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31 May 2012

Market Watch

North American markets were off to a decent start out of the gate this
morning, but had the wind knocked out of the sails after some sluggish
economic data from south of the border. The ADP private payrolls report
showed a 133,000 gain in employment this month, slightly less than
forecasts. Jobless claims ticked higher, while the Chicago-area
manufacturing index unexpectedly slipped to 52.7. Finally, US first-quarter
GDP growth was revised lower to 1.9%, although the revision was expected.
The Canadian banks are propping up the TSX this morning after both CIBC and
National bank reporting better than forecast profits, with National Bank
raising its quarterly dividend. Still that won't stop the index, along with
most world market averages, from posting its worst monthly performance since
last September. The TSX is down 43 pts. The Dow is down 96 pts.

The Canadian dollar is down another half cent this morning to US$.9661. Bond
yields continue to sink with the 5-year Canada yield now down to 1.22% and
the 10-year to 1.72%. Oil is off $1.19 to US$86.63/barrel. Gold is up $4 to


Jim FitzGerald
Regional Vice President, Western Ontario Radius Financial

29 May 2012

Home ownership getting less affordable in Canada






Dont let the title of this article scare you, Canada is not Vancouver! Got to love the media. Worth a quick read below.


TORONTO — RBC says home ownership was less affordable in most major Canadian cities during the first quarter, although Calgary and Edmonton bucked the trend.

The latest RBC Economics report on home affordability says its index deteriorated sharply in Vancouver and to a lesser degree in Toronto, Montreal and Ottawa — primarily due to higher real-estate prices.

But the bank’s affordability index was unchanged in Calgary and improved in Edmonton compared with the fourth quarter of 2011.

The report tracks how much of a home owner’s income would be required to pay typical costs associated with owning a standard one-storey detached house.

In Vancouver, RBC estimates the combined cost of mortgage payments, utilities and property taxes rose 3.1 percentage points to 88.9%.

In Calgary, by contrast, only about 36.7% of pre-tax income would be required to pay for a standard bungalow — unchanged from the previous study — and in Edmonton the index improved by 0.4 percentage point to 32.4%.

In Toronto, the index deteriorated by 1.2 percentage points to 53.4%; in Montreal, the cost of ownership increased 1.2 percentage points to 41.4% of income and in Ottawa it was up 0.9% to 41.8%.

“It became a little tougher on household budgets to carry the costs of owning a home at market prices at the start of this year,” said Craig Wright, RBC’s chief economist said in a statement Tuesday.

“Strong buyer demand was a principal driver of the modest rise in homeownership costs. While the deterioration in affordability was felt to varying degrees across the country, it was mild in most cases.”

He said the challenge will likely increase once the Bank of Canada begins raising interest rates.

“Exceptionally low interest rates have been the key force in keeping affordability from hitting dangerous levels in Canada in recent years,” Wright said.

“Affordability headwinds are likely to increase next year, as interest rates make their way towards more normal levels.”

He said RBC expects Canada’s central bank will hike rates gradually, starting in the fourth quarter.

“A gradual pace of increases will allow income growth to provide some offset,” he said.



 Courtesy of


Alec Bowes
Director, Business Development | Canadiana Financial Corp.


510 - 67 Yonge St. Toronto, ON M5E 1J8


1-877-672-7219 Ext. 237






Something exciting is brewing at Canadiana Financial… ask me about our new compensation plan options today!




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17 May 2012

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The American consumer is starting to
move in the right direction.
First quarter US GDP was OK, but nothing to write home about. What’s
important, however, is that the American consumer is starting to move
in the right direction. Will the bruised American consumer regain its
traditional role as the main engine of America’s economic growth? We
think so. An array of indicators suggests that consumers will build on
recent momentum and will probably surprise the market with their
regained resiliency.
In Europe, both the UK and Spain are now officially in a recession and
once again the market gets nervous. While the European Central Bank
will take its time to intervene, there are already some communications
from the Bank that it will be willing to reintroduce its lending program if
needed. The likelihood is that this kind of merry-go-round will dominate
the European markets in the coming months.
Bank of Canada might start raising rates before the end of the year.
In Canada, the government is giving Canada’s banking regulator—The Office of the Superintendent of Financial
Institutions—new authority to oversee Canadian Mortgage and Housing Corporation (CMHC). The government
is also putting a stop to banks using mortgages insured by CMHC as collateral on covered bonds. We view these
two developments as marginally negative to the mortgage market.
It appears that the Bank of Canada is turning hawkish again suggesting that it might start raising rates before
the end of the year. Note that exactly a year ago, we were in the same situation when the Bank hinted even more
strongly that it will start raising rates, but had to change its mind due to the increased global macro economic
uncertainty. At this point the likelihood of a move before the end of the year is about 50%—but even if the Bank
starts moving, say in the 4th quarter, it will be a very slow and hesitant move.

