Archive for September, 2013

Where do the world’s millionaires live?

Friday, September 27th, 2013

Some 300,000 people joined Asia’s millionaire ranks last year, according to a world wealth report released Wednesday, which also found that the region slipped behind a rebounding North America.

The report by CapGemini and Royal Bank of Canada is the latest of several recent surveys highlighting the strong rise in the region’s wealthy while also hinting at persistent inequality.

The survey found that the number of Asian millionaires grew 9.4 per cent in 2012 to 3.68 million people, up from 3.37 million the year before, and their combined wealth rose 12.2 per cent to $12 trillion.

Economic growth, strong stock markets, rising property prices and the region’s high savings rates helped boost fortunes.

The report defines wealthy as those with at least $1 million in liquid assets. It covered 10 Asian countries and territories including China, Japan, Australia and South Korea.

Asia was surpassed only by North America, where the millionaire population grew 11.5 per cent to 3.73 million with combined wealth rising 9.8 per cent to $12.7 trillion.

Asia’s millionaire population outnumbered Europe’s for the first time in 2009, and in 2011 it edged out North America for top spot, according to previous editions of the report. The report’s authors forecast that Asia would reclaim its crown as soon as 2014.

The superrich, defined as those worth at least $30 million, grew even faster than the millionaire population at large. Their ranks in Asia grew 15.4 per cent last year to 25,000 while combined wealth rose 18 per cent, about double the global average.

Earlier this month, the Hurun Report, which tracks China’s wealthy, said surging stock prices helped mint 64 new billionaires this year, raising the total number to 315, compared with none a decade ago. At about the same time, Wealth-X, which follows the world’s wealthy, said Asia’s superrich population grew 4 per cent to 44,505.

Eric Lascelles, RBC asset management’s chief economist, chalked up some of the rebound in the fortunes of the superrich to more aggressive investments, which tend to get hit harder in downturns and rise more rapidly on the rebound.

“Equally we need to acknowledge that globalization over the past few decades has increased inequality to some extent,” he said. “We have seen rates of poverty decline quite nicely over that period as well but that’s not to say that wealth or incomes have risen as quickly in the lower end as it has in the higher end.”

Source: Kelvin Chan, The Associated Press

Just who is buying Vancouver’s real estate?

Tuesday, September 24th, 2013

I can’t resist posting this article in the Globe and Mail written by Stephen Quinn answering the question that reverberates around many dinner tables these days – just who is buying Vancouver real estate?

That sound you heard between the rumbles of thunder and the shofar blasts this week was the collective sigh of Vancouver residential property owners looking at the August sales figures.

Yes, in this, the most overvalued, frothiest, most bubblicious real estate market in Canada, sales in August were up more than 50 per cent over last year.

The consensus seems to be that Vancouverites who are already willing to spend upward of 70 per cent of their household income to keep a roof over their heads are in a buying mood again. They’ve figured out how to navigate or have found creative ways around the stricter lending rules and are jumping in before Finance Minister Jim Flaherty clamps down even harder.

But with Vancouver home prices still hovering at double the national average, you have to wonder: Who is buying?

Popular wisdom is that foreign money is fuelling the market: wealthy Chinese investors parking their cash in the relative security of $2-million or $3-million Vancouver homes and driving up prices.

The degree to which foreign buyers are fanning the market is a continuing debate. In any case, the theory fails to explain why the fixer-upper bungalow up the street from me in East Vancouver is listed at $930,000.

No, something else is going on here. Who are the buyers? I have a few ideas:

1) Slumlords. As is the case everywhere else in the city, property values have risen dramatically, even in Vancouver’s least desirable neighbourhoods. Owners of SROs, flophouses and falling-down vermin-infested tenements are cashing out of the slum business and investing in only marginally better-maintained condominiums. And the good news is that they’re holding onto the cash that the Residential Tenancy Branch has ordered them to pay to tenants they housed in deplorable conditions for decades. That’s found money: They can use it to increase their down payment and reduce mortgage costs.

