Upside economic surprises served to whet investor risk appetite in the early days of 2012 stoked by a spike in stronger than expected US reports. Even outside the US, the balance of reports fared better than market expectations except in the euro zone where the economy continues to weaken. RBC’s economic surprise indices cover data for the US, euro zone, UK, Japan, Canada, and Australia. Importantly, the data confirmed a strengthening in the US labour market with 212,000 private-sector jobs created in December and the unemployment rate falling to its lowest level since February 2009. This improvement, abetted by reports of firming manufacturing and service-sector activity, supports our view that the rebound in growth over the second half of 2011 will be sustained through 2012.

In the first full week of trade, the world stock market gained almost a full percentage point and commodity prices, according to the CRB futures index, rose 2%. 10-year government bond yields bounced around although stayed within reach of their all-time lows. The prospect of central banks maintaining ultra-stimulative policy with prospective further easing in some countries will keep government bond yields low throughout 2012. In turn, low interest rates will support consumer and business investment with overall growth rates in all but the euro zone expected to be higher this year than in 2011. European growth will be held down by fiscal restraint although we expect the downturn to prove shallow and short lived. This is based on our assumption that policymakers make sufficient headway in resolving the debt crisis while keeping monetary policy stimulative enough to alleviate some of the attendant downward pressure on the economy.

Canada’s economy caught its breath in the fourth quarter

Economic news for Canada proved more volatile than in the US recently. Labour data showed 55,000 jobs were lost in the final quarter of 2011 resulting in the unemployment rate rising to 7.5% from 7.1% in September. The softening in the labour market was consistent with the economy gearing down in October following four months of solid gains. October’s flat print in real GDP was not enough to displace the strong growth recorded in prior months, and output was still 2.7% higher than in October 2010. Data for the final months of 2011 showed a mild pickup in activity driven by firm housing starts and sales, and rising auto production. We retain our call for Q4 GDP growth of 2.0% following the outsized 3.5% gain recorded in Q3. Stronger US activity, low interest rates, and a gradual improvement in global financial markets will likely result in the average pace of growth recorded in the second half of 2011 being sustained in 2012. The Bank of Canada’s Business Outlook Survey showed 37% of respondents expect business activity to increase, and although 41% anticipate slower sales growth, this follows a prolonged period of rapid gains. A growing number of firms indicated their intention to hire new workers with 21% more respondents planning to increase M&E investment than to reduce it. With business investment one of the mainstays of our 2012 growth forecast, the survey results strengthened our confidence that growth will sustained in early 2012.

Bank to remain on heightened alert

The Bank will stay focused on mitigating the effect of external events on the Canadian economy. This was the message in December when policymakers acknowledged that both the Canadian and US economies were outperforming their forecasts while putting equal emphasis on the downside risks to the outlook emanating from Europe via financial market turbulence and weakening trade flows. The less robust end to 2011 for Canada’s economy means that the Bank will be on heightened alert as it assesses the effect of global events on the growth outlook. The prospect of the Fed holding the funds rate in the 0% to 0.25% range past the end of next year to ensure the economy stays on an accelerating growth path will allow the Bank to take its time in removing the ‘considerable’ monetary policy stimulus that is in place especially against a backdrop of stable domestic inflation. The reversal of fiscal support in 2012 and 2013 will provide additional incentive for the Bank to proceed slowly in withdrawing monetary policy stimulus. In keeping with the change to our Fed funds forecast, we reduced the amount of tightening that we expect by the Bank of Canada in 2012 and 2013. Our updated forecasts look for the overnight rate to end 2012 at 1.25% and 2013 at 2.0%

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RBC Mortgage specialist

Emily.lombardo@rbc.com

403.516.2205

In releasing its December data on Tuesday, CREB said total sales reached 18,568 for 2011 compared with 17,267 in 2010.

“Recovering from tepid sales activity in the first half of 2011, early improvements in employment and migration resulted in a pickup in housing demand in the second half of the year,” said the board in a news release. “By the end of June 2011, year-to-date sales activity had only increased by two per cent compared to the second half of the year, where residential sales improved by 15 per cent.”

