The Canadian housing market is still “holding up well” despite the gloomy economic news from south of the border, says Royal LePage President and CEO Phil Soper.

“While rate of price appreciation is obviously tempering across the entire country, it’s important to underscore the fact that Canada's housing market is supported by markedly different, and stronger economic fundamentals than those that American homeowners are wrestling with,” says Soper.

 “For the most part, Canadian home buyers have been able to shrug off the gloomy stories of economic woe from south of the border, and are taking advantage of reasonable financing options and healthy levels of housing supply,” he says. “Average house price appreciation curves are beginning to flatten, but this is a completely natural reaction to the explosive gains that characterized the market earlier this decade.”

Soper says the Canadian housing market differs from the situation in the U.S. because “credit-worthy Canadians continue to have wide access to fairly priced mortgages. While we are not immune to the serious problems facing global credit markets, our financial institutions are in much better shape than mortgage providers in the U.S. In Canada, subprime or high-risk mortgages account for a small portion of our banks’ portfolios and the mortgage approval process has many more checks and balances in place. As such, we should expect stability in Canada’s real estate market.

Royal LePage says that further supporting Canada’s steady housing market is a growing population and reliable buyer demand. Among the G7 countries, Canada continues to report the highest level of population growth. First-time buyers were also active during the third quarter as many took advantage of increased inventory levels and affordable mortgage rates, says the company.

Home prices continued to grow modestly through the third quarter in most major cities, according to a House Price Survey report released today by Royal LePage.

The report says that during the boom of the last several years, the market was characterized by higher than normal annual unit sales, constrained listings supply, and in many cases, sharp price increases. It is not surprising that the regions that had experienced the largest and quickest rise in home value are now experiencing easing price appreciation trends as their markets return to more balanced conditions, says the report.

Of the housing types surveyed across Canada, on average, standard condominiums rose by 0.2 per cent to $243,529, while standard two-storey properties increased by 0.1 per cent to $408,927, year-over-year. The average price of detached bungalows remained stable at $240,000, year-over-year.

Regina’s housing market posted the highest year-over-year price appreciations with gains as high as 49 per cent among standard condominiums; St. John’s condominium market followed closely behind, rising by 26.9 per cent.

From coast to coast, strong fundamentals such as favourable rates of employment, solid local economies and the continuing availability of affordable mortgage financing have positioned Canada’s housing market to weather the storm south of the border, and allow the country to continue to chart its own course, says Royal LePage.

Nowhere in the country is burgeoning buyer demand more apparent than in cities undergoing explosive growth due to the resource boom, it says. Winnipeg, Regina, Saskatoon and St. John’s are all experiencing a surge in both in-migration and immigration as people flock to these cities in search of employment opportunities.

In Atlantic Canada, the revitalized oil sector remained a bright spot for St. John’s and continued to fuel buyer demand. Although prices are continuing to rise in much of the east coast, house prices there remain well below the national average.

Among central Canadian cities including Montreal, Ottawa and Toronto, average house prices inched upwards during the third quarter. While the manufacturing sectors in Toronto and Montreal tightened in the third quarter, the drop in value of our Canadian dollar offset some negative impact by improving trading channels with other countries.

Despite dropping year-over-year house prices in Alberta, the province remains poised for growth. Alberta’s underlying resource-rich economy is strong and regional unemployment figures are amongst the lowest in the country. As such, the recent price decline is merely a correction to the dramatic run-up in prices that both Edmonton and Calgary experienced in the past few years, says Royal LePage. “What Alberta is experiencing now is merely a consequence that inevitably comes from an unsustainable period of dramatic growth,” says the report.

“The most important factor to note right now is that Canada’s real estate market is stable, and continues to show modest price appreciation in almost all regions of the country,” says Soper. “While homeowners will not be experiencing the double-digit price increases that characterized the past few years, their real estate assets remain safe. Buyers entering the market today have much better choice and negotiating ability than those who bought during the supply-constrained years of the past decade,” says Soper.

