Thursday, October 02, 2008

NCC buys three more acres in Gatineau Park

The National Capital Commission has agreed to buy an additional three acres of private property within Gatineau Park as part of its plan to buy up to $385 million worth of land to prevent further development inside the federal park.

On Monday, the NCC announced its board of directors had approved the purchase of a two-acre lot on Lac-la-Peche Road and a one acre lot on Kingsmere Road.

Terms of the purchase were not released.

"The acquisition of these vacant lands supports our objective to acquire privately owned properties in Gatineau Park that, based on the Gatineau Park Master Plan and the NCC's budget envelope, are priorities for acquisition," said NCC chief executive Marie Lemay in a statement.

The NCC is currently developing an updated inventory of the 1,400 acres of privately owned land within the park boundaries.

U.S. Headed for Deep Recession

The U.S. is likely headed for a deep recession, the International Monetary Fund warned Thursday in a report in which it notes that the current banking crisis is the type that's most likely to lead to such a downturn, and suggesting the government's proposed bailout of the banking system is the right course of action.

Episodes of financial turmoil characterized by banking sector distress are more likely to be associated with severe and protracted downturns.

Financial stress is more likely to be followed by an economic downturn when it is preceded by a rapid expansion of credit, a run-up in house prices and heavy borrowing by households and non-financial firms. The current situation of the United States bears some resemblance to previous episodes of banking-related financial stress episodes that were followed by recessions.

Based on a comparison of the current episode of financial stress to previous episodes, there remains a substantial likelihood of a sharp downturn in the United States.

Not all episodes of financial stress lead to economic slowdowns or recessions.

However, when a slowdown or recession is preceded by financial stress, and especially when the stress is concentrated in the banking sector, typically it is substantially more severe than slowdowns or recessions not preceded by financial stress. In particular, slowdowns or recessions preceded by bank-related stress tend to involve two to three times greater cumulative output losses and tend to endure two to four times as long.

The odds that a banking-related crisis is followed by a slowdown or recession is associated with the extent to which house prices and outstanding credit have risen prior to the eruption of the crisis. Further, while greater reliance on borrowing by non-financial corporations is associated with a sharper downturn in the aftermath of financial stress, the indebtedness of households is crucial in determining whether the downturn will turn into a recession.

However, the relatively strong positions of corporate balance sheets at the onset of the crisis and the aggressive monetary easing by the U.S. Federal Reserve may provide some cushion in the U.S., while the relatively strong balance sheets of European households offer some protection against a sharp downturn there.

In the current circumstances, strong actions by policy-makers to deal with the stress and support the restoration of financial system capital seem particularly important.

Canada Likely Bound for Rate Cuts

Canada is safe from recession, even if the U.S. Congress rejects a bailout package and global credit dries up further, but the economy may take enough of a beating to force the Bank of Canada to cut interest rates.

Credit is harder to come by for Canadian businesses, curtailing their investments. U.S. consumer purchases of made-in-Canada goods is wilting and commodity prices are slamming into reverse from record highs.

That toxic mix has sent economists back to their models to churn out lower growth forecasts for both 2008 and 2009, raising the likelihood that the central bank will have to consider easing borrowing conditions.

If the U.S. government can't put something through, that clearly increases the risk to Canada through the end of the year and into next year.

The export sector, heavy reliant on the U.S. market, is getting clobbered and 70,000 factory jobs have been lost in the past year. But commodity prices are still higher than a year ago, padding household and corporate income.

At this point we don't really see negative growth for Canada, even in the worst-case scenario. We still look at them as being able to eke out a little bit of growth because they've been so resilient thus far.

Last month after holding rates steady at 3%, the Bank of Canada flagged a worsening U.S. outlook as one key risk that could prompt it to change its mind on rates. In a Sept. 25 speech Governor Mark Carney said this risk had become "more probable."
Markets on Thursday had priced in a 96% probability of a rate cut on Oct. 21 due to the financial market meltdown, up from 51% on Sept. 23.
Some economists are gradually coming around to that view as well.

Even if the rescue package is passed, I'm still assuming that there is about a 60 % chance the bank will cut in October.

Strong Showing for Ottawa Housing Prices

Ottawa's hot housing market is bucking the national trend as homes in the region averaged a near six-per-cent increase year-over-year in August.

Its report on Canada's major markets cataloged a 5.1% decrease in prices compared with last year, with an average listing price at $316,052.

The rosy numbers in Ottawa were a stark contrast to the situation in most other regional housing markets. Calgary's average price of $390,091 was eight per cent less than last year. Vancouver fell by 5.2%, and Edmonton also dropped by 4.8%.

However, Regina's area saw a strong 36% gain, with markets in Saskatoon and Winnipeg also posting gains of at least 10% each.

With the fall in prices also came a drop in listings and mortgage rates.

Ottawa Home Construction Slows

A 14% drop in Ottawa's housing starts in August was the first significant decline in recent months.

Housing starts fell to 639 last month compared to 743 units in August 2007
However, year-to-date figures show growth in starts has moderated to a "still solid" 14.3% above 2007.

Townhomes continue to drive Ottawa's new home market, up 22.5% over August 2007 and up 28.2% for the year. Single-detached properties - which fell slightly in August by 2.4 % compared to August 2007 - still represented 45% of total starts in Ottawa.

Housing starts in the Gatineau area were up by 21%, to 363 from 299, from the same month a year ago.