Tax data shows first-time buyers such as millennials are jumping into Alberta housing again

Millennials appear to be buying into the Canadian housing market with new zeal and the beleaguered Calgary and Edmonton markets are prime beneficiaries of a boost in first-time buyer purchases, new tax data shows.

The survey from TurboTax examines the use of the first-time homebuyer credit — a non-refundable tax credit of up to $5,000 calculated at 15 per cent and worth up to $750 in actual savings. The company won’t reveal the size of the survey for competitive reasons, but says it is “statistically significant.”

“Every little bit helps. It might let you buy a new coat of paint on your house,” said Robin Taub, a spokesperson for TurboTax and a chartered professional accountant, referring to the tax break.

The data provide a glimpse into buying activity of first-time buyer thought to be key to a continuing real estate boom. The tax software company found 3.1 per cent of millennials filing their tax returns with the software were taking advantage of that credit, as of April 2016. That was up from 2.4 per cent a year earlier.

Alberta’s two largest cities, where real estate sales have been hit by the slump in oil prices appear to be benefitting substantially from the increase in first-time buyers, many of whom are thought to be millennials, generally defined as ages 18 to 34.

Three per cent of buyers in Edmonton claimed the first-time buyer credit on their 2015 return, up from 2.4 per cent a year earlier. In Calgary, 2.6 per cent of filers reported using the credit in 2015 versus 2.4 per cent a year earlier.

“I think Toronto and Vancouver for sure is where you expect the house prices to be the highest for first-time buyers,” said Taub, noting that, on a provincial basis, Alberta had the highest use of the tax credit. “Maybe house prices are coming down just enough there.”

Toronto managed a sixth place finish, with 1.9 per cent of tax filers using the tax credit in 2015, up from 1.5 per cent a year earlier — the difference possibly attributable to condominium purchases, Taub said. In Vancouver, only 1.5 per cent of filers used the tax credit, which placed it 10th on a city-by-city comparison.

Brad Henderson, chief executive of Sotheby’s International Realty Canada, said anything that makes things more affordable helps first-time buyers, and the situation in Alberta has created a buying opportunity.

“The caveat is if they continue to be gainfully employed, and that’s the major issue (in Alberta),” he said.

Henderson said he thinks millennials are working their way into the market with more family support.

“There are higher incidence of family members providing financing, whether that’s interest-free loans, grants or whatever to try and help kids get into the first-time homebuyer market because the numbers are just much higher not just in absolute terms but in relative terms to when the parents were at the same age,” said Henderson.

His comments echo, to a degree, a survey from Royal Bank of Canada that found 24 per cent of buyers 25-34 would purchase a home today with a family member, compared to 13 per cent of the general population. The same survey from RBC found that 24 per cent of young buyers would purchase with a friend compared to nine per cent of the general population.

“This speaks to some of the affordability challenges in markets like Toronto and British Columbia,” said Erica Neilsen, vice-president of equity financing at RBC. “If you are a young buyer trying to get in and you need a down payment, often times it’s easier with a family member or a friend. I don’t think that was the case five or 10 years ago, when home prices were at different levels than they are today.”

-Calgary Herald

Number of homes on market continues to rise in Calgary

With the latest sales numbers showing no signs of improvement in Calgary’s housing market, one real estate analyst says he expects prices to fall even faster in the months to come.

Don R. Campbell, senior analyst with Real Estate Investment Network, said there is always a lag effect that keeps the real estate market from feeling the full impact of an economic downturn early on.

“It’s not until 18 months after GDP starts to drop that the economy really starts to hit the housing market,” Campbell said. “We’re now at that 18-month mark where reality and actual economics start to kick in.”

According to the Calgary Real Estate Board, March home sales in the city totalled 1,588 units — 11 per cent below the same time last year and 28 per cent lower than long-term averages for the month.

