Government to reduce exposure to housing market; but doesn’t know how

Reducing the federal government’s exposure to risk from the housing market is a long term aim of finance minister Joe Oliver, but so far there’s no plan to do it. Concerns have been raised by organisations such as the International Monetary Fund which believes that exposure to the market, especially through the CMHC, is a risk to the government and wants Ottawa to pass more responsibility onto the private sector. Speaking to the media yesterday Mr Oliver stated that there is not going to be any change in the short term.

Canadian Economic Growth (Q3) - November 28, 2014

BCREA ECONOMICS NOW

The Canadian economy posted a better than expected 2.8 per cent growth the third quarter of 2014, on the heels of even stronger 3.6 per cent growth in the second quarter. Economic growth was largely driven by residential investment which grew at its fastest pace since early 2012 as well as healthy gains in household consumption and exports.

 

The Canadian economy is on track to expand 2.4 per cent in 2014, a marked improvement on 2 per cent growth in 2013 and above what the Bank of Canada considers the economy's potential rate of growth (beyond which, inflation may trend upward).  We expect the economy to grow about 2.3 per cent in 2015, which should further reign in slack in the economy. The recent sharp decline in energy prices may trim economic growth, but it will also take the wind out of inflation next year. Overall, improving economic growth and modest inflation pressure is consistent with the Bank of Canada raising its target rate next year. 

CMHC says property market is not at risk

The Canada Mortgage and Housing Corporation has released its analysis of house prices and concludes that

while there is some overvaluation, there is little risk from overheating or overbuilding. The agency says that Montreal, Quebec, Toronto, Calgary and Halifax all have some characteristics of overvaluation but there is some improvement. In the rest of the country CMHC believes that the market is broadly consistent with interest rates and other economic factors. Bob Dugan, CMHC’s Chief Economist says: “Across the 8 CMAs examined, there is no overheating or acceleration. There is however a cautionary note with respect to overbuilding in Toronto and Montreal. The number of units under construction is elevated in these centres.”

by Jamie Henry

Canadian Retail Sales - November 25, 2014

BCREA ECONOMICS NOW

Canadian retail sales rose 0.8 per cent in September, propelled by higher motor vehicle sales. Excluding

motor vehicles, retail sales were essentially flat.  Sales were higher in 5 of 11 retail sub-sectors.   In BC, retail sales were up 0.5 per cent on a monthly basis, and were 5.7 per cent higher compared to one year ago. Through the first nine months of the year, retail sales in BC are up a robust 5.7 per cent, which if sustained would mark the fastest rate of sales growth since 2007.

With the release of September retail sales data we have a fairly complete picture of growth for the third quarter. Our tracking estimate puts Canadian real GDP growth for the third quarter at a healthy 2.2 per cent, though a deceleration from 3.1 per cent in the second quarter. Growth in the BC economy is currently tracking at 2.3 per cent through September.

Canadian Consumer Price Inflation - November 21, 2014

BCREA ECONOMICS NOW

Canadian consumer prices rose 2.4 per cent in the 12 months to October, an acceleration of 0.4 points from

September. The Bank of Canada's core measure of inflation, which excludes the most volatile prices such as energy and food products, was also higher, rising 0.2 points to  2.3 per cent. Consumer prices in BC rose actually fell on a month-over-month basis, but were up a modest 1.1 per cent year-over-year.

The relatively sharp uptick in both headline CPI and core inflation in October could spark some concern that the Bank of Canada will act sooner than later on interest rates to tame consumer prices. While strong economic growth and a lower dollar are exerting pressure on consumer prices, inflation remains within the Bank's 2 to 3 per cent control range and we therefore expect the Bank to remain on hold until at least mid-2015, 

No oversupply of condos; we may even need more...by Jamie Henry

Far from being oversupplied the condo market needs more units to cope with the immigration inflow. That’s the view of CIBC’s economist Benjamin Tal who says that for now the high level of condo building in our major cities is just supplying the demand from immigrants who make up 70 per cent of Canada’s population

growth. Figures show that around half of those moving to Canada are in the prime demographic for home purchasing, but CIBC’s report says the numbers are underestimated. That’s because the official figures exclude temporary immigrants such as students, short-term workers and refugees. Last year the level of immigrants in the 20-44 year age group, who would typically make up a large percentage of home buyers, grew at the fastest pace for twenty years. Read the full story.

Property prices in Toronto to continue rising says CMHC

The Canada Mortgage and Housing Corporation presented its outlook for the Toronto property market today and predicts no slow down in the rise of prices. CMHC regional economist Ted Tsiakopoulos said that homeowners shouldn’t be in any hurry to sell and forecast that prices would continue to rise through to 2016 with the average hitting close to $600,000.

