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May 2008

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20 Billion Spent on Home Renovations - May 22, 2008

An estimated 1.5 million households in 10 major Canadian centres surveyed indicated they completed renovations last year that cost an average of more than $12,800, according to the Renovation and Home Purchase Survey released today by Canada Mortgage and Housing Corporation (CMHC).

“Close to $19.7 billion was spent on renovations in 2007 across the 10 major centres surveyed, an increase of more than $2 billion compared to 2006,” said Bob Dugan, Chief Economist at CMHC. “As well, when Canadian homeowners in these 10 centres surveyed were asked about their plans for this year, 40 per cent indicated that they intend to spend $1,000 or more on renovations by the end of 2008.”

The Renovation and Home Purchase Survey reports on actual renovation expenditures made in the previous year, as well as intentions to buy or renovate a home in 2008 in the following 10 major centres: St. John's, Halifax, Québec, Montréal, Ottawa, Toronto, Winnipeg, Calgary, Edmonton, and Vancouver1. The survey enables all market participants to benefit from timely information on renovation market trends.

Close to half — 46 per cent — of households reported that the cost of renovations was in line with what they had budgeted, while 37 per cent went over their planned budget for the renovation. More than a quarter — 26 per cent — of households that undertook a renovation project hired a contractor for a portion of the work, up slightly from 24 per cent that undertook renovations in 2006. ‘Do-it-yourselfers' accounted for 31 per cent of renovators in 2007, down slightly from 34 per cent in 2006. However, many households — 41 per cent — chose to contract out the entire renovation project.

The main reason given by households for renovating in 2007 was to update, add value or to prepare to sell — 59 per cent. Some 27 per cent of respondents stated that the main reason for renovating was that their home needed repairs. The top three renovations completed last year were: remodelling rooms — 31 per cent, — painting or wallpapering — 27 per cent, — and hard surface flooring and wall-to-wall carpeting — 26 per cent.

Of the 10 major centres surveyed, the percentage of households that spent $1,000 or more on renovations in 2007 was highest in Winnipeg at 36 per cent, followed by St. John's and Halifax at 35 per cent, while the centre with the least proportion of households that undertook renovations was in Québec at 28 per cent.

Similarly, renovation intentions for 2008 across the 10 major centres are strongest in Winnipeg and St. John's, where 50 and 48 per cent of consumers, respectively, indicated they plan to undertake renovations costing $1,000 or more. The proportion of potential renovators is lowest in Québec where 35 per cent of households indicated they intend to renovate in 2008.

On the home purchasing front, six per cent of households across the 10 major centres surveyed intend to purchase a home that will be used as a primary residence in 2008. This is down from eight per cent in 2007. Forty-two per cent of households that stated they intend to purchase a home in 2008 are first-time buyers. This percentage is identical to the share of actual first-time homebuyers in 2007. The majority of first-time buyers are between the ages of 25 and 34, with a household income between $40,000 and $60,000 annually.

Home buying intentions are strongest in Calgary where 8 per cent of households reported that they are considering buying a home this year, down from 14 per cent in 2007. Purchase intentions are the lowest in Québec at four per cent.

Housing Starts Continue to Drop - May 15, 2008

New home construction will begin to slow in 2008, but remain high by historical standards, according to Canada Mortgage and Housing Corporation’s (CMHC) second quarter Housing Market Outlook, Canada Edition report.

Higher mortgage carrying costs will be a catalyst for the decrease in residential construction to 214,650 units in 2008, from 228,343 in 2007. As a result, 7 of the 10 provinces will register a lower number of housing starts in 2008 than in 2007.

“Strong economic fundamentals such as continuing high employment levels, rising incomes and low mortgage rates will provide a solid foundation for healthy housing markets this year,” said Bob Dugan, Chief Economist for CMHC. “Most of the pent-up demand that built up during the 1990s has now been fulfilled and residential construction activity will gradually move in line with Canadian demographic fundamentals. These factors will continue to exert downward pressure on housing starts, which will decline to 199,900 units in 2009.”

