Monday, January 30, 2012
CANADA - NOTING THE POSITIVES, BUT ALSO THE RISKS
Economists often get a bad rap for seeing the world as exclusively a glass half empty. Given this reputation, it is not surprising that economics is dubbed the ‘dismal science.’ Still, they are also known to call a spade a spade when they see it. We must do just this when we say that the Canadian economy ended last year on a more positive note than they had last predicted. This momentum represents a solid hand-off into 2012. What’s more, financial markets so far this year have enjoyed the absence of volatility that was the dominant theme for 2011.
The latest tracking shows the Canadian economy grew by 2.0-2.5% in the fourth quarter annualized an upside from most banks December forecast. An important part of the story has been Canadian consumers. We saw evidence of this in the retail sales’ numbers for November. They grew month-over-month by 0.3% in real terms and an even stronger 0.5% in nominal terms. With Black Friday and Cyber Monday increasingly becoming important calendar events on this side of the border, retailers were hoping to capitalize on greater mall traffic as consumers stocked up for the holiday season. We will have to wait and see if November’s gain comes at a cost to December. However, data so far suggest that there is an upside risk to our consumer expenditure forecast for the fourth quarter of 2011. The 2012 economic outlook should also be helped by higher consumer and business sentiment.
Also this week, the U.S. Federal Reserve injected further monetary stimulus into its economy by telling markets and investors that it plans to keep its interest rates at near-zero levels until late 2014, or eighteen months longer than was previously stated. In the fallout of the announcement, U.S. and Canadian bond yields fell across the curve. In terms of currency, the loonie reached parity with the U.S. dollar yesterday for the first time since November 2011.
Business investment is expected to be a bright spot in the outlook given the low borrowing conditions and strong currency. The forecast is that Canadians will continue to spend, creating positive pressure for the domestic side of our national forecast. This spending behaviour does not come without repercussions. Canadian households are already posting record debt levels. What’s more, the longer low rates persist, the more difficult it will be to reverse course. If consumers continue to spur heightened real estate activity as well, there could be a larger and steeper correction for the housing market than the 10-15% that has been incorporated into various forecasts over the next few years in certain parts of Canada, but there will be an increase in values in other areas; like Downtown Vancouver and notably commercial real estate in neighbourhoods like Gastown, Chinatown, and the Downtown Eastside Harbour front. Given where this note has ended, perhaps it’s true that economists cannot say sunny and rosy for too long. At the same time, it’s prudent to constantly look for risks, such that there are no surprises if they come to materialize.
Excerpt from January 2012 Action Forex article by TD Bank Financial Group, available online at http://www.actionforex.com/analysis/weekly-forex-fundamentals/the-weekly-bottom-line-20120128158365/
Monday, January 30, 2012
9 Tax Deductions Canadians Often Miss
Does the looming tax deadline have you gritting your teeth? Here's how to get a bigger, better refund.
Does the looming tax deadline have you gritting your teeth? We all have to pay our taxes. And nobody wants to pay too much.
“Unfortunately, people tend to pay more tax than they need to because they do tend to overlook some of the savings they can take advantage of,” said Carol Bezaire, vice-president, tax and estate planning, at Mackenzie Financial.
A deduction is valuable because it reduces your income for tax purposes.
Rack up enough of deductions and you’ll pull yourself down into a lower tax bracket and end up with a big refund, if you’re lucky.
These are worth more to those in higher tax brackets. By contrast, a non-refundable tax credit reduces the amount of taxes owed. The value is the same for everyone. The term “non-refundable” refers to the fact that if the tax credit exceeds the amount of tax payable, you won’t get a refund for the difference.
1. RRSPs: Contributions to Registered Retirement Savings Plans are the mother of all tax deductions. Roughly speaking, you are allowed to contribute up to 18 per cent of your earned income from the previous year, and deduct that amount from your income at tax time.
The government even gives you an extra two months past the end of the previous calendar year to sock that money away. (That’s why January and February are known as RRSP season.) The trick here is that you can carry forward contribution room indefinitely.
You can also carry the deduction forward to use in a year when your income is higher. Check your Notice of Assessment from the Canada Revenue Agency for more details about how much you are allowed to contribute and deduct.
If you carry forward those RRSP contributions to deduct in a future year, keep track of them carefull. This amount will determine how much you can put into your account in the current year.
