by David Pett
Economy, Market Call, Ian McGugan

For years, policymakers have been warning that things will be different when boomers start retiring in large numbers. You’ve probably heard the phrase so often that it’s lost all impact. But guess what? It’s no longer a matter of “when.” It’s a matter of now that the boomers are retiring in large numbers.

Stephen Gordon, a professor of economics at Laval, has the numbers (as well as a scary chart) on Worthwhile Canadian Initiative, the excellent blog on Canadian economics which he co-authors. His post shows that the working-age population as a percentage of the total population is beginning a sharp decline. Since 2005, the data have been at the extreme bad end of the 13 scenarios imagined by Statistics Canada.

Gordon figures the decline in the size of the labor force is going to cut per-capita GDP growth rates by about 0.4% a year. While Gordon doesn’t go into all the ramifications, it seems safe to assume that an aging population and slower economic growth will put pressure on the government’s deficit projections—not to mention Canada’s booming real estate market.

Yesterday was the 6th Annual Calgary Real Estate Board Forecast Breakfast Tradeshow and Conference. Calgary Realtors were given an overview of what to expect in the following months. I thought I would share some of the information with you that was shared with me.

 CONDO MARKET LAGS IN THE FACE OF STEADY INVENTORY

Calgary’s recent housing boom pushed single family prices up at a rapid rate and demand for condominium and multi-family homes quickly followed. In repsonse builders generated an average of 1200 starts per month from 2004 through 2007 resulting in a build-up of inventory under construction that peaked in 2008 at nearly 15,500 units.

A steady supply of new and resale multi-family units has meant little price growth for the condominium market, while a diminishing inventory of singles has put upward pressure on the average price of a single family home.

In 2010 single family resale prices will again outpace condos as equity gains from pre-2006 will enable move-up buyers to afford more. Consequently, the gap between single family homes and condominium prices will continue to widen in the short term.

AVERAGE PRICE COMPARISON, SINGLE FAMILY TO CONDO, CITY OF CALGARY

AFFORDABILITY WILL BENEFIT CONDO MARKET LATER IN 2010

Multi-family supplies are typically “lumpy” with building completions adding hundreds of units to the market at one time. Late 2008 saw many of the multi-family starts from 2007 completing at the same time. Longer build-times of condos also complicate market timing and the rate of supply. Completions of unsold unitys, especially in the downtown apartment segment, will contiunue through 2010. The oversupply of complete and unoccupied condo apartments is expected to persist as completions of investor units are added to the rental stock or are immediately listed for sale.

On a more positive note, once this excess inventory works through the marketplace, the extremely low level of new starts will again drive prices up, particularly for the lower priced end of the market that connot be supplied by the single family market.

source: Calgary and Area Housing Market Forecast 2010

Welcome to 2010! A New Year, a new decade and as usual likely a fair share of new goals and resolutions to go around.

While you were making plans for the upcoming 12 months the federal government as well was talking about plans of their own. Hot on their list? The possibility of changing the way Canadians buy homes, yet again.

In the fall of 2008, the federal government took away 40-year amortizations, 100 per cent financing (or no money down purchases) and made it so interest-only mortgages and home equity lines of credit could no longer exceed 80 per cent of one’s property value.

This time around they are speculating on the need to further scale back amortizations, to a suggested maximum of 30 years, and proposing increasing the amount of down payment required when buying. Currently applicants can apply for mortgage financing with a five per cent down payment and their mortgage could be amortized over 35 years.

The government’s concern is that low interest rates and increased market activity in 2009 might be creating a housing bubble. So what could that mean if the government follows through with these ideas?

First-time homeowners are the obvious hardest hit group. As of December 2009 Calgary’s Metro average house price was $451,349 according to the Calgary Real Estate Board. That means to purchase an “average” home (right now) buyers would have to come to the table with at least $22,567. Condos are a slightly easier pill to swallow with an average price of $288,640 lowering the currently required down payment to $14,432 — which is part of the reason why condos are so popular with first-time buyers.

So if you were in the market for a single family home and the government did follow through with increasing the down payment required (seven or 10 per cent has been tossed around as a possible new minimum) then any way you look at it your goal just moved that much further out of arms reach. Considering December’s average price on single family homes seven per cent down payment would be $31,594 and a 10 per cent down payment would be $45,135.

