April 20, 2012
Federal Budget - Good News For Home Owners And Realtors Alike
Federal Finance Minister Jim Flaherty tabled the 2012 Federal Budget on March 29, 2012. Eliminating the deficit by 2015 is a key goal and the government plans to do this by cutting spending by $1.4 billion in 2012/13 and by $3.9 billion in 2013/14 for a total of $5.3 billion. With unemployment steady at 7.5% and record household debt, property buyers and owners were looking for any glimmer of good news. The government did offer some hope.
Spending
To keep Canadians working (working Canadians buy homes), the government will spend:
- $205 million to extend the Hiring Credit for Small Business program to encourage hiring. A small-business employer can receive a credit of up to $1,000 to help offset employment insurance premiums.
- $165 million over two years for responsible resource development which creates jobs and protects the environment.
- $150 million over two years on the Community Infrastructure Improvement Fund for repairs and improvements to community facilities.
- $99.2 million over three years to help provinces develop permanent flood mitigation measures.
- $67 million through the National Research Council on business-led, industry-relevant research.
- $60 million over two years to protect wildlife at risk.
- $35.7 million over two years for inspections and emergency preparedness to improve oil tanker safety.
Spending on innovation
- $500 million over five years, (to begin in 2014) to the Canada Foundation to support innovation in advanced research infrastructure.
- $105 million over two years to support forestry innovation and market development.
- $100 million to the Business Development Bank of Canada to support its venture capital activities.
- $37 million annually to granting councils to enhance support for industry-academic research partnerships.
Cutting red tape
- Streamline the multiple-step regulatory process to a single-step review known as “one project, one review.” This will include amending the Canadian Environmental Protection Act.
- Streamline the process for approving major economic projects.
- Introduce a legislative amendment clarifying the prohibition against banks selling life insurance.
There will be no new personal or corporate taxes or tax increases.
New oversight for CMHC
In response to record household debt and concerns that home buyers could be in trouble if the Bank of Canada raises interest rates, the federal government plans to strengthen the governance and oversight of Canada Mortgage and Housing Corporation (CMHC).
In the past four years, the government has tightened rules for CMHC government-backed insured mortgages three times: in July 2008, February 2010 and January 2011.
In June 2011, the government approved legislation to formalize arrangements with private mortgage insurers and CMHC to enhance the government’s ability to manage risks associated with the mortgage insurance sector.
When details are released, we’ll keep you informed.
CREA initiatives continued
The Canadian Real Estate Association (CREA) and its member Associations and Boards have been at the forefront of lobbying the federal government to play a stronger role in providing programs that benefit home buyers. Two programs CREA successfully lobbied for over the years will continue:
Home Buyers’ Plan: qualifying home buyers can withdraw up to $25,000 (couples can withdraw up to $50,000) from their RRSPs for a down payment. Home buyers who have repaid their RRSPs may be eligible to use the program a second time.
First-time Home Buyers’ Tax Credit: this federal non-refundable income tax credit is for qualifying buyers of detached, attached, apartment condominiums, mobile homes or shares in a cooperative housing corporation. The calculation: multiply the lowest personal income tax rate for the year (15% in 2011) x $5,000. For the 2012 tax year, the maximum credit is $750.
Private Property on First Nations Lands
The federal Economic Action Plan 2012 announced the government’s intent to explore with First Nations the option of moving forward with legislation that would allow private property ownership within current reserve boundaries.
The intention is to create conditions to accelerate economic development opportunities and enable First Nations to have greater control over reserve lands, resources and environment, through the First Nations Land Management Act. First Nations opting in to this Act may have more control over their economic development.
PENNY SAVED IS A PENNY EARNED:
$11 million annually will be saved by stopping production of the penny, which costs 1.6 cents each to produce. Pennies can continue to be used as currency
Posted on April 20, 2012 at 11:24 PM in Canadian Real Estate News, Federal Government | Permalink
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January 21, 2012
Quebec's Provincial Real Estate Association Is Appealing The recent Quebec Court Decision That Upholds The Right Of The For-Sale-By-Owner Firm DuProprio
Quebec’s provincial real estate association will appeal a recent Quebec Court decision that upholds the right of the for-sale-by-owner firm DuProprio.com to put For Sale signs outside properties and to advertise in newspapers.
