“An increase in residential housing starts combined with rising MLS® sales is expected in New Brunswick in 2010 after seeing reduced activity in both the new home and resale market in most provincial urban centres last year,” said Claude Gautreau, CMHC’s senior market analyst for New Brunswick. Housing activity during the first quarter of 2010 has yielded positive results as economic fundamentals in the province remained strong, highlighted by historically high employment levels. These conditions are expected to persist over the forecast period.

In New Brunswick’s three large urban areas – Saint John, Moncton and Fredericton – residential starts are expected to outpace last year’s totals. However, the anticipated increase in housing starts in 2010 and 2011 will be moderate. The existing home market is expected to follow the same general trend with steady price growth in both 2010 and 2011, combined with a moderate increase in sales.

As Canada’s national housing agency, CMHC draws on more than 60 years of experience to help Canadians access a variety of quality, environmentally sustainable and affordable homes. CMHC also provides reliable, impartial and up-to-date housing market reports, analysis and knowledge to support and assist consumers and the housing industry in making vital decisions.

New Brunswick Housing Starts

“An increase in residential housing starts combined with rising MLS® sales is expected in New Brunswick in 2010 after seeing reduced activity in both the new home and resale market in most provincial urban centres last year,” said Claude Gautreau, CMHC’s senior market analyst for New Brunswick. Housing activity during the first quarter of 2010 has yielded positive results as economic fundamentals in the province remained strong, highlighted by historically high employment levels. These conditions are expected to persist over the forecast period.

In New Brunswick’s three large urban areas – Saint John, Moncton and Fredericton – residential starts are expected to outpace last year’s totals. However, the anticipated increase in housing starts in 2010 and 2011 will be moderate. The existing home market is expected to follow the same general trend with steady price growth in both 2010 and 2011, combined with a moderate increase in sales.

As Canada’s national housing agency, CMHC draws on more than 60 years of experience to help Canadians access a variety of quality, environmentally sustainable and affordable homes. CMHC also provides reliable, impartial and up-to-date housing market reports, analysis and knowledge to support and assist consumers and the housing industry in making vital decisions.

Housing starts rebounded in the second half of 2009 and will strengthen in 2010, according to Canada Mortgage and Housing Corporation’s first quarter Housing Market Outlook, Canada Edition*.

Following a total of 149,081 units in 2009, housing starts are expected to be in the range of 152,000 to 189,300 units in 2010, with a point forecast of 171,250 units. In 2011, housing starts will be in the range of 156,400 to 205,600 units, with a point forecast of 175,150 units.

“Canadian housing markets will benefit from improving economic conditions and low mortgage rates,” said Bob Dugan, Chief Economist for CMHC. “As well, measures recently announced by the Government of Canada to support the long-term stability of Canada’s housing market will help moderate housing activity as some potential buyers will have to save a larger down payment or consider a less expensive home.”

Mr. Dugan also noted that the existing home market has shifted from a buyers’ market, at the beginning of 2009, to a sellers’ market. The relative lack of new listings for existing homes has pushed some of the demand into the new home market, which helps explain the forecast for higher housing starts activity in 2010.

The strong pace of MLS®1 sales seen in the second to fourth quarters of 2009 reflects, in part, activity that was delayed in the previous two quarters. The pace is not likely to be sustained as pent-up demand is exhausted and financing costs increase with anticipated higher interest rates later in 2010. As a result, existing home sales will be in the range of 455,350 to 509,900 units in 2010, with a point forecast of 486,700 units, and then move slightly lower in 2011 to be in the range of 426,300 to 494,600 units, with a point forecast of 469,950 units.

With an improved balance between demand and supply, the average MLS® price is expected to remain close to the average in the last quarter of 2009, for most of 2010, and then rise modestly in 2011.

Economic conditions have substantially improved since the beginning of the year, as the financial crisis is largely over. Governments’ expansionary monetary and fiscal policies allowed for the massive injection of capital that stabilized the financial markets and revitalized the economies.