Have a great day!!

Lisette Amalfi, AMP

Mortgage Broker/Owner
Mortgage Alliance Oac Mortgages

Phone: 905-529-1199
Toll Free: 877-529-1199
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14 May 2012

Small Business May Have A Better Chance

Government of Canada Supports Angel Investors in Southern Ontario

For immediate release
May 14, 2012

Oakville, Ontario — Terence Young, Member of Parliament for Oakville, on behalf of the Honourable Gary Goodyear, Minister of State for the Federal Economic Development Agency for Southern Ontario (FedDev Ontario), today announced a new Government of Canada investment for Angel One Investor Network that will help the organization connect more angel investors with promising new businesses in the region.

"The Government of Canada is committed to creating jobs, growth and long-term prosperity for southern Ontario," said MP Young. "By helping encourage greater angel investment in the innovations of entrepreneurs in our region, we are strengthening relationships between start-up companies, investors and our government, and equipping businesses with the tools they need to succeed. This will help drive innovation in southern Ontario, for the benefit of our people, businesses and communities."

Angel One Investor Network is a not-for-profit angel network based in Oakville, Ontario. The group aims to develop a strong base of active angel investors to respond to the funding needs of early-stage, entrepreneurial companies in the Oakville, Burlington and Hamilton areas that are working to commercialize innovative technologies.

Under FedDev Ontario's Investing in Business Innovation initiative, Angel One Investor Network will receive up to $50,000 to expand its membership base and increase its pool of angel investors through outreach activities such as recruiting and training seminars, a web site and other promotional tools. The group is aiming to increase its investor group from the current 11 members to a total of 40 members.

"The introduction of a formal angel organization in the region is expanding the investing breadth and depth of the local investors. Angel investing has become an important component in the effective commercialization of innovation," said Karen Grant, executive director of Angel One Investor Network. "Individually and in groups Angel investors fund at least $1.9 billion a year in Canada, complementing the $871 million invested by venture capital in early-stage companies."

Created in 2009, FedDev Ontario supports the southern Ontario economy by building on the region's strengths and creating opportunities for jobs and economic growth. The Agency has launched a number of initiatives to create a Southern Ontario Advantage and place the region in a strong position to compete in the global economy. These initiatives are designed to encourage partnerships and support projects that help the region's businesses and communities become more competitive, innovative and diversified. To learn more, please visit or call 1-866-593-5505.

Follow us on Twitter @FedDevOntario

– 30 –

For more information, contact:

Michele-Jamali Paquette
Director of Communications
Office of the Honourable Gary Goodyear

Media Relations
FedDev Ontario


Want to buy a cottage? Weigh the costs vs the rewards

Want to buy a cottage? Weigh the costs versus the rewards

Jason Heath  May 5, 2012 – 7:00 AM ET | Last Updated: May 7, 2012 9:49 AM ET

Is a vacation property affordable without stretching yourself too thin and sacrificing other financial goals?

May marks a time of change for those who own or who wish to own a vacation property. The snowbirds are returning from the sunny south and the Victoria Day holiday has historically been “opening weekend” for many cottagers. It is also a time of year that sees a lot of turnover of vacation properties — whether north or south — which might make you wonder how you can achieve your dream of owning a vacation property.

Most people opt for cottages over homes or condos in the southern states simply because of proximity. The Royal LePage Recreational Property Report says standard waterfront recreational properties can range from the mid-$150s on the East Coast to approaching $1-million in Cranbrook or Vernon, B.C., the Muskoka region of Ontario or the Eastern Townships of Quebec.

For argument’s sake, assume the purchase of a $200,000 cottage. Not everybody has a couple of hundred thousand dollars waiting to find a home (pun intended), so most cottage purchases will be financed. It’s important to know ahead of time that mortgages for recreational properties may be subject to different lending requirements and higher interest rates than your home. Banks tend to look more favourably upon cottages that have year-round access and are winterized when determining acceptable loan-to-value ratios and discounts off of posted mortgage interest rates, so don’t count on standard mortgage terms for an uninsulated log home on an island.