2. Capital losses: Losses from buying and selling shares in an unregistered account (not your RRSP or your TFSA) can be carried back to any of the previous three years or carried forward indefinitely. These can be applied against capital gains to reduce your total income from investments.]
3. An equivalent-to-spouse-tax-credit: Taxpayers who are single, divorced or separated with children, can be claimed for a child. This non-refundable tax credit is worth $10,527 this year federally. (That’s multiplied by 15 per cent when calculating the final credit, but it’s still far higher than the $4,282 tax credit for a dependent child.)
In the case of a child, the dependent has to be a Canadian, resident, under 18, and financially dependent on you.
4. Child care expenses: These expenses, whether for a nanny or day-care centre, must be claimed by the parent with lower net income in most cases. Allowable expenses are those paid for the care of a child age 6 or under, to enable the parent to work, carry on a business, or go to school.
5. Medical expenses: Claim non-refundable tax credits for medical expenses paid by either you or your spouse or common-law partner.
“People forget to take a look or they assume it’s not eligible,” Bezaire said. But, in fact, any non-reimbursed medical expense can be claimed, including prescription medication, dental surgery that’s not covered by insurance, or laser eye surgery.
Expenses that total more than $2,052 or 3 per cent of net income can be claimed. To make the most of the tax credit, the expenses should be claimed by the person with the lower net income, Bezaire said.
6. Moving expenses: If you moved at least 40 km to be closer to a new job, run a business, or go to school, you may deduct the moving expenses. Eligible expenses include transportation and storage costs, reasonable costs for meals and accommodations, real estate commission, legal fees, and costs related to changing your address, such as replacing your driver’s licence and connecting or disconnecting utilities.
“What many people overlook is that you can claim the cost of moving your children to university or college,” Bezaire said. [More: 10 tax tips to save you money]
7. Carrying charges: This refers to costs incurred in order to earn income on your investments. Fees paid for the management of your investments, other than commissions, are eligible. If you use a safety deposit box for safekeeping your investments, you can claim the cost as a carrying charge.
8. Physical fitness and arts activities for children: Eligible programs must be supervised, appropriate for children and must be at least eight consecutive weeks or five consecutive days long, with at least half of the activities involving a significant amount of physical or artistic activity.
Additional tax credits are available for a child with a disability. The sports programs must build muscular strength, endurance, flexibility and balance. On the arts side, eligible programs can focus on literary, visual or performing arts, music or language.
9. Charitable donations: keep in mind that these donations can be carried forward.
“If you’re doing your housekeeping and find a charity receipt and you say, ‘rats, I didn’t use it’, hang on to it. You can still use it still.
If you have a spouse, pool them and include them on the return of the person who pays the most tax, she added.
January 27, 2012 YahooFinance Article by Madhari Acharya-Tom Yew, available online at http://ca.finance.yahoo.com/news/9-tax-deductions-canadians-often-miss.html
Friday, January 27, 2012
Vancouver among world's 'least affordable' housing markets
Vancouver is the world’s second-least affordable major city to buy a house, according to an annual survey of global housing markets.
The Eighth Annual Demographia International Housing Affordability Survey covers 325 metropolitan markets around the world.
It measures the markets using something called the “median multiple,” which is the median house price divided by gross annual median household income.
The study comes as Canadian banks worry about the state of the market and economists suggest prices could drop by as much as 10 per cent in cities such as Vancouver and Toronto.
Canada was the third most affordable market, behind the United States and Ireland. The markets that were surveyed were Australia, Canada, China (Hong Kong), Ireland, United Kingdom and the United States.
The report suggests the country is actually a very affordable place to own a home. There’s a catch, of course. It depends where you buy. And it’s a big country.
At 10.6 – with prices at $678,500 and incomes at $63,800 - Vancouver comes second only to Hong Kong in the major market category (cities over one million population), which has a rating of 12.6 ($3.1-million median house price, with income at $249,000).
Toronto sits in 18th place ($406,400/$73,600), sandwiched between Boston and Los Angeles with a rating of 5.5.
Montreal is the world’s 23rd least affordable market, with a rating of 5.1 ($281,700/$54,700).
“Canada’s Median Multiple was 3.5, indicating slightly deteriorating housing performance from last year’s 3.4,” the report states.
“All of the 128 affordable markets (having a Median Multiple of 3.0 or below) were in Ireland, Canada and the United States. There were 117 affordable markets in the United States and nine affordable markets in Canada and two affordable markets in Ireland.”
