The vacancy rate for private rental apartment buildings with three or more units in the St. Catharines- Niagara CMA (hereinafter Niagara) was above the national and historical averages. According to the CMHC’s Fall 2009 Rental Market Survey, the vacancy rate edged up to 4.4 per cent in 2009. This was above the 20-year average level of 3.5 per cent, and an increase of 0.1 percentage point from last year. Four main factors placed upward pressure on the vacancy rate. First, record low mortgage rates in combination with lower prices in the earlier part of the year translated into very affordable mortgage carrying costs. Many buyers, in particular first- time buyers, took advantage and moved out of rental accommodation and into home ownership. A comparison of average rents and mortgage carrying costs based on the mortgage terms chosen by most first-time buyers (i.e., maximum amortization period and the minimum down payment allowed) suggests that the gap between the two narrowed by more than 50 per cent in the first quarter of 2009.

Also, youth aged 15 to 24 are a key source of rental demand. Weaker employment among youth in this age group meant that some of them, after losing their jobs, moved back into their parents’ homes, or alternatively, postponed a decision to move out. Total employment for all age groups declined by around 11,000 people or 5.6 per cent when comparing the average level in the 12 months ending September 2009 to average level in the same period a year earlier.Youth employment declined by 4,500 people or 14 per cent, of which 2,900 in full- time positions and the rest in part- time jobs.

Finally, there were fewer international immigrants in 2009, due to the global economic slowdown. Since they traditionally tend to rent after landing in Canada, this implies that rental demand in 2009 was not as strong as in the previous years. Many international migrants find it difficult to settle in the region and land a job. Instead, they prefer to settle in major centres, such as the Greater Toronto Area, where they are more likely to find their first job and where there are established social networks.

Vacancy rate stable in October 2009

According to the results of the Rental Market Survey conducted by CMHC in October 2009, the vacancy rate remained rather stable in the Montréal metropolitan area, reaching 2.5 per cent, compared to 2.4 per cent in October 20081. The stronger than expected homeownership trend, especially starting in the second quarter, and the job losses among young people aged from 15 to 24 years offset the increase in migration, which kept the vacancy rate relatively stable over the past year. After easing from 2002 to 2006, the Montréal rental market has since stabilized. That being said, conditions remain relatively tight compared to the 1990s.

The difficult economic environment also had a direct impact on young renter clients. Nearly 15,000 jobs, most of them full-time, were lost among the group aged from 15 to 24 years between October 2008 and October 20092. Although the people in this age group account for only 7 per cent of renter households, a vast majority (89 per cent) of them rent their dwellings3 . The job losses very likely forced a number of these young people to stay with their parents or share their apartments with more roommates. Therefore, the difficult job market conditions for people aged from 15 to 24 years resulted in a decrease in demand for housing.

That said, the arrival of more immigrants acted as a counterbalance for the renters who left the rental market. According to our forecasts, net migration in the Montréal CMA should reach 30,000 people in 2009, up from 28,600 in 2008. Montréal received more immigrants this year, thanks to the higher immigration targets set by the Government of Quebec. A large majority (84 per cent) of the 55,000 immigrants that the province aims to welcome annually will settle in Montréal, and most will first choose to rent a dwelling. Immigration puts pressure on the Montréal rental market and keeps the vacancy rate low.

On the supply side, there have been fewer traditional rental housing starts in recent years, even though the vacancy rate has been relatively low. Builders still seem to be further attracted to more profitable markets, such as the condominium and retirement home segments. The rather limited growth of the rental housing stock is also helping to maintain the vacancy rate at a low level.

According to the survey results, larger apartments, that is, units with two bedrooms and those with three or more bedrooms, appear to be the most popular. In fact, demand for roomier units, notably from families, has been steady. The vacancy rates in these two unit categories reached 2.0 per cent and 1.7 per cent, respectively, well below the rates recorded for bachelor apartments (3.7 per cent) and one-bedroom units (3.2 per cent).

As well, the vacancy rates by rent range also revealed differences depending on unit size. In fact, apartments renting for less than $500 per month recorded the highest vacancy rate (3.2 per cent). These apartments are less popular, because they are usually smaller. By comparison, units with rents from $500 to $899 and apartments renting for $900 or over had lower rates, at 2.5 per cent and 2.8 per cent, respectively.

