The Government of Canada announced today an investment of more than $1 million as part of the year one funding through Canada’s Economic Action Plan to improve housing conditions for First Nation communities in the Chilliwack – Fraser Canyon region of British Columbia.

The Honourable Chuck Strahl, Minister of Indian and Northern Affairs and Federal Interlocutor for Metis and Non-Status Indians, on behalf of the Honourable Diane Finley, Minister of Human Resources and Skills Development and Minister Responsible for Canada Mortgage and Housing Corporation (CMHC), made the announcement today.

“Our Government’s Economic Action Plan is creating jobs, stimulating the local economy and improving housing conditions for First Nation communities in British Columbia,” said Minister Strahl.

Through Canada’s Economic Action Plan, the Government of Canada has committed $400 million over two years to help First Nation communities build needed new housing, repair and remediate existing non-profit housing for their members, and complement housing programs offered by CMHC. This investment will also provide an economic stimulus for many First Nations and surrounding areas by creating jobs.

Through Canada’s Economic Action Plan, some $50 million in federal investments will be made available to First Nations in British Columbia to address immediate housing needs.

Specifically, CMHC will allocate $1,004,962 to retrofit 71 housing units on-reserve in the Chilliwack – Fraser Canyon region.

The vacancy rate throughout the St. John’s CMA (census metropolitan area) remained low in 2009. In fact, there was little change in the vacancy rate, which largely reflects the impact of solid economic activity and positive employment growth within the region. Robust residential construction activity, combined with healthy MLS®1 sales and a strong supply of existing homes for sale, translated into continued house price growth, once again making the transition from renting to home ownership challenging for renter households. CMHC’s rental market survey conducted during the first two weeks of October included the enumeration of 3,601 privately initiated apartment units within the St. John’s CMA. The survey identified 31 vacancies within the rental stock, translating into a vacancy rate of 0.9 per cent. This compares to a similar 0.8 per cent vacancy rate recorded in 2008, with the rate below one per cent now for two consecutive years and holding steady at its lowest level since 1980. The vacancy rate was one per cent or lower in every zone within the St. John’s area this year. The biggest change was within Remainder of Metro Area (zone 3), with a rate of 0.3 per cent compared to 0.8 per cent in 2008. St. John’s East (zone 1) posted a vacancy rate of 0.9 per cent versus 1.0 per cent last year. In St. John’s West (zone 2), the vacancy rate was 1.0 per cent compared to 0.7 per cent in 2008. St. John’s City (zones 1-2) posted a vacancy rate of 0.9 per cent versus 0.8 per cent a year earlier. Throughout the St. John’s region, vacancies remained highest in bachelor units at 1.5 per cent and lowest in three bedroom units at 0.4 per cent. The recorded vacancy rate for one and two bedroom apartments was 0.8 per cent for both. Average rents increased across the region for all bedroom types in 2009. The following percentage changes in average rent are based on the fixed sample, which includes structures common to the survey for both years (2008/2009). Bachelor unit average rents increased the most of all bedroom types at 6.2 per cent; one bedroom average rents increased 5.7 per cent; two bedroom unit average rents were up 4.9 per cent; and three bedroom rents increased 5.4 per cent. Overall, the total average rent for all bedroom types combined, advanced 5.5 per cent.

Based on the 2009 survey, bachelor unit average rents were $541; one bedroom average rents were $592; two bedroom units posted average rents of $677; and three bedroom rents came in at $713. Overall, the total average rent for all bedroom types combined was $643. The increase in average rents is a reflection of the upward pressure very low vacancies have exerted on rents since 2008, as well as increasing energy costs and the increased costs associated with operating and maintaining apartment buildings. Once again, current rent levels prevented the construction of multi-unit rental projects in 2009, making the rent/return equation uneconomical for developers and real estate investment trusts (REITs). This has been the situation for more than 20 years within the local rental market. However, local rental market dynamics have been changing, with fewer private owners and increasing corporate ownership. The buoyant St. John’s economy and housing market has seen these corporate entities become increasingly interested in the local rental market. In fact, they have purchased many apartment buildings in recent years. The expectation is that these and other players will engage in new multi-unit apartment building construction activity in the coming years, once average rents reach a point where project development becomes feasible.

