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Calgary home prices were the fastest growing in Canada in November

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Calgary, Canada’s oil capital and hottest real estate market last year, continued to lead national home price increases in November.

Prices for new homes in Calgary gaiimagened 0.3 per cent in November, the biggest advance among the nation’s largest real estate markets, Statistics Canada said today in Ottawa. From a year earlier, prices in the city were up 6.5 per cent.

Calgary prices rose in November amid concerns even then about the health of the oil industry. Oil prices continued their decline, with benchmark West Texas Intermediate crude this week falling below $48 a barrel for the first time in more than five years.

Nationally, new home prices rose 0.1 per cent in November and 1.7 per cent from a year earlier.

Related Oil prices are making housing forecasts a tough call in Alberta Sales of Canadian homes worth over $1M grew substantially last year and will again in 2015 Canada’s municipal real estate markets diverged over the last year, with gains in Calgary and southwestern Ontario markets such as Toronto and Hamilton offset by weakening elsewhere. Prices in Vancouver fell 0.2 per cent in November and are down 0.6 per cent from the same month a year earlier.

Home prices in Montreal recorded their first annual decline in November since 1997.

Statistics Canada’s new home price index doesn’t include condominiums or apartments, which comprise about a third of the new real estate market.

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Deutsche Bank reveals 7 reasons why ‘Canada is in serious trouble,’ starting with a 63% overvalued housing market

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Deutsche Bank’s chief international economist Torsten Sløk has circulated a chart deck looking at global housing markets, and Canada stands out as having quite a few problems.

According to the report, homes in Canada are 63 per cent overvalued, greater than the 50 per cent levels in Australia and Norway, Deutsche Bank AG said in a report Thursday.image

Values in Canada are 35 per cent higher when the median house price is compared to the median household income than the historical average and 91 per cent higher compared with average rentals.

Related New American Homes Are Bigger Today Than They Were During The Housing Bubble Why We Should All Love The Suburbs The 25 Cheapest Housing Markets In America Sløk dedicated seven charts to the country.

Simply put, debt levels are very high, and with sky-high home prices cooling off, we could see pressure on the Canadian financial system and the labor markets.

While US households have been deleveraging since the Great Recession, Canadian household debt as a percent of household income is higher than ever:

Torsten Slok/Deutsche Bank

The mortgage credit market has been slowing down, which is a bad sign for the housing market:

Torsten Slok/Deutsche Bank

Other forms of debt have also been exploding, while income has grown at a much slower rate:

Torsten Slok/Deutsche Bank

Construction of houses has been level over the last decade, while multifamily units like apartments have reached record highs:

Torsten Slok/Deutsche Bank

Canada’s biggest housing market, Toronto, has been slowing down over the last couple years:

Torsten Slok/Deutsche Bank

Meanwhile, Canada’s West Coast metropolis of Vancouver has held steady:

Torsten Slok/Deutsche Bank

Any difficulty in the Canadian housing market could bleed over into the larger economy, since construction is a much larger part of Canadian employment than US employment:

Sales of Canadian homes worth over $1M grew substantially last year and will again in 2015

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TORONTO — Sales of homes worth over $1 million increased in four major Canadian real estate markets last year, according to a report released by Sotheby’s International Realty on Wednesday.

The Toronto area saw year-over-yearimage sales growth of 38 per cent, while sales of Vancouver’s high-end homes rose by 25 per cent from the previous year.

Canadian housing bulls are joining real estate doubters as warnings and oil collapse sink in

Canadians who last year brushed off predictions of a real estate slowdown and kept buying houses are increasingly joining the doubters.

The nation’s households are the least optimistic since May 2013 that home prices will keep rising, according to weekly polling data compiled by Nanos Research for Bloomberg. Keep reading. Growing demand and limited supply cut down the number of days that homes stayed on the market and increased the percentage of homes in both markets that sold over the asking price, the report said. Sales grew by a “more modest” 16 per cent in Calgary and 21 per cent in Montreal, according to the study.

That trend is expected to continue into 2015, with demand to outstrip supply in the Greater Toronto Area and in Vancouver. Meanwhile, the high-end real estate markets in Montreal and Calgary are expected to be balanced, according to the Sotheby’s analysis.

The report notes that oil prices, which have fallen by 55 per cent since the summer due to a supply glut, could have an impact on sales of high-end homes in Calgary.

“We’re really watching Calgary very closely,” Sotheby’s president and chief executive Ross McCredie said in an interview. “There’s fear out there in terms of what 2015 is going to look like if oil stays where it is today.”

So far, the number of homes being sold has continued to grow in Calgary’s high-end real estate market. McCredie said while buyers may begin holding off to get a sense of where oil prices are headed, it’s unlikely that Calgary’s real estate market will go flat.

