REAL ESTATE ASSETS

Distressed Debt Investors Prefer Real Estate In 2011
Forbes
January 27, 2011

With risk-taking coming back to most markets, investors in the riskiest asset classes are being forced to channel their funds into different sectors and instruments in their attempts to get the most bang for their buck.

The North American Distressed Debt Market Outlook 2011, a survey of 100 experienced distressed debt investors released by Debtwire, Macquarie Capital and Bingham McCutchen, found that these investors will move their cash from energy to real estate assets and from first and second-lien loans to common equity and convertible bonds. Distressed debt investors will have to adapt to a surging equity market and a bubble in high-yield loan markets, finding themselves pushed down the capital structure in search for yield.

Distressed debt markets will provide opportunities for investors in 2011, as “lingering concerns about unemployment, housing, and the European sovereign debt crisis will cause investors to remain cautious and focus on the ability of companies to withstand additional economic shock,” according to David Miller of Macquarie Capital. Investors will therefore “continue to stress the downside when evaluating investment opportunities.”

This will force a change in strategy for those brave enough to invest in distressed assets. Real estate will be the sweet spot for investors in 2011, with 48% of those surveyed choosing it as their favorite sector, a 22% rise from a year ago.

Specifically, the sector will be commercial real estate, where 51% of respondents expect default rates will not peak before the second half of 2011. “[These findings] don’t necessarily bode well for the prospect of the housing and commercial real estate markets avoiding a double dip,” reads the report.

This represents a marked change from a year ago, when energy and automotive sectors were amongst the top picks, with 37% and 29% respectively. But, with energy prices back on the rise and “the automotive sector dodging a huge bullet,” opportunities will lay elsewhere, in the real estate and financial markets. For example, General Motors and Fords carry a Fitch corporate rating of BB-, which is below investment grade.

The change is not only in sector, but in preferred instrument too. Whereas first and second-lien loans topped the list of “most attractive opportunities” in 2010, common shares, convertible bonds, and preferred/mezzanine loans have taken the top three spots. “There is no longer a need to be at the top of the capital structure,” said Ronald Silverman of Bingham McCutchen, another of the firms that cooperated in the report. “Unlike last year where first- and second-lien loans were the place to be, fund managers are prepared to move away from secured debt and are ready to enter on the ground floor.

A bubble in the high-yield and leveraged loan markets, as well as the staggering rebound in the equity markets, is the catalyst behind change. “Many investors experienced significant gains as they exploited inefficiencies in the high-yield and leveraged loan markets in 2010. As investors continue to deploy capital to these markets, returns will diminish, causing investors to move even further down the capital structure in search of outsized yields,” wrote Raoul Nowitz of Macquarie. Thus, 55% of respondents see those markets in a bubble, with most expecting a burst in the second half of 2011 or the early 2012.

Allocation of assets to distressed debt will remain essentially unchanged from 2010, with distressed allocations exceeding 40% of assets under management for 27% of those surveyed. Expected returns are “largely in line with those of 2010,” with 27% of managers expecting returns under 5%, and 16% of them expecting returns greater than 20%.

“Given the run-up in asset prices in 2010, distressed debt investors will be forced to take more aggressive risk positions to chase higher yields, creating an environment in which achieving extraordinary returns will be increasingly challenging,” said Ford Phillips of Macquarie Capital.

TANKING CMHC RULES?

Think Tank: Time to leash the CMHC
John Greenwood 
FPPOSTED, January 31, 2011

The federal government should limit tax payer exposure to potential problems in the housing market by winding back the role of the Canada Mortgage and Housing Corp. in the provision of mortgage insurance, according to a new report by the CD Howe Institute.

The CMHC has a pervasive presence in the domestic mortgage market, potentially resulting in “unmanageably large risks in financial markets” that are ultimately borne by the Canadian public, says the report.

Under current rules, people who borrow more than 80% of the value of the home they want to buy must also take out insurance, and the CMHC is by far the most dominant player in that market.

According to the report by Finn Poschmann, vice president of research at the CD Howe Institute, the CMHC now backstops mortgages equivalent to more than 30% of Canada’s gross domestic product.

As a result, Canadians are exposed to “large, ill-defined risks,” says the report, which argues that Ottawa should crank back the CMHCs presence in mortgage insurance and allow more room for private sector insurers.

