Good afternoon everyone;
It’s been a busy week. The federal government DID NOT drop the prime overnight lending rate and the Canadian dollar responded with a rise. This also allows room for the government to make a cut(s) in future if need be.
In essence this means, for the time being, that the banks will make larger margins on their lending products as they stopped discounting at the same levels. Mortgage rates are still VERY, VERY low as a 5 year fixed rate can be had for approx. 2.8%. Remember the commotion that TD created when they announced a low interest rate of 2.9% (that was only about 18 months ago). Supply is low and the GTA market fundamentals are strong. 2016 Should be another strong year in terms of volumes and with a modest average price increase.
Oil price have seemed to bottom out and even today it is trading higher by about 4% ($31.55/barrel) and this is also helping the dollar stay above the 70 cent range (versus the US dollar). The Toronto Stock exchange seems to be holding relatively stable as well.
I hope you enjoy a the selected stories below.
Bank of Canada announces overnight rate
by Justin da Rosa | 20 Jan 2016
The Bank of Canada will maintain its target for the overnight rate at 1/2%.
“Inflation in Canada is evolving broadly as expected. Total CPI inflation remains near the bottom of the Bank’s target range as the disinflationary effects of economic slack and low consumer energy prices are only partially offset by the inflationary impact of the lower Canadian dollar on the prices of imported goods,” the Bank of Canada said in a release. “As all of these factors dissipate, the Bank expects inflation will rise to about 2 per cent by early 2017. Measures of core inflation should remain close to 2 per cent.”
The bank did acknowledge that commodities and oil prices continue to take a hit and negatively impact the economy. It suspects the economy stalled in Q4 2015. It also expects growth to be delayed.
“The Bank now expects the economy’s return to above-potential growth to be delayed until the second quarter of 2016,” the BoC said. “The protracted process of reorientation towards non-resource activity is underway, helped by stronger U.S. demand, the lower Canadian dollar, and accommodative monetary and financial conditions.”
On a bright now, however, employment and household spending remains strong.
“The Bank projects Canada’s economy will grow by about 1 1/2 per cent in 2016 and 2 1/2 per cent in 2017. The complex nature of the ongoing structural adjustment makes the outlook for demand and potential output highly uncertain,” the bank said. “The Bank’s current base case projection shows the output gap closing later than was anticipated in October, around the end of 2017. However, the Bank has not yet incorporated the positive impact of fiscal measures expected in the next federal budget.”
The unexpected Ontario city that should be on every investor’s radar
HomeNews / by CRE18 Jan 2016
For over 90% of real estate investors, the focus of their portfolio is the market they live in. As Toronto-based real estate investors with almost two decades of rising prices, this has worked out very well.
At the same time, Connect Asset Management noticed yields in other Canadian markets were higher, while appreciation is typically lower. Having traveled both the country and internationally over the past few years, we began to develop a strategy for determining the best places to invest as a Canadian regardless of where we lived.
While “location, location, location” is the key to real estate, the most important determinant of long term real estate appreciation is city selection. Buy in a city with a declining economy, your returns will suffer no matter how good the “location” is. While an A site might be easier to sell than a B or C location, property rarely makes money when real estate prices drop in a city.
A COMPETITIVE ADVANTAGE
That is the bottom line for why we chose Waterloo (often referred to as Silicon Valley North) over any other city was that no other market we looked at a significant competitive advantage in any industry the way Waterloo does with technology and the sciences. To quote Dave Caputo, CEO and co-founder of Sandvine Inc, “Waterloo right now, I have to believe, is one of the best places in the world to build a technology company”
This is confirmed by major international companies like Microsoft and Google setting up head offices here, as well as major Canadian technology companies like Shopify that recently opened a 40,000 sq ft office to take advantage of the engineering talent.
The foundation for all this is the University of Waterloo and Wilfrid Laurier two of Canada’s top universities with strong international reputations as well as an industry leading co-op programs. Around these organizations, major research institutions have developed as well as, incubators, angel investor and venture capital networks linked directly to Bay Street and Silicon Valley.