2) Vampires. The estimated life span of a vampire in good health is 800 to 1,000 years. This affords gainfully employed vampires who manage to avoid frivolous spending the opportunity to save enough money for a 25-per-cent down payment on a single family home in Vancouver by the time they reach 400 years of age. Vampires have the added advantage of being able to attend overnight open houses hosted by vampire real estate agents, which is why so many mortals find themselves out-bid by dawn.

3) Goalies. Well, one goalie.

4) Former high-school chemistry teachers now cooking crystal meth. If Breaking Bad’s Walter White has taught us anything, it’s that a career in the production and distribution of crystal methamphetamine not only can be lucrative, but empowering. Real estate investment in Vancouver requires a stomach for risk, and the confidence and feeling of invulnerability that comes with having to murder your competitors in cold blood can serve you well.

5) Transit police officers. A transit police officer who pulls even a moderate amount of overtime can earn an income well into the six figures. In addition, transit police officers have the opportunity to scan the lower mainland real estate market in real time on a daily basis, particularly high-value properties close to transit. They also appear to have ample time to stand around on Skytrain platforms and discuss the merits of various available properties with their colleagues.

6) Real Housewives. But not real housewives.

7) Granite countertop/stainless steel appliance fetishists. These are the rarely-talked-about drivers of the Vancouver real estate market, known by insiders as “Rennies.” They are known to drive up the price of condominium projects by bidding against each other where ample granite surfaces and high-end appliances are on offer. So great is their influence that condo-marketers can often presell entire buildings with little more than a photograph of a glass of Chardonnay sweating on a granite counter top bathed in the reflected light of a gleaming refrigerator.

8) News aggregater website entrepreneurs. As masters of click-bait with little or no journalism training, these shrewd business people have amassed fortunes by simply reorganizing and repurposing content provided by actual news outlets, turning fractions of pennies into millions of dollars. They tend to snatch up properties with coffee shops at street level to avoid overhead.

9) Oprah. Because she can afford to buy a home wherever she likes, even in Vancouver.

Overseas buyers target high-end Canadian properties

Saturday, September 21st, 2013

Buyers from China, Russia, the Middle East, India and the United States are expect to be among those looking for high-end homes in major Canadian cities during the fall, says leading agent Sotheby’s International Realty Canada.

Over the year to June, sales of luxury homes worth at least CAN $1-million have risen, according to the newly-published Top Tier Report.

Single family homes in the first half of 2013 compared with the same time last year, worth more than CAN $1-million have risen by 10% in Calgary, 6% in Montreal, 5% in Toronto and are down 2% in Vancouver. Most property sold was worth between CAN $1-4-million.

Sales of townhouses worth more than CAN $1-million were up 73% year-on-year in Calgary and 21% in Toronto, but were down 8% in both Vancouver and Montreal.

But year-on-year condo sales were down in all areas, falling 37% in Calgary, 20% in Vancouver and 19% in Toronto and Montreal.

Sotheby’s President and Chief Executive Ross McCredie says, “In examining the performance of the high-end market, we feel confident that Canada’s largest urban centres remain in exceptional positions heading into fall, with healthy market fundamentals from coast to coast.”

Despite the annual fall in condo sales, many overseas buyers are still actively looking to buy.

Elli Davis, a Sales Representative from Royal LePage, Toronto, says many foreigners buy condos for their children to live in while they attend school in Canada.

“I’m seeing a lot of foreign names on showings of all of my listings. More foreign names than not.”

Canadian buyers have lagged a little behind international demand, says the bi-annual report that is claimed to be the only Canadian study that compares data for residential properties with values over CAN $1-million.

“The performance of Canada’s high-end residential real estate market in the first half of 2013 reflected a year of recalibration and overall strength.

“While international demand for luxury real estate in the major urban centres of Vancouver, Calgary, Toronto and Montreal had been consistently strong leading into 2013, Canadian buyers had taken time to adjust to the precautionary lending controls implemented by the Bank of Canada in July 2012.

“By June 30, 2013, sales data for the first half of 2013 reflected positive momentum in key markets compared to the last half of 2012, with variations between condominiums, attached homes and single family homes, as well as between price segments above the $1-million mark.

Mr McCredie says investors of luxury home are unlikely to be put off by short-term market fluctuations. “They’re not first-time homebuyers. They’ve seen cycles before. Most of our clients remember what it was like in the early 80s and the early 90s, when you had major corrections, so they’re not going into these markets blindly.”