Originally conceived as a mechanism for executing public policy, the CHMC has expanded dramatically, especially in the wake of the financial crisis as the government encouraged banks to boost lending by allowing them to securitize more home loans.

But critics worry that the unintended consequence was that mortgages became too easy to get, pushing up real estate prices across much of the country to unsustainable levels.

The CD Howe report comes on the heels repeated warnings from the Bank of Canada that Canadians have become over leveraged and need to start paying down debt.

One of the main concerns about the CMHC is the lack of disclosure about the quality of its mortgages and details of the types of loans it insures. For instance, when the government announced earlier this month that home equity lines of credit, or HELOCs, would no longer qualify for CMHC insurance, many analysts expressed surprised that such loans were ever allowed to be part of the CMHC program in the first place.

A GROWTH SUPER-CYCLE

Forget Great Recession, growth super-cycle ahead
Simon Kennedy, Bloomberg
Monday, Jan. 24, 2011

For only the third time since the Industrial Revolution, the world may be entering a long-term growth cycle that will lift all economies simultaneously, driving bond yields and commodity prices higher, according to leading economists attending the World Economic Forum in Davos, Switzerland.

The depth and scope of the expansion will be a focus for discussion at this week’s annual meeting of the WEF. Evidence of a broadening global recovery will enable U.S. Treasury Secretary Timothy F. Geithner, investor George Soros and 2,500 political, business and academic leaders to shift their emphasis away from crisis- fighting. Yet doubts remain over how much rich nations will be able to benefit from growth which is increasingly driven by the emerging world.

With the economic and investment outlooks “much better” than in recent years, “people are talking about how to get back to business as normal and what comes next,” said Jitesh Gadhia, a delegate to the conference and the London-based senior managing director at Blackstone Group LP, which runs the world’s largest buyout fund.

Goldman Sachs Group Inc., PricewaterhouseCoopers LLP and London’s Standard Chartered Bank are among the financial companies sending executives to the meeting. Their economists predict a growth spurt in coming decades led by emerging nations that will be strong enough to boost developed countries.

Global gross domestic product will swell to US$143-trillion by 2030, allowing for inflation and market-exchange rates, from US$62-trillion in 2010, with China and other emerging markets accounting for about two thirds of the rise, estimates Gerard Lyons, chief economist and group head of global research in London for Standard Chartered, which generates most of its earnings from Asia.

Lyons and his colleagues predict a “super-cycle” of historically high growth that will last at least a generation and will be led by booming trade, investment and urbanization, according to a report published in November. He reckons such a cycle has occurred only twice since the end of the 18th century: the four decades before the First World War and the three following the Second World War. He’s betting the new phase will contribute to a reversal in the three-decade decline for U.S. bond yields after 10-year Treasury notes lost an average 40 basis points a year since the early 1980s.

Richard Dobbs, a director of the research division at New York-based McKinsey & Co., will use the Davos meeting to highlight a study by the international consulting firm that sees an imminent end to cheap capital. The causes are a building bonanza in developing economies and aging populations who are draining their savings, according to the report, which was released Dec. 9.

“It’s a topic capturing the attention of people who want to think beyond the crisis,” said Seoul-based Dobbs.

While Goldman Sachs Asset Management Chairman Jim O’Neill has found fame for promoting the “BRIC” economies of Brazil, Russia, India and China, he says their rise has positive impact beyond their borders, with Chinese imports totaling about US$400-billion, almost the equivalent of South Africa’s economy last year. That should attract investors to rich-nation companies with links to these markets, and the resurgence in the U.S. economy has prompted O’Neill to predict higher U.S. bond yields in 2011.

“World-trend economic growth is being lifted,” said London-based O’Neill, who helps manage US$840-billion. “The notion that BRICs benefit at the expense of others is increasingly out of date.”

Investors should buy copper, coal and oil to take advantage of the growth of cities in emerging markets, according to Standard Chartered, which says the Chinese yuan, Indian rupee and Korean won will appreciate on strengthening domestic growth.

Developed nations also will benefit as their emerging- market counterparts invest more abroad, hire more of their workers and rely on their expertise in areas such as financial services, said Mr. Lyons, who will be at Davos. He predicts both the U.S. and European Union will enjoy an average trend growth of 2.5% through 2030, compared with the 1.9% and 1.7% he forecasts for this year.

