The Versatile Investor Blog: Mark Loeffler

Though the quarter is not yet over, the performance of the commercial real estate sector in the first couple months of 2012 has experts looking towards continuing positive results.

In the First Quarter 2012 REALpac/FPL Canadian Real Estate Sentiment Survey, the Real Property Association of Canada (REALpac) and FPL Advisory Group report a slight improvement over the last quarter of 2011.

The overall real estate sentiment index came in at 61, slightly up from 60 last quarter but down from 71 a year ago. Though respondents indicated improvement in market conditions, many expect the rate of improvement to decline over the coming year.
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Housing starts, an important indicator of health in the economy and the real estate market, are on the upswing across the country.

And while the west has generated much attention in recent months, due to growth in population and economic output, the leading city for housing starts in year-over-year increases is right here in Hamilton.

In the Conference Board of Canada’s February 2012 Metropolitan Housing Starts report, 14 of the of the 27 census metropolitan areas (CMAs) show positive short-term expectations. That is up from just seven the previous month. (more…)

The Canadian Real Estate Association reported yesterday that national resale housing activity retreated in January, after a strong finish in December 2011.

Among the highlights:

Home sales were down 4.5 per cent from December to January

Activity came in 4.0 per cent above levels in January 2011, and stood even with the five and 10 year averages for January sales.
The number of newly listed homes edged down 1.4 per cent from December to January.

With sales down by more than new listings, the national market shifted further into balanced territory.
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Was it all too good to be true?

The recent mortgage wars – the major banks and other lenders introducing all-time low rates on new products – seem to be coming to an end sooner than expected.

You may recall a few weeks ago, BMO threw down the gauntlet first when it unveiled a five-year fixed-rate mortgages at 2.99 per cent and an amortization of 25 years. The other major lenders soon followed suit with similar mortgage products.

BMO’s offer was to expire Jan. 25, and carried fine-print restrictions. A similar mortgage from RBC was to be available until Feb. 29.
Now, however, these lenders are already pulling back the reins on these products, ending them sooner than planned, and some of the big banks even raising rates for some products. Other smaller lenders, however, seem to be staying the course and resisting the pressure to raise rates.
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As real estate investors, we know how important immigration is to our business. Immigration, as “new Canadians” enter the country in search of opportunity, leads to population growth. Over the course of a year or so, this growth, in turn, leads to increased rental demand, tightening vacancy rates, rising rents and increased property demand and prices.

For owners of investment properties, this is all music to our ears.
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Mortgages

Yesterday, we mentioned how some lenders were beginning to restrict mortgages to self-employed Canadians and immigrants. Now today comes news that the federal finance ministry is actively leaning on banks to take such action on their own – or another new round of mortgage rules will do it for them. Ottawa is worried that banks continue to introduce low-interest rate products and make a push on home loans, while Canadians household debt continues to rise.
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Tighter mortgage rules already on the way We’ve written a few times about he likelihood that the federal government may decide to introduce tighter mortgage lending rules, in lieu of raising interest rates.

Interest rates are expected to remain at their currently low historic levels through much – if not all – of 2012, since a rise in rates might inadvertently put the brakes on the continuing (but tenuous) economic recovery.

The next best thing, in Ottawa’s eyes at least, might be to make it more difficult for Canadians to apply for a mortgage, as a way of keeping the market from overheating.
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