Spring Into Action in 3 Simple Steps

General Kim Stenberg 24 Mar

Spring is here and that means we’re embarking on the best time to start getting outside and enjoy more of what the beautiful outdoors has to offer. From weekend hikes, to community running events, don’t underestimate the power of a quick ‘at-home workout’ to compliment leg, ankle, and core strengthening before you hit the trails. With no need for any equipment, all this Mandy Gill APP workout calls for is 20 minutes on the clock.

burpees

Only 10 reps! Begin standing with your legs shoulder-width apart. Place your hands on the floor and kick your legs, back so you end up with your stomach and thighs on the floor. Your elbows should be bent. From this position, press up like you’re doing a push-up and push your hips up. Jump your feet under your hips and stand. Finish the movement by jumping in the air and bringing your hands over your head. Repeat. Want to blast fat and tone up quickly? This is the movement to get you there!

donkey kicks

While still on all fours, keep your right knee bent at a 90 degree angle and flex the foot as you pull your knee towards your right elbow. Then extend your right leg to a straight position, and repeat for a total of 50 reps on the right side. Once you’ve completed that, switch to the left leg for 50 reps.

leg lifts

This move and the next primarily target the glutes, hip flexors, and abs. Position yourself on all fours on a mat, with your hands underneath your shoulders, and your knees under your hips. Lift the right leg up towards the ceiling while keeping your leg as straight as possible, and your glutes squeezed. With control, bring down your leg to tap your right toe to the ground and then return it back up towards the ceiling to complete a total of 25 reps. Then complete 25 reps on the left side.

 

DLC Marketing Team

Canadian CPI Inflation Rises to 5.7%

Latest News Kim Stenberg 17 Mar

StatsCanada today reported that consumer prices rose 5.7% year-over-year in February, up again from the prior month’s 5.1% rise. This was the largest gain since August 1991 (+6.0%).

This was no surprise, as the Ukraine War has stepped up inflation pressure worldwide. The US CPI rose a whopping 7.9% last month (see chart below).

Price increases were broad-based in February, pinching the pocketbooks of Canadians. Consumers paid higher prices for gasoline and groceries in February 2022 compared with the same month a year earlier. Shelter costs continued to trend higher, rising at the fastest year-over-year pace since August 1983.

Excluding gasoline, the Consumer Price Index (CPI) rose 4.7% year over year in February, surpassing the gain in January (+4.3%) when the index increased at the fastest pace since its introduction in 1999.

On a monthly basis, the CPI rose 1.0% in February, the most significant increase since February 2013, following a 0.9% increase in January. On a seasonally adjusted monthly basis, the CPI rose 0.6%.

Gasoline Prices Surge Amid Geopolitical Conflict
Canadian motorists paid 32.3% more at the pump compared with February 2021.

Monthly gasoline prices increased 6.9% amid geopolitical conflict in Eastern Europe and the Middle East, as uncertainty surrounding the global oil supply put upward pressure on prices.

Similarly, prices for fuel oil and other fuels increased 8.5% month-over-month following higher international energy prices.

Grocery Prices Shot Up Again
Prices for food purchased from stores (+7.4%) rose faster in February than in January (+6.5%). This is the most significant yearly increase since May 2009. Higher input prices and heightened transportation costs continued to contribute to inflationary pressure in February.

Price growth for meat (+11.7%), including fresh or frozen beef (+16.8%) and chicken (+10.4%), was higher year over year in February than in January (+10.1%).

Shelter Costs Rise At Fastest Pace Since 1983
In February, shelter costs rose 6.6% year over year, the fastest pace since August 1983. Higher costs for both owned accommodation (+6.2%) and rented accommodation (+4.2%) increased.

Homeowners’ replacement cost (+13.2%), which is related to the price of new homes, and other owned accommodation expenses (+14.3%), which includes commissions on the sale of real estate, remained elevated year over year. In contrast, mortgage interest cost (-6.0%) moderated the shelter index on a year-over-year basis.

