Calgary Alberta Mortgage and Real Estate News

Just before the high-tech bubble burst, a colleague hurried into the office declaring excitedly to all within earshot that she was now in the stock market. Having tired of listening to everybody else’s endless chatter about stocks and the profits they were claiming on a daily basis, she decided that it was time for her to be involved.

Oh, Lord, I thought, here comes the elevator boy, harkening back to the legendary tale of the Wall Street financier who got out of the market just before the October 1929 crash after the elevator boy gave him a stock tip. That was a realization the market was riding a speculative bubble.

Some say the financier was Bernard Baruch. Others that it was J.P. Morgan and a shoeshine boy. No matter. Whenever speculative motives enter the investment equation, the risk increases. There’s no question that the climate in today’s stock market differs notably in one respect from the situation at the height of the high-tech mania. These days, there isn’t the feverish day-trading that accompanied the high-tech meltdown.

But there are other concerns. Core inflation is running at 2.5 per cent, and while we dodged a bullet on Tuesday when the Bank of Canada held its key overnight rate steady at 4.25 per cent, a rate hike seems inevitable in the “near term,” those words accompanying the bank’s decision to hold for now.

An anticipated rate cut that we have been living with since last September is now nowhere to be seen and no one expects it to materialize.

The worst of the scenarios comes from Toronto-Dominion Bank economists, who forecast that Bank of Canada Governor David Dodge will raise the key rate by 25 basis points in July and by another 25 basis points in September to bring the overnight rate to 4.75 per cent.

“Given the fact that core inflation has consistently been at or above the target of two per cent for the past 11 months, the odds of higher rates are tilted toward the upside now,” TD senior economist David Tulk told me.

The Bank of Canada’s concession that “some increase in the target for the overnight rate may be required in the near-term to bring inflation back to target,” confirms this.

The message for mortgage hunters or those making a purchase that requires credit is to lock in now, because interest rates are heading upward.

The benchmark S&P/TSX composite may have priced-in some of those increases, but that hasn’t tempered the chances of a pullback.

Short-selling — the practice of borrowing a stock and selling it in anticipation that it will fall, and then buying it back at a lower price, a dangerous practice, at best, because historically stocks go up — is at its highest level ever.

The short interest on the NYSE is 11.76 billion shares, which represents 3.1 per cent of all outstanding shares.

In Canada, short-selling activity is highest in the IT sector, where 6.5 per cent of all outstanding shares have been shorted, notes National Bank Financial market strategist Pierre Lapointe.

The IT companies and the percentage of their outstanding shares shorted are Celestica (12.8 per cent), CGI Group (9.7), Cognos (9.4), and Research in Motion (6.7).

The most heavily shorted stock in all sectors is Norbord (13.8 per cent), followed by CanWest Global Communications (13.4), Northern Orion Resources (12.9), Cott Corp. (12.4), Saskatchewan Wheat Pool (11.2), Gildan Activewear (10.9), Abitibi-Consolidated (10.4) and Angiotech Pharmaceuticals (10).

“Given the adverse market conditions that short-sellers face, we regard these short-sold companies as red flags,” says Lapointe. “Even the raging bull market hasn’t stopped many investors from betting that these stocks will fall. Short-sellers clearly see something negative that merits investigating.”

Barring a severe decline today, most investors will have recorded remarkable returns during May. The S&P/TSX has so far gained 665 points for a return of 4.9 per cent. The Dow Jones Industrial Average is up 4.3 per cent and the S&P 500 index 3.2 per cent.

It is worth noting that Canada’s inflation now exceeds U.S. core inflation for the first time in three years and the possibility that the Federal Reserve will ease its Fed Fund rate, although slim, is still greater than the chances of it happening here.

The only saving grace for Canada is that the anti-inflation lobby is running full steam in Washington where the word is that core inflation at two per cent is not good enough. The Fed wants it down to 1.5 per cent and that could mean higher interest rates for Americans and a tighter spread, now at a full percentage point, between the two central banks.

