Posted: February 24, 2009 at 7:18 pm | Tags: activity, Alexander, canadian funding corp, canadian funding corporation, cent, construction, demand, economy, employment, growth, home, Housing Market, market, Moishe, moishe alexander, North Monaghan, Ontario, Peterborough, Peterborough City, price, region, review, South Monaghan, Toronto, Township, US
February 24, 2009 — Moishe Alexander’s review on how the current world economy and Canadian economic turndown is affecting Peterborough Housing Market
Moishe Alexander’s Review
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
Posted: February 24, 2009 at 5:47 pm | Tags: Alexander, Area, canada, canadian funding corp, canadian funding corporation, cent, construction, economy, employment, fact, Gatineau, Housing Market, market, Moishe, moishe alexander, number, Ontario, Ottawa River, Quebec, region, review, sector, year
February 24, 2009 — Moishe Alexander’s review on how the current world economy and Canadian economic turndown is affecting Gatineau Housing Market
Moishe Alexander’s Review:
Pace of residential construction to moderate in 2009 after peaking in 2008
Gatineau Quebec - Credit Abdallahh, Flickr Creative Commons
Moishe Alexander says This year will end with more housing starts than in 2007 in the Gatineau area. Already, for the first nine months of the year, the CMHC survey results show that starts are up 2 per cent compared to the same period in 2007. This upward trend is expected to continue in the fourth quarter and bring the annual starts total to 3,000 units, for an increase of almost 8 per cent over 2007.
Moishe Alexander says Only in 2009 will construction begin to ease in the Gatineau area. In fact, there should be 400 fewer starts in 2009 than in 2008, which will bring the number of new units back down to 2,600. As Canada’s economic growth will be weaker than anticipated this year, consumers will be more inclined to save. However, the area’s economic structure, about 40 per cent of which is based on the public sector, and the strong job creation observed since the beginning of the year will maintain housing starts at high levels in the Gatineau area. In fact, their volume will be above the average for the last ten years.
Gatineau residents will be busy in 2009
Moishe Alexander says A closer look at the Quebec part of the Ottawa-Gatineau census metropolitan area (CMA) reveals that the economic fundamentals remain strong for the moment. In the past year, almost 10,000 jobs were created in the area, two thirds of them full-time. This is good news for the real estate market, as it is mainly these jobs that fuel potential demand. Another benefit for the housing market is that the employment gains were registered mostly in the public service, a stable and well-paying sector, as well as in the professional and technical services and trade sectors. Slight decreases were observed, however, in the communications, transportation and construction sectors. Overall, the good performance of the labour market brought down the unemployment rate to slightly less than 5 per cent in the last few months and raised the employment rate to 70.3 per cent in September—the best result in the province.
Moishe Alexander says The economic boom enjoyed by the National Capital Region will continue to stimulate real estate activity in 2009. Employment will grow, but at a slower pace, and will be driven in part by the implementation of the Quebec government’s infrastructure plan, under which the Outaouais region will receive $200 million for roadwork from now until the end of 2009. The health and social services sector will also generate employment, thanks to a 4.5-percent budget increase. In the federal public service, the slowdown of the Canadian economy could make it difficult for the government to balance the budget and cause it to stop in the wave of hiring that began in the area a year ago. The impact of such a measure would be limited, though, as retirements will continue to increase in this sector, leaving the door open to more hiring.
Moishe Alexander says On the external economic front, Gatineau will manage to escape the international turmoil. Given its limited economic trade with foreign countries, the area will be fairly immune to the global ups and downs. In fact, the Outaouais region only has about 70 exporting companies whose products represent just 1 per cent of the overall value of Quebec’s exports of goods. Even if the economic conditions south of the border are barely affecting the Gatineau regional economy, they will have effects on certain industrial sectors, including lumber and pulp and paper, which are currently going through a very difficult period. Finally, the recent weakening of the Canadian dollar will help certain exporting companies do relatively well.
