The Government of Canada and the Government of Prince Edward Island today announced a joint investment to build new affordable housing on the Island. The bundled announcement represents a total of 21 affordable rental units for persons with disabilities and is made possible in part through a $775,000 investment from the Canada – P.E.I. Affordable Housing Agreement.

The Honourable Gail Shea, Minister of Fisheries and Oceans and Regional Minister for Prince Edward Island, on behalf of the Honourable Diane Finley, Minister of Human Resources and Skills Development and Minister Responsible for Canada Mortgage and Housing Corporation (CMHC), and the Honourable Robert Ghiz, Premier of Prince Edward Island, made the announcement.

“The Government of Canada is dedicated to helping those in need in Prince Edward Island through these tough economic times,” said Minister Shea. “Through projects like these, our government is providing safe affordable housing to many residents in our community while creating jobs and stimulating our economy.”

“We’re pleased to partner with the Federal Government on these significant initiatives for the City of Summerside and the community of Hunter River,” said Premier Robert Ghiz. “The Hunter River project is in line with the provincial government’s Rural Action Plan which supports the continued provision of essential services in rural communities.”

Today’s announcement recognized funding for three multi-unit affordable housing projects in Prince Edward Island. Scotcor Rentals Inc., Community Connections Inc. and HR Holdings Ltd. are developing the buildings at three separate locations in Summerside and Hunter River, near schools, businesses and community services.

The Canada – Prince Edward Island Affordable Housing Agreement involves an investment of $8.32 million in affordable housing in Prince Edward Island. To date, more than 155 units have been supported by the Agreement in rural and urban communities across P.E.I.

Potential buyers were asked to rank their top incentives for purchasing a first property. While home prices and interest rates took the number one and two rankings, respectively, the third most popular incentive was the First-Time Home Buyers’ Tax Credit. The recently introduced Home Renovation Tax Credit for 2009 was cited by 42 per cent of potential first-time buyers as either ‘very likely’ or ‘somewhat likely’ to impact their purchasing decision.

“When first time buyers stepped out of the market in the fourth quarter of 2008, at the height of the global recession, their absence was profoundly felt.  Without significant volumes of entry-level homes trading hands, the entire market limped through the winter months.   First time buyers are back in force this spring, and with them the beginnings of a market recovery.  While these consumers appreciate government incentives such as tax credits, greater RSP deduction limits and rebates on home renovations, it is markedly improved affordability that is proving to be the powerful drawing card,” said Phil Soper, president and chief executive of Royal LePage Real Estate Services. “Our survey demonstrates how important affordability factors such as interest rates and house prices are in stimulating demand.”

Across the country, potential first-time homebuyers agreed that affordability was their top consideration, however the survey also revealed differences amongst buyers in various regions of Canada. In provinces such as British Columbia where high housing prices have kept some buyers out of the market in recent years, 92 per cent of potential first-time buyers are now motivated by low interest rates and 96 per cent say lower home prices are likely to prompt them to buy.

In Atlantic Canada, where local economies have been resilient in the face of a worldwide recession and housing markets remain stable, 43 per cent of first-time buyers say they that job security is a factor in their decision to buy, while 84 per cent of buyers in British Columbia and Alberta said job security will influence them.

Atlantic Canadians were less motivated than other Canadians by declining interest rates, with only 72 per cent saying it will likely prompt a buying decision, compared to 86 per cent of Canadians overall. Buyers in Ontario and Quebec rated the Home Renovation Tax Credit as a bigger factor in their buying decision, compared to the Canadian average.

Mr Soper continued, “The significant response differences from region to region show how closely the residential real estate market is tied to broader economic trends and consumer confidence. Buying your first home is a major life decision, and people are more likely to purchase a home if they feel comfortable about the state of the economy and confident that they will have a job to support their new mortgage obligation.”

Top Incentives for First-Time Buyers across Canada
Potential first-time buyers were asked to choose their number one incentive for purchasing a first property. The table shows the percentage of respondents who selected each factor as their top incentive.

