5 Signs a Canadian Housing Recovery is On the Way

Housing starts, home sales and building permits are starting to pick up again (although, in the case of housing starts, it's a stuttering start). Here's a look at some of the numbers that, economists say, indicate Canada's housing market is on the mend

1. Housing starts expected to rise

Canada Mortgage and Housing Corp. reported yesterday that the seasonally adjusted annual rate of housing starts decreased to 132,000 units in July from 137,000 units in June after two months of gains. CMHC said the starts statistics - which mark the actual beginning of construction - are expected to improve throughout 2009. The reason? "Over the next several years, housing starts will gradually become more closely aligned to demographic demand ... currently estimated at about 175,000 units per year," CMHC said.

How solid is this foundation? Economists' opinions are mixed. BMO Nesbitt Burns economist Robert Kavcic said July results indicate a rain delay, rather than a reversal. Unseasonably soggy weather caused "a puddle on the road to recovery," he said.

However, Toronto-Dominion Bank economist Pascal Gauthier noted that the July results, which were dragged down by fewer starts in the condominium sector, were below expectations. Starts rose in May and June, and economists had anticipated a third consecutive monthly increase. "The latest data for July is yet another warning that extrapolating the bounce back from [the earlier] extreme lows ... can be overly optimistic," he wrote.

2. Building permits have bounced higher

"Building permits not only held on to the big bounce in May, they were revised higher (to 15.5 per cent) and they rose again in June (up 1 per cent) in another sign that construction is recovering from the extreme lows earlier this year," Bank of Montreal said in a research note. In June, the value of building permits was $5.2-billion, 1-per-cent higher than the revised $5.1-billion measured for May. Residential permits rose 0.5 per cent to $2.7-billion, marking the fourth month in a row in improvement.

3. Existing home sales soar

Nowhere has the turnaround been more apparent than in July sales of existing homes in Canada's biggest cities, BMO reports. "[S]ales in Greater Vancouver were up a massive 89 per cent year over year, a world away from a 70-per-cent drop last November. Toronto is a little less frenetic, but managed to post a 28-per-cent year-over-year gain in July."

Edmonton also reported a 28-per-cent increase in the number of homes that changed hands year over year and, in Calgary, the level of resale activity was up 22 per cent year over year.

4. It's still a buyers' market, but prices are firming up

Economists expect that when the Canadian Real Estate Association reports on the overall national picture Friday, the data will show that average prices are up about 4 per cent year over year - skewed upward by sales in higher-priced markets. The Toronto Real Estate Board, which has already published its July results, reports that the average price for July transactions was $395,414, up 6 per cent from the same month last year.

BMO reports new home prices "are a bit slower to turn, and we believe [today's] report on that front will show a 3.2-per-cent year-over-year decline for June."

5. Affordable mortgages

"We're probably at the best point of [mortgage] affordability right now," said Bank of Nova Scotia economist Adrienne Warren in a Let's Talk Investing video posted on globeandmail.com, noting that interest rates are starting to drift up again. She cautioned, however, that job-loss fears are keeping a lot of consumers on the sidelines.

VIRGINIA GALT
Globe and Mail
Wednesday, Aug. 26, 2009 03:25AM EDT

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Lawless Brown Mortgage Brokers
Victoria BC

Economic signals turning green as consumer confidence, home sales rise

OTTAWA - Canadians are starting to believe that better times are just around the corner, and that's good news for the economy, analysts say.

The August consumer confidence survey from the Conference Board of Canada shows optimism returning to Canadian households, with the index rising for the sixth consecutive month to the highest level since April 2008, when the economy was firing on all cylinders.

And in a separate report, the Canadian Real Estate Association reported that sales of existing houses rebounded so strongly during the spring and into July that the housing group was dramatically revising upwards its forecast for the year.
"The difference in the resale market now, compared to the beginning of the year, is night and day," said president Dale Ripplinger, in increasing CREA's projection for sales this year to 2008 levels, from a previously thought 14.7-per-cent decline.
As well, the real estate body forecasts the general prices of homes across Canada will rise 1.5 per cent this year, a stark contrast to the situation south of the border, where both prices and sales have collapsed.

Both indicators were below levels that existed in 2007 when the economy was booming and the horizon contained few warnings of forthcoming turbulence, but they do support the general view that the sharp economic slide of the winter and spring has stopped.

They also coincide with the recent slowdown in job losses and steady growth in the retail sector, including June's surprise one per cent increase in sales.
Since October, 414,000 jobs have vanished in Canada, but the majority of the losses occurred in December, January and February.

Economists don't often get excited about consumer confidence surveys, mostly because they often reflect the economic news rather than predict future behaviour.
Douglas Porter of BMO Capital Markets said the latest survey is worth noting, however, because of its timeliness, and its track record in accurately predicting last winter's consumer spending slump.