In Quebec, the economy is showing signs of an imminent recovery, and GDP is expected to grow in 2010. Employment, which tends to start growing again with some lag behind the economic cycle, should pick up slowly during 2010. The number of jobs should fall by 1.3 per cent this year, which should drive up the unemployment rate to 9.5 per cent in the Montréal CMA. After having increased rapidly since the beginning of the year, the unemployment rate has been rising more slowly in the last few months, as employment has stabilized to a certain extent. Even if the worst of the job losses is now over, the labour market will remain anemic, with a small gain in jobs (+0.4 per cent) next year, which will limit income growth and housing demand. In 2010, the unemployment rate should reach 9.6 per cent.

During the period from September 2008 to September 2009, employment in the Montréal CMA declined by 1.1 per cent from the previous twelve months, as around 21,300 jobs were eliminated. The losses were concentrated in full-time jobs
( 1.3 per cent), as part-time jobs rose slightly (+0.1 per cent). As well, the job cuts particularly affected young people aged from 15 to 24 years ( 3.5 per cent) and also people aged from 25 to 44 years ( 1.3 per cent).
The financial sector has been the hardest hit by the job losses for the past year. In the midst of the crisis that shook the financial markets, the companies in this sector cut their workforces by more than 10 per cent in one year. In all, about 15,000 jobs were eliminated in this sector. The improvement of the situation on the financial markets now seems to have stemmed the hemorrhage of jobs in this sector.
A more significant sector in terms of number of jobs, trade–and more particularly retail trade–also registered considerable job losses in the last twelve months ( 7 per cent). In fact, more than 16,000 jobs were eliminated in this sector, but the situation should stabilize over the coming quarters, as economic conditions improve.

After having declined for four consecutive years, employment in the manufacturing sector seems to have stabilized in recent quarters but, with the strong Canadian dollar, the recovery in this sector remains uncertain. The slowdown of the Montréal housing market at the beginning of 2009 sharply affected employment in the construction sector, which had posted two years of solid growth. The massive investments in infrastructure will support employment in this sector in the Montréal area in 2010.

Despite a slight slowdown, activity will remain solid on the Trois-Rivières census metropolitan area (CMA) residential real estate market in 2009 and 2010. In fact, transaction volumes will stay high on the resale market, as will housing starts, which will remain above the average levels for the last few years. The rental market, for its part, will continue to post a relatively low vacancy rate. Even though the job market will be sluggish, financing conditions, which will still be very favourable, combined with strong migration, will energize the market. Job market to stay sluggish
The economy in Trois-Rivières, like in several other areas around the province, was affected by the global economic crisis that has been prevailing for over a year now. Already, the regional economy had suffered from the surging loonie, which had severely tested manufacturing companies by undermining their competitiveness on the market. The ensuing decline in demand, as a direct result of the economic slowdown, only made things worse. Consequently, job losses have now been accumulating for four quarters in the Trois-Rivières CMA (with almost all the losses having been full-time positions), in pace with the announcements of layoffs and plant closings, which have increased. On the other hand, the area will benefit from the vitality of other sectors of the regional economy, including the non-residential

Property experts say first-time buyers and Bank of Canada rate cuts have helped restore stability to a market that slumped from late 2008 to early this year, when the worst leg of the global financial crisis battered consumer confidence.

“We should be less fearful than we were six months ago, but I don’t think we should be exuberant yet. The resale markets in Canada are very strong. May numbers were pretty good, and June numbers will be even better,” said Will Dunning, an economic consultant who specializes in the housing market.

“But by July and into the fall there will be an offset of considerably slower activity. I don’t think it’s likely to go off a cliff. It’ll depend on what happens in employment and the broader economy, and how that affects confidence.”

Recent data suggest Canada’s residential property market, which weathered the financial crisis much better than its hard-hit U.S. counterpart, has been thawing for several months.