Existing home sales, as measured by the Multiple Listing Service (MLS®)1, are expected to fall by 8.5 per cent in 2008 to 475,900 units. In 2009, the trend will continue with a decrease to 465,000 units (-2.3 per cent). Despite a slowdown of MLS® sales, demand remains strong by historical standards. For 2008 and 2009, MLS®price growth will remain above inflation. Prices will reach $323,000 (+5.1 per cent) in 2008 and $333,500 (+3.3 per cent) in 2009.

At the provincial level, British Columbia’s housing starts, which have been above historical averages, will decline in 2008 and 2009. A tight labour market, robust income growth, and high levels of consumer confidence will partially offset the dampening effect of rising mortgage carrying costs on the demand for new and existing homes in British Columbia. Housing starts will decline to 34,700 units in 2008, and 32,900 in 2009 from 39,195 units in 2007. The average MLS® price in British Columbia will grow by 9.3 per cent in 2008 and 3.3 per cent in 2009. This moderation is due to an increase in listings and fewer existing home sales bringing more balanced supply and demand conditions to market.

Alberta continues to experience very low unemployment and continuing overall prosperity. Despite these positives, the province is expected to face a drop in net migrants between now and the end of 2008 due in part to the increased house prices in Alberta and improved labour market conditions in other provinces. These factors will combine to reduce housing starts to 37,250 in 2008 and 33,000 in 2009 from 48,336 units in 2007. Following exceptional 30.7 per cent and 24.8 per cent gains in 2006 and 2007 respectively, growth in the average MLS® price is expected to slow to 3.6 per cent in 2008 and 5.1 per cent in 2009.

Over the last year, Saskatchewan experienced a rebound in economic growth, strong job creation and a surge in net migration. This contributed to strong housing demand. Total housing starts reached 6,007 units in 2007, the highest level in 24 years. However, escalating costs will stabilize housing starts at 6,600 units this year and 5,900 units in 2009. The average MLS® price in Saskatchewan rose by 32.0 per cent during 2007 and is expected to climb 26.1 per cent in 2008 and 8.2 per cent in 2009.

Manitoba’s economic growth exceeded the national average in 2007 and job creation rebounded. The Provincial Nominee Program has boosted net migration to levels not seen since 1982. These factors have contributed to healthy levels of new home construction. Total housing starts reached 5,738 units in 2007, the best performance in 20 years. Starts will edge down to 5,450 units in 2008 before rebounding to 5,650 in 2009. The average MLS® price in Manitoba increased 12.6 per cent in 2007 and will continue to increase at a pace above the national average by 13.5 per cent in 2008 and 7.8 per cent in 2009.

The Ontario economy is expected to improve slightly during 2008 and this will help sustain housing demand across the province. New home construction activity will be moderate between now and the end of 2008. Housing starts will move up to 72,175 units in 2008 from 68,123 units last year given an increase in new condominium projects; however starts will decrease to 65,000 units in 2009. The average MLS® price in Ontario rose by 7.6 per cent in 2007. For 2008 and 2009, the increases will be more modest at 3.5 per cent and 2.4 per cent respectively.

Solid job creation and steady economic growth in Quebec during 2007 pushed housing starts up by 1.4 per cent to 48,553 units. A moderation in employment growth will cause a slight shift downwards in 2008 to 46,500 units and 45,750 in 2009. A reasonably healthy resale market will also fuel average MLS® price growth in Quebec; prices will increase by 4.7 per cent in 2008 and 2.8 per cent in 2009.

In New Brunswick, rising mortgage carrying costs, a slower economy and more choice in the resale market will result in lower levels of new home construction. Housing starts are forecast to decline to 3,925 units in 2008 from 4,242 units in 2007, a decrease of 7.5 per cent. Moving into 2009, starts are expected to fall to 3,650 units. The average MLS® price in New Brunswick rose by 7.7 per cent during 2007. The price increases will be more modest at 4.0 per cent in 2008 and 2.8 per cent in 2009.

Nova Scotia is experiencing slower employment and population growth during 2008, causing new home construction activity to be more restrained. Housing starts are forecast to decrease slightly to 4,500 units in 2008 and 2009 from 4,750 units in 2007. After rising 7.3 per cent in 2007, the average MLS® price in Nova Scotia is expected to increase by 5.0 per cent in 2008 and 2.6 per cent in 2009.