The court rejected the argument that the unlicensed DuProprio is allowed to act like a traditional real estate broker.
In her judgement, Judge Nicole Martin wrote that DuProprio does not identify itself as a real estate broker and that its advertising does not make it seem that it performs the tasks of brokers. Selling a home is not the exclusive domain of real estate brokers and the way an owner decides to sell a home “belongs to him or her and several options are possible,” she wrote.
In a statement, Robert Nadeau, president and CEO of the Organisme d’autoréglementation du courtage immobilier du Québec (OACIQ), expressed concern about the ruling, which he called contradictory. The court is acquitting a company “that performed actions that gave the impression it was authorized to perform the functions of real estate brokers,” Nadeau said.
The OACIQ maintains DuProprio acts in a matter similar to that of real estate brokers and by doing so confuses the public, which can be left unprotected if troubles arise in the selling or buying of a home.
The court action was started in 2009 by the OACIQ’s predecessor, the Association des courtiers et agents immobiliers du Québec.
Just before Christmas, Nadeau announced the decision will be appealed. “We have serious reasons to believe that DuProprio committed several infractions of the Loi sur le courtage immobilier (real estate brokerage law) and that’s why we’re appealing this decision,” he says.
Posted on January 21, 2012 at 12:09 AM in Canadian Real Estate News, intriguing/ intersting Real Estate Stories, Provincial Governments | Permalink
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January 20, 2012
Bank Of Canada January 2012 Announcement
As you know, your variable rate mortgage, lines of credit and/or student loans are all based on the Prime Rate and as promised, here is your personal update on the recent Bank of Canada announcement on changes to their Overnight Rate which in most cases impacts your Prime Rate.
At 9:00 am EST, January 17th, 2012, the Bank of Canada again did what we expected
them to do… they maintained their overnight rate. What this means to you
is that the prime rate on your mortgage or line of credit will not change and
remains at 3.00%. This is great news as you still have a great low rate
and so continue to make the most of the low payments you will still have and
maybe chat with a financial advisor about a Tax Free Savings Account or
some RRSP contributions to trigger a potential income tax refund next year!
If you don’t have a financial advisor, let me know and I’d be happy to
recommend one to you.
Here is an excerpt of the announcement from the Bank of Canada and what they had to say about their decision:
“the outlook for the global economy has deteriorated and uncertainty has
increased… The Bank continues to assume that European authorities will
implement sufficient measures to contain the crisis, although this assumption
is clearly subject to downside risks. The Bank expects the U.S. recovery will
proceed at a more modest pace going forward. For Canada, net exports are
expected to contribute little to growth, reflecting moderate foreign demand and
ongoing competitiveness challenges, including the persistent strength of the
Canadian dollar. In contrast, very favourable financing conditions are
expected to buttress consumer spending and housing activity.”
The outlook hasn’t really changed since the last announcement... they expect that growth will slowly continue but it is anticipated that prime rate might not actually increase until into 2013. When it does start to increase, it is expected to be gradual and controlled in line with economic recovery, both in Canada and globally. Remember any change to the prime rate since 1992 has only been by 0.25% at any ONE time.
We have seen fixed rates remain very low at around 3.29% to 3.49% for a five year
fixed term. Based on this recent announcement, and the anticipation that the prime rate will still remain low for the coming months, unless you feel otherwise, I’d recommend that you remain with your current variable rate product (if you are on a variable rate) as the
interest is very much lower than a fixed term rate right now. However, if having a fixed payment is important to you, call me so I can calculate what your new payment would look like and also if it is suitable for you. The next announcement on any change to the prime rate is March 8th, 2012 at which time I’ll be in touch again.