The latest Canadian Real Estate Association data shows May resale home prices rose 0.4 per cent to $319,757, topping the previous record set a year earlier. It was the first year-over-year increase since May last year. And sales activity climbed for a fourth straight month.

The industry group, which represents more than 97,000 real estate brokers and agents, also cut its forecast for a drop in home prices this year and said it expected sales activity to trend higher.

Meanwhile, Canada Mortgage and Housing Corp., the national housing agency, forecast in its second-quarter outlook that new home construction is expected to decline to 141,900 units in 2009 but rebound next year.

“ Stability is something you can’t overemphasize”

Still, no one predicts the residential property market is headed back to the heady times seen between 2002 and 2007, when prices surged and outpaced income growth. In some cities, such as Vancouver and Calgary, home prices doubled and are now going through a sharp correction.

A “stable but unremarkable” period for the real estate market is expected this year, said Philip Soper, chief executive officer of Brookfield Real Estate Services, an arm of Canadian property giant Brookfield Properties Corp that holds real estate broker brand Royal LePage.

“Stability is something you can’t overemphasize in terms of its importance for the housing market right now.”

Unless the global financial system succumbs to another crisis, analysts expect the Canadian home market is likely to stabilize further.

Activity from first-time buyers appears to be providing support because of stimulative measures by the federal government that allow these buyers to defray closing costs and withdraw more from retirement funds.

The Bank of Canada has also pledged to keep interest rates near zero until mid-2010, which could underpin confidence.

But the economy is still on shaky ground, contracting for the ninth straight month in April. And the unemployment rate spiked to an 11-year high in May, boosted by layoffs in the factories of Ontario.

Experts warn that further job losses in pockets of Canada’s export-oriented economy could slow the momentum that has been gathering in the housing sector.

“We don’t expect the recession to end until the fall. It’s clear that the spring fling in housing markets, this remarkable surge in resales and prices, has been driven by record low mortgage rates,” said Sal Guatieri, senior economist at BMO Capital Markets.

These record low rates, whether variable or fixed, had increased affordability for many buyers. But weakness in the bond market, caused in part by reduced investor demand for safe-haven assets, has pushed mortgage rates higher.

The posted rate on a five-year mortgage at Royal Bank of Canada, the country’s largest lender, has risen to 5.85 per cent from 5.25 per cent in April.

Brookfield’s Mr. Soper has been telling his management team to prepare for softness in the housing market in the second half.

“The advice I have been giving … is to accept the recovery this spring with humility, to continue to plan for a difficult second half of the year although the comparables are going to be positive simply because the second half of 2008 was so poor,” he said in an interview.

“But at least we have a stable market and stable prices, which is something that you need to encourage consumers to trade.”

http://www.theglobeandmail.com/report-on-business/real-estate-recovery-expected-to-be-tepid/article1204023/

reviewed by Moishe Alexander, CFC CEO

All the Canadian newspapers are aflutter because the Canadian Real Estate Association released their monthly report today, with positive news. I think people tend to get over excited about these releases whether positive or negative, but, here is the gist of it.

Resales of existing Canadian homes showed continuing improvements in in May, with both the number of transactions and the national average price on the rise. The national average sale price in May hit the highest monthly level on record, at $319,757, which was up four-tenths of a percentage point from the previous record in May 2008.

The real-estate association said the dollar value of sales through its members reached $11.4 billion in May, up 10 per cent from the previous month and more than 50 per cent above the low of $7.5 billion in January.

The association said the the rebound in activity was led in some of the most expensive local markets in Canada and that had the effect up pushing the national average price upward.

Seasonally adjusted sales were up on a monthly basis in about 70% of local markets. Monthly activity gains in Toronto (9%), Calgary (25%), Montreal (10%), Vancouver (8%), and Edmonton (12%) contributed most to the overall increase in monthly activity.