There were no affordable markets in Australia, New Zealand or the United Kingdom.
“The 87 moderately unaffordable markets were divided between the United States (64), Canada (19), Ireland (3) and the United Kingdom (1). There were no moderately unaffordable markets in Australia or New Zealand.”
The report said the world’s least affordable markets all had something in common – “each of the least affordable markets were characterized by more restrictive land-use regulations which materially increases the price of land and makes housing less affordable.”
The most affordable major market in the world was Detroit, with a multiple of 1.4 ($66,500/$48,700).
Over all, Windsor was the most affordable Canadian city of any size, with a ratio of 2.2 ($149,900/ $67,900).
January 23, 2012 Globe & Mail Update, available online at http://www.theglobeandmail.com/report-on-business/economy/housing/vancouver-among-worlds-least-affordable-housing-markets/article2311279/
Friday, January 27, 2012
Is record household debt a problem for home owners?
Continuous bad news about rising Canadian debt has been making headlines for the past few years – and now we’re hearing over and over again that mortgage debt has reached epic proportions.
Is all of this negativity accurate? We decided to find out by asking some credible sources.
The truth about household debt.
It is true: the overall household debt of Canadians is at a record of $1.5 trillion, growing from $147 billion in 1982. Two-thirds of the increase from 1982 - 2010 occurred from 1999 - 2010.
Why have we seen high mortgage debt?
Mortgage holders are also typically younger, who have bought their home within five years, and who carry higher mortgage debt than those who have been in their homes longer.
How does mortgage debt compare with other debt?
Annual Growth Rates of Canadians’ Debt
Excerpt from January 2012 Edition of Realtor Link, Volume 13, Number 01
Monday, January 23, 2012
2012 MARKET FORECAST
FOR IMMEDIATE RELEASE – From the desk of Amalia Liapis
2012 MARKET FORECAST
As we move forward into 2012, the year of the Dragon, I thought it helpful to review some global activity that will have a measurable effect on our local real estate market.
China’s fourth quarter gross domestic product (GDP) rose 8.9% from a year earlier, beating analysts’ expectations of 8.6% growth. For the full year of 2011, China’s GDP rose by 9.2% compared to a 10.4% rise in 2010. It always amazes me how China can produce statistics so quickly but market analysts are always skeptical on how accurate the data is out of China as there is no way to reliably check the accuracy.
USA reporting season is in full swing for the December quarter and results here will direct US and world markets over the next few weeks. The US still has the world’s largest economy and, while it has slowed, guidance from the corporate world during reporting season will give a better idea of future recovery. Again the next two weeks will be vital here, but so far so good. Economic data has been better than expected and this has been reflected in the US equities market now at five month highs. This is the year for the Presidential elections, so we can expect to see lots of big promises from both parties that should also help equity markets and real estate activity.
Europe’s financial problems will be with us all during 2012 as there appears no easy fix. The International Monetary Fund (IMF) is hoping to raise $500 billion US to help with the European crisis. The US Treasury and some non-euro zone European countries, such as Britain, are reluctant to contribute and this could leave Asian and other developing countries to make up the shortfall.
Greece is trying to work out with its creditors how much they will write off. An agreement of sorts was reached last year as a part of the Greek bailout fund that bond holders would take a “hair cut” of 50%. Now, Greece wants that to be taken out to 68% and could be close to an agreement; however Greek Banks don’t want to be included. No one does, but most will agree if everyone else will. The European Central Bank (ECB) is the largest holder of Greek bonds with a total of around €50 billion ($61.5 billion US). Hedge funds are threatening to sue the Greek Government to make good on bond payments so this issue could hang over any deal made. We could then expect Portugal to be the next to stand up for Portuguese bond holders to also take a “cut,” perhaps then followed by Ireland. If Spain and Italy start looking for a deal then the world economy will be in turmoil for a long time which will have an effect on the stock markets. During these economic times people start to move their money into other investments and so real estate is an obvious choice. Demand for investment properties will create a momentum in our local market.
Friday, January 13, 2012
Buy, rent, sell, and profit
Investing 101 Novice investors took plunge on becoming landlords in small-town British Columbia
Investors: Professional working couple
Investment: Rental condo
Strategy: Buy, rent out, sell
Time frame: 4 years
Bought for: $50,000
Rented for: $400 per month
Sold for: $85,000
First time investing can feel a little intimidating in the beginning. As a young professional couple, we questioned whether investing was a smart idea at all.