Related As Vancouver home prices surge out of reach, businesses worry how to retain staff Houses might not be as overvalued as the Bank of Canada thinks, Moody’s report suggests “Definitely in the later part of last year you saw a lot of people waiting,” he said. “A lot of transactions didn’t end up closing or deals fell apart. I think they’re all just taking a cautious look at it.”

If oil remains below $50 a barrel, that could spell trouble for Alberta’s real estate sector in general, including in the high-end segment, McCredie said.

“Six months later, if oil’s still at $50 or less, I think you’re going to start to see some really concerned people there,” he said.

McCredie also said that foreign investors are snatching up roughly half of the homes worth $5 million or more in Vancouver and Toronto, despite a recent report from Canada Mortgage and Housing Corp. that puts the foreign ownership numbers much lower.

The CHMC report last month found that foreigners own only 2.4 per cent of the condos for rent in Toronto and 2.3 per cent in Vancouver.

While the CHMC report noted that some areas of Vancouver and Toronto had a higher proportion of foreign condo owners — as high as 5.8 per cent in parts of Vancouver and 4.3 per cent in Toronto’s centre core — it’s still much lower than the estimated 50 per cent foreign ownership that McCredie says exists in the luxury real estate market in those two cities.

“It’s not an exact science,” McCredie said. “It’s not like you can literally say, ‘Well there’s X number,’ because what we see a lot is the transaction for foreigners buying Canadian real estate happens through Canadian subcompanies.”

Since many of the sales take place through Canadian companies owned by foreign individuals or corporations, those transactions wouldn’t be captured in the CMHC data, McCredie said. Sotheby’s, which markets and brokers the sales of luxury homes, is in a better position to gauge the level of foreign ownership, at least in the over $1 million market.

Some critics have raised concerns that a mass selloff of foreign-owned properties could crash Canada’s real estate market in an economic downturn.

But McCredie says strong underlying factors, such as historically low mortgage rates and high levels of immigration, continue to make Canadian real estate attractive to foreign buyers.

“They’ve got a lot of money right now. They see Canada as a very stable marketplace. They like the story around Canada. They like coming here. They have friends and family here.”

Oil prices are making housing forecasts a tough call in Alberta

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Plunging oil prices have made it almost too difficult to predict what will happen in the Calgary housing market, according to a new real estate forecast.

As Vancouver home prices surge out of reach, businesses worry how to retain staff

Business groups are raising the alarimagem about Vancouver’s ability to attract and retain the talent needed to foster local successes like retailer Lululemon Athletica or tech startups like video surveillance maker Avigilon Corp and social media manager Hootsuite. Keep reading. “Continued uncertainty in the oil market will impact Calgary real estate over $1 million, however, the degree of influence is still unknown. If employment and migration into the city remain at expected levels, sales are expected to remain on pace into early 2015,” said Sotheby’s International Realty Canada in a report on what it calls top-tier housing.

Ross McCredie, president and chief executive of Sotheby’s in Canada, says 2015 could continue to be a strong year for real estate if interest rates remain low. The Bank of Canada has not raised its overnight lending rate for more than four years.

Alberta is the one place where there is a lot of wait-and-see right now “There’s nothing that I’ve seen from any of the banks [indicating that the Bank of Canada is going to raise rates] and even if it went up one, two or three percentage points, that’s cheap money historically,” said Mr. McCredie. The prime rate at most financial institutions, which variable rate loans are tied to, is 3% and most consumers are able to negotiate discounts off that rate.

The exception to the Sotheby’s forecast might be Calgary where $1 million-plus sales were up 16% in 2014 from a year earlier. “Alberta is the one place where there is a lot of wait-and-see right now. This time last year no one saw this,” said Mr. McCredie, referring to the drop in oil prices. “For most of our clients, they’re upper end [and] they’ve really made a lot of money. There’s a lot of blue-eyed sheiks coming out of Alberta. They’ve diversified in their investments and you won’t see a panic.”

Related Sales of Canadian homes worth over $1M grew substantially last year and will again in 2015 Canadian housing bulls are joining real estate doubters as warnings and oil collapse sink in The Calgary Real Estate Board said last week that 2014 sales jumped 9.3% from a year earlier. The average sale price for the year was $483,079, a 5.8% increase from a year earlier.

Sotheby’s said Montreal’s high-end market has had a strong recovery because of a return to political stability. Sales of homes worth $1 million or more were up 21% in 2014 from 2013. “The whole sovereignty question is off the table now,” said Mr. McCredie.

The real estate company, which only looked at Montreal, Calgary, Toronto and Vancouver in the report, says Toronto should have the most momentum in the $1 million-plus category in 2015.

