New Homes
New Homes
Cautious optimism prevails in housing market
The Canadian housing market is faring well, despite some numbers that may suggest otherwise.
In Alberta, housing starts are almost non-existent as renovation and restoration are the orders of the day. This trend will continue for a while until things are under control and then new-home starts will return. There's also been considerable uncertainty in Quebec due to a construction strike, again resulting in a slowdown in starts.
However, given that Canadian numbers in general are quite positive, this means that eight other provinces are performing at a level that counterbalances the two giants who may not be performing at peak levels just yet.
Canadian businesses are planning on increased hiring and employment, but have been slow off the mark this year. There are still domestic economic concerns, resulting in high part-time employment and a jobless rate still over seven per cent.
On a positive note, we seem to have better control over our personal finances. Growth in total household credit is running below historical averages and the ratio of household debt to disposable income is moving lower. With continuing current low interest rates, the debt-servicing burden remains very low.
Edmonton and Halifax have been leading the way in elevated building-permit activity this year, primarily in the multi-family sector. But permits also appear to be up slightly across Canada.
The ever-increasing condominium supply is creating temporary relief in the rental market. The national apartment vacancy rate sits at 2.7 per cent, with Calgary, Edmonton, St. John's, Toronto and Winnipeg well below the national average.
We continue to enjoy low inflation rates, well below the two-per-cent target called for earlier in the year. This will hopefully keep the pressure off the Bank of Canada to increase rates, which is good news for the new-home and renovation markets. New Bank of Canada Governor Stephen Poloz seems to have backed off a bit from a previous tightening of policy, preferring to keep rates unchanged while there is slack in the economy.
Given that the Canadian economy is not anticipated to reach full capacity until at least mid-2015, this translates into continued ideal conditions for the residential construction industry and market in Canada.
Mike Moore is president of the Manitoba Homebuilders' Association
New Homes
Boomers continue to influence housing market
Much has been written about baby-boomers -- their numbers, culture and economic impact. This generation has had, and will continue to have, a very significant impact on the housing market as well.
The largest annual increase in number of births occurred between 1945 and 1946 (15 per cent), which started the boom. The largest decrease was between 1964 and 1965 (-8 per cent), thereby ending the boom.
During the boom period, the average number of children per woman was 3.7, as opposed to under 1.7 now. It's therefore no surprise that this same generation has had and will continue to have a significant influence on housing demands.
In the 1970s, Canadian housing starts reached record numbers thanks to boomer buying patterns. Children of boomers, or echo-boomers, have been driving the market recently. Their impact continues to be felt today and will do so into the future.
Some believe that boomers may create a negative effect on the market as they move towards retirement. The argument is that this group will be moving exclusively into condos and retirement homes, thereby leaving a glut of empty homes behind.
But recent experiences here do not support this theory. Winnipeg has one of the lowest inventories of resale-home listings in Western Canada. We have less than half the number per capita in Calgary or Saskatoon. When you consider that more than 10,000 immigrants arrive in this city every year, it's clear that the market can sustain additional housing choices.
As well, not all retirees opt for downsizing or away from single-family detached housing either. Many stay in their current houses and choose to renovate in ways that help them adapt to certain age limitations. Others move from two-storey homes to bungalows -- their children may have moved out, but there needs to be room for visits from grandchildren.
Lifestyle also will continue to be a major factor in determining where boomers want to live. If they spend a portion of the year down south, they will want a home that does not require constant attention. Unlike older areas, walking paths are an important aspect of new community design, and having nearby recreation facilities is a key influencer in boomer home selection.
Baby-boomers are not fading away anytime soon. They will continue to have a strong influence on housing choices in Winnipeg and throughout Canada.
Mike Moore is president of the Manitoba Homebuilders' Association.
New Homes
Steady long-term increases in housing market spell success
A look at housing starts in Winnipeg for the first half of 2013 shows that we are on pace to match last year's solid performance.
Single-family detached starts are tracking almost 200 above 2012, while multi-family starts are up 71 from last year.
One could argue that the numbers are flat or one could argue that they are consistent. Either way, the market remains strong. This scenario plays out very similarly throughout the province.
The rest of Canada, to borrow from Charles Dickens, is a tale of two cities. Housing prices have been stable in Atlantic Canada and across the Prairies, but Vancouver has seen prices drop by about five per cent. This is due to the somewhat irrational splurge in Vancouver's condo market in that centre which led to Ottawa tightening mortgage rules. In Toronto, prices have levelled out after some recent dramatic increases.
As I've said many times before, numbers from these two cities can completely skew the Canadian picture. When you consider that Toronto is increasing in population by about 125,000 a year, you can see how overwhelming an impact the city has on an overall Canadian analysis. If Toronto and Vancouver decrease by five per cent, even though the rest of Canada remains level, the Canadian market will show a two- or three-per-cent decline.
However, no matter how one looks at these numbers, there is no evidence of a housing bubble in Canada. The over-building and price spirals that took place in the United States and some of Europe are not happening here. Nor is Canada experiencing the over-abundance of office-building and shopping-centre construction that accompanied the unwarranted housing starts in those areas. So, do not mistake our national two- to three-per-cent drop in prices in two urban centres with the massive numbers that occurred south of the border.
Canada's unemployment rate continues to be under control. Household net worth continues to soar to new heights. Immigration numbers also remain strong. Plain and simple: Canada is a great place to live.
Housing in the Canadian market remains a strong investment. Fixed-income investments such as GICs and bonds have recently produced low returns, and commodity stocks have also not done well. Even gold and oil are down from recent highs. For steady, long-term increases in value over time in a productive, safe and reliable market, it's tough to beat the performance of a Canadian home.
Mike Moore is president of the Manitoba Home Builders' Association.
New Homes
Builders want return to 30-year mortgage
Canadians have been extremely diligent in paying off their mortgages as quickly as possible, generally in about two-thirds of the original intended time period.
In a recent report by the Canadian Association of Accredited Mortgage Professionals (CAAMP) for mortgages completed from 2010 to 2013, it was found that the actual average amortization length was 11.7 years, compared to an original average term of 17.9 years.
Despite the propensity of Canadians to be cautious in their spending habits, over the same period of time the federal government has reduced amortization periods from 40 years to 25 years.
CAAMP argues that Ottawa's changes have caused a 15-per-cent decline in new-home starts, which in turn has had a negative impact on jobs and the economy. They also argue that the resale business has suffered from this reduced amortization period.
The association's primary concern is with the first-time buyer who, given all of the other costs associated with buying that first home, is having trouble getting into the market. Their recommendation is to allow first-time buyers a 30-year period if they financially qualify for 25.
Such a move would permit a better cash-flow situation for the buyers over the length of the payment period. As first-time buyers complete renovations, purchase furniture and appliances and cover other expenses associated with owning a first home, they could then concentrate on paying off their mortgages more quickly.
Surveys over the past two years have shown that 48 per cent of Canadians intend to buy a property in the next five years. New-home buyers may concentrate on amenities for the home over that initial mortgage period, so any change to rates after the current period concludes will not result in any financial hardship.
The Canadian Home Builders Association shares the concerns of CAAMP regarding the reduced amortization period. The CHBA feels that the proven performance of Canadians in managing debt, the superiority of our financial institutions in qualifying buyers and the traditionally low default rate of buyers justifies a review of the current amortization period with an eye towards reinstatement of the 30-year mortgage within the next few years.
Mike Moore is president of the Manitoba Home Builders' Association.