The supply of homes on the market, meanwhile, continued to rise, with 6,084 active listings in March — up 6.7 per cent and the highest level in at least two years. Calgary’s benchmark price was $442,800 in March, a 0.5 per cent decline from February and 3.5 per cent lower than levels recorded last year.

In the condo sector, benchmark prices have been trending down since late 2014. In March, benchmark condo prices totalled $281,300, seven per cent lower than levels recorded prior to the slide and 4.93 per cent lower than levels recorded last year.

After the first quarter of the year, condo sales totalled 554 units, a 17 per cent decline from the same 2015 period.

Campbell said it is almost “textbook” how the market is performing.

“There’s no timing a top or a bottom — you can’t do it in the stock market and you can’t do it in real estate,” Campbell said. “But this is a bit of an inflection point, where you are going to start to see increasingly more deals available in the condo market for those who are wanting to buy.”

Cliff Stevenson, president of the Calgary Real Estate Board, said there are no surprises in the March numbers.

“We were definitely anticipating another down month. There were no economic indicators that we would be seeing any kind of improvement,” he said.

Stevenson said it’s impossible to predict if sale price declines will accelerate from here on in, but added that prospective homebuyers seem to be taking their time, waiting to see how it will all play out.

“We are still dealing with buyers who are trying to time the bottom. They’re taking that wait and see approach and expecting further declines,” he said.

-Calgary Herald

5 things to know about Calgary’s single-family home market

New construction and resale activity pulled back for Calgary’s single-family housing segment over the first two months of 2016.

But certain ends of the city had a noteworthy start to the year. Here are five things you should know about Calgary’s single-family market through the first two months of 2016.

Homes changing hands

People selling single-family homes on the resale market have been busiest in three key ends of Calgary; the city’s south, southeast and northwest areas. Citywide, sales were down nine per cent over the first two months of 2016 from a year earlier. But it’s been a strong start for the city’s south end, which led the first two months in resale with 264 deals on the books, says the Calgary Real Estate Board. Its most bustling neighbourhoods for sales were Evergreen and Chaparral with 22 and 21 transactions, respectively, year-to-date. Southeast Calgary followed with 189 sales and there were 163 in the northwest. The southeast’s leaders in sales were master-planned communities by Brookfield Residential, with Auburn Bay at 33 and 28 in New Brighton. In the northwest, it was 26 for Tuscany and 16 in Silver Springs, topping the list.

Breaking ground

Over the first two months of the year, new construction of single-family homes in the Calgary census metropolitan area eased to 443 starts from 778 a year earlier, says Canada Mortgage and Housing Corp. CMHC tracks new home construction in neighbourhood clusters. Between Jan. 1 and the end of February, three of these clusters recorded at least 50 single-family starts. A stretch of southeast Calgary, which includes New Brighton, Copperfield, Cranston, Auburn Bay and Mahogany carried the pace with 77 starts.  A section of northeast Calgary, including Saddle Ridge, Saddlestone, Cityscape and Redstone was next with 64. Then Sherwood and Nolan Hill, in the city’s northwest, followed with shovels in the ground for 51 single-family homes.

Resale prices

Overall, single-family homes were more affordable in Calgary over the first two months of 2016 compared than the same time a year earlier. The benchmark price dipped to $506,200 from $521,950, says CREB. The benchmark price is that of a typical home based on a formula that uses various factors to ensure accurate comparisons. The benchmark price in Calgary’s city centre was the highest through the first two months of 2016 at $659,950 It was followed by $695,450 in south Calgary, $539,750 in the northwest, $458,350 in the southeast and $444,000 in the north. Then there was the northeast with a $397,250 benchmark and $356,200 on the east end.

New listings

There were 3,098 additions to the single-family home market over the first two months of 2016. The bulk came in south Calgary where there were 564 new listings, topped by Evergreen with 62. Then there were 534 in the southeast, paced by 86 in Cranston and 84 in Auburn Bay. Northwest Calgary was next with 425 new listings and there were 401 in the city centre. Leading the northwest in additions were Tuscany and Edgemont with 78 and 36, respectively. In the city centre, most of the listing growth came from 37 in Altadore and 30 in Mount Pleasant, says CREB.