The local rental market is driven by a number of factors. These factors have remained fairly constant over time and involve both demand and supply influences. Key factors affecting the demand dynamics for rental accommodations over the short term include economic activity, employment, migration trends and the home ownership rate. The supply side of the local rental market is affected by additions to the rental stock via new construction or conversion of existing space into apartments. Apartment supply can also be reduced by conversion activity when existing rental units get converted to condos or hotels. On rare occasions, demolition of apartments for alternate site use or loss due to fire may also diminish the supply of rental units. While CMHC’s rental market survey historically covered structures containing three or more apartment units only, both demand and supply has always been affected by competition from the secondary rental market (newly surveyed since 2007). This market consists of single-detached units; semi-detached, row and duplex units; and other- primarily accessory suites. Statistics for secondary rented units exclude apartments in purpose built rental structures with three rental units or more, condo apartments, units in institutions, and any dwelling whose type could not be identified in the survey. The estimated number of households in secondary rented units within the St. John’s CMA is quite substantial at 12,896, with an average rent of $653 compared to $618 in 2008. Refer to tables 5.1 and 5.2 for additional details regarding secondary rental market survey results.

Moishe Alexander’s Review

New Home Market – New Home Construction Under Pressure

St Catherines, Ontario - Credit B. Gilliard, Flickr

Moishe Alexander says new home construction will ease back by 12 per cent to around 1,000 homes in 2009 from 1,140 home starts in 2008. The contraction will be felt across all housing types, with the number of single detached home starts easing off by about 13 per cent. Given their popularity, townhouse starts will moderate by only 8.3 per cent. The lower number of starts is attributable to uncertainty about economic prospects, limited land supply, demographic changes and more selection in the resale home market. Construction of single-detached homes will continue to moderate because of land supply limitations.

This will translate into higher prices, especially in the relatively built-up northern part of St. Catharines- Niagara. Given the land supply limitations and Greenbelt legislation constraints in the north, more active residential construction is expected to occur in the southern areas of the region. Single-detached homes will also continue to lose their attraction due to changes in the region’s demographic composition. The declining average number of persons per household suggests that smaller households will require smaller and less expensive homes. Moreover, an aging population will need to live closer to amenities, in homes which are easier to maintain than single detached houses. In some cases, wealthy seniors will move from small single-detached houses to larger condominium apartments. This is still a movement to higher-density housing. To accommodate a growing population of older people, there will be more construction of townhouses and apartments, more retirement home building and many redevelopment projects. Some of these projects are expected to take place in former industrial sites abandoned by the manufacturing industry. Prices for new homes will continue to grow although at a slower pace than in 2008. Rising residential construction costs associated with land supply constraints and higher development charges will account for the major part of the increase. Increasing concrete and steel costs will also contribute to higher costs for high-rise construction. Consequently, in 2009, there will be a shift to more modestly priced housing which will lower the average price. The softening and well-supplied resale market will offer a broader selection of homes for buyers thereby encouraging more interest in resale homes which are more affordable relative to the new home market. The price differential between Toronto and St. Catharines- Niagara homes, on the other hand, will continue to attract many well off households from Toronto area, especially among people of preretirement age and those whose commutes are less-than-daily because of workplace flexibility. This will provide some support to the slowing market.

Resale Market – Back to Balance

Moishe Alexander says sales are forecasted to moderate again in 2009 by 4.9 per cent to 5,800 transactions. A moderation in employment, slow growth in earnings and less migration are the main factors behind the projected tapering off. Prices increasing at a more subdued pace will mitigate the decline in demand. The region is losing population to all other areas in Canada except for Toronto and Hamilton. Since people moving to St. Catharines-Niagara tend to be older than those leaving, there will not be as many first-time buyers coming to the region. At the same time, the housing demand of incoming migrants from Toronto and Hamilton will be probably more concentrated in the adult lifestyle-housing segment of new homes. The number of listings in 2009 is expected to trend slightly higher to the 12,600-level which is a moderate gain of 0.8 per cent after the 6.7 percent increase in 2008. The sales-to-new listings ratio will move down to balanced market territory at around 49 per cent in 2008. The ratio will ease down slightly in 2009. The greater selection in the resale market will underlie the deceleration in the growth of resale home prices to 1.9 per cent, a rate similar to inflation. Buyers will have definitely more options to find a home of their choice. Resale home prices have been growing slower than new home prices in 2008. This is forecast to change in 2009 as builders will start sensing demand for new homes is declining. As a result, the resale price growth will again outpace new home price growth, but both will be slower than in the past.