Sano Stante, president of CREB, said sales activity remained 17 per cent below the long-run average but monthly figures point toward the trend of this gap narrowing.  In the single-family home market, there were 13,186 sales in 2011, a nine per cent increase over the previous year.

Meanwhile, the condominium market recorded declining sales for nearly half of the year, but favourable pricing and improved economic conditions pushed sales up by double-digit rates for the second half of the year, said CREB.  Condo sales totalled 5,382 in 2011, a four per cent increase over the previous year.

“The demand recovery in the condominium market lagged the single-family market, as price adjustments in both the single-family and condominium markets resulted in more selection for consumers,” said Stante. “For the first time in several years, consumers had additional selection of single-family homes at a lower price range, which directly competed with the condominium market.”

The single-family average price in 2011 reached $466,402, a one per cent increase over the previous year. The average price for condos of $287,172 remained one per cent lower than the previous year.

“Throughout 2011, elevated levels of inventories have limited price growth as consumers benefited from sufficient supply of housing to choose from. However, as these inventories drop to levels more consistent with a balanced market, we can expect some moderate price growth moving forward,” said

Stante.

Toneguzzi the Herald

” Sotheby’s International is synonymous with high quality marketing that is provided to all clients ensuring maximum exposure and professional presentation of their property to potential buyers, as one of the Worlds most trusted brands of quality, I am very pleased to be joining the team at  Sotheby’s International ” says Stewart.

Alberta is expected to be one of the best economic performers in the world this year, with the Royal Bank of Canada pegging GDP growth at 4.3% and the Conference Board of Canada predicting that the province will lead Canada in growth for 2011. With Albertan homebuyers driving demand in key Western Canadian real estate markets and with investment opportunities abounding in the province itself, Sotheby’s International Realty Canada has expanded into Calgary.

The new Calgary office has launched at a time when improvements in the energy sector are anticipated to promote stronger job growth in the second half of the year, providing the foundation for continued strengthening in the real estate market.

According to figures released in March 2011 by the Calgary Real Estate Board, Calgary single family home sales in the first quarter of 2011 were 3,309, a 4% increase over the first quarter of 2010. The combination of stable home prices, low interest rates and year-over-year improvements in employment are the primary factors fueling the growth.

“Calgary is a strategically important real estate market, and our presence represents a key step forward in our growth across Canada,” said Ross McCredie, President & Chief Executive Officer of Sotheby’s International Realty Canada. “We’re looking forward to offering our clients in Calgary the highest caliber of real estate service, as well as local and international marketing solutions that are unrivaled in their ability to market Canadian homes to the world.”

With exceptionally low interest rates (3 year fixed 2.99%) and affordable housing, Calgary is rated as one of the top buying opportunities in Canada.

Mortgage companies are seeing increased activity both in actual deals and pre approvals as a number of buyers who sat on the fence  through 2011 are preparing to move on properties.

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Born to a nation of heroes, on the crest of Victory during and post Second World War, Generation V has lived through six decades of peace, prosperity and technological innovation. New research, conducted on behalf of Warner Leisure Hotels, has shown exactly why this generation is the luckiest on the planet.

For Generation V, teenagers at the time, these words turned out to be true. Generation V grew up with Elvis Presley, the Swinging Sixties, and the birth of colour TV. They benefited from the booming 80’s housing market and in the early part of the first decade of the 21st Century held 80% of the Worlds wealth. In spite of all of this, a third of Generation V say that they are happier now than they were in their 20s or 30s and describe this as the happiest decade of their lives.
Proving that age is not an issue for Generation V, almost half describe themselves as ‘Sexy at 60’ or ‘younger than my years’. Less than 1% think of themselves as ‘old’. This generation is not only fit in mind, but in body too; 45% actively undertake three or more hours of physical exercise a week – more than the recommended average for people of their age. A generation which has seen men land on the moon and the invention of pocket sized mobile phones, Generation V are not shy of new technology. Active online as much as they are offline, Generation V spend a lot of time, and money, on the internet; shopping (79%), banking (74%) and catching up on the news (57%).

Keeping up to date with modern society and trends is very important to them; Generation V use the internet as a major source of communication – 40% have an active Facebook account and almost 30% use Skype to communicate with friends and family.