Ready for possession

CMHC tracks the number of completed but unabsorbed homes in the Calgary area and says this largely represents spec and show homes. At the end of February, there were 360 of these homes in the single-family segment, with an average price of $736,291. Last month’s count marks an increase from 334 spec or show homes in Calgary a year earlier. Most of the constructed but unabsorbed single-family homes last month were in southeast and northwest Calgary, with 82 and 81, respectively. The average cost in the southeast was $693,890 and it was $642,667 in the northwest. The most affordable price was in the northeast quadrant, where the average was $628,558 on 35 units, says CMHC.

-Calgary Herald

Calgary’s resale housing market lost more than $4.6 billion in sales in 2015, data from the Canadian Real Estate Association show.

Calgary’s resale housing market lost more than $4.6 billion in sales in 2015, data from the Canadian Real Estate Association show.

It said the total dollar volume of MLS sales fell to $10.89 billion in 2015, from $15.5 billion in 2014 — a plunge of 29.7 per cent that was by far the largest in Canada.

The drop was the result of sales declining by 28.6 per cent to 23,994 transactions combined with the average sale price falling by 1.5 per cent to $453,814.

“The recent decline and uncertain outlook for oil prices means that housing market prospects are unlikely to improve in the near term in regions where job market prospects are tied to oil production,” said Gregory Klump, chief economist with CREA, the national association of realtors.

Across Alberta, total dollar volume in 2015 fell by 22.8 per cent to $22.2 billion from $28.8 billion the year before based on a 21.3 per cent decrease in sales to 56,477 units and a 1.9 per cent decline in the average sale price to $393,138.

Diana Petramala, economist with TD Economics, said listings are rising fastest in cities facing significant economic uncertainty including Calgary, Edmonton, Winnipeg and Saskatoon.

“Rising economic uncertainty and the lower-for-longer mantra of oil prices are likely to continue to take a toll on housing markets in economies heavily tied to the oil business,” she said.

“Calgary home prices appear on track for a 10 per cent peak-to-trough decline over 2016.”

The benchmark price, which tracks the sale price of a “typical” home, was down 2.3 per cent in the Calgary region from a year ago to $443,900.

MLS sales in the Calgary area were down 20.8 per cent in December from a year earlier. The average sale price was off by 0.4 per cent.

It was a different story nationally.

CREA statistics indicate the total dollar volume in MLS sales rose 14.4 per cent in 2015 to $224.2 billion from $195.9 billion in 2014. That was a result of sales rising by 5.5 per cent to 506,334 units while the average sale price was up 8.5 per cent to $442,857.

MLS sales in Canada were up 10 per cent in December while the average sale price rose by 12 per cent to $454,342.

-Calgary Herald

Canada housing starts deteriorate as Alberta hits 5-Year Low

Canadian housing starts fell for the third time in four months in January with construction in Alberta tumbling to its lowest level in almost five years.

The pace of work starting on new homes nationwide fell 4.1 per cent from December to 165,861 at a seasonally adjusted annual pace, Canada Mortgage and Housing Corp. said Friday.

Alberta’s unadjusted starts fell to 1,466 in January, the lowest since March 2011 and a 50 per cent decline from a year earlier. The decline coincides with a jump in the province’s unemployment rate, CMHC chief economist Bob Dugan said in the report.

The commodity collapse is increasing a drag on the national housing market, weakness that was masked over much of last year by surging demand in Toronto and Vancouver. There was evidence Friday of fresh job-market weakness that could temper housing further — Statistics Canada reported Alberta’s unemployment rate rose to the highest since 1996 at 7.4 per cent in January.