A spread wider than that would catapult the dollar even closer to parity and cause all sorts of trouble for Canada’s manufacturing sector, export industries and equity markets.

The Bank of Canada today announced that it is maintaining its target for the overnight rate at 4 1/4 per cent. The operating band for the overnight rate is unchanged, and the Bank Rate remains at 4 1/2 per cent.Information received since the April Monetary Policy Report (MPR) indicates that economic growth and inflation in Canada in the first part of this year have been stronger than the Bank was expecting. In April, both total CPI inflation, at 2.2 per cent, and core inflation, at 2.5 per cent, were above expectations. On the basis of available information, the Canadian economy is likely to have grown at an annual rate of about 3 1/2 per cent in the first quarter of this year - a full percentage point higher than was estimated in the MPR. The Bank now judges that there is somewhat greater excess demand in the economy than was thought to be the case in April. U.S. economic activity has come in largely as expected and continuing robust growth outside North America has maintained the global demand for, and high prices of, many commodities produced in Canada. Against this overall backdrop, the Canadian dollar has risen appreciably above the range assumed in the Bank’s April projection.

On balance, the Bank judges that there is an increased risk that future inflation will persist above the 2 per cent inflation target and that some increase in the target for the overnight rate may be required in the near term to bring inflation back to the target.

An updated analysis of the Bank’s outlook for growth and inflation, including economic and financial developments, trends, and risks, will be set out in the Monetary Policy Report Update, to be published on 12 July 2007.

Information note:
The Bank of Canada’s next scheduled date for announcing the overnight rate target is 10 July 2007.

After leaving its key interest rate unchanged for the last year, the Bank of Canada could be about to signal that higher rates are on the way, some analysts are forecasting.

The central bank will release its next interest rate policy announcement at 9 a.m. ET Tuesday.

While no one is expecting a rate hike on Tuesday, some rate watchers say the central bank and its governor, David Dodge, could lay the groundwork for the overnight lending rate to jump as early as the following meeting on July 10.

The key overnight rate has been stuck at 4.25 per cent since May 2006. Any change in this interest rate triggers an immediate change in rates charged for variable mortgages and many demand loans and lines of credit.

TD Economics, for one, thinks the next rate hike could be as early as July, with another hike to follow in September. “The inflation backdrop has become troubling enough, in our view, to fully justify the bank finally moving off the sidelines,” said TD Securities chief economist Marc Lévesque in a commentary.

BMO Capital Markets agrees that the Bank of Canada will move off the sidelines, but not before the fall. “We judge that that Canadian dollar appreciation … and the prospects for continued slow growth will likely keep Dodge & Co. on the sidelines, at least through the summer,” wrote BMO senior economist Michael Gregory.

But he said his firm was “pulling forward our forecast for a first [central bank] rate hike into late 2007 from early 2008.”

RBC Economics also expects a later 2007 rate hike.

“With the core inflation rate well above the two per cent target and the domestic economy gaining steam, the odds of a significant slowing in price pressures are waning, making a very strong case for a policy interest rate increase later this year,” says RBC senior economist Dawn Desjardins.

Markets gird for rate increase
The markets are now fully pricing in at least one rate hike before the end of the year. Mortgage rates have already begun to head up as bond yields have risen in anticipation of higher rates. 

The mere prospect of higher interest rates has helped to boost the Canadian dollar to a 30-year high near the 93-cent US level.

The C.D. Howe Institute asked its nine-member monetary policy council to weigh in on what they think the Bank of Canada should do, as opposed to what they think the bank will do.

Their verdict? The majority think the central bank should raise its key overnight rate right away from the current 4.25 per cent to 4.50 per cent. “Both headline and core inflation are running ahead of the bank’s target,” the council said in a statement.

The core inflation rate — which excludes volatile items such as gasoline and fresh fruit and vegetables — surged to a four-year high of 2.5 per cent in April.

