Riocan Real Estate Buys Another Property Near Toronto. Tanger and Riocan also Developing Shopping Centre in Kanata.

Riocan Real Estate, Canada's largest real estate investment trust, has partnered with American firm Tanger Factory Outlet Centers to buy the Cookstown Outlet Mall.

Riocan and Tanger are paying $62 million for the property, which is located approximately 50 km north of Toronto. The property consists of 161,000 square feet of retail space and Riocan will provide the development and property management services for the location.

Riocan and Tanger are also partnering to develop 50 acres of land in Kanata Ontario, which will greatly benefit from the Ottawa market.

Riocan is now the largest real estate investment trust in Canada with a total market capitalization of almost $12 billion. For investors, it currently yields about 5.5%, and has been increasing distributions at a fairly steady pace for years. The commercial property market in Canada has been healthy as of late, and the Canadian consumer has proved particularly vibrant by comparison to those in the United States. This has boded very well for Riocan and its owners.

Full Disclosure: Matthew J.W. Clarke owns or indirectly controls shares in Riocan Real Estate.

Recent Economist Study States Canadian Real Estate Overvalued. Rents and Incomes do not Support Prices. Will Home Prices in Canada Start to Fall?

A recent study conducted by the Economist indicates that housing prices in Canada are overvalued by 29% according to historical metrics that compare income levels to home prices. More astoundingly, according to measures that utilize current rental rates, the study suggests that property may be overvalued by 71%! This same situation is true in Belgium, France, Australia, New Zealand, Sweden, Spain, the Netherlands, and Britain. American real estate, having already undergone a massive correction, is undervalued by 8 to 22% according to the Economist study.

This raises two questions according to the Economist.

1) Are American prices set to rebound?

"Prices may have reached a floor, but this is no guarantee of an imminent bounce. In Britain and Sweden in the mid-1990s, prices undershot fair value by around 35%. Prices in Britain did not really start to rise for almost four years after they bottomed. Some 4m foreclosed homes could come onto America’s market, which may hold down prices." (The Economist).

2) Are overvalued markets likely to experience steep price declines?

"Some economists reject our measures of overvaluation, arguing that lower interest rates justify higher prices because buyers can take out bigger mortgages. There is some truth in this, but interest rates will not always be so low. The recent jump in bond yields in some euro-area countries has raised mortgage rates for new borrowers. And low rates need to be balanced against the fact that tighter credit conditions make it harder for home buyers to get mortgages... Another popular argument used to justify sky-high prices in countries such as Australia and Canada is that a rising population pushes up demand. But this should raise both prices and rents, leaving their ratios unchanged. Prices do not necessarily need to drop sharply to return to fair value. Adjustment could come through higher rents and wages. With low inflation, however, it could take a decade or more before price ratios return to their long-run average in some countries." (The Economist).

Fixed or Variable Rate Mortgage? Now is the Time for Which? Have Your Advisor Prepare the Right Documents.

In a recent study conducted by the Bank of Montreal, "variable-rate mortgages have worked out to be better than fixed-rate mortgages 83 per cent of the time since 1975." That is an impressive statistic in favour of variable rates. In today's current environment, however, there are a number of key reasons to think fixed rates might be the better option for most borrowers.

Firstly, it is extremely rare to get a fixed rate mortgage historically below 5 percent. With some clients being able to get fixed rates under 3%, clear advantages are available for some individuals that historically simply have not usually been available. If you can lock-in around 3%, or even under in some cases, it is often more advisable to do so depending on your situation. To be sure, for those who want added security, 10 year fixed rates are even available in the 4% range.

Generally, the spread between fixed and variable rates is much higher. Just last month I was able to get a client a variable rate of Prime minus 0.8%, or 2.2%... this month, however, variable rates have largely risen to Prime minus 0.5%, or 2.5%. If one can obtain a fixed rate for only around 3%, the advantage of the variable rate is only half a point. Too many, half a point is simply nor worth the worry of rate fluctuations and at the end of the day, peace of mind is worth much more to people than they realise.

Most of my investment and mortgage clients are much more risk averse than they initially realize and protecting your clients from both fear and greed should be the hallmark of most advisors. So you should think of how much you can afford your mortgage payments to fluctuate should rates change, and ask your advisor to prepare you a document outlining how much your payments will be at each rate. If you feel comfortable with a fairly reasonable level of increases, then perhaps variable is for you, otherwise be content with today's low fixed rate environment.