“It’s a win-win situation,” said Mr. Lyons, who concedes growth won’t always be strong and continuous during the entire period.

The increasing integration of China and other developing economies will boost commerce and investment worldwide, agrees Edward Prescott, a senior monetary adviser to the Federal Reserve Bank of Minneapolis who shared the 2004 Nobel Prize for analysis of business cycles and economic policy.

Prescott points to South Carolina, which has benefited from new factories opened by Chinese companies such as appliance maker Haier Group. The International Monetary Fund projects this year will be the first in which Chinese foreign investment outpaces inward flows.

“The whole world’s going to be rich by the end of this century,” Mr. Prescott said.

Such euphoria may not be the only view in Davos, given the European sovereign-debt crisis, fears of a real-estate bubble in China and mounting public-debt burdens, said Nariman Behravesh, chief economist at consultants IHS in Lexington, Massachusetts, who is attending the meeting.

“There’s going to be more optimism but still some worries,” he said.

Talk of a super-cycle gets little support from Joseph Stiglitz, a Davos veteran and 2001 Nobel laureate. He contends that globalization and free trade may be stymied by unemployment in rich nations and the risk that more of these countries’ jobs will be lost abroad. The U.S. jobless rate has remained above 9% since May 2009.

“Standard Chartered works mostly in developing markets, and that shapes its world view,” said Mr. Stiglitz, an economics professor at Columbia University in New York. “If you work in emerging markets, you feel the energy. If you are in the U.S. or Europe, you see the numbers and it’s hard not to feel depressed.”

The difference reflects a “shift in the center of gravity in the world economy, in which the West is struggling to keep up with turbo-charged,” emerging markets, says Stephen King, chief global economist in London at HSBC Holdings Plc and a former U.K. Treasury official. He will outline in Davos what he calls the next phase of globalization: increased trade among emerging countries.

His team calculated this month that by 2050, global output will have trebled and average annual growth will accelerate toward 3% from 2% in the last decade, with emerging markets contributing twice as much to the expansion as the developed world.

Ian Bremmer, president and founder of the Eurasia Group, a political-risk consulting company in New York, is more downbeat as he heads to the Swiss ski resort. He predicts what he calls a “G-Zero” era in which no country has the political or economic leverage to dominate the international agenda and all nations focus on their own priorities. That will reduce economic efficiency and prompt trade conflicts, he said.

The subsequent volatility and uncertainty mean U.S. assets will prove the “comparative safest bet” and the price of gold will stay high, Bremmer said, after touching a record US$1,432.50 an ounce on Dec. 7. Fixed-income securities still may suffer as nations impose capital controls, which Brazil and South Korea have done lately, while companies will continue saving rather than spending, he predicted.

John Hawksworth, the London-based head of macroeconomics at PricewaterhouseCoopers, is confident a so-called zero-sum world isn’t in the cards. His own attempt to see into the future this month generated a projection that a bloc of seven leading emerging markets, including India and China, will be 64% larger than the current Group of Seven by 2050 at market- exchange rates, compared with 36% smaller today.

Even so, average income levels in the G7 countries will rise in absolute terms as new market opportunities open up for their businesses, and consumers will benefit from lower-cost imports, predicts Mr. Hawksworth, who has served as a consultant to the World Bank and whose company will release its annual survey of executives in Davos tomorrow.

“There is a shift in economic power from West to East, but the West can still do well,” Mr. Lyons said.

GROWTH OUTLOOK

The Bank of Canada leaves overnight rate unchanged and 2011 growth outlook revised modestly higher


As was almost universally expected, the Bank of Canada left the overnight rate unchanged at 1.00% for the third meeting in a row and followed a string of three meetings where it opted to raise rates 25 basis points each time from a recessionary trough of 0.25%. Steady policy was largely a reflection of little change in the economic outlook. As expected, growth for 2011 was revised up although by a minimal 0.1 percentage point (pp) to 2.4%. Inflation expectations were characterized as remaining “well-anchored”.

With no move on interest rates expected coming out of this meeting, attention was more focused on the statement issued following the meeting to provide clues as to any eventual shift in policy. What was most widely expected was a likely upward revision to growth in the wake of some aggressive stimulative measures in the US that are expected to boost growth in that economy. In the statement, the Bank of Canada acknowledged that “private domestic demand in the United States has picked up and will be reinforced by recently announced monetary and fiscal stimulus.” In the end, however, the Bank of Canada opted to notch up 2011 growth only 0.1 pp to 2.4% from 2.3% previously. Growth in 2012 was raised to 2.8% from 2.6%.