The Canadian dollar rose
against the U.S. dollar on Monday following the release of
domestic labor productivity data that was stronger than
expected.

 Domestic bonds, with no major data to consider, managed to reclaim some of the sharp losses from Friday when strong data in both Canada and the United States eased expectations for interest rate cuts.
 At 9:30 a.m. (1330 GMT), the Canadian unit was at C$1.1702 to the U.S. dollar, or 85.46 U.S. cents, up from C$1.1723 to the U.S. dollar, or 85.30 U.S. cents, at Friday’s close.
 Canadian labor productivity growth matched the U.S. rate of 0.3 percent in the fourth quarter, Statistics Canada said, but for all of 2006 was just 1.2 percent, trailing the U.S. level of 1.7 percent.
 That helped support earlier gains made by the Canadian dollar as the U.S. unit was unable to extend the momentum from last week following a strong U.S. non-farm payrolls report.
 Also, comments from a European Central Bank official who said he could imagine raising rates to slow inflation even if that meant curbing economic growth appeared to weigh on the U.S. dollar and opened the door for gains in the Canadian unit.
 ”There were some hawkish comments coming out of ECB central bank officials that have kept the U.S. dollar on the defensive,” said Carolyn Kwan, markets economist at Scotia Capital. “But the Canadian dollar is actually underperforming against many of of the majors, mostly because of energy prices at this point.”
 The resource-linked Canadian dollar did not get any help from oil prices, which slipped below $60 a barrel amid expectations OPEC will not trim output and a view that oil supplies are plentiful in the United States.
 The remaining data due out this week, while not considered top-tier, could trigger moves in the Canadian dollar amid a dearth of other key events.
 Capacity utilization rates for the fourth quarter of 2006 are due out on Wednesday, while manufacturing shipments data for January will be released on Thursday.
 ”We’ve got … manufacturing shipments data to finish off the week so I think people are just looking ahead to see what happens with the data,” said Kwan.
 BONDS TILT HIGHER
 Canadian bonds recovered some of Friday’s data-related losses, when strong Canadian jobs numbers eased expectations for interest rate cuts.
 While Canadian economists have been forecasting no rate change by the Bank of Canada, bond prices have suggested the market is positioned for a cut around mid-year.
 However, some analysts said the recent steep declines in the equity market had inflated bond prices somewhat, making them an inaccurate gauge of the market’s rate expectations.
 ”People are sort of revisiting the movements from last week because there was a pretty significant selloff on Friday following the data,” said Kwan.
 ”I think it’s really just taking back a little bit of what happened on Friday but there’s nothing really fundamental to drive things this morning.”
 The two-year bond was up 2 Canadian cents at C$100.44 to yield 3.980 percent, while the 10-year bond rose 17 Canadian cents to C$99.81 to yield 4.025 percent.
 The yield spread between the two-year and 10-year bond moved to 4.5 basis points from 6.0 at the previous close.
 The 30-year bond rose 33 Canadian cents to C$126.40 to yield 4.097 percent. In the United States, the 30-year treasury yielded 4.699 percent.
 The three-month when-issued T-bill yielded 4.19 percent, down from 4.18 percent at the previous close.

Canadian employers added the most jobs in eight months in January and almost seven times what economists forecast, further damping speculation that the central bank will reduce interest rates this year.January’s 88,900 new jobs represent the fifth-straight monthly gain, Statistics Canada said today in Ottawa. The unemployment rate rose to 6.2 percent from December’s 6.1 percent, which matched a 31-year low from May and June.

The figures bear out Bank of Canada predictions that economic growth will rebound after slowing to the least since 2003 in the third quarter. The Canadian dollar soared and bonds weakened on speculation Governor David Dodge will keep borrowing costs unchanged for much of the year, or even increase them.

“It’s good news” for policy makers, said Doug Porter, an economist with BMO Capital Markets in Toronto. “They have a nice combination of full employment and slow wage growth.” Porter predicted in a note to clients that the Bank of Canada’s next move will be a tightening, sometime in 2008.