Net migration still positive in the area
Moishe Alexander says Since 2001, the Gatineau region has recorded net positive migration. For the last five years, the annual average number of in-migrants has exceeded 11,000, while the annual average number of out-migrants has remained constant, at about 9,000. Net migration reached 2,203 people in 2007 and should remain close to 2,200 people in 2008 and 2009. Newcomers will come mainly from other regions of Quebec and from other countries. The Gatineau area will still attract people from other provinces, particularly Ontario, but will see as many individuals leave.
Moishe Alexander says The wave of Ontarians crossing the Ottawa River that was observed at the beginning of the decade has lost some momentum since 2006. Finally, good employment prospects in the area, compared to other Quebec regions, will keep attracting people to Gatineau in 2009. However, Quebecers settling in the National Capital Region are increasingly opting for the Ontario side of the CMA. In 2007, more than half of them chose the west bank of the Ottawa River. This trend is pushing down net migration, which would be otherwise higher in the Gatineau area.
Moishe Alexander says Positive net migration, combined with natural population growth, will add about 3,500 people to the Gatineau area population in 2009. Favourable labour market conditions and a new government policy to progressively increase the international immigration target for Quebec to 55,000 people by 2010 (from the current level of 49,000 people) will help keep net migration positive. Numerous advantages granted to parents of preschool-age children, such as parental leaves, child benefits and the new subsidized child care spaces that will be created over the next four years, will quicken the pace of family formation—families with their own housing needs.
Single-detached houses losing ground to multiple family housing
Moishe Alexander says The impact of the price increases in the last few years and the moderate growth of the Canadian economy will be greater for single-detached housing construction, especially in the upper-range segment. Buyers will be pickier; they will be looking for more affordable homes, such as semi-detached or row houses, or for existing properties. Tighter credit conditions will also reinforce this trend, with Canadian financial institutions now demonstrating more caution before granting credit to lenders. While multiple-family (semi-detached, row and condominium) housing starts will increase by 8 per cent this year, single-detached home starts will only rise by 1 per cent. Despite the expected decline, multiple housing starts will see their market share increase, from 46 per cent five years ago to over 67 per cent in 2009. The faster rise in the average price of single-detached houses caused demand to shift toward more affordable housing types. In 2007, the gap, at the time of absorption, between the average prices of singledetached and semi-detached houses was over $91,000, compared to $60,000 four years earlier. For firsttime buyers, the type of housing that they must choose is more obvious.
Moishe Alexander says As a result of this price gap, multiple housing will stay popular. Semidetached and row home building will remain stable next year, while apartment construction should moderate slightly. It is anticipated that the volume of new condominiums will remain significant in 2009, despite a decrease in the rental housing segment. In fact, over the past few years, the supply of rental housing for seniors has increased more rapidly than the population aged 75 years or older.
The vacancy rate for this type of housing is on the rise, making waiting lists a thing of the past. The anticipated completion of over 400 retirement housing units in 2009 will strengthen this trend and could lead to a temporary reduction in starts. As well, units are managing to be absorbed within less than eight months after completion. The strong demand for affordable homes will keep the semi-detached housing price curve above inflation. The price of single-detached houses will climb again in 2009, but at a rate similar to the Consumer Price Index (CPI).
Moishe Alexander says Since 2007, Aylmer has been the sector with the highest volume of starts, and the same will hold true in 2009. In 2001, Aylmer ranked last in terms of housing starts among the three large sectors of the municipality of Gatineau but has since been steadily gaining in popularity. Improvements made to the road network and the redevelopment of many lots along the new major thoroughfare (Des Allumettières Boulevard) are attracting buyers.
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/64287/64287_2008_B02.pdf
Posted: February 19, 2009 at 7:18 pm | Tags: Alexander, canada, canadian funding corp, canadian funding corporation, capital, cent, charlottetown, City, CMHC, construction, demand, employment, home, Housing Market, increase, market, Moishe, moishe alexander, pei, period, Prince Edward Island, region, Stratford, trend, Vacancy
February 8, 2009 — Moishe Alexander’s review on how the current world economy and Canadian economic turndown is affecting Charlottetown CA Housing Market
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