The release on Wednesday (January 19, 2011) of the Monetary Policy Report (MPR) will provide more details of the revised outlook. Of interest will be the extent that U.S. 2011 growth has been revised up relative to a current forecast of 2.3%. On the surface, the upward revision to Canada implies growth in the US has only been revised to around 2.5%. This amount implies a fairly modest effect from the fiscal and monetary policy stimulus recently introduced. Our current U.S. growth this year is 3.4% with recent consensus numbers indicating expected growth of 3.2% for 2011.

The upward revision to Canadian growth this year and next did not alter the central bank’s view on the output gap closing by the end of 2012. The offset was “a little more excess supply in the near term.” This statement is likely a reference to growth in the second half of 2010 coming in below the Bank’s forecast of 1.6% and 2.6% in third and fourth quarters of 2010, respectively. The actual third-quarter 2010 growth rate was 1.0%, and we are currently monitoring a fourth-quarter gain of 2.3%. Tomorrow’s MPR will provide further clarification of the source of this addition of near-term excess supply.

The stronger U.S. outlook contributed to global growth improving slightly faster than the Bank of Canada had anticipated; however, this also reflected stronger growth in Europe although the central bank cautioned that sovereign and bank balance sheet issues in the region continue to be a source of uncertainty. With respect to emerging markets, it was noted that more restrictive policy measures were being introduced in the region implicitly to counter stronger than desired growth.

The description of the Canadian economy was marginally more upbeat as it acknowledged “the beginning of the expected rebalancing of demand.” This statement referred to the increased role of business investment to support growth near term as fiscal stimulus unwinds and household spending continues to be constrained by overextended balance sheets.

Comments on the currency were limited to a reference to its “persistent strength” that was restraining the recovery in net exports.

As expected, the Bank of Canada opted to hold the overnight rate steady at 1.00%. This result occurred despite an acknowledgement of slightly stronger growth in both the US and globally along with some optimism about the “beginning of the expected rebalancing of demand” in Canada. The Canadian growth outlook was revised up as a consequence although by a minimal 0.1 pp this year and 0.2 pp for 2012. These minimal changes to growth did not alter the expected closing of the output gap by the end of 2012 because of weaker growth in the second half of 2010 and thus provided the strongest justification for unchanged policy. Our view, however, is that growth will likely come in stronger than expected this year. As it becomes more evident in the data, we assume a return to tightening mode by the second quarter of 2011. Low inflation will not prevent further tightening, yet it will keep the pace of tightening gradual with the overnight rate rising to only 2.00% by the end of 2011.

Paul Ferley, Assistant Chief Economist, RBC Economics

NEWS FROM THE HILL

Ottawa toughens mortgage rules
By Andrew Mayeda
Postmedia News January 17, 2011

OTTAWA -- Finance Minister Jim Flaherty is cracking down on Canadians' ability to qualify for a mortgage, in the government's latest attempt to rein in consumer debt.

Flaherty announced Monday the government is reducing the maximum amortization period for government-backed mortgages to 30 years from 35 years. The change will affect mortgages with loan-to-value ratios over 80 per cent.

Canadians will only be able to borrow up to 85 per cent of the value of their homes, down from 90 per cent.

In addition, the government is withdrawing backing for lines of credit secured by people's homes.

Flaherty said the changes are designed to prevent the kind of housing bubbles that developed in other countries, most notably in the United States, where the collapse of the subprime mortgage market triggered the global financial crisis.

"The main reason we're taking the action is for the longer term, that we avoid even the beginning of the development of the kinds of issues in some other countries that have been very damaging to families," the minister told reporters after unveiling the mortgage changes.

Flaherty said the decision was based on the long-term goal of protecting household finances and the broader economy, rather than on any particular data on the housing market.

A number of economic observers, including Bank of Canada Governor Mark Canada, have recently expressed concern about the record-high debt levels of Canadians. Based on the ratio of debt to income, Canadians are actually deeper in the red than American households, which are still struggling to dig themselves out from the debt taken on before the financial crisis.

