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.