Although we are hearing some gloom about the economy in America, there is much economic development around the world. There are some remarkable things happening across the oceans.
India is rolling out a new cricket league with a lot of hype similar to the glitz of NFL football.

They even imported cheerleaders from the Washington Redskins to promote the opening game of the season. This is happening because entrepreneurs are discovering what home builders in India knew years ago. The new-found wealth of India’s robust economy is presenting all kinds of opportunities for making money.

Oil is certainly more expensive but not because there is less of it. It is because more is demanded by China. The economy is booming in China, as well as India. Both nations are manufacturing cars and other goods that are beyond the usual trinkets we once associated with them. Along the way property and housing have become more important when accounting for personal wealth. Yes, there is a real estate industry in China.

These two countries alone count their people in the billions.

In Dubai, the crossroads of economic wealth between Europe and Asia, spectacular buildings are being built. They are building them out in the ocean on man-made islands with magnificent shapes that can be seen from space. There are huge indoor malls and many more are being built. There is even an indoor ski slope with artificial snow and temperature held at -2 C to accommodate winter fun and sports. Can you imagine that? A ski slope in the midst of a desert country?

While not as robust as developing countries and their markets, the united countries of Europe are presenting the leading edge in development of environmental alternatives and manufacturing from recycled goods and services. These are costly ventures but the people support these initiatives enthusiastically. The technologies of wind power, solar energy and recycled products of every description are beginning to accelerate in value, both in sales and savings.

The economy is chugging along nicely even in Russia. There are a lot of folks with incomes today who did not have incomes before. They are buying homes and they are pretty pleased about it.
But don’t forget for one minute about the one place they all wished they lived. The number one place for them is North America.

At the end of the day, if any of these folks in all these hustling economies had the chance to live here, they would come over in a New York minute.

North America is the greatest market for all goods and services. Period. It is the judge and jury of what is cool and hip in the world. It is the in place. It is the only place to be. It is a place where freedom is almost unlimited. Human rights are rock solid. Opportunity is everywhere. Chances are dealt out like playing cards on every street corner.

In Canada, America’s shadow next door, all these things are at our daily disposal and more. On top of everything else we have mountains, ocean fronts, clean water, forests, vast tracks of land and more services at our doorstep than anyone can possibly imagine. We have more of everything than any other country in the world.

It is no wonder that anyone, anywhere in the world, anytime would drop everything they were doing for a chance to live here. Including the chi-chi rich folks in all parts of the world.

So if you really believe that property values here in Canada will be heading downward and sustain lower prices…if you believe that the recent mortgage market screw up has not created an incredible opportunity for real estate purchasers in the United States…if you think lower prices in the American market will last a long time….then get out of this business, because you’re about as smart as a bag of rocks and you are standing in the way of a potential buyer who might have the misfortune of becoming your client. They are not going to benefit from the investment of real estate following your advice.

The real estate market in America and Canada will be as robust as it ever was, house values will rise and the market will be even more active.

If you really care about your clients, then tell them: Beg, borrow, figure, fiddle, scrape, save but for crying out loud get out there and buy a house! It’s the best investment you will ever make.

REALTORS® across Canada are now required to collect personal identification information from their clients in order to comply with federal legislation.

These new federal laws and regulations took effect June 23, 2008 and are aimed at combating money laundering and terrorist financing activities. As part of the federal Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA), financial institutions and REALTORS®, among other professionals and services, must identify customers who conduct financial transactions.

Under the new rules, REALTORS® must obtain, record, and retain the personal information of their clients, including their full legal name, address, date of birth and occupation. To do this, they will ask for a government-issued identification document such as a driver’s licence, passport, or residency card. You should not provide your Social Insurance card as identification.

“The public needs to be aware that REALTORS® are asking for this personal information to comply with the new federal laws," said Kelvin Neufeld, president of the Fraser Valley Real Estate Board . “The information received will not be used in any commercial way and will not be provided to anyone except in response to a request from the federal agency responsible for compliance.”