Average hourly wages rose 2.2 percent from a year earlier, slower than December’s 2.6 percent rate, the agency said.

Economists in a Jan. 31-Feb. 8 Bloomberg News survey forecast a reduction in the main interest rate, from the current 4.25 percent, during the fourth quarter. The next decision is March 6.

In a separate Bloomberg survey, economists forecast 13,500 new jobs for January and a 6.1 percent jobless rate, based on the median of 24 and 26 estimates.

Dollar and Futures

The Canadian dollar rose to 85.32 U.S. cents at 4:17 p.m. in Toronto, the biggest gain in more than seven months, from 84.45 cents before the report. The currency, which touched its lowest since November 2005 yesterday, fell 7 percent since it rose to a 28-year high on May 31, reaching 91.44 U.S. cents.

The yield on the banker’s acceptance contract due in December rose 9 basis points to 4.27 percent on the Montreal Exchange, indicating more investors are betting the central bank won’t cut interest rates before then.

The jobless rate increased because 110,000 people joined the labor force, which was the largest monthly gain since 1981 and a reflection of Canadians’ optimism, Carolyn Kwan, a Scotia Capital Inc. economist in Toronto, wrote to clients.

Still, today’s data illustrate a disconnect between employment and growth that has puzzled central bankers, Porter said. Even as the economy added an average of 47,500 new jobs each month since September, it failed to grow at a commensurate pace, suggesting Statistics Canada isn’t measuring growth properly or that worker productivity has plummeted, he said.

Discrepancy

Dodge and Deputy Governor David Longworth have said the discrepancy is confusing, and the statistics agency said Feb. 1 it’s setting up a task force to investigate the numbers.

“It is possible that one of the employment or gross domestic product is being mismeasured, which should show up with revisions, or productivity growth has indeed fallen apart,” Kwan wrote. “In the end, it will take some time before our own conundrum is cleared.”

Canadian Finance Minister Jim Flaherty also cautioned against reading too much into today’s numbers.

“I always take monthly figures with a grain of salt,” Flaherty told reporters in Rome, on his way to a Group of Seven meeting in Essen, Germany. “They don’t depict trends.”

Job Details

Employers in the information, culture and recreation sector hired 29,200 people in January, boosting their payrolls by 4 percent. Also leading the surge were professional, scientific and technical services, with 27,600 new positions, and hotels and restaurants, with 23,800.

The net job gain was almost evenly distributed between full-time and part-time employment, with companies creating 45,900 full-time positions and 42,900 part-time jobs. Employers had already hired a total of 148,900 workers between September and December.

Home Depot Inc.’s Canada operation, which has more than 27,000 employees in the country, said today it will hire another 7,000 to cope with its busiest sales period, which is from March to June. The company will hire part-time, full-time and seasonal workers, according to a statement.

Ubisoft Entertainment SA, Europe’s second-largest video games maker, said in a statement that it will spend as much as C$454 million ($386 million) in Canada over the next six years to hire game developers and create a digital-movie studio.

Natural-resource companies led the gain in the goods- producing sector. Commodity-related companies added 9,600 employees, and manufacturers hired 3,600 people.

Factories, which have contended with higher production costs and a strong currency that makes their goods more expensive abroad, have fired 11,400 people in the past year.

Western Provinces

British Columbia, Canada’s westernmost province, led the overall gain in January, with 31,700 new jobs.

Alberta, the western province where an oil boom has caused labor shortages, added 24,000 jobs. The province’s employment was unchanged at 3.3 percent, as 23,300 joined the workforce.

From January 2006, employers have added 399,200 jobs, or 2.4 percent of their workforce, the statistics agency said.

Canada should cut taxes on investment and personal income, instead of further reducing a national sales tax, and continue paring the federal debt, the International Monetary Fund said.“We welcome the government’s commitment to using interest savings from debt reduction to lower personal income taxes and to reducing effective marginal tax rates on investment, which would provide larger efficiency gains than further cuts to the goods and services tax,” the Washington-based IMF said today in an annual consultation report it prepared in December.