Prince Edward Island’s economy is expected to undergo modest economic growth through 2008. As a result, housing starts will slowly decline to 700 units in 2008 and 675 in 2009 from 750 units in 2007. The average MLS® price in Prince Edward Island will rise by 3.0 per cent in 2008 and 3.3 per cent in 2009. Last year, the average price on the resale market increased by 6.4 per cent.

In Newfoundland and Labrador, a strong export-driven economy has pushed housing demand up. This is the only province that is anticipating two years of growth. Housing starts for 2007 were up 18.6 per cent to 2,649 units. For 2008, starts will reach 2,825 units before increasing further to 2,850 units in 2009. The average MLS® price in Newfoundland and Labrador will rise by 10.5 per cent in 2008 and 6.1 per cent in 2009.

Increase in New Housing Prices Continues to Slow - May 12, 2008

Year-over-year growth in new housing prices slowed for a second consecutive month in March. This deceleration continues a downward trend that started in September 2006, due mainly to the softening market in Alberta. A Statistics Canada report released this morning indicates that contractors' selling prices rose 6.1% between March 2007 and March 2008, a slightly slower pace than the 6.2% year-over-year increase posted in February 2008. Nationally, prices rose 0.2% between February and March.

Regionally, for the 11th straight month, prices rose at the fastest pace in Saskatoon, with a year-over-year price increase of 46.2%, down from the record-setting pace of 58.3% in February. Saskatoon housing prices rose 2.1% from February. In Regina, the year-over-year increase was 27.8% in March, down marginally from the annual growth rate of 28.6% recorded in February. Regina's new housing prices rose 1.7% between February and March.

In Winnipeg, prices rose 15.0% on a year-over-year basis. In Saskatoon, Regina and Winnipeg, builders reported higher prices as a result of increased material and labour costs, as well as a strong market and high demand for new housing.

In Edmonton, the 12-month growth rate slowed to 13.5% in March, the eighth consecutive month in which the pace of growth has decelerated. On a monthly basis, new housing prices declined in Edmonton for a third consecutive month, falling 1.1% in March. In Calgary, prices rose 5.3% between March 2007 and March 2008, slightly faster than the 5.2% increase between February 2007 and February 2008. Edmonton and Calgary continued to experience slow market conditions. Builders in both cities reported lowering their prices to generate interest and stimulate sales.

A strengthening economy, coupled with increased material and labour costs, contributed to record increases in Nova Scotia. Homebuyers in Halifax saw prices rise 12.8%, up from the year-over-year increase of 11.4% in February, while buyers in St. John's saw a 12.0% gain compared with March 2007.

On the West Coast, the 12-month increase in contractors' selling prices for Vancouver was 6.1%, while in Victoria it was 1.2%, down from 1.6% in February.

Windsor recorded year-over-year deflation in March, with prices falling 0.6% from March 2007. This continues the downward trend that started 18 months ago.

Housing Starts Up in BC - May 8, 2008

The seasonally adjusted annual rate of housing starts was 213,900 units in April, down from 243,000 units in March, according to Canada Mortgage and Housing Corporation (CMHC).

“Housing starts in April moderated from the high levels posted in February and March. Most of the decrease reflected a drop in multiple starts, which in March and February had reached their second and third highest levels since March of 1978, respectively,” said Bob Dugan, Chief Economist at CMHC’s Market Analysis Centre. “Despite the decline, starts remained robust at over 200,000 units.”

In April the seasonally adjusted annual rate of urban starts edged down by 16.3 per cent to 185,400 units compared to March. Urban multiples were also down to 113,900 in April from 141,000 in March. In addition, singles decreased 11.3 per cent to 71,500 units.

The seasonally adjusted annual rate of urban starts went down in all regions of Canada, except British Columbia, which saw an increase of 17.1 per cent to 34,900 in April. Urban starts decreased to 7,500 units in Atlantic Canada, 37,600 units in Quebec, 73,000 units in Ontario, and 32,400 units in the Prairies. In terms of single urban starts, all regions except Quebec were down in April. Quebec registered an increase of 9.3 per cent to 12,900 units.

Rural starts were estimated at a seasonally adjusted annual rate of 28,500 units in April2.