-Calgary Herald

Calgary-area population grew by 2.4% to last July, Statistics Canada estimates

While a bigger question might be what’s happened to population in the Calgary area since, the number of people living in the region grew 2.4 per cent in the year ended June 30, 2015, according to a new Statistics Canada estimate.

According to the federal agency’s latest population estimate, the growth rate in the Calgary region was second highest in the country, behind only Kelowna, which grew by 3.1 per cent.

The increase puts the population for the Calgary region at just shy of 1.44 million people — 1,439,756. But growth in the city apparently slowed — in each of the previous three years, Statistics Canada estimated growth of more than three per cent.

With continuing economic uncertainty and job losses in Calgary and Alberta since the end of June, that slowing trend could continue.

Among the country’s metropolitan areas, Statistics Canada said the senior population in the Calgary region was the smallest in the country, on a proportional basis, with just 10.4 per cent of residents aged 65 or older.


-Calgary Herald

Housing affordability continues to improve in Calgary market

Owning a home in Calgary at market price remains more affordable than it has been on average since the middle of the 1980s, says a new report released Monday by RBC Economics Research.

But the latest Housing Trends and Affordability Report said movements in oil prices are likely to exert a stronger influence on the market direction in the short term.

“Alberta’s housing market is still feeling the impact from the oil price shock,” said Craig Wright, senior vice-president and chief economist, RBC. “That said, the dust began to settle this spring, and we saw a gradual recovery in confidence, which helped rebalance demand-supply conditions. Home re-sales started to turn around, and sellers no longer rushed to list their properties.”

RBC said prices remained under slight downward pressure for the most part in the second quarter, which helped keep the cost of home ownership in the province on a descending course from the first quarter.

The RBC Housing Affordability measures, which capture the proportion of pre-tax household income needed to service the costs of owning a home at market values, fell slightly in Calgary for both two-storey homes, by 0.8 percentage points to 31.9 per cent, and bungalows, by 0.4 percentage points to 32.4 per cent. The measure for condos stayed relatively the same, rising by 0.1 percentage points to 19.5 per cent.

Across the province, the measures fell 0.5 percentage points to 32.5 per cent for two-storey homes and 0.1 percentage points to 31.7 per cent for bungalows, while rising 0.2 percentage points to 20.1 per cent for condos.

In the second quarter, RBC said national affordability measures rose by 0.7 percentage points to 43.3 per cent for bungalows and by 0.4 percentage points to 48.3 per cent for two-storey homes. The measure for condominiums remained unchanged at 27.1 per cent.

RBC’s Housing Affordability measure for the benchmark detached bungalow in Canada’s largest cities was: Vancouver 88.6 (up 3.0 percentage points); Toronto 59.4 (up 2.1 percentage points); Montreal 36.0 (down 1.2 percentage points); Ottawa 35.4 (unchanged); Calgary 32.4 (down 0.4 percentage points); Edmonton 32.5 (down 0.4 percentage points).

“With home resales beginning to turn around and sellers no longer rushing to list their properties in the spring, there was evidence that confidence slowly returned to the Alberta market in the second quarter following the hard blow delivered by the oil price plunge in the previous two quarters,” said the report.

“These developments helped rebalance demand-supply conditions; however, prices still remained under slight downward pressure for the most part in the second quarter, thereby contributing to keep the cost of home ownership on a generally downward course in the province.”

It said recovery in oil prices in the second quarter boosted buyers’ confidence to jump back in play and reduced sellers’ eagerness to get out.

“However, this boost to market sentiment may be short lived if a resumption of the slide in oil prices in the third quarter persists,” it said.


-Calgary Herald

Housing prices to ease in second half, CREB® forecasts

Continued weakness in housing demand will limit downward pressure on supply levels and cause prices to ease in the second half of the year, CREB® said in its 2015 mid-year forecast. Despite this anticipated retraction, Calgary’s benchmark prices are only expected to decline by less than one per cent on an annual basis. 

