SOME GREAT HEIGHTS!

Calgary luxury real estate market soars to new heights
Sales climb in million-dollar plus category
By Mario Toneguzzi
Calgary Herald July 20, 2012

CALGARY — The demand for luxury real estate in Calgary has soared to new heights this year, fuelled by strong economic fundamentals, says a report by Sotheby’s International Realty Canada.

For the first six months of this year, there have been 301 homes sold for over $1 million in Calgary, up 19 per cent from the same period last year, said the report.

From January 1 to June 30, 2011, there were 253 homes sold for over $1 million and another 194 luxury homes sold between July 1 and December 31 that year.

The number of homes listed on the market for over $1 million was 474 between January 1 and June 30, 2011 and 473 homes between July 1 and December 31 in 2011. From January 1 to June 30 this year, there have been 908 homes listed at that price point.

The Sotheby’s report said six per cent of homes over $1 million this year have sold for over the asking price. The first half of last year also had six per cent selling for more than the list price while for the second half of last year it was eight per cent.

As for days on the market, the first half of this year was 53 days while for both halves of last year it was 49 days.

Corinne Poffenroth, a realtor in the Calgary office of Sotheby’s International Realty Canada, said a number of factors have contributed to the demand for luxury homes in the local market.

“We’re seeing a bit of a lifestyle change for some of the Baby Boomers here and that sometimes involves downsizing when they’re planning for retirement and it sometimes involves perhaps purchasing a second property either down south or B.C., and because of that there’s a bit of a trend moving, re-locating from some of the suburban areas back to the urban centres with some of the amenities closer by,” she said.

“I also think there’s some new optimism in the next generation of young professionals here. They’re seeking these exclusive, higher-end properties like both single-family and condo in some of the most sought-after areas of the city. And that can involve both urban and suburban areas as long as there’s amenities and transportation close by.”

Also, there is growing confidence and optimism in the province’s energy sector and all the industries that benefit from that.

“These higher-end buyers if they’re showing the confidence in buying these still multi-million dollar properties and second properties that’s a good thing for everyone else because that confidence just kind of goes on down the line in the market overall. There’s a huge sector of high-end buyers and I think that’s what’s increased the listings because these sellers are wanting to take advantage of this demand for higher-end homes and condos,” added Poffenroth.

According to the Calgary Real Estate Board, MLS sales for properties in Calgary of $1-million or more were: 2011, 446; 2010, 365; 2009, 337; 2008, 369; 2007, 458; 2006, 334; and 2005, 138.

The biannual report of Canada’s four largest urban markets — Calgary, Toronto, Vancouver and Montreal — showed a steady upward trend in the first half of 2012 with Toronto, Calgary and Montreal all reporting double-digit sales growth in homes over $1 million.

In Vancouver, the 2011 to 2012 comparison of properties over $1 million, showed that the reigning hot spot for million-dollar listings is experiencing a similar correction to conventional properties in the area, said Sotheby’s. Sales in that price category of 1,291 properties so far this year are down 35 per cent from the same period last year, which had 1,996 transactions. The inventory of properties asking $1 million or more also rose 11 per cent in 2012, increasing to 3,912 from 3,518.

In the first half of 2012, the Greater Toronto Area reported a 29 per cent increase in sales, generating 3,113 transactions of million dollar-plus properties, compared with 2,405 in the first half of 2011. The inventory of listings in the GTA also rose 31 per cent from 6,193 homes listed over the $1 million price point to 8,105 listings, said the report.

Montreal experienced similar growth in both the sales and inventory of million-dollar real estate. This year, Montreal reported a 15 per cent sales increase with the first six months reporting 227 transactions exceeding $1 million compared with 196 in 2011. The volume of top-tier listings also increased 11 per cent from 590 in 2011 to 656 in 2012.

“Given the transition occurring in international economies like Europe and Asia, the value and stability of luxury property in Canada has become an increasingly recommended asset,” said Ross McCredie, Sotheby’s International Realty Canada chief executive.

THE HOUSING SQUEEZE

Jay Bryan: Did Ottawa squeeze housing at the wrong time?
By Jay Bryan
The Gazette July 16, 2012

Did the Harper government blunder into overstimulating a housing market that it’s now in the process of squeezing at just the wrong time?