In Vancouver, sales are now picking up, the report claims. The city saw 1,239 sales of homes over CAN $1-million in the first six months of the year. “Buyers are beginning to gain more confidence when making big purchase decisions and those who initially put their decision to buy on hold are now coming back on the market.”

Calgary saw 388 sales over $1 million from 1 January to 30 June. “Calgary’s high-end residential real estate market continues to display strong market fundamentals, setting records in the first half of 2013 while experiencing both a steady rise in sales volume for homes over $1-million and a strong decline in days on market for key segments compared to 2012.”

Toronto got off to a faltering first three months, but recovered later and sales of prime homes reached 2,947.

The Montreal market is stable, but there were no sales of single family, attached and condominium properties over CAN $4-million within the first half of 2013, the report admits.

Source: OPP Connect

Record $40-million sale of Vancouver condo a sign our housing market is peaking?

Friday, September 20th, 2013

A Middle Eastern royal’s purchase in May of the penthouse suite and unit below it at Vancouver’s five-star Fairmont Pacific Rim hotel for $40 million was the most expensive condominium purchase in Canada.

The hotel is in Coal Harbor, a community in Vancouver West, one of Canada’s most expensive home-buying areas. The property is one block north of a street that residents in the 19th century called Blueblood Alley for its wealthy mansion-owners.

“Vancouver has been fuelled tremendously in the last couple of years by high-end wealthy Chinese and Hong Kong buyers,” Malcolm Hasman, the luxury real estate agent who brokered the sale of the Fairmont penthouse unit to the Middle Eastern client, said in a Sept. 16 phone interview. This year probably will be Hasman’s third-highest in sales, after 2012 and 2007, with more than $200 million in luxury real estate sold, he said.

“There’s more money around today than there’s ever been in the high-end market. And where’s it coming in from? The Middle East, China, Asia.”

The oceanfront apartment was also among about 131,324 house and condo transactions in the past three months, up 6.1% from the same period a year earlier and defying the predictions of the Toronto Real Estate Board and the Bank of Montreal that the market is cooling. Analysts and investors including Bank of Nova Scotia and Sun Life Financial Inc. now say it represents the excesses of a market that may be peaking.

“I’m not bullish on Canadian housing,” said Stephen Groff, who helps oversee $7 billion in assets at Cambridge Global Asset Management unit of CI Investments Inc., in a Sept. 13 interview. “It’s just people seeing rates starting to go up and they rush to get the deal done. It isn’t indicative of an improving market.”

The sales pop, driven by wealthy foreign investors and Canadians jumping into the market before expected mortgage rate increases, is at odds with Canada’s sluggish growth. Fuelled by consumers carrying record levels of personal debt and a high unemployment rate, there’s growing concern that the housing decline when it comes will be harder than the “soft landing” predicted by Bank of Canada Governor Stephen Poloz and Scotiabank Chief Executive Officer Richard Waugh.

Purchases of multimillion-dollar luxury properties on the west coast and condo units in Toronto’s 260 towers helped drive debt-to-household income to a record level in the second quarter. Mortgage borrowing rose 1.7% to $1.11 trillion, according to Statistics Canada, and debt such as mortgages and credit cards increased to 163.4% of disposable income, compared with a revised 162.1% in the prior three-month period. That’s among the highest in the world and compares with 91.9% in the U.S., down from a record 112.7% in 2009.

Home buying slowed last year after regulators tightened borrowing qualification standards. It has picked up again as consumers take advantage of historically low mortgage rates.

The government shortened amortizations in July 2012 to 25 years from 30 years as benchmark interest rates continue to be anchored at 1% in the longest pause since the 1950s. The Office of the Superintendent of Financial Institutions also introduced tougher standards for lenders.

The result of the efforts was short-lived. In August last year, home sales slipped 14% across the country led by Vancouver’s 31% dip, according to data from local real estate boards. The total values of August, 2012 purchases was 24% lower than this year’s $8.2 billion.

In comparison, Toronto residential real estate sales last month rose 21% from a year ago, according to the Toronto Real Estate Board, or TREB, and Vancouver existing home sales surged 53%, said that city’s board.

