New Homes
New Homes
Looking for some shelter in flood-hit Calgary
I recently attended some national meetings of various homebuilder associations from across Canada in Calgary before and during the flood.
I went out a day early to join some friends for a round of golf at Stewart Creek in Canmore. It's a beautiful area -- tree-lined with a small creek running through the course, houses and condos nearby.
Not anymore. Stewart Creek became a raging river which wiped out the trees, the course, many of the houses and the highway connecting Canmore with the rest of the area. Fortunately, I missed the devastation by 24 hours. Those that live and work there will spend months trying to rebuild what they lost.
Our meetings were in downtown Calgary, across from the tower and about two blocks from city hall. Thursday morning, we were told we might have to alter our schedule somewhat, but that everything would be OK. By Thursday evening, it was obvious this was a more serious situation, especially when we began seeing footage from Canmore. We were told that anyone who didn't have to be downtown on Friday probably shouldn't be there.
I'm from Manitoba, I've seen floods. They happen all the time here, but not like this.
By 8 a.m. Friday the power was out at the hotel. Emergency vehicles were abundant in the area. By 10 a.m. we were told all hotels were being evacuated within the next two hours and only one bridge out of town was still open. City hall, the zoo and numerous parkades, underpasses and other buildings were all under water.
I managed to get out of downtown but couldn't get another hotel room elsewhere or a flight out of town for another 24 hours. During that period of circuitous cab rides, I saw some of the widespread effects of the flood on the city of Calgary. More than 100,000 residents had to leave their homes, every downtown hotel was emptied, businesses were left vacant and major thoroughfares, bridges and other exit routes were closed. Water was everywhere.
I just had to deal with a minor inconvenience -- 24 to 36 hours of wondering where I was going to stay. Tens of thousands of Alberta residents are wondering what is left of their homes and if and when they will be able to return and start the restoration process.
Food, clothing and shelter are three basic necessities. Let us never take the importance of shelter for granted.
Mike Moore is president of the Manitoba Home Builders' Association.
New Homes
Study finds home-building starts to decrease in 2013-14
Last week, we looked at some macroeconomic influencers on Canada’s housing industry courtesy of the Conference Board of Canada. This week, we will look at the results and trends across Canada.
In 2012, Canadian housing starts were at 215,000, performing slightly better than projected. This increase was due primarily to some large multi-family projects in major urban centres as the single family detached market remained steady but somewhat flat. Projections for 2013 and 2014 show a slight decline with a significant rebound the following three years.
To no one's surprise, the multi-family segment of the industry will be the driver of starts in Canada for the next few years. This is due primarily to the overwhelming influence of numbers from Toronto, Vancouver and Montreal where the multi-family segment dominates the market much moreso than on the Prairies or Atlantic Canada. Longer commute times, gas prices and changing lifestyles are all factors that influence this trend. In fact, national market share indicates a 60 per cent to 40 per cent split between multi and SFD going forward in contrast with the exact opposite 10 years ago. Manitoba traditionally experiences numbers showing a majority of single family detached starts.
Condo prices have skyrocketed in Toronto and Vancouver in the past decade while remaining much more reasonable here. Those two markets cannot help but experience a cooling-off period both in terms of starts and prices over the next couple of years.
Another factor that cannot be ignored is the federal government's recent decision to shorten the amortization period from 30 to 25 years. This has had a most significant effect on first-time buyers.
It is interesting to note nationally, the cost of construction is expected to slow due to a reduced pace of building, job cuts and a decline in the average wage rate. Those criteria are certainly not expected to materialize in Manitoba. As mentioned earlier, material prices will definitely be a factor.
In conclusion, there are many lessons to be learned from observing the residential construction industry in other parts of Canada. In some cases, we get a preview of what we are about to experience. In other cases, we are able to learn from others and avoid certain pitfalls. The most important factor is to never stop learning.
Mike Moore is president of the Manitoba Home Builders Association.
New Homes
Conference Board assesses new home construction
The Conference Board of Canada recently published a fascinating report on Canada's residential construction industry, looking at macroeconomic drivers, industry trends and financial performance.
The board also looked at the changing Canadian housing market and the impact of the multi-family sector, once fairly dormant but now a major driver for the housing industry from coast to coast. Although the research is national and large urban centres such as Toronto, Vancouver and Montreal significantly influence numbers, there are some very important messages for all parts of our country.
Even though the Canadian economy is only expected to realize modest growth, the Canadian consumer is in a stable position. Almost 200,000 new jobs were created last year, unemployment was its lowest in four years and consumer confidence is increasing. This confidence level is buoyed by job and income prospects, although there is still reluctance in certain parts of the country to make major purchases.
Concern has been expressed about debt levels, and the Canadian consumer has heard this message. Between 2005 and 2010, consumer credit (primarily non-asset based or credit cards) was increasing at a rate of 8.5 per cent a year. From 2010 through 2012, this has dropped to 3.2 per cent. As a result, the debt-service ratio has improved considerably from a high in early 2008 to a current low similar to the late 1990s.
All indications are that current low mortgage rates will remain intact for at least another year. Given the economic situation in Europe and other significant trading partners, inflation is not likely to be an external factor on the Canadian market.
The U.S. housing market appears to be rebounding nicely due to low mortgage rates and a declining inventory of foreclosed properties. At the height of the crash, there was a 12-month inventory of new homes available. That number has fallen to 4.5 months, essentially where it was at the turn of the century.
New home starts in the United States are at their highest in four years and likely to double by 2015. As American demand continues to grow, an impact may be felt in the Canadian market through higher cost of material goods.
Next week, we will look more closely at the Canadian housing market and how all these factors may influence it.
Mike Moore is president of the Manitoba Home Builders Association.
New Homes
Housing bubble nowhere in sight: minister
Last week, Finance Minister Jim Flaherty reviewed Canada's housing market and looked for any signs of doom and gloom.
To those who claim that Canada is on the verge of a housing bubble, the minister said that he doesn't see it. He may see areas of moderation but not disaster as was experienced recently in the U.S. Furthermore, he wished bad luck to any U.S. hedge funds betting on short-selling the Canadian market.
BMO Economics further substantiated this position by saying that the Canadian housing market is calming, not crashing. Given that some regions have experienced record highs in recent years, it is only natural to expect a slowing in the rate of appreciation.
BMO's research showed that 48 per cent of those surveyed intended to buy a property within the next five years, signalling a high confidence rate in the market.
There have been other indications of a slowdown, but no collapse. Retail sales have softened a bit and recent vehicle sales are running behind last year's levels. On one hand, employment numbers haven't gotten any better; on the other, they also haven't gotten any worse.
Inflation remains extremely low at 2 per cent or lower. The Canadian dollar has fallen a couple of points, hopefully bringing some renewed optimism to a manufacturing industry that has been hurt by the European economic crisis and problems in the U.S.
New home sales and starts projections have the Prairies as the strongest areas of Canada while B.C. appears to be the weakest. There appears to be increased pressure on the single family detached sector given a critical shortage of serviced land available. Infill housing seems to be an option for those large urban centres that have run out of new land supply.
One interesting observation is the growth in apartment starts in Manitoba. This may be the start of a trend or just an item that seems all the more dramatic given the historical lack of apartment availability and vacancies.
The renovation industry remains strong despite a slight decline across the country. The DIY market continues to grow in concert with the demand for larger projects that require professionals.
In conclusion, all indications are that the housing market will remain strong and stable for years to come. The naysayers who continue to predict doom and gloom will have to wait some more.
Mike Moore is president of the Manitoba Home Builders. Association.