The question springs to mind now that new numbers show Canada’s housing market showed signs of significant softness in June, with sales falling 4.4 per cent below their year-earlier level – the first such drop in a year – as the national average home price edged down by nearly one per cent.

This comes just as new, tighter mortgage-lending rules went into effect early in July, the key change being one that shortens the allowed repayment period on a government-backed insured mortgage to 25 years from 30.

The result is to jack up the monthly payment on a mortgage by about 10 per cent if the buyer was originally hoping to use the longer 30-year repayment option.

This is just the right medicine for an overheating real-estate market, but much more dubious when demand is already weakening. It will price some buyers, especially first-time ones, right out of the market.

Analysts, including some who favoured the tightening, are a little worried.

There was already a recent undercurrent of concern as home prices moved inexorably higher in the winter and spring: was the market setting itself for a painful fall? At TD Bank, chief economist Craig Alexander predicts an average price drop of 10 per cent to 15 per cent over the next two to three years.

Most analysts didn’t see such a big correction, although many think the priciest markets, Vancouver especially, are overdue for a dip.

But, warns economist Robert Hogue at Royal Bank, “the risks are higher now than they were before.” Hogue thought markets were cooling nicely even before the stricter rules came in. Now, he worries, “this may give a push beyond what the market needs.”

Douglas Porter, deputy chief economist at BMO Capital Markets, thinks the market will probably adjust without too much trouble, but acknowledges that he too feels a little tug of concern. “This may have been one turn of the screw too many,” he says. “That’s the risk.”

The irony is that it was under this same Harper government that Canada loosened its mortgage rules so much that by late-2006 you could borrow for 40 years with nothing down. The then-governor of the Bank of Canada, David Dodge, saw this as so irresponsible that he broke the central bank’s usual rule against criticizing government policy.

It’s what foolish governments often do: curry favour by loosening policy too much in good times, only to have to tighten as conditions worsen.

So far, though, the market still appears to be healthy, with modest price gains in most big cities across Canada, but a downtrend in sales pointing to the possibility of further cooling in the very costly Vancouver and Toronto markets.

Indeed, in the country’s priciest market, Vancouver, prices actually fell by nearly one per cent last month, according to the Home Price Index compiled by the Canadian Real Estate Association. Over the entire past year, Vancouver prices are only up by a modest 1.7 per cent.

This evaporation of price gains in a market that was red hot last year was so dramatic that it helped stabilize the entire Canadian market. The average Canadian price fell by 0.8 per cent from a year ago, but once you remove Vancouver from the numbers, the average price elsewhere goes up by 3.2 per cent, not down.

This resulted from the unwinding of frenzied demand early last year for some of the highest-priced homes on the Vancouver market, said Hogue, the Royal Bank economist. Possibly because foreign demand waned, such homes are now much slower to sell.

Toronto prices barely moved last month, edging up by 0.2 per cent, although earlier gains pushed the average up by a strong 7.9 per cent year-over-year.

Montreal, where last month’s gain was a modest 0.3 per cent, is ahead by a total of 2.7 per cent over the past year, according to the Home Price Index, which, unlike simple price averages, seeks to eliminate the distortions caused by varying numbers of high-priced and lower-priced homes sold in different months.

Calgary stands out as the only city where the number of sales went up significantly – by a robust 17 per cent, in fact – but prices rose by a more modest 5.3 per cent.

BALANCE IN JUNE

Fewer home resales in June in a more balanced market: real estate association
By LuAnn LaSalle
The Canadian Press July 16, 2012

The number of Canadian homes sold last month dropped more than four per cent from the level in June 2011, the first year-over-year decline in sales volume since April 2011, the Canadian Real Estate Association said Monday.

Resales of homes were also down 1.3 per cent in June from May — the second month-to-month decline — with a total of 46,444 transactions through CREA members. That was down from 48,591 in June 2011, the association said.

"Canada's housing market lost a little altitude in June, but it's still flying pretty high," association president Wayne Moen said in a news release.

"That said, sales activity and average prices bucked the national easing trend in a number of markets, which underscores that all real estate is local," Moen said.

