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April 2009

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Homeowners Using HRTC for Renovations - April 29, 2009

Survey results released today by residential mortgage company ResMor Trust Company show that 94% of Canadian homeowners who are planning to do renovations between April, 2009 and February 1, 2010 will use the Home Renovation Tax Credit (HRTC) introduced by the Federal Government earlier this year. In fact, 39% of those surveyed said their decision to renovate was positively influenced by the introduction of the HRTC. The survey was conducted by Research Now with 1,000 Canadian homeowners from across the country between April 6 - 9, 2009.

The HRTC applies to eligible home renovation expenditures of more than $1,000, but not more than $10,000, resulting in a maximum income tax credit of $1,350. Eighty-three per cent of survey respondents who plan to renovate, said they intend to spend within the allowable amount to qualify for the tax credit.

"Seventy percent of homeowners surveyed intend to renovate their homes over the next year," observed Tracie Tesser, President and CEO of ResMor Trust. "In addition to the Home Renovation Tax Credit, this high number may be attributed to the current housing market, which has made it more attractive for homeowners to stay in their homes due to decreased housing values in many parts of the country."

Half of the homeowners surveyed plan to use their savings to pay for their renovations while thirty per cent will use their line of credit. Seven per cent said they will put the cost on their credit cards and five per cent plan to add the cost to their current mortgage.

BoC Lowers Interest Rate 1/4 Per Cent - April 21, 2009

The Bank of Canada today announced that it is lowering its target for the overnight rate by one-quarter of a percentage point to 1/4 per cent, which the Bank judges to be the effective lower bound for that rate. The Bank Rate is correspondingly lowered to 1/2 per cent. The deposit rate - the rate paid on deposits held by financial
institutions at the Bank of Canada - is left unchanged at 1/4 per cent and provides the floor for the overnight rate.

In an environment of continued high uncertainty, the global recession has intensified and become more synchronous since the Bank's January Monetary Policy Report Update, with weaker-than-expected activity in all major economies. Deteriorating credit conditions have spread quickly through trade, financial, and confidence channels. While more aggressive monetary and fiscal policy actions are underway across the G20, measures to stabilize the global financial system have taken longer than expected to enact. As a result, the recession in Canada will be deeper than anticipated, with the economy projected to contract by 3.0 per cent in 2009.

The Bank now expects the recovery to be delayed until the fourth quarter and to be more gradual. The economy is projected to grow by 2.5 per cent in 2010 and 4.7 per cent in 2011, and to reach its production capacity in the third quarter of 2011. Given significant restructuring in a number of sectors, potential growth has been
revised down. The recovery will be importantly supported by the Bank's accommodative monetary stance.

The Bank expects core inflation to diminish through 2009, gradually returning to the 2 per cent target in the third quarter of 2011 as aggregate supply and demand return to balance. Total CPI inflation is expected to trough at -0.8 per cent in the third quarter of 2009 and return to target in the third quarter of 2011. While the underlying macroeconomic risks to the projection are roughly balanced, the Bank judges that, as a consequence of operating at the effective lower bound, the overall risks to its inflation projection are tilted slightly to the downside.

With monetary policy now operating at the effective lower bound for the overnight policy rate, it is appropriate to provide more explicit guidance than is usual regarding its future path so as to influence rates at longer maturities. Conditional on the outlook for inflation, the target overnight rate can be expected to remain at its current level until the end of the second quarter of 2010 in order to achieve the inflation target. The Bank will continue to provide such guidance in its scheduled interest rate announcements as long as the overnight rate is at the effective lower bound.

To reinforce its conditional commitment to maintain the overnight rate at 1/4 per cent, the Bank will roll over a portion of its existing stock of one- and three-month term Purchase and Resale Agreements (PRAs) into six- and twelve-month terms at minimum and maximum bid rates that correspond to the target rate and the Bank Rate, respectively. These longer-term PRAs will be issued according to the schedule released today:
http://www.bankofcanada.ca/en/fixed-dates/2009/rate_210409_3.pdf

Today's decision to lower the policy rate by 25 basis points brings the cumulative monetary policy easing to 425 basis points since December 2007. It is the Bank's judgment that this cumulative easing, together with the conditional commitment, is the appropriate policy stance to move the economy back to full production capacity and to achieve the 2 per cent inflation target. The Bank retains considerable flexibility in the conduct of monetary policy at low interest rates, consistent with the framework to be outlined in the Bank's Monetary Policy Report on 23 April.

Fed Money Available for Cities - April 20, 2009

The Honourable Diane Finley, Minister of Human Resources and Skills Development and Minister Responsible for Canada Mortgage and Housing Corporation (CMHC), today announced that municipalities can begin applying for direct, low-cost loans for shovel-ready infrastructure projects through CMHC.