The regulations are enforced by the federal agency known as the Financial Transactions and Reports Analysis Centre of Canada, or FINTRAC.

REALTORS® are to track the amount and source of funds received during the course of a real estate transaction. The Act also requires that these identification records and FINTRAC reports be kept for five years.

If the client is a corporation, that information must include corporate documentation and the names of the corporation directors. REALTORS® are further obligated to ascertain whether a third party is involved in a given transaction.

These new compliance requirements affect even a buyer or seller not using the services of a licensed real estate practitioner or lawyer. If a REALTOR® is involved in the transaction, he or she must make best efforts to verify the unrepresented buyer or seller’s information.

Also under the new FINTRAC regulations, REALTORS® need to verify the personal information of clients with whom they have no face-to-face interaction. One way to do this is for the broker office to hire an agent in the area where the client is located. That agent must then meet the client, verify the identification of the client, and provide the information to the office actually handling the transaction in Canada.

What you need to know about this new federal law.

While Bill C-25 is Canada’s newest legislative attempt to curtail money laundering and terrorist financing, we have had legislation since 2001 that required designated industries in Canada (including real estate) to report suspicious transactions and large cash transactions of $10,000 or more.

Money laundering

Money laundering is the process used to disguise the source of money or assets derived from criminal activity. This illegal activity can include drug trafficking, smuggling, fraud, extortion and corruption. Criminals must launder the profits and proceeds from these crimes to be able to enjoy them. The scope of criminal proceeds is significant; the International Monetary Fund (IMF) estimated that some $500 billion (U.S.) is laundered worldwide each year.

Terrorist financing

Terrorist financing operates somewhat differently from money laundering. While terrorist groups do generate funds from criminal activities such as drug trafficking and arms smuggling, they also obtain revenue through legal means. Supporters of terrorist causes may, for example, raise funds from their local communities by hosting events or membership drives. In addition, some charity or relief organizations may unknowingly become the route where donors contribute funds that may eventually be used to commit a terrorist act.

How does FINTRAC assist law enforcement and security agencies?

The Financial Transactions and Reports Analysis Centre of Canada, or FINTRAC, collects, analyzes and discloses financial information and intelligence on suspected money laundering and terrorist financing activities. It was created as part of a Canadian government initiative to fight money laundering and terrorist financing. Although it operates at arm’s length from law enforcement, FINTRAC's primary role is to provide law enforcement agencies with information to help them with their investigations.

FINTRAC is required by law to protect the personal information it receives from unauthorized disclosure.

Who must report to FINTRAC?

The following persons and entities must report suspicious and certain other transactions to FINTRAC:

• real estate brokers and agents;
• financial entities including banks, credit unions, trust and loan companies and agents of the Crown that accept deposit liabilities;
• life insurance companies, brokers or agents;
• securities dealers, portfolio managers and investment counsellors who are provincially authorized;
• persons engaged in the business of foreign exchange dealing;
• money services businesses;
• accountants and accounting firms when carrying out certain activities on behalf of their clients;
• casinos; and
• individuals and any entity importing or exporting currency or monetary instruments (such as a money order) of $10,000 or more.

Additional information about this federal initiative, the federal legislation, and the role of FINTRAC in the reporting system is available at http://www.fvreb.bc.ca/www.fintrac-canafe.gc.ca or call toll-free: 1-866-346-8722

Cameron Muir provided an update on the state of the British Columbia economy. He noted that the province's forest sector is in troubled times as a result of the downturn in the U.S. housing market. As well, recession in the U.S. will impact the province’s tourism industry. Although both sectors more directly affect areas outside Vancouver and Victoria, their impact on the provincial economy as a whole will affect retail, industrial and office sectors in urban areas.