"Given that the consumer confidence survey is the first piece of data we have from August, it's at least a hint that maybe some of the other indications we're going to see later on - spending, perhaps even employment - are going to be better than expected," he said.

The survey, conducted between Aug. 6 and 16, raised the consumer confidence index by 5.5 points from July to 88.4, the highest reading in almost a year and a half. Confidence has risen 18.2 points since the beginning of the year.
Another good sign was that all components of the survey showed gains: more respondents were upbeat about their near-future financial prospects, fewer were pessimistic about job prospects, and a plurality said it was a good time to make big purchases, such as a car or home.

On the critical jobs question, 25.6 per cent of respondents said there will be fewer jobs available in the next six months, a huge improvement from the 54.5 per cent who felt gloomy about jobs prospects six months ago. Twenty-one per cent felt there would be more jobs six months from now, an increase of over six percentage points from July.

"In general we see this as good news," said Todd Crawford of the Conference Board. "In terms of going forward, as people become more optimistic and they go out and spend more money, that is good news for the economy."

By Julian Beltrame, The Canadian Press

If you want to get into the market, call us for a free evaluation of your financial status. You may be closer to home ownership than you think.

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Mortgage Depot

Our September Newsletter!

Every month we publish a newsletter for our clients full of interesting tidbits and real estate news. It's free and a good read. Please don't hesitate to go to our website and sign up for your copy. Thanks to Carmena Consulting for assisting us with creating our newsletter.

Here is a downloadable copy. Enjoy.

http://www.mediafire.com/?hxol0my2zqr

Call us for any of your mortgage questions. We're also landladies and real estate investors so if you have any questions about how to take advantage of the equity in your home and purchase a rental home....call us.

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Krista and Sherri

Lawless Brown Mortgage Brokers
Mortgage Depot

Back to school adds up to housing crunch for UVic students

"One of the newly renovated rooms in Sir Arthur Currie Hall is close to being ready for the new crop of students at the University of Victoria. Students are expected to start moving in on Labour Day weekend.

Claire Riddell doesn't expect to see a repeat of last year – in fact, that's the last thing she wants.

It's her job to manage the distribution of housing for students at UVic, where almost 40 per cent of those who apply for a room on campus aren't placed.



"We need more housing," she said. "It's that simple."

The school has about 2,400 beds, including 100 for staff and units for families.

Since 2007, the school has guaranteed it will provide a room to all first-years who qualify for housing – something that caused a problem last fall.

Housing Services guaranteed more beds to students than the school could actually provide -- around 120 students had to be housed in common-room lounges around campus until January.

"I think the problem was a computer glitch last year and all of a sudden there was some extra guaranteed students," she said. "But that won't be an issue this year."

But what could be a concern this year is out of UVic’s hands: Greater Victoria has one of the lowest rental vacancy rates in the country, 1.2 per cent, making it a significant challenge for students to find an affordable place to live.

Student Maine McEachern is finding this year's search to be difficult, especially since she's looking from Alberta.

The second-year law student won't be back in Victoria until the end of the month, but she has been looking for more than a week now, posting ads online and scouring Craig's List and the university's off-campus housing website for a reasonable place.

"There seems to be quite a few affordable houses, but not many are available," she said in an e-mail from Alberta. "My experience from house hunting last August was that affordable properties for rent advertised (online) would be gobbled up -- most probably by students actually in Victoria and capable of viewing the properties and meeting the landlords in person -- very rapidly."

McEachern spent all of September last year living on different friends' couches, until she found an available place for Oct. 1.

"The difficulty is being able to secure anything from afar," she said. "And I suspect that landlords are more likely to offer their properties to flesh-and-blood individuals with whom they've spoken face-to-face."

Statistics from the Canada Mortgage and Housing Corporation list that the average monthly rental rate for a two-bedroom apartment in Victoria is $1,043.

On Craig's List and UVic's off-campus housing website, it's almost impossible to find a room in the CRD for under $800. If students do find one, it's likely not conveniently close to campus.

"They may have to move farther away and take a longer bus ride, but there's always cheaper rooms and houses. Most people want to be in the (Greater Victoria Area), but Langford and Colwood are only a 20-minute to half-hour bus ride," said Leigh Urqhuart, off-campus ads clerk with Housing Services. "So there's always cheaper accommodation, you just have to be willing to move further away."

With the combination of a low vacancy rate and a high average monthly rental price, the options in Greater Victoria are not ideally suited for most students, being that many are on fixed budgets.

"August is a highly competitive time to find student housing, as tens of thousands of students are returning simultaneously, all in search of similar rental properties," said McEachern "And, because real estate is at a premium in the city, being a student on a tight budget is even more stressful because one's options are consequently severely limited."

McEachern has budgeted $500 a month to spend on rent, but, for many students, that's more than they can afford.

Craig MacBride, spokesperson for the Ministry of Advanced Education, said this year they've seen a 20 to 30 per cent increase in the number of student loan applications.

