RBC Down Grade, again?

Just over a year after it was initially downgraded, Royal Bank of Canada is at risk of another slash to its credit quality as Moody’s Investors Service reviews all major global banks with big capital markets divisions.

The rating agency has initiated a review of 17 banks and securities firms with global capital markets operations because it feels that the risks associated with these divisions “are not fully captured in their current ratings.”
More related to this story
Moody's weighs downgrade of Sun Life US
RBC downgraded by Moody’s
RBC’s rating put on watch by Moody’s

“Capital markets firms are confronting evolving challenges, such as more fragile funding conditions, wider credit spreads, increased regulatory burdens and more difficult operating conditions,” the rating agency said. “These difficulties, together with inherent vulnerabilities such as confidence-sensitivity, interconnectedness, and opacity of risk, have diminished the longer term profitability and growth prospects of these firms.”

“Rapidly changing risk positions expose these firms to unexpected losses that can overwhelm the resources of even the largest, most diversified groups.”

RBC was already dinged for its exposure to capital markets in December 2010, when Moody’s downgraded its credit rating to Aa1 -- which is stil a stellar rating.

But much has changed since then, and Moody’s thinks its worthwhile to re-evaluate.

“The combination of changed operating conditions and increased regulatory requirements and restrictions has diminished these firms' longer-term profitability and growth prospects,” the agency said. “While we had initially expected their standalone credit profiles to recover once the acute phase of the crisis had passed, we now view these challenges as structural features of global investment banks.”

In an e-mailed statement, RBC said it was “surprised” to be included in the review and the banks believe is inclusion “is unwarranted.”

“This action does nothing to help investors differentiate between strong banks and weak ones. RBC’s credit rating and capital base are among the strongest of all banks globally,” RBC said. “Over the past three fiscal years, our capital markets business has been consistently profitable and represents less than 25 per cent of RBC's earnings.”

10 of the 17 firms that Moody’s will inspect have been her placed on review for downgrade, or had their reviews for downgrade extended. Along with RBC (RY-T53.24-0.12-0.22%), the firms placed under review include U.S. giants such as Bank of America (BAC-N8.03-0.06-0.74%), Citigroup (C-N32.990.280.86%), and JPMorgan Chase (JPM-N38.480.481.26%).

Moody’s goes so far as to break the firms it will review into different categories, with some susceptible to one-notch downgrades, and others susceptible to more. RBC is susceptible to two-notch downgrades, while Credit Suisse, Morgan Stanley and UBS could all face three-notch downgrades.

CMHC 2012 Predictions.

Canada's housing market will remain stable for at least two more years, Canada Mortgage and Housing Corp. predicted Monday, with the expected slow growth in the economy keeping house prices in check.

CMHC, the Crown corporation that insures Canadian mortgages, expects little change during 2011 in prices and sales of existing homes, as well as little change in new home construction.

Mathieu Laberge, deputy chief economist at the agency, says low interest rates will keep buyers buying, but the slow economy will put a damper on any price hikes.

"With the Canadian economy set to expand at a moderate pace and mortgage rates expected to remain low, activity levels in 2012 in both new home construction and sales of existing homes will stay close to levels seen in 2011," Laberge said in a CMHC statement.

Mortgage rates will remain flat through most of 2012, CMHC predicts, and start increasing moderately in late 2012 or early 2013.

The average house price across the country will hit $368,900 for 2012. By 2013, it will be $379,000.

Around 457,300 existing homes are expected to change hands in 2012, moving a little higher in 2013 to 468,200 units.

Housing starts are expected to be around 190,000 units this year and 193,800 units in 2013, the CMHC also predicted.

Over 2012, CMHC expects Canada's six eastern provinces will see a contraction in housing starts. By 2013, however, modest growth will return to Quebec and Ontario, they say.

All four western Canadian provinces will see growth in housing starts in 2012, with Alberta leading the way at 13.2 per cent. In 2013, the western provinces except Saskatchewan will see positive growth; Saskatchewan's total starts are expected to contract by 2.7 per cent.

Low mortgage rates have driven demand in the housing markets for years now, causing house prices to rise sharply, particularly in big cities such as Toronto and Vancouver.

Even as the economy has slowed in recent years, the housing market has seen little change. Price growth has slowed in most areas, but not retreated.

Last month, BMO economists suggested Canada would likely avoid a serious housing market crash, with the possible exception of Vancouver.

That analysis, by BMO economists Sherry Cooper and Sal Guatieri, suggested that most markets are more likely to cool rather than collapse over the next couple of years.

The one exception, they said, would be Vancouver and parts of B.C., which will likely experience a more severe correction, because demand from non-resident Chinese investment has been driving up prices.

Top 10 Large Home Ownership Markets in the USA

   Location                                        Median Home Price 
    Honolulu HI                                                $ 489,200
    Washington-Arlington-Alexandria DC       $ 384,900
    Santa Barbara-Santa Maria CA                   $ 395,300
    Oxnard-Thousand Oaks-Ventura CA         $ 389,000
    San Luis Obispo-Paso Robles CA              $ 393,700
    Barnstable Town MA                                 $ 364,000
    Ocean City NJ                                            $ 358,700
    Santa Rosa-Petaluma CA                           $ 344,500
    Naples-Marco Island FL                             $ 229,300
    Olympia WA                                              $ 214,700

The analytics above compute expected appreciation, cost of ownership and projected return on investment upon sale of the property in 10 years, and adjust them for expected risk associated with volatility of home prices in the market. The highest score was for Naples-Marco Island, Fl.