“Inventory levels are still high in many markets, but fewer new listings and rising sales activity suggests that the selection of homes available for sale may shrink as the year progresses. The supply of homes up for sale needs to be drawn down further before average price increases become more widespread among local markets,” said CREA economist Gregory Klump.

http://www.edmontonrealestateblog.com/my_weblog/2009/06/edmonton-brings-up-the-national-average.html

Moishe Alexander’s Review

Single-Detached Starts Remain Resilient in 2008

Moishe Alexander says Single-detached starts should remain relatively flat over the next two years as gains in Kingston City are expected to offset weaknesses in South Frontenac Township. Therefore, construction for this type of dwelling is forecast to reach 570 units in 2008, close to the 600 units recorded in 2007. Year-to-date single starts have exceeded last year’s levels. But in the months ahead, construction activity will moderate amid growing concerns about the economic and job market conditions in Canada.

Next year, however, single-detached starts will ease further by nine per cent to 520 units, as builders react to rising new home inventories and sustained competition from the existing homes market. The recent surge in new listings provides more choice in the market-place and will snare many first-time home buyers away from the new homes market.  Nevertheless, the high end and custom design single-detached homes will maintain market shares as some baby boomers look to build their dream homes. This will help sustain single starts in the coming years.

New Semi-Detached and Row Units Gaining Ground

Moishe Alexander says While single-detached homes are most popular among home buyers in Kingston, many first-time buyers will more likely have to settle for semidetached, since the average prices of new single-detached homes across Kingston appear beyond the reach of less affluent households. As a result, semi-detached starts are predicted to reach 40 units this year over the 16 units posted in 2007. In 2009, however, starts for this type of dwellings are anticipated to decline slightly as the economy slowly recovers.

Meanwhile, row starts will retreat to 25 units in 2008 before climbing to 60 units in 2009. In general, slow economic and job market activity will translate into a shift in consumer demand away from single detached homes to less expensive townhomes and semis.

Expect Low Apartment Starts to Pull Down Total Starts

Moishe Alexander says New apartment starts are expected to fall this year and next. Construction has been inactive year-to-date as the market continues to absorb the high influx of new rental units that were started over the past two years. In addition, weak youth employment growth, low international migration combined with high vacancy rate point toward a decrease in new apartment starts in the next two years.

Although gradual and in line with demographic changes, the decline in apartment starts will prompt total housing starts to moderate from 880 units in 2007 to 635 in 2008 and further to 610 in 2009. In addition, negative net migration in the Kingston CMA is predicted as high youth unemployment encourages many young adults to leave the Kingston area for the bigger cities.  According to its recent publication, Statistics Canada reported that 9.1 per cent and 8.6 per cent of Kingstonians left the Kingston CMA for Montreal and Edmonton respectively – between 2001 and 2006.

Resale Market

Resale Transactions to Mirror Record Set in 2006

Moishe Alexander says Sales of existing homes through the Multiple Listing Service® (MLS) are forecast to ease by 3.9 per cent this year compared to last year’s record level, and then ease an additional 0.8 per cent in 2009.

Despite the moderation in MLS sales, our resale forecast for the next two years suggest more activity than the level recorded in 2006 – which was considered a strong year for existing home market activity. In addition to healthy full-time employment growth, the strong real income gains – as measured by the average weekly earnings – will help sustain the resale market.

More Balanced Market Conditions Will Slow Price Growth

Moishe Alexander says There has been strong price growth in the resale market in recent years, especially during the 2003 to 2005 period when the market saw a double digit increase. With moderating sales activity coupled with an increasing supply of new listings, price increases will not be as brisk in 2009. However, average MLS price increase will remain strong at 4.6 per cent in 2008 before dropping to 1.9 per cent in 2009.

