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June 2009

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Is There an Economic Rebound for B.C. in 2010 - June 15, 2009

The weakness in British Columbia's economy has spread and accelerated in recent months, pointing to an overall decline of 1.9 per cent in provincial real GDP for 2009, according to the latest provincial forecast released today by RBC. However, with the worst of the recession likely passed, B.C.'s economic future is looking brighter, and 2010 should show a rebound to a 2.9 per cent growth.

"British Columbia's economic performance has deteriorated significantly since the middle of last year," said Craig Wright, senior vice-president and chief economist, RBC. "Weakness has spread beyond the long-suffering forestry sector into mining, construction and manufacturing. The service sector has not been spared either, as transportation and retail trade also have staggered."

With little hope of a meaningful rebound in U.S. housing construction in the near term, the report expects that B.C.'s forest products sector will remain focused on rationalizing production capacity. This will continue to weigh on exports, employment and private capital spending. The mining sector will fare little better, with weaker coal prices and waning demand prompting cuts in output.

The RBC report also points out that the provincial housing sector is still in a fragile state. Housing starts are forecast to drop by 57 per cent in 2009 to a total of 14,700 units, the lowest tally since 2000. Significant job losses and surging unemployment since September mean consumers will be hard-pressed to step up spending until their economic prospects improve later this year.

"Consumers have gone into hiding over the past several months, shunning major expenditures such as automobiles, home furnishings and costs related to home renovations - this has contributed to significantly lower retail sales," noted Wright.

The report anticipates that the substantial ramp up in public infrastructure spending - slated to jump by 15 per cent in this fiscal year - will help to partly offset the weakness in the rest of the economy. This will also help set the stage for a return to overall growth next year, which will be further fueled by an expected recovery in commodity markets and higher tourism activity arising from the 2010 Olympic and Paralympic Winter Games.

The main theme of the RBC Provincial Outlook is that tremendous weakness late last year and early this year has prompted a downward revision to real GDP growth forecasts across the board for 2009. Recent developments lend support to RBC's view that a general recovery will be established by the second half of 2009 and sustained in 2010. In 2009, expectations are that the economies of only three provinces - Saskatchewan, Manitoba and Nova Scotia - will grow, while all other provincial economies will contract. Ontario (deep troubles in the auto sector) and Newfoundland and Labrador (sharp drop in mineral and oil production) are taking the biggest hits, with Alberta (cutbacks in business and residential investment) being the other province showing above-average decline in activity. However, RBC continues to project that growth will return to all provinces next year.

Rental Accomodation Vacancy Rate Increases - June 10, 2009

The average rental apartment vacancy rate in Canada's 35 major centres increased slightly to 2.7 per cent in April 2009, from 2.6 per cent in April 2008, according to the spring Rental Market Survey released today by Canada Mortgage and Housing Corporation (CMHC).

Completions of condominiums, which continue to attract renter households looking to move into homeownership are decreasing demand for rental housing. Also, some of the completed condos compete with rental units if they were purchased by investors who then rent them out. These two factors have put upward pressure on the vacancy rate,” said Bob Dugan, Chief Economist at CMHC's Market Analysis Centre. “However, this has been balanced by higher levels of demand for rental housing.”

The results of CMHC’s spring survey reveal that the major centres with the lowest vacancy rates in April 2009 were Québec City (0.6 per cent), Regina (0.7 per cent), Winnipeg (0.9 per cent), Saguenay (1.1 per cent), and Trois-Rivières (1.1 per cent). With respect to British Columbia, only two centres had vacancy rates below two per cent; Victoria at 1.2 per cent and Vancouver at 1.9 per cent.

At the other end of the spectrum, the major centres with the highest vacancy rates were Windsor (15.5 per cent), St. Catharines – Niagara (5.3 per cent), and Abbotsford (4.8 per cent).

The highest average monthly rents for two-bedroom apartments in new and existing structures were in Vancouver ($1,154), Calgary ($1,106), Toronto ($1,093), Edmonton ($1,059), and Victoria ($1,043). Of all the major centres, these five were the only ones with average rents at or above $1,000. The lowest average monthly rents for two-bedroom apartments in new and existing structures were in Saguenay ($494), and Trois-Rivières ($512).

