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November 2008

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Consumer Confidence Slides Further in November - November 24, 2008

After falling dramatically in October, the Conference Board's Index of Consumer Confidence slipped another 2.9 points in November and now stands at 71 (2002 = 100).

"Consumer sentiment has fallen to depths previously reached only in 1982 and 1990, which were both periods of recession in Canada," said Paul Darby, Deputy Chief Economist. "The ongoing troubles in equity markets undoubtedly had a negative effect on consumers' view of their family financial situations and future job prospects in their communities."

"The one area for optimism is that 25.9 per cent of respondents said it was a good time to make a major purchase, up slightly from the October results. The increase on this question may indicate that the slide in the index is bottoming out."

Regionally, consumer confidence fell in the Prairies by the largest one-month decline on record. Sentiment in British Columbia, Ontario and Quebec also declined, while the index in Atlantic Canada rose by just 0.2 percentage points.

The survey was conducted from November 6 to November 13. The margin of error is plus or minus 2.19 per cent, 19 times out of 20.

Multi-Family Investment Market Changing in BC - November 24, 2008

Shaken by the global credit turmoil, BC's multi-family investment market faces a repricing of properties, according to Avison Young (Canada) Inc.'s "Fall 2008 BC Real Estate Multi-Family Investment Report", released today.

"There is now a standoff between purchasers, who in the wake of the global credit meltdown have changed their pricing expectations; and vendors, who are looking for yesterday's pricing in a much more challenging market," comments Avison Young principal, Rob Greer. "The number of listings will continue to increase until assets are re-priced and purchaser confidence returns."

According to Avison Young's survey, sales in BC's multi-family market have slowed to an almost standstill, with the total number of trades year-to-date November 2008 representing only 50% of the total number of transactions in 2007. (The number of trades during the first 11 months of 2008 totals 76, versus 153 in 2007.) The total value of multi-family investment transactions year-to-date November 2008 amounts to $270 million - approximately 52% of the $519 million recorded in all of 2007. Local private investors represent the majority of the buyers and sellers to-date in 2008.

Greer says the average prices per unit in Metro Vancouver's various submarkets, based on year-to-date 2008 sales, do not reflect current pricing expectations from purchasers in the marketplace: "Should financing troubles continue through 2009, we may see values move as much as 20% as investors re-evaluate their required returns on investment."

According to the report, the once prevalent multiple offer situations have shifted to ones of price reductions and lingering listings. Of the current 130 listings on the market, approximately one quarter has received at least one price reduction in recent months. This does not include any recent sales that involved a price reduction to induce the sale.

"The disappearance of the debt market has significantly changed the dynamics of BC's commercial real estate," explains Michael Brodie, Avison Young's multi-family real estate advisor. "The inability to get yesterday's lending has driven many potential purchasers from the market simply because they don't have enough equity."

Brodie continues: "Purchasers can no longer achieve the loan-to-value ratios (needed for their required cash-on-cash returns) they have become accustomed to. A purchaser who could once get 75% loan-to-value for a 5% capitalization rate purchase of a multi-family asset is now facing 60% to 65% loan-to-value amounts for CMHC (Canada Mortgage and Housing Corp.) insured loans. Either purchasers need to change their required return on investment or vendors need to adjust their pricing expectations. The answer lies somewhere in between."

The report goes on to say that multi-family capitalization rates may be a cause of concern for some investors: "The market reached record low cap rate territory in 2007 and early 2008. However, as investors need a higher cap rate on their investment to match their cash-on-cash return achieved in yesterday's lending markets, cap rates will have to adjust accordingly."

Financing issues may also force some investors in 2009 to increase their equity in their existing multi-family assets. "With the complete turnaround in the credit markets, highly-leveraged owners who have to refinance in 2009 may be faced with the reality that they will have to put more money into their asset. This will be particularly true for buildings with low debt service ratios or those purchased at low cap rates," says Greer.

According to the Avison Young report, the multi-family investment market is expected to witness more listings, fewer sales and lower sale prices in 2009. "Listings will continue to grow as the number of able investors decreases," comments Greer, who adds that annual rent increases aren't reflective of the changing environment. "With growing costs for apartment building owners, limiting the annual rental increase at 3.7% makes it difficult for owners to keep their net operating income up." (In September 2008, the provincial government announced that effective 2009, the allowable annual rent increase will be 3.7%.)