Most common types of homes in Ontario, Canada

Apartment (suite, flat)
Usually includes 1 bedroom or more, a kitchen, a bathroom and a living room. A bachelor or studio apartment has 1 room for sleeping and eating.
May be in a building or a house.
There are highrises (6-60 stories high with an elevator) or lowrises (fewer than 6 stories high, often with no elevator and called a "walk-up").
Generally, apartments are owned by a landlord and managed by a superintendent who lives in the building.
Condominium (condo)
A type of home ownership where you buy a unit in an apartment building or townhouse complex, but do not own the land. Owners sometimes rent condos to tenants.
Condominium owners join together in a corporation and elect a board of directors to manage the building and the land. Each owner pays his or her own mortgage, taxes, utilities and a monthly fee towards property maintenance.
Duplex and Triplex (semi, tri)
A house that is divided into 2 or 3 separate apartments, one on top of another. The owner of the house may live in one of the apartments.
May be a detached house, semi-detached house, or a townhouse.
Room (shared accommodation)
A room in an apartment, house or other type of accommodation that is rented to 1 person. The tenant usually shares the kitchen, bathroom and living room with other tenants.
Furniture is often included. Meals may be included.
Some types of housing may be more available in certain cities.
Detached (single family home)
Typically a home without any other structure attached to it (other than a garage, carport etc). These can be single storey or multi-storey, anywhere from hundreds of square feet (or tens of square meters) to tens of thousands. Typically you own the land it sits on and is therefore freehold.

Les Sohar is a salesperson with Re/Max in Canada who is an International Real Estate specialist.

It's A Small World After All

Apartment seekers in notoriously pricey Vancouver shouldn’t get too excited about the inexpensive new “designer lofts” now on the market. They may be cheap—the average rent is just $850 a month—stylish, and located in a refurbished heritage building, but they’ve also been labelled “micro-lofts” by developers: a euphemism for exceedingly small. Ranging from 226 to 291 sq. feet, the new lofts, located in the once-condemned Burns Block building, are said to resemble many metropolitan apartments in Europe and Asia—with floor space roughly the size of two parking spaces, or a generous prison cell. And their location isn’t a selling point either. The “micro-lofts” may be downtown, but they’re on Hastings Street, in what is arguably the city’s most crime-ridden neighbourhood. The Portland Hotel—a non-profit residence for drug addicts, sex workers, and the terminally ill—is right next door.

Some say the area is slowly gentrifying, with the addition of similar (albeit larger) developments in the works. And considering Vancouver’s housing market remains the most expensive in the country (not to mention the fact that most inner-city condos today are under 600 sq. feet), apartment seekers may have no choice but to lower their standards.

Each of the 30 furnished “micro-lofts” will have high ceilings, a built-in fold-up wall bed, a flat-screen TV and a very small three-piece bathroom, with a showerhead installed directly above the toilet. Local activists opposed the development, aruging the space should have been used to house the poor, instead of, presumably, those who will just come home to their tiny apartment every night and feel poor.

Real Estate Tips and Dangers to look out for When Investing

Here are the most ignored issues in Real Estate Investing

 Choosing A Location To Invest In
 Market Research
 Putting A Price On A House
 Valuation Using A Cap Rate
 Dirty Tricks To Watch Out For
 Property Inspection
 Rental Properties - What To Look For
 Creative Financing - Multiple Methods
 Fixer-Uppers: What To Fix
 Should You Offer Seller Financing?
 Myths About Real Estate Investing
 Real Estate Investment Clubs
 Partners?
 Private for sales or Sell Your own Companies, the many Pitfalls

Where should I live in Ontario?

This is a very important decision. Where you live will affect your entire experience of moving to Canada.

You need to make an informed decision about where to live in Ontario. It is a good idea to know what a particular community can offer you and what you can offer it.
You might choose a community for many different reasons. Here are just a few things to consider:

Size and cultural makeup of local population

Urban or rural Job opportunities

Social and recreational activities

Services for newcomers

Public transportation/mobility

Weather

Community Profiles


Some websites have useful information about communities in Ontario. Many of these sites are created and maintained by municipal/city governments. Here are some useful sites;


Cities and Towns - Certain cities have developed websites for newcomers who are already living there or who are thinking of moving there.

Municipal websites - Information about communities to see if you want to live there.

Economic community profiles - Information from the Ontario Ministry of Economic Development and Trade. It focuses on the labour market, including population, labour force, wage rates, and more.

Statistical community profiles - Statistics Canada has a statistical profile of all communities in Canada from the 2006 Census data. It has information such as population size, the average number of people living in a home, and languages spoken.

Services Near Me - Go to "Search by Region" and select a region or city to find some basic information, such as geography, population, percentage of immigrants, and useful links.

 For More Information


Canada's Best Places to Live - MoneySense magazine analyzes data for 100+ communities to discover the very best places to live in Canada. This is updated once a year.


Choosing a Safe Place to Live - Tips to help you choose a safe neighbourhood and building to live in.

Child-Friendly Neighbourhoods - Information about how to choose a healthy neighbourhood for children.

Settling in Canada - Profiles of some of Canada's major cities and regions.

Les Sohar 1-877-855-2201
www.sohar.ca
www.soharworldhomes.com

lesandchris@sohar.ca