Year-over-year comparison of rents can be slightly misleading because rents in newly built structures tend to be higher than in existing buildings. However, excluding new structures provides a better indication of actual rent increases paid by tenants. Overall, the average rent for two-bedroom apartments in existing structures across Canada’s 35 major centres increased 2.9 per cent between April 2008 and April 2009. Rent increases were larger in Saskatoon (15.5 per cent) and in Regina (11.4 per cent).

CMHC’s spring Rental Market Survey also found that the average rental apartment availability rate in Canada’s 35 major centres was 5.0 per cent in April 2009, up slightly from 4.9 per cent in April 2008. A rental unit is considered available if the unit is vacant (physically unoccupied and ready for immediate rental), or if the existing tenant has given or received notice to move and a new tenant has not signed a lease. Availability rates were highest in Windsor (18.0 per cent), London (7.9 per cent), St. Catharines – Niagara (7.9 per cent), Guelph (7.0 per cent), and Sherbrooke (7.0 per cent). The lowest availability rates were in Winnipeg (1.4 per cent), Regina (1.8 per cent), and Victoria (2.5 per cent).

New House Prices Continue to Drop - June 10, 2009

Contractors selling prices decreased 0.6% in April, compared with a 0.5% decline in March. This resulted in a New Housing Price Index decreasing to 153.7 (1997=100). A report released this morning by Statistics Canada says that the New Housing Price Index has declined 3.2% since reaching a record high of 158.7 in September 2008.

Between March and April, prices declined the most in Vancouver (-1.2%) followed by Edmonton (-0.9%) and Calgary (-0.8%). In Vancouver, most builders are still reducing prices to encourage sales.

In Alberta, although some builders reported increased material costs as a result of new fire code regulations, these increases were negated by builders lowering prices or offering free upgrades in an increasingly competitive market.

Prices declined in Hamilton and Kitchener (-0.7%) and in Toronto and Oshawa (-0.6%) and Victoria (-0.6%).

Between March and April, most new housing contractors' selling prices declined or remained unchanged for the cities surveyed. The exceptions were in St. Catharines–Niagara (+0.6%), St. John's (+0.3%) and Saint John, Fredericton and Moncton (+0.2%). In St. Catharines–Niagara, contractors' reported that selling prices have returned to their regular list price levels after a few months of lower transaction prices. In St John's, builders' prices have been increasing because of high demand for housing, which has created a shortage of lots.

The New Housing Price Index decreased year-over-year by 3.0% in April, due primarily to declines in Western Canada. On the Prairies, 12-month declines were recorded in Edmonton (-12.5%), Saskatoon (-11.9%) and Calgary (-8.8%). On the West Coast, Vancouver (-9.0%) and Victoria (-7.0%) each also posted year-over-year declines.

Housing Starts Up in Canada, Down in B.C. - June 8, 2009

The seasonally adjusted annual rate of housing starts increased to 128,400 units in May from 117,600 units in April, according to Canada Mortgage and Housing Corporation (CMHC).

“The increase in May is broadly based, encompassing both the singles and multiples segments,” said Bob Dugan, Chief Economist at CMHC’s Market Analysis Centre.

Housing starts are expected to improve throughout 2009 and over the next several years to gradually become more closely aligned to demographic demand, which is currently estimated at about 175,000 units per year.

The seasonally adjusted annual rate of urban starts increased 11.1 per cent to 107,800 units in May. Urban multiple starts increased 11.1 per cent to 60,900 units, while urban single starts also moved up by 11.1 per cent to 46,900 units in May.

May’s seasonally adjusted annual rate of urban starts increased 22.0 per cent in Ontario, 16.8 per cent in the Prairies, 7.3 per cent in Atlantic Canada, and 3.3 per cent in Quebec. Urban starts declined 5.0 per cent in British Columbia.