Additionally, by reducing the maximum amortization buyers could stretch their mortgage over, purchasing power is reduced as the required mortgage payments would be increased which then pushes against the debt ratio ceilings which lenders use to determine an applicants ability to pay their monthly expenses (gross income vs. monthly payments).

So if you have already made the leap to ownership, should you then take a sigh of relief? Well yes, that is until you want to sell your home and you realize that your pool of eligible buyers has been reduced — especially if your Calgary home is worth $450,000 or less, as this is widely considered the first time buyers arena.

Canadians have earned a reputation as being conservative. Lending in Canada is no different. If we are in fact in a housing bubble, then perhaps the government is right to be concerned. That said, if this is an exaggerated concern than many Canadians will be affected by this proposed scale back, both now and in the future.

It is worth noting that although the prime lending rate is incredibly low right now, historically, the majority of Canadians opt with fixed interest rate mortgages, more proof of our conservative nature. Fixed rates and the prime lending rate operate independently and only the prime lending rate is directly affected by the Bank of Canada’s (BoC) benchmark rate, meaning fixed rates will not automatically climb when the BoC starts bringing the prime rate back to realistic levels.

Also, many homeowners choose extended amortizations, even if they don’t need to for qualifying purposes, for a large variety of reasons. Situations such as maternity leaves, extended travel or wanting greater cash flow to maximize RRSP’s are just a few examples why people prefer to go with a lower mortgage payment then they could swing if need be. Choice is a powerful thing and it is possible our financing options may be further reduced over 2010.

If you have been thinking about making the move from tenant to owner, then why risk it and wait? The same would apply if you are contemplating selling your current home and moving up. Secondly, you can voice your opinion to your Member of Parliament about how you think this change could affect you and your family. If your goals for 2010 involve real estate in any way it is wise to get started early while the options available are still clear. Call today to discuss your plans for the New Year and ensure you avoid disappointment.

source: www.cren.com

Noone likes tax time, and even though it’s a ways away we should probably start thinking about it. I came across some informative tips to help you make the most of your tax return this year. Enjoy!

Tax-planning should be a year round activity. Even if you’ve been otherwise occupied this year, you still have time to save money on your 2009 taxes by using strategies like these.

Be deadline savvy — File your tax return and make tax payments on time to avoid penalties and interest. Payments that qualify for tax credits and deductions should be made by Dec. 31.

Deduct to save — Take full advantage of all tax deductions including the most important — your Registered Retirement Savings Plan (RRSP) deduction. Be sure to fill up all your RRSP contribution room.

Give yourself all the credit — Make full use of tax credits to reduce your tax bill by:

• Pooling medical expenses on the tax return of the lower earning spouse.

• Pooling charitable donations or carrying them forward for up to five years to surpass the $200 threshold that increases your credit.

• Using the spousal credit for the higher-earning spouse.

• Transferring the age, disability, tuition and/or education credits to a spouse or supporting relative when not used by a dependent.

• Don’t forget the first time homebuyer, home renovations and moving expenses credits.

Split to save — Income-split by sharing pension income with a spouse, through a spousal RRSP or by paying a salary to (eligible) family members.

Be RRSP savvy — If you’re turning 71 this year, you must wind up your RRSP and need to decide whether to take the cash (poor choice) or transfer the funds to investments held within a Registered Retirement Income Fund (RRIF) or annuity (much better choices). If you have earned income, you can continue making contributions to a spousal plan until your spouse reaches age 71.

Save tax-free — Make up to a $5,000 contribution to a Tax-Free Savings Account (TFSA). The contribution isn’t tax deductible but money and interest inside your TFSA is tax-free and so are withdrawals that you can make at any time for any purpose. Amounts withdrawn are added to your TFSA contribution room for the following year.

Make down investments pay off — Plan to sell money-losing investments by the Dec. 31 settlement date, which creates capital losses, which can then offset capital gains.

Buy now to save — If you’re self-employed and claiming the capital cost allowance (CCA) on depreciable assets, buy them before year-end to speed up tax write-offs.

