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Vancouver and Abbotsford CMAs

Comments: 0January 4th, 2010 by admin

Posted by Moshe Alexander

Renters had an easier time finding rental accommodation in Vancouver this fall, compared to last year. Higher rental apartment vacancy rates have meant that renters have more choice. Although higher than last year, Vancouver’s vacancy rate is still below the national average and among the lowest in the country.

A slowdown in employment sent Vancouver’s rental apartment vacancy rate higher in 2009. The vacancy rate increased to 2.1 per cent, after sitting below one per cent for three consecutive years. Unemployment in the Vancouver Census Metropolitan Area (CMA) for the first ten months of 2009 increased to seven per cent from 4.3 per cent for the same period last year. Although employment has been gradually improving since the spring of this year, it has only been in the last couple months that full-time employment has grown.

A shift to homeownership also contributed to higher rental vacancy rates in 2009. A combination of low mortgage rates and home prices off their peak value has meant that monthly mortgage payments are lower. As of September 2009, the average monthly mortgage payment for an apartment condominium was approximately ten per cent less than it was one year ago3. Although the average mortgage payment is still higher than the average monthly rental payment, some renters have chosen to take this opportunity to enter homeownership.
Virtually all communities in the Metro Vancouver area saw an increase in vacancies in 2009. The only exception to this was the University Endowment Lands (UEL). The vacancy rate in the UEL, along with several areas of Vancouver City and North Vancouver, remained tight, below one per cent in October 2009.Vancouver City, with its educational infrastructure and job opportunities in the business centre, and the lifestyle communities of West Vancouver and White Rock recorded vacancy rates just over one per cent.Vacancies increased in all other municipalities, with suburban communities north of the Fraser River near three per cent, and communities south of the Fraser, in the 4-6 per cent range.

The rental availability rate4 for private rental apartments moved higher in 2009. The availability rate increased to 2.8 per cent in October 2009, from 1.1 per cent a year earlier. The vacancy rate for investor-owned rental condominiums increased in 2009, but to a lesser extent than that for purpose-built rental units. The rental condominium vacancy rate moved up to 1.7 per cent from 0.6 per cent last fall. The stock of rental condominiums is generally newer and features more amenities than their purpose-built rental counterparts. These benefits shore up demand for rental condominiums.

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Posted in CMHC, Canada, affordable housing

HOUSING MARKET OUTLOOK Greater Sudbury

Comments: 0November 9th, 2009 by admin

Posted by Moishe Alexander

The slackness in the resale market coupled with the slowing economy will directly impact the new home market. Single-detached starts will fall to 190 units in 2009 and 180 in 2010, as the market comes more into line with long-term demographic requirements. CMHC expects 210 row, condominium and apartment starts in 2009 and another 160 in 2010.

After rising 4.3 per cent and 5.5 per cent respectively in 2007 and 2008, the New Home Price Index for Sudbury-Thunder Bay will rise in 2009 and 2010 but only modestly given the slowdown in demand.

Developers have plans for condominium development in 2010. Pricing will be very important as this product is primarily targeted at empty nesters who do not typically want to pay more for a condo that what they obtain from the sale of a homeownership unit.

As is well known, the vacancy rate has fallen from a peak of 11.1 per cent in 1999. A tight market partially brought on by a lack of new rental construction and demand pressure has finally resulted in some development of rental housing in Greater Sudbury. Vacancy rates rose slightly in April and will also increase this October before falling again to 1.3 per cent in 2010 as the economy begins improving. Strong enrolment figures at the three Sudbury-based post-secondary institutions will contribute to the tight market conditions. Rents should continue to escalate in 2009 and 2010 given continued strong demand for rental accommodation.

After plateauing in 2006-2007, Sudbury sales fell 13 per cent in 2008 and have fallen a further 26 per cent to the end of September. Sales will certainly continue this downward trend in 2009. Given the buyer’s market conditions, CMHC estimates a 27 per cent drop in existing home transactions when the year is complete. Sales will drop a further six per cent in 2010 as the market moves towards a balanced position.

The sale to new listings ratio, an indicator of the existing home market behaviour, is improving. After growing in the third quarter, Sudbury’s market will keep an upward trend, increasing its temperature. CMHC expects this ratio to end the year approaching 50 per cent, indicating that prices will adjust all the way into next year.