As a leading predictor of future average MLS price increases, the current sales-to-new listings ratio is pointing toward a more balanced market condition in the entire Kingston CMA. Since 2000 the salesto-new listings ratio has been held firmly in the sellers’ territory. However, toward the end of 2008 we anticipate new listings to reach a record high of 6985 units, pulling down the sales-to-new listings ratio to 0.51 from 0.56 in 2007.

A drop in the ratio generally means a slow average MLS price increase ahead – which is in conformity with our forecast for 2008 and 2009.

The Economy

Employment Growth Is Brighter in 2009

Moishe Alexander says Employment growth in Kingston is forecast to slow to 0.6 per cent in 2008, as further manufacturing and accommodation job losses are combined with declining retail trade sector activity. However, the em-ployment outlook is slightly brighter in 2009 for two main reasons. First, both the health care and public administration sectors will boost overall labour market activity and, second, the manufacturing sector will finally begin a gradual recovery due to strengthening U.S. dollar visà-vis the Canadian dollar. The number of people employed in 2009 is expected to increase by 0.9 per cent.

A diversified economy and the expected decline in the Canadian dollar will help protect Kingston from a deep economic slowdown.  Continued economic growth will translate into job gains for Kingstonians and relatively low unemployment rate. Due to the aging population, a shortage of skilled labour in key industries will put upward pressure on wages. The resulting wage gains coupled with declining mortgage rates should have a positive impact on the demand for both existing and new homes.

Construction Sector Growth Solid

Moishe Alexander says Construction sector employment is expected to finish 2008 with positive job gains of 13 per cent. However, growth will be held back in 2009 almost entirely from the residential sector, as the housing market cools off.

Moreover, non-residential investment remains strong due in part to several ongoing projects. For instance, the phase 1 of the $230 million Queen’s Centre construction is still underway and is scheduled for completion in September of 2009.  Notwithstanding the gains from nonresidential activity, the construction sector suffered a setback as a result of the decision to postpone the opening of the Ethanol plant in Kingston later this year. The West Kingston Ethanol plant is not anticipated to open but until the spring of 2010.

Mortgage Rates

Moishe Alexander says Mortgage rates are expected to be relatively stable throughout the last quarter of this year, remaining within 25-50 basis points of their current levels. Posted mortgage rates will decrease slightly in the first half of 2009 as the cost of credit to financial institutions eases. Rising bond yields, however, will nudge mortgage rates marginally higher in the latter half 2009. For the last quarter of 2008 and in 2009, the one year posted mortgage rate will be in the 6.00-6.75 per cent range, while three and five year posted mortgage rates are forecast to be in the 6.50-7.25 per cent range.

You can find the entire report in PDF format through the following link:
http://www.cmhc-schl.gc.ca/odpub/esub/64335/64335_2008_B02.pdf

New Home Market

Slowdown of New Housing Market

Peterborough - Credit Bobolink, Flickr Creative Commons

Moishe Alexander says Activity in the new housing market in Peterborough will moderate over the remainder of 2008 and in 2009. This pullback will be due to past price gains, an abundant selection of homes for sale in the resale market, and to some extent the economic slowdown. Though Peterborough’s economy is not as export-dependent as other regions, it will be somewhat affected by the strong Canadian dollar and trends in the U.S. economy. Starts will total 430 units by the end of 2008 and 410 units in 2009. Single-detached homes will continue being the pillar of home construction, with dominant shares of 74 percent and 76 percent over 2008 and 2009 respectively. Meanwhile, rowhouses will account for 14 per cent of total starts and will register total of 65 units and 56 units in 2008 and 2009 respectively. Apartment construction will remain stable at 40 units for both 2008 and 2009.  While the Peterborough Metropolitan Area (CMA) covers the regions of Peterborough City, Otonabee-South Monaghan Township, Cavan-Millbrook-North Monaghan Township, Douro-Dummer Township and Smith-Ennismore-Lakefield Township, Peterborough City accounts more than two thirds of new construction in the area.