According to the Canadian Mortgage and Housing Corporation, improved economic and demographic conditions over the past year, including youth employment recovery and resumption of international migration to Canada, supported rental demand. This, in part, contributed to higher rent (+4.2%) prices year over year in February.

Bottom Line

Inflation has exceeded the Bank of Canada’s 1%-to-3% target band for 11 consecutive months. Other central banks have already begun to hike overnight rates from their effective lower bound introduced in March 2020.

Today, the U.S. Federal Reserve hiked the overnight policy target for the first time since 2018 by 25 basis points and signalled that it expects to hike rates six times more this year.

The global geopolitical tensions and rising risk of a drawn-out conflict exacerbate inflation and supply bottlenecks, delaying a return to sub-3% inflation.

 

Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres

Canadian Home Sales Rose in February as New Listings Increased Sharply

Latest News Kim Stenberg 16 Mar

New Listings Finally Show Some Life

Statistics released today by the Canadian Real Estate Association (CREA) show that national home sales were up in February 2022 as buyers jumped on the first spring listings. The number of newly listed properties surged a welcome 23.7% from extremely depressed levels, hopefully portending a much-needed increase in supply that will continue for the spring selling season. National home sales rose 4.6% month-over-month in February as prices rose 3.5%, taking the y/y price gain to a record 29.2%.

In February, sales were up in about 60% of local markets, led by some big jumps in Calgary and Edmonton. The GTA also outperformed the national averages.

The actual (not seasonally adjusted) number of transactions in February 2022 came in 8.2% below the monthly record set in 2021. That said, as was the case in January and throughout the second half of 2021, it was still the second-highest level on record for that month.

New Listings

The pullback in new listings in January was reversed in February, rebounding by 23.7% m/m. The monthly gain was led by the GTA, Calgary and the Fraser Valley.

With sales up by quite a bit less than new listings in February, the sales-to-new listings ratio fell back to 75.3% after having shot up briefly to 89% in January. The February reading puts the measure roughly back in line with where it has been since the summer of 2020. The long-term average for the national sales-to-new listings ratio is 55.1%.

About two-thirds of local markets were seller’s markets based on the sales-to-new listings ratio is more than one standard deviation above its long-term mean in February 2022. The other third of local markets were in balanced market territory.

There were just 1.6 months of inventory on a national basis at the end of February 2022 — tied with January 2022 and December 2021 for the lowest level ever recorded. The long-term average for this measure is a little over five months.

 

Home Prices

There were just 1.6 months of inventory on a national basis at the end of February 2022 — tied with January 2022 and December 2021 for the lowest level ever recorded. The long-term average for this measure is a little over 5 months.

Compared to the national year-over-year increase, gains remain about on par in British Columbia, lower in the Prairies and Newfoundland & Labrador, a little lower in Quebec and Prince Edward Island, and a little higher in Ontario, New Brunswick and Nova Scotia. The regional differences under the surface of those provincial numbers can be seen in the table below.

 

 

Bottom Line

Canada has the most significant housing shortage in the G7. This began in late 2015 when the federal government decided it would target the entry of much larger numbers of economic immigrants. Canada is “underpopulated” and celebrates a growing population, unlike many other countries. There are many job vacancies to be filled, and more people means more economic growth and prosperity for Canada.

In mid-February, the federal government revised up its targets for immigration this year and next (see chart below), raising the spectre of even more significant housing shortages going forward. While CMHC announced an 8% rise in February housing starts this morning, home completions are not keeping up with the increase in household formation. The only solution is a sharp increase in new home construction for sale and rent. This requires local zoning regulations to increase housing density and measures to speed up the approval processes.

This month, the Bank of Canada began their rate-hiking cycle with much more to come. We believe they will raise the overnight rate again on April 13, with the likelihood of five more rate hikes this year. That would take the overnight rate up to 2.0% by yearend. The Ukraine War has added to future uncertainty, but it has also boosted inflation pressures and increased the risk of a marked economic slowdown. All in, home price pressures are likely to dissipate for the remainder of this year and well into next year.

