Canadian Mortgage Broker News – Flaherty not worried about slowing house market

Flaherty not worried about slowing house market

| Friday, 17 September 2010

Federal finance minister Jim Flaherty said Thursday he is not worried about the slowing house sales in some Canadian markets and isn’t planning to reverse mortgage restrictions made earlier this year.

Housing sales dropped significantly last month in Calgary, Victoria and Greater Vancouver compared to last year.

“I, for one, am not particularly concerned about the softening we’ve seen in some markets in Canada in residential real estate,” said Flaherty, who was in Calgary delivering a speech on Ottawa’s proposal for a national securities regulator. He noted that Ottawa has twice limited mortgage rules. “This is entirely intentional, to tighten the market, so that we avoid the excesses that we’ve seen in other countries. If we have to do more, we’ll do more.”

Though housing foreclosures in U.S. are expected to reach more than 1 million this year, Canada’s banking system has mostly withstood the recessionary effects of its neighbour to the south.




Incredible Space Maximization in a Small Studio Apartment

Incredible Space Maximization in a Small Studio Apartment

You’ve seen a lot of ingenious ideas on how to decorate small apartments on Freshome. Here is another tiny crib that manages to maximize space and create a cozy living environment as well. The East Village Studio comes from JPDA Architects, stretches over an area of 46 square meters (500 square feet) and was built as a little “nest” for the owners who also work here. It has all the utilities a common looking contemporary home has and dare we say a lot more. This original crib has storage space and shelves in the most unusual and unexpected places, reducing clutter and contributing to a clean and fresh interior design. The wood gives this home its warmth which is “intensified” by the friendly vegetation pots spread around the open studio.

Incredible Space Maximization in a Small Studio Apartment

studio apartment small


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HST is good public policy and a good tax – The Globe and Mail

Comment: Tony Wilson

HST is good public policy and a good tax

Peter Leitch, president of North Shore Studios and Mammoth Studios and chair of the Motion Picture Production Industry Association of British Columbia, looks on during a pro-HST news conference at North Shore Studios in North Vancouver, B.C., on Thursday August 5, 2010.

Peter Leitch, president of North Shore Studios and Mammoth Studios and chair of the Motion Picture Production Industry Association of British Columbia, looks on during a pro-HST news conference at North Shore Studios in North Vancouver, B.C., on Thursday August 5, 2010.

Your Business columnist Tony Wilson says most lawyers and economists agree with his position


Tony Wilson

Vancouver Special to Globe and Mail Update

I’m going to say it right upfront, so you know exactly where I stand: the HST is good public policy and a good tax.

Most tax lawyers and economists agree with me. Here’s why:

First of all, you get rid of an entire provincial government department charged with collecting a tax and passing the expense on to the federal government. Good riddance.

Second, it’s good for business. Business will get input tax credits on the full 12 per cent in BC, and 13 per cent in Ontario, and it won’t have to deal with the archaic and byzantine rules that applied to the old PST regimes. With some exceptions, the GST rules and the HST rules will be the same. And the streamlining will be more efficient for business.

The proof is in the pudding in B.C. My law office and other law firms in Vancouver are already acting for U.S. businesses that could have otherwise located in no-sales-tax Alberta, but they are coming to B.C. It’s not just because of the lifestyle, the ocean and the mountains, it’s because of the input tax credits and no longer having to swallow the 7 per cent PST. (Note to anti-HST leaders in B.C.: these are businesses that are hiring British Columbians).

Third, accountants, consultants and other professionals will now have to charge the tax lawyers have had to charge in B.C. for almost 20 years, levelling the playing field in this province.

Fourth, the PST, whether in B.C. or elsewhere, is discriminatory. Why didn’t the PST apply to services all these years? Why just “goods?” If you paid 7 per cent or 8 per cent PST on the televisions, cars and barbeques you bought before July 1, why do you have a problem paying the same level of tax to your barber or your realtor? Are barbers and realtors somehow more important than the sellers of barbeques and lawnmowers that they shouldn’t have the same level of tax applied to them?

If I was a supplier of goods that the PST applied to all these years, I’d wonder why the service sector was getting a free ride for so long.

Fifth, how does a province like B.C. compete with Ontario if Ontario is adopting the HST? Ontario businesses will have a competitive edge that we in B.C. would lose if we didn’t come aboard as well, particularly in sectors such as high tech and film and TV. Seven per cent is a big hit to swallow for great scenery and skiing.

Sixth, it’s hard to turn down almost $2 billion from the federal government to make the transition.

And finally, they aren’t touching my income. Just my spending. So I can save or invest more.

As for former B.C. Premier Bill Vander Zalm and other anti-HST proponents who say the tax is a windfall to business (Mr. Vander Zalm was once a “free enterprise/pro business” premier), I’d remind them not to forget that virtually all taxes collected by government emanate from the private sector. By paying corporate taxes and by paying employees who pay their taxes, “business” pays for the things government provides, such as education and health care.