Moishe Alexander says The average price of single-detached homes increased rapidly in the past several years, pulled up by the construction of more high value homes. In 2009, the average price of a newly absorbed single-detached home is expected to rise to $362,000, 2 per cent up from an estimated $355,000 in 2008.

Resale Market

Resale Market Cooling Off

Moishe Alexander says Sales of existing housing are expected to moderate by 5 per cent in 2008, to 2,750 units and by another 7 per cent in 2009. Demand will soften as employment growth slows.
Sales will decrease because fewer renters will make the move to ownership. The average price has increased quite strongly over the last few years. At the same time, part-time employment has increased faster than full-time job creation.

Moishe Alexander says This has made the decision to rent more attractive than home ownership for some households. With fewer renters becoming owners, the vacancy rate will decrease and rental costs will inch higher over the next two years.

Moishe Alexander says The strong increase in prices has drawn more sellers to the market.  As a result, new listings will reach 5,300 units in 2008 from 5,085 in 2007, before declining to 5,200 units in 2009. The decrease in sales of existing homes and the increase in the listings will push the sales to new listings ratio downward, indicating balance between demand and supply in this market.

Moishe Alexander says Overall, despite the slowdown in activity, the housing market in this region is still healthy, in part, because housing prices in Peterborough continue to be much lower than in surrounding markets. The price differential continues to attract people to the region.

Economic Trends

Healthy Local Economic Conditions

Moishe Alexander says The majority of the population growth in Peterborough is occurring in two age groups: 20-24 and 45-64.  In years to come growth in these significant age cohorts will continue to bolster housing demand as these two groups are associated with firsttime or repeat home buying.
Moishe Alexander says The Peterborough region is expected to benefit from several projects financed by the public and private sectors. The projects will have a positive impact on job growth, especially in the construction and service sectors. As the biggest employer in the region with more than 2000 employees, the health centre, which moved to a new facility in June 2008, is expected to increase its number of workers over the next two years. Furthermore, Peterborough will benefit from the financial contribution from three levels of the government to help with different projects for infrastructure needs and businesses growth, including projects such as the proposed rail transportation link from Peterborough to Toronto.  Nearly 80 per cent of employment in Peterborough is in the services sector. The services sector will continue to expand, taking advantage of the high investment in support of the aging population and the increased hiring of mature part-time employees. Yet, this strength in the services industry will not completely offset changes in full-time employment in the goods-producing sectors.  Therefore, employment is expected to grow modestly by 0.3 per cent to 56,800 and by 0.5 per cent to 57,100 in 2008 and 2009 respectively.

Mortgage Rates

Moishe Alexander says Mortgage rates are expected to be relatively stable throughout the last quarter of this year, remaining within 25-50 basis points of their current levels. Posted mortgage rates will decrease slightly in the first half of 2009 as the cost of credit to financial institutions eases. Rising bond yields, however, will nudge mortgage rates marginally higher in the latter half 2009. For the last quarter of 2008 and in 2009, the one year posted mortgage rate will be in the 6.00-6.75 per cent range, while three and five year posted mortgage rates are forecast to be in the 6.50-7.25 per cent range.

You can find the entire report in PDF format through the following link:
http://www.cmhc-schl.gc.ca/odpub/esub/65716/65716_2008_B02.pdf

New Brunswick Economy to Face Short-term Challenges, Positive Long-term Prospects