Although the final numbers aren't available, he suspects upwards of $200 million worth of student loans will be handed out across the province this year.

In 2008/09, the average amount of financial aid given to B.C. residents attending UVic was $7,583 for an eight-month term (tuition and books account for a large chunk of that). That equates to around $215 a week, below the maximum possible provincial loans of $520 for a student with dependents, and $320 for a student without dependents.

The average amount of financial aid given across all provincial institutions in the province was $7,841 over eight months.

Urqhuart, who monitors the off-campus website postings on a regular basis, says the prices now are higher than they were in May or June, but relatively consistent with what they've been in years past.

"It got off to a slow start (this year) ... The supply was greater than the demand," he said. "Landlords were reducing their prices because they thought (the problem) was price related, but it was because there's less international students coming, so there was less need for accommodation.

"But now things are normal. Most people aren't reducing. The people who are reducing are the ones in far out areas," he added.

With under three weeks to go before school is back in session, McEachern, like hundreds of other students, will continue looking for a place to live come early September. And if she can't find anything affordable by then, she’s not sure what options she’ll have.

"Very few, I fear," she said. "If worse came to worst, I could rent a place further from campus ... and I could commute everyday if I had to."

It's something many students will have to do, at least until the university solves its on-campus housing problem.

Currently one new residence is being built, but Claire Riddell said even when that opens in January 2011, it won't make a dent in what's needed.

Right now the school has a waiting list of 1,400 students hoping to secure a place on campus, on top of the 2,300 who have already been assigned a room. Riddell said that number will likely rise, and they would be lucky to see even 20 of the students on the wait list get a room in September.

For students still in need of a place, Urquhart recommends regularly checking online to see what's available, and researching your options based on a balance of affordability and suitability."

By Kyle Slavin - Saanich News
Published: August 23, 2009 11:00 AM
kslavin@saanichnews.com




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Lawless Brown Mortgage Brokers

Tax Hits Hard on New House Sales

By Roszan Holmen - Victoria News
August 15, 2009 8:00 AM

House buyers will take the biggest hit when the provincial government harmonizes the provincial sales tax with the federal goods and services tax next summer. Consumers across B.C. are opposing a planned seven per cent tax increase on select services and goods, including new house purchases.

In cities such as Victoria, Vancouver and Kelowna, where new houses cost more than $650,000 on average, the tax promises to cut the deepest. “This is really a big, big tax on the middle class,” said Casey Edge, executive officer of Canadian Home Builders’ Association, Victoria branch. Edge objects to what he calls the triple taxation of new houses.

The provincial government imposes a property transfer tax on a property both when it is sold to the developer, and again when it is sold to the consumer. The new harmonized sales tax will add yet another level of taxes to the sale. Last month, the B.C. government announced its intentions to harmonize the provincial sales tax with the federal goods and services tax, as of July 1, 2010. The idea is to eliminate the hassles of paying and administering two different taxes.
While some business organizations applaud the move, many consumers and industries see it as a hit to their pocketbook and their bottom line.

The reason?

Many goods and services, which are currently exempt from the PST, will soon be subject to the newly-combined 12 per cent harmonized sales tax. New houses fall into this category, so to ease the burden, the government introduced a rebate to keep taxes roughly the same.
The rebate, however, caps out at $20,000, so any new house worth more than $400,000 will be hit with the tax. In Greater Victoria, that’s the majority, as the average new single-detached home sells for $668,655.

The B.C. Real Estate Association has crunched the numbers to calculate a net tax impact of $13,433 on the average home. Add to that several thousand dollars in taxes on services associated with buying a home. Property inspection and appraisal, the real estate commission and the lawyers fee will all be taxed at 12 per cent rather than five per cent starting next summer.

How all this will affect home sales and prices is yet to be seen.

“It’s too early to say exactly what the impact will be on the number of sales as well as resale home prices,” said Bryan Yu, economist with the real estate association. “Until we know what the transition rules will be, it’s impossible to predict the impact.” The new house market, however, will be more affected than the resale house market, he said. Edge called for consultation with the industry before the government moves ahead with the tax.

“HST is a consumption tax. It’s not appropriate to put it on very large investments where people take out amortized loans because then it turns into a monster and the costs virtually double for the consumer,” he said. “One of the few manufacturing industries creating local employment is homebuilding and it doesn’t appear to be any recognition of this.”
Stephen Spector, president of Certified General Accountants of Canada, B.C. branch, said the benefits of HST will outweigh the costs. Consumers will pay more but there is relief for people of low-income, he pointed out. “If somebody is spending nearly a million dollars (on a house) don’t tell me they can’t afford an extra $20,000. “As an economist I applaud this move simply because a single value-added tax is a much more efficient tax,” he said.

Businesses, Spector added, will also benefit because they’ll be able to claim rebates on the provincial portion of their taxes, rather than just the federal portion.
In a competitive market, consumers can choose those businesses that pass the savings along, he said.

rholmen@saanichnews.com

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