, cost 10.3 times income. It was the sixth straight year the city ranked among the top three least affordable markets according to the study, which fingered land use regulations as partly to blame for a shortage of affordable housing.
• Vancouver, the priciest market in the country, saw an increase of 36% in sales in 2013 from 2012 in homes selling for $2-million and up.

TORONTO

• Toronto Real Estate Board: December home sales in Toronto were up almost 14% and prices were up nearly 9% compared with a year earlier.
• Multiple listings service totaled 4,078 for the month, up from 3,582 in December 2012. Sales for all of 2013 totalled 87,111, up about 2% compared with 85,496 in 2012.
• The average price for a home sold in December was $520,398, up 8.9% compared with $477,756 in December 2012.
• New listings for the Toronto market in December were down by almost 4% over the same period.
• Royal LePage: prices should climb a further 3.9 per cent in 2014 over average gains of 5.1 per cent in 2013 — as a shortage of lowrise homes in the 416 region continues to drive up average sale prices.
• Resale condo transactions, especially in the more affordable 905 regions, saw the biggest increase of any sector of the housing market: Sales were up 27.8 per cent in December year over year — 46.1 per cent in the 905 regions (accounting for just 374 transactions) and 20.7 per cent in the 416 region.
• The biggest price gains were in the City of Toronto, where sale prices were up about 7.6 per cent to $367,376, according to TREB’s figures
• A shortage of listings has plagued the GTA market for more than three years now as baby boomers stay put and homeowners opt to renovate their homes rather than pay hefty real estate fees and land transfer taxes for properties that, in many cases, end up in bidding wars that have further pushed prices into the stratosphere.
• Urbanation: prices for sold units grew by 1.3% on an annualized basis in the fourth quarter to an average of $543 per square foot, which is the slowest pace of growth since 2005.  Urbanation said sales totalled 4,299 in the fourth quarter, up 12% from a year ago and the best quarterly result since the fourth quarter of 2012. But it was not enough to stop a 22% slide for 2103 when compared to 2012.
• Resale condominium apartment sales reached 15,698 units in 2013, up 2.7% from 2012. Condo resale prices jumped 2% in 2013 reaching $418 per square foot.
• Rents continue to grow and were up 4.2% in 2013
• The sale of both new homes and new condos hit their second-lowest levels in a decade in 2013. 30,054 new units — 12,256 of them lowrise homes, and 17,798 of them highrise condos — went up for sale across the GTA last year, 22 per cent less than in 2012 and close to the record low recorded in 2009 as the industry held its breath in the wake of the Great Recession.
• In Toronto, where a luxury home is said to start at $1.5-million, sales were up 18% in 2013 over 2012. The most expensive home sold in the city last year went for $13.4-million for 21,000 square feet in the city’s prestigious Bridle Path area.

CALGARY

• CMHC reported that total housing starts in the Calgary region closed 2013 slightly down from a year ago despite an increase in the single-detached sector. Total starts for the Calgary CMA were 12,584 last year, down from 12,841 in 2012. But the federal agency said the single-detached market saw starts rise to 6,402 from 5,961 the year before. In the multi-family sector, starts dropped from 6,880 in 2012 to 6,182 in 2013.
• Statistics Canada: total building permits in Alberta of $1.5 billion were up 3.3 per cent from last year but down 2.8 per cent from the previous month. Residential permits of $875.5 million rose by 18.4 per cent on an annual basis but dropped by 8.7 per cent from October. Non-residential permits of $590.3 million were down 13.1 per cent year-over-year but up 7.5 per cent month-over-month.
• Cochrane and Okotoks both experienced record years in 2013 for MLS residential sales activity
• CREB: total sales in communities surrounding Calgary rose to 4,440 units in 2013, a hike of nearly 12 per cent. In the city, MLS sales rose by nearly 11 per cent to 23,489 transactions.
• “Lifestyle preferences play a role in demand,” said Ann-Marie Lurie, CREB’s chief economist, in a statement. “Single-family homes in surrounding communities tend to provide newer and larger homes at a lower cost than in Calgary.”
• CREB: 554 homes were sold in Cochrane in 2013, a nine per cent increase over 2012. Prices rose six per cent from 2012 with an average annual single-family benchmark price of $403,183.
• CREB: Okotoks had 699 sales, up 19 per cent from 2012. Single-family benchmark prices in Okotoks rose 4.8 per cent to $385,308.
• CREB: Sales in Airdrie rose by 15 per cent to 1,321 units. The single-family benchmark price averaged $357,583, which was a seven per cent increase.
• CREB: The single-family benchmark price in Calgary in December was $472,200, up 8.60 per cent from a year ago.
• “There’s huge demand for single-family houses in Calgary proper, and that’s meant price increases. All those young people who are moving to Calgary might be getting priced out of the market a bit, so they’re increasingly looking for condos and duplexes, but also more affordable single-family homes in these other communities.” Scott Bollinger, broker with the ComFree Commonsense Network said “Improving transportation accessibility is also a key factor. As the Ring Road actually becomes a true circle, it’s connecting Cochrane and Chestermere and Airdrie and Okotoks to Calgary like never before, and it’s allowing people who choose these communities to access work and play in the city without sacrificing their lives to the road.”
• Calgary Real Estate Board: A slowdown in net migration this year should help ease some of the housing demand pressure in the city but overall MLS sales are forecast to rise by 3.6 per cent with prices going up by 4.28 per cent.
• Sales of upper end homes, a luxury home starts at $1-million in Calgary, climbed 34% in 2013 from 2012. Edmonton is a little less pricey for a luxury home with the starting price $750,000 but sales jumped 32% over the same period.