Move to save — If you’re moving to a province with a lower tax rate, do it before Dec. 31 and you’ll pay the lower rate for the full year. If you’re moving to a province with a higher tax rate, try to delay until 2010.

What’s best tax-saving tip of all? Talk to your advisor before year-end to be certain you make the most of the other tax-reduction strategies available to you.

Source: www.cren.ca

OVERSIZED PATIO!! OVER 600 SQ FT OF OUTDOOR LIVING SPACE!!

C3404100  *  $330,000  *  1 Bedroom   *  1 1/2 Bath  *  857 Sq Ft

Move to one of the best locations in Calgary just 2 blocks from the heart of 17th Avenue.  This unit features a floor plan that is sure to impress with plenty of storage, function and living space.  One of the most spectacular highlights of this unit is its OVERSIZED PATIO WITH OVER 600 square feet of outdoor living space, great for summer gatherings.  Inside you will find a great space for both living and entertaining with an open concept living room and kitchen with convenient half bathroom. Also you will find a separate den, storage room and dual closets.  In the master bedroom there are his and her closets as well as a 4 piece ensuite and in suite laundry.  This condo is rounded off with a titled indoor heated parking stall a must have for Calgary’s temperate climate.  Also please note that while this unit is located on the main floor it is NOT AT GROUND LEVEL. 

This unit must be seen to be appreciated, book your appointment today.

OPEN CONCEPT TOWNHOUSE!!

C3403326  *  $429,900  * 1 Bedroom Up, 2 Total * 2 Bath * 1,086 SqFt

Welcome to Marda 17 one of South Calgary’s hottest new condo’s just finished this year! PRICE INCLUDES GST!  This modern open concept townhouse includes all the high end finishing’s demanded by today’s savvy buyer.  Granite is in kitchen and bathrooms, hardwood in kitchen and living area, ceramic tile in bathrooms and high end carpeting in bedrooms.  As an end unit it is one of the best units in the complex with its own large and private patio, a street entrance, garage entrance and access from the patio.  Large windows allow plenty of natural light combined with modern paint makes this home feel very contemporary.  The kitchen is enhanced with top of the line stainless steel appliances, glass mosaic tile and pendulum lighting and looks out to the living room below.  Both bedrooms are very generous in size and are accompanied by 2 bathrooms.  The heating of this unit is top of the line in-floor radiant heat and is extremely efficient.

Book your appointment today to view this great property!

I came across this article elaborating on nation wide statistics on the market conditions from this year’s third quarter. Hope you find them as interesting as I did.

Source: CBC

The Canadian Real Estate Association says 135,182 homes were sold countrywide in the third quarter, up 18 per cent from a year earlier and the most ever for the period.

It’s the biggest year-over-year increase since early 2002, the group said Thursday.
People walk past new homes for sale in Oakville, Ont., in April. Nationally, housing sales increased by 18 per cent during the third quarter, the CREA says. People walk past new homes for sale in Oakville, Ont., in April. Nationally, housing sales increased by 18 per cent during the third quarter, the CREA says. (Nathan Denette/Canadian Press)

Building on two previous quarterly increases, seasonally adjusted home sales on the agency’s Multiple Listing Service now stands 48 per cent above the low reached in the fourth quarter last year.

Quarterly sales increases in Vancouver (34 per cent), Toronto (11 per cent), and Calgary (19 per cent) were the largest contributors to the national increase.

The rise in sales activity is combining with fewer new listings to draw down inventories and drive up prices, compared with year-ago levels, the association said.

There were 208,215 homes listed for sale on MLS in Canada at the end of September 2009, down 16 per cent from a year earlier.

That’s the fifth consecutive year-over-year decline in active listings and the largest decline in more than six years, the association said.

On the price side, at $327,736, the average price of a home in Canada rose 11 per cent in the third quarter, compared with a year earlier.

The national average price continues to be skewed upward by a sharp rebound in activity at the higher end of the price spectrum in some of Canada’s priciest markets, the CREA said.

The national average price surpassed all previous monthly levels in September 2009, rising 13.6 per cent year-over-year to $331,602. July and August also posted new average price records.

Several provinces set price records for September. Ontario posted the highest average price on record in the province, at $326,698 — 10.7 per cent higher than the level during the same quarter last year.