Source: Katia Dmitrieva, Bloomberg News

Sales of luxury homes in Vancouver rise

Tuesday, September 17th, 2013

Sales of single-family homes over $1 million were up 65 per cent in the first half of 2013, up from the last half of 2012.

According to the report, Calgary was the only Canadian city to surpass Vancouver, with sales up 67 per cent in the same category, as reflected in the recent Top Tier Real Estate Report. Luxury condo sales over $1 million were up in Vancouver, Calgary and Toronto, compared to the last half of 2012, and spent fewer days on the market.

“We feel confident that Canada’s largest urban centres remain in exceptional positions heading into fall, with healthy market fundamentals from coast to coast,” says Ross McCredie, president and CEO of Sotheby’s International Realty Canada.

Foreign buyers make up approximately 40 per cent of luxury single-family home buyers in Vancouver, according to Sotheby’s International Realty Canada’s Top Tier Trends study (April 2013). This trend is expected to continue with China remaining the top market influencer, followed by Iran and the United States.

“A lot of people have this perception that people are getting off an Air China flight and are buying these million-dollar properties and that is an incredibly rare event. What you are seeing is second or third generation Chinese,” says McCredie. “That’s been a trend that has gone on for a long period of time and it’s going to continue in the Vancouver marketplace.”

Another trend that has continued in Vancouver is parents buying condos for their children. According to McCredie, the transfer of wealth between generations in Canada is unprecedented.

“For a young family trying to start out in Vancouver, there is almost no chance that they could do it on their own,” he says.

The report also attributes an uptake in sales to a steadied political and economic environment, following May’s provincial election. Many Sotheby’s clients were worried a change of government would not be positive for the province’s economy, he says.

While Vancouver’s high-end real estate is up in the first half of 2013 compared to the last half of 2012, condo sales 2013 were down by 20 per cent compared to the first half of 2012. McCredie attributes this to a couple of high-profile projects that were deeply discounted last year, spooking potential buyers. Talk of the real estate market being overheated didn’t alleviate buyers’ worries.

McCredie is confident that sales will continue to grow this year and says that there isn’t anything worrying the real estate industry at this point in time. In fact, he believes that Canada has one of the healthiest real estate markets in the world.

“When you look at the Canadian real estate fundamentals it’s one of the healthiest real estate markets in the world,” he said. “All Canadian cities are growing and we have very low vacancy rates in almost all of our cities. So when you have all those different dynamics, it speaks to a healthy market.”

Source: Nicole Clark, BC Business

Homes sales in Vancouver and Toronto continue to surge

Friday, September 13th, 2013

Home sales in two of Canada’s largest cities continued their surge in August from a year earlier.

Sales in Toronto, the largest market, rose 21% from August last year to 7,569 units, the Toronto Real Estate Board said in a statement Thursday, with average prices gaining 5.4%. Vancouver existing home sales rose 52%, that city’s real estate board said Wednesday.

Housing-market data are showing few signs of a hard landing after warnings from economists and policy makers that a bubble may have been forming. Buyers have adjusted to tighter mortgage rules imposed last year, according to Diane Usher, president of the Toronto realtor group.

“Many households have accounted for the added costs brought on by stricter mortgage lending guidelines and have reactivated their search for a home,” User said in today’s statement.

Other regions and cities recording double-digit sales gains in August include Victoria and the Fraser Valley areas of British Columbia, and Calgary.

The average price of a home sold in Toronto was $503,094 in August, the Toronto realtors group said Thursday.

There are signs the country’s housing market may be losing some steam. Existing home sales recorded their smallest monthly gain in five months in July, the Canadian real estate association said Aug. 15. Banks including Royal Bank and Toronto-Dominion, the two largest lenders, also have raised mortgage rates in recent weeks to reflect higher yields in the bond market.

The Canadian Real Estate Association publishes aggregated national data around the middle of each month.

Source: Theophilos Argitis, Bloomberg News

Which are the world’s most liveable cities?

Friday, September 13th, 2013

Bragging rights are a big deal for the world’s top cities, each trying to edge out one another in any category of prestige. But while Paris may be the world’s most romantic city and New York the most cosmopolitan, where, truly, is the best place to live?

