WinnipegREALTORS® is always monitoring the ebbs and flow of the real estate market and what may be ahead to give us a better gauge of where we expect things to go. As an example, CMHC recently increased its mortgage insurance premiums by 15 per cent. There was no prior indication this new fee increase would be coming and it is another cost first-time buyers will have to absorb in order to buy a home.
On a positive note and not surprising, the Bank of Canada announced on March 5th it was keeping its trend-setting overnight lending rate at 1 per cent. It has been at this low level since September 2010. The Canadian Real Estate Association (CREA) made the following remarks based on this long standing Bank of Canada stance of holding firm at 1 per cent.
Canadian private sector forecasters currently expect the overnight lending rate to remain on hold until well into 2015.
In its assessment of the overall economy, the Bank recognized that recent economic growth was slightly stronger than it expected and inflation was a bit higher than it anticipated. On their own, these two factors are likely to result in increased financial market speculation about interest rates rising sooner than previously expected.
However, the Bank also cautioned that it continues to expect that inflation will stay well below the midpoint of its target range for inflation of between one and three per cent over the rest of 2014. This means it remains in no rush to increase interest rates.
The Bank said it is still worried about Canadians’ high levels of household indebtedness but took comfort from recent Canadian housing market trends that point to a soft landing for the Canadian housing market.
On balance, the Bank is of the view that interest rates should remain where they are, and will continue to monitor economic and inflation data closely to determine the direction of future policies.
As of March 5th, 2014, the advertised five-year lending rate stood at 5.24 per cent, down from 5.34 per cent at the previous Bank rate announcement on January 22nd, 2014.
The next interest rate announcement will be on April 16th, 2014. On that date it will also update its Monetary Policy Report, which sets out its views of where the economy is going and potentially drop more hints as to where it sees interest rates going next year.
Talking about monitoring, every month WinnipegREALTORS® reports on its MLS® market activity. February 2014 was no different and we took advantage of our market release to remind the provincial government they need to be cognizant of the impact of their land transfer tax on home buyers, particularly first-time buyers who do not have the equity to help them meet high upfront closing costs in addition to coming up with the down payment requirement for a home they wish to purchase.
The entire market release can be found at winnipegrealtors.ca under resources. Suffice to say, February MLS® sales were down slightly from February 2013 but interestingly enough the two major property types — residential-detached and condominium — were trending higher this year over last. It was actually vacant lots that were down significantly and when you look into it further, there were a few newer subdivision lots sold in February 2013 over this year but you also have to factor in the harsher winter weather which would make it more difficult to market vacant rural lots. Certainly it is a bit of an anomaly and surprise to see a property type which only represents 5 per cent of the total MLS® market activity on an annual basis is the culprit to bring everything down from last year.
Year-to-date MLS® sales are only down 5 per cent and understandably January and February are some of the least active months for real estate sales activity every year.
“Far too early to get overly concerned with a market that is well poised and in a position to do better as we move into an early spring market,” said David Powell, president of WinnipegREALTORS®. “Besides expecting warmer weather in March to get people out of their winter mode I would also like to see a signal in this week’s provincial budget to give Manitobans more confidence in investing here. First-time buyers in particular would welcome some relief from Manitoba’s very onerous land transfer tax as they are now faced with higher CMHC insurance premiums.”
Note: This quote from WinnipegREALTORS® president was in the February MLS® market release and went out just prior to the unveiling of the 2014 provincial budget. Home buyers were ignored once again. They will endure the highest land transfer tax in the country and first-time buyers will be challenged to meet all the required down payment and closing costs. Other provinces with high land transfer taxes have recognized the difficulty first-time buyers’ face and have brought in exemptions. In B.C.’s 2014 budget they adjusted the exemption level higher from $425,000 to $475,000 so any first-time buyer that purchases a home does not pay a land transfer tax. The federal government is currently promoting a $750 first-time home buyer tax credit it has offered since 2009.
As for the weather we did get a break this week and like the ground hog more Manitobans are poking their heads out and emerging from one of the coldest winters on record.