Surprise! The market didn’t do what it was predicted to do

The unpredictability of 2013 has added yet another surprise. Housing sales dipped in November but the decline expected to follow failed to materialize. Canada’s housing market is on track to close on a stronger note than 2012, defying expectations. Twenty-five out of 26 largest Canadian cities recorded price gains, a complete contrast to predictions made by industry experts earlier this year.

The market it expected to remain resilient through 2014, that is if interest rates remain low. RE/MAX Realty is predicting that sales will increase by 2% and prices by 3%. Canadian Real Estate Association is calling for sales growth of 3.7% with average price increases of 2.3%.

For Calgary, their November year-over-year home price growth, best in the country with more than double the national average, is expected to forge strongly into 2014. Toronto’s 3-year challenge with property shortages isn’t expecting to change, and Vancouver’s laneway house popularity is hoping to help families with affordable housing options.

More highlights from December’s headlines:

OVERALL

• Stats Canada: Credit-market debt such as mortgages increased to 163.7% of disposable income, compared with a revised 163.1% in the prior three-month period, Mortgage borrowing climbed 1.8% to $1.13 trillion.
• Stats Canada: Over the last five years, the growth in mortgage debt has averaged 1.7% per quarter, while consumer credit debt growth has averaged 1.2%.
• Stats Canada: The amount of equity that owners have in their homes as a percentage of real estate dropped to 69.3% in the quarter from 69.5%.
• Stats Canada: National net worth increased 2.1% to $7.50 trillion in the third quarter. On a per capita basis, the gain was to $212,700 from $209,200.
• Deutsche Bank Report: Canada has the most overvalued housing market among 20 developed countries. The new report comes as real estate giant Re/Max predicts an “exceptionally healthy” year for real estate in 2014. Deutsche Bank estimates that house prices in Canada are overvalued by 60 per cent. That’s an average of two different measures: Home prices compared to rent (88 per cent overvalued) and home prices compared to income (32 per cent overvalued). The analysis compares house prices to historical norms.
• Canada’s housing market is on track to close out 2013 on a stronger note than last year, defying the expectations of economists just a few months ago.
• Canada named Evan Siddall, a former official with Goldman Sachs Group Inc., as chief executive officer of the country’s government-owned housing agency, CMHC.
• CREA chief economist Gregory Klump said while interest rates remain relatively low, the Canadian market should remain “well behaved” based on current trends. “Most housing markets are in balanced territory, including in many large urban centres where sales are below peaks reached earlier this year.
• Don Lawby, the chief executive of Century 21 Canada, agrees that so far the Canadian housing market seems to be holding its own, if no longer taking off. “The collapse has not happened and it looks like there is a stable market and people are still out there looking for real estate,” said Mr. Lawby. “In my mind what we have now is a very stable market. People have heard this story of a balloon that was going to pop for so long,” said Mr. Lawby. “People carry on as long as their employment carries on. Maybe there is a postal worker out there today not going to buy a house but most people are in a stable environment.”
• CIBC deputy chief economist Benjamin Tal said he could see a little bit of negative sales numbers in December or January but concurs that the market is showing more resiliency than many anticipated.
• CMHC Report: Growth in owner-occupied condominiums has exploded over the last three decades. In 1981, there were 171,000 owner-occupied condo units but that figure grew to 1,154,000 by 2011.
• CMHC Report: Women are a growing powerhouse in the Canadian condominium market. Among people who live alone, women made up 65% of owner occupants in 2011. The female factor is even more prevalent among older women with 76% of those 55 and older living alone women. Among lone-parents, women make up 84% of condominium owners.
• CREA: November’s home sales dipped slightly from October but were up substantially from the same month last year, when the industry was going through a soft patch attributed to changes in federal rules for mortgage lenders and borrowers.
• “In staggering contrast to the dire forecasts early this year, precisely one of the 26 largest cities in the country has reported a drop in average prices so far this year — Victoria, with a minuscule 0.6 per cent sag,” said Doug Porter, chief economist with BMO Capital Markets. “All of the other 25 cities have recorded single-digit price gains, with the median city posting a non-threatening 3.6 per cent rise. “When judged by total sales volumes, a measure that combines both price changes and the number of units sold, the hottest markets this year have been Calgary, Edmonton, and, against all expectations Vancouver. All three reported double-digit volume increases, the only cities in that category.”
• CREA: By November, year-to-date sales for the entire country were up 0.2% from the previous year with 433,678 transactions. Prices climbed 5% over the first 11 months of the year from the same period a year earlier to an average of $382,111.
• A report found Calgary’s median family income at $100,500. Three other cities surveyed had median family incomes of $72,400 in Toronto, $72,800 in Vancouver and $73,200 in Montreal.
• The ratio of house prices to annual family income in Calgary was 4.1. It was also 4.1 in Montreal, 6.6 in Toronto and 8.3 in Vancouver. The mortgage service costs as a percentage of family income were: 23.1 in Calgary, 39.3 in Toronto, 50.2 in Vancouver and 23.1 in Montreal.

