Credit Card Delinquencies Soar In Canada’s Oil Provinces

Canadians are increasingly putting it on plastic, but those in the recession-riddled oil patch are also increasingly having a hard time paying it off.

Ninety-day credit card delinquencies soared by 23 per cent in Alberta in the fourth quarter of 2016, compared to a year earlier, credit bureau TransUnion said Wednesday. They were up 22.7 per cent in Saskatchewan.

credit card delinquencies

TransUnion had earlier warned that the job slump in some western provinces would result in double-digit increases in credit card delinquencies, “a risk that current data confirm has indeed been realized,” the company said in its report.

A larger number of Canadians are using credit cards, and the total balance on those cards rose 3.3 per cent in the past year, to a total of $94.2 billion in the fourth quarter of 2016.

But the number of credit cards in use in Canada actually declined by some 814,000 over the past year, to 43.4 million cards. TransUnion suggested this has to do with greater customer loyalty to their existing cards.

“Some lenders appear to be increasing credit lines to their customers to capitalize on this loyalty effect,” TransUnion’s VP for product innovation and analytics, Chris Dias, said in a statement.

“We may expect more lenders to evaluate increasing credit lines to cardholders in response to this higher demand.”

non mortgage debt

Overall, TransUnion described Canadians’ non-mortgage debt situation as “sound,” but noted there is a risk of interest rates rising.

“However, this scenario has yet to deter the Canadian consumer, and we believe the far majority of them will be able to weather the impact of these increases,” TransUnion said.

-Huffington Post Canada

Investing in Alberta is better than buying stocks

Homes provide shelter and refuge, but they are also most Albertan homeowners’ single largest investment. Housing represents 47% of total assets for the average Alberta family – much higher than stock market investments and pension plans combined (29%). Why is this important? Because homeownership benefits the economy as a whole, as well as individual homeowners. Let’s look at this in the context of the most recent stats on Alberta’s real estate, reported by the Canadian Real Estate Association.

Investing in housing in Alberta is better than buying stocks

Over the last 18 years, house price appreciation in Alberta has outpaced Toronto stock market returns. Between 1999 and 2016, with average annual residential sales of roughly 57,000, house price growth in Alberta (6.6%) outpaced yearly returns on stocks traded on the Toronto Stock Exchange (6.4%).

Average residential prices up 3.1% in Alberta in January

Total residential sales across the province were up 17.7% year-over-year, totalling 2,679 resale transactions in January 2016. Roughly 3.4 out of every 10 newly listed homes were sold, translating into a sales-to-new listings ratio (SNLR) of 34%. And the average residential sales price rose 3.1%, to $383,040.

Increased home equity = increased net worth

What’s so great about house prices being up? Rising house prices mean homeowners are building equity in their homes. Home equity represents the current market value of the house, minus any remaining mortgage payments. Equity is built over time as the homeowner pays off their mortgage and fluctuates with the market value.

Rising home equity benefits homeowners individually, and the Alberta economy as a whole. By how much? More than $40 billion in 2016.


Calculating Returns to Equity

Using Statistics Canada’s data on Alberta homeowners’ mortgage balances (Surveys of Financial Security), we calculated equity shares by age group. Equity shares multiplied by user costs (average two-bedroom apartment rents used as proxy) provided the income generated (returns to equity) per homeowner, by age class. The annual income generated by homeownership was then derived by multiplying the number of homeowners by age group in Alberta with returns to equity per homeowner.

For those under 35, the income generated by homeownership reached $11,000 a year per homeowner

Over the past five years (2012-2016), the annual income generated by homeownership averaged roughly $57,000 per homeowner (all ages) in Alberta. Returns on equity per homeowner ranged from annual income generation of $11,000 for homeowners under the age of 35 (generally considered as first-time buyers), to roughly $14,000 for those above 65 (annual average).

REALTOR® Tip: First-time buyers build equity in their home as they pay off their mortgage – roughly $11k a year!

Collectively, annual returns on equity (ROE) for all homeowners in Alberta reached roughly 38 billion dollars, or 12% of GDP

Thirty-eight billion dollars a year represents roughly 12% of Alberta’s nominal GDP and 85% of Government of Alberta’s annual revenues. When people build equity in their homes, they borrow against that equity through a home equity loan, or home equity line of credit. An increase in the value of their homes increases the amount of collateral available to households, leading to higher credit. Rising house prices, which imply higher housing equity, may encourage consumers to borrow more, causing a rise in consumer spending. Looking at the data, we know this to be true.

The increase in consumer spending following a rise in in house prices has been referred to as the marginal propensity to consume (MPC) from housing wealth. We found that, for every $1 increase in average residential prices, Albertans raise their personal spending by 6.7 cents, which collectively amounts to roughly $5 billion a year (2012-2016 average).For every $1 rise in housing prices, Albertan homeowners raise their personal spending by 6.7 cents – collectively $5 billion a year

Five billion dollars a year is 1.5% of provincial GDP, and 11% of government revenues. This is a significant boost to Alberta’s economy. A 3.1% price gain, like the one we just saw in Alberta this January, equals an average increase of $11,420. The associated rise in consumer spending that could come out of that is $868 per homeowner per month, or $10,415 per homeowner per year, or a collective increase of $616 million a year. 

-Regine Durand.  Economist

Calgary awash in homes without owners as new condo projects flood market

Calgary is awash in newly built homes that remain unoccupied — hitting levels not seen in 15 years — as an influx of condo projects comes at a time of muted demand, according to housing data.

The surge in supply has not scared off all developers in the city, with a number of new projects on the horizon. But some are converting their condo proposals into rentals, which they view as a better investment as the economy slowly turns the corner on a prolonged slump.

The city had about 1,500 newly constructed housing units that were vacant in December, a stunning glut not seen since June 2001, according to the Canada Mortgage and Housing Corp. More than half of the current stockpile, about 800 units, were apartment-style condos.

“Very pricey homes have taken a beating,” said Brian Kernick, president of Greenview Developments, which plans to break ground in the coming weeks on a 65-unit low-rise condo building in Inglewood.

“There are still areas of the market where there is demand, even though the economy has taken a hit lately.”

Highrise condo projects that were planned pre-recession have been finished in the rout, driving up supply during a period of weak demand.

Smaller projects “don’t get over-built like highrise condos do, because they don’t take as long (to build),” Kernick said. 

Canada’s national housing agency expects fewer new apartment and row-house projects will get off the ground this year as the focus turns to selling existing inventories of new homes.

“Later in 2017, these inventory levels should be moving lower,” said Richard Cho, analyst at Canada Mortgage and Housing Corp.

Many prospective buyers have been nervous about putting their money down for new housing at a time of high unemployment and low commodity prices, said Chris Pollen, director of sales and marketing at Battistella Developments, which is planning a condo tower for East Village in 2018.

The City of Calgary received 27 development permit applications for condo projects worth more than $10 million in the last six months of 2016.

Four of them, including an $18.7-million apartment development in Mahogany and a $15.8-million building at Legacy Park, have been approved so far.

“Demand is low but it’s not gone,” said Calvin Buss, who specializes in designing and marketing large condo projects in Calgary.

Several developers that have approached his company recently have found they couldn’t charge high enough prices for condos in the current market to build their projects economically.

Three out of four condo projects that have come across Buss’ desk in the past few months have converted to rental developments. The theory is that builders would have to sell condos at a loss now, or they could build rental apartments and take a loss on rents — but only until the economy recovers.

“If you build a tower and you have to rent it out for two years at 15, 20 per cent below market value, you eat it for those two years, and in the next 20 years, you make it all up again,” Buss said.

-Calgary Herald

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