“Our Government understands the importance of infrastructure in maintaining strong and prosperous communities,” said Minister Finley. “We’re very pleased to officially launch our Municipal Infrastructure Lending Program, which will give municipalities access to the low-cost funding they need to move forward quickly on housing-related infrastructure projects. These projects will also provide job creation for the local community.”

Canada’s Economic Action Plan provides up to $2 billion in direct low-cost loans to municipalities, over two years, for housing-related infrastructure projects. Municipal infrastructure loans are available to any municipality in Canada and will provide a new source of funds for municipalities to invest in housing-related infrastructure projects. Eligible loans will be approved largely on a first come, first serve basis, however, CMHC will also seek to facilitate equitable access to the program and will work to encourage applications from urban and rural municipalities across Canada. Only infrastructure projects serving new or existing residential areas may be considered.

Eligible municipal infrastructure projects must directly relate to housing, contributing to the efficient functioning of residential areas. Projects include, for example, infrastructure related to the provision of housing services such as water, wastewater and solid waste services, power generation; local transportation infrastructure within or into residential areas such as roads, bridges and tunnels; residential sidewalks, lighting, pathways, landscaping and green space.

"The Canadian Home Builders' Association (CHBA) is pleased to see this program launched so quickly," said Gary Friend, President of CHBA. "This funding will not only provide needed municipal infrastructure for housing in our communities, but it will also help to create jobs and stimulate our economy."

Non-Res Construction Investment Declines - April 17, 2009

Investment in non-residential building construction reached $10.8 billion (in current dollars) in the first quarter of 2009, down 1.8% from the fourth quarter of 2008 says a report issued by Statistics Canada today. This marks the first decline since the fourth quarter of 2004.

Investment in the commercial and industrial components fell. Investors injected $6.6 billion in commercial projects, down 3.0% from the fourth quarter of 2008. For the industrial component, investment fell 4.7% to $1.2 billion.

In contrast, spending in the institutional component continued to rise, up 2.5% to $3.0 billion.

Overall, five provinces and two territories posted declines in the first quarter. Ontario, Quebec and Alberta reported the sharpest drops, mainly the result of lower spending on commercial construction. Saskatchewan posted the strongest increase as a result of higher spending in all components.

Investment fell in 17 of the 34 census metropolitan areas. The largest drops were in Calgary, Montréal and Toronto, mainly because of the decline in commercial construction projects. However, Edmonton posted $643 million in investments, a 4.3% increase as a result of advances in the institutional and commercial components.

Investment in the construction of commercial buildings (-3.0%) fell for the first time since the first quarter of 2005. The drop was a result of spending on the construction of office buildings and commercial centres in Alberta, Ontario, Quebec and British Columbia. All of the other provinces posted increases in the commercial component.

Investment in the construction of industrial buildings fell because of the drop in investments in the construction of primary industry buildings in every province, and in the construction of maintenance buildings in seven provinces. At the provincial level, Ontario posted the sharpest decline (in dollars), with decreased investment in every category of industrial building. In contrast, Saskatchewan and Alberta posted increases in industrial construction, including manufacturing plants and utilities buildings.

The construction of health care buildings drove the institutional component upwards for a fifth straight quarter. Higher investments were posted in seven provinces in the first quarter. Ontario and Alberta posted the most significant dollar increases due to the construction of health care buildings. In contrast, Quebec posted the sharpest decline (in dollars), which was attributed to the construction of teaching facilities.

Construction Employment Continues to Slide - April 9, 2009

Employment throughout Canada declined by 61,000 in March, all in full-time work according to a reported filed this morning by Statistics Canada. This decrease pushed the unemployment rate up 0.3 percentage points to 8.0%, the highest rate in seven years.

Since peaking in October 2008, employment has fallen each month, with net losses totalling 357,000 (-2.1%). In percentage terms, this is the largest decline over a five-month period since the 1982 recession.

Since October, full-time employment has declined by 2.8% (-387,000) while part-time has edged up 0.9% (+30,000).

Losses in March were widespread across a number of industries, most notably in manufacturing; finance, insurance, real estate and leasing; construction; and natural resources. These losses were only partially offset by gains in "other services"; and business, building and other support services.

Employment fell in several provinces in March, with the largest declines in British Columbia (-23,000), Alberta (-15,000) and Ontario (-11,000). Since October, these three provinces also had the fastest rate of employment decreases.

March's employment losses were spread among core-aged men (25 to 54), youths (15 to 24), and women 55 and over. Since the start of the downturn in October, employment has fallen by 3.1% for core-aged men, the largest five-month loss in 33 years.

In March, the increase in average hourly wages was 4.3% compared with 12 months earlier.

Employment in manufacturing fell by 34,000 in March. Of the major industry groups, manufacturing has lost the most workers since October (-134,000, or -6.8%). These losses were concentrated in the manufacturing of fabricated and primary metal; motor vehicle, body, and parts; and wood products.