PREDICTIONS

• “As the housing market stabilizes over the coming quarters and income growth picks up, the debt-to-income ratio is expected to remain close to its current, still elevated, level,” Leslie Preston, an economist at TD Economics.
• Central 1 Credit Union says higher mortgage rates in the next three years will restrain housing sales in Ontario as a whole, but not cause a market correction. Ontario home prices will rise about 4% a year through 2016, down from a decade-long annual average of about 6%. Toronto condo market will slow as builders delay new construction in the face of weaker demand. Ontario’s overall rental apartment vacancy will hold steady at 2.6% through 2014, before declining to less than 2% in 2016.
• The Canadian Real Estate Association’s 2013 sales projections have been increased slightly upward in Ontario and the four western provinces and that prices have been generally firmer than expected.
• Re/Max says that nationally, home sales are expected to climb 2% to 475,000 units next year after a 3% increase to well over 453,000 projected for 2013 when all the numbers are in. At the same time, the value of an average Canadian home is forecast to escalate 3% to $390,000 in 2014 after rising 4% to $380,000 in 2013, according to a survey of the group’s independent brokers and affiliates. Re/Max says its optimism is largely based on an improved outlook for Canada next year which is expected to see the country enjoy economic growth second only to the 2.8% rate of the United States among Group of Seven countries. Although there are several factors that are expected to contribute to rising housing prices on a national basis, one of the most pressing is build out, Re/Max said. “As such, the availability of low-rise homes relative to the population is expected to contract, placing further pressure on prices,” it said.
• Helmut Pastrick, chief economist of Central 1 Credit Union, expects Toronto resale house prices to continue to climb by a more modest, but still healthy, 4 to 5 per cent through 2016 and double over the next 25 years fuelled by a shortage of land for new development and rising population levels. “Housing in Toronto is expensive but not overvalued, especially from a long-term perspective,” Pastrick said in a forecast. “Today’s record high prices will seem inexpensive in 25 years.”
• While that spending spree has already shown signs of a letup, demand for houses continues to outstrip supply which could see Toronto price gains “temporarily rise” to as much as 7 per cent, year over year, in early 2014, says Amna Asaf of Capital Economics.
• Real Estate Association said that it now expects the average price of houses sold over the Multiple Listing Service to have risen by 5.2 per cent this year, to $382,200. Heading into 2013, CREA had been expecting the average price to rise just 0.3 per cent; it became even more pessimistic in March when it revised its forecast and called for a 0.2-per-cent decline, to $362,600.
• CREA’s prediction for the number of houses that will change hands this year is now 458,200, which would be a 0.8-per-cent increase from 2012. In contrast, at the outset of 2013, CREA was expecting sales to fall 2 per cent, and by March it was expecting sales to fall by 2.9 per cent. CREA is calling for sales to grow by 3.7 per cent in 2014, while it expects average prices to rise by 2.3 per cent.
• CREA said there was a drop off in the fourth quarter but sales are expected to be up 0.8% this year. In a new forecast, it is now predicting an even stronger rebound with a 3.7% increase in sales.
• Nationally, CREA is projecting 458,200 homes will be sold through its members this year — eight-tenths of a per cent more than in 2012. CREA also anticipates next year will be even stronger, with 475,000 homes nationally. The updated numbers are slightly ahead of a forecast in September by the association that predicted 449,900 homes sold this year and 465,600 in 2014.
• CREA: the 2013 projected national average price is $382,200, a 5.2 per cent increase from last year. The projected national average price for 2014 is $391,100, a 2.5 per cent increase from this year.
• CREA: Alberta this year is projected to reach 66,300 units, which is a 9.8 per cent hike from the previous year and the best growth rate in the country. Sales will rise an additional 3.5 per cent in 2014 to 68,600 units.