Prime Minister Stephen Harper’s Conservative Party was elected in January 2006 in part on a promise to lower the goods and services tax to 5 percent from 7 percent. The government cut the tax to 6 percent in July. Harper promised in a Feb. 6 speech to introduce legislation to fund tax cuts with the money the government saves on interest as it pays down the debt.

Canada’s economic growth will slow to 2.5 percent this year from 2.8 percent in 2006, the report said. The Bank of Canada’s decision to leave its key interest rate at 4.25 percent “appears appropriate moving forward,” the report said. The central bank had raised rates at seven consecutive meetings ending in May.

Canadian factory shipments rose more than twice as much as forecast in December, led by sales of cars and airplanes.Shipments gained 1.7 percent to C$49.7 billion ($42.6 billion), the highest since July, Statistics Canada said today in Ottawa. Economists expected a 0.7 percent increase, according to the median of 22 estimates in a Bloomberg News survey.

The report suggests the Bank of Canada, which left interest rates unchanged last month, was right in saying factories have adjusted to a currency that rose by a third since 2003. Today’s data, combined with a surge in employment since September and a trade surplus that expanded for two straight months, may remove any need for central bankers to consider cutting interest rates.

“The worst for Canadian manufacturers may be behind us,” Marc Levesque, an economist with TD Securities in Toronto, said in a note to clients. The numbers “certainly punch another big hole in any lingering hopes that the Bank of Canada will be easing monetary policy over the course of 2007.”

Thirteen of the country’s 21 manufacturing industries accounting for 74 percent of factory output posted gains in December, with shipments by carmakers surging 7.2 percent to C$5.6 billion, the statistics agency said. Excluding price changes, overall shipments rose 1.4 percent to C$45.6 billion.

The Canadian dollar rose to 86 U.S. cents, a six-week high, at 4:16 p.m. in Toronto, from yesterday’s 85.77 cents. Manufacturers have had a reprieve on the currency front, with the Canadian dollar dropping 6 percent since touching a 28-year high of 91.44 U.S. cents on May 31.

Interest Rates

Policy makers kept the benchmark lending rate at 4.25 percent for the fifth-straight meeting Jan. 16, and later said they saw no need to cut interest rates to boost demand. The economy will expand 2.4 percent in the first quarter and 2.6 percent in the second quarter, after slowing to a 1.5 percent annualized rate in the fourth quarter, central bankers say.

A majority of 12 economists surveyed by Bloomberg News between Jan. 31 and Feb. 8 said they saw that forecast as too optimistic and predicted a fourth-quarter rate cut.

The manufacturing numbers follow a Feb. 13 report showing Canada’s trade surplus widened more than expected in December to the largest since February 2006, as exports of cars and energy products gained.

The surplus widened to C$4.98 billion from a C$4.72 billion in November, Statistics Canada said. Exports rose 3.8 percent to C$40.4 billion and imports advanced 3.6 percent to C$35.4 billion, the agency said.

Durable Goods

Today’s report showed durable goods shipments rose 3 percent to C$27.5 billion in December, including a 4.1 percent gain in shipments by aerospace companies.

Excluding cars, manufacturing shipments increased 1 percent to C$41.7 billion, the statistics agency said.

Inventories fell 0.6 percent to C$63.1 billion, while new orders increased 2.1 percent to C$50.6 billion. Unfilled orders gained 2.1 percent to C$42.9 billion.

For all of 2006, shipments fell 0.6 percent from 2005’s record level, to C$587 billion on a nominal basis. Adjusting for price changes, they dropped 1.6 percent to C$539 billion.

Canadian manufacturing shipments ended 2006 on a strong note, rising a higher-than-expected 1.7 percent in December after a dismal year, cementing expectations of a comeback in economic growth in early 2007.Statistics Canada said on Thursday a revival of Canadian motor vehicle shipments helped boost overall factory shipments in December from November, topping analysts’ forecasts of a 0.9 percent rise.