I wonder if I can ask a favour – rates are so
low right now and so it is a great time to buy a property or consider
refinancing especially as my mortgage specialist can hold rates for up to six months, if you know of someone that is looking for advice on their home or mortgage options, with no
obligation, would you mind passing my contact information on to them – this is very much appreciated.
Posted on January 20, 2012 at 11:30 PM in Canadian Real Estate News, Federal Government, Residential Financing | Permalink
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January 13, 2012
The New MLS Home Price Index - What's New, What's Different. - Re-Indexing To Equal 100 In January 2005 As Base 100
As announced in December, a new national home price index will launch in February. This index will replace the MLS®Link Housing Price Index, which has been used by Greater Vancouver and Fraser Valley REALTORS® since the mid 1990s. To read the full report follow this link read
Posted on January 13, 2012 at 05:05 PM in British Columbia Real Estate News, Canadian Real Estate News | Permalink
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December 22, 2011
Real Estate Board Of Greater Vancouver Developing National Housing Price Index With 5 Of Canada's Largest Boards
REBGV Partners With Major Markets To Develop MLS® Home Price Index
Five of Canada's largest real estate boards – Calgary, Fraser Valley, Montreal, Toronto and Greater Vancouver –and the Canadian Real Estate Association (CREA) are partnering to develop a national housing price index. It’s scheduled to launch at the end of January 2012.
As part of continuous efforts to develop tools and information that support REALTORS® business needs, the six partners contracted with Altus Group to develop the MLS® Home Price Index (MLS® HPI).
The MLS® HPI will replace our existing MLS®Link Housing Price Index, which was the first HPI in Canada. It began with UBC research into improving the measurement of price inflation in housing markets. The Fraser Valley board was first to implement an HPI in 1995, followed by our board in 1996. The HPI has since been widely recognized as providing the most accurate indication of housing price trends in our markets.
The new MLS® HPI will allow housing price trends to be tracked over time for different areas within participating boards markets, for different property types, and will allow comparison between local and national markets.
Today, the MLS®Link Housing Price Index provides benchmark price trend data for three property types: detached, attached, and apartment.
With the national effort, it was necessary to select common property categories across each major market. As a result, the following property categories will be covered in the MLS® HPI, replacing the three noted above:
Like our current housing price index, the MLS® HPI uses a sophisticated statistical model to estimate the value buyers attach to attributes and amenities that are quantitative, like number of rooms, and qualitative, such as a finished basement.
Price changes calculated using this method are less volatile compared to those calculated using average or median prices, which can swing dramatically in response to changes in the proportion of high-end or low-end sales over time.
The MLS® HPI also allows for the identification of benchmark homes, with a set of quantitative and qualitative attributes that do not change over time. This allows for an apples-to-apples comparison of price over time.
More information on the MLS® Home Price Index will be communicated as it becomes available.
Posted on December 22, 2011 at 04:06 PM in Canadian Real Estate News | Permalink
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10 Ways To Sell In Winter
RE/MAX Agents Share Ten Ways to Get the Best of Winter When Selling Your Home
If your home will be for sale this winter, it is important to master certain seasonal issues that are less significant or even non-existent at other times of the year. Here are 10 bits of sage advice from RE/MAX agents that can help put a “Sold” sticker on that yard sign.
Let Those Lights Shine: The best way to combat winter’s short and frequently cloudy days is to turn on your house lights. For a showing, every single light in the house must be on, even in the closets and utility/mechanical rooms, according to Marlene Granacki of RE/MAX Exclusive Properties, Chicago.
“Make sure all the bulbs are working, and stock up on all the right bulbs for lamps and fixtures so burned out bulbs can be replaced immediately,” she advises. “Also, it’s a great idea to keep the lights on in the front of the house even if no showings are scheduled. People are always driving past the house, and keeping it lighted makes it look happy and welcoming.”
She also advises opening the drapes and blinds during the day to let in light and let visitors enjoy the view.