Even though BC's market has not been affected nearly as significantly as other markets, Greer says the market slowdown is not limited to one asset class or one economy, and it may take several quarters for vendors' expectations to adjust. He adds: "However, it is important to note that investors are generally confident in BC's economy, there is still a lot of money out there looking for a home, and multi-family assets are still one of the most stable investments.

Housing is also one of the last places people stop spending money, and we can expect the region's average rental vacancy rate (currently less than 1%) to remain at historically low levels." "Investors requiring high leverage may be sidelined for now, but even if the credit markets remain tight in the foreseeable future, multi-family assets should generally perform well operationally and provide relatively stable cash flows," says Brodie.

BC Housing Supporters Win 2008 Housing Awards - November 21, 2008
(Announcement)

The Honourable Diane Finley, Minister of Human Resources and Skills Development and Minister Responsible for Canada Mortgage and Housing Corporation (CMHC) commemorated National Housing Day today by congratulating the five British Columbia recipients of CMHC’s 2008 Housing Awards.

“National Housing Day is an ideal opportunity to recognize these winners and showcase the importance of housing in our communities,” said Minister Finley. “This year’s CMHC Housing Awards winners exemplify the incredibly rich source of housing knowledge and innovation in British Columbia that has helped create and revitalize communities across the province.”

CMHC’s Housing Awards honour housing initiatives that have contributed to improving the affordability of housing in Canada. The theme of this year’s 10th Housing Awards Program was Best Practices in Affordable Housing. It recognizes affordable housing innovations in the following fields: buildings, housing finance, neighbourhoods, housing with resident services, and Aboriginal housing.

Winners fromBritish Columbia include:

• City of Langford Affordable Housing Strategy. This policy is the backbone of a partnership between the City of Langford, industry and other stakeholders to deliver market and subsidized ownership and rental housing. The policy features inclusive zoning, visitability requirements and mandatory secondary suites. It also promotes diverse options for housing.
• Performing Arts Lodge (PAL) in Vancouver. This is a 111-unit subsidized life-lease and rental residence for seniors mainly from the professional performing arts community. The building also features a reading and craft room, rooftop garden and a 100-seat theatre for residents and the local community.
• The Cornerstone Initiative in Victoria. A formerly derelict heritage property, it was transformed into market-based affordable homes with mixed retail spaces. The Initiative, led by the Fernwood Neighbourhood Resource Group (NRG) Society, involved thousands of volunteer hours, contributions from private companies and a partnership with a local school.
• Ucluelet First Nation 24-Unit Revisionary Housing Project in Ittatsoo Reserve # 1 Ucluelet. The result of innovative construction techniques and community consultation, these 24 social-housing units were built for the Ucluelet First Nation. The energy-efficient, affordable and weather-resistant units were constructed to address the community’s needs as well as the climate conditions of B.C.’s West Coast.
• Verdant @ UniverCity in Burnaby. This is a 60-unit green, affordable and family-oriented townhouse community for faculty and staff of Simon Fraser University. A covenant requiring owners to resell at 20 per cent below market value ensures the future affordability of the project.

As Canada’s national housing agency, Canada Mortgage and Housing Corporation (CMHC) draws on more than 60 years of experience to help Canadians access a variety of quality, environmentally sustainable, and affordable homes — homes that will continue to create vibrant and healthy communities and cities across the country.

Mortgages and Fuel Increase October Housing Costs - November 21, 2008

Consumer prices rose 2.6% in the 12 months to October 2008, a sharply slower pace than the 3.4% increase recorded in September. While October's slowdown was due primarily to slower price increases for gasoline, prices for food and mortgages exerted stronger upward pressure on consumer prices according to a report released this morning by Statistics Canada. On a seasonally adjusted monthly basis, consumer prices fell 0.5% from September to October.

Increasing mortgage interest costs were the second major contributor to October's rise. Other energy products, such as natural gas and fuel oil and other fuels, also continued to push up consumer prices, as did price increases for various food items, namely bakery and cereal products.