The gain came after a 2.4 percent increase in November and as the transportation sector, led by automobiles, shipped C$10.2 billion worth of products in December, the highest monthly total in 2006.

“The details do suggest that there is reason for optimism heading into the new year, and at a minimum, should help boost GDP and provide a good handoff into 2007,” said Carolyn Kwan, senior economist at Scotia Capital in Toronto.

The manufacturing data, combined with weaker U.S. jobless claims and capital flows data, pushed the Canadian dollar higher versus the U.S. currency. The dollar climbed to C$1.1642, or 85.90 U.S. cents, up from C$1.1651, or 85.82 U.S. cents, at Wednesday’s close.

Canada’s economy grew a weaker-than-expected 0.2 percent in November and stagnated in October but a string of strong data suggest December will be stronger. Third-quarter growth came in at 1.7 percent.

The expected upturn in growth, combined with inflation under control, led the Bank of Canada to suggest it will keep borrowing costs unchanged for some time. It has kept its overnight interest rate at 4.25 percent since last May following seven hikes.

“Evidence continues to build that the Canadian economy rebounded with purpose around the turn of the year after a squishy soft autumn and summer,” said Doug Porter, deputy chief economist at BMO Capital Markets in Toronto.

The strong showing in the auto sector boosted shipments of durable goods by 3.0 percent while non-durable goods shipments crawled 0.2 percent higher as declines in chemicals offset gains in petroleum and coal.

In all of 2006, however, shipments were down 0.6 percent from the 2005 peak and in line with 2003 levels. “The year-end rally was not enough to offset several months of weak performances earlier in the year,” Statscan said.

That rally drove new orders for manufactured goods up 2.1 percent in December to their highest level since January 2006 while unfilled orders jumped by the same amount to their highest in four years — both as a result of strong demand for motor vehicles and aerospace equipment. Inventories were drawn down by 0.6 percent.

Canada’s trade surplus widened unexpectedly in December to the largest since February, as exports of cars and energy products gained.The surplus widened for a second-straight month to C$4.98 billion ($4.24 billion), from a revised C$4.72 billion in November, Statistics Canada said today in Ottawa. Exports rose 3.8 percent to C$40.4 billion, and imports gained 3.6 percent to C$35.4 billion.

The wider trade surplus, combined with January employment data that showed almost seven times more new jobs than forecast, suggests Canada’s economy rebounded after slowing in the second and third quarters. The country’s currency has fallen since touching a 28-year high in May, helping factory exports abroad and reducing the need for the Bank of Canada to lower interest rates.

The trade sector “had its best performance in over two years” between October and December, Stefane Marion, an economist with National Bank Financial in Montreal, said in an interview. The December data means trade contributed two percentage points to growth during the quarter, Marion said.

Economists had forecast the December trade surplus to come in at C$4.7 billion, according to the median of 23 estimates in a Bloomberg News survey.

The Canadian dollar rose to 85.73 U.S. cents at 4:11 p.m. in Toronto. The currency gained the most in seven months on Feb. 9 after the employment report, reaching 85.30 U.S. cents.

The yield on the banker’s acceptance contract due in December rose 3 basis points to 4.32 percent on the Montreal Exchange, indicating more investors are betting the central bank won’t cut interest rates before then.

`Widespread Strength’

“The widespread strength in both exports and imports in December suggests that overall gross domestic product also ended the year on a strong note,” Doug Porter, an economist with BMO Capital Markets in Toronto, said in a note to clients. It’s the second time in two-and-a-half years that a widening trade surplus has contributed to quarterly growth, he wrote.

Statistics Canada reports economic growth figures for December and the fourth quarter on March 2.

The Bank of Canada predicted last month the economy would expand 2.4 percent in the first quarter and 2.6 percent in the second quarter, after slowing to a 1.5 percent annualized rate in the fourth quarter. Should that scenario bear out, the central bank won’t need to cut interest rates to boost demand, Bank of Canada Deputy Governor David Longworth said Feb. 6.