Provide Convenient Parking: It’s vital that buyers have a convenient place to park. They won’t want to walk very far in cold weather or be forced to climb over a snow bank to exit their vehicle. Because parking is often more restricted around condominiums, sellers should make sure their agent can pass along parking details to buyers.
Make It Easy to Enter: Winter showings can get off to an awkward start if prospective buyers arrive with snow or salt on their shoes.
“Make it easy for buyers to deal with their shoes when they arrive,” recommends Barbara Hibnick of RE/MAX Showcase, Long Grove, Ill. “Put a festive area rug at the front door for a great first impression and so visitors can wipe their feet. Have slippers or disposable booties available, along with a bench or chair, if there is room for one, where a visitor can sit and easily remove or put on their boots.”
Keep Odors Under Control: Any home tends to be stuffy in winter when windows are opened rarely. That can allow odors to build up, which can be a turn-off to buyers.
“Pet odors can be especially worrisome in winter,” says Mike Mondello of RE/MAX Synergy in Orland Park, Ill. “Use a room fragrance if needed, but nothing too strong, and I recommend that in winter sellers clean more often.” For example, change the cat litter daily, rather than every third or fourth day, or even consider using an air purifier.
If pets are in the house, consider setting the thermostat control so that the furnace fan runs constantly during the day to keep air moving through the house and dissipate odors. Also try to avoid strong cooking odors, especially if a showing is scheduled that day.
Cultivate a Festive Look: Appropriate decorations for Thanksgiving, Christmas and even St. Valentine’s Day help give a home a cheerful look during the winter months.
“I really believe that holiday decorations can help homes sell, but don’t go to excess,” suggests Starr Zook of RE/MAX On Track in Aledo, Ill. “Keeping small, decorative white lights on trees and bushes pretty much through the winter season is fine, but other decorations should be taken down quickly once the holiday passes.”
Don’t Ignore the Outdoors: Make a good first impression on buyers with a neatly maintained yard. Walks and steps should be kept clear, especially of snow and ice.
Look after Condo Common Areas: If the home you are selling is a condominium, your job as a seller may be relatively easy in winter, with no snow to shovel or yard work to worry about. However, that is only the case if your condominium association does its job well.
If the association isn’t doing it, the homeowner may have to take responsibility for keeping the entrance area and hallways clean. If the association isn’t getting snow shoveled promptly, consider buying some de-icing salt and sprinkling it judiciously around the building entry.
Don’t Roast Buyers: We all tend to prefer a specific temperature for our homes during the winter, but don’t blast buyers with hot air. Keep the temperature at a comfortable 65 degrees for all showings. Remember, buyers are likely to be wearing their coats even as they walk through the house.
Keep Seasonal Clothing under Control: “One major challenge of selling a home during the winter months is the overabundance of cold weather gear that must be stored,” says Mike Mondello. “A buyer doesn’t want to find the mudroom filled with boots or the hall closet overflowing with heavy coats. Shift some winter coats to another closet and put anything not needed in the closet into storage.”
To keep gloves and scarves from piling up in the front hall or mudroom, put a special container for them, such as a decorative chest, where the family typically enters the home.
Encourage Day Time Showings: A home shows to its best advantage during daylight hours, which are relatively scarce in winter.
“Encourage your agent to show your home before 3 p.m. and have it ready to show by 9 a.m. if you want the best results,” Granacki recommends.
Despite the special challenges of marketing a home during winter, there also are benefits, notes Laura Ortoleva, a spokesperson for the RE/MAX Northern Illinois real estate network.
“Buyers out looking at homes in December or January are, as a group, quite serious about buying. Therefore, sellers tend to benefit because each showing is more productive, and fewer showings are needed to sell the property,” she said.
Posted on December 22, 2011 at 03:31 PM in British Columbia Real Estate News, Buying a Home, Canadian Real Estate News, Homes for Sale, Selling a Home | Permalink
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December 19, 2011
What Is The Property Transfer Tax
How does the First Time Home Buyers’ Exemption work?