Besides, the experience of the other HST provinces suggests prices will eventually come down. If consumers think their realtors and barbers will benefit too much by charging the HST (thereby getting a larger input tax credit back), then they’ll strike a better deal with their barbers and realtors, won’t they? They’ll shop around. And prices will come down.

Everyone should appreciate that Mr. Vander Zalm never lowered the PST when he was premier of British Columbia, even though he had the chance to do it. He also introduced the hated Property Transfer Tax that applies to the sale of all real estate in B.C. So playing the “Sarah Palin Tea Party populist” is rather disingenuous.

Despite the arguments of business leaders, tax lawyers and economists who believe the tax will benefit B.C. by attracting business that would otherwise go to Alberta or Ontario, the anti-HST proponents appear to have misrepresented the tax in the media, and on websites dedicated to overturning it. Vancouver tax lawyer David Robertson has formally complained to the Chief Electoral Officer that the anti-HST proponents falsified 21 out of 70 “facts” about the tax on one of their websites in order to gain signatures for their anti-HST petition in B.C.

When he tried to correct some of the incorrect information posted on a Facebook group dedicated to overturning the tax, he was dumped from the group for “offensiveness” and all of his previous posts were deleted. Unfortunately, the tax hasn’t been sold very well by the provincial Liberals, allowing the anti-HST proponents to gain the upper hand in the debate, one that seems non-existent in Ontario.

What’s interesting about debates on taxes is that many of the people who complain about them are the same ones who want 24-hour turnaround time for MRI’s and hip replacements, well-paid teachers and nurses, hospitals without waiting lists, more legal aid, homes for the homeless, no school closures, their roads paved, and cheaper wine.

I hate to break it to the naysayers, but taxes are the price we pay for civilization, something people in California (which can’t raise taxes constitutionally) are discovering amid the state’s crumbling infrastructure, collapsing public school system and regular fiscal crises. As for Greece, from where I’ve just returned, a Greek diplomat in the adjacent airplane seat told me hardly anyone paid income tax there yet everyone expected to comfortably retire by 55, which infuriated expat Greeks in Canada and, of course, the Germans who bailed Greece out of its endemic financial profligacy.

Unfortunately, taxes are like a prostate exam or that colonoscopy you’re dreading: an awful experience but one that could very well save your life. The question is how to do it without killing the goose that lays the golden egg – the goose being the private sector that actually creates the tax base that pays for the roads, schools … and colonoscopies.

I guess if taxes are like a colonoscopy, make it as painless as possible, but make it worth my while. So if I have to be taxed to pay for my teachers, nurses, or my health care, tax me on something I can control, like my spending, rather than what I earn, which is a disincentive to me wanting to work harder to earn more money. Why work harder to make more money if the government will just tax it all away? But spending? That’s a different kettle of fish. So that’s why I like the HST.

There’s an old book that should be making the rounds more these days, at least here in B.C. Its called Extraordinary Popular Delusions and the Madness of Crowds by Charles Mackay, which is ostensibly about England’s South Sea Bubble but it’s just as much about how people are inclined to believe the “wondrously false” more than the “wondrously true.”

“Men” he said “think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, one by one.”

The HST debate, at least in B.C., is clearly an example of the madness of crowds, fuelled by charlatans trying to hoodwink the public. I’d say we live in a time and a place when, in Yeats’ famous words, “the best lack all conviction while the worst are full of passionate intensity.”

Special to the Globe and Mail

Vancouver franchise lawyer Tony Wilson is the author of Buying A Franchise In Canada – Understanding and Negotiating Your Franchise Agreement and he is ranked as a leading Canadian franchise lawyer by LEXPERT. He is head of the Franchise Law Group at Boughton Law Corp. in Vancouver and acts for both franchisors and franchisees across Canada, many of whom are in the food services and hospitality industry. He is a registered Trademark Agent, an Adjunct Professor at Simon Fraser University and he also writes for Bartalk and Canadian Lawyer magazines.



CTV Toronto – Think tanks says rate hikes will soften housing market – CTV News

Think tanks says rate hikes will soften housing market

Updated: Wed Sep. 08 2010 4:37:56 PM

The Canadian Press

TORONTO — Another hike in borrowing costs Wednesday is likely to further soften Canada’s housing market, but a major think tank says the slowdown in recent months won’t produce a “freefall” in demand.

The Bank of Canada raised interest rates another quarter point — the third such increase in a month — and the banks bumped up their prime rates by the same amount, pushing up the costs of mortgages linked to prime.

But the Conference Board of Canada says it sees a pause in the real estate market — not a U.S.-style collapse — after a surge in prices for the last several years in most Canadian cities.