REGIONAL SUMMARIES

Atlantic
Overall activity in the housing market has remained steady in the Atlantic region with first-time homebuyers continuing to enter the market.  Low interest rates and recent government incentives, such as the Home Renovation Tax Credit, greater RSP deduction limits and the First-Time Homebuyer’s Tax Credit speak to affordability.  Buyers in this area are entering the market that would not have a few years ago, due to these influencing factors. Entry-level buyers in Newfoundland, Prince Edward Island, New Brunswick and Nova Scotia continue to search for detached bungalows, with the average price ranging from $157,000 in Charlottetown to $215,667 in Halifax during the first quarter of 2009.

Quebec
First-time buyers continue to pursue the dream of home ownership in Montreal, as the number of entrants to the housing market has remained relatively stable. Low interest rates are contributing to increased market entry with 41 per cent of first-time buyers suggesting this is the key incentive driving the purchase of their first property, followed by 13 per cent who suggest lower housing prices might influence their buying decision. With 47 per cent of new buyers in Quebec planning to settle in urban areas, buyers are planning to invest and live in their first home for ten or more years.  Fifty-six per cent of first-time buyers hope to purchase a property in the $150,000 to $300,000 price range.

Ontario
Encouraged by recent government initiatives, home ownership in Ontario is becoming a reality for an increasing number of younger purchasers.  Across Ontario, 36 per cent of potential first-time buyers are most likely to purchase property in an urban setting.  Condominiums continue to attract first-time buyers in the Greater Toronto Area with urban communities at accessible price points appealing most to market newcomers. In addition to affordability, location is a leading factor dictating condominium appeal. Neighbourhoods in Toronto’s east and west downtown core are popular with first-time buyers. In Ottawa, affordability continues to drive activity and most first-time buyers are opting to purchase in suburban areas where properties typically cost $50,000 to $75,000 less than in the city centre. Active first-time buyer markets include Orleans, Barrhaven and Kanata.

Manitoba & Saskatchewan
Thirty per cent of Prairie buyers planning on purchasing their first home in the next three years will choose a detached bungalow. The second-most popular choice for first-time buyers is condominiums at 21 per cent, followed by detached two-story homes at 15 per cent. In Winnipeg, up-and-coming neighbourhoods for first-time buyers include River Heights – which has traditionally been attractive for people entering the market – Fraser’s Grove and East / North Caldonin. With a good selection of older bungalows and two story homes, Broders Annex is the hottest neighbourhood for first-time buyers in Regina.

Alberta
Alberta’s urban centres continue to be popular with first-time buyers, who make up nearly a third of home sales in both Calgary and Edmonton. Condominiums and detached bungalows are the most popular choices for first-time buyers in Edmonton, where lower housing prices and low interest rates are the biggest incentives for buyers entering the market for the first time. Popular areas for new buyers include the suburbs, where a new condominium may be within budget, the university area, where many parents are buying for their kids, Allendale and McKernan. In Calgary, new buyers are most interested in inner city condominiums and detached houses in the suburbs, with many seeking new or renovated homes.

British Columbia
With home prices either flat or declining in many communities in British Columbia and with interest rates at record lows, first-time buyers are taking advantage of greater affordability, with female buyers leading the trend. Sixty per cent of the buyers getting into BC’s housing market for the first time are women. In British Columbia, 40 per cent of prospective first-time buyers intend to purchase a ‘fixer-upper’ while 80 per cent would take advantage of the Federal Government’s Home Renovation Tax Credit in making upgrades to a home. First-time buyers in Vancouver are favouring condominiums and townhomes, however an increasing number of entry-level buyers are finding affordable detached homes outside the city in the Fraser Valley suburbs.

The survey portion of the Royal LePage First-Time Homebuyers’ Report was conducted by Pollara from April 29, 2009 to May 8, 2009 among 474 first-time homebuyers in Canada. The online survey was conducted among a randomly-selected sample of 474 adult Canadians who are likely to purchase their first home in the next 3 years.  A probability sample of this size with a 100% response rate would have an estimated margin of error of +/- 4.5 %, 19 times out of 20. The data was statistically weighted to ensure the sample’s regional and age/gender composition reflects the actual Canadian population according to the most recent Census data.

http://torontorealestatetrends.com/royal-lepage-first-time-home-buyers-report/

reported by Moishe Alexander, CFC CEO

Moishe Alexander’s Review:

Housing Market Starting to Ease

Canada - Credit Rick Harris, Flickr Creative Commons

Housing starts: The multi-family sector will keep residential construction strong this year despite a slow down in single-detached activity.  Housing starts this year will remain above the 200,000 unit mark for a seventh consecutive year before dipping to 177,975 units in 2009.