Flaherty said Canadian families must keep in mind that interest rates will eventually rise from their relatively low levels. Economists have expressed concern that a sharp rise in interest rates could leave Canadians stranded with too much debt.

"I think people need to demonstrate that good Canadian trait of prudence and reasonableness and common sense in terms of their debt assumption," said Flaherty.

Speculation has been building about whether the opposition parties will support the government's upcoming federal budget. The NDP, for example, has outlined a series of proposals, including help for Canadians' home-heating bills and the revival of the home-renovation tax credit. But Flaherty said the government doesn't plan to bring back the popular renovation credit, which was part of the government's economic-stimulus program.

Last Friday, Prime Minister Stephen Harper acknowledged his government was considering changes to the rules governing mortgages. He said the government "remains concerned about growth in the level of household debt.

In February 2010, Flaherty moved to toughen up the mortgage rules amid worries that Canada was in the midst of a housing-market bubble. The reforms, since introduced, compelled borrowers to meet standards for a five-year fixed-rate mortgage, even if the buyer wanted a shorter-term, variable rate loan.

They further required purchasers of rental properties to issue a 20 per cent down payment as opposed to five per cent. The moves played a role, observers say, in slowing down real-estate activity. While the federal government looks to curb borrowing, economists say the Bank of Canada may have to follow by raising its key interest rate sooner rather than later.

The central bank issues its latest rate statement Tuesday and it is expected to hold its benchmark rate at its present one per cent level as signs indicate the economy may be benefiting from renewed business and consumer confidence in the United States.

The tightened mortgage rules take effect March 18, 2011. Under federal law, lenders must obtain mortgage insurance when homebuyers pay a down payment of less than 20 per cent of the purchase price of the new home. The government then backs the insured mortgages. The new changes apply to such government-backed mortgages.

The withdrawal of government insurance on home-equity lines of credit takes effect April 18.

"Taxpayers should not bear any risk related to consumer debt products unrelated to house purchases. Those risks should be managed by the financial institutions that originate and offer these products," Flaherty said.

Changes to take affect this spring

The New Measures:

- Reduce the maximum amortization period to 30 years from 35 years for new government-backed insured mortgages with loan-to-value ratios of more than 80 per cent.

- Lower the maximum amount Canadians can borrow in refinancing their mortgages to 85 per cent from 90 per cent of the value of their homes.

- Withdraw government insurance backing on lines of credit secured by homes, such as home equity lines of credit, or HELOCs.

Photo By: Digital Agent

WELCOME TO YOUR NEW HOME

New home prices top pre-recession peak

Financial Post · Wednesday, Jan. 12, 2011

OTTAWA — New-home prices were up more than expected in November, according to data released by Statistics Canada on Wednesday.

The new-housing price index rose 0.3% that month, beating economists’ expectations for a 0.1% gain, which would have matched the rise in October.

The latest data shows new-home prices have more than fully recovered from losses sustained during the recession.

Some of the biggest gains in particular cities were 4.2% in St. John’s, 1.6% in Ottawa-Gatineau and 1.2% in Halifax.

Higher costs for labour and materials were cited as some of the main causes of higher new-home prices in November, and for St. John’s in particular, bigger development fees.

Some areas, such as Victoria, Charlottetown, and Ontario’s Windsor and St. Catharines-Niagara regions saw lower new-home prices in November.

Year-over-year, the new-home price index was up 2.3% in November, down from 2.5% in October.

Photo By: SmartAnnie (Away)

HOT LIKE FIRE!

Canada's on fire
Jacqueline Thorpe
Financial Post · Thursday, Jan. 13, 2011

Three weeks into 2011, Canada has been swept up in a wave of mergers, foreign money and international attention as commodity prices soar, the loonie jumps above US$1.00 and the economic recovery gathers steam. Check out the latest deals putting Canada in the sights of the global economy:

Zellers sells 220 stores to Target

U.S. retailing giant Target Corp. has secured the land needed to make its much-anticipated arrival in Canada. Target reached a deal with Hudson’s Bay Co. that will see it pay $1.825-billion to acquire the leasehold interests in as many as 220 sites now operated by Zellers Inc.

Lundin Mining, Inmet agree to $9B merger

Canadian miners Inmet Mining Corp. and Lundin Mining Corp. have agreed to a blockbuster $9-billion merger to create a leading global copper company that appears poised for even more growth in the future.