Provincially, the labour force and employment are expected to rise moderately in 2010, while in Halifax, growth is expected to be more significant. Halifax will continue to see steady growth in the economy and this will translate into improving conditions in the local housing market.

The local economy in Halifax continues to benefit from positive migration patterns. With more people moving to Halifax than moving away, the labour force has been growing. Almost every month of 2009 saw greater numbers of people looking for work in Halifax and by the summer months there were more people looking for work than ever before. Fortunately, most of these job seekers found employment which resulted in a record level of employment in Halifax. Employment was up by three to four per cent in 2009 compared to 2008. Employment may ease off of record highs during certain months in the forecast period, however overall employment is expected to continue to show positive growth in 2010.

Employment is being bolstered by the construction industry and the public sector. Large construction projects and large military contracts have contributed to strength in these industries. The largest employment sector in Halifax is the services sector which has seen slow but steady growth of approximately three per cent so far in 2009. The opening of some new or trendy retail stores has contributed to the growth in this sector. Areas experiencing weakness are the finance, trade and primary goods sectors which are struggling due to global economic issues and reduced demand for exports. Wages are also expected to continue to move upwards. As of August 2009, seasonally adjusted average weekly earnings have risen by over six per cent compared to the 2008 average. Average earnings now exceed $39,000 per year compared to just under $37,000 in 2008.

Record employment levels and wages  will be supportive of housing activity in Halifax for the remainder of 2009 and 2010. Continued in-migration and near historic low interest rates will also contribute to increased housing demand in the Halifax Regional Municipality (HRM). In the near-term, some lingering effects of the weakened economy will keep demand subdued. In the medium- term, however, expect to see demand and activity begin to increase again in 2010.

The Bank of Canada cut the Target for the Overnight Rate in the early months of 2009. The rate was 1.50 per cent at the start of 2009 and has since fallen to 0.25 per cent. The Bank has committed to keeping this rate at 0.25 per cent through the middle of 2010 unless inflationary pressures warrant an increase.

Mortgage rates have fallen over the course of 2009, but are now expected to remain relatively stable for the rest of the year. Posted mortgage rates will gradually increase through 2010, but will do so at a slow pace. For 2010, the one-year posted mortgage rate will be in the 3.50-4.25 per cent range, while three and five-year posted mortgage rates are forecast to be in the 4.50-6.00 per cent range

Repairs will include the replacement of windows and balconies, installation of energy efficient lights and carbon monoxide sensors and the replacement of appliances in the following buildings:

* Les Centres d’Accueil Heritage at 33 Hahn Place, $1.1 million.
* Toronto Community Housing Corporation at 30 and 40 Teesdale Place, $2 million.
* Mimico Co-op at 1 Summerhill Road, $403,300.

The $3.5 million investment is part of a notional allocation of more than $220 million for the City of Toronto to repair and retrofit existing local social housing units over the next two years.

The funding was made available as a result of a $1.2 billion joint investment under the amended Canada – Ontario Affordable Housing Program Agreement, which includes funding through Canada’s Economic Action Plan and by the Government of Ontario. The federal and provincial governments are contributing equally to this overall investment.

Lois Brown, Member of Parliament for Newmarket – Aurora, on behalf of the Honourable Diane Finley, Minister of Human Resources and Skills Development Canada and Minister Responsible for Canada Mortgage and Housing Corporation (CMHC) and George Smitherman, Minister of Energy and Infrastructure and Member of Provincial Parliament for Toronto Centre, on behalf of the Honourable Jim Watson, Ontario Minister of Municipal Affairs and Housing, made the announcement today.

“This funding will improve the quality of life for residents by upgrading their homes and keeping them affordable,” said MP Brown. “These investments also benefit our communities by creating jobs and supporting the local economy.”

“These repairs are another step towards improving social housing in Toronto,” said MPP Smitherman. “This new funding will help ensure that people living in social housing have a safe and reliable place to live. Ontarians deserve nothing less.”

“This is very good news for the City of Toronto and is in keeping with our efforts to create a city that is liveable and prosperous for all residents,” said Toronto Mayor David Miller. “Through Council’s Housing Opportunities Toronto Action Plan, we will continue to work with Provincial and Federal partners in order to continue to upgrade and improve housing in the city.”