• Across Canada, CREA is forecasting 0.8 per cent growth this year to 458,200 sales and 3.7 per cent growth in 2014 to 475,000. As for the average sale price, CREA is projecting it to rise by 4.9 per cent this year in Alberta to $381,100 followed by 3.4 per cent growth, the best in Canada, in 2014 to $393,900. Across Canada, the association is forecasting 5.2 per cent price growth this year to $382,200 and 2.3 per cent growth in 2014 to $391,100.
• “A tweak to amortization or requiring a little more down payment is not enough to significantly change the state of the market. The big change will occur when the cost of money starts to rise and that won’t happen in 2014,” says Mr. Soper, Chief executive of Royal LePage Residential Services
•  “The investor is a big part of the condo market and rents are still rising. It’s not that difficult to find a tenant given the condo vacancy rate is quite low,” says the economist, noting the issue for buyers today is rent is simply not covering all the costs of owning a condo. “If prices start to fall, we could see investors getting antsy and start to sell their units which could aggravate the market,” said Bank of Montreal senior economist Sal Guatieri, who nevertheless says the risk is low because a spike in rates seems unlikely.
• Toronto: With a surprisingly unpredictable 2013 coming to an end, economists are weighing in on what the future could hold. While opinions vary somewhat, there seems general agreement that house price gains will slow — if not slip by the end of 2014 — and the rental vacancy rate should edge up slightly as a record number of new condos come on the market.

VANCOUVER

• Of Canada’s four largest real estate markets, Vancouver has the highest number of vacant condos, with 1,934 units completed and unabsorbed.
• The city of Vancouver says demand for laneway houses continues to grow, with 348 permits to build the rental dwellings issued in 2013. Laneway housing, also known as granny flats, coach or carriage houses and “Fonzie suites,” are usually one-and-a-half or two stories high, and typically built above or next to detached garages in narrow lots or laneways.
  • Laneway housing is just one part of a series of consumer-driven housing trends that is changing the provincial residential construction sector, according to the Canadian Home Builders’ Association of B.C. That includes strong demand for smaller, cheaper units, dense housing along transit lines, and residential space in shopping complexes.
  • More than 1,000 laneway house permits have been issued in Vancouver since they became legal in 2009. That year there were just 18 permits handed out. But by 2012 a record 350 permits had been issued, up from 192 in 2010 and 229 in 2011.
  • “We’re seeing this as a family-based solution. Often we see the parents build them for their adult children. So it’s not a silver bullet for the affordable housing strategy but it is one piece in trying to confront the (housing) crisis.” Says city councillor Geoff Meggs
  • Laneway houses were first approved by Vancouver back in 2009 as a way to boost the supply of affordable rental housing in a landlocked city where the vacancy rate has hovered at less than 1 per cent for years and the average two-storey detached house costs more than $1 million. But they’re now exploding in popularity for other reasons, says Brian Jackson, general manager of planning and development for the City of Vancouver: They’re allowing baby boomer homeowners to downsize but yet age in their own communities. They’re also enabling echo kids to stay close to home and raise their kids in neighbourhoods they otherwise couldn’t afford. In fact, the program has worked so well that the City of Vancouver has now amended its bylaws so that every single-family lot can now have three units — a basement apartment and upper suite in the main house, as well as a laneway home in the backyard. Already he’s working with one B.C. credit union that’s approving so-called “mixer mortgages” that allow shared ownership of a property. He foresees a day where two buyers will jointly own both the main house and a laneway home through something akin to a condominium agreement, and perhaps even swap homes as their personal circumstances change.