We worried about risking our savings and taking out another mortgage. If we had extra finances, why not use it to pay down our current mortgage? We were concerned about finding the right property to invest in. How far would we need to travel to get something in our price range? How would we know if we were getting a good deal? Then we knew we'd have the ordeal of finding good tenants and maintaining a property from afar. With both of us being academics, rather than handy or businesslike, these were real concerns.
Yet , we saw that real estate had the potential of bringing in a better return on our investment than did our measly 2.5 per cent "high-interest" savings account. WE could keep a property short term and bring in a chunk of money to apply to our next real estate purchase or another investment.
Where to start?
To start, you need to decide what to invest in and how much moeny you want to put into it. In our case, as people who generally avoid risk, we decided on finding something we could afford, where the rent would pretty much pay for the mortgage. For us to feel secure, that meant looking for out-of-town older residential apartments.
Finding a property
Finding an area was our first challenge. We looked at small towns with properties in our price range, and tried to locate places where big companies were moving to, growth was projected and residential vacancy rates were low. We choose Kimberley, B.C., which had opened a ski resort and had an airport close by. The only problem.... it was 12 hours away.
This meant we had to get pre-approved with a good mortgage broker who could act from afar if necessary. We also had to check out what had been selling, what the average prices where and what units were renting. And finding a good realtor was essential. We phoned and emailed a couple before settling on one we believed we could trust. By the time we visited, we were in good position to view suites of interest to us and make offers on any good deals we saw.
We wasted some time getting distracted by nicer places rather than what we could afford. On the other hand, it was still important to do the work to find a unit that would be easy to rent at decent rate. So, we spent a lot of time understanding the area, looking for an accessible building with a great location and amneties nearby. After viewing several units, we found the one we wanted to make an offer on. We made sure to do our due diligence: read the strata minutes, walked the suites, got a home inspector in, talked to neighbours and collected as much information as we could. Eventually, we bought a 600- square foot condo on the ground floor of a low-rise building, which was walking distance to town centre and a short drive from the ski hill.
We were surprised by all the costs we hadn't anticipated with our investment property. In the end, the rent we received did not cover our costs and we had to subsidize it by about $100 per month when the suite was rented, and $500 when it was not. Think about how much you are able to put into this at the beginning and throughout. At the outset, consider not only the down payment, mortgage and legal fees, but any potential upgrades you may require to attract a higher rent. On an ongoing basis, remember you'll need to cover strata fees, maintenance, insurance, property taxes (with no homeowner's grant). Also, we found city utilities in a small town astronomical compared with our residence in the city. In addition, don't forget to set aside money for emergencies - months when your unit sits vacant when a tenant bails, replacing appliances, or special levies. And don't forget about capital gains tax when you sell.
To attact a good rental income, you want to make your apartment as appealing as possible to tenants. This can mean getting it properly cleaned, painted and perhaps replacing cupboards or appliances that our outdated to give your suite an edge over others in the building. We lucked out by finding a relaiable person to check our suite between tenants, and a good affordable painter.
Although we could have directly managed the tenants, we decided to get some help as we were so far away. During the four years we owned the suite, we had three different rental experiences - a rental pool and two different proerpty managers. In the rental pool, several units pooled their rents together and then split it proportionally (by square feet), regardless of whether units were rented or not. This allowed for a regular income stream, but in the end felt frustrating to those whose units were always rented.
Finally, we found an excellent solution - an independent property manager. He charged us 10 per cent of the rent, but found us a tenant who never left. He also had excellent relationships with service providers, including a plumber, electrician and carpenter, so repairs could be quickly handled. Having the property manager gave us the peace of mind that our property was being looked after.
Our strata also voted on being able to communicate and vote electronically if necessary. Above all, we found that one of the best methods to ensure that our unit was looked after was to show extra apprecaition to everyone involved.
In the end, no matter how pleasant your situation is, you are still looking to make money on your investment. For us, as we saw prices rising, we allowed our place to sit vacant, got it repainted again and put it on the market. After four years, we decided it was time to liquidate our investment property. We made quite a good profit, something that never could have happened in four years with a savings account.
Overall, buying and selling our first investment property was a scary but exhilarating process. This experience gave us the confidence that we can buy and sell real estate. In the end, we made a chunk of moeny we never would have if we didn't take the risk, and look forward to taking the plunge again.