Ontario is moving quickly to invest a total of $704 million to repair eligible social housing across the province. In an effort to get shovels in the ground quickly, projects must be committed by the end of the fiscal years 2010 and 2011.

Moishe Alexander’s Review

Resale market: sales volumes to stay high in 2008 and 2009

Trois Rivieres, Quebec - Credit Stingler, Flickr

After a year of stability, resale market activity in the Trois-Rivières CMA will slow down somewhat in 2009. Still favourable financing conditions, a dynamic job market in 2007, strong net migration and slightly more properties for sale on the market helped maintain the number of transactions (830 sales, compared to 825 a year earlier). For 2009, a small decrease in sales is anticipated, with 790 transactions. While migration and rising inventories of properties for sale will continue to boost sales, the job market, which has been idling since the beginning of 2008, combined with higher home prices, will put a damper on resale market activity in the Trois Rivières CMA next year. Inventories of properties for sale on the market, which have been on the rise since the low point reached in 2004, will continue their upward course in 2008 and 2009. In the absence of an equivalent increase in demand, this rise in supply will cause the market to ease further, pushing up the seller-to-buyer ratio. Since attaining its lowest level in 2004 (4.0 to 1), the seller-to-buyer ratio has been rising gradually year after year. At the end of 2007, the market even left the overheating zone, characterized by a ratio below 5 sellers per buyer. However, even though this ratio will continue to ris progressively from now until the end of 2009, the market will still remain below the balanced range*, reflecting a market where sellers will still have the edge. Consequently, significant price hikes will again be recorded. In 2008, the average price of singlefamily homes will reach $143,000, up by 6 per cent over 2007. The increase will be slightly smaller in 2009 (as the seller-to-buyer ratio will rise), and single-family homes will be selling for an average price of $148,500 (a hike of 4 per cent over 2008).

Residential construction: continued high rental housing starts volumes

Residential construction has been very active in the Trois-Rivières CMA for the last four years, with starts volumes reaching very high levels. This vigorous activity has been attributable to the many rental housing starts, which have virtually jumped since 2004, in response to the low vacancy rates observed on the rental market. In fact, rental housing starts have accounted for close to half of the annual starts totals, for four years now. From 1996 to 2000, when the vacancy rate hovered around 8 per cent in the CMA, only 540 rental housing units were started. From 2002 to 2007, this figure climbed to 1,925 units, effectively doubling the share of rental housing starts, which rose from 23 per cent to 42 per cent within the space of a few years. The results for 2008 will be similar to the levels recorded in previous years, and the total starts volume wil remain high, once again supported by rental housing construction. In fact, a total of 1,150 starts should be enumerated in the Trois-Rivières area. For 2009, a small decrease is anticipated, as construction should get under way on 1,000 new dwellings. Rental housing starts are expected to fall slightly, as the vacancy rate will go back up in the CMA. Single-detached home starts will decrease somewhat in 2008, and foundations should be laid for 400 houses on the CMA territory (compared to 430 in 2007). Still favourable financing conditions and an active job market in 2007 will keep single-detached housing starts at a relatively high level. In 2009, 350 such houses should be started. The wider choice of properties for sale on the existing home market, along with slowing household formation, will dampen demand for new houses. Condominium construction in the Trois-Rivières CMA has been very limited and inconsistent over the past 20 years. Given the difficulties with the absorption of condominiums, developers have preferred to turn their efforts to the construction of other types of housing. The wind should change in 2009, however, when some 60 condominium units should get under way as part of the first phase of the Trois-Rivières-sur-Saint-Laurent development project.

Mortgage rates to remain low

Mortgage rates are expected to be relatively stable throughout the last quarter of this year, remaining within 25-50 basis points of their current levels. Posted mortgage rates will decrease slightly in the first half of 2009 as the cost of credit to financial institutions eases. Rising bond yields, however, will nudge mortgage rates marginally higher in the latter half 2009. For the last quarter of 2008 and in 2009, the one-year posted mortgage rate will be in the 6.00- 6.75 per cent range, while three- and five-year posted mortgage rates are forecast to be in the 6.50-7.25 percent range.