   

 

Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres

Canada Reach Full Employment for February 2022

Latest News Kim Stenberg 11 Mar

Statistics Canada released the February Labour Force Survey this morning, reporting a much more significant than expected 336,600 net new jobs, with the unemployment rate falling a full percentage point to 5.5%. This is the first time the unemployment rate fell below its pre-Covid level and reinforces the expectation for another Bank of Canada rate hike in April and as many as five more increases this year. Last month’s recovery more than offsets the losses that coincided with the Omicron lockdowns in January and points to the continued resilience of the Canadian economy.

The loonie jumped on the news, as did Canadian government bond yields.

Other indicators point to an increasingly tight labour market in February. Total hours worked surged 3.6% to a record high, while the employment rate rose 1.0 percentage points to 61.8%. Gains were most notable in the hard-hit accommodation and food services sector (+114,000; +12.6%), and information, culture and recreation (+73,000; +9.9%) industries. Employment increases were widespread across provinces and demographic groups.

Average wages increased 3.1% from February 2020, significantly faster than the 2.4% rate recorded in January. That could signal that inflationary pressures, already intense, continue to build.

 

Bottom Line 

This Labour Force Survey was conducted in mid-February, before the start of the Ukrainian War. since then, many commodity prices have surged, especially oil, gasoline, aluminum, wheat and fertilizer. This will accelerate CPI inflation worldwide, which dampens consumer and business confidence and reduces family purchasing power. The war has also contributed to continuing supply disruptions, all of which point to increased uncertainty and potentially slower growth.

The Bank of Canada is likely to hike interest rates when it meets again on April 13 by 25 basis points. Any more than that is imprudent given the risk of an economic slowdown. The outlook for the remainder of this year is more uncertain and likely to be volatile, depending on how long the war lasts. Right now, the likelihood for another five or six rate hikes this year and a few more next year. This, however, is subject to change.

 

Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres

Investment Properties

General Kim Stenberg 10 Mar

So, you are looking to purchase a second property! Congratulations! This is a great opportunity for you to expand your financial portfolio and ensure stability for the future. However, before you launch into this purchase there are a few things you should know, depending on which type of second property you are looking to purchase.

SECOND PROPERTY WITH INTENTION TO RENT

Buying a property for the purpose of renting it out to someone else comes with different qualifying criteria and mortgage product options than traditional home purchases. Before you look at purchasing a rental property, there are a few things to consider:

  1. The minimum down payment required is 20% of the purchase price, and the funds must come from your own savings; you cannot use a gift from someone else.
  2. Only a portion of the rental income can be used to qualify and determine how much you can afford to borrow. Some lenders will only allow you to use 50% of the income added to yours, while other lenders may allow up to 80% of the rental income and subtract your expenses.
  3. Interest rates usually have a premium when the mortgage is for a rental property versus a mortgage for a home someone intends on living in. The premium can be anywhere from 0.10% to 0.20% on a regular 5-year fixed rate.

Rental income from the property can be used to debt service the mortgage application, but do bear in mind that some lenders will have a minimum liquid net worth requirement outside of the property. Also, if you do eventually want to sell this property it will be subject to capital gains tax. Your accountant will be able to help you with that aspect if you do decide to sell in the future.

VACATION PROPERTY

While vacation properties are not always the perfect investment, they are popular options for people who want to get away from it all and build memories in! If you’re motivated to head down that road, buying a vacation property is essentially like purchasing a second home.

If you are considering buying a unit within a hotel as a vacation spot (known as “fractional ownership”), it is important to note that if there is any mention of using your vacation home to provide rental income it will be treated like an investment property.

SECONDARY PROPERTY

Most people are trained to stay out of debt and don’t tend to consider using the equity in their home to buy an investment property, but they haven’t realized the art of leveraging. If you’re using equity from your primary residence to buy a secondary property, keep in mind that the interest you’re using is tax deductible. Consider that you’re buying an appreciating asset, and if you put a real estate portfolio and a stock portfolio side-by-side, they don’t compare.

WHO IS A GOOD CANDIDATE?

You might be surprised to learn that you don’t need to make six figures to get in the game. Essentially, you just have to be someone who wants to be a little smarter with their down payment. Before taking on a secondary property remember that the minimum down payment is 5% of the purchase price – unless you are intending to rent, in which case it is 20% down.