“Further job losses are expected in the second half of the year,” said CREB® chief economist Ann-Marie Lurie. “These employment changes, combined with overall weakness and slower than anticipated recovery of oil prices, are expected to keep housing demand relatively weak for the rest of 2015. However, with the initial shock of oil price declines having dissipated, the pullback in sales activity in the second quarter is not expected to be as dramatic as the first part of the year,” said Lurie.

Overall sales activity in Calgary is forecasted to total 19,798 in 2015, a 22 per cent decline relative to last year, but only six per cent lower than average activity over the past five years.

Dramatic swings in new listings during the first half of the year caused inventory levels to rise, but by June, they remained below previous highs. Over the second half of the year, inventory levels traditionally ease as we move toward the fall and winter markets. However, this year housing supply levels are expected to remain relatively elevated due to improved selection in the rental markets, completion of projects under construction, and an easing in the rate of decline in resale new listings. 

While some price moderation is expected moving forward, it should be noted that it’s not going to be the double-digit decline that some have suggested. In part, this is related to the limited supply in the market moving into this next cycle. Also, the forecasted pullback in employment and migration is not going to be as severe as what occurred last time we recorded significant price declines. The City of Calgary residential benchmark price is expected to average $448,354 for 2015, a modest 0.20 per cent decline over the previous year.

“It’s a two sided coin when talking about pricing for buyers and sellers,” said CREB® president Corinne Lyall. “Some buyers have the expectation that they will get significant price reductions in this market, but that’s not always the case. In some areas, supply levels are more balanced with demand and that creates price stability. On the other hand, in most situations, it will be the sellers who need to adjust expectations, particularly if they have to compete with a large amount of comparable product in the neighbourhood.”

While slower demand is impacting all sectors of the market, the apartment sector is expected to record the largest pull-back in both sales and price growth in the second half. Challenges in this segment are linked to the rising supply in competing markets. There is more selection is the detached and attached segments, which makes it difficult to attract buyers. Sellers also faced added competition from new apartment units and increased selection in the rental market. 

Meanwhile, activity in the detached segments will continue to vary based on price and location. Continued weakness in demand relative to supply levels, particularly in the higher price ranges, are expected to cause aggregate detached benchmark home prices to decline in the second half of this year. However, annual prices are expected to remain relatively unchanged compared to last year. Overall, detached sales are expected to total 12,105 units in 2015, a 19.8 per cent decline over last year.

“It’s important for active housing consumers to understand what type of comparable property is available by product type, community and price range,” said Lyall. “While some degree of competition exists in every market condition, most sellers in the current environment will need to take extra care in setting realistic expectations to attract a good crop of potential buyers. This kind of smart pricing may encourage buyers who are sitting on the sidelines to consider entering the market if they are in a position to do so.”

As with any market forecast, there are several factors that could influence the outlook. On the upside, if there is no further deterioration in the economic climate, it’s possible that the pullback in housing demand could be less severe. In this scenario, potential buyers who are in the market may decide to take advantage of higher supply levels and overlook short-term risks in favour of the positive long-term outlook. This possibility could keep market conditions relatively balanced in the second half and prevent any further price declines.

 “Ultimately, what happens to prices will depend on supply levels and how much they go up or down against demand,” said Lurie. “The duration of this economic downturn and the resulting job loss will determine which direction supply will go in the months ahead.


Texas oil tycoon T. Boone Pickens has something he wants to say to us: Calgary, I’m so sorry about the Keystone pipeline

Not every day you get an apology from a billionaire, but here it is.

To my friends in Calgary and across Canada: I apologize on behalf of my fellow Americans for the United States government’s actions.

Why? Because after years of poring over the engineering, design, geology and the contents of the proposed Keystone XL pipeline, President Barack Obama chose to make a political statement and vetoed a bill to allow construction to begin.

I feel bad about this.