One fifth is still working but for most, this is the time in life to enjoy the fruits of their labour, and they certainly are!

They indulge themselves by dining out and going to the theatre (53%), going on holidays (51%) often two or three times per year, and making improvements to their homes (39%).

Richard Bates, Managing Director of Warner Leisure Hotels said: “Far from being ready to hang up their dancing shoes and put on their slippers, Generation V shows us that the best part of your life begins at 60! Their passion, ambition and enthusiasm for living life to the full is inspiring to the generations that succeed them.”

According to the Calgary Real Estate Board, month-to-date from Nov. 1-24, there have been 794 single-family MLS sales, up from 724 for the same period last year.

The average sale price has also jumped to $475,277 this year from $460,731 a year ago.

TORONTO – A volatile year for Canadian banking results is likely to end on a soft note, and the outlook for 2012 won’t inspire confidence as Europe’s debt troubles deepen and Canadian borrowers turn shy.

Analysts expect percentage year-over-year profit gains in the mid-to-high single digits when the country’s big banks begin reporting this week. On a quarter-to-quarter basis, profits are expected to drop from the third quarter.

Even so, with bank shares already at year-lows, even modest results could spark a rally, particularly if one or more of the banks raise dividends.

Toronto-Dominion Bank and Canadian Imperial Bank of Commerce are first in line to report for the fourth quarter, with results due early on Thursday.

Volatile financial markets will likely steer the results in the most recent quarter, just as they have so far this year. “I think it’s fair to say the capital market side of the business is going to be lackluster,” said Ian Nakamoto, director of research at MacDougall, MacDougall & MacTier in Toronto.

The S&P/TSX composite index is down nearly 20% from the year-high reached in March. Falling trading fees, and weak underwriting and advisory activity should weigh on results, too. Analysts see only slim growth in wealth management income, a growing focus for several of Canada’s top six lenders.

National Bank of Canada, with one of the highest weightings of capital markets revenue, is the bank most likely to show zero growth, according to analysts. TD, which is most highly geared to retail banking, is expected to show double-digit profit growth.

The markets-related weakness should be offset by revenue from business and mortgage lending, which should grow despite razor-thin interest rate margins. RBC Capital Markets analyst Andre-Philippe Hardy said stronger business-loan growth and lower loan losses should drive revenue in the business line that makes up the bulk of revenue for the banks. However, mortgage growth is expected to slow next year. “In light of the recent market volatility and slowing economic growth, we expect bank commentary on the outlook for 2012 to have a greater impact on share prices than reported earnings relative to expectations,” he said in a note.

CIBC World Markets analyst Robert Sedran expects full-year per-share earnings to rise a slim 4.4% in 2012, down sharply from his expected 12.3% for 2011.

Analysts also expect banks to reveal more about any exposure to Europe, where the sovereign debt crisis is spreading.

“I think the direct exposure is relatively minimal,” said Gavin Graham, president of Graham Investment Strategy.

“The real problem for the North American banks is the knock-on effect in the event we get a sort of Lehman-style freeze up in interbank lending,” he said, referring to the 2008 collapse investment bank Lehman Brothers.

Setting that aside, he said the recent pressure on the bank stocks could subside once results are released, particularly if the banks raise dividends again.

Shares of TD, Bank of Nova Scotia, and National Bank dropped to their lowest level in more than a year on Friday, while Royal Bank of Canada touched its lowest in more than two years.

After putting dividend increases on hold in 2008, Canadian banks began to resume raising payouts a year ago, and now all have done so except for Bank of Montreal, which instead directed its capital towards its $4 billion acquisition of Wisconsin bank Marshall & Ilsley.

“They got a [pass] because they had a big takeover,” Mr. Graham said. “But now you have to think there would be an indication from management that if they don’t do it now they are looking at raising it in the next few quarters.”

Other banks that analysts say may be due for dividend increases this quarter are Scotiabank and National Bank.