Nationally, the number of months of inventory was 4.9 months in September, down slightly from August and well down from the recessionary peak of 12.8 months in January.

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Canada’s Next Generation of Recreational Property Owners

Canadians love their cottages and chalets. According to a recent report by Scotiabank, the rate of second homeownership rose from seven per cent of Canadian households in 1999 to nine per cent in 2005. Up until the end of the housing boom last year the recreational property market was very active across the country. While sales and prices dropped with the end of the boom, recent reports suggest that interest in recreational markets is already picking up. Lower prices combined with low interest rates have made properties more affordable, and in areas such as the Kawarthas in Ontario, sales are once again brisk.

The Scotiabank report raises an interesting question about the future of the recreational property market. It notes that the median age of Canadians who own second homes is 50, and that only one-quarter of vacation homes are owned by families with children – the rest are owned by empty nesters, singles and childless couples.

“Demand for second homes/vacation homes could slow over the coming decade as the large baby boom generation moves past its peak cottage buying years, and wealth gains fail to replicate the outsized increases of the past decade,” says report author Adrienne Warren.

Re/Max says the demographic shift from baby boomers to Gen X purchasers has already begun. It says demand for recreational property from those born between 1965 and 1980 has increased from 40 per cent in 2008 to 74 per cent this year.

“After being priced out of most markets for the better part of the last decade, Gen X purchasers now have the financial wherewithal to buy recreational property at virtually every price point,” says Michael Polzler, executive vice-president of Re/Max Ontario-Atlantic Canada. “Gen X is ideally positioned to pick up the slack in recreational property markets caused by softer demand from baby boomers and retirees. They represent the next wave of recreational property owners in Canada and they know it.”

A Re/Max report says that although the supply of recreational properties is adequate in most areas, “heated activity in the lower-end has resulted in tight inventory levels for entry level products in 18 markets” in Ontario, North Saskatchewan and Salt Spring Island in B.C.

A Royal LePage survey found that 64 per cent of Canadians view cottage ownership as a sound investment. “To save money, a majority told us that if they owned a cottage, they would be happy to call it their new vacation destination,” says Phil Soper, president of Royal LePage Real Estate Services. “It appears that many view owning a recreational property as the ultimate, no-hassle ’staycation’ and one that presents an opportunity to invest while they enjoy.”

The survey also found that 55 per cent of respondents say they would be willing to make financial or lifestyle compromises in order to get their vacation home. This includes purchasing a property with family or friends, renting out their cottage to help pay for expenses, buying a ‘fixer-upper’ and even moving to a smaller principal home in the city.

The Scotiabank report says that the majority of first and second homeowners in Canada are in the 45 to 64 age group. They represent 45 per cent of all homeowners, but 70 per cent of the increase in the number of recent homeowners.

Warren acknowledges that “anecdotal reports suggest that ‘baby bust’ households … are already stepping up as the next wave of vacation home buyers. However, this cohort is far smaller than its baby boom predecessor.”

She says while this could produce an easing in the steady upward pressure on cottage prices, “the available supply of listings is likely to remain fairly tight.” That’s because family properties are often passed down through generations of cottage owners, and land for development is hard to come by.

Re/Max says that while “low-ball” offers are increasing, they are not meeting with much success because sellers are in no hurry to make a deal. The sales-to-list ratio is still relatively high in most markets, says the company.

Some other recreational property trends:

Some American cottage owners in Canada are taking advantage of the stronger dollar to cash out of the market, says Re/Max. Older Canadians continue to look for secondary homes in the U.S. in Florida, Nevada, Arizona and California. But Scotiabank says that about 75 per cent of second homes owned by Canadians are located in Canada.

Re/Max says American purchasers have “largely fallen off the radar” except in a few locations.

When searching for a property, 68 per cent of Canadians want a lakefront location, says Royal LePage. The company says the three most important features of a recreational property are peace and quiet; access to electricity, sewers and plumbing; and four-season use.

“Notwithstanding the potential for a cyclical slowdown in home sales and price appreciation over the next few years, the longer-term trend toward real estate investing will likely remain an important component of household wealth accumulation and portfolio diversification,” says Warren.