Owe Canada. It’s not our anthem any more.
Crazy borrowings on lines of credit? History. The gotta-buy-now housing market? Toast. Credit card debt? Slowing down, too.
Many months ago, it was fashionable to question how Canada’s profligate borrowers would hold up when interest rates began to rise. Today, after the Bank of Canada raised its trendsetting overnight rate for the second time in the past two months, we’re starting to see the answer.
In virtually all forms of borrowing, the rate of increase has slowed drastically. “I’ve been saying for a while that this is the most logical display of behaviour on the part of the consumer that I’ve seen in a long time,” said Benjamin Tal, senior economist at CIBC World Markets and an expert on household finances.
Mr. Tal’s take is that consumers ramped up their borrowing to take advantage of the historically low rates that were used by central banks around the world to fight the recession and global financial crisis. The likelihood of a rate rebound was widely discussed, and people took notice. When he looked at borrowing data for the first quarter of 2010, the rate of growth was down across the board.
“What we need to see now is a continuation of the softening in credit in order for people not to get into trouble,” Mr. Tal said.
This appears to be happening. The latest mortgage data has prompted him to forecast growth in outstanding mortgage debt of 3 to 4 per cent in 2011, down from 10 to 12 per cent in the first half of this year. He said growth in line-of-credit balances has fallen to about 7 per cent on an annual basis from 30 per cent two years ago. As for credit cards, growth in balances has fallen to 3 to 4 per cent from 12 to 14 per cent two years ago.
“All credit vehicles are slowing significantly,” Mr. Tal said.
This responsible attitude toward debt came through as well in the results of a survey by Genworth Financial Canada, which competes with Canada Mortgage and Housing Corp. to provide mortgage default insurance. It indicates that one-quarter of homeowners with mortgages have either made a lump-sum payment against principal or accelerated their payments in the past year.
There’s no better way to prepare yourself for the impact of rising interest rates on your mortgage than to make a lump-sum payment or speed up your pace of repayment.
In a way, the Bank of Canada’s latest move to raise rates is a gift to people with debts. They’ll have to pay a bit more in interest on their lines of credit, variable-rate mortgages and floating rate loans, but the increase is mild and the pace of further increases will be muted. It could be a lot worse.
In fact, lots of market watchers thought it would be worse last year when they looked ahead to 2010. They saw all the government stimulus pumped into the economy during the recession producing a significant uptick in inflation, which in turn would send interest rates marching higher.
Now, there’s talk of deflation, or falling prices. The Bank of Canada’s not outwardly concerned about this, but it did throw a mention into its latest statement on rates about how it expects economic growth to slow next year and in 2012 from the 3.5-per-cent growth of 2010. Back in April, the bank expected 3.7-per-cent growth this year.
Borrowers would undoubtedly argue in favour of keeping rates steady at current levels, but that promotes an unhelpful complacency. Rates are still close to the unsustainable emergency lows they hit in the financial crisis and recession. By increasing them by a quarter-point in June and then another quarter-point on Tuesday, the Bank has signalled to people that it’s time to take control of their debts.
Lots of people have obviously got the message already, and good for them. But let’s remember that less borrowing means less of the consumer spending that’s essential to economic growth.
Mr. Tal said lower levels of consumer spending are one of the reasons why his firm sees growth slowing, just as the Bank of Canada does. But he still thinks both the economy and borrowers are benefiting from the central bank’s early action on rates.
“By October, I think we’ll have reached a point where interest rates have gone up enough to slow down economic momentum without the risk of punishing the consumer too much.”
That seems fair, given how much less Owe Canada’s being sung these days.
http://www.theglobeandmail.com/globe-investor/personal-finance/rob-carrick/canadians-back-away-from-borrowing/article1646613/
Wednesday, July 21, 2010
Friday, July 9, 2010
Canadian economy adds 93,200 jobs in June; loonie jumps after employment report
OTTAWA - Canada enjoyed another big month for employment in June, churning out a whopping 93,200 new jobs — almost all in Ontario and Quebec and all in the services sector.
The strong performance brings the jobless rate to 7.9 per cent, the first time it has been under eight per cent since the depths of the recession in January 2009.
The Canadian dollar rose sharply after the Statistics Canada report. A few minutes before the release, the loonie was trading overseas just below 96 cents US and jumped more than half a cent after the jobs report came out.
Canada's dollar was at 96.71 cents US shortly before the official open of trading Friday, up about a cent from the previous close of 95.79 cents
With the employment gains in June, the Canadian economy has recouped almost all the jobs that were lost during the economic contraction that began in the fall of 2008.