If someone qualifies for an 80% mortgage on their notional $200,000 cottage, that requires a down payment of $40,000. It’s possible (though may or may not be advisable) to borrow against your principal residence for this down payment. Assuming a 4% rate and a 25-year amortization on the $160,000 mortgage, the monthly payments would be $842, which is about $10,000 a year. Property taxes, insurance, utilities and maintenance might conservatively add another $5,000 a year, meaning a total annual cost of $15,000 (7.5% of the cottage purchase price). Assuming the entire down payment came from a secured line of credit on your home, add another $2,000 in interest-only payments at a minimum at today’s rates. Remember, though, in addition, cottages need new roofs and experience other expensive and unexpected maintenance requirements just like a home. And interest rates have nowhere to go but up.

It wouldn’t be unreasonable for a family of four to spend $5,000 to go on a one-week vacation, but that’s a long way from the $15,000 carrying costs for the cottage. That said, in this example, nearly $4,000 a year would be going to mortgage principle repayments and if the cottage rises in value at a modest 3% a year, there’s another $6,000 in net equity — $10,000 in total — over the course of the year. If we knock $10,000 off the carrying costs, a family might be looking at only a $5,000 annual net “cost,” which is getting a bit more reasonable when you look at it this way.

There is still a valid argument that the average family who might only take a couple weeks of vacation per year might do better to rent a cottage or visit an all-inclusive resort and spread out their vacation spending. A $5,000 vacation budget could go a long way and for those who like diversity, it might not be very rewarding to spend it all in one place at the cottage. But likewise, some would gladly add this to their budget to have a second home to call their own.

For those who like diversity, it might not be very rewarding to spend it all in one place at the cottage

One consideration when purchasing a cottage property is the potential to rent it out. It’s much easier to rent a cottage on your own these days on Kijiji or other online directories, by creating your own website or simply by word of mouth. But there are also property managers who will find tenants and provide various levels of management — typically for 10% to 20% of the rent collected. This can certainly help pay for some of the carrying costs and can be a good option for families who can’t spend much time at their cottage. It also makes some of the carrying costs tax-deductible (though the rent received is also taxable). Renting any property, cottage or otherwise, can present many unpleasant challenges for landlords, so renting is not without potential headaches.

More and more Canadians are looking south of the border for vacation properties. Florida, Arizona and California tend to be hot spots. With the decline in U.S. home prices, coupled with the increase in the Canadian dollar vis-à-vis the U.S. in recent years, home prices are very affordable in the U.S. on a relative basis compared to many places here in Canada.

Average home prices in Florida peaked around $271,985 in 2006 and have since stabilized around $159,900. This compares to the average home price in Canada of about $369,677.

If financing is required for a U.S. property, U.S. banks may lend 50% to 75% of the purchase price to a Canadian depending on the state. Lenders may also require the deposit of up to 12 months of mortgage payments, property taxes and insurance premiums into a U.S. bank account. Some people use a mortgage or line of credit on their Canadian home to provide the funds to purchase a U.S. property to keep things simple.

Canadians with a high net worth need to be cognizant of U.S. estate taxes, which could become payable on death for those owning U.S. assets. There is a lot of short-term uncertainty around U.S. estate tax rules, so be sure to consult a professional.

A Canadian who rents out a U.S. property will be required to file a U.S. tax return, although in most cases, little or no tax results and the filing is simply administrative.

Is a cottage or U.S. recreational property a good investment? That depends in part on what happens with real estate prices. Some have called for the bursting of a real estate bubble in Canada, suggesting caution for Canadian cottage buyers. Historically, Canadian homes have averaged about 3.5 times household income — currently, they stand at 4.75 times, which is quite a jump from the long-term trend. Meanwhile, the U.S. housing market, although it seems to have found a floor, has not shown much of an improvement to suggest positive returns in the near term.

Prices aside, because future real estate trends are just speculation, one needs to examine more tangible factors. Is a vacation property affordable without stretching yourself too thin and sacrificing other financial goals? Is diverting money otherwise spent on vacations to a fixed address a good trade-off? And finally, where do you and your family want to be — sitting on the dock this summer or baking on a beach next winter? Both sound good, but take the time to determine what’s right for you from both a financial and lifestyle perspective.

Jason Heath is a fee-only Certified Financial Planner (CFP) and income tax professional for Objective Financial Partners Inc. in Toronto.



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