Housing Market – Canada – July 2016

By: Paul Young, CPA, CGAAugust 16, 2016

Disclaimer• This presentation when it comes to housing market for Canada

Paul Young - Presenter

Bio• CPA/CGA• 25 years of experience in Academia, Industry and Financial solutions• Youtube Channel -

https://www.youtube.com/channel/UCAArky1bAXPSuV2NLtUnyLg

Agenda• North American Housing Market• BMO Analysis• Building Permits• Housing Prices• Renovations• Housing Stats• Housing Prices• Lumber Industry• Skill Trades / Wages

North America Housing Market

BMO/Breakout Housing

• Source: BMO Economics

Canadian housing starts fell to 198,400 annualized units in July from 218,300 in the prior month, slightly ahead of expectations. Urban multi-unit starts pulled back from one of the strongest readings on record, to 123.6k annualized units, while singles edged down to 59k. Through the first seven months of the year, starts are now running at a 198k pace—firm, but not out of whack with overall demographic demand. Of course, the strength in residential construction remains largely concentrated in British Columbia and Ontario, where economic growth and demographic fundamentals are leading the country, despite lower activity in both provinces in July.

Canada Building PermitsMunicipalities issued building permits worth $6.4 billion in June, down 5.5% from the previous month. Lower construction intentions for multi-family dwellings and institutional buildings were mostly responsible for the decline.

In the residential sector, the value of building permits fell 5.0% to $4.1 billion. This was the third consecutive monthly decline. The decrease in the value of multi-family dwelling permits more than offset the gain posted by single-family homes. Five provinces recorded declines, led by British Columbia and Ontario.

The value of non-residential permits was down 6.2% to $2.3 billion in June, led by lower construction intentions for institutional buildings. Decreases were registered in seven provinces. Ontario and the Northwest Territories posted the most notable declines.

Canada Housing Prices• The combined region of Toronto and Oshawa (+0.5%) was the top contributor to the national gain among the census metropolitan areas covered by the survey. Builders reported higher labour costs, market conditions and new list prices as the reasons for the increase. New house prices in Vancouver advanced 0.4%, reflecting market conditions.

• The largest monthly price gains in June were observed in St. Catharines–Niagara (+1.2%) and Windsor (+0.9%). Builders in St. Catharines–Niagara cited market conditions as the main reason for the rise, the eighth consecutive monthly increase. Builders in Windsor reported higher material costs and land development fees.

• Prices were unchanged in 8 of the 21 metropolitan areas surveyed.

• New housing prices fell in Calgary (-0.5%), Edmonton (-0.4%) and Saskatoon (-0.2%) in June. Builders in Calgary offered promotional prices to stimulate sales, while builders in Edmonton and Saskatoon reported lower negotiated selling prices. The decline in Edmonton followed six consecutive months of unchanged prices.

Renovations

• Source: Scotiabank

• Canadians’ enthusiasm for major home renovations appears to be waning. Inflation-adjusted expenditures on home additions, alterations and new installations stalled in the twelve months through Q1. Even so, the overall level of spending is still tracking around record highs.

• The more cautious approach of households continues the relatively sluggish growth in the industry in recent years. During the 2000-2007 renovation boom, real outlays increased at an average annual rate of 9%. Over the 2008-2015 period, annual growth slowed to a much more modest, though still healthy, 2½%

Housing Stats

Average Housing Prices

Housing Prices / World

Housing Market Quotes

• Calls for the government to intervene and curb soaring home prices in Canada’s hottest housing markets are growing louder, but a new report outlines another way markets may be cooled down.

• “We expect declining affordability to help gradually cool the early-2016 surge in Vancouver’s, Victoria’s and Toronto’s housing markets, despite their solid employment growth this year,” says Scotiabank’s Global Outlook.

• In a separate report, BMO recently highlighted job creation in Toronto and Vancouver as a major driver of surging prices in these markets, noting a quarter of all jobs in the country are based in the two cities. Employment in June grew 6.3 per cent in Vancouver, compared to that time last year, and 2.1 per cent in Toronto looking at the same time frame, according to Statistics Canada’s latest Labour Force Survey, released today.

• In Scotiabank’s forecast report, which covers everything from North American industrial activity to housing, the bank noted the impact these cities, with their high employment and real estate activity, are having on a broader level. “National home sales are currently supported by elevated activity in BC and Ontario, especially in and around Vancouver and Toronto,” says Scotiabank.

• The average price of a Canadian home in May was $509,460, which is 13.2 per cent more expensive than a year earlier, according to the most recent numbers from the Canadian Real Estate Association. But remove Greater Toronto and Greater Vancouver from calculations and the average price falls to $375,532, up 9.1 per cent year-over-year.

• “However, (Toronto and Vancouver) are beginning to show early signs of levelling off as rapid and sustained price gains erode affordability,” Scotiabank continues.

• Speaking to BuzzBuzzHome News recently, Diana Petramala, a TD real estate economist, explained how high prices, such as in Vancouver, where the benchmark price of a detached home was $1,561,500 in June, can eventually cause even investors to turn attention elsewhere. “Prices are pretty bid up,” said Petramala of Vancouver. “What investors probably are looking for are places that have more upside potential,” she explains.

• That’s relatively good news for those concerned about skyrocketing home prices there, and comes in the wake of a proposal from Vancouver Mayor Gregor Robertson to tax investors for letting their houses sit empty. As the resale housing market cools, Scotiabank predicts builders will pull back on construction of new homes.

• The bank is predicting housing starts will reach around 190,000 units this year, shy of 2015’s total of 196,000. CMHC, which tracks construction progress of homes from coast to coast, defines a start “as the beginning of construction work on a building, usually when the concrete has been poured for the whole of the footing around the structure.” For 2017, Scotiabank is calling for starts to slump to 180,000 units. “Softening rent growth and rising rental vacancy rates point to a reduced pace of apartment construction, a major driver of starts in recent years,” the bank explains.

• Source: http://news.buzzbuzzhome.com/2016/07/canadas-housing-markets-could-cool-themselves.html

Lumber Industry• https://www.globalwoodmarketsinfo.com/us-canada-increased-lumb

er-production-in-first-five-months-of-2016/• http://www.journalgazette.net/business/Canadian-lumber-riding-hou

sing-boom-14363499• Is imperative that a softwood lumber agreement be reached

between the United States and Canada,” said Premier Brian Gallant. “The value of the lumber industry to New Brunswickers is significant in terms of employment and economic opportunity. We need to work collectively to protect and enhance the forestry sector in Canada and in New Brunswick in particular.”http://www2.gnb.ca/content/gnb/en/news/news_release.2016.07.0675.html

Skill Trades/Construction