Resales: Rising house prices in recent years have cooled resale activity. Sales of existing homes through the Multiple Listing Service®1 (MLS®) are forecast to fall 13.6 per cent this year compared to last year’s record level, then ease an additional 4.2 per cent in 2009.

Resale prices: Record levels of new listings this year have reduced the upward price pressures that prevailed over the previous six years. As sales of existing homes moderate and new listing continue to increase, the average MLS® price growth this year is expected to ease to 0.3 per cent and 0.1 per cent increase in 2009.

Saskatchewan: The natural resource sector will sustain economic growth in Saskatchewan. Net migration turned positive in 2007, after 22 years of negative net flows. The economy and shift in migration are key factors driving provincial housing starts in 2009.

British Columbia: Economic expansion and job creation will outperform the national average both this year and next. Despite the province’s growing population and job numbers, a well-supplied resale home market will offer more choice to home shoppers and moderate new home demand. By 2009, housing starts will have moved back toward their long term average.
National Housing Outlook:

In Detail

Moishe Alexander says Housing starts this year will remain above the 200,000 unit mark for a seventh consecutive year as slowing construction of single-detached homes is partially offset by growth in multiples. Housing starts will fall 7.1 per cent to 212,188 units in 2008, then dip an additional 16.1 per cent to 177,975 units in 2009. Even with the slow down, new home construction in 2008-2009 will remain strong in a historical context.
The new home market is moderating due to three key factors. First, strong house price growth over the last six years has tempered home ownership demand particularly in Western Canada. Second, the record high levels of new listings has increased the competition from the existing home market and reduced spillover demand.  Third, pent-up demand that built up during the 1990s is nearly exhausted and new home construction will become more aligned with long run demographic demand.
Housing starts will moderate in seven of the ten provinces in 2008, particularly in Western Canada. In Alberta, housing starts are expected to decline by a third compared to the previous year and be more in line with activity in 2001. Higher housing starts this year in Ontario, Saskatchewan and Newfoundland will partially offset the moderating pace in the other seven provinces.
As for 2009, national housing starts are forecast to dip below the 200,000 unit mark.

Higher prices moderate demand for single detached housing

Moishe Alexander says The rising house prices of previous years will moderate single-detached housing starts where activity is forecast to dip below the 100,000 unit mark. Single-detached starts will decrease 20.7 per cent to 94,263 units in 2008, then drop an additional 11.3 per cent to 83,600 units next year coming off of 10 years of high levels. For 2009, Alberta will post higher single-detached housing starts, increasing 3.4 per cent, while the remaining provinces will see singles move lower. In Saskatchewan, single starts are expected to fall 23.3 per cent next year, closer to the recent historical average. A slowdown in single-detached starts will also occur in Ontario, Prince Edward Island, Nova Scotia, Newfoundland, and New Brunswick. Modest decreases in single-detached activity are forecast in British Columbia, Manitoba, and Quebec in 2009.

Multi-family housing increases in popularity

Moishe Alexander says As house prices have moved higher, less expensive multi-family housing (row, semi-detached, and apartment units) has increased in popularity relative to single-detached housing.  This year and next will see multi-family housing starts out number singledetached activity for the first time since 1982. Furthermore, 2008 marks the fifth consecutive year in which multiple starts have surpassed the 100,000 unit mark. Multi-family housing starts are forecast to rise 7.8 per cent to 117,925 units this year, while they are forecast to drop by 20.0 per cent to 94,375 units in 2009. Apartment construction has been growing for 11 consecutive years since bottoming out at just over 23,000 starts in 1996. The resurgence in apartment construction has been pushing multiple starts higher in recent years. Apartment starts are expected to grow 18.1 per cent to 84,725 units in 2008 before declining 21.4 per cent to 66,550 units in 2009.

MLS® sales will ease

Moishe Alexander says Existing home sales activity will ease 13.6 per cent to 452,225 units this year and an additional 4.2 per cent to 433,375 units in 2009 as rising house prices cool home ownership demand.  While sales have been easing throughout the first half of this year, new listings have continued to rise into record territory. Thus, the strong seller’s market that has existed since 2002 have given way to balanced market conditions in most regions across Canada.