Employment: slowdown in sight

The Trois-Rivières census metropolitan area (CMA) job market will moderate slightly in 2008 and 2009. Following a relatively vigorous year in 2007, with more than 3,400 jobs created, the pace will slow down. A climate of weakness and uncertainty continues to loom over manufacturing companies in the area, which have had to contend with several difficulties in recent years. In addition to the rapidly rising value other  Canadian dollar against the U.S. currency and increased competition from emerging countries, there are now fears on the part of exporters in the area related to the U.S. economy context, which could dampen the job outlook. However, although a few shutdowns have already been announced since the beginning of the year, other announcements, such as the canola seed and soybean crushing plant in Bécancour, suggest that, for the moment, certain manufacturing sectors might get through this period of turmoil relatively unscathed. The construction sector (residential and non-residential), for its part, will remain strong. A high volume of housing starts is anticipated, as several public infrastructure projects will be pursued in the area this year and next. In 2008 and 2009, employment growth in the Trois-Rivières CMA will hover between 0.1 per cent and 0.3 per cent (compared to 5 percent in 2007).

Rental market: slight easing on the horizon

The Trois-Rivières CMA rental market has tightened significantly since the beginning of the decade. Strong migration to the area put upward pressure on demand for rental housing, which, combined with the low rental housing construction volumes recorded during the 1990s, caused the market to tighten considerably. From 7 per cent in 2000, the vacancy rate consequently fell to 1.5 per cent just three years later. Since then, this rate has stayed below the 2-per-cent mark, even with the arrival of many new rental housing units on the market. Demand therefore still remains vigorous, mainly on account of the strong migration. In 2008 and 2009, the vacancy rate will rise again gradually, reaching 1.8 per cent and 2.2 per cent, respectively. While migration will keep demand at a relatively high level, the rental housing supply, which has been progressively replenished in recent years, will cause the market to ease somewhat.

Migration: still strong

The Trois-Rivières CMA has attracted a significant number of migrants in recent years, which has greatly stimulated the residential real estate market. In fact, the years 2005 and 2006 particularly stood out in this regard, with annual net migration levels above 800 people, which had not been seen in over 15 years in the area. This strong migration will continue in 2008 and 2009, when the numbers of newcomers to the Trois-Rivières area should stay at levels similar to those of previous years. From now until the end of 2009, migration will therefore be the main driving force behind the Trois- Rivières CMA residential real estate market.

You can find the entire report in PDF format through the following link:
http://www.cmhc-schl.gc.ca/odpub/esub/64299/64299_2008_B02.pdf