“Once considered luxury and therefore a more limited market segment, $1-2 million dollar homes are now sought after by average homebuyers seeking conventional single family homes within city limits,” said Sotheby’s referring to both Toronto and Vancouver.

As Vancouver home prices surge out of reach, businesses worry how to retain staff

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1229vancouverVANCOUVER — When Allan Pulga, a communications manager, found out he was going to be a father, he had to make a tough choice — stay in a tiny downtown condo or leave Vancouver.

First-time homebuyers are feeling the weight of Canada’s housing boom

Bank of CanadaWith rising home prices and hefty student debts, more first-timers are being locked out of the market. What they need is a strategy The 34-year-old, who works for fast-growing private Canadian technology firm iQmetrix, packed his bags and moved to Regina, Saskatchewan, where the typical family home costs roughly one third of the price in the Greater Vancouver area.

“When you’re a young, single person, you can make Vancouver work financially,” said Pulga, who was able to transfer to iQmetrix’s Regina office. “But I feel like if it’s time to settle down and have kids, maybe you won’t stay.”

Pulga typifies a worrying trend in Vancouver, where sky-high housing prices are forcing many young professionals out of the city and into long commutes from far-flung suburbs, with some choosing just to leave the region altogether.

That has business groups raising the alarm about Vancouver’s ability to attract and retain the talent needed to foster local successes like retailer Lululemon Athletica or tech startups like video surveillance maker Avigilon Corp and social media manager Hootsuite.

Vancouver has long boasted Canada’s costliest housing. But low interest rates and strong foreign demand, especially from Chinese buyers, have helped drive the cost of a typical detached home up nearly 30% in the last five years.

The average Vancouver-area property — including houses, town homes and condos — sold for $828,937 in November, compared with $580,326 in greater Toronto and $306,541 in Regina, according to the Canadian Real Estate Association. In Seattle, on the West Coast of the U.S., with massive employers such as Boeing, Microsoft and Amazon in the area, the median sale price was $436,250.

On Vancouver’s desirable west side, the median selling price for detached homes rose to $2.6 million in November.

Related Sizzling Vancouver home sales likely to fuel national bubble debate Toronto and Vancouver home prices pass Rome and close in on Paris SQUEEZED OUT

Government data shows the migration of 25 to 44-year-olds out of Vancouver to other provinces has outpaced those migrating in from elsewhere in Canada over the past three years, eroding a key working-age demographic.

“Housing prices are a concern for that exact reason,” said Ken Peacock, chief economist at the Business Council of British Columbia. “It makes it more challenging for younger people starting a family.”

Vancouver’s expensive housing also makes it tough for companies to bring in new talent from other regions, in particular senior executives, he noted.

“There is a sticker shock phenomenon,” said Peacock. “A lot of these people are coming from 5,000-square-foot estates and here they get a three bedroom bungalow.”

To be sure, Vancouver is not alone. New York, London and Singapore have long been popular with foreign investors, driving up the cost of living for locals. But while those cities are global financial hubs and have many bankers with big compensation, Vancouver’s economy relies more on tourism and a cyclical resources industry.

There is a sticker shock phenomenon. A lot of these people are coming from 5,000-square-foot estates and here they get a three bedroom bungalow The median family income in Vancouver in 2012, the last data available, was just $71,140 a year, the lowest of any major city in Canada, putting home ownership far out of reach for most. The median income in Regina, by comparison, was $91,200, while Toronto families make just a bit more than Vancouver families.

Vancouver is working to address the affordability gap, but existing initiatives mainly target lower-income families. Renting is a cheaper option in the city of 1.3 million, with small 2-bedroom downtown condos listed for about $2,000 a month and suburban basement units available at $1,200.

Despite the challenges, numerous companies interviewed by Reuters said most of their staff are willing to make sacrifices — like long commutes or raising kids in shoebox condos — for the benefit of Vancouver’s mild climate and outdoor lifestyle.

But those same companies, such as Vancouver-based retailer Mountain Equipment Co-op, also had examples of key hires who ultimately turned down jobs because of the high home prices.

It’s an issue Craig Hemer, an executive recruiter with Boyden, has been grappling with for the better part of a decade.

Hemer has learned ways to soften the blow — selling older executives on the idea of downsizing to a luxurious downtown condo and convincing those with families that suburban life offers more amenities for kids.

LOVE IT OR LEAVE IT

Companies too are shifting their policies, with some offering car allowances and transit subsidies. Others are opening small suburban offices or allow staff to telecommute from home.

But that isn’t always enough, especially in Vancouver’s startup scene. Executives say it is easy enough to hire junior staff, but a dearth of experienced engineers and technology workers makes it hard to grow past a certain point.