The Economist Intelligence Unit measures the world’s most liveable cities, gauging the top towns by several metrics, including their social stability, healthcare prospects, culture and environment, education system, and physical infrastructure. Which city does the EIU nominate as the most liveable in the world, and which Canadian cities make the list?

In reverse order (to keep the suspense!):

10. Auckland

Liveability score (out of 100): 95.7

Auckland kicks off this top ten with sterling ‘cross the board numbers. The EIU uses five key categories (social stability, healthcare, culture and environment, education, and infrastructure) and gives them all scores out of 100 — 100 being ideal, zero being intolerable. Auckland, for its part, doesn’t score less than 92 in any of the five categories, and gets a perfect 100 score for its education system.

9. Perth

Liveability score (out of 100): 95.9

With four cities appearing on this list from Australia, the island nation is, by participation at the top of the EIU’s study, the most liveable country in the world. But Perth, despite finishing last compared to its country mate cities, is no slouch. Perth gets three perfect 100 scores, recognizing the city’s exemplary healthcare system, education system and physical infrastructure.

8. Helsinki

Liveability score (out of 100): 96.0

The Finnish capital is, notably, the only city on this list without a perfect 100 score for its education system. No matter, for a 91.7 education score is still enough to get by, and Helsinki excels in other categories. The EIU awards Helsinki perfect scores for its healthcare system and social stability.

7. Sydney

Liveability score (out of 100): 96.1

Australia’s most prominent city isn’t its most liveable, according to the EIU. Still, there is plenty to like about Sydney, defined most notably by its Opera House along the city’s picturesque harbour. Perhaps that’s a nod to Sydney’s culture and environment, which receives a sterling 94.2 score by the EIU’s study.

5. Adelaide (tie)

Liveability score (out of 100): 96.6

Tied for the fifth-most liveable city in the world is another Australian town, Adelaide. You won’t find any flaws in Adelaide’s portfolio; the EIU awards it a score no less than 94 in each of the five categories it used as a liveability measure. By comparison, Adelaide’s 96.6 overall liveability score means the Australian town is more than twice as liveable as a city like Tehran, which received a liveability score of just 45.8.

5. Calgary (tie)

Liveability score (out of 100): 96.6

Canada’s first entrant to this list comes out west, where Calgary is staking its claim as one of the finest cities in the world. First, the negative: the EIU does not smile kindly on Calgary’s culture and environment, perhaps lambasting the rodeo lifestyle with its 89.1 score in the category — among the worst marks on this list. Still, Calgary has much to boast about, including one of just three perfect scores awarded for the category of social stability.

4. Toronto

Liveability score (out of 100): 97.2

Toronto has long been lampooned for its subpar transportation system and hellish traffic scene, so perhaps many residents of the city understand why the EIU could give the city a poor 89.3 score for the town’s physical infrastructure. Otherwise, though, Toronto is a standout. Across the other four categories used for this study, Toronto scores no less than a sparking 97.

3. Vancouver

Liveability score (out of 100): 97.3

Canada’s most liveable city ekes out Toronto by a tenth of a point in the EIU’s rankings, though such are the razor-thin margins when discussing the best of the best. Vancouver is a star in this study’s scoring system, receiving perfect 100 scores in the categories of healthcare and education. In fact, Vancouver also receives a perfect 100 score in the culture and environment category, the only city on this list to do so.

2. Vienna

Liveability score (out of 100): 97.4

The highest-scoring European city on this list is also just one of two from the continent to appear here. Vienna’s highest honour in this study comes from the city’s infrastructure, which earns a perfect 100 score by the EIU’s measure. Only three other cities — Perth, Sydney and the most liveable city in the world, which you can see on this feature’s next slide — can lay claim to such a rank.

1. Melbourne

Liveability score (out of 100): 97.5

Australia’s most liveable city is also the most desirable in the world, according to the EIU. Melbourne excels in each of the five categories measured by the EIU, especially healthcare, education and infrastructure. Melbourne stands above by comparison. According to the EIU, Melbourne is nearly two-and-a-half times more liveable than Damascus, the Syrian city that is the least liveable town on the planet, by the EIU’s ranks.