Shelter costs rose 3.8% in October, slower than the 4.5% rise posted in September. Price increases for mortgage interest costs (+7.2%), natural gas (+11.1%) and fuel oil and other fuels (+30.1%) were the largest upward contributors to the increase in the shelter component. However, the increase for all three of these items was slower than it was in September, thereby mitigating the rise in shelter costs for October.

Increasing property taxes also contributed to rising shelter costs in October. Property taxes rose by an average of 3.2% across Canada, ranging from a high of 6.1% in Alberta to a low of 0.3% in Newfoundland and Labrador and Manitoba.

Although the growth in gasoline prices eased in the 12 months to October, they were still the most significant upward contributor to the overall growth in the Consumer Price Index (CPI). Prices at the pump increased 13.3%, compared with a 12-month change of 26.5% in September. On a monthly basis, gasoline prices fell 13.4% from September to October 2008.

Excluding gasoline, the CPI rose 2.0% in the 12 months to October. Excluding all energy components, the CPI advanced 1.8%.

Falling House Prices Expected in BC - November 18, 2008

Residential mortgage consumers remain remarkably positive as they weather the financial storm, according to a report released today by the Canadian Association of Accredited Mortgage Professionals (CAAMP). Attitudes towards local conditions have shifted only slightly with 38 per cent of Canadians believing now is a good time to purchase and 32 per cent believing it is a bad time. Mortgage arrears remain low and steady at .28 per cent and an overwhelming 84 per cent of home owners are satisfied with their mortgages. The information was gathered by Maritz from an online survey of over 2,000 Canadians in mid-October and analyzed in conjunction with CAAMP Chief Economist Will Dunning.

Canadians do expect housing prices to fall: 35 per cent, more than twice as many as last fall, now believe prices will drop; half of those surveyed gave a neutral answer while the number who thought prices would go up fell from 40 per cent to 20 per cent. Westerners, who have endured particularly hot housing markets, are most negative, and in British Columbia, 48 per cent of those surveyed said they expect prices to fall, far above the national average.

"As we confront these challenging times, borrowers foresee changes in their local housing markets, yet remain confident in a stable Canadian mortgage system," said Jim Murphy, AMP, President and CEO of CAAMP. "CAAMP anticipates mortgage credit growth to slow, but remain relatively strong, surpassing the $1 trillion mark by 2010."

Despite the traumatic American mortgage fall out, Canada has managed to steer clear of deflated markets. The Canadian system is supported by low and steady interest rates, better underwriting processes, different products and normal re-sale activity levels. "Canada is a financially conservative country where consumers are able to meet the terms of their mortgages and buying decisions are based on affordability," said Dunning. "This contributes to a solid real estate market that will not experience the same drop off we see south of the border."

Housing equity positions are strong in Canada with a growing trend of re-financing mortgages. About one in five borrowers took out an increasing amount of cash from their mortgages, with the average draw rising 20 per cent to $41,000 compared to last year. Fifty-six per cent of respondents said they used this money, which totals $18.5 million nationwide, for debt consolidation and repayment; 30 per cent of these funds went towards home repair and renovation.

New home buyers took advantage of alternative mortgage products - half of new mortgages taken out in the last year were for amortizations longer than the traditional 25 years, an increase of 13 per cent. Longer term amortizations now account for 16 per cent of all outstanding mortgages and six per cent are 40-year terms. The federal government has now introduced stricter regulations on insured mortgages. CAAMP's survey found Canadians had low awareness of the new regulations; however once explained, 60 per cent supported the changes.

More Canadians Look for Contractors/Suppliers Online - November 17, 2008

More Canadians used the Internet to purchase goods and services in 2007, placing almost $12.8 billion worth of orders, up 61% from 2005 according to a report released this morning by Statistics Canada. This increase was driven by a larger volume of orders, which rose from 49.4 million in 2005 to 69.9 million in 2007. Due to more American than Canadian business advertising online, the proportion of orders placed with Canadian vendors declined slightly from 57% of the total in 2005 to 52% in 2007.

