New Homes
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.
New Homes
Late spring, but not too late to view show homes
It took a while, a very long while, but it appears that spring is finally here. And, who knows? Summer may be just around the corner.
We've all been trapped indoors for what seems like forever. The snow was piled over your head, it was cold and you didn't feel like going outside, no matter what the attraction. You may have missed the Spring Parade of Homes because you just couldn't motivate yourself.
Fear not, it isn't too late to visit those fantastic new homes and find the perfect place. Now that things have warmed up a bit, you can take full advantage of the opportunity to see new homes with their new ideas.
Almost all of the 124 show homes that were on display during the Spring Parade of Homes are still available for viewing. The only difference is that you don't have to put on boots, a down-filled jacket and a hat.
A leisurely weekend afternoon or one day after work is perfect for touring various new neighbourhoods to see what the finest builders in Canada have to offer. In fact, without the crowds, you have more time to talk to sales agents and learn more about the various amenities of the homes.
Another nice aspect of touring new homes now is that, with the snow gone, you can envision the full landscaping of the yard with potential flowers and plants that you prefer being placed in strategic locations.
You can purchase this style of home on another lot within the neighbourhood or somewhere else, completely done to your tastes. You may love the d©cor of the show home or want something entirely different. The choice is yours.
Of course, you might just be touring show homes to get the best ideas and concepts in products or design for a renovation project on your existing home. That's fine too, as the sales agent can tell you about the appliances, flooring, cabinets, countertops and various fixtures.
After collecting all of this information, you just may decide that you want it all.
So, now that we can actually venture outside comfortably, take full advantage of the opportunity to visit the new show homes in our most dynamic new neighbourhoods. You might just find your new home.
Mike Moore is president of the Manitoba Home Builders' Association.