Source: MSN

What housing crash? Vancouver house sales come roaring back

Tuesday, September 10th, 2013

Greater Vancouver home sales roared ahead 52 per cent last month, raising the prospect of a new phase of stability in Canada’s most expensive housing market.

The number of properties sold on the Multiple Listing Service reached 2,514 in August, up from 1,689 sales in the same month a year earlier, the Real Estate Board of Greater Vancouver said Wednesday. The increased activity marks the fourth consecutive month that Greater Vancouver has experienced a year-over-year gain in monthly sales, following a 19-month slump in volume.

The rebound is a sign that fears of a possible housing market crash in the Vancouver region appear overblown.

Greater Vancouver’s housing market is gradually on the mend after the 19-month decline in year-over-year resale volume from October, 2011, to April, 2013, said Tsur Somerville, a professor at the University of British Columbia’s Sauder School of Business.

Some buyers in August signed up in advance for mortgages before rates crept up, but interest rates remain relatively low, Prof. Somerville said. “Trying to time the market is really hard,” he said. “I’m not expecting any kind of raging growth market in Vancouver housing. We’re in an environment of a perception of more hikes in interest rates coming and the economy isn’t that strong.”

The benchmark MLS price index in Greater Vancouver for single-family detached homes, condos and townhouses was $601,500 in August, down 1.3 per cent from the same month in 2012. Since January, however, the price index has risen 2.3 per cent.

Dustin Strong, 34, a territory manager in Vancouver for a food distributor, is looking to buy a home with his girlfriend, Sarah. “We’re patiently waiting and watching,” he said. “Prices have been overheated, and you weren’t getting good value for the money. But I don’t think a crash would be a good thing because that would have catastrophic consequences for the economy.”

Mr. Strong said he is being realistic about what is attainable, so a townhouse is on the shopping list. Greater Vancouver’s price index, which strips out the most expensive properties, was $923,700 for a single-family detached home in August, compared with $457,000 for a townhouse and $366,100 for a condo.

“It’s a constant analysis for me,” Mr. Strong said, adding that it would be ideal to have a minimum down payment of 10 to 20 per cent of the purchase price.

While buyers rushed back into Greater Vancouver’s housing market, the increased sales came after a weak period in the summer of 2012. In July last year, the federal government reduced the maximum period on government-backed mortgages to 25 years from 30 years. Real estate experts say the change, which knocked some first-time buyers out of the market, contributed to the slowdown in housing sales in Vancouver in August of 2012.

Sales volume last month was still 4.6 per cent below the 10-year average for August.

Board president Sandra Wyant said this summer’s housing market has been much more hectic than it was in 2012, but she doesn’t expect a return to widespread bidding wars. “Buyers and sellers need to recognize that this is an increase in sales. Some buyers might be getting apprehensive that prices are about to surge, but this is a balanced market with stable prices,” Ms. Wyant said.

A measurement closely watched by the real estate industry, known as the sales-to-active-listings ratio, registered 15.7 per cent in Greater Vancouver last month. B.C. real estate agents consider it a balanced market when the ratio ranges from 15 to 20 per cent. It is deemed a buyer’s market below 15 per cent and a seller’s market above 20 per cent in the Vancouver region. There were a total of 16,027 active listings last month, down 8.8 per cent from a year earlier.

In the B.C. Fraser Valley, 1,258 residential properties sold in August, up 17 per cent from same month in 2012. The MLS home price index dipped 0.6 per cent year-over-year in the Fraser Valley, which includes the sprawling and less-expensive Vancouver suburb of Surrey.

Source: Brent Jang, Globe and Mail

London’s Walkie-Talkie ‘fryscraper’ melts luxury car

Friday, September 6th, 2013

Motorists may want to think twice about parking in front of the half-built London skyscraper known as the Walkie-Talkie.

That’s because the glare off the skin of the new building is so intense that at least one Jaguar owner says it caused part of his vehicle to melt.

And that’s not all: Locals say the building’s heat also burned a hole in the welcome mat of a nearby barber shop.

“We were working and just saw the smoke coming out of the carpet,” said shop owner Ali Akay. “This is a health and safety issue. They should have looked into this before they built it.”