Cheers, and be sure to comment or e-mail any of your questions.
matthew.j.w.clarke@gmail.com

Mortgage Rates to go up at Royal Bank and CIBC after Thankgiving. Other Banks to Follow. Vote with your Wallet and get your Mortgage Elsewhere.

According to the Canadian Press, mortgage rates at Canada's largest banks will be on the rise after the Thanksgiving weekend. Strong U.S. jobs numbers have caused the cost of borrowing to rise for banks in the bond market, and as usual these costs will be passed on by our banks to the Canadian consumer.

The Royal Bank is raising rates on both variable and fixed rate mortgages. At Canada's biggest bank, a five year closed rate will be 5.29%, well above rates available at mortgage brokerages and other lenders. CIBC also increased its five year rate to 5.29% for most customers. Canadians should vote with their money and choose to do business somewhere else.

Post or E-Mail Your Comments and Questions.

Dundee International

Dundee International:

Dundee International has been holding up very well during recent market turbulence. With equity markets posting their worst weekly return since 2008, a stock that provides a stable and reliable stream of income is a breath of fresh air.

Dundee International is paying investors 8% per annum, well above current T-Bill and Bond rates, and far higher than any other current savings vehicles offered at your local bank branch. As mentioned on this site before, Dundee International holds a disparate array of commercial properties that it leases out primarily to Germany`s pre-eminent postal service. With a reliable tenant, the default risk for Dundee International is currently low.

Personally, I own Dundee International for the cash it generates and the diversity it provides my equity portfolio.

Highlighted on the company website are three key reasons to own this stock:

It

• Unique opportunity to diversify outside of Canada
• Strategically located, geographically diversified portfolio
• Attractive yield and cash flow stability

Home Prices up Over $25,000 From Last Year. Low Mortgage Rates Contribute to Growth.

Home Prices Show August Increase:

According to the CBC, Canadian's paid 7.7 percent more for homes than they did last year. The Canadian Real Estate Association said the average sale price for an existing home is now $349,916, up about $25,000 from a year ago. The market clearly remains strong. In addition, economic troubles outside of Canada are keeping interest rates low and mortgages attractive for Canadians.

The Bank of Canada has a number of reasons to keep rates low and encourage the continued rebound in the Canadian housing market. Nationally, Toronto and Vancouver showed some signs of slowing down, with many other parts of Canada picking up steam.

E-Mail or comment with any questions.

Variable Discounts Quickly Evaporating. Fixed Rates Becoming More Attractive.

Variable Discounts Quickly Evaporating. Fixed Rates Becoming More Attractive.

Variable rate discounts are quickly evaporating at Canada's major banks. Effective tomorrow, TD, Scotia, CIBC, and Royal are reducing the discount under Prime at which they are willing to lend new mortgage money. Soon, the second-tier lenders will follow.

The banks are encouraging borrowers to choose higher margin fixed rate loans, which generate a steady income and stream of profits for the banks. Generally, new rates on variable loans will be in the 2.5% range for A rated borrowers, and in the neighbourhood of 3.29% for fixed rate borrowers.

Average Housing Prices Rise Again Across Most of Canada's Major Urban Centres.

July's resale housing price numbers have been released, indicating another year over year increase in most of Canada's major urban centres. Real estate continues a strong upward trend. 

Average MLS® Resale Price for Local Markets

City	July 2011	July 2010
Halifax	$ 262,723	$ 245,944
Saint John	$ 158,448	$ 176,061
Quebec	$ 240,225	$ 237,605
Montreal	$ 317,519	$ 303,317
Ottawa	$ 342,925	$ 322,342
Toronto	$ 459,122	$ 420,455
Hamilton/Burlington	$ 349,235	$ 309,293
Winnipeg	$ 238,258	$ 225,191
Saskatoon	$ 303,439	$ 289,715
Regina	$ 272,548	$ 281,836
Calgary	$ 397,613	$ 402,809
Edmonton	$ 334,444	$ 329,731
Vancouver	$ 761,673	$ 657,815
Victoria	$ 467,052	$ 496,943

E-Mail or comment with any questions or concerns:

matthew.j.w.clarke@gmail.com

www.kingstonhomeloans.ca

Lending Rates Hold at Historically Low Levels. Mortgage and Consumer Lending Stays Cheap Money, Could go Even Lower.

