While Canada worries about condos, people worry about taxes …
Real Estate Cheat Sheet: Bank of Canada worries about condos; homebuyers worry about taxes
The top stories in Toronto real estate this week: the Bank of Canada takes aim at the city’s condo market (again), and the building industry tallies up taxes and government charges on new houses.
• Toronto’s condo sector could imperil Canada’s economy
One stat worrying the central bank: 18,000 of the more than 85,000 condo units currently being built or in the pre-construction phase remain unsold. Meanwhile, an estimated 60 per cent of the condos under construction are owned by investors. If they get spooked or feel pinched by rising interest rates, they could try to dump their units, sending prices tumbling, along with net household worth, consumer confidence and consumer spending.
• Condo construction surged in May, but it won’t last
Despite fears surrounding the condo boom, construction began last month on more new units than expected. Developers say the buildings starting construction now were marketed and pre-sold when the market was hotter a few years ago. A slowdown is almost certainly ahead.
• Taxes and fees account for nearly one-fifth of the cost of a new house in Toronto
Thanks in large part to swelling development charges, government fees now account for $101,300 of the cost of a new detached house valued at $540,000 (and $67,300 of a new condo valued at $406,900). A study commissioned by the building industry also gives stats for Markham, which had the highest fees of all municipalities, Oakville, Brampton, Ajax, and Bradford West Gwillimbury.
ReMax says real estate speculators has maxed out on residential properties so much so that they are now eyeing grandpa’s hideout – Cottage Homes.
Rising confidence levels, lower values, and favourable supply spark buyer enthusiasm in Canadian recreational property markets, says RE/MAX
77 per cent of recreational markets reported stagnant starting prices or a year-over-year decline
Greater stability is returning to recreational markets as demand gains traction in major Canadian centres, according to a report released today by RE/MAX.
The RE/MAX Recreational Property Report 2013 found that many markets have experienced a rebound in activity— set in motion by softer values and better selection—in recent months. Starting prices are down or unchanged in 77 per cent (24/31) of markets examined in 2013, prompting renewed interest. As a result, recreational sales are projected to match and/or exceed 2012 levels by year-end in almost 70 per cent (20/30) of centres.
The shift can be attributed to six major factors:
- Confidence is growing in overall economic performance.
- Selection of recreational product is at its best level in recent years.
- Prices have softened in many Canadian markets.
- Paper wealth accumulated in the stock market in recent years is making its way into recreational property markets.
- Purchasers are bypassing tighter financing criteria through HELOCs (Home Equity Line of Credit) on their principle residence.
- Increased foreign and out-of-province investment.
“Despite the solid pace of residential real estate activity following the 2008/2009 recession, recreational property markets failed to follow suit,” says Gurinder Sandhu, Executive Vice President, Regional Director, RE/MAX Ontario-Atlantic Canada. “It’s been a soft five years for the most part, with improvement slow, but consistent. Given the steady momentum of today’s market, there are indications that 2013 could emerge as the turning point. Excellent value exists in cottage/resort communities from coast to coast, but the window of greatest opportunity is likely drawing to a close.”
Read more here
To view the full RE/MAX Recreational Property Report 2013, click here: http://rem.ax/12edQAs
To view the RE/MAX Recreational Property Report 2013 video, click here: http://rem.ax/12lxfey
But according to The Canadian Press, cottage properties are heading south …
BC Real Estate: Recreational Property Sales To Rise, Says Report
Recreational home sales are expected to increase this year on stagnant or lower prices and good selection, according to a report by real estate firm RE/MAX.
The company said Tuesday that starting prices are down or unchanged in 77 per cent of the 31 Canadian markets surveyed outside Quebec.
It expects sales will at least match last year’s level in almost 70 per cent of the centres.
The RE/MAX recreational property report said “softer values” and better selection in recent months is prompting a rebound in sales activity in many markets.
Other factors include growing confidence in the overall economy and increased foreign and out-of-province investment.
Recreational property sales in seven of 10 markets in Western Canada are on par or ahead of last year’s levels.
The report said the $250,000 to $500,000 segment is the strongest.
Meanwhile, Loonie tanks …
David Rosenberg gets real on the Canadian dollar
David Rosenberg is again coming to the defence of Canada — more specifically, the loonie.
The currency declined to nearly US95¢ this week, after trading at par with the U.S. dollar in February, as global investors shift back into risk-off mode and sell commodities on concerns about economic growth in China.
While the chief economist and strategist at Gluskin Sheff + Associates Inc. acknowledged the loonie’s fall is significant, he emphasized it needs to be looked at in the context of wide fluctuations across asset classes and regions of late.
For example, other commodity-sensitive currencies such as the New Zealand dollar and Norwegian krona have both dipped more than 10%, while the Brazilian real, Australian dollar and South African rand have fared even worse.
“It is always so tempting to throw in the towel after a Canadian dollar correction like this. And it seems to happen every year,” Mr. Rosenberg said in his daily Breakfast with Dave report.
However, he noted that while sentiment appears to have changed, the domestic fundamentals have not.
“The Canadian housing market is not imploding,” the strategist said, pointing out that recent data has been encouraging, particularly in terms of real estate and employment.
He also highlighted that Canadian banks boast ROEs of 17%, are compliant with Basel III rules, and trade near a 10x multiple.
“The Bank of Canada governorship has changed but policy has not. And there is already a lot of slow growth from China being priced in,” Mr. Rosenberg added.
Finally, he noted Canada has just 12% exposure in its balance-of-payments to metals, so the loonie is clearly different from the Aussie and Kiwi dollars in that respect.
The Canadian dollar is much more closely tied to energy, which the economist said is more stable and accounts for 25% of the country’s exports.
Another 22% comes from wood products and autos combined, which are both linked to two parts of the U.S. economy that are “doing just fine” — housing and motor vehicles.