Cliffs Natural Resources to buy Consolidated Thompson for $4.9B

In the biggest iron-ore deal in Canadian history, U.S. miner Cliffs Natural Resources Inc. is buying Montreal-based Consolidated Thompson Iron Mines Ltd. for $4.9-billion as it pushes for more scale and enlarges its customer base beyond North America

U.S. bond giant enters retail fray in Canada

The world's largest bond fund is about to make an erratic year on debt markets even more interesting for Canadian retail investors. U.S. investment behemoth PIMCO, which has about US$1.3-trillion under management, plans to introduce to the retail market a suite of funds focusing on Canadian fixed income. With the volatility in bond markets expected to continue throughout the next several months, exposure to credit these days carries a heightened risk component. And returns promise to be modest.

Canada gets 'emerging' label from Merrill Lynch

There is a dichotomy to the analysis of world economies these days. On one hand, there are the struggling developed economies of the West, on the other, ascendant emerging markets, now including Canada. When examining Canada's growth prospects, the country might better be lumped in with emerging market economies rather than its traditional economic peers, said Sheryl King, head of Canada economics and strategy at BofA Merrill Lynch Global Research.

Maple Sales May Double in 2011 on Dollar Rally

Sales of Canadian-dollar debt by foreign companies may double this year as borrowers diversify funding sources and take advantage of the nation’s strengthening currency.

PIECING TOGETHER THE MARKET

Home prices expected to rise further: Royal LePage
By Derek Abma
Financial Post January 6, 2011
OTTAWA — Home prices will continue a "moderate and steady climb" this year, helped along by an improving economy and low interest rates, according to a report released Thursday.

Real estate services firm Royal LePage said the average price of a home in Canada will rise three per cent to $348,600, even as the number of transactions falls two per cent.

It said that after a "lacklustre" third quarter in 2010, home prices were up between 3.9 and 4.6 per cent, year over year, in the year's fourth quarter. This marked a return to growth more typical of trends since the end of the recession, Royal LePage said.

The report said, similar to last year, sales will be more robust in the first half of the year as homebuyers take advantage of low interest rates that could be on the rise in the near future.

"Canadians realize that interest rates are unsustainably low and that homes will become effectively more expensive when mortgage rates return to normal levels," said Phil Soper, CEO of Royal LePage Real Estate Services. "We will likely see more price appreciation early in 2011 as some buyers complete transactions in advance of anticipated higher borrowing costs."

The report said the strongest price gains will happen in mid-sized cities where homes are priced below the national average. It noted places like Winnipeg, St. John's and Fredericton, where single two-storey homes are still widely available for less than $300,000.

Alberta's housing market is also expected to be strong in the coming year, as the energy sector helps fuel a strong hiring climate.

However, cities such as Calgary and Edmonton were among the few major centres showing price declines, year to year, as of the end of last year. Edmonton now has lower-priced homes than Saskatoon, according to the Royal LePage report. The average price for a two-storey home in Edmonton was $334,286 in last year's fourth quarter, down 2.3 per cent from a year earlier. It was $359,250 in Saskatoon, up 6.1 per cent.

In Vancouver, the average price of a two-storey home is now more than $1 million, Royal LePage said, up 9.8 per cent over the last year. More moderate price gains in the range of four per cent are expected for Vancouver this year.

Average prices for two-story homes as of Q4 2010 (change from year earlier):

Halifax $291,000 (9.7%)

St. John's $327,627 (9.6%)

Montreal $375,222 (8.7%)

Ottawa $354,083 (6.7%)

Toronto $594,231 (5.6%)

Winnipeg $296,750 (6.4%)

Regina $282,500 (9.1%)

Saskatoon $359,250 (6.1%)

Calgary $404,622 (-5.3%)

Edmonton $334,286 (-2.3%)

Vancouver $1 million (9.8%)

Victoria $480,000 (6.9%)

Source: Royal LePage

© The Financial Post

Photo By: Area Bridges

JOIN THE CLUB!

Membership grows in Calgary's $1M home club
By Eva Ferguson
Calgary Herald January 5, 2011

A growing number of properties are joining Calgary's million-dollar home club, with sales of high-end houses up by 25 per cent in some areas as the city's luxury home market whittles its way out of a recession.