Moncton - Credit stu_pendousmat, Flickr Credit Commons

Moishe Alexander says The New Brunswick economy has been marked by limited growth in 2008. Traditionally, the province has relied heavily on natural resources, and particularly the forestry sector, for economic development. The higher cost of New Brunswick products, due in part to higher energy prices, has led to softening demand for paper and other forest products, a former mainstay of the New Brunswick economy. Manufacturing in other sectors, as well as the transportation industry, have equally been subject to unfavorable conditions. However, the recent lower dollar will help offset some of the issues that the higher dollar created for manufacturing in the province.
Despite these challenges, the long term outlook for the province is positive. Capital investment has helped bolster the economy by offsetting the restraining effect of reduced exports. Multi-billion dollar projects, such as the expansion of the PotashCorp mining operation in Sussex and the refurbishment of the region’s only nuclear power generation station in the Saint John area, have sparked economic activity in Southern New Brunswick. Although the economic impact of current projects is significant, future projects planned for the region stand to make an even greater impact if approved. These include the construction of a new oil refinery and a second nuclear generation station in the Saint John area. Due to the number of skilled workers needed to complete projects of this magnitude, a positive announcement on one or both proposed projects would generate significant economic spin-offs throughout the province, bolstering in-migration and providing an overall boost to the New Brunswick economy.

The New Brunswick housing market posted strong results during the first three quarters of 2008 and it is expected to remain strong in historical terms in the fourth quarter. Despite softer economic growth in 2008, there was positive net-migration in both Moncton and Fredericton, as each centre benefited from solid service, retail and construction sectors. Inmigration to Saint John will remain muted for the remainder of this year as a formal announcement on the refinery project is not expected until 2009, minimizing any impact on the housing market in 2008. Plans for the second nuclear reactor at Point Lepreau are in the early stages and will have minimal effect on the housing market over the forecast period. As a result of migration to Western Canada, a smaller labour force in some specific trades continued to challenge the local construction industry, a strong contributor to New Brunswick’s robust employment numbers.  Expect limited GDP growth in New Brunswick in both 2008 and 2009.  Although the residential housing market will remain strong in historical terms, provincial housing starts are expected to decline to 4,200 units in 2008, with a further drop to 3,625 units in 2009.

Mortgage Rates

Moishe Alexander says Mortgage rates are expected to be relatively stable throughout the last quarter of this year, remaining within 25-50 basis points of their current levels. Posted mortgage rates will decrease slightly in the first half of 2009 as the cost of credit to financial institutions eases. Rising bond yields, however, will nudge mortgage rates marginally higher in the latter half 2009. For the last quarter of 2008 and in 2009, the one year posted mortgage rate will be in the 6.00-6.75 per cent range, while three and five year posted mortgage rates are forecast to be in the 6.50-7.25 per cent range.

Residential Construction to Remain Strong in Historical Terms

Moishe Alexander says Of the Province’s three major urban centres, year-over-year growth in new construction has been strongest in Saint John. To the end of the third quarter, total residential starts in the area exceeded last year’s pace by over 30 per cent, with both single and multiple starts benefiting from increased activity.

Speculation has been a driving force as economic development has blossomed in the port city in anticipation of the large scale expansion of the region’s energy sector. Despite fuelling activity in the local housing market, projects currently being considered for future development still face some uncertainty due to the enormous amount of resources necessary for completion. Meanwhile, current projects, such as the $1.4 billion refurbishment of the existing nuclear reactor at Point Lepreau, and the $1.7 billion expansion of the PotashCorp mining operation in Sussex, have helped foster increased economic activity. Consequently, housing demand over the forecast period is expected to remain strong in historical terms. For 2008, expect both single and multiple starts to exceed last year’s total with 490 and 360 units respectively. Expect a moderate decline in single starts to 440 units in 2009 while multiple starts will drop to 330 units.
Residential housing starts in Greater Moncton have remained high in historical terms in 2008 despite a decline in both single and multiple starts. The latter, in particular, have been bolstered by increased semidetached starts, the starter home of choice in Greater Moncton.
Economic development and strong employment in the area continued to fuel in-migration in 2008. Expect semi-detached starts to surpass last year’s record setting total, though this will be combined with fewer apartment starts. Nevertheless, multiple starts will remain at historically high levels with 760 units in 2008, followed by a subsequent drop to 670 units in 2009. And, although single starts will remain strong in historical terms, expect them to decline to 640 units this year, with a further drop to 600 in 2009.
After rebounding last year, single starts in Fredericton maintained a positive trend this year to the end of September. The local economy, bolstered by strong service and retail sectors, continues to foster job creation, helping to fuel in-migration and, subsequently, housing demand.  As a result, expect single starts to remain strong with 480 starts anticipated in 2008, followed by a modest drop to 430 units in 2009.  As for multiple starts, they were down during the first three quarters of 2008. Following reduced activity in 2007, expect a continued mild decrease in multiple starts to 200 units in 2008, to be followed by a small decline to 160 units in 2009.