According to local sources, demand is greatest in the price ranges under 200,000 while the upper end of the market (>$400.000) has not been greatly affected. Prices have been falling since mid-year 2008 after rising to unsustainably high levels over the prior four years. The price decrease will continue into 2010 but will be tempered by falling listings. Watch for average prices to fall 5.5 per cent in 2009 and level off in 2010.

Given the adjustment in home prices, there has been improvement in required income to purchase a home. Unfortunately, with the slowing economy, the adjustment to incomes has been stronger. As a result the net impact on affordability will decrease somewhat in 2010 after improving in 2009. Nonetheless, there are buyers in the market searching for lower priced homes.

Greater Sudbury has experienced a strike at Vale Inco, one of the biggest mining companies in the community. Consequently employment will decline 1.2 per cent in 2009 and recover only slightly, 0.5 per cent in 2010. The combination of job loss and labour force growth have caused the unemployment rate to head north, and will approach on average nine per cent this year and next.

After an increase of nearly nine per cent in 2008, average weekly earnings will drop this year declining three per cent and fall a more modest 0.5 per cent in 2010. Removing a relatively high proportion of mining and mining- related incomes from the mix would have had a downward impact on average weekly earnings over the course of this year.

In the short term local economic uncertainty will impact housing demand. However, the current commodity price rebound will form a solid long term foundation for growth in the broader Sudbury economy. Despite the current weakness in the Sudbury economy, some economic development plans are still moving ahead.

Migration has been positive of late, while natural increase is trending down. In-migration will trend downward in 2009 and 2010 prior to recovery in 2011. Mining workers affected by work stoppages may contemplate relocating if the national economy begins to improve, generating opportunities elsewhere.

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.

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Posted in CMHC, Canada, New Home Starts, Sudbury

HOUSING MARKET OUTLOOK Thunder Bay

Comments: 0November 9th, 2009 by admin

Posted by Moishe Alexander

The slackness in the resale market has directly impacted the new home market as has the slowing economy. Single-detached starts will fall to 160 units in 2009 and 170 in 2010, as the market comes more into line with long term demographic requirements. CMHC expects 30 row, condominium and apartment starts in 2009 and another 55 in 2010. Relatively tight rental market conditions and reasonable take up of condominium units will result in some of this activity over the next 18 months.

As Figure 2 indicates, there has been improvement in household incomes in Thunder Bay and with required income being more or less flat, affordability has improved. Next year, with home prices and incomes rising modestly, homeownership should remain an affordable option and therefore demand should strengthen slightly.

After rising 4.3 per cent and 5.5 per cent respectively in 2007 and 2008, the New Home Price Index for Sudbury-Thunder Bay will rise in 2009 and 2010 but only modestly given the slowdown in demand.

Vacancy rates have come down steadily since 1998 in Thunder Bay while two bedroom rents are the lowest amongst other centres in Ontario. Lack of new supply and healthy demand due to strong enrolment numbers at Lakehead University and Confederation College contribute to the demand picture, not-to-mention in-migration from Northwestern Ontario from retirees and education and/or job seekers. CMHC expects the vacancy rate to fall again in 2009 to 1.6 per cent before increasing to 2.0 in 2010 as resale market activity picks up bringing households out of rental housing into homeownership. Rents should escalate in 2009 and 2010 given continued strong demand for rental accommodation.

Developers have plans for condominium in 2010 and beyond. A steady supply condominium units coming onto the market over the last twenty years has given Thunder Bay a nice mix of housing. This type and tenure of housing gives the city some allure, especially as empty nesters from the region look to retire to this city. Pricing will be very important as this product is primarily targeted at empty nesters who do not typically want to pay more for a condo than what they obtain from the sale of the family home or other homeownership unit.

After hitting a record high in 2008, Thunder Bay sales have fallen 18 per cent in 2009. July was the only month to register a year-over-year increase in sales. Sales will fall twenty per cent in 2009 and CMHC estimates a relatively small six per cent increase next year to 1,400 sales. Expect a gradually improving economy as low mortgage rates will positively impact the market next year.

The shortage of active listings in the Thunder Bay existing home market will exert pressure on prices. Although sales are still reasonably solid given last year’s all-time record in the Thunder Bay market, the sales to active listings ratio is unquestionably in a strong balanced to seller’s market position. The supply- demand relationship will cause price appreciation to continue barring some unforeseen economic shock. Watch for average prices to rise four per cent in 2009 and another four per cent in 2010.

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Posted in CMHC, Canada, Thunder Bay

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