The Property Transfer Tax (PTT) is a tax of 1% on the first
$200,000 and 2% of the remaining value of the purchase price,
when the transaction is registered at a Land Title Office.
Qualifying first time buyers may be exempt from the PTT if
they meet the First Time Home Buyers’ Program requirements.
The buyer must:
• be a Canadian citizen or permanent resident;
• have lived in BC for 12 consecutive months before the date
of registration, or have filed two income tax returns as a BC
resident within the last six years;
• never owned an interest in a principal residence anywhere in
the world at any time; and
• not have previously obtained a First Time Home Buyers’
Exemption.
In addition:
• The maximum purchase price of the home is $425,000.
There is a proportional exemption for homes priced up to
$450,000.
• The land may be a maximum of 0.5 hectares or 1.24 acres.
• The mortgage term taken must be at least one year. If the
term is less than one year, a rebate may be applied for after
the qualifying individual has resided at the residence for 12
months.
• The mortgage financing must be 70% or greater of the
purchase price (mortgage financing cannot be from family
members).
• The property must be owner-occupied (no rentals or investment
properties).
If the home exists, the buyers must move
into it within 92 days. If it is vacant land,
the buyer must build and move into the
new home within one year.
• Buyers must reside in the home for at least
one year.
Please note:
You cannot re-qualify as a first time home buyer. This rule may be different from federal programs for first time homebuyers ( e.g., the Canada Revenue Agency Home Buyer's Plan).
Posted on December 19, 2011 at 02:15 PM in British Columbia Real Estate News, Buying a Home, Canadian Real Estate News | Permalink
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December 11, 2011
Bank Of Canada Announcement of December 6th 2011 Regarding The Overnight Rate
As you know, your variable rate mortgage, lines of credit and/or student loans are all based on the Prime Rate and as promised, here is your personal update from me on the recent Bank of Canada announcement on changes to their Overnight Rate which in most cases impacts your Prime Rate.
At 9:00 am EST, December 6th, 2011, the Bank of Canada again did what we expected them to do… they maintained their overnight rate. What this means to you is that the prime rate on your mortgage or line of credit will not change and remains at 3.00%. This is great news as you still have a great low rate and so continue to make the most of the low payments you will still have and maybe chat with a financial advisor about a Tax Free Savings Account or some RRSP contributions to trigger a potential income tax refund next year! If you don’t have a financial advisor, let me know and I’d be happy to recommend one to you.
Here is an excerpt of the announcement from the Bank of Canada and what they had to say about their decision:
“Uncertainty around the global economic outlook has increased. The recession in Europe is now expected to be more pronounced than the Bank had anticipated in October. Recent economic data suggest that growth in the US has been slightly more robust than anticipated… Nonetheless, household deleveraging, fiscal consolidation and negative spillover effects from the European crisis are all expected to weigh on U.S. growth. On balance, recent economic indicators in Canada suggest that growth in the second half of this year is slightly stronger than the Bank projected in October. The economy also continues to face competitiveness challenges, including the persistent strength of the Canadian dollar”.
The outlook hasn’t really changed that much since the last announcement... they expect that growth will slowly continue but will be impacted by global economic conditions. Based on this repeated message, it is anticipated that prime rate might not actually increase until well into 2012 maybe even 2013. When it does start to increase, it is expected to be gradual and controlled in line with economic recovery, both in Canada and globally. Remember any change to the prime rate since 1992 has only been by 0.25% at any ONE time.
We have only seen some minor fluctuations to the fixed term rates since the last announcement and are still very low at around 3.49% to 3.79% for a five year fixed term.
Based on this recent announcement, and the anticipation that the prime rate will still remain low for the coming months, unless you feel otherwise, I’d recommend that you remain with your current variable rate product as the interest is very much lower than a fixed term rate right now.