Economic Factors- Local Economy to Contain the Slowdown

Moishe Alexander says that in 2008, the labour market has been strong creating slightly over two percent more new jobs. In 2009, the economy is not expected to perform as strongly. Employment is forecast to moderate by 0.7 per cent and the unemployment rate will edge a little higher. The moderating employment picture is also consistent with demographic trends. The region has one of the oldest and slowest growing populations in Canada. More and more baby-boomers will be retiring in the coming years and since the migration into the region is not expected to be strong, the labour force will be shrinking. Several strong service-producing sectors, particularly health care, public administration and, to a lesser degree, educational and financial services, will have better performance somewhat offsetting job losses in other sectors. Even tourism sector which is perceived to be very vulnerable to the fluctuations in the value of the Canadian dollar has been doing relatively well. Although the number of trips by US citizens is down significantly, a steady inflow of international tourists and more domestic travellers have sustained the tourist industry. Average weekly earnings will grow in 2009 but at a slower rate than in 2008. Some service sectors are adding relatively high-wage jobs. The regional economy is becoming better positioned to weather economic downturns thanks to diversification of the production base. Also, the region is gradually shifting more to the creation of many smaller but more viable businesses which replace large plants.

Mortgage Rates

Moishe Alexander says that 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.

You can find the entire report in PDF format through the following link:
http://www.cmhc-schl.gc.ca/odpub/esub/64315/64315_2008_B02.pdf

Moishe Alexander’s Review:

Sustained Demand for Housing

St Johns, Newfoundland - Credit BriBriTO, Flickr

Strong fundamentals such as a solid local economy, continued inmigration and favourable employment will sustain the demand for housing within the St. John’s region throughout the remainder of this year and in 2009. Accordingly, the housing market will continue to perform well. The renovation sector will build on its recent strength, exceeding $800 million annually over the forecast period. With homeownership costs increasing, some prospective buyers remain sensitive to prices when considering the purchase of a home. However, personal income growth and a tight labour market will continue to provide support to the overall level of demand for both new and existing homes. Furthermore, energy related announcements such as Hebron and growth throughout the local oil industry continue to fuel the housing market, with unprecedented buyer demand supporting current and future house price appreciation.

Resale Marke:

Buoyant MLS® Market

Having posted record sales for several years in a row, the local resale market is expected to continue this trend, eclipsing the 4,000 unit mark this year and in 2009. Accordingly, the forecast calls for MLS® sales of 4,800 units this year, with 4,400 sales expected in 2009. With many new homes selling through the MLS® system, solid numbers for housing starts will have a positive impact on total MLS® sales over the forecast period. Unprecedented housing market activity this year has been characterized by higher than normal unit sales, constrained listings supply and sharp price increases. In fact, active listings are approximately 40 per cent lower this year versus last year and with demand expected to remain high over the forecast period, unit sales growth will be constrained by fewer listings in 2009. While favourable for sellers, very tight resale market conditions have proved challenging for buyers, resulting in multiple offers and offers above list price on choice listings. With fewer listings available, buyers have looked to the new home market instead. However, the growing new versus existing house price premium more first-time buyers are choosing existing home over a new home, adding pressure to the resale market.

Resale Market Classified as Sellers

The resale market became balanced in 2005 after three years that favoured sellers. Balanced conditions existed for less than a year, as record sales activity was offset by an increase in active listings in 2006, driving the number of listings to their highest level since 1999. As a result, the St. John’s resale market was classified as buyers until mid 2007. Subsequent robust economic activity and in-migration to the region, combined with solid resale market dynamics, positioned the market once again as a sellers market. With fewer available listings to choose from and choice listings selling quickly, prospective homebuyers continue to face challenges in their search for a new home. The average time on market has trended lower than historical norms and notable price growth has been experienced in all segments.  The current forecast is for active listings to remain low. As some sellers capitalize on recent price appreciation, others downsize from their family homes, making way for new young families in the active move-up segment. The increasingly active move-up buyer segment will continue to absorb many of these family homes. This segment will also be bolstered by returnees from Alberta coming home to St. John’s to work on energy related projects. As a result, the local resale market is expected to remain classified as sellers through to the end of 2009.

Steady Price Growth

With the market classified as sellers, expect to see steady price growth this year and in 2009. The average MLS® house price is forecast to end this year at $176,500, an increase of 18.3 per cent, followed by a further 6.2 per cent gain in 2009 to $187,500. The active move-up buyer segment will result in two-storey homes experiencing the highest price growth over the forecast period. The current cost of homeownership will continue to reduce on two-storey demand from the first-time buyer segment. As such, demand for bungalows with or without basement apartments should remain a solid alternative for this segment of the market.