Resale markets move back into balance

Moishe Alexander says The strong sellers’ market conditions in recent years were reflected in strong upward pressure on the average price of homes, which increased in the 9 to 11 per cent range in each of the last six years. The first half of this year has seen an easing in MLS® sales and record high levels of new listings; this has brought balance back to the Canadian resale market.  More balanced markets combined with decreased sales activity in the provinces of British Columbia and Alberta, where the provincial average prices are significantly higher than the Canadian average, will cause growth in the average MLS® price to slow in 2008 and 2009.
As more new listings enter the resale market, and sales begin to ease, future price growth will be well below the price increases seen over the previous 6 years. For 2008 and 2009, the MLS® annual average price will rise 0.3 per cent to $306,500 in 2008 and 0.1 per cent to $306,700 in 2009.

Trends Impacting Housing:

Mortgage Rates

Moishe Alexander says The Bank of Canada has cut the Target for the Overnight Rate by a total of 225 basis points since December 2007, bringing the rate down to 2.25 per cent.
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 of 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.

Migration

Moishe Alexander says Net migration (immigration minus emigration) is forecast to increase by 9.2 per cent this year to just over 261,000 people, then remain essentially unchanged in 2009.  Historically high levels of migration will continue to support housing demand.  The majority of newly arrived immigrants initially settle in rental accommodations then move into home ownership over time. Net interprovincial migration to the West, coming at the expense of central Canada, will continue to boost housing demand in these provinces both this year and next.

Employment and Income

Moishe Alexander says Employment in Canada grew by nearly 194,000 people in the first three quarters of this year and was up 1.1 per cent on a year-over-year basis.  Although there is uncertainty, employment growth is expected to be in the 1.4 per cent to 1.8 per cent range this year and in the 0.5 per cent to 1.5 per cent range in 2009. Tight labour market conditions will continue to drive wages and incomes higher.

You can find the entire report in PDF format through the following link:
http://www.cmhc-schl.gc.ca/odpub/esub/61500/61500_2008_Q04.pdf

Moishe Alexander’s Review

Housing Market to Moderate in 2009

Charlottetown, PEI - Credit dmealiffe, Flickr

Moishe Alexander says starting in 2001 the Charlottetown housing market posted seven years of impressive growth that mirrored the national trend. Some of the key reasons for this increase in activity were low interest rates, low vacancy rates, steady employment growth, positive in-migration, and relatively low home prices. However, in 2005 rising vacancy rates and new home prices started to have a negative impact on the demand for new properties. The increase in multiple unit starts also created a situation where there was a temporary oversupply of rental units that was not fully absorbed until the end of 2007. However, one area where new construction has continued to remain strong is multiple units intended for homeownership. A key reason for the increased activity in this part of the market is the relative lower cost of semi-detached units compared to single-detached homes.  Despite the forecasted increase in semi-detached units over the next two years it is expected that the overall housing market will moderate over the forecast period.

Employment growth is forecast to post a slight improvement from the 2007 level and remain positive through the end of 2009. During the first three quarters of 2008 the increase in employment in Charlottetown can be attributed mainly to the public service and finance/insurance sectors. Employment in the construction sector started to decline in 2008 as numerous large non-residential projects are coming to an end. The net result of the increased employment levels is that the capital region is more attractive for job seekers when compared to other parts of the province. This fact has lead to the continued trend of urbanization in the province, as Islanders continue to move to the capital region from more rural parts of the province. Positive net-migration has been one of the main factors contributing to the sustained demand for housing in the capital region. The results from Statistics Canada’s 2006 Census revealed that the Charlottetown CA recorded a population gain of almost 1,400 people or 2.4 per cent, from 2001 to 2006. It also showed that within the CA, the Town of Stratford posted the largest population gain during this period, with an increase of over 700 people or 12 per cent.  This helps explain the substantial increase in new construction in the Stratford area and why the Town of 7,000 residents is able to rival the City itself for annual single-detached starts. In addition to the Census, Statistics Canada produces a series of data based on income tax returns (Tax Filer Data) that details the migration patterns by county on an annual basis. The results of this survey reveal that in any given year about 70 per cent of the people moving to the capital region are coming from elsewhere in the province. It also shows that of the remaining 30 per cent, the vast majority are coming from another major urban centre in Canada. These results seem to confirm the local theory that there are a number of ex-Islanders moving home to either retire or finish their careers.