Moishe Alexander’s Review

Economic and demographic: changes on the horizon

Quebec City, Quebec - Credit Zingaro, Flickr

Moishe Alexander says in 2007 and 2008, the Québec census metropolitan area (CMA) has stood out with a pace of economic growth above the rates recorded in other cities across Quebec. This performance is related to the investments in infrastructure and the city’s 400th anniversary activities. However, the regional economy will moderate; in fact, this has already started to be felt. This year, the tourism industry is benefiting from the record number of visitors to the multiple events held for the 400th anniversary of the city of Québec. The popularity of these activities is reflected in the tourism indicators: for July 2008, the number of people who contacted the Quebec tourist information centre rose by 37 per cent over the same month in 2007, and the accommodation indicators also show an increase (+13.2 per cent). In 2009, tourism will be less significant, which will reduce the economic spin-offs for the area. In 2008, the major investments in infrastructure helped generate growth in the job market. The nonresidential construction sector benefited from these favourable conditions with a strong increase in the number of jobs and hours worked in the area overall. During the first nine months of the year, 8,100 jobs were created in this sector. Several projects were completed, including the modernization of the Jean-Lesage Airport, the creation of the Espace 400e area, the construction of the Lévis Convention Centre and the Sheraton Hotel, the redevelopment of the Promenade Samuel-De Champlain and various sites of the Québec Port, the construction of several office buildings and the completion of road and municipal infrastructure projects. While activity will slow down in 2009, this sector will still benefit from investments in road, institutional and commercial infrastructure, such as the modernization of the sports facilities at the Université Laval (PEPS) and the repairs to the Charles-de-Koninck university pavilion, the pursuit of the modernization work at Robe Giffard Hospital, and the continuation of several commercial real estate projects. Residential construction also significantly contributed to job creation, as sustained activity continued in 2008. However, a setback is anticipated in this sector for 2009, on account of a downturn in the housing markets. The overall service sector is showing signs of stagnation in 2008, as the number of jobs fell by 0.1 per cent for the first nine months of the year. In fact, employment is down in wholesale and retail trade (-11.6 per cent), as well as health care (-8 per cent) and business services (-24 per cent), but on the rise in accommodation and food services (+6 per cent), professional, scientific and technical services (+28 per cent), finance, insurance and real estate (+10.5 per cent) and transport and communications (+16.2 per cent). The other service industries show relatively stable results. The gains in professional, scientific and technical services can be explained by the good economic performance in the area, the different infrastructure projects that stimulated job creation in the field of engineering and the regional strategies to develop industries and research centres related to applied technology and life sciences. Over the coming years, this sector will continue to be supported by the economic development efforts and strategies adopted by different stakeholders in the area. The finance, insurance and real estate sector also benefited from a favourable economic environment in 2008. In 2009, this sector will remain strategic for the area, given the presence of the 11 insurance company head offices. Public and parapublic services account for nearly one in three jobs in the area. The plan to reduce the size of the Quebec government will support a decrease in employment in the public service, but health and education needs, in line with political priorities, will bring about an increase in jobs for these services over the next few years. On the decline since 2007, the manufacturing sector is facing uncertain conditions and will be affected by the anticipated slowdown. In 2008, job creation in the CMA will be somewhat more modest than in 2007, with a gain between 1.2 per cent and 1.6 per cent, compared to 2.4 per cent in 2007. In 2009, job creation will continue, at a rate between 0.6 per cent and 1 per cent. The unemployment rate, which stands below the provincial average, should remain at around 5 per cent in 2008 and then rise slightly in 2009, as a result of more moderate employment growth. On the demographic front, the results are expected to show a small decrease, as the more modest growth in the job market should drive down net migration from 4,500 people in 2007 to 4,000 in 2008 and then to 3,800 in 2009. It is likely that the anticipated slowdown in the construction sector will cause an increase in emigration to areas where major projects are planned or petroleum development is under way. Household formation, for its part, will slow down among young people over the coming years but pick up in the group aged from 65 to 74 years. The number of people aged 75 years or older should also grow less rapidly. These demographic changes in the CMA will have impacts on the housing market and, more specifically, on demand and tenure. In fact, demand will be less significant in the single-detached home segment but will rise for condominiums, as they represent an interesting alternative for households wanting to lighten the burden of maintaining a house.

Mortgage rates

Moishe Alexander says mortgage rates are expected to be relatively stable throughout the last quarter of this year, remaining within 25-50 basis points of their current levels. Posted mortgage rates will decrease slightly in the first half of 2009 as the cost of credit to financial institutions eases. Rising bond yields, however, will nudge mortgage rates marginally higher in the latter half 2009. For the last quarter of 2008 and in 2009, the one-year posted mortgage rate will be in the 6.00-6.75 per cent range, while three- and five-year posted mortgage rates are forecast to be in the 6.50-7.25 per cent range.

Resale market to ease

Moishe Alexnader says sales recorded through the Service inter-agencies / Multiple Listing Service (S.I.A. / MLS)® reached a peak in 2007, with just over 8,100 transactions, for an increase of 6 per cent over 2006. The transactions volume will again be high in 2008, but the market will stabilize, with a small gain of 1 per cent. In 2008, new listings have risen, but the steady demand is still giving sellers more of an edge during negotiations. The growth in prices remains above inflation, as the average price has now reached $194,950, up by 10 per cent over 2007. The solid economic performance, the healthy job market and favourable mortgage lending conditions have contributed to maintaining a strong demand. The price level remains higher in the centre of the CMA, as the average price for single-detached houses in this sector is about $60,000 greater than the averages noted on the South Shore and North Shore (third quarter of 2008). In 2009, the increase in the number of households aged from 65 to 74 years will support a new rise in listings, since some of these households will turn to the condominium market. In addition, the decline in the formation of young households over the coming years will ease pressures on demand for starter homes. The economic slowdown will also drive down demand, but the price level will favour the existing home market, as prices are lower on this market than on the new home market. The price increases will therefore still be above inflation but will be less significant (+5 per cent) than in 2008, as the average price will reach $204,700 in 2009. It is expected that sellers will lose some of their bargaining power. Certain market segments will still remain tight, though, such as the semi-detached home segment, where prices are more affordable. For the first six months of 2008, the average selling price of semi-detached houses attained $166,500, or $43,000 less than the selling price of single-detached homes. The average time to sell is in fact shorter for semi-detached homes (53 days) than for single-detached houses (72 days), and this trend will continue. The condominium segment is not as tight, although sellers still have a slight edge. In fact, in the second quarter of 2008, the seller-to-buyer ratio was 5.6 to 1, versus 6.3 to 1 for the same period in 2007. In 2008, the new home market is following the same trend, as condominium starts are up significantly (+62 per cent). For 2009, it is expected that condominiums will again be in demand: first, their affordability is a definite asset in a context of sustained price hikes and, second, the greater number of households aged from 65 to 74 years will fuel demand for homes of this type.