But Statistics Canada noted that the unemployment rate remains well elevated above the 6.2 per cent that existed in October 2008 because many more Canadians have since joined the labour force.
Still, the quickly improving labour market likely gives the Bank of Canada all the evidence it needs to raise its key interest rates by another quarter-point to 0.75 per cent on July 20 in order to keep inflation in line.
There were a number of surprises in the Statistics Canada report.
Economists had expected a modest pick-up in the range of 15,000 new jobs because several economic indicators, including retail sales, exports and building permits, have been weak since March.
Also, the 109,000 additional jobs created in April suggested a pay-back was in order.
The other surprise was that the jobs were all concentrated in Ontario and Quebec, despite the fact that manufacturing actually shed workers during the month.
Ontario gained 60,300 workers, slicing the province's unemployment rate 0.6 points to 8.3 per cent.
Meanwhile, Quebec gained 30,400 new jobs, bringing its unemployment rate to 7.8 per cent.
This was accomplished without any help from the manufacturing sector, a mainstay in both provinces, as factories actually shed 14,300 jobs overall in June.
All of the new jobs were in the services, including retail and wholesale trade, business building and other support services, health care, social assistance and other services, such as auto repair and personal care.
The agency said the new jobs were split between full-time and part-time, with more than half private sector.
There was also a big increase in student employment — 63,000 more last month than was the case in June last year.
However, there were setbacks. There were 10,200 fewer working in the goods producing industries last month, with losses in the factories sector leading the way.
Regionally, other provinces didn't fare a well as Canada's two most populous, with most recording slight gains and Newfoundland and New Brunswick outright job losses.
The strong performance brings the jobless rate to 7.9 per cent, the first time it has been under eight per cent since the depths of the recession in January 2009.
The Canadian dollar rose sharply after the Statistics Canada report. A few minutes before the release, the loonie was trading overseas just below 96 cents US and jumped more than half a cent after the jobs report came out.
Canada's dollar was at 96.71 cents US shortly before the official open of trading Friday, up about a cent from the previous close of 95.79 cents
With the employment gains in June, the Canadian economy has recouped almost all the jobs that were lost during the economic contraction that began in the fall of 2008.
But Statistics Canada noted that the unemployment rate remains well elevated above the 6.2 per cent that existed in October 2008 because many more Canadians have since joined the labour force.
Still, the quickly improving labour market likely gives the Bank of Canada all the evidence it needs to raise its key interest rates by another quarter-point to 0.75 per cent on July 20 in order to keep inflation in line.
There were a number of surprises in the Statistics Canada report.
Economists had expected a modest pick-up in the range of 15,000 new jobs because several economic indicators, including retail sales, exports and building permits, have been weak since March.
Also, the 109,000 additional jobs created in April suggested a pay-back was in order.
The other surprise was that the jobs were all concentrated in Ontario and Quebec, despite the fact that manufacturing actually shed workers during the month.
Ontario gained 60,300 workers, slicing the province's unemployment rate 0.6 points to 8.3 per cent.
Meanwhile, Quebec gained 30,400 new jobs, bringing its unemployment rate to 7.8 per cent.
This was accomplished without any help from the manufacturing sector, a mainstay in both provinces, as factories actually shed 14,300 jobs overall in June.
All of the new jobs were in the services, including retail and wholesale trade, business building and other support services, health care, social assistance and other services, such as auto repair and personal care.
The agency said the new jobs were split between full-time and part-time, with more than half private sector.
There was also a big increase in student employment — 63,000 more last month than was the case in June last year.
However, there were setbacks. There were 10,200 fewer working in the goods producing industries last month, with losses in the factories sector leading the way.
Regionally, other provinces didn't fare a well as Canada's two most populous, with most recording slight gains and Newfoundland and New Brunswick outright job losses.
Thursday, July 8, 2010
Real estate broker predicts lower home prices on the way
BY LUANN LASALLE
MONTREAL — Home buyers can expect more choice and lower prices in the second half of 2010, while sellers can expect fewer offers for their homes, says one of Canada’s leading real estate brokers.
“Accurate pricing is going to be really key,” said Phil Soper, president and chief executive of Royal LePage Real Estate Services.
In its latest housing survey, Royal LePage said Wednesday the real estate market will start to slow in the second half of 2010 with the number of sales expected to fall compared with the hot activity earlier in the year.
“I would say if you’re a seller, the first thing you should expect is fewer multiple offers on your home,” Soper said.
Sellers who try to squeeze extra money out of their homes will likely have their homes “languish” on the market, unless they’re exceptional properties, he said.
“I believe we are through the highly volatile spiking of prices and activity levels, both up and down,” Soper said.