Article taken from January 2012 Edition of Western Investor (www.westerninvestor.com)
Friday, January 13, 2012
Real estate on a roll
Regional Roundup: Five-year plan will see about $600 million pumped into Winnipeg's "SHED" zone
You can excuse Winnipeggers if they think they've travelled back in time to the turn of the 20th century.
Back then, Winnipeg was one of the fastest growing cities in the country - it peaked at No.3 for population around 1912 - and quickly became known as the "Chicago of the North" due to the seemingly endless flurry of growth and activity.
The flurry, of course, eventually fizzled and the Manitoba capital lost its momentum to cities such as Calgary, Edmonton and Ottawa. Sure, it has long been a major center in Canada, but it lacked the spark of yesteryear.
That was then, however, and this is now.
There's a new attitude in Winnipeg but it's not just lip service - it's being backed up by investment and action.
Much has been made in recent months about the return of the Winnipeg Jets to the city and the pending arrival of IKEA in late 2012. While there's no questioning their impact and high profile, these two developments are hardy operating in isolation.
Wrecking balls are poised to kick-start what could be the most significant overhaul of the downtown in Winnipeg's history. Dubbed the sports, hospitality, and entertainment district, or SHED, this five-year plan to spend upward of $600 million is poised to revitalize an 11-block area that incluedes the MTS Centre, home of the Jets, the Winnipeg Convention Centre and the Metropolitian and Burton Cummings theatres.
Shortly after a pair of old building on Portage Avenue across from the MTS Centre are demolisted ealry in the new year, consrtuction will begin on a multi-use facility featuring five storeys of retail and office space, topped by a 14-storey hotel with 154 roooms.
Cindy Rodych, vice pressident at Stantec, the architect of record for the SHED, said a key part of the development will be the transformation of a surface parking lot in-between the MTS Centre and the convention centre. She said much of the SHED is shaped like a doughnut and this lot is the doughnut hole.
"Something has to happen on this site. A SHED isn't and can't just be a district; it has to be a destination. What has been proposed in the master plan is a destination element for the public, active, vibrant, urban and an entertainment-focused area, " she said.
Rodych said the hope is that the area will ultimately resemble the intersection of Dundas and Yonge streets in Toronto.
Much of the anticipated success for the SHED is contingent on downtown Winnipeg attracting more workers - say another 1,000 - during the day. Rodych said with Stantec moving between 200 and 300 staff into its new headquarters for the first SHED project, she doesn't see this being a problem.
This new activity and more is translating into a healthy real esate market for the city, experts say.
Retail vacancy rates are currently sittting around 3.5 per cent, after being as high as 5 per cent over the last decade. They're even lower right now in the power centre sector at 0.7 per cent.
Office vacancy rates are on the upswing at 6.9 per cent, a rise from 4 per cent a few years ago, thanks primarily to the contraction of Manitoba Hydrp's new downtown office tower a couple of years ago. The addition of the nearly 700,000-square-foot building has caused a bit of a glut in the market.
"When you add that much space to the market and pull all their occupancies from other areas in the city, you create an articial high on vacancy. That will smooth out over time as absorption occurs," said John Pearson a commercial leasing specialist with Shindico Realty Inc.
Industrical vacancy rates, meanwhile are hovering in the 5 per cent to 7 per cent range.
Despite the relative lack of activity in Winnipeg's industrial market, there is no question that it's the dominant force in the city's commerical real estate sector. There is approximately 70 million square feet of industrial space in Winnipeg compared with just 15 million square feet in each of the retail and office markets.
Pearson said a combination of positive factors, including the new air terminal building and the excitement surrounding the hockey team, is attracting investment in the downtown area for reaurants, hotels, and offices.
The construction of a new stadium at the University of Manitoba for the CFL's Winnipeg Blue Bombers, which is scheduled to oepn next spring, has also created a substantial investment opportunity for the continued redevelopment of the area north of Polo Park Shopping Centre. That's where the old Winnipeg Arean was demolished several years ago and whether the antiquated Canad Inns Stadium hosted its last football game a few weeks ago. The football staduim is scheduled to be torn down next spring.
Wayne Pratt, managing director of the Winnipeg office of Colliers International, said there is regular sales and leasing activity occuring across all real estate sectors and the outlook for the supply and demand balance is good.
He said rents are going to have to increase, however, in order for any construction cranes to appear on the skyline.
Article taken from January 2012 Edition of Western Investor (www.westerninvestor.com)
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