“There’s just not enough high caliber people here. They all leave when they realize they can make more money in other cities and live there for cheaper,” said Simeon Garratt, chief executive of Spark CRM, a property-focused tech startup.

“We debate at least once a month whether we should just move to Toronto.”

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House shopping in Toronto, Calgary, Vancouver? They’re desperation cities

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Toronto. Calgary. Vancouver. They’re all Desperation City as far as young people trying to afford a house are concerned.

The theme in housing market forecasts for 2015 so far is steady pricing. Some markets will more or less be flat, while the Big Three markets could rise 3 to 4 per cent. What more could go wrong if you’re struggling to save enough money to buy a first home? Here’s something: You buy aimagend then have to deal with a shock to the economy. Something like a plunge in oil prices that undermines growth and hurts the job market, for example.

MORE RELATED TO THIS STORY

ROB CARRICK What can home buyers learn from stock market jitters? The 10-year rule THE LONG VIEW Why Canadians should consider Poloz’s overvalued housing warning ROB CARRICK How the housing market beats up on first-time buyers

CARRICK TALKS MONEY Video: Carrick Talks Money: Should young adults buy a condo as a first home?

CARRICK TALKS MONEY Video: Carrick Talks Money: Can you really afford a house?

VIDEO Video: What $6-million buys you in Montreal’s real estate market In a column earlier this week, I argued that anyone buying a house today should plan to live in it for a decade to ride through any price decline that could happen in the years ahead . Now for some advice specifically aimed at young buyers who despair of price declines ever happening and wonder if they should buy now, before affordability deteriorates further. If affording a house is at all a stretch for you financially, step back from the housing market and keep saving. Let’s talk again in a year.

Some insight on the financial situation of young homeowners was contained in the much-publicized Bank of Canada report estimating that house prices may be as much as 30 per cent overvalued. First off, the bank says the current generation of young people who own a house carry more mortgage debt relative to income than previous generations did at the same age. So why should young people not simply go with the flow and take on larger mortgages to buy houses? Because the more they owe, the more vulnerable they are to, in the bank’s words, “negative shocks to income and to higher interest rates.”

Let’s look at the rate risk first. There are so many cross-currents in the global economy today that it’s tougher than ever to know what will happen. The U.S. seems to be improving, but China’s growth rate is slowing and both Japan and Europe aren’t in great shape. Falling oil prices are negative for Canada’s economy, although there are offsets in the form of a falling dollar that helps feed exports. Bottom line, rate increases of any consequence seem unlikely. If there’s an interest rate surprise next year, it could turn out to be a rate cut.

Income shocks are a bigger deal, and not just because of the trickle-down effect on the economy of sliding oil prices. In fact, the young adults of Generation Y are already dealing with precarious incomes. With temporary work becoming increasingly common, Gen Y lives under constant threat of the sort of income shock that comes when a contract expires without another one at hand.

TD Economics issued a report last week on youth employment in Canada and said job market conditions for this group are not as bad as some commentators say . However, even in this little-to-worry-about narrative, two concerns were raised. One is that there’s evidence of young people being underemployed relative to their level of education, and the other is an increasing share of temporary work for this demographic.

The Bank of Canada itself notes that young households are more vulnerable than average to economic downturns. If it’s also true that young people are carrying more mortgage debt than previous generations, it stands to reason that a weaker economy would hit them exceptionally hard.

The Real Life Ratio, introduced in a column earlier this year , will help you figure out how much house you can afford and still meet other financial obligations such as daycare and saving for retirement. If your score’s in the green zone, then you’re good to go (remember the 10-year rule, though). If not, then postpone your purchase.

People have always felt they were taking a big leap into the unknown when they bought first homes, but things are different today. In pointing out that today’s young households carry more mortgage debt than previous generations, the Bank of Canada confirms this.

A higher risk level for young homeowners requires more intense preparation to buy. If you’re a millennial stretching to afford a home, consider using 2015 to save a bigger down payment and practise living on a tight budget. One more year living in Desperation City won’t do you any harm, and it may do you some good if the central bank is right about how overvalued house prices could be.

**

Can you afford to buy?

A quick tutorial on house affordability for first-time buyers:

1. Do not rely on what the bank says you can afford: Banks look at whether you have the means to repay what you borrow, not at how well you’ll be able to balance your mortgage and other financial obligations.

2. Remember to consider daycare costs: They’re a huge factor in household budgeting and should be considered by home buyers even before they have kids.

3. Leave room for savings: If you can’t save roughly 10 per cent of your gross pay after you buy a house, you have too big a mortgage.

4. Maintenance costs add up: A rough estimate is 1 per cent of the value of your home per year, on average.

5. Mind those condo fees: If you live in a condo, your monthly fees could easily rise at more than the inflation rate every year.

Rob Carrick (more…)


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