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Housing market assessment continues to cause confusion

The Canada Mortgage and Housing Corporation released its second quarter Housing Market Assessment recently and the results continue to cause anger and confusion.

The worst grades were given to Saskatoon, Regina, Calgary and Toronto; all of whom were labelled as having strong evidence of problematic conditions.

In the case of Calgary, no big surprise here. With the oil industry being where it is, one could claim overbuilding and overvaluation and not be far off the mark. However, for all of those forecasters of doom and gloom, there still is building activity occurring, and when oil hits $50 and $55 this year, Calgary will be just fine.

The Toronto forecast is of little concern to the industry. Cries of overvaluation are being accompanied by record sales. If it’s selling, it’s not over-priced. Local market demand determines price, not number crunching in Ottawa.

Builders and realtors in Regina and Saskatoon are extremely upset at their ratings. Both cities have been marked for strong evidence of overvaluation and overbuilding. However, they question the degree to which these situations occur. For instance, if a particular number is established for overbuilt, are they one house over the mark or 1,000? No indication is given. If the market is considered overvalued, is it by five per cent or 25 per cent? Again, no clarification for builders, buyers or sellers.

According to the CMHC, these concerns used to exist in the Winnipeg market, but never to the extent of our neighbours to the west, and not to that degree anymore. Both the Winnipeg Realtors and Manitoba Home Builders Association had the same questions for the CMHC.

Of course, as projected, the local market established resale prices on its own, and local builders built according to demand, both current and projected.

Single-family detached new-home starts appear to be up this month and this year in Winnipeg and the surrounding area.

April’s good weather resulted in a 26 per cent increase in starts over last year in the CMA, which then resulted in a 12 per cent increase for the first four months of the year. The City of Winnipeg showed encouraging numbers, however not as much as the surrounding area.

Not surprisingly, while single-family detached starts showed a significant increase, multi-family starts exhibited a significant decline from last year.

In 2015, a concerted effort was made to compensate for years of shortages in the multi-family sector, so construction was brisk in this area, so much so that it greatly outdistanced the single family market. It has now settled back into a stable 50/50 split similar to the previous three years.

Mike Moore is president of the Manitoba Homes Builders’ Association

By Mike Moore
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Small tax increases have big impact on housing industry

Last week, the Newfoundland provincial government announced a two per cent increase in its harmonized sales tax (HST) as part of its budget. The HST is a harmonized sales tax that combines the PST and the GST. Most of Eastern Canada has blended the two taxes, while the west has kept them separate.

This two per cent increase is estimated to add more than $6,000 to the cost of a $300,000 home in St. John’s. This may prove to be particularly profound for first-time home buyers.

The HST increase will also impact the renovation industry in Newfoundland. In an already healthy underground market, the ability for the tax cheat to further distance themself from the legitimate tradesperson will become even greater. It is conservatively estimated at least half of all renovation projects in Atlantic Canada are not declared. This puts honest businesses and consumers at risk.

In April, 2013, the Manitoba provincial government increased the PST from seven per cent to eight per cent.

It may just be coincidence, but new home starts throughout the province fell by 17 per cent in 2014. They continued to decrease in 2015, albeit at a lesser rate. There were numerous other economic factors in play over the course of those 18 months from the time the PST increase was announced, but a drop in starts of that magnitude cannot be underplayed.

All indications are new home starts for 2016 should remain level before hopefully experiencing some form of growth in the following three years. A commitment by the incoming Progressive Conservative government to eliminate the one per cent PST increase within the next four years should further buoy the housing and renovation market and make purchasing a new home more affordable for Manitobans.

It’s never as simple as just one factor when looking at consumer costs. Affordability can only be enhanced when all cost factors are taken into consideration.

 

Mike Moore is president of the Manitoba Home Builders’ Association.

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