“The housing market has lost its lustre,” Mario Lefebvre, director of the board’s Centre for Municipal Studies, said in a report Wednesday.

“No doubt about it. However, this will not lead to a freefall for Canada’s housing market. This country will not experience home price declines to the tune of what we have witnessed in the United States over the past few years.”

Canadian housing price increases in recent years were fuelled by low borrowing costs and strong consumer confidence linked to Canada’s solid recovery from the 2008-2009 recession.

In the United States, the housing bubble burst mainly because of risky lending practices by major banks, which saddled them with hundreds of billions of dollars in bad loans that eventually led to widespread foreclosures and the collapse of many regional banks and some Wall Street financial companies.

The troubles in the U.S. financial industry sparked the recession and reverberated across Europe and other parts of the world.

In its report, the Conference Board predicted weaker new home and resale housing sales in Canada over the next several months because of slower economic growth, the impact of new harmonized sales taxes in Ontario and B.C. on July 1 and eroding consumer confidence.

“But we’re not the U.S,” asserted Lefebvre. “The house price bubble in the United States came about due to elements that have less to do with economic fundamentals than with U.S.-specific laws, like mortgage deductibility for tax purposes and the ring-fencing of mortgage debt, such that the lender can’t pursue the other assets of a mortgagee.

“If anything, Canada will see a pause in home price growth with possible marginal declines in a few markets, but nothing near what the United States has been through.”

In recent weeks, economists have debated how far the Canadian housing market will fall — with some predicting a sharp decline and others expecting only moderate price drops.


Housing prices and starts decline – The Globe and Mail – #Toronto #realestate

Housing prices and starts decline

Todd Korol/Reuters

New housing price index falls for the first time in 13 months

Toronto The Canadian Press

The price of a new home in Canada edged down in July for the first time in more than a year and fewer were built in August, evidence that a real estate slowdown seen this summer in the resale market is beginning to bleed into the new home sector.

Statistics Canada reported Thursday that its new housing price index fell for the first time in 13 months, declining 0.1 per cent in July from its level in June. That reversed what was seen between May and June, when new house prices rose 0.1 per cent.

Reinforcing that trend, the annualized rate of housing starts dropped three per cent in August compared to July, according to the Canada Mortgage and Housing Corp., to 183,300 from 188,900. Both single and multiple-dwelling starts dropped during the month.

And Canadians should expect further signs of cooling across Canada’s housing market, said Bank of Montreal economist Benjamin Reitzes.

“That would be the slowest pace of homebuilding so far this year, though in line with long-run household formation,” Reitzes wrote.

“A lack of pent-up demand should see the high-priced housing market cool further this winter, though we don’t expect it to freeze.”

StatsCan blamed the price declines partly on the introduction of the Harmonized Sales Tax in July in the hot housing markets of British Columbia and Ontario, adding tax to real estate services that were previously excluded from provincial levies.

The agency noted that July new home prices were still 2.9 per cent higher than they were in July 2009. But that was lower than the 3.3 per cent price increase seen in June compared to a year earlier, suggesting that the pace of increases is slowing even though prices could remain relatively high for some time.

Resale home activity fell in July – down 6.8 per cent from June and a whopping 30 per cent from a year earlier, according to the most recent figures from the Canadian Real Estate Association.

That there is a decline in new housing starts, which usually lag a cooling trend by about six months, indicates that builders are slowing down construction activity as they see demand falling, to avoid a creating a glut of unsold houses on the market.

Home sales began to drop off this spring, normally one of the busiest times for activity in the market, following months of unsustainable robust activity that led Canada’s economy out of recession.

As consumers began to feel more confident about spending, many rushed into the market during the last quarter of 2009 and the first quarter of the year to beat mortgage rate hikes, the HST and mortgage qualification changes in April.

That created a market that strongly favoured sellers who could raise the price of their homes far above asking price and buyers were willing to engage in bidding wars and pay exorbitant prices.

Sky high house prices have persisted for months, sparking some fears that Canada’s housing market could enter a dangerous bubble that could burst at any time and create a crisis similar to that the U.S. is facing.

However, the market has now returned to one that is balanced between buyers and sellers.

Economists say it will remain that way, with some slight price declines– and avoid any sharp market correction in which homeowners see the price of their home plunge.



CBC News – Montreal – Bank of Canada rate hike seen before pause | #Toronto #finance #economy

Bank of Canada rate hike seen before pause

Last Updated: Tuesday, September 7, 2010 | 7:52 PM ET  

The Bank of Canada should boost interest rates one more time on Wednesday and then could leave rates alone for as long as a year, according to many economists.

That is because Canada’s domestic financial strength is getting offset by a quickly flagging U.S. economy, reducing the necessity of raising borrowing costs on this side of the border.