“We’ll see a much a more stable, but frankly less exciting in a good way, real estate market in the next 18 months,” he said.
The Canadian housing market has been a strong pillar under the economic recovery in Canada, mainly because of low mortgage rates and positive consumer confidence. However, interest rate increases and stiffer bank lending rules have taken some of the steam out of the sector since the early part of the year.
Soper said a lot of buyers were frustrated by a tight supply and “over-exuberant competition,” particularly in the 2010 first quarter, but that’s easing with increased listings.
In the first six months of 2010, about half of real estate transactions involved first-time buyers, he said.
“It took a while for sellers to get comfortable that the recovery from the recession was real. We had an all-time record number of new homes come on the market in the first quarter of 2010. It started to impact prices in the second half (of 2010).”
Derek Burleton, vice-president and deputy chief economist at TD Bank Financial Group, said the decline in homes sales is expected to accelerate and selling prices will also go down.
“The market is frothy and it’s going to come back down to earth for the usual reasons,” he said.
In the survey, Royal LePage said some markets will see a decline in home prices and sales volumes toward the end of 2010 but that should be seen more as a reaction to the highs reached late last year rather than a major slowdown.
Prices for detached bungalows and two-storey houses were up about nine per cent in the April-June quarter, compared with the same time last year. Condominiums were up 7.3 per cent.
Royal LePage is forecasting that by the end of 2010, home prices will rise an average 6.8 per cent over last year, while the number of home sales will increase by just over one per cent from 2009.
The Canadian Press
MONTREAL — Home buyers can expect more choice and lower prices in the second half of 2010, while sellers can expect fewer offers for their homes, says one of Canada’s leading real estate brokers.
“Accurate pricing is going to be really key,” said Phil Soper, president and chief executive of Royal LePage Real Estate Services.
In its latest housing survey, Royal LePage said Wednesday the real estate market will start to slow in the second half of 2010 with the number of sales expected to fall compared with the hot activity earlier in the year.
“I would say if you’re a seller, the first thing you should expect is fewer multiple offers on your home,” Soper said.
Sellers who try to squeeze extra money out of their homes will likely have their homes “languish” on the market, unless they’re exceptional properties, he said.
“I believe we are through the highly volatile spiking of prices and activity levels, both up and down,” Soper said.
“We’ll see a much a more stable, but frankly less exciting in a good way, real estate market in the next 18 months,” he said.
The Canadian housing market has been a strong pillar under the economic recovery in Canada, mainly because of low mortgage rates and positive consumer confidence. However, interest rate increases and stiffer bank lending rules have taken some of the steam out of the sector since the early part of the year.
Soper said a lot of buyers were frustrated by a tight supply and “over-exuberant competition,” particularly in the 2010 first quarter, but that’s easing with increased listings.
In the first six months of 2010, about half of real estate transactions involved first-time buyers, he said.
“It took a while for sellers to get comfortable that the recovery from the recession was real. We had an all-time record number of new homes come on the market in the first quarter of 2010. It started to impact prices in the second half (of 2010).”
Derek Burleton, vice-president and deputy chief economist at TD Bank Financial Group, said the decline in homes sales is expected to accelerate and selling prices will also go down.
“The market is frothy and it’s going to come back down to earth for the usual reasons,” he said.
In the survey, Royal LePage said some markets will see a decline in home prices and sales volumes toward the end of 2010 but that should be seen more as a reaction to the highs reached late last year rather than a major slowdown.
Prices for detached bungalows and two-storey houses were up about nine per cent in the April-June quarter, compared with the same time last year. Condominiums were up 7.3 per cent.
Royal LePage is forecasting that by the end of 2010, home prices will rise an average 6.8 per cent over last year, while the number of home sales will increase by just over one per cent from 2009.
The Canadian Press
Tuesday, July 6, 2010
Home Sales Surpass Billion Dollar Mark in first half of 2010
By Taniab • July 6th, 2010
KITCHENER-WATERLOO, ON (July 6, 2010) – During the first half of the year, the number of residential properties sold through the Multiple Listing System (MLS®) of the Kitchener-Waterloo Real Estate Board (KWREB) increased 16 percent.
While the 3,633 homes sold during the first six months of the year are 96 units shy of 2007’s record breaking first half, the total value of those sales broke the one billion dollar mark for the first time to the end of June.
“The residential real estate market is alive and kicking in Waterloo Region,” says Ted Scharf, President of the KWREB. “Consumers continue to have a strong sense of confidence in the value of home ownership in the region, and I expect the market will remain steady and healthy for the remainder of the year.”