The national average home price in June was $369,339, down 0.8 per cent from the same month last year, CREA said.

Prices increased in Calgary, remained strong in Toronto and continued to slow in Vancouver.

However, CREA said its MLS Home Price Index — which the association says is a better measure because it adjusts for different types of properties sold — increased 5.1 per cent between May and June 2012.

There have been several reports saying some real estate markets and some types of housing are over valued, although there's a range of opinions about how much and how quickly prices will decline.

Economists and consumers have been closely watching for signs that demand has softened to the point where prices will start going down.

But the association, which represents real-estate boards and associations that handle most of the country's property transactions through the MLS system, said Monday the decline in sales activity and an increase in new listings resulted in a "more balanced" national housing market in June.

The number of newly listed homes rose 1.4 per cent in June compared to May, led by the Toronto market. Some 42 local markets, out of 100 markets across the country, registered a monthly increase in new listings of at least one per cent, the association said.

RBC senior economist Robert Hogue noted the resale market eased again in June but the number of homes newly listed for sale rose 1.4 per cent last month.

"Market conditions, therefore, eased a little, providing more breathing room for Canadian buyers," Hogue said in a research note.

"Despite this easing, the demand-supply equation continued to be balanced in the majority of markets in Canada. The previously tight Toronto market became much more balanced, whereas the Vancouver market inched closer to conditions favouring buyers," Hogue said.

In the first half of 2012, a total of 257,193 homes traded hands over Canadian MLS Systems, up 4.7 per cent from the same period in 2011.

Gregory Klump, CREA's chief economist, said home buyers didn't rush to make purchases before the latest restrictions on mortgage regulations came into effect in July.

"That's a big change compared to what we saw as a response to previously announced changes," Klump said.

"It will take some time before the compound effect of previous and recent changes to regulations on Canada's housing market becomes apparent."

Hogue also said that going forward this year he expects home resales to ease in light of the latest mortgage restrictions.

"This moderation trend will become more entrenched next year when we expect the Bank of Canada to begin normalizing its interest rate policy."

Under new mortgage rules announced in June by Finance Minister Jim Flaherty, borrowers will be allowed to use up to 80 per cent of their property's value as collateral for home-equity loans, down from 85 per cent.

In addition, the maximum amortization period dropped to 25 years from 30 years for government insured mortgages.

Flaherty also said government-backed mortgage insurance will be limited to homes with a purchase price of less than $1 million.

Photo By: the past tends to disappear

RISE UP!

New-home prices in Calgary region on the rise
By Mario Toneguzzi
Calgary Herald July 13, 2012

Real estate . New-home prices in the Calgary region continued to rise in May.

Statistics Canada said Thursday that prices in the Calgary area were up 0.3 per cent from April and 0.8 per cent from a year ago.

Nationally, the index rose by 0.3 per cent and prices were up 2.4 per cent from May 2011.

Gains in Toronto, Oshawa and Calgary were the top contributors to the May increase, StatsCan said. The most significant monthly price declines were recorded in Victoria (0.8 per cent) and Charlottetown (0.4 per cent).

The Royal LePage house-price survey, released earlier this week, showed varied year-over-year resale house price increases in Calgary.

In the second quarter, detached bungalows posted the largest average year-over-year price increases, rising five per cent to $432,322. Prices for two-storey homes rose 2.5 per cent year-over-year to $425,456. Condominiums declined by 0.8 per cent year-over-year to $247,056.

FLOWER POWER

Need immediate garden impact? Buy larger plants
By Donna Balzer
Calgary Herald June 28, 2012

BETTER LATE THAN NEVER - The spring garden frolic for serious gardeners is over, and dabbling gardeners are buying now for parties, garden events or real estate open houses. Instead of tenderly planting promising seeds or tiny fragile annuals, latecomers to the garden party buy their fully-grown plants in big pots. This allows a wow effect without the early work. One 14-inch (35 cm) hanging basket will comfortably fill one 18-inch (45 cm) decorative pot. Where five bare-root hostas may have suited dormant planting in March, one large three-gallon pot will fill the space now for instant beauty and summer balcony or patio enjoyment.