For the first four months of 2008, actual starts in rural and urban areas combined were up an estimated 3.3 per cent compared to the same period last year. Actual starts in urban areas to date have increased by an estimated 9.6 per cent over the same period in 2007. Actual urban single starts for the four months of this year were 14.9 per cent lower than they were a year earlier, while multiple starts increased by 29 per cent over the same period.

Construction Intentions Continue to Cool Off - May 6, 2008

Construction intentions in Canada continued to cool according to a report released this morning by Statistics Canada. As a result of a marked decline in Alberta, the total value of building permits in Canada dropped 4.5% in March to $5.6 billion. This was the fourth decrease in five months. Both residential and non-residential sectors declined in March.

The total value of permits reached $17.3 billion for the first quarter of 2008, down 8.2% from the fourth quarter of 2007 and a third consecutive quarterly retreat.

Construction intentions continue to soften in the housing sector

In the residential sector, the value of building permits decreased 5.7% to $3.6 billion. This was the second lowest value in 13 months. It was generated by drops in values of both multi-family (-7.8%) and single-family (-4.4%) permits.

The number of multi-family units approved increased 4.6% while single-family units decreased by 8.5% in March. This was consistent with a general tendency observed over the last five years, where the demand has shifted from the more expensive single-family dwellings toward the more affordable multi-family units. The overall number of residential units approved has been on a downward trend since the summer of 2007.

Industrial and institutional permits pull down the non-residential sector

The value of non-residential permits fell 2.4% to $2.0 billion, a level not seen since April 2007. Intentions peaked for this component in May and June last year.

On the industrial side, the value of permits plunged 21.9% to $318 million, the third decline in four months and the lowest level since February 2007. This result was fuelled by declines in projects for utility buildings.

Following a 32.3% drop in February, the institutional component fell 4.7% to $454 million, mainly as a result of a decline in projects for medical buildings.

In the commercial component, the value of permits increased 5.3% to $1.2 billion, as a result of increases in various types of buildings such as warehouses, hotels, restaurants, recreation buildings and retail and wholesale stores.

Overall, the value of permits in each of the three non-residential components has been on a downward trend since the last part of 2007.

Four provinces post declines in their value of building permits

Alberta recorded the largest reduction in March (-32.9%) among the provinces. This decline had a significant impact on the overall results. Excluding Alberta, the value of building permits would have increased by 5.1% instead of declining 4.5% nationally. With marked retreats in both residential and non-residential sectors, the total value of construction intentions was below the $1 billion mark for the first time in 13 months.

The cumulative value of permits for the January-to-March period in Alberta totalled $3.7 billion, down 3.8% from the fourth quarter of 2007 and a third consecutive quarterly decline. This result was 19.2% lower than the peak recorded in the second quarter of 2007. Newfoundland and Labrador, New Brunswick and Manitoba also recorded reductions in March.

The most significant gain (in dollars) occurred in Ontario (+7.3% to $2.1 billion), as a rise in construction intentions for multi-family dwellings more than offset a fifth decrease in six months in the non-residential sector.

Saskatchewan and Quebec also posted sizeable gains, thanks in large part to non-residential permits.

Furthermore, in Saskatchewan, the value of residential permits in March was just 1.1% below the record of $96 million reached in December 2007. The robust demand for housing in Saskatchewan is positively affected by a dynamic economy and strong interprovincial migration. In Quebec, the value of housing permits dropped to $647 million, a 13 month low.

While the total value of permits increased in British Columbia and Nova Scotia, the level remained almost 10% below the average monthly level in 2007 for both provinces.

The demand for new dwellings falls in Calgary and Montréal

Overall, 11 out of the 34 census metropolitan areas showed a decline in March. The largest retreats (in dollars) were recorded in Calgary, Edmonton and Montréal.

In Calgary, the decline came in large part from the residential sector. The number of new units approved in March (692) was at its lowest level since July 2000.

In Montréal, the 1,536 new residential units approved represented the lowest number on record since December 2002.

In Edmonton, the decline came from a retreat in the non-residential sector after this component reached a near record level in February.

In contrast, the total value of permits in Kitchener reached a record high of $144 million, thanks to strong results in both residential and non-residential components.

 

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