Canadian employers added 88,900 jobs in January, Statistics Canada said Feb. 9. Still, a majority of 12 economists surveyed by Bloomberg News between Jan. 31 and Feb. 8 see the bank’s forecast as too optimistic and predict a fourth-quarter rate cut.

2006 Surplus

For all of 2006, the size of the trade surplus shrank C$11.2 billion to C$53.6 billion, the smallest annual surplus since 1999, the statistics agency said.

The trade surplus with the U.S., which buys about 75 percent of Canada’s exports, widened to C$7.92 billion, from November’s C$7.48 billion, the statistics agency said today.

Carmakers’ sales abroad rose 8.4 percent to C$7.54 billion, the third-straight gain, the statistics agency said.

Canadian energy exports increased 5.8 percent to C$7.28 billion during the month, led by natural gas. Canada sits on the largest oil reserves outside the Middle East and is the world’s No. 2 exporter of natural gas.

Exports of machinery and equipment rose 2 percent to C$8.75 billion and those of consumer goods other than cars surged 9.2 percent to C$1.79 billion.

Cars, Energy

Factory exports have benefited as the Canadian dollar fell almost 7 percent since touching 91.44 U.S. cents on May 31. Overall though, exports will probably drop in the first quarter of this year, as carmakers shut down plants and commodity prices fall, National Bank’s Marion said.

Cars and energy products such as crude oil and heating and diesel fuel led the imports’ gain. Energy imports advanced 7.9 percent increase to C$2.95 billion and cars imports rose 6.5 percent to C$7.13 billion.

Excluding the effects of price changes, exports rose 2.5 percent during the month, and imports gained 2.1 percent, the statistics agency said.

The U.S. trade deficit widened more than expected in December, rising 5.3 percent to $61.2 billion on higher prices for crude oil imports, the Commerce Department said today in Washington.

Edmonton apartment rents are climbing while vacancies have fallen to their lowest level in five years.”The apartment vacancy rate in the Edmonton region fell from 4.5 per cent in October 2005 to 1.2 per cent this October,” Canada Mortgage and Housing Corporation reported Thursday.

Demand is boosted by strong in-

migration and by a healthy job market that lets some young people leave their family homes — and others split from shared accommodation to their own apartments.

Meanwhile, the number of renters moving to home ownership has fallen as interest rates and house prices have risen.

“On the supply side, rental apartment completions have been weak in 2006,” CMHC noted. “A number of rental units have been converted to condominiums, further reducing the supply of apartments available for rent.”

Average rents for two-bedroom units in the Edmonton region now are $808 — up 10.4 per cent in the 12 months through October, 2006.

Compounding that, rental incentives were offered by 19 per cent of landlords in October, 2005 — but by only three per cent this October.

In 2007, “demand for rental accommodation will continue to outstrip new supply, with apartment vacancies expected near 0.9 per cent,” predicted Richard Goatcher, CMHC senior market analyst.

“A lot of landlords have told us there will be further increases in January,” Goatcher said. In 2007, he expects rents to rise about 12 per cent.

The Canadian Federation of Apartment Associations issued a news release Thursday, arguing that vacancy rates are misleading.

“Even where vacancy rates are low, rental suites are still available because of tenant turnover,” it said. “In Calgary, the vacancy rate is 0.5 per cent but the availability rate is 1.6 per cent.”

In October, only 241 Calgary apartments were vacant — but another 492 units were available through turnover.

The CFAA acknowledged that “due to very low incomes, some households cannot afford to rent apartments of the size they need.”

CFAA president John Dickie recommended that the federal government help with income supports rather than construction subsidies.

“Portable housing allowances are the most cost-effective way to make housing affordable for low-income Canadians,” he said. “Unlike many other housing programs, they also preserve choice for tenants.”

CFAA member groups represent owners and managers of more than one million rental units.