Daily Market Update

Housing starts fall in August…BMO brings back 2.99 per cent rate…Vancouver’s growth in high-end homes … and banks could take some of the burden off the CMHC…


Housing starts fall in August

New figures from the CMHC show a cooling in house building in August with new starts falling for the first time in five months. The trend measure of housing starts in Canada was 189,837 units in August compared to 189,596 in July; based on a six-month moving average and seasonally-adjusted figures. The standalone monthly SAAR was 192,368 units in August, down from 199,813 in July. Bob Dugan, CMHC’s Chief Economist commented: “The currently elevated level of inventory of newly completed and unoccupied condominiums, and units under construction, supports CMHC’s view that condominium starts will likely see a declining trend over the coming months as developers and builders seek to limit risks of over-building.” In August, the seasonally adjusted annual rate of urban starts decreased in Atlantic Canada and Ontario, and increased in British Columbia and the Prairies. Urban starts remained essentially unchanged in Quebec compared to July. This data may well prove to be a blip as new housing permits surged in August as we reported yesterday, so the coming months are likely to see resurgence.


BMO brings back 2.99 per cent mortgage

The Bank of Montreal has dropped the rate of its 5-year fixed mortgage to 2.99 per cent, down from 3.29 per cent. The first time its rate was reduced to that level was in 2012 and BMO was criticised by the late finance minister Jim Flaherty for fuelling a potential bubble but it was also at 2.99 per cent as recently as this March. Although other lenders offer a similar or lower deal, BMO is the only one of the big banks to do so. It’s suggested that this is more of a marketing move rather than a longer term policy as rates are expected to edge upwards ahead of interest rate rises predicted for next year. Read the full story.


Vancouver sees growth in properties over $3 million

Vancouver is seeing growth in high end home sales despite predictions that there would be a slowdown when the federal government scrapped its foreign investors plan. Macdonald Realty Group’s analysis of real estate board data shows a 35 per cent increase so far this year in homes valued at over $3 million, totalling 572. Of those, 135 were valued at $5 million or above. The record level in one year was set in 2011 when 691 homes sold for $3 million or above but this year is one target to beat that. Read the full story.


Banks may be forced to carry some CMHC burden

The CMHC is looking at a formula that would force banks to pay a deductible on mortgages insured by the crown corporation before claims are settled. The idea was briefly mentioned in the International Monetary Fund’s assessment of the Canadian housing market earlier this year and would enable the CMHC to move some of its financial burden on to the private sector; the banks are of course against the idea. The suggestion is that banks could take on risk of between 5 and 10 per cent of the value of the mortgage. Read the full story.

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