Another benefit this trend provides is that many of the people returning home are coming from centres with much higher priced housing markets, which has resulted in some accumulating large amounts of equity. This also provides a partial explanation for the substantial increase in the new home price that has been recorded over the past five years. This trend of positive netmigration is expected to continue over the forecast period, and will continue to provide support for the local housing market.

While the local housing market has been performing well above average since 2001, it is expected to continue to moderate from the peak level of 2004. Despite the expectation that both in-migration and interest rates will remain favorable in 2008 and into 2009, these will not be enough to counter a slower growing local economy. As such it is expected that the construction of both single and multiple starts will not match the level set in 2007.

Rental Market:

Vacancy Rate to Decline in 2009

Moishe Alexander says the vacancy rate should post a moderate decline in 2008 due to a combination of steady demand for rental accommodations and a general decline in the construction of new rental units in the Charlottetown area. This will result in the vacancy rate inching down to 4.0 per cent in October of this year from 4.3 per cent during the same period last year. In October 2009, it is expected that the vacancy rate will decline once again to 3.8 per cent, due to further declines in the supply of new units. However, demand will continue to be supported by in-migration. Expect a larger than average rent increase in 2009 due to the nine per cent allowable rent increase for heated units, that was approved by the Island Regulatory and Appeals Commission in late 2008. Together these will result in average two-bedroom rents of $670 and $700 in 2008 and 2009 respectively.

Resale Market:

MLS® Sales Will Not Match the Peak Level Set in 2007

Moishe Alexander says the number of residential MLS® sales in the Charlottetown area is expected to decline over the next two years, due to the current economic environment. Since the start of the most recent economic cycle in 2000, the number of resale transactions in the Charlottetown area has only dropped below 500 sales once, and this is not expected to occur in either 2008 or 2009.  While the level of sales is expected to decline from last year’s level it is important to note that 2007 recorded the highest level of sales on record for the capital region.  Despite the aforementioned variables working against the local market, there are still aspects that will provide demand for existing properties. Employment growth is expected to remain positive over the forecast period, interest rates should remain low and the rising cost of new homes will help provide support for MLS® as homebuyers opt for existing homes.
Average price growth is expected to take a breather in 2008 after increasing almost $30,000 in the last two years alone. This appreciation in local real estate was partially the result of increased activity in the Stratford area were the homes tend to be newer and as a result more expensive. There was also increased demand for properties with water frontage or water views, which tend to command the highest prices in the province. Expect the average MLS® sales price to grow by a more modest four per cent in 2008 before slowing to one per cent growth in 2009.

New Home Construction Poised to Slow

Moishe Alexander says New home construction in the Charlottetown CA will slow in 2008 and again in 2009, due to a decline in most unit types. Semi-detached units, for the homeownership market will remain relatively strong over the next two years. During the first three quarters of 2008, semidetached starts maintained momentum from 2007, due mainly to their popularity with first-time buyers and this trend is expected to continue over the forecast period.  As first-time buyers show a clear preference for new homes compared to existing homes, and with the rising cost of a new singledetached homes, many first time buyers will look to the semidetached market.
Single starts, although slowing from the near record pace set in 2004, have continued to remain at above average levels. This decrease can be partially attributed to rising new home prices which have caused some potential buyers to opt for the resale market. The influx of people moving to the Island however should partially offset this and result in the construction of 275 new units in 2008 before slowing to 225 in 2009. Rental starts have been on the decline every year except one since reaching a 15 year high in 2002 with 143 units. This has been due in part to a rising vacancy rate which reached 4.3 per cent in 2007, from the almost record low of 1.8 per cent in 2001. With the vacancy rate expected to stay near the four per cent mark over the forecast period, expect to see developers continuing to focus on multiple starts for the homeownership market. As such, rental starts are expected to remain below the ten year average over the forecast period.

You can find the entire report in PDF format through the following link:
http://www.cmhc-schl.gc.ca/odpub/esub/64263/64263_2008_B02.pdf