There are many very positive indicators. Employment growth, while slowing from earlier in the decade, will still be at or near the highest level in Canada. Unemployment remains very low, domestic consumption is strong and consumer confidence remains high. In-migration levels are very high, with 55,000 new residents expected to come to British Columbia in each of 2008 and 2009 (all of whom will require housing). As a result, Mr. Muir predicted provincial economic growth of 2.5% in 2008 (as compared to 3.1% in 2007).

With respect to the housing market, Mr. Muir countered reports regarding low affordability and stated that housing is still relatively affordable. He noted that although the focus stays on record average housing prices (skewed by homes at the high end of the market), fully 30% of apartments sold in the Vancouver CMA in 2007 were under $250,000 and a similar percentage of houses were under $500,000. Mr. Muir also stated that the Metro Vancouver market is entering a balance between listings and sales, which should result in less upward pressure on prices. He predicted 9% growth in housing prices in Metro Vancouver in 2008. Mr. Muir also noted that the top performing housing markets in British Columbia in 2007 in terms of price gains were outside the metropolitan areas, with gains of 20% to 30% year over year in smaller markets such as Nanaimo, Kamloops and Kelowna. He expects this trend to continue into the future as increasing numbers of baby boomer retirees seek housing with recreation and other amenities in smaller markets.

B.C.'s real estate markets are no longer sellers' markets for the most part, although they aren't buyers' markets just yet, according to statistics compiled by the B.C. Real Estate Association.

The association released its first-quarter provincial sales report Thursday, which showed that the ratio of Multiple Listings Service real estate sales to the number of homes in the inventory declined to 29 per cent in March compared with 39 per cent in March of 2006.

"This year, at least for March, [the sales-to-listing ratio] is on the higher bounds of a balanced market," association chief economist Cameron Muir said in an interview.

That means there were enough people selling homes to meet the demand of buyers, though not so many that they flooded the market.

MLS-recorded sales declined six per cent to 22,198 units in the first quarter of 2007 compared with the same months of 2006, the real estate association reported.

Steady demand, however, continued pushing prices up in the same period to hit $415,765, which is 12 per cent higher than the same point last year. So the total value of real-estate transactions for the quarter reached $9.2 billion, some $462 million higher than the total in the first quarter of 2006.

Muir added that provincial unemployment remains at a record low (3.9 per cent at the end of March), the economy is growing and still adding jobs, average wages are rising faster than inflation and mortgage rates remain relatively low and are not projected to rise quickly.

"Those are all positive for the housing market," Muir said.

"What's not as positive is [high] home prices. Low-equity buyers, typically younger people buying their first home, some of them are facing a price-lead affordability squeeze."

That, Muir added, is cutting into demand.

Robert Helsley, an economist and professor in the Sauder School of Business at the University of B.C. said the sales-to-listings data reported by the B.C. Real Estate Association is the best evidence that real estate markets are slowing.

However, Helsley added that the provincial economy is still doing well and the prospects for population growth, particularly in Vancouver, are so strong "it is hard to forecast a substantial softening."

It would take a sudden rise in interest rates or a large global economic shock to shake B.C. into a real estate downturn, Helsley said, and the meltdown of subprime mortgage markets in the United States won't be it.

"Markets are somewhat softer than they were a year ago, sort of taking a breather," Helsley added. "But it certainly doesn't appear to have turned down, at least in terms of price."

depenner@png.canwest.com

SALES RATIOS DECLINE

Fewer real estate sales and an increase in property listings in March brought a sales-to-active-listing ratio (percentage of listed properties that sold) that balances out better for buyers. Below are some examples from markets around the province.

2007 / 2006

B.C. 29% / 39%
Greater Vancouver 33% / 44%
Fraser Valley 27% / 48%
Chilliwack 33% / 35%
Victoria 34% / 39%
Vancouver Island 21% / 30%
B.C. Northern 24% / 78%
South Okanagan 18% / 27%
Okanagan Mainline 28% / 27%
Source: B.C. Real Estate Association