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The long days of summer are upon us and this means it’s outdoor patio season. If your spring garden efforts failed to launch, it’s time now to fluff your space with green and blooming plants. Donna says at this time of year, you’re better to start with bigger plants, set them up with watering systems and finish your weeding before the seasonal parties begin.

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Better Late than Never

The spring garden frolic for serious gardeners is over, and dabbling gardeners are buying now for parties, garden events or real estate open houses. Instead of tenderly planting promising seeds or tiny fragile annuals, latecomers to the garden party buy their fully-grown plants in big pots. This allows a wow effect without the early work. One 14-inch (35 cm) hanging basket will comfortably fill one 18-inch (45 cm) decorative pot. Where five bare-root hostas may have suited dormant planting in March, one large three-gallon pot will fill the space now for instant beauty and summer balcony or patio enjoyment.

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SIPs For Summer Homes

Like good gossip at work, the news about self-irrigated pots (SIPs) is spreading from gardeners to the retail world. These pots hold water and don’t dry out on balconies the way conventional pots do. YouTube videos have fanned the flame for homemade SIPs: plastic bins and recycled pails, adapted from third-world designs. These SIPs are ideal for low budget hippie-style gardens. Better-looking commercial self-watering pots are available now for patio-grown annuals and vegetables. If you are away and unable to water longer than a few days, a better choice is an automatic irrigation system for pots. Connect a splitter, timer, control valve and individual bubblers on pots to keep them evenly moist.

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Weeding

The worst weedy offenders in older neighbourhoods are seeds falling from overhanging trees. Dry propeller seeds from maples and ash sail to the ground in fall and winter and sprout in spring. Birds drop the remains of berries all winter in eavestroughs or sidewalk cracks, where they sprout and become permanent fixtures if left in place. New gardens with more recently farmed soil are likely to have weeds like thistle, stinkweed and stinging nettle. Pull or cut these before they go to seed. A new crop of chickweed will appear with every soil rotation, so cover the soil with newspaper and bark to stop existing chickweed seed from germinating.

SMART GROWTH IN CENTRE

Infographic: Nature of Calgary neighbourhoods changing, new census results reveal
 'Smart growth' emerges in city centre
By Jason Markusoff,
Calgary Herald June 29, 2012

Although the 2012 census shows the same story on all Calgary's suburban edges - grow, grow, grow - a blend of dynamics are reshaping the city's existing neighbourhoods.

In older, inner-city neighbourhoods such as the Beltline, Chinatown and Inglewood, new condo projects are spiking community populations. In the past year, 42 per cent of new homes have sprung up within the built-up part of Calgary - the sort of redevelopment pattern Calgary's "smart growth" blueprints urge.

"If we're maximizing the infrastructure we've already built, that helps accommodate the growth and put less pressure on the edges," said Rollin Stanley, the city's new general manager of planning.

In other communities like Parkdale and Spruce Cliff, population growth is being triggered by some densification, but more so by an influx of new families moving into homes that empty nesters have vacated.

Bowness, which has in the past been marred by population decline, gained 312 residents last year but only five dwelling units.

"Those houses will turn over. We have to track very closely how this changes," Stanley said, recalling in his former neighbourhood in Washington's suburbs, five houses occupied by octogenarians flipped to families with kids, a trend that would put new pressure on once-lagging schools.

The flip side of the Calgary trend is the population decline of communities in a middle ring of Calgary suburbia. Deer Run, Sundance, Scenic Acres, Edgemont and MacEwan all share two things in common: they have lost a sizable chunk of their population in the last four years, and were all developed between 1978 and 1982. A similar generational dip has previously hit communities of a different vintage.

Photo By: John Ostrom

STARTING JULY 9, 2012

Ottawa tightens mortgage rules to avert household debt crisis
By Jason Fekete
Postmedia News Jun 21, 2012

OTTAWA — The federal government is moving once again to tighten mortgage-lending rules amid lingering concerns about an overheated housing market and rising household debt levels.

In a decision called for by some of the big banks — and one that’s expected to soften housing prices — Finance Minister Jim Flaherty announced Thursday the federal government is reducing the maximum amortization period for a government-insured mortgage to 25 years from 30 years.