More than 8.4 million Canadians aged 16 and over made an online purchase in 2007, up from nearly 6.9 million in 2005. They accounted for 32% of Canadians in this age group, compared with 28% in 2005. Not all online consumers participated equally. The top 25% of "online consumers," who spent an average of $5,000 during 2007, were responsible for 46% of orders and 78% of the total dollar value.

Among those Canadians aged 16 and over who used the Internet in 2007, 44% made an online order. This proportion is lowered slightly by including those aged 16 and 17 in the 2007 survey. Regionally, Internet users from Alberta were the heaviest online shoppers in 2007, with one-half placing an online order.

While the vast majority (97%) of teenagers aged 16 and 17 used the Internet, only 25% used it to make an online order. Demographically, Internet users aged 25 to 34 were the heaviest online consumers, with more than one-half (51%) ordering online.

For many Canadians, the Internet has become a place to shop for goods and services, to discover who is out there, and then to contact the business directly to discuss their needs. In 2007, 43% of Canadians logged on to do research on products and services, or to "window shop." Of these window shoppers, a majority (64%) reported that they had subsequently made a purchase directly from a business.

"Our members don't have the types of products or services that one can just click a button and order something online," said Mark Green, VP Operations for BCdex, the BC Construction and Landscaping Network. "People coming to BCdex are looking for a list of established contractors or suppliers who service their area. Once they find them on BCdex, they contact them directly to make any arrangements."

Canadians were more experienced users in 2007, with 54% reporting five or more years of Internet use, up from 45% in 2005. Among the "top online consumers," 91% had used the Internet for five or more years in 2007.

CMHC Releases Comprehensive Report on Housing - November 13, 2008

New analysis that tracked how long Canadians living in core housing need remained in this situation over a three-year period is unveiled in the 2008 Canadian Housing Observer, released today by Canada Mortgage and Housing Corporation (CMHC).

"The 2008 Canadian Housing Observer provides an in-depth picture of housing trends and developments in Canada," said Karen Kinsley, President of CMHC.

"The 2008 Observer provides the first analysis of the dynamics of core housing need over time, finding a significant turnover among urban Canadians who lived in this condition." The Observer reveals 84.6 per cent of urban Canadians were able to access housing that was in good condition, suitable and affordable between 2002 and 2004.

For the majority of the 15.4 per cent of urban Canadians who lived in core housing need, it was temporary. Only 4.6 per cent of urban Canadians lived persistently (all three years) in core housing need. The 2008 Observer also provides analysis of how Canada’s housing market developed through 2007, showing it experienced high housing starts, strong sales, double-digit price increases and record-level renovation spending.

Other key findings in this year’s Observer include:

• Strong employment and income growth continued to bolster homeownership demand in Canada.The rate of homeownership in Canada rose to 68.4 per cent in 2006, the largest increase between censuses dating back to 1971.
  
• In 2007, housing-related spending contributed close to $300 billion to the Canadian economy.
  
• Mortgage arrears in Canada remain low. In 2007, slightly more than a quarter of one per cent of Canadian households (0.26 per cent) fell three or more months behind in their mortgage payments.
  
• The composition of Canadian households continues to change as baby boomers age. For decades, couples with children have made up a declining percentage of all households, and the average size of households has shrunk.

"CMHC's Canadian Housing Observer is an absolute ‘must-read’ for any organization relying on housing statistics to communicate important messages to decision makers. At its core, this annual publication provides credible and well-documented statistics on a comprehensive array of topics, offering data that can be trusted," said Jean Perrault, President of the Federation of Canadian Municipalities (FCM) and Mayor of Sherbrooke, Québec.

Complementing the 2008 print edition of the Observer is a detailed array of online housing market and housing conditions data resources at CMHCs website . This includes CMHC’s Housing in Canada Online (HiCO), a powerful and free interactive tool that provides access to data on national, regional, local and off-reserve housing conditions, including core housing need.

BC Housing Starts Decline in October - November 10, 2008

The seasonally adjusted annual rate of housing starts across the country was 211,800 units in October, down from 218,600 units in September, according to Canada Mortgage and Housing Corporation (CMHC).