Commercial property costs rocket in Vancouver

Businesses looking for property in the Metro Vancouver area are finding prices have increased substantially over the last two years. A new report from Colliers International shows that the cost of developing commercial property in Vancouver is 18 to 26 per cent higher now than it was in 2012. A lack of commercial land is just part of the equation with land prices varying across the area. Changing regulations have also added to costs and the report notes that property taxes are higher than many surrounding alternatives adding an annual burden on top of the initial set-up costs. Read the full story.

Halifax office vacancy rate rises

With more construction taking place landlords in Halifax are concerned of oversupply in the office sector. Figures from CBRE show that the year will end with a vacancy rate of 13.7 per cent; 700,000 square feet of available office space. This year almost 400,000 square feet of space will have been added to the central business district in the city. Bob Mussett, senior vice-president at CBRE, says that until population growth increases in Halifax there will be an underperformance downtown. Read the full story.

US Housing Starts - November 19, 20

BCREA ECONOMICS NOW

Housing starts in the United States fell 2.8 per cent in October to a seasonally adjusted annual rate (SAAR) of

1.009 million units. However, that level was 7.8 per cent higher than October 2013. After a somewhat slow start, new home construction in the US has been trending higher for much of the second half of 2014. Housing starts have registered a more than 1 million unit SAAR pace for 2 consecutive months and in 3 of the past four months. Overall, housing starts are 9.6 per cent higher year-to-date.

The recovery in the US housing market has been the primary driver of  BC's resurgent forest products industry. Moreover, a healthy residential construction industry in the US is helping put the overall US economy on stronger footing.  Moreover, robust growth in the US over the past two quarters has helped lift BC exports in 2014 in spite of flagging performance in the global economy. 

Mortgage rates set to stay lower for the next six months. Jamie Henry

Renewing a home loan shouldn’t be too painful for the next six months according to a new report from The

Canadian Association of Accredited Mortgage Professionals. It’s predicting that the low rates should continue well into 2015 and that means those that have been used to paying at a higher rate can look forward to savings and that will be good news for the economy as a whole. CAAMP says that of the 1.35 million homeowners that have renewed or refinanced their loans during this year 1.05 million are now paying at a lower rate. Their figures also show that 16 per cent of those with a mortgage have increased the level of their monthly payments or paid a lump sum to pay down their loan faster. Another 7 per cent have increased the frequency of their loan repayments to fortnightly. Around 11 per cent have taken equity out of their home for other purposes including debt consolidation, home renovation or investments. Among first-time buyers the average down payment is 21 per cent with 11 per cent of respondents being gifted the money from a relative and 6 per cent receiving a loan from a family member.  Read the full survey.

Calgary’s most successful condo launch since the recession

The majority of properties at the Parkside development on Calgary’s waterfront have sold within days; making it the most successful launch since the recession. The 288 units had attracted interest from 1,800 people looking to buy and 252 sold in just 72 hours.

Ontario tax hikes not ruled out

With a $12.5 billion deficit, Ontario may have to increase taxes in order to balance the books. The preferred option for finance minister Charles Sousa is attracting investment into the province through a competitive business environment; but speaking yesterday he wouldn’t rule out tax hikes.

Federal infrastructure building project “open for business”

The $14 billion New Building Canada Fund was launched in April but critics say it has not been clear how to get some of the money and that has delayed the start of building projects this year. Yesterday finance minister Joe Oliver insisted the program is “open for business and the money is rolling out.” He said that dozens of projects have already been announced but local officials need to submit their plans; Ontario for example hasn’t put forward their project proposals so far. Read the full story.

BCREA 2014 Fourth Quarter Housing Forecast

Housing Demand Ratchets Higher in British Columbia

Vancouver, BC – November 18, 2014. The British Columbia Real Estate Association (BCREA) released its 2014

Fourth Quarter Housing Forecast today.

"Consumer demand has ratcheted up this year and is expected to remain at a more elevated level through 2015,” said Cameron Muir, BCREA Chief Economist. “While historically low mortgage rates support demand, the housing market is also being underpinned by a more robust economy and associated job growth, strong net migration and consumer confidence."

BC Multiple Listing Service® (MLS®) residential sales are forecast to increase 15.1 per cent to 83,900 units this year. Stronger economic conditions are expected to be somewhat offset by higher interest rates later next year, and keep home sales from advancing much further. As a result, MLS® residential sales are forecast to edge up a further 1.2 per cent to 84,900 units in 2015. The 15-year average is 80,400 unit sales and a record 106,300 MLS® residential sales were recorded in 2005. 

The average MLS® residential price for the province is forecast to increase 6 per cent to a record $569,800 this year and a further 1.2 per cent to $574,300 in 2015. “New construction activity is generally keeping pace with population and household growth, keeping supply in line with consumer demand,” added Muir. BC housing starts are forecast to increase 4.6 per cent to 28,300 units this year and a further 1.4 per cent to 28,700 units in 2015.