It’s the third time the Harper government has reduced the maximum amortization period in the last four years, after it initially increased the lengths of mortgage terms to make it easier for Canadians to purchase homes.

The government has since ratcheted it back from 40 years to 35 in 2008, and then further reduced it to 30 years in 2011.

Banks will still be allowed to offer 30-year amortization periods on low-ratio mortgages that include a downpayment of 20% or more.

The changes will see the government lower the maximum Canadians can borrow against their home to 80% of its value, from 85%, in an effort to encourage them to keep more equity in their homes.

As well, under the new rules, to qualify for a mortgage loan Canadians can spend a maximum of 39% of their gross household income on home expenses such as mortgage, property taxes and heating, and a maximum 44 per cent of income on housing expenses and all other debt.

Flaherty also announced Ottawa will limit government-backed insured mortgages to home purchases of less than $1-million.

A downpayment of at least 20% will be required on mortgage loans for homes priced at or above $1-million.

Reducing the amortization period will increase monthly payments, but reduce the amount of total interest paid on a mortgage. Ottawa expects the change from a 30-year to 25-year amortization will, on a $350,000 mortgage loan at four per cent, increase the monthly payment $177 but reduce total interest costs by nearly $47,000.

The government believes less than five per cent of home buyers will be affected by the clampdown.

The new rules take effect July 9, 2012.

“We watch carefully, we monitor the market carefully. I remain concerned about parts of the Canadian residential real estate market, particularly in Toronto, but not only in Toronto, so that is why we are intervening once again,” Flaherty told reporters in Ottawa.

“It’s our job to try to be ahead of things and act in a measured way, listening to the market. And I have been listening to the market, and quite frankly, I don’t like what I hear, particularly in the condo market.”

Flaherty said the government’s moves are part of an effort to “moderate behaviour” among Canadian homeowners and make them reflect before jumping into the housing market at the high end.

Canada’s largest city is seeing continuous home building because of persistent demand, he noted, which is accelerating prices and eroding affordability.

“This concerns me because it’s distorting the market, quite frankly,” the minister added. “My judgment is that we need to calm particularly the condo market in a few Canadian cities.”

Statistics Canada reported last week that the ratio of Canadian household debt-to-income continued increasing in the first quarter, to 152 per cent from 150.6 per cent in the fourth quarter of 2011. That came on the heels of a warning from the Bank of Canada that high household debt levels remain the most important domestic risk to financial stability.

Opposition parties said Thursday the Harper government, with its changes to mortgage rules, is simply retreating from its own decision to ramp up the amortization to 40 years after taking power in 2006.

“This is Mr. Flaherty versus Mr. Flaherty. He has done all of this. He’s the guy who has let it go up and is now bringing it dramatically down again. We are now at the same situation we were — what do you know, 2006 — where we had 25-year mortgages,” said interim Liberal leader Bob Rae.

“There’s going to be a real issue as to exactly what message this is sending to markets and what impacts it will have.”

Flaherty and some of the country’s leading economists have for months been warning that they remain worried about Canada’s housing market and rising household debt.

In March, prior to delivering the federal budget, Flaherty met with 13 private-sector economists for his traditional pre-budget consultation to get their assessment of the Canadian economy.

Some of the big banks suggested at the time the federal government consider implementing “measured actions,” such as reducing the maximum amortization period for government-insured mortgages back to the traditional 25 years.

On Thursday, the banks largely welcomed the measures.

“Overall we see (Thursday’s) announcement as a much better substitute to interest rate hikes since the moves are aimed with almost surgical precision at the margins of the mortgage market,” Benjamin Tal with CIBC World Markets said in a research note.

“The combined impact of the four changes will not be large enough to derail the housing market, but are clearly significant enough to soften activity, and at the margin will act as a negative for house prices —mainly at the mid-range segment of the market.”

Frank Techar, president of personal and commercial banking at BMO Financial Group, called the changes “prudent, measured, responsible, timely.”

“Minister Flaherty has tapped the brakes at precisely the right time and his actions should help ensure Canada’s housing market experiences a soft landing,” Techar said in a statement.