Mortgage and lending rates should remain relatively steady over the short-term as Bank of Canada governor Mark Carney decided to hold the benchmark lending rate at 1 percent today. Borrowing costs should remain low, hopefully spurring the purchase of more housing and other big ticket items like cars by Canadians. This is good news for anyone shopping for a home or investment property soon, and anyone who has existing variable rate debt. 


In the Globe and Mail today, Mark Carney is cited as saying:

“In light of slowing global economic momentum and heightened financial uncertainty, the need to withdraw monetary policy stimulus has diminished.”

“The Bank will continue to monitor carefully economic and financial developments in the Canadian and global economies, together with the evolution of risks, and set monetary policy consistent with achieving the 2-per-cent inflation target over the medium term.’’


In layman's terms, the global economy is doing worse than expected, and trouble in Europe and the United States is forcing Canada to keep stoking its economy to encourage domestic spending and consumption.


Most importantly, the door has now been left open for the Bank of Canada to actually cut interest rates going forward instead of raise them... money is cheap and in Canada it might just get even cheaper : )


Please post or e-mail me your comments and questions.
Matthew J.W. Clarke.

What Amortization Period is Best when Selecting a Mortgage?

What amortization will work best for me?


The lending industry’s benchmark amortization period is 25 years, and this is also the standard used by lenders when discussing mortgage offers, as well as the basis for mortgage calculators and payment tables. Shorter or longer time-frames are also available – up to 30 or even 35 years. 


The main reason to opt for a shorter amortization period is that you’ll become mortgage-free sooner. And since you’re agreeing to pay off your mortgage in a shorter period of time, the interest you pay over the life of the mortgage is, therefore, greatly reduced. A shorter amortization also affords the luxury of building up equity in your home sooner. While it pays to opt for a shorter amortization period, other considerations must be made before selecting your amortization. 


Because you’re reducing the actual number of mortgage payments you make to pay off your mortgage, your regular payments will be higher. So if your income is irregular because you’re paid commission or if you’re buying a home for the first time and will be carrying a large mortgage, a shorter amortization period that increases your regular payment amount and ties up your cash flow may not be your best option.


Lastly, and very importantly, depending on the interest rate being offered, a longer amortization period might be to your advantage, especially if you are investing in the property as a rental or for a longer period of time. For instance, if you are offered an interest rate in the 3 to 4 percent range, your cost of borrowing relative to inflation is so low, you might as well use more of the lenders money while you can. If you have extra cash, invest it separately from your real estate until a time when interest rates go up, and then put the money onto the mortgage so that you have a lower debt. 


If you have any questions about real estate, mortgages, or investing, send me an e-mail. 

How to Ensure Your Credit Score Qualifies you for the Best Mortgage Rate.

How can you ensure that your credit score enables you to qualify for the best mortgage rate?

There are several things you can do to ensure your credit remains in good standing. Following are five steps you can follow: 

• 1) Pay down credit cards. The number one way to increase your credit score is to pay down your credit cards so they’re below 70% of your limits. Revolving credit like credit cards seems to have a more significant impact on credit scores than car loans, lines of credit, and so on.

• 2) Limit the use of credit cards. Racking up a large amount and then paying it off in monthly instalments can hurt your credit score. If there’s a balance at the end of the month, this affects your score – credit formulas don’t take into account the fact that you may have paid the balance off the next month. 

• 3) Check credit limits. If your lender is slower at reporting monthly transactions, this can have a significant impact on how other lenders view your file. Ensure everything’s up to date as old bills that have been paid can come back to haunt you. Some financial institutions don’t even report your maximum limits. As such, the credit bureau is left to only use the balance that’s on hand. The problem is, if you consistently charge the same amount each month – say $1,000 to $1,500 – it may appear to the credit-scoring agencies that you’re regularly maxing out your cards. The best bet is to pay your balances down or off before your statement periods close. 

• 4) Keep old cards. Older credit is better credit. If you stop using older credit cards, the issuers may stop updating your accounts. As such, the cards can lose their weight in the credit formula and, therefore, may not be as valuable – even though you have had the cards for a long time. Use these cards periodically and then pay them off. 