TORONTO

• TREB: Toronto home sales rose 13.9% to 6,391 units in November from the same month the year before. The average price of homes sold during the month rose 11.3% to $538,881
• Despite concerted efforts by Ottawa to cool the housing market, the average price of a home in the GTA hit $538,881 last month, up from $484,208 in November of 2012.
• But what’s really pushing up prices — in addition to exceptionally low interest rates — is the worsening shortage of properties for sale that has plagued the Toronto market for more than three years now. The number of new “for sale” signs dotting the region was down 4.4 per cent in November, year over year, and month-end active listings were down 12.1 per cent, according to TREB.
• TREB: The number of new “for sale” signs dotting the region was down 4.4 per cent in November, year over year, and month-end active listings were down 12.1 per cent.
• The average sale price of a detached house in Toronto was a whopping $855,188 in November.
• Condo sales showed somewhat mixed results depending on where people were buying. Sales remained strong in both the city and suburbs, up 12.7 per cent and 14.2 per cent respectively.
• Resale condo prices were up 10 year cent, year over year, in the 416 region, but they were down just slightly, 0.4 per cent, in the 905 regions.

CALGARY

• 22,489 MLS sales in the city, up 10.85 per cent from a year ago. New listings of 31,366 are up by 0.75 per cent but active listings of 3,034 are down 19.27 per cent. So far this year, the median selling price of $400,000 has increased by 5.26 per cent while the average sale price of $456,680 has risen by 6.60 per cent.
• BMO Economics report: new home construction has picked up but housing starts have barely kept pace with an exploding population. “Inventories of new homes are very low, while benchmark prices are climbing the fastest among major cities and have now all but retraced the 16 per cent collapse from 2007 to 2009.
• Guatieri, senior economist with BMO Capital Markets, said that despite “heady price gains” they remain reasonable at about four times the median family income and mortgage costs “consuming a manageable” 23 per cent of earnings. “About half of the increase in prices is supported by rising income. Hourly wages in Alberta are up 4.4 per cent year over year in the first 10 months of the year, double the national rate,” he said. BMO said immigrants and young Canadians are flocking to the city, drawn by better job prospects, faster wage growth, and healthier housing affordability than in Vancouver and Toronto.
• (December) Sales in the city are actually higher than new listings this month making it a strong sellers’ market right now.
• Calgary Real Estate Board: total MLS sales in the city were 546 transactions, up 14.95 per cent from the same period a year ago. New listings of 511 are up by 1.19 per cent. Active listings of 2,865 are down 18.77 per cent.
• The tight market has pushed sale prices higher this month than a year ago. The median price of $406,000 is up by 7.98 per cent while the average sale price has risen by 0.91 per cent to $457,758.
• CREB: the last time the city has had more sales than listings was December 2012. Before that, it was 2006. Right now, it’s looking like this December will be the 12th time since 1990 when sales eclipse new listings and seven of those have been in December.
• Canadian Real Estate Association: Calgary year-over-year home price growth was the best in Canada in November and more than doubled the national average.
• CREA: MLS sales across Canada in November rose by 5.9 per cent to 32,411 units. They were up by 18.7 per cent in Calgary to 2,173 units and increased by 13.1 per cent in Alberta to 4,563 sales.
• BMO: If there is a market that can support further price gains it is Calgary, which has been a major benefactor of net-immigration growth. Alberta attracted 53,000 more people in the last year than it lost.