The city of Calgary will send out its annual property assessment notices this week, showing a total 8,198 single-family residential homes and condominiums assessed at $1 million or more, significantly higher than last year's total of 6,496 million-dollar properties.

Richard Cho, senior market analyst for Canada Mortgage and Housing Corp., says more million-dollar homes are available in Calgary for a combination of reasons. More high-end homes are being upgraded in the inner-city or built on the edge of town, in areas like Aspen and Tuscany.

As well, thousands of homes that were valued around the $900,000-range last year have probably broken the million-dollar barrier this year.

"Prices were growing somewhat in the middle of last year, so houses that may have been below a million have crossed over," said Cho.

"But it's still a buyer's market out there, we'll see prices come down a little in December, January and then come up again in the spring."

Rachelle Starnes of Royal Lepage Foothills, said demand for high-end homes is growing, adding that her luxury homes division celebrated a record year in 2010, showing "huge recovery in high-end real estate."

In upscale areas on the city's southwest edge, including Elbow Valley, Springbank and Bearspaw, sales for homes priced over $1.5 million showed a 25 per cent increase from the previous year.

The team also just sold a custom home in Stonepine, just west of Elbow Valley, for $4 million, averaging one of the highest price per square foot sales since 2007.

"It proves that Calgarians in the high-end market are confident of our future and we believe it's going to be the start of an incredible 2011 in real estate."

Calgary's highest-assessed home, holding the top spot for more than four years, is in Pump Hill S.W., with an assessed value of $20,190,000, down slightly from the $22 million it was billed at in 2008, well before the global economic downturn.

Following behind a distant second is a home on 4th Street S.W. valued at $10,220,000; third is on Riverdale Avenue S.W. at $8,870,000; fourth is another Riverdale Avenue home at $8,760,000; and fifth is on Briar Crescent N.W. at $7,580,000.

The list is similar to last year's top five, assessment officials say, with slight changes possibly due to major renovations or additions that would result in value increases.

City assessors releasing figures Tuesday said assessments for all homes, whether low-income or high-end, didn't see significant rises or falls, with up to 93 per cent of properties falling between plus or minus 10 per cent of last year's taxes.

"Preparing assessments on an annual basis ensures property and business owners' assessments maintain currency with changing market conditions and experience more stability in year to year property and business tax levels," said Stuart Dalgleish, city assessor.

But small adjustments in assessment don't always indicate small change in real estate values, says realtor Jim Sparrow. "Property assessment isn't really an accurate assessment of what your property is worth," Sparrow said, explaining that city assessors aren't always aware of a home's upgrades over the years.

Anyone who doesn't agree with their assessment can call the city at 403-268-2888.

Complaints to city assessment have come down significantly in recent years.

In 2008, 7,620 complaints were filed, in 2009 that went down to 4,377 complaints and last year, assessors only took 898 complaints.

Oh, say can you see, by the dawn's early light?

U.S. should see Canada as 'land of the future'
By Rebecca Lindell
Postmedia News January 6, 2011

Canada has strong banks, a stable real estate market and rock-bottom corporate tax rates, and it's about time Americans paid attention, according to a Washington Times op-ed piece.

"Our well-mannered Canadian neighbours have pulled their act together. We could learn a lot from them," writes Jim Bacon in an article that compares Canada to a quiet, orderly neighbour and Mexico to a bachelor pad with "drunken parties" and the "occasional gunshot eruptions."

Canada's good behaviour has kept it off America's radar until now, said Bacon, who hails from Richmond, Va., and has never been to Canada.

"You all behave yourselves, you are well-mannered and you don't create a lot of problems for us," he said.

But it's that good behaviour chronicled by the International Monetary Fund and international media that inspired Bacon to pen the piece.

"It smacked me with a two-by-four," he said in an interview with Postmedia News. "Everywhere else was showing deteriorating financial conditions and Canada was looking pretty good by comparison."

Bacon credits Canada's low corporate tax rate, strict fiscal discipline in the 1990s, housing policies and stringent bank system for the country's economic pre-eminence.

Bacon said he doesn't expect his op-ed piece to inspire U.S. President Barack Obama to make an impromptu trip to seek northern wisdom, but that it could channel the attention of the business community.

"Talented Canadians have long regarded the United States as the land of opportunity. It may not be long before Americans see our northern neighbour as the land of the future," he writes.