Posted on December 11, 2011 at 12:13 AM in Canada, Canadian Real Estate News, Federal Government | Permalink
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December 10, 2011
Re/Max Housing Market Outlook Report For 2012 - Forecast
Balanced conditions set to return to most Canadian housing markets in 2012, while residential values expected to once again set new records, says RE/MAX
Kelowna, BC (December 6, 2011) – Canadian residential real estate defied conventional logic and outperformed expectations in 2011, posting another solid year of housing activity virtually across the board. The trend is expected to carry forward into 2012 as Canadians continue to demonstrate their faith in homeownership, despite concerns over the European debt crisis and its impact on the global economy, according to a report released today by RE/MAX.
The RE/MAX Housing Market Outlook 2012 examined trends and developments in 26 major markets across the country. Eighty-eight per cent (23/26) anticipated average price increases by year-end 2011—with percentage hikes ranging from one to 16 per cent. The forecast for 2012 shows the upward trend moderating, but still ahead of 2011 figures. Overall home sales are expected to remain on par or ahead of last year’s levels in 85 per cent (22/26) of markets in 2011—including Saskatoon with a year-over-year percentage increase of 13 per cent and an eight per cent uptick in Calgary, Winnipeg, Hamilton-Burlington and Sudbury. Almost half of Canadian markets will match the 2011 performance, while the remainder should post increases ranging from one to five per cent next year.
By year-end, an estimated 460,000 homes are expected to change hands, up three per cent from the 447,010 units reported in 2010. Sales are expected to climb one per cent to 464,500 units in 2012. The value of a Canadian home is set to climb to $363,000 by year-end—an increase of seven per cent over the $339,030 posted one year ago. By year-end 2012, the average price in Canada is forecast to appreciate two per cent to $371,000.
“What 2011 proves is that real estate continues to have momentum,” says Elton Ash, Regional Executive Vice President, RE/MAX of Western Canada. “The economic underpinnings support ongoing demand, particularly as job creation efforts continue and unemployment rates edge down further. Nationally, we remain on an upward track, and the confidence consumers have demonstrated in housing over the past decade will prove well founded once again next year. The rising belief in homeownership is key, especially among Generation X and Y—some of whom are making their moves sooner. Boomers and retirees are changing, too. They’re healthier and more active, with longer life expectancy. Overall, we’re seeing an extension of the homeownership cycle, and it’s great news for housing going forward.”
Improvement in both provincial and local economies, especially during the second half of 2012, should serve to further stimulate homebuying activity. Calgary, Saskatoon, and Halifax-Dartmouth will likely lead the country in unit sales in 2012, each with a projected increase of five per cent. Regina, Greater Toronto, Saint John, Moncton, and St. John’s anticipate a three per cent increase in home sales next year.
“Canadian consumers are intent on making their moves now, in advance of higher housing values,” says Michael Polzler, Executive Vice President, RE/MAX Ontario-Atlantic Canada. “Housing markets are not impervious to the impact of economic concerns moving forward, but real estate has proven its resilience time and again—2011 was case in point, as residential real estate markets actually experienced an upswing in the volatile third and final quarters, instead of responding to economic concerns both here and abroad with a retreat in sales and prices.”
While tighter supply levels contributed to steady price appreciation in most major markets across Canada this year, an increase in inventory more in line with years previous should ease upward pressure on average price in the year ahead. The highest appreciation is expected in Regina, where values are forecast to increase eight per cent, followed by Greater Toronto, Halifax-Dartmouth, and St, John’s—each posting a five per cent gain. Overall, 81 per cent of the markets examined are forecast to set new records for average price next year. Noteworthy milestones include Greater Vancouver, which will break the $800,000 threshold, as well as Regina and Kitchener-Waterloo, which will reach the $300,000 mark.
“While prices will remain on the upswing, buyers will benefit from greater selection moving forward,” says Sylvain Dansereau, Executive Vice President, RE/MAX Quebec. “Stability or modest growth will characterize sales activity, while GDP moves forward at a more muted pace in 2012. Whether markets will meet or potentially exceed projections will hinge largely on consumer confidence. An unexpected call for interest rate hikes could also serve to bolster sales.”