Rural starts were estimated at a seasonally adjusted annual rate of 20,600 units in May.

$2 Billion Available from Feds Housing Action Plan - June 6, 2009

Low-income Canadians, including seniors and persons with disabilities will be well served by funding to renovate and build new social housing across Canada, thanks to Canada’s Economic Action Plan, Ed Komarnicki, Parliamentary Secretary to the Honourable Diane Finley, Minister of Human Resources and Skills Development Canada and Minister Responsible for Canada Mortgage and Housing Corporation (CMHC) spoke about today.

“Housing is a priority for our government,” said Parliamentary Secretary Komarnicki. “People across Canada, including seniors, persons with disabilities, First Nations, and those living in Canada’s North, will benefit from this investment, which will help to ensure that we continue to offer safe and affordable housing to Canadians.“

Canada’s Economic Action Plan includes more than $2 billion to build new and renovate existing social housing. Of the $2 billion: $1 billion is for renovations and upgrades; $475 million is for low-income seniors and persons with disabilities; $400 million is for on-reserve communities; and $200 million is for housing in the North.

For more information about this plan visit the CMHC web site.

Renovation Spending Up by $1.6 Billion in 2008 - June 5, 2009

An estimated 1.7 million households in 10 major Canadian centres surveyed indicated they completed renovations last year that cost an average of approximately $12,600, according to the Renovation and Home Purchase Survey released today by Canada Mortgage and Housing Corporation (CMHC).

“Close to $21.3 billion was spent on renovations in 2008 across the 10 major centres surveyed, an increase of about $1.6 billion compared to 2007,” said Bob Dugan, Chief Economist at CMHC. “As well, when Canadian homeowners were asked about their renovation plans for this year, 46 per cent indicated that they intend to spend $1,000 or more by the end of 2009.”

The Renovation and Home Purchase Survey reports on actual renovation expenditures made in the previous year, as well as intentions to buy or renovate a home in 2009 in the following 10 major centres: St. John’s, Halifax, Québec City, Montréal, Ottawa, Toronto, Winnipeg, Calgary, Edmonton, and Vancouver.1 The survey provides timely information on renovation market trends.

Close to half of households surveyed reported that the cost of renovations undertaken in 2008 was in line with what they had budgeted, while 38 per cent said that they went over their planned budget for the renovation. A quarter of households that undertook a renovation project hired a contractor for a portion of the work. ‘Do-it-yourselfers’ accounted for 30 per cent of renovators in 2008. However, many households (44 per cent) chose to contract out the entire renovation project.

The main reason given by households for renovating in 2008 was to update, add value or to prepare to sell (55 per cent). Thirty-per-cent of respondents stated that the main reason for renovating was that their home needed repairs. The top three renovations completed last year were: painting or wallpapering (28 per cent); remodelling rooms (27 per cent); hard surface flooring and wall-to-wall carpeting (27 per cent).

Of the 10 major centres surveyed, the percentage of households that spent $1,000 or more on renovations in 2008 was highest in St. John’s at 43 per cent, followed by Winnipeg at 42 per cent and Ottawa at 41 per cent. The centre with the lowest proportion of households that undertook renovations was Québec City at 32 per cent.

Similarly, renovation intentions for 2009 across the 10 major centres are strongest in St. John’s and Ottawa, where 56 and 54 per cent of consumers, respectively, indicated they plan to undertake renovations costing $1,000 or more. The proportion of potential renovators is lowest in Québec City at 41 per cent.

On the home purchasing front, five per cent of households across the 10 major centres surveyed intend to purchase a home that will be used as a primary residence in 2009. Forty-nine per cent of households that stated they intend to purchase a home in 2009 are first-time buyers. This percentage is significantly higher than the share (36 per cent) of actual first-time homebuyers in 2008. The majority of first-time buyers are between the ages of 25 and 34.

Home buying intentions are strongest in Calgary and Edmonton where six per cent of households reported that they are considering buying a home this year, down from eight and seven per cent, respectively, in 2008. Purchase intentions are the lowest in Halifax and Montréal at four per cent.

 

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