The surge in Metro Vancouver homes sales the past 3 months had resulted in reversal of the price decline since the middle of 2008. The Vancouver sun reported on June 16, 2009 “Fourth straight increase in monthly sales, as reported by the Canadian Real Estate Association”.
“The housing market continued to rebound in May with a fourth consecutive increase in monthly sales, according to the CREA”.
This is good news, Moishe Alexander, CFC CEO says.
Meanwhile, the pace of new home construction is down close to 50 per cent from last year while new listings in the existing-homes market are also sharply declining.
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For a home buyer, it is back to the hectic days of making a quick decision when a suitable home is found. There is less room for negotiation, and sellers are holding on to their prices and they have no problem finding a buyer.
The demand far exceeded what’s available in the market place, and a return of a “seller’s market” is evident in multiple offers on many homes. The current strong market activities is unlikely to change anytime soon, as inventory of new listings is not replenishing at the same rate of homes being sold.
OTTAWA, June 10, 2009 — The average rental apartment vacancy rate in Canada’s 35 major centres1 increased slightly to 2.7 per cent in April 2009, from 2.6 per cent in April 2008, according to the spring Rental Market Survey2 released today by Canada Mortgage and Housing Corporation (CMHC).
And this is very good news, Moishe Alexander says.
Mark Salerno, CMHC district manager explaines:
Completions of condominiums, which continue to attract renter households looking to move into homeownership are decreasing demand for rental housing. Also, some of the completed condos compete with rental units if they were purchased by investors who then rent them out. These two factors have put upward pressure on the vacancy rate,” said Bob Dugan, Chief Economist at CMHC’s Market Analysis Centre. “However, this has been balanced by higher levels of demand for rental housing.”
The results of CMHC’s spring survey reveal that the major centres with the lowest vacancy rates in April 2009 were Québec City (0.6 per cent), Regina (0.7 per cent), Winnipeg (0.9 per cent), Saguenay (1.1 per cent), and Trois-Rivières (1.1 per cent). With respect to British Columbia, only two centres had vacancy rates below two per cent; Victoria at 1.2 per cent and Vancouver at 1.9 per cent.
At the other end of the spectrum, the major centres with the highest vacancy rates were Windsor (15.5 per cent), St. Catharines – Niagara (5.3 per cent), and Abbotsford (4.8 per cent).
The highest average monthly rents for two-bedroom apartments in new and existing structures were in Vancouver ($1,154), Calgary ($1,106), Toronto ($1,093), Edmonton ($1,059), and Victoria ($1,043). Of all the major centres, these five were the only ones with average rents at or above $1,000. The lowest average monthly rents for two-bedroom apartments in new and existing structures were in Saguenay ($494), and Trois-Rivières ($512).
Year-over-year comparison of rents can be slightly misleading because rents in newly built structures tend to be higher than in existing buildings. However, excluding new structures provides a better indication of actual rent increases paid by tenants. Overall, the average rent for two-bedroom apartments in existing structures across Canada’s 35 major centres increased 2.9 per cent between April 2008 and April 2009. Rent increases were larger in Saskatoon (15.5 per cent) and in Regina (11.4 per cent).
CMHC’s spring Rental Market Survey also found that the average rental apartment availability rate in Canada’s 35 major centres was 5.0 per cent in April 2009, up slightly from 4.9 per cent in April 2008. A rental unit is considered available if the unit is vacant (physically unoccupied and ready for immediate rental), or if the existing tenant has given or received notice to move and a new tenant has not signed a lease. Availability rates were highest in Windsor (18.0 per cent), London (7.9 per cent), St. Catharines – Niagara (7.9 per cent), Guelph (7.0 per cent), and Sherbrooke (7.0 per cent). The lowest availability rates were in Winnipeg (1.4 per cent), Regina (1.8 per cent), and Victoria (2.5 per cent).
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 — homes that will continue to create vibrant and healthy communities and cities across the country.
1 Major centres are based on Statistics Canada Census Metropolitan Areas (CMAs) with the exception of the Ottawa – Gatineau CMA, which is treated as two centres for Rental Market Survey purposes and Charlottetown, which is a Census Agglomeration (CA).
2 CMHC’s Rental Market Survey is conducted twice a year in April and October, to provide vacancy, availability and rent information on privately initiated structures in all centres with populations of 10,000 and more across Canada. Reports are released in June and December.
The spring survey covers apartment and row structures containing at least three rental units, and unlike the fall survey does not report information on:
Smaller geographic zones within centres
Secondary rental market (rented condominium apartments, single detached, semi-detached, duplexes or accessory
apartments).
Single starts activity moderates in 2009 but growth returns in 2010
Moishe Alexander, CEO, Canadian Funding Corporation reports that after the strongest two-year performance since the late 1970’s, Saskatoon single detached housing starts will decline to 600 units in 2009 and bounce back to 725 units in 2010. The 2009 singles forecast represents the lowest number of housing starts since 2001 when 542 single starts took place.
The moderation in activity compared to 2007 and 2008 is due to the effects of price escalation from previous years, heightened competition from resale housing, and a build up in the supply of new housing units. Reduced in-migration and lower employment gains in 2009 and 2010 will also play a role in this market adjustment.
Single-detached starts in the first three months of 2009 were below last year’s levels. To the end of March, there were 77 foundations poured compared to 284 in 2008, a decline of nearly 73 per cent. Single starts have shown year-over-year declines in activity since June 2008.
In terms of total supply, there were more than 800 single-detached units both under construction and completed and unoccupied at the end of the first quarter. Supply has been in decline, on a year-over-year basis, since December 2008 and on a month-over-month basis since June of last year. The bulk of single units in supply are those in various stages of construction. After peaking at close to 1,300 units in June 2008, the number of single units under construction has seen monthly declines. The combined effects of slower starts and increased absorptions have reduced the total supply on a month-over-month basis over the last nine months.
The number of single units that are completed and unoccupied now lies at close to 200 units, up from only 14 one year earlier. The number of completed and unoccupied single units is at a record high and builders will be restraining production until the excess inventories are absorbed.
Monthly single absorptions were achieving year-over-year gains starting in November 2008 but March 2009 brought slower absorptions compared to a very strong March 2008. Year-to-date, single absorptions now stand even with the first quarter of 2008.
At the present trended absorption rate of 110 to 115 units monthly, the supply of ownership (mainly single-detached) units at various stages of construction as well as those that are complete and unoccupied is sufficient to last seven to eight months. This is down from the 2008 first quarter figure of 11 to 12 months.
Starts in bedroom communities slower in 2009
Single starts in Saskatoon’s bedroom communities fell 62 per cent in the first quarter compared to the previous year. So far this year, these communities have captured 33.8 per cent of total single starts. At this time in 2008, 24.3 per cent of starts were outside the city limits. Over the last five years, bedroom communities have seen an average of 38 per cent of single starts fall within their boundaries. The share of units within the city has fluctuated over the last few years due to the availability and price of developed land within the city limits versus the bedroom communities.
Average price to decline in 2009 but return to growth in 2010
We forecast the average price of a new single-detached home will be $352,000 in 2009, a four per cent decline from the 2008 annual figure. The average new house price will ease due to the historically high number of units that are completed and unoccupied and competition from the resale market. Builders advise that in some new subdivisions, their newly completed homes are competing with homes sold to buyers in the previous year. As a result, builders will be offering incentives and price reductions in order to liquidate their excess inventory in 2009. Provided inventories sufficiently decline, the average price will then see an uptick of two per cent in 2010.