I lived in Canada in the 1960s. You have a great country, and it’s a great place to operate in the oil and gas sector. We should have done better by you.

You may not follow the ins and outs of the U.S. Congress as much as we do, but you probably know Keystone was a bipartisan bill. Republicans and Democrats in the U.S. House and Senate voted for it. That was big news, as Democrats and Republicans working together on anything over the last 10 years has been rare.

There was no good explanation for Obama’s decision to veto the bill. The U.S. Department of State reported previously the environmental effects of the pipeline would be minimal. In its January 2014 report, the department stated: “emissions (from pipeline activities) would be equivalent to greenhouse gas emissions from approximately 300,000 passenger vehicles operating for one year.”

There are 250 million passenger vehicles operating in the U.S.

Keystone would have the effect of adding about 1/10th of one per cent to the fleet.

Because the pipeline crosses national boundaries, the State Department is charged with producing reports. Yet, after State made its report, the White House went “agency shopping” and asked the Environmental Protection Agency (EPA) to take another look at Keystone. To no one’s surprise, the EPA fired off a letter objecting to pipeline construction, citing concerns of increasing greenhouse gas emissions.

Where the EPA went wrong, however, was calculating the effects on greenhouse gases “from the extraction, transport, refining and use of the 830,000 barrels per day of oilsands crude that could be transported by the proposed project at full capacity.”

The problem with the EPA’s math is that Canadians don’t need permission from the U.S. to recover that oil and sell it. Canadians will extract it and ship it overland by train or via pipeline and tanker, not south to the United States, but west to Asia, or elsewhere.

When oil prices come back up, Korea, Japan, China and others will benefit from the Canadian oilsands, not the U.S.

It is no surprise to Canadians that Canada is the U.S.’s largest oil-trading partner. But it is a surprise to many U.S. residents. I have long been a supporter of the idea of building on the North American Free Trade Agreement by establishing a North American energy alliance to include Canada, the U.S. and Mexico.

The reason oil prices are not bouncing up and down with every piece of news out of Iraq, Iran and Israel is the U.S. and Canada are using the latest innovative technology to recover oil and natural gas — from sands and shale. Additional production from those sources has provided an international energy price shock absorber. For U.S. consumers, lower gasoline and diesel prices have been like getting a $300-billion bonus. The effect in Canada has likely been similar.

So, why is Obama so opposed to the Keystone XL pipeline?

As my dad used to say, “Son, it’s kind of like murder. It’s tough to explain.”

Politics is the most likely answer. The veto lets the president throw a bone to his political left while thwarting a win for the Republican-controlled House and Senate on their bill.

The silver lining is this: Obama’s veto didn’t kill the Keystone XL pipeline. He delayed it. Sooner or later, good planning will trump bad politics and the project will get the green light — we hope.

My Canadian friends, please have patience. The Keystone pipeline will happen.

T. Boone Pickens is the architect of the Pickens Plan, an energy plan for America. He is also chairman and CEO of BP Capital.

-Calgary Herald

Bank of Canada- Prime Reduction

The Bank of Canada announced today that it has reduced its overnight rate by a quarter of a percent. Therefore the Prime lending rate has been reduced to 2.65%. At this time only one lender has announced that they are also dropping their Variable rates but only by 10 basis points and not the full 25 basis point drop indicated by the Bank of Canada. Typically other lenders will follow.

Total CPI inflation reflects price declines for consumer energy products. The Bank’s estimate of growth in Canada for 2015 has been marked down considerable from it’s prior expectations. However, growth is expected to resume in the 3rd and 4th quarters.

With all that being said, both variable and fixed rate mortgages are still at record lows. If you’re in the market for a new mortgage-or if you have a question about your existing one-please don’t hesitate to reach out.

With the Prime rate falling, we are continuing to recommend that clients stay in their existing variable rate mortgages. The date of the Bank of Canada’s next announcement is scheduled for September 9 2015