Other highlights include:
- Population growth and immigration are major factors expected to prop-up housing demand and household formation in the coming years. Since 2000, Canada’s population has experienced double-digit growth of 11 per cent. By 2031, over 42 million people are expected to call Canada home.
- Investment will also continue in Canada’s major centres, with income producing properties at the top of the most wanted list. Low vacancy rates and stock market volatility reinvigorated this segment of the market in 2011 and the very same factors are forecast to influence sales moving forward.
- Condominiums are expected to gain an increasing share of the marketplace, particularly in Western Canada and Ontario. A focus on higher density urban growth is impacting purchasing patterns and introducing new, affordable options—critical to the attainability of homeownership as price continue to move upward.
- Housing stock in major Canadian centres will improve as municipalities focus on redevelopment and revitalization
National Overview: http://www.youtube.com/watch?v=l-WeYkq9HGk
Vancouver: http://www.youtube.com/watch?v=3Ns3UU1gj5M
Victoria: http://www.youtube.com/watch?v=sNPIlbfDSQw
Kelowna: http://www.youtube.com/watch?v=To7bVysu9fY&feature=player_embedded
Edmonton: http://www.youtube.com/watch?v=0eDco5McEcE
Calgary: http://www.youtube.com/watch?v=VYJIZ5M4x8g
Saskatoon: http://www.youtube.com/watch?v=cak8Px6gW80
Regina: http://www.youtube.com/watch?v=i2YRJx_xNFE
Winnipeg: http://www.youtube.com/watch?v=5sLfx1AZPIo
Posted on December 10, 2011 at 11:57 PM in Canadian Real Estate News, RE/MAX | Permalink
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November 18, 2011
Interest Rate Prediction May Boost Market In 2012
Bank of Canada could slash interest rates in a big way next year
As the nail biter in Europe continues this week, two economists are predicting the Bank of Canada will move to cut rates in a big way next year.
Sheryl King, an economist at Bank of America Merril Lynch, said in a note that the volatility hitting Europe and the risk of damage to the global economy means the Bank of Canada will move to cut its benchmark interest rate to ward off the risk of recession. Her prediction is the cut will be a whopping 0.75% decrease from the current rate of 1%.
“With the Eurozone sovereign debt and banking crisis showing no sign of containment, we think the Bank of Canada will cut rates back to the effective lower bound of 25 basis points (0.25%) early next year,” she said.
Ms. King forecasts that the cut would come in two phases, with a 0.50% trim being announced during the bank’s January 17 meeting, while the second and final 0.25% cut coming during the March 8 meeting.
Also predicting a lower interest rate next year is David Madani, Canada economist at Capital Economics. He is forecasting a more mild cut of 50 basis points, however, saying he expects it to occur in April or June.
Either way, Mr. Madani said he expects interest rates in Canada will remain low for some time.
“The Bank might communicate that its policy rate will remain at 0.50% for a lengthy period of time, conditional on its projected outlook for consumer price inflation,” he said, in reference to the Bank of Canada’s target of 2% annual inflation.
“Even if we are wrong, the broader message remains that interest rates will remain unusually low for a very long time.”
Most economists, however, are still predicting that the Bank of Canada will raise interest rates rather than lower them in 2012. In a recent Reuters survey of 40 economists last month, the consensus was that an interest rate increase will occur in the third quarter of next year.
If rates are cut, it will mark a sharp turnaround for the Bank of Canada, which only last year raised interest rates. Canada became one of the first advanced economies to raise its benchmark interest rates following the recession when the Bank of Canada implemented a 25 basis point hike in September of last year. The benchmark rate has since remained unchanged at 1%.
Follow this link to read more about John's writing and who he is. John Shmuel
Posted on November 18, 2011 at 04:11 PM in Canadian Real Estate News | Permalink
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