The increase in home sales occurred predominantly in the top half of the price range spectrum: There were 2,093 sales of residential properties for more than $250,000 to the end of June, compared to 1,446 for the same period in 2009, an increase of almost 45 percent.
In the upper end of the market, this trend was even more prominent, with an 84% increase in homes selling for more than half a million dollars relative to one year ago for a total of 205 sales.
KITCHENER-WATERLOO, ON (July 6, 2010) – During the first half of the year, the number of residential properties sold through the Multiple Listing System (MLS®) of the Kitchener-Waterloo Real Estate Board (KWREB) increased 16 percent.
While the 3,633 homes sold during the first six months of the year are 96 units shy of 2007’s record breaking first half, the total value of those sales broke the one billion dollar mark for the first time to the end of June.
“The residential real estate market is alive and kicking in Waterloo Region,” says Ted Scharf, President of the KWREB. “Consumers continue to have a strong sense of confidence in the value of home ownership in the region, and I expect the market will remain steady and healthy for the remainder of the year.”
The increase in home sales occurred predominantly in the top half of the price range spectrum: There were 2,093 sales of residential properties for more than $250,000 to the end of June, compared to 1,446 for the same period in 2009, an increase of almost 45 percent.
In the upper end of the market, this trend was even more prominent, with an 84% increase in homes selling for more than half a million dollars relative to one year ago for a total of 205 sales.
First-time homebuyers want new, detached homes but expect a deal: TD Bank survey
SUNNY FREEMAN, THE CANADIAN PRESS
THE CANADIAN PRESS, 2010
TORONTO - A majority of Canadians who just bought or are about to buy their first home expect to pay less than the asking price and prefer newer and detached homes over older and semi-detached homes or condos, according to a TD Bank survey.
But the report questioned whether the homebuyers had unreasonable expectations, considering that nine out of 10 took out or expect to take out a mortgage for their home.
"It's only natural to want your first home to be the home of your dreams, but it is important to be realistic about what you can afford," said Farhaneh Haque, a mortgage specialist at TD Canada Trust.
Six in 10 first-time homebuyers said they were worried about being able to afford their home should interest rates rise — a scenario that economists say is inevitable after an era of historically low rates sparked a rush into the housing market.
Only 30 per cent said they plan to or already have more than a 20 per cent down payment, and the remaining 70 per cent will require mortgage insurance. Eight of 10 buyers reported putting down as much as they can afford.
But Haque advised that prospective first-time homeowners consider a larger down payment because paying 10 per cent or more will make a big difference, bringing down the time it will take to pay off a mortgage and possibly affecting regular payment amounts.
"It may mean that you need to save longer before buying your first home, but it will pay off in the end."
The vast majority of those surveyed said they made informed financial decisions before buying, with nine in 10 homebuyers getting pre-approved mortgages and calculating closing costs before buying.
However, closing costs, land transfer tax, and legal fees were the top three costs buyers felt unprepared for.
Six in 10 first time home buyers said they bought or intend to buy a fully detached home and three-quarters want a new home.
Meanwhile, survey respondents were equally split between preferring a smaller home closer to work and 45 per cent would prefer a larger home with a longer commute.
Almost all respondents, 99 per cent, said price was the most important factor when considering what kind of home to buy.
The report compiled 1,000 results from an online survey between June 8 and 21 of Canadians who had purchased their first home within the past 24 months or intended to purchase their first home within the next 24 months.
First-time homebuyers in B.C. bucked a national trend and said condominiums were their No. 1 choice. They were also most concerned about being able to afford their homes if interest rates rise.
Respondents from Atlantic Canada were most likely to have their hearts set on new, large and fully detached homes. They are also most likely to prefer a larger home even if it would mean a longer commute.
Quebecers browsed through the fewest number of homes while shopping for their first, but were most likely in the country to live in their first home for their entire lifetime, the report found.
More first-time buyers in Alberta expected to pay less than asking price than those in any other province.
In Ontario, more homebuyers than the national average planned to put more than 20 per cent toward a down payment.
More than in any other provinces, people in Manitoba and Saskatchewan said they would prefer a newer home over an older home if price points were similar.
THE CANADIAN PRESS, 2010
TORONTO - A majority of Canadians who just bought or are about to buy their first home expect to pay less than the asking price and prefer newer and detached homes over older and semi-detached homes or condos, according to a TD Bank survey.
But the report questioned whether the homebuyers had unreasonable expectations, considering that nine out of 10 took out or expect to take out a mortgage for their home.
"It's only natural to want your first home to be the home of your dreams, but it is important to be realistic about what you can afford," said Farhaneh Haque, a mortgage specialist at TD Canada Trust.