Housing starts to fall in 2009

Moishe Alexander says after reaching a peak in 2004, housing starts fell in 2005 and 2006. In 2007, a small increase was observed on account of the rise in the supply of retirement housing. In 2008, starts of this type will set a new record, with the construction of close to 950 units. Likewise, the supply of new condominiums will also grow significantly (+62 per cent). These two gains will drive up the overall housing supply, bringing total starts to 5,430 units (+3 per cent) this year. In 2008, the decrease in singledetached home starts will reach 10 per cent, as rising prices and municipal intensification efforts are rather favouring semi-detached houses. In fact, this phenomenon has now been observed for several years in the CMA. In 2009, the economic slowdown, along with the formation of fewer young households and a growing supply of existing homes, will weaken demand for new singledetached houses. These factors, combined with the higher prices on the new home market, will cause starts to fall by 15 per cent in 2009. With the lower demand, prices will rise less significantly (+5 per cent). Semi-detached houses (multiplefamily housing segment), however, will remain popular among consumers, on account of their relative affordability, so starts should remain at the same level as in 2008. Starts of multiple-family (semidetached, row, condominium and rental) housing will be on the rise in 2008 but will decline markedly in 2009. This situation will be due to the decrease in demand for rental housing for seniors. In fact, not only did starts of this type set records in 2007 and 2008, but fewer people will be turning 75 years old in the near future, which will curb demand for retirement housing. This is evidenced by sharply rising inventories and a major increase in the short-term supply in August 2008. In addition, the vacancy rate is expected to climb in 2009. Condominium starts will be numerous in 2008 and again in 2009. Dwellings of this type are popular thanks to their affordable prices and to the changes in the demographic profile in the CMA. The formation of more households aged from 65 to 74 years and the appeal of this housing type, even among first-time home buyers, will keep demand strong, and condominium starts will reach close to 1,100 units in 2009. This result represents a decrease of 10 per cent from the level recorded in 2008 but corresponds to the average for the last five years. The traditional rental market is running out steam in 2008, and only small projects with 20 units or less are being added to the existing housing stock. High construction costs are limiting the development of the rental market, which remains the most affordable housing market segment. In 2009, starts should remain below the average for the last five years. Demand in this segment is coming mainly from newcomers to the area, as household formation among people aged less than 35 years will be slightly negative in 2008 and 2009.

Rental market: no easing in the short term

Moishe Alexander says the last time the traditional rental housing market was relatively softer dates back to 1998, when the vacancy rate stood at 3.3 per cent. At the beginning of the current decade, the rates reached levels of 0.3 per cent and 0.5 per cent. Since then, the market has eased somewhat, but the vacancy rates remain very low. This situation will persist in 2008 and 2009, as rental-housing construction is idling and remains well below the volumes observed over the last five years. The vacancy rate will stay at 1.2 per cent in 2008 and 2009, given that net migration will remain at high levels (4,000 and 3,800 people, respectively) and that fewer renter households will be accessing homeownership as a result of the economic slowdown. The average rent for two-bedroom apartments will rise by 2 per cent in 2008 and by 1.5 per cent in 2009, on account of changes in energy costs.

You can find the entire report in PDF format through the following link:
http://www.cmhc-schl.gc.ca/odpub/esub/64279/64279_2008_B02.pdf