Construction employment also declined in March, down 18,000, the third notable decrease in four months. In percentage terms, this industry had the fastest employment growth from January to October 2008, and has since experienced the steepest decline. Employment in this industry has decreased by 99,000 (-7.9%) since October 2008, led by losses in British Columbia, Alberta and Ontario. These provinces also had the largest drops in both housing starts and building permits in the most recent year-over-year estimates.

For the second month in a row, employment in natural resources declined, down 11,000 in March. This was led by losses in Alberta, mostly in mining, oil and gas extraction.

British Columbia's employment fell by 23,000 in March. This brings total employment losses to 69,000 (-3.0%) since October 2008, largely driven by decreases in construction and manufacturing. Over the same period, British Columbia has seen its unemployment rate climb 2.2 percentage points to 7.4% in March.

Housing Starts Down 17 Per Cent in BC - April 8, 2009

The seasonally adjusted annual rate of housing starts increased to 154,700 units in March from 136,100 units in February, according to Canada Mortgage and Housing Corporation (CMHC).

“Higher multiple starts in Ontario and Quebec were the main contributors to the rise in new construction activity in March,” said Bob Dugan, Chief Economist at CMHC’s Market Analysis Centre. “While the multiples segment experienced the largest increase, the overall boost in starts was broad based, encompassing the singles segment as well.”

The seasonally adjusted annual rate of urban starts increased 17 per cent to 127,900 units in March. Urban multiple starts increased 28.3 per cent to 81,500 units, while urban single starts moved up by 1.3 per cent to 46,400 units in March.

March’s seasonally adjusted annual rate of urban starts increased by 35 per cent in Ontario and by 23.3 per cent in Quebec. Urban starts declined by 17.3 per cent in British Columbia, by 7.9 per cent in Atlantic Canada, and by 7.5 per cent in the Prairies.

Rural starts were estimated at a seasonally adjusted annual rate of 26,800 units in March.

New home construction appear to now be at a more sustainable level after having been exceptionally strong over the past 7 years, exceeding 200,000 units per year.

BC Leads on Future Building Intentions - April 6, 2009

The value of building permits fell 15.9% to $3.7 billion in February says a report released earlier this morning by Statistics Canada. The largest decreases came from the non-residential sector in Ontario.

In the residential sector, the value of permits edged down 0.3% to $2.1 billion. The increase in the value of permits for multiple dwellings in British Columbia nearly offset the declines in the residential sector in six provinces.

In the non-residential sector, the value of permits fell 30.5% to $1.6 billion. This decline was due to a drop in Ontario and decreases in four other provinces.

The total value of construction intentions declined in half the provinces.

Non-residential sector: Decrease in institutional and commercial components

Following a 64.2% increase in January, the value of permits for institutional components declined 56.4% to $363 million in February. The decrease came mainly from construction intentions for medical buildings in Ontario and Quebec and a decline in permits for educational institutions in Ontario and Alberta.

Permit values for the commercial component declined 20.4% to $972 million. This decrease came largely from construction intentions for office buildings and recreational buildings in Ontario. However, British Columbia experienced the strongest growth in this component.

The value of industrial permits increased 14.3% to $236 million, following a 50.8% decrease in January. The gain in February was a result of increased intentions in six provinces.

The value of residential permits virtually unchanged

The value of permits in the residential sector declined 0.3%, as the increase in multi-family permits nearly offset the decline in single-family permits.

Municipalities issued $756 million worth of permits for multi-family dwellings in February, up 10.6% from January. The value of multi-family dwelling permits nearly quadrupled in British Columbia, while Quebec, Saskatchewan and Ontario reported declines.

The value of single-family permits fell 5.5% in February to $1.3 billion. Intentions in this component have been declining since July 2008. The decrease in February was mainly a result of declines in Quebec, Ontario and Saskatchewan.

Municipalities approved 10,341 new dwellings in February, down 3.2%. Single-family units decreased 6.9% to 5,211. The number of multi-family units rose 0.9% to 5,130 units.

Increase in British Columbia

The value of building permits increased in half the provinces with British Columbia leading the way. British Columbia reported an 86.5% gain in the value of its permits, spread out among all components.

Ontario experienced a 38.2% decline in the value of its permits. This decrease came from construction intentions for institutional and commercial buildings and residential permits. Quebec (-18.0%) and Saskatchewan (-43.5%) also posted declines in both the residential and non-residential sectors.

Metropolitan areas: Increases in Vancouver

The total value of permits increased in 17 of the 34 census metropolitan areas. Vancouver reported the most significant increases. The advances were generalized except for the industrial component. In contrast, Toronto saw declines for all components. Barrie followed with decreases that could not be offset by the increase in the value of multiple-family permits.

 

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