In addition, our research indicates that while Waterloo still has commercial vacancy, the residential market is much tighter with vacancy rates sub 2%. New condos projects targeting students and young professionals which sold out during their pre-construction launches have rented very well with ICON 330 renting over 1500 beds in under two months.
Essentially, in Waterloo, the market for prime student housing has been waitlisted. The shortage in luxury furnished rentals to us seems like one of the greatest opportunities for investors with a strong growth from both student and young professionals. Office space also presents tremendous opportunities but those risks are more significant with there being a significant vacancy backlog.
With Waterloo commercial real estate renting for less than a third of what these companies would be paying in major centres, and the low Canadian dollar, established international companies will continue to establish offices in the region. To use Google as an example, in Mountain View, California where they are headquartered, the average rents are $97 US per square foot in Waterloo they are less than $15 CDN.
This doesn’t even begin to describe the difference in salaries vs Silicon Valley. Even Toronto based companies are looking at a 1/3 of the cost for even B office space.
Combine this with the different tax incentives from various levels of government and the business case for Waterloo will continue to be very compelling for years to come. That, combined with the talent from the education system and the start-up funding ecosystem, will drive the growth of Waterloo for years to come.
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Investment Hot Spots:
Saint-Hilarion, Cromer, Pontiac, Passes-Dangereuses, Bath
by Waterloo Investor 2016-01-18 1:33:28 PM
Agreed Waterloo Region is a great place to invest in principle but the part about student housing omits the fact that there is an oversupply which is likely to become critical when 7000 units under construction are finished. Vacancy rate for student apartments is already high and most new builds are not easily rentable to non-students because they are five bed apartment units in purpose built buildings filled with undergrads. Current demand is about 31k beds for students…currently 32k beds are available in the areas immediately near the two universities — add 7k or so more already in the pipeline and to me that spells a serious crisis. B class units and even luxury new builds, from what I can see, are already experiencing considerable vacancy. ‘Enormous opportunities for returns’ is to say the least an exaggeration — 10-15 years behind the curve on that one if you are talking about student housing. I would say more accurately there are enormous opportunities for losses in that sector as sellers stubbornly cling to valuations based on 600/bed while ignoring rising vacancies.
Did Hollywood doom this house to an unsellable fate?
HomeNews by Jill Gregorie18 Jan 2016
When Scott and Barbara Lloyd agreed to let filmmakers shoot scenes for The Silence of the Lambs in their Layton, Pennsylvania home, they didn’t realize the decision would have such a market effect on the value of their home more than 15 years later.
Although Buffalo Bill first appeared on the silver screen in 1991, the Lloyds have found that the gruesome scenes he depicted may have tainted their three-story Victorian residence.
The couple retired and are looking to downsize to a ranch. They listed the house for US$300,000 last summer, but have since lowered their asking price to $250,000 due to a lack of interest from buyers, The Pittsburgh Tribune-Review reports.
“We’re finally starting to see a little bit of motion,” Scott Lloyd told the newspaper. The Lloyds couldn’t ask for more promotional activity: when they announced that they wanted to sell the house, such media outlets as The Huffington Post and the Wall Street Journal contacted them to learn more about sale. Moreover, it was the second most viewed home on realtor.com last year. The attention has not translated to a closing, however.
“The fact that a home gets a ton of publicity doesn’t necessarily add up to a quick sale,” Erik Gunther, senior editor and unique home expert at realtor.com, told The Pittsburgh Tribune-Review. “Just because I want to gawk at something doesn’t mean I want to buy it.”
Still, Scott and Barbara Lloyd admit that the house does face other setbacks, including its remote location in a small village, and the fact that it only offers one bathroom alongside its four bedrooms.
Fortunately for them, however, the house is not equipped with a basement dungeon – those scenes were filmed on a studio soundstage.
While the Lloyds hope that the price reduction will generate new leads, the couple’s realtor has expressed some exasperation with the undertaking.
“We know there are people interested,” said Dianne Wilk, RE/MAX Select Realty, “but it comes down to who wants a home like that?
Have a wonderful weekend and a fantastic week, Anthony