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AL NENSHI

Mortgage Associate

Quantus Mortgage Solutions

(403) 540.3000

ALNENSHI@TELUS.NET

http://calgarydreamhomes.com

European policymakers continued to work on containing the debt crisis. The European Leaders Summit produced the broad strokes of a plan aimed at finding a sustainable solution to the area’s debt problems. Financial markets reacted positively to the resolutions although the details of how they would be implemented were scant. The main takeaway was that the summit was deemed to reduce the near-term risks to the outlook by strengthening euro-area integration and making a disorderly default by Greece less likely. Investors piled back into riskier assets with the global stock index up 4.6% two days after the Summit’s end and the 10-year US Treasury yield rising 28 basis points (bp). The rally in risk assets was short lived, however, with some retracement occurring in the wake of the announcement of a Greek referendum on the bailout deal. Initially, the announcement of the vote created another bout of market anxiety, and the next payment to Greece from its euro-zone partners and the International Monetary Fund (IMF) was put on hold reviving the spectre of a disorderly Greek default. By week’s end, with the odds of a referendum fading, quashing worries about an imminent default by Greece and the European Central Bank (ECB) cutting its policy rate, funds flowed back into riskier assets.

Bank of Canada becomes antsy…

The Bank of Canada made some aggressive cuts to the 2011 and 2012 growth forecasts, attributing the downward revisions to a “less favourable external environment affecting Canada through financial, confidence and trade channels.” The Bank’s global growth forecast this year was trimmed to 3.8% from 3.9% while the 2012 projection dropped 0.9 percentage points (pp) to 3.1%. Incorporated in these forecasts were lower assumptions for both the U.S. and European economies, with Europe expected to experience “a brief recession.” Canada’s economy is now forecasted to grow by 2.1% this year, not 2.8% as in the July forecast, with 2012’s real GDP projection cut to 1.9% from 2.6%. The Bank’s forecast are below RBC’s estimates of 2.3% in 2011 and 2.5% in 2012. One key difference between the forecasts is that the Bank is not assuming any further fiscal stimulus in the US while our assumption is that the Obama Job’s Plan will be a factor in supporting U.S. growth next year. Another difference is that the Bank expects “an environment of lower confidence and heightened uncertainty” to continue to weigh on activity. To our minds, this call is putting too much weight on the effect that financial market volatility will have in pushing consumers and businesses onto the sidelines.

…although economy is riding the waves better than most

The second quarter’s unexpected contraction produced talk that Canada’s economy was headed back into recession; however, this proved to be ill founded with real GDP growing by 0.4% in July and 0.3% in August. Even in the absence of any increase in September, data point to the economy growing at a 2.8% annualized pace in the third quarter. Although the economy regained its momentum, excess capacity exists. In the Bank’s October forecast update, the output gap was estimated at 1.25% as of the third quarter of 2011. With the economy running with more slack and a weaker growth profile, the Bank pushed out its assessment of the timing when the gap will be eliminated to the end of 2013 from the middle of 2012. Based on our slightly more upbeat assessment of the economy’s growth prospects, we expect that the output gap will be closed in mid-2013. The amount of spare capacity in the economy dampened inflation projections with the Bank forecasting a 1% headline rate in the second quarter of 2012, which is sharply below September’s 3.2% pace. Lower energy prices are expected to play a key role in slowing the pace of inflation. Similar to the Bank, we expect that inflation pressures will ease, thereby removing inflation concerns from the worry list.

Low for long lives here!

The Bank of Canada’s elevated concern about the effect of the European sovereign-debt crisis and the slow-growing U.S. economy resulted in a change in tone in its October policy statement. The statement signalled that the Bank will maintain sufficient policy accommodation to mitigate the downward pressure on growth emanating from outside Canada’s borders. Our more optimistic view of the momentum in Canada’s domestic economy continues to support our call that the Bank’s next move will be a rate hike, although given the current heightened level of uncertainty and the prospect of subpar global growth, the first increase will be a long time in coming, and we look for a 25 basis point move in the third quarter of 2012. Against this backdrop, government bond yields are expected to stay low with the 10-year yield forecasted to end this year at 2.30% and next year at 2.90%.

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Emily Lombardo

RBC Mortgage Specialist

T: 403-516-2205

E: emily.lombardo@rbc.com

http://calgarydreamhomes.com

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