Canadian Manufacturing Sales - November 14, 2014

BCREA ECONOMICS NOW

Canadian manufacturing sales rebounded from a poor showing in August, rising 2.1 per cent in September to $53 billion. The increase in sales was the eighth gain in the past nine months and was primarily the result of higher sales of transportation equipment.

In BC, where manufacturing employs over 160,000 people, manufacturing sales were up 1.9 cent on a monthly basis, and were 9 per cent higher year-over-year.  Through the first nine months of the year, manufacturing sales are close to 7 per cent higher than last year.

Vancouver, BC – November 14, 2014. The British Columbia Real Estate Association (BCREA)

reports that a total of 7,648 residential unit sales were recorded by the Multiple Listing Service® (MLS®) in October, up 14.6 per cent from October 2013. Total sales dollar volume was $4.4 billion, an increase of 22 per cent compared to a year ago. The average MLS® residential price in the province rose to $575,504, up 7.1 per cent from the same month last year.

“Consumer demand for housing continues at an elevated level,” said Cameron Muir, BCREA Chief Economist. “There were more homes purchased during the first ten months of the year than during all of 2013”. To the end of October, 73,001 homes have traded hands in the province compared to 72,936 for all of last year."

“Strong year-over-year increases in housing demand were experienced in Chilliwack (up 31 per cent), Victoria (up 21.9 per cent) and the Kootenay (up 19.4 per cent) market areas. Vancouver, Vancouver Island, the Fraser Valley and Okanagan Mainline also posted a marked increase in sales activity last month."

Year-to-date, BC residential sales dollar volume was up 23 per cent to $41.4 billion, compared to the same period last year. Residential unit sales were up 15.8 per cent to 73,001 units, while the average MLS® residential price was up 6.2 per cent at $566,687.

BCREA Housing Market Update (November 2014)

Canadian and US Employment - November 7, 2014

 BCREA ECONOMICS NOW

October was another big month for job growth as the Canadian economy added 43,000 jobs. The

national unemployment rate dropped 0.3 points to 6.5 per cent, the lowest rate since November 2008. Total hours worked, which is closely associated with economic growth, rose 0.4 per cent.

In BC, employment grew by 4,600 jobs in October. Full-time employment expanded by 6,600 jobs while part-time employment fell by 2,000. The provincial unemployment rate remained unchanged at 6.1 per cent. Year-to-date, total employment in BC is up just 0.7 per cent.

The US economy added 214,000 jobs in October while estimates of previous months job growth was revised higher by 30,000 jobs. Over the past 3 month, US payroll growth has averaged a healthy 233,000 jobs.  The US unemployment rate fell to 5.8 per cent, the lowest level since July 2008.

Should investors be on the hook for their tenants’ bad behavior?

Investors should be bracing for more Canadian municipalities following in the footsteps of a small

university town in Nova Scotia, which is suggesting that landlords face fines if their tenants routinely ignore noise and liquor laws.

The proposed nuisance bylaw, backed by the mayor of Wolfville, N.S. (home to Acadia University) and some of the town’s councillors, has been put to the town council.

But Gillian Irving, an Ontario investor with five student housing properties in Hamilton, says she wouldn’t be surprised if such a bylaw became more widespread across Canada.

“For me, investing in student housing is all about knowing the risks and mitigating them, like having a property manager who is all over [the tenants],” she says.

“My guy is known as the ‘party wrecker’. He goes around on Saturday nights and prevents those things from happening.”

Another way to be prepared for the risks of renting to students, adds Irving, is to include a clause in the lease that ensures the investor is covered in the event a fine is handed down for bad tenant behaviour.

Irving says: “There would never be any expectation that we would have to pay for it.

“In Hamilton, if there are noise complaints by a neighbor, [the police] will issue a warning and if they have to come back they will fine the students around $280.

“Multiple complaints do result in a letter being sent to the landlord. The city might try, if there were multiple noise violations, to get the landlord to pay, but our leases would be set up to prevent that.”

by Jennifer Paterson

Canadian Building Permits - November 6, 2014

BCREA ECONOMICS NOW

The value of Canadian building permits increased 12.7 per cent in September, rebounding from a

steep decline in the previous month.

Building permits also rebounded in BC, rising 9.8 per cent on a monthly basis and 3.8 per cent year-over-year to $879.4 million. Both non-residential and residential permits were higher in September, but growth was primarily the result of a 12.1 per cent increase in residential permits.

Construction intentions were mixed in BC's four census metropolitan areas (CMA). Permits in the Abbotsford-Mission CMA posted a second consecutive month of steep declines, falling 45.7 per cent on a monthly basis, and 37.4 per cent compared to September 2013.  Construction intentions in the Kelowna CMA were also lower, with permits dipping 14.1 per cent from August, but were 12.5 per cent higher year-over-year.  In the Victoria CMA, permit activity increased 15.8 per cent on a monthly basis and was up 24.9 per cent year-over-year. In the Vancouver CMA, permits were up 8.5 per cent on a monthly basis and were 1 per cent higher year-over-year.