“Housing starts remained strong countrywide in October and are consistent with our new home construction forecast for 2008,” said Bob Dugan, Chief Economist at CMHC’s Market Analysis Centre. “The slight decrease in housing starts is the result of declines in both single-detached and multiple starts in October.”

The seasonally adjusted annual rate of urban starts eased 4.2 per cent in October, compared to September. Urban multiples declined in October by 6.0 per cent to 115,300 units. Urban single starts decreased 1.1 per cent to 69,300 units in October compared to September.

October’s seasonally adjusted annual rate of urban starts moderated in three out of the five regions of Canada. Urban starts increased to 41,300 units in the Quebec region and to 9,600 units in Atlantic Canada. On the other hand, urban starts declined to 27,900 units in British Columbia, 26,900 units in the Prairies, and 78,900 units in Ontario. Single urban starts decreased in all regions in October, with the exception of Ontario, where they increased by 10.1 per cent.

Rural starts were estimated at a seasonally adjusted annual rate of 27,200 units in October.

 

Building Intentions Decline in BC - November 6, 2008

Municipalities across Canada issued $6.5 billion in building permits in September, up 13.4% following an 11.7% decline in August according to a report released this morning by Statistics Canada. September's increase was the result of gains in all three components of the non-residential sector. The total value of building permits increased in seven provinces and two territories.

In the non-residential sector, the value of permits rose 41.7% to $3.2 billion. This increase was generated by a substantial gain in institutional permits, and lesser increases in the industrial and commercial components. Major increases occurred in Ontario, Saskatchewan and Alberta.

In the residential sector, the value of permits fell for the second month in a row and the sixth time in nine months. Housing permits declined by 4.9% to $3.3 billion, the result of lower levels of permits for multi-family dwellings in six provinces.

Non-residential sector: Institutional permits double

After two consecutive monthly declines, the value of institutional permits more than doubled (+108.8%) in September to a record $986 million. The increase came mostly from planned medical and educational building projects in Ontario and Saskatchewan.

Construction intentions for commercial buildings rose by 11.7% to $1.5 billion after three consecutive declines. Overall, seven provinces reported increases in commercial permits, with most of the gains occurring in Ontario, British Columbia and Quebec.

In the industrial sector, contractors took out $679 million in permits in September, more than 50% above the average value recorded in 2008. This was a 64.4% increase, which more than offset a 16.8% decline in these permits in August. The increase came mostly from maintenance buildings in Ontario and utility buildings in Alberta.

Residential sector: Second consecutive monthly decline for multi-family dwellings

Municipalities issued $1.2 billion in multi-family dwellings in September, down 11.6% from August and the second consecutive monthly decline. Ontario and British Columbia accounted for most of the decline among the six provinces that reported a decrease in multi-family dwellings.

At the same time, permits for single-family dwellings fell 0.7% to $2.1 billion, a third consecutive decline. Significant decreases occurred in Ontario and British Columbia, which more than offset increases in five provinces and the three territories. Quebec registered the largest gain and a third increase in four months in the value of single-family dwellings.

The overall number of residential units approved fell for a second consecutive month. Municipalities approved 16,134 new dwellings in September, down 3.5% from August. The number of multi-family dwelling units approved declined 4.7% to 8,448. The number of single-family dwelling units fell 2.1% to 7,686, a third consecutive decrease.

Permits up in most provinces

The value of building permits increased in seven provinces in September.

The most significant increase occurred in Ontario, where permits rose 17.9% to $2.4 billion. In Saskatchewan, permits more than doubled (+115.2%) to $334 million, while in Alberta they were up 11.9% to $1.0 billion. The increases came mainly from the non-residential sector.

The only provinces recording declines were Newfoundland and Labrador, New Brunswick and British Columbia.

Metropolitan areas: Large increases in Edmonton and Saskatoon

Of the 34 census metropolitan areas, 19 recorded increases in the value of building permits in September. The largest increases occurred in Edmonton, the result of gains in both residential and non-residential buildings. Saskatoon and Toronto followed closely, thanks to gains in the non-residential sector.

In contrast, Victoria recorded declines, the result of drops in residential permits. The second consecutive decline in Calgary was due mainly to a decrease in the commercial component.

 

 

 

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