When it comes to purchasing a secondary property, whether for investment or rental or vacation, it can be a great opportunity! As your mortgage broker I can work with to find the best solution for your unique needs.

AIR BNB ON YOUR MIND?

More and More Canadians are hopping on the short-term rental train as Air bnb’s popularity has sky-rocketed over the last few years. It’s not a bad way to earn extra money, but don’t forget there are a few things to consider:

  • Check strata/city bylaws
  • Contact your insurance provider to get correct coverage
  • Talk to your mortgage broker to see if a short-term income property can affect your approval
  • Consider tax implications, and talk to an accountant.

The more services you provide as a host, the greater the chance that your rental operation will be considered a business.

 

Published by DLC Marketing Team

Bank of Canada Starts Hiking Rates, Signalling More to Come

Latest News Kim Stenberg 8 Mar

The Governing Council of the Bank of Canada raised the overnight policy rate target by a quarter percentage point in a widely expected move and signalled that more hikes would be coming. This is the first rate hike since 2018. In a cautious stance, the Bank announced it was continuing the reinvestment phase, keeping its overall Government of Canada bonds holdings on its balance sheet roughly stable.

The Bank’s press release highlighted the major new source of uncertainty provided by the unprovoked invasion of Ukraine by Russia and suggested that it is a new source of substantial inflation pressure. Prices for oil, metals, wheat and other grains have skyrocketed recently. Moreover, this geopolitical distention negatively impacts confidence worldwide and adds new supply disruptions that dampen growth. “Financial market volatility has increased. The situation remains fluid, and we are following events closely.”

The Bank commented that economies have emerged from the impact of the Omicron variant more quickly than expected. Demand is robust, particularly in the US.

“Economic growth in Canada was very strong in the fourth quarter of last year at 6.7%. This is stronger than the Bank’s projection and confirms its view that economic slack has been absorbed. Both exports and imports have picked up, consistent with solid global demand. In January, Canada’s labour market recovery suffered a setback due to the Omicron variant, with temporary layoffs in service sectors and elevated employee absenteeism. However, the rebound from Omicron now appears to be well in train: household spending is proving resilient and should strengthen further with the lifting of public health restrictions. Housing market activity is more elevated, adding further pressure to house prices. Overall, first-quarter growth is now looking more solid than previously projected.”

Canadian CPI inflation has risen to 5.1%, as expected in January, well below the 7.5% level posted in the US.” Price increases have become more pervasive, and measures of core inflation have all risen. Poor harvests and higher transportation costs have pushed up food prices. The invasion of Ukraine is putting further upward pressure on prices for both energy and food-related commodities. All told, inflation is now expected to be higher in the near term than projected in January. Persistently elevated inflation increases the risk that longer-run inflation expectations could drift upwards. The Bank will use its monetary policy tools to return inflation to the 2% target and keep inflation expectations well-anchored.”

The final paragraph of the Bank’s press release speaks with great clarity: “The policy rate is the Bank’s primary monetary policy instrument. As the economy continues to expand and inflation pressures remain elevated, the Governing Council expects interest rates will need to rise further. The Governing Council will also be considering when to end the reinvestment phase and allow its holdings of Government of Canada bonds to begin to shrink. The resulting quantitative tightening (QT) would complement the policy interest rate increases. The timing and pace of further increases in the policy rate, and the start of QT, will be guided by the Bank’s ongoing assessment of the economy and its commitment to achieving the 2% inflation target.”

 

Bottom Line

The Bank of Canada has made a clear statement regarding the outlook for a normalization of interest rates. We expect a series of rate hikes over the next year. Expect another 25 basis point increase following the next meeting on April 13. The increased uncertainty and volatility arising from the war in Ukraine is front of mind worldwide. Still, it will not deter central banks from tightening monetary policy to forestall an embedded rise in inflation expectations.

The Bank of Canada has postponed Quantitative Tightening, for now, a prudent move in the face of geopolitical uncertainty.

 

Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres