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Friday 30 March 2012

Canadians worried about mortgage rate hikes

As concerns over the state of the Canadian real estate market abound, a new survey says nearly half of Canadians are unsure about their ability to afford their homes if rates rise by as little as two percentage points.

The survey commissioned by the Bank of Montreal study finds 43 per cent believe an interest hike would either hamper their ability to pay or leave them on unsure footing.

Regionally, residents of Alberta were the least concerned, with 73 per cent saying that rising rates would not affect their ability to afford their homes, while residents of British Columbia were the most concerned. Just 48 per cent B.C. residents are comfortable in their ability to handle higher rates.

The survey results come as banks and economists warn about the rising debt levels of Canadian households.

It also comes as some of Canada's biggest banks have started raising variable mortgage rates, even though the Bank of Canada's overnight interest rate remains unchanged.

Earlier this week, both RBC and TD raised the posted rates on five-year mortgages.

That could signal the end of the era of cheap borrowing that has encouraged many Canadians to take on houses they may not have been able to otherwise afford.

BMO anticipates that the Bank of Canada will begin increasing interest rates from the current one per cent next year.

Fixed or variable?

Many in the mortgage industry have recently advised homeowners to take on the previously less-popular variable mortgage rates as interest rates had remained low since the end of the recession, when the Bank of Canada pushed its overnight rate down to an emergency low 0.25 per cent.

But looking ahead, some industry watchers say now is the time to consider switching to lock in longer term rates with shortened amortization periods.

"Our interest rate outlook now projects that fixed mortgage rates will trump variable. While the decision ultimately depends on the individual, the low rate combined with a shorter 25-year amortization will significantly strengthen household financial stability," said Doug Porter, deputy chief economist at BMO Capital Markets.

In a report issued last week, Porter and colleague Benjamin Reitzes argued that with the U.S. recovery gathering steam, central bankers on both sides of the border are becoming more comfortable with the economy and less so with historically depressed interest rates.

Already, financial markets have priced in a near 50 per cent chance that Bank of Canada governor Mark Carney will start hiking his one per cent policy setting before the year's end, they noted.

Both Finance Minister Jim Flaherty and Carney have recently flagged the danger to the economy of Canadians becoming increasingly indebted, mostly through taking advantage of low rates to buy homes or take out home equity loans. Household debt to disposable annual income is above 150 per cent and likely to rise further toward the 160 per cent level that preceded the housing collapse in the U.S., say analysts.

Thursday 29 March 2012

Should you rent or own property in today's market?

To rent or own a home is an ongoing debate in today's world. Angela Self, a personal finance columnist at The Globe and Mail, revealed the pros and cons to each strategy on Monday on CTV's Canada AM.

Key points:

* Renting can be a good thing for people living in Toronto, Vancouver or Calgary, where real estate prices for houses and condos have escalated in recent years.

* Renting can also be a good option at the start of a career. It gives people more flexibility should they need to move for a new job.

* Try to save money while renting. This will allow hopeful buyers to make a significant down payment on a house in the years ahead.

* For those in the market to buy house or condo, look at all the costs attached to the property before the deal is signed. This includes heating, repairs and all other maintenance costs.

* Buyers should spend no more than 40 per cent of their income on housing. Also, a mortgage should be no more than three times your income.

* Property owners should stay a house or condo for at least five years. This is the general amount of time it takes to recoup many costs and take a bite out of a mortgage.

* For those who can afford to buy, owning a home is a good investment tool. People spend thousands of dollars on rent, according to Self -- a founding member of the Smart Cookies Money Mentoring website. The same amount could be spent each month on a mortgage.

Wednesday 28 March 2012

QDOT: ESTATE PLANNING FOR NON-U.S. CITIZEN SPOUSE

In Canada as in the United States, the transfer of property from one spouse to the other at death is typically not subject to taxation. The tax rules differ between countries however.

In Canada, the Income Tax Act allows spouses to roll assets over to one another, on a tax-deferred basis. In the U.S., the Internal Revenue Code allows the surviving spouse to use what is called the “unlimited marital deduction” to avoid paying an estate tax on the assets held by the decedent.

This unlimited marital deduction allows the surviving spouse, in effect, to delay the payment of the estate tax on the assets received from his/her deceased spouse. There is a catch though. This deduction is only available to United States citizens. Uncle Sam wants to make sure that that a non-U.S. citizen surviving spouse (U.S. resident or not) will not avoid taxation in the United States. That is why the Qualified Domestic Trust (QDOT) has been created: to provide a vehicle where property can be transferred to a non-U.S. citizen spouse while deferring the payment of the U.S. estate tax.

The Internal Revenue Code imposes an estate tax on the estate of every decedent who is a citizen or resident of the United States. It also imposes estate tax on U.S. assets in excess of US$60,000 held by a non-U.S. resident who is not a U.S. citizen.

For 2012, there is an effective exemption limit of US$5.12 million dollars on assets held by a decedent; meaning that no U.S. estate tax will be payable if the value of worldwide assets held at death is less than US$5.12 million. However, that exemption level will expire on December 31st, 2012.

We do not know, as of today, what the exemption level will be for 2013 and beyond. If Congress cannot come to an agreement on the subject before the end of the year, the exemption will revert to its 2001 level (US$1 million).

Monday 26 March 2012

Canadian Real Estate Bouncing Back

National resale housing activity in Canada improved in February after having declined in January and increased 1.4% month on month, according to the latest statistics from the Canadian Real Estate Association (CREA).

Actual, not seasonally adjusted, activity was up 8.6% from February 2011 levels and the number of newly listed homes climbed 1.9% from January to February. The national sales to new listings ratio was little changed, remaining firmly in balanced territory.

The national average home price increased 2% on a year on year and sales activity recorded through the MLS Systems of Canadian real estate Boards and Associations edged up 1.4% from January to February 2012, recouping one third of the monthly decline in activity between December 2011 and January 2012.

Activity was up on a month on month basis in half of all local markets in February, led by Calgary, Toronto, Barrie, Montreal, Quebec City, Saint John, and Halifax-Dartmouth.

Actual, not seasonally adjusted, activity was up 8.6% year on year in February and a total of 61,772 homes traded hands in the first two months of 2012, up 6.7% from the same period in 2011.

The number of newly listed homes also rebounded 1.9% month on month in February, reaching the highest level since May 2010. A rebound in new listings in Toronto and Montreal, Canada’s two most active markets, offset a retreat in new listings in Vancouver, Canada’s third largest market.

With both sales and new listings having risen, the national sales to new listings ratio, a measure of market balance, was little changed in February at 53.3% compared to January’s 53.6%.

‘The national rise in both sales activity and the number of newly listed homes beyond the normal seasonal increase provides clear evidence that Canadians are confident in housing market prospects,’ said Gary Morse, CREA’s president.

The data also shows that based on a sales to new listings ratio of between 40 to 60%, some 60% of local markets were balanced in February. Compared to the previous month, there were more buyers’ markets and fewer sellers’ markets.

The actual national average price for homes sold in February 2012 was $372,763, up 2% from its reading for the same month last year.

‘In February 2011, the national average price was stretched upward by a spike in high end home sales in some of Vancouver’s priciest neighbourhoods, and a replay of that was not expected this year,’ said Gregory Klump, CREA’s chief economist.

‘February’s data bear this out, but other factors are now keeping the national average price aloft. The main one is the housing market in Toronto, where a tight balance between supply and demand continues to drive some of the strongest home price gains in the country, particularly for single detached properties,’ he added.

He also pointed out that there has been a preference in recent months, in Toronto and other markets, for single family homes which are typically more expensive. This trend held in February, putting additional upward pressure on the national average home price.

Saturday 24 March 2012

Housing resilient in Q1, ‘heated’ spring expected: Re/Max survey

MISSISSAUGA, ONT. The real estate market in Hamilton-Burlington is in for a busy spring, according to a major Canadian real estate organization.

Re/Max says the local market is among 12 of 15 Canadian centres that reported sales activity in January and February that was ahead of last year’s levels.

More than half of the cities reported double-digit increases, “with the strong demand and diminished supply setting the stage for a heated spring 2012.”

Re/Max said low interest rates, coupled with strong consumer confidence levels and a mild winter played a significant role in the upswing, ushering in an early start to the spring market.

In Hamilton-Burlington, sales were up close to 7 per cent (1,855 units in 2012 versus 1,736 in 2011). Average home prices were up more than 5 per cent, from $329,722 to $347,660.

According to Re/Max, local sales were driven by a surge in east Hamilton and Dundas and by Toronto residents buying in Burlington. The realty reported bidding wars in eastern Burlington in the $350,000 to $550,000 price range and in entry-level ($230,000 to $275,000) properties in Hamilton.

“Hamilton offers up some of the country’s most affordable inventory — and for many, the cost of owning is less than the cost of renting,” the report says.

As well, Hamilton-Burlington sales in the million-dollar category are up over last year.

Industry watchers who are closely monitoring home prices have suggested Canada’s real estate market, which has been fuelled by low mortgage rates since the recession, will soon cool off, but many predict a so-called “soft landing.”

Others have called for a more drastic decline in sales and home prices, saying that the market is overheated, creating a housing bubble that could soon burst.

In terms of sales volumes, the best performing markets heading into the traditionally busy spring period were Halifax-Dartmouth, up 35 per cent, Saskatoon (21 per cent), Saint John, N.B., (20 per cent), Regina (16 per cent), St. John’s (12.5 per cent), Greater Toronto Area (12 per cent) London-St. Thomas (11 per cent) and Edmonton (11 per cent).

Thursday 22 March 2012

Your next dream home: finding a perfect residential real estate in Mississauga

If you happen to have plans to move to Mississauga, the decision is not entirely surprising. After all, offering optimistic suburban destinations along the shores of Lake Ontario, an interesting mix of easy availability and location for a myriad of cultural events. But before you set foot officially and settle in your new city, you would probably go through Mississauga homes for sale first.

At first glance, you'll probably be able to discern that there is more than enough homes to choose from Mississauga for sale. There are residential units located within the class of high-rise residential, and there are also a myriad of houses in several villages and subdivisions. There are apartments and town houses and residential buildings with their swimming pools and they are fairly compact and simply furnished. The problem is not going to be in the election, but will be in the same election. That's why it will be in your best interest to have a real estate agent in Mississauga and finalize your plans to move.

With all the things you need to do, logically, there is a good chance that you will be overwhelmed to allocate the necessary time needed to properly examine your new home. This is where famous real estate agent will be able to get in Mississauga manage the complexity of actually looking for a home that suits you and your family best, while taking care of other pressing issues. Of course this does not mean that you will not get involved. Instead, you will oversee all - the difference is that you have more time for other things you need to do before you move.

For example, expect that he would communicate regularly with your Mississauga real estate agent and discuss your needs and desires in a home. Do you have a small studio, or perhaps an impressive three-story is better suited? Wold you your house is in the center of town, or you may prefer to be on the edge characteristic of the city - from distractions? You will also discuss your budget - your financial ability is something that can not be overlooked. Your agent will likely be able to propose financing options, and he will be able to give you the most appropriate if you know exactly what your financial situation is.

If you do not know of any agent in town, maybe you can ask your family and friends for recommendations. Getting the right agent, after all, can make the difference between landing safely your new dream home or get lost somewhere in the process of sad - and perhaps even the financial obligation. Remember, it is important that you get a Mississauga real estate agent who is not only competent, but also of dignity and respectability. It would help if you can show evidence of past customers, and clear documentation are licensed to legally operate their business in town. If you take the time to find a good realtor, you are already taking aggressive action to get the house you really want.