Similar problems developed in Los Angeles, when neighbours of the Frank Gehry-designed Walt Disney Concert Hall reported heat buildups that required corrective measures.

In a joint statement, developers Land Securities and Canary Wharf said they are taking the complaints seriously and looking into how the building reflects sunlight. The 37-storey tower – one of the most distinctively shaped skyscrapers in London’s financial district – is expected to be completed in 2014.

The apparent problem came to public attention when businessman Martin Lindsay told reporters that his Jaguar’s mirror, panels and hood ornament had all melted from the concentrated sunlight reflected from the building.

“It was parked for a couple hours in the city … and it’s completely warped,” he said. “It’s absolutely ruined.”

The problem lasts about two hours a day and is expected to continue for another two to three weeks, developers said in a statement.

“The phenomenon is caused by the current elevation of the sun in the sky,” they explained.

Source: Gregory Katz And Sylvia Hui, The Associated Press

When will the Bank of Canada raise interest rates?

Wednesday, September 4th, 2013

The short answer is ‘not yet’.

Just announced today is that the Bank of Canada is holding its main interest rate at one per cent, where it has been since September 2010.

Economists widely expect the central bank to hold its trendsetting rate steady well into next year, so Wednesday’s announcement came as no surprise.

“The bank did precisely what was expected of them today: nothing,” BMO Capital Markets chief economist Doug Porter said in a note to investors.

“If anything, the tone of the statement was slightly more dovish, noting the more moderate global backdrop, less certainty on the output gap and still relatively relaxed on the household debt front.

“The bottom line is that we are still looking at a very long period of inactivity by the bank, and may well be talking about four years of unchanged rates a year from now.”

That wait-and-see approach would appear to suit Bank of Canada governor Stephen Poloz just fine. He has been on the job since early June and shows no sign of breaking from the monetary policies of his predecessor, Mark Carney, who took up a new post this summer as head of the Bank of England.

“Add it all up and this is a central bank that believes that growth will pick up in 2014 and that will eventually require higher rates, but which is happy to sit on the sidelines and wait for substantial proof such an acceleration is underway before raising rates,” CIBC World Markets economist Avery Shenfeld said in an investors’ note.

“We still look for the first hike in early 2015, with some risk of a move late in 2014 if there are upside surprises to our forecast.”

In the explanatory note to Wednesday’s announcement, the Bank of Canada said it intends no changes as long as considerable slack remains in the economy, inflation remains muted and household finances continue to improve.

Sluggish exports and business investment have slowed the country’s economic growth, the bank said.

“Uncertain global economic conditions appear to be delaying the anticipated rotation of demand in Canada towards exports and investment.”

To underscore that point, new figures Wednesday from Statistics Canada showed the country’s exports fell to $39.2 billion in July, down 0.6 per cent from the month before.

At the same time, imports grew slightly, to push the country’s merchandise trade deficit with the world to $931 million in July from $460 million in June.

Meanwhile, the Bank of Canada noted the housing sector has been slightly stronger than anticipated, while household credit has continued to slow and mortgage interest rates are higher, the bank added, all of which point to “a continued constructive evolution of household imbalances.”

The bank also said the global economy has less momentum than anticipated.

“In Europe, there are early signs of a recovery and Japan’s situation remains promising,” it said.

“In a number of emerging market economies, financial volatility has increased, adding uncertainty to growth prospects, although China continues to grow at a solid pace.”

While commodity prices have been relatively stable, the bank says geopolitical tensions — which presumably include the bloody conflict in Syria and the continued unrest in Egypt — are raising the global price of oil.

The bank took a slightly dimmer view than it has previously of short-term economic growth in the United States, said RBC assistant chief economist Dawn Desjardins.

“While today’s statement incorporated a slightly less optimistic view of the near-term outlook for U.S. growth and acknowledged that in turn, a firming in Canadian export and business investment was evolving slower than projected, the main thresholds required for the bank to start to reduce the amount of stimulus remained intact,” she wrote in an investors’ note.

The bank’s next rate announcement is scheduled for Oct. 23.

Source: Steve Rennie, The Canadian Press

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