Resale Market Resilient in Large Urban Centres

Moishe Alexander says After a strong start in 2008, MLS® sales in Greater Moncton have been stable with a minimal year-to-date decline of only 1.8 per cent to the end of the third quarter. Although sales have not faltered, a record number of new listings have provided ample selection for potential home buyers. Consequently, slower price growth has limited the year-over-year increase during the first nine months of the year to less than three per cent. With the current level of economic uncertainty, home buyers are expected to become increasingly conservative in both 2008 and 2009.  Expect sales to decline to 2,750 units in 2008, with a subsequent drop to 2,600 units in 2009. However, the average sale price is expected to maintain an upward trend, rising to $147,000 in 2008, followed by a further increase to $151,500 in 2009.
Existing home sales in Saint John have also maintained a positive trend in 2008. However, the year-overyear increase has been minimal, remaining under one per cent to the end of the third quarter. In contrast, the average sale price has experienced a significant increase through the first nine months of the year. As a result, Saint John has the distinction of having the highest average MLS® price in the province.  Enthusiasm regarding current and upcoming energy projects has contributed to the strong performance of the local resale market in 2008. The full impact will not be felt, though, until pending announcements, expected in 2009, become reality. Expect the resale market to remain strong in historical terms with 2,150 and 2,000 sales in 2008 and 2009, respectively.
Furthermore, the average sale price is expected to rise to $157,000 in 2008, with a subsequent increase to $163,000 in 2009.

In the Fredericton area, existing home sales have been below last year’s pace for the first three quarters of the year. As of the end of the third quarter, MLS® sales in Fredericton had declined by approximately 8.4 per cent compared to the same period last year. This was the largest decline among New Brunswick’s three large urban centres. Meanwhile, year-over year price growth was 7.6 per cent.  Despite signs of economic uncertainty, the diversified nature of the Fredericton economy continues to support strong employment numbers and should provide some stability over the forecast period. For 2008 and 2009, expect unit sales to reach 2,250 and 2,125 units respectively, with the average sale price climbing to $151,500 in 2008, and $158,000 in 2009.

Vacancy Rates to Decline in Some Provincial Centres

Moishe Alexander says Last year, the vacancy rate in Saint John and Moncton declined by 1.6 and 1.3 percentage points respectively. Meanwhile, in Fredericton, the local vacancy rate rose to 6.5 per cent last year -the highest vacancy rate among the province’s three major urban areas.  With the rapid development of the energy sector, increased in-migration will apply downward pressure on the vacancy rate in Saint John.  Expect the vacancy rate to decline to 4.8 per cent in 2008 and to 4.5 per cent in 2009. Following a large increase last year due to an increase in supply, the vacancy rate in Fredericton will decrease to 6.0 per cent in 2008, followed by another moderate decline to 5.5 per cent in 2009. In historical terms, a relatively large number of apartment starts were recorded in Greater Moncton in the last two years. As a result, an increase in the vacancy rate is anticipated in 2008, up to 4.8 per cent from last year’s 4.3 per cent. This will be followed by a subsequent increase to 5.0 per cent in 2009. In all three of the province’s three major urban areas, expect the average rent increase for a two-bedroom unit to be between two and three percent in both 2008 and 2009.

You can find the entire report in PDF format through the following link:
http://www.cmhc-schl.gc.ca/odpub/esub/64275/64275_2008_B02.pdf