Six in 10 first-time homebuyers said they were worried about being able to afford their home should interest rates rise — a scenario that economists say is inevitable after an era of historically low rates sparked a rush into the housing market.
Only 30 per cent said they plan to or already have more than a 20 per cent down payment, and the remaining 70 per cent will require mortgage insurance. Eight of 10 buyers reported putting down as much as they can afford.
But Haque advised that prospective first-time homeowners consider a larger down payment because paying 10 per cent or more will make a big difference, bringing down the time it will take to pay off a mortgage and possibly affecting regular payment amounts.
"It may mean that you need to save longer before buying your first home, but it will pay off in the end."
The vast majority of those surveyed said they made informed financial decisions before buying, with nine in 10 homebuyers getting pre-approved mortgages and calculating closing costs before buying.
However, closing costs, land transfer tax, and legal fees were the top three costs buyers felt unprepared for.
Six in 10 first time home buyers said they bought or intend to buy a fully detached home and three-quarters want a new home.
Meanwhile, survey respondents were equally split between preferring a smaller home closer to work and 45 per cent would prefer a larger home with a longer commute.
Almost all respondents, 99 per cent, said price was the most important factor when considering what kind of home to buy.
The report compiled 1,000 results from an online survey between June 8 and 21 of Canadians who had purchased their first home within the past 24 months or intended to purchase their first home within the next 24 months.
First-time homebuyers in B.C. bucked a national trend and said condominiums were their No. 1 choice. They were also most concerned about being able to afford their homes if interest rates rise.
Respondents from Atlantic Canada were most likely to have their hearts set on new, large and fully detached homes. They are also most likely to prefer a larger home even if it would mean a longer commute.
Quebecers browsed through the fewest number of homes while shopping for their first, but were most likely in the country to live in their first home for their entire lifetime, the report found.
More first-time buyers in Alberta expected to pay less than asking price than those in any other province.
In Ontario, more homebuyers than the national average planned to put more than 20 per cent toward a down payment.
More than in any other provinces, people in Manitoba and Saskatchewan said they would prefer a newer home over an older home if price points were similar.
Friday, July 2, 2010
Tech sector keeps multiplying in tough times
WATERLOO REGION — Waterloo Region’s technology sector just keeps on growing.
The number of high technology companies in the region has jumped to about 700 from 550 in 2008, according to a new report from Communitech, the association representing tech companies in the area.
That represents a growth rate of 21 per cent during one of the worst economic downturns of the past 20 years.
This sector, which includes digital media, information technology and software companies, computer hardware firms and advanced manufacturing businesses, employs roughly 30,000 people with 2,000 job openings waiting to be filled, Communitech said in a news release Wednesday.
The figures are based on a survey and inventory of technology firms in Waterloo Region and area conducted by Communitech in January and February.
Results are published in the 2010 edition of the Waterloo Region Tech Directory, which will be released at a tech leadership conference sponsored by Communitech on July 14.
Featured speakers at the conference, to be held at Bingemans in Kitchener, include Clayton Christensen, author of the Innovators Dilemma, Bill Taylor, co-founder of Fast Company magazine, and Noel Biderman, president of Avid Life Media.
Among other findings, the report notes that 51 per cent of technology firms in the area are small businesses of between one and five employees. The region is also home to 25 publicly traded tech companies, of which 15 have their headquarters here. They include Research In Motion, Open Text, ATS Automation Tooling Systems and Com Dev.
Venture capital invested in area tech companies exceeds $300 million and the sector accounts for $18 billion in annual revenues, the report notes.
Iain Klugman, chief executive officer of Communitech, said the latest inventory underscores the strength of the local tech sector. “We’re thrilled because so much has changed in the past five years,” he said in an interview. “We’ve really got the momentum going.”
The region has been home to roughly 350 startups in the last 30 months, he noted. “Not all of them make it, but at the end of the day you’ve got to have startups if you want to have successful medium-sized companies.”
One of the key drivers of recent growth, Klugman said, has been digital media, broadly defined as computer gaming, social networking software and digital tools to advance research in areas such as health care, finance and mineral exploration.
The region has benefitted greatly in this regard through its designation as the headquarters of the Canadian Digital Media Network, a joint venture of all three levels of government, Communitech and industry partners. The network will set up shop in the Tannery building in downtown Kitchener this summer along with a Communitech digital media incubator called the Hub.
Apart from digital media, the local sector has shown its resilience during the recession by maintaining strong balance sheets and focusing its research on “solving significant problems,” Klugman said.
chowitt@therecord.com
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