New Home Market:

New Home Demand Will Continue

A favourable provincial net-migration picture, combined with local workers commuting to and from Alberta, will increase provincial housing demand this year. Activity will only retreat slightly next year to a more normalized level. Consequently, total provincial housing starts are expected to reach 3,100 units this year, with 2,725 forecast for 2009. Conditions within the St. John’s metro area will also remain favourable. Robust residential construction activity will continue due to solid economic and demographic factors, as well as an expectation of continued inmigration to the region, as a result of recent energy project announcements. The expected strength in overall home buying activity will sustain a healthy level of residential construction activity within the metro region over the forecast period. However, additional price growth, combined with higher development and construction costs, will partially reduce demand in the new home market. On the flip side, with fewer listings available within the local resale market, some buyers will continue to face difficulties in finding a home that meets their needs and may end up buying a newly built home instead.  As demand for housing increases, this situation is not expected to change significantly. Accordingly, total housing starts are forecast to increase 19.9 per cent to 1,775 units within the St. John’s region this year with activity taking a small pause in 2009 to 1,650 starts.

Flat Multiple Starts:

Activity

Multiple unit construction is expected to remain flat over the forecast period, offset slightly by higher numbers of condominiums and an increase in affordable housing projects. Continued in-migration, due to increased economic activity and employment, and demographic trends such as smaller households and an aging population, will support the growing condo market in St.  John’s. With a recent peak in supply and higher disposable incomes, demand for new semi-detached homes is expected to remain fairly flat, as buyers opt for singledetached dwellings. That being said, new lower-priced semi-detached units will remain attractive as overall house prices continue to grow. In view of this, the multiple housing starts forecast calls for 350 units by the end of this year and another 350 in 2009.

Rental Market Decrease in Vacancy Rate

Several factors will decrease the vacancy rate this year and in 2009. As homeownership costs rise, the movement of renter households to homeownership will continue to slow. However, out-migration of the 18 to 24 year-old segment of the population will persist and once again this will put upward pressure on the vacancy rate. In fact, close to 80 per cent of this age group tend to be renter households. Investment in rental housing will increase the supply only slightly this year and next. Accordingly, the vacancy rate for structures containing three or more units is forecast at 1.0 per cent in 2008 and 1.5 per cent in 2009. With the vacancy rate decreasing, expect monthly rents to increase by 6.0 and 11 per cent this year and next, respectively, as landlords attempt to recover increased costs associated with maintaining the rental stock and lower vacancies and higher energy costs exert upward pressure on rents.

Economic Trends:

Economic Growth Will Strengthen

The Hebron project continues to drive local economic growth. The ramping up of the project will contribute to stronger growth in 2009. However, declines in offshore oil production will dampen pronounced GDP growth in 2008. In fact, during the January to August period of this year, oil production decreased 9.2 per cent over the same period in 2007. Terra Nova and Hibernia are expected to continueto see declines in production over the 2008-2009 period. Higher commodity prices over the past few years have resulted in increased mineral exploration activity in the interior region of Newfoundland, as well as Labrador. However, the recent correction in commodity prices may suggest a moderation in growth. The fishery may benefit from recent declines in fuel costs and the Canadian dollar. Coming off the heels of real GDP growth of 7.9 per cent in 2007, additional growth in the final GDP number for 2008 and again in 2009 is expected.

The local labour market has performed very well in recent years, thanks in large part to the increased economic activity and growth that has been experienced as a result of the oil sector. Last year represented a 26 year low for unemployment and a 26 year high for employment. This trend is expected to continue in terms of both employment growth and the unemployment rate remaining low this year and next. The tight labour market conditions continue to exert upward pressure on wages and salaries. Overall, personal incomes continue to grow, having increased 4.3 per cent in 2007, while personal disposable income increased 5.0 per cent, with additional growth expected this year and in 2009. Retail sales were up 9.0 per cent last year and similar results are expected for 2008 and 2009. In fact, during the January to June period of this year, retail sales increased 7.1 per cent over the same period in 2007. Some of this growth has been driven by the Alberta commuter, working in Alberta and coming back during their time off, injecting their earnings into the local economy. On the population front for the first time in 16 years, the NL Government recently announced a net population ncrease of 1,436 from July 2007 to July 2008. This was driven primarily by net-migration of 1,713, as people continue to relocate for work from other provinces, particularly Alberta.

Mortgage Rates

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.

You can find the entire report in PDF format through the following link:
http://www.cmhc-schl.gc.ca/odpub/esub/64271/64271_2008_B02.pdf