“Even if the BOC ultimately pulls the trigger on Wednesday, it is likely to be the last rate hike for a while,” said Derek Burleton, deputy chief economist at TD Bank Economics.

Rising rates

The Bank of Canada is widely expected to increase its well-followed target rate on Sept. 8 — the next regularly scheduled meeting of the bank’s governors — to one per cent, up from the current 0.75 per cent.

Canadian interest rates are set to rise to one per cent on Wednesday 

Canadian interest rates are set to rise to one per cent on Wednesday Bank governor Mark Carney has long signalled the need to hike national borrowing costs in order to rein in economic activity and reduce inflationary pressures.

But now, economists believe the central bank will hold rates steady at one per cent after Wednesday’s boost.

TD is forecasting the bank’s rate at one per cent until at least the second quarter of 2011.

The Bank of Montreal figures Canada’s one per cent interest to last even longer, until the July-to-September period in 2011.

American stumble

In recent months, the U.S. economy appears to have been lurching toward a double-dip recession in the eyes of many analysts.

And such a scenario would spell trouble for Canada’s largest trading partner.

In the U.S., slowing gross domestic product growth, stubbornly high unemployment and a sagging real estate sector have all combined to act as a millstone on recovery.

U.S. economic activity has slowed in recent quarters, hurting Canadian export potential.U.S. economic activity has slowed in recent quarters, hurting Canadian export potential. (Rainier Ehrhardt/Associated Press)

RBC Economics has tagged U.S. consumer spending to decline over 2009 by 1.2 per cent while the forecaster expects the unemployment rate to decline by only half-a-percentage point in the fourth quarter of 2010 compared to the same period one year earlier.

“The U.S. economy lost momentum during the summer months, causing the Fed to contemplate the prospects for further easing,” said Michael Gregory, senior economist at BMO Economics.

More pump priming

Of course, with an interest rate basically at zero, the U.S. Federal Reserve has been eyeballing more exotic instruments, such as buying back more toxic debt assets from chartered banks, to help the overall economy.

In addition, U.S. President Barack Obama just announced a $50 billion US stimulus spending package in a bid to generate more private sector economic activity, heading into the Christmas quarter.

Canadian hawks

While many Canadian analysts agree with the “one hike, then stop” theory of the Bank of Canada, some believe the central bank should increase rates more aggressively.

Canada and Australia are the only major industrialized countries to increase interest rates in 2010.

Still, the C.D. Howe Institute’s monetary policy committee has called upon Carney to hike rates faster and higher than Bay Street might want.

“Members who favoured more rapid increases in the overnight rate and higher targets in 12 months’ time tended to emphasize Canada’s position among countries less damaged by the crisis … where returning policy rates to levels consistent with longer-term stability in inflation is more appropriate,” said the Toronto-based research institute in its September missive on bank policy.

The committee said the Bank should boost interest rates to 1.5 per cent by March 2011 and 2.25 per cent by next September.

Interestingly, the most hawkish of the C.D. Howe’s economists were all academics who argued for three per cent interest rates in 2011.



CTV News | Sellers’ market over for housing | #Toronto #realestate

Sellers’ market over for housing

Steve Ladurantaye

Anyone hoping that the real estate market turned around for the better in August probably won’t want to hear the latest news from Vancouver and Toronto. The real estate boards in each city are among the first to release their monthly sales data, and tend to foreshadow the broader national data that will be released on Sept. 15 by the Canadian Real Estate Association. Here’s what they’re seeing:


The two cities released their August data late last week, and real estate boards in both cities have conceded that the heady days of the seller’s market are over. In Vancouver, sales were down 36 per cent from August, 2009. In Toronto, sales were 22 per cent lower.

“The prospect of interest rate hikes and new mortgage lending rules prompted some households to purchase a home sooner than they otherwise would have this year. The result has been a larger than normal dip in sales over the summer months,” Toronto Real Estate Board president Bill Johnston said.


After peaking earlier this year, average sale prices in both cities have fallen back as well. In Vancouver, prices are down 2.8 per cent from April’s peak and ended August at $576,803. In Toronto, the average price in August was $411,012 – 8.6 per cent lower than May’s high of $446,593.

“We’re seeing moderate demand, low interest rates and a healthy but slowing stream of supply in our marketplace, all variables that favour those looking to purchase a home,” said Jake Moldowan, president of the Vancouver board.

“The last few months have also shown some stability when it comes to price fluctuations in the region, which is a welcome trend after reaching record highs in April.”


In both cities, prices are still higher than they were last year. In Vancouver, prices are 6 per cent higher than August, 2009. In Toronto, prices are up 5.6 per cent.

“Market conditions have remained tight enough to support higher home prices in comparison to last year. Market conditions and the affordability picture would have to change dramatically before a sustained drop in the average selling price would take place,” said Jason Mercer, the Toronto Real Estate Board’s senior manager of market analysis.