• 5) Don’t let mistakes build up. Always dispute any mistakes or situations that may harm your score. If, for instance, a cell phone bill is incorrect and the company will not amend it, you can dispute this by making the credit bureau aware of the situation.

As always, if you have any questions, just send me an e-mail and I will be happy to help.

CMHC Says that House Prices will Continue to Rise in the Near Future. Employment, Immigration, and Low Mortgage Rates are Positive.

The Canada Mortgage and Housing Corporation says that house prices will continue to rise in the near future. The average price will probably level out in 2011 to an average of $367,500 and then rise to $372,400 in 2012. Factors such as employment, immigration, and low mortgage rates remain supportive for the housing sector as a whole.

CMHC also predicts relatively flat mortgage rates through 2011, and that they will moderately increase in 2012. Good news for mortgage borrowers over the next twelve months. Overall, housing starts are also expected to be strong, with 183,900 new builds predicted for the second quarter of 2012.

For anyone thinking of investing in real estate over the near-term, CMHC brings welcome news.

Happy Investing : )

Ottawa Housing Boom. Real Estate Investors and Home Owners in Ottawa are Experiencing Fast Rising Prices.

Ottawa is experiencing a housing boom and real estate investors have been making easy money in the condo market. First-time buyers are leading the way in purchases. 

"The Canada Mortgage and Housing Corporation says housing starts across the country are lagging but Ottawa boasts stronger employment numbers for people in their 20s. These are the people now looking to buy."

Numbers recently announced by the Canada Mortgage and Housing Corporation (CMHC) reveal that sales of town homes and condos are near record levels. In the last year, hosing starts have risen by more than forty percent, and there does not seem to be any sign of imminent decline. 

Ottawa has great earnings projections, increasing housing demand, and a stable employment market, all great trends for real estate investors and home owners. Especially good for developers will be the new light rail lines that should be completed in the near future. Real estate along the lines will be sought after by many of those who want to be close to the downtown core.

Drop me a line if you have any real estate or financial questions, 

Happy Investing : )

Interest Rates to Remain Low. Cheap Loans Will Continue for the Near-Term. More Variable Rates and Inflation the Result.

Yesterday's news from the federal reserve that interest rates will remain low for two years provided a sigh of relief for investors and those looking to buy homes over the next little while. 


According to the Globe and Mail:


"High unemployment, tapped-out consumers and a depressed housing market led the Federal Reserve to say Tuesday that the outlook for recovery in the world’s largest economy is now so tepid that short-term interest rates will probably remain at emergency, near-zero levels until mid-2013."


The Federal Reserve initially lowered rates to the 0 - 0.25% level following the financial crisis in 2008, but the elusive recovery has caused rates to remain largely unchanged since that time. With two more years added to the low rate environment, the markets now have some degree of certainty regarding the Fed's decisions going forward, and an assurance that cheap money will be plentiful for investors and home buyers in the near-term.


What's the move for those thinking of buying real-estate any time soon? In the current interest rate environment, consider variable rates to save you some cash as any raise in rates going forward is becoming unlikely. And for investors? Be very wary of holding cash as inflation is sure to eat away at your savings quickly. 


For more from the Globe and Mail:


http://www.theglobeandmail.com/report-on-business/economy/interest-rates/fed-promises-two-years-of-low-rates/article2124029/


Happy Investing and contact me if you have any home buying or financial questions.

Average Sale Prices for Homes in June: Vancouver, Toronto, Victoria, and Calgary all well over $400,000.

Average Sale Prices for Homes in June: Vancouver, Toronto, Victoria, and Calgary all well over $400,000.

City	June 2011	June 2010
Halifax	$ 269,605	$ 262,992
Saint John	$ 168,830	$ 175,123
Quebec	$ 245,008	$ 236,463
Montreal	$ 323,785	$ 307,512
Ottawa	$ 354,524	$ 328,238
Toronto	$ 476,386	$ 435,064
Hamilton/Burlington	$ 339,189	$ 314,189
Winnipeg	$ 243,977	$ 233,567
Saskatoon	$ 310,643	$ 295,963
Regina	$ 285,613	$ 274,673
Calgary	$ 415,431	$ 412,016
Edmonton	$ 328,695	$ 335,271
Vancouver	$ 808,867	$ 657,934
Victoria	$ 507,385	$ 511,498