In 2009, new home starts will reach 350 new homes from 428 starts recorded in 2008, contracting by 18 per cent. Single-detached starts are forecast to decline by 20 per cent, while row homes and apartments will decrease by 14 per cent. The downward momentum in the economy has lessened new construction demand. Also, slower population growth and less spill-over demand from the resale market have contributed to the slow down in demand for new homes. However in 2010, this trend will change due to the gradually improving provincial economy and declining new home inventories. The number of starts will increase by six per cent to 370 units. Demand for affordable housing is increasing. A number of social housing projects are planned or underway to accommodate the increased demand for this type of housing.

The new home price will average 343,000 in 2009 and 355,000 in 2010. New single-detached prices will de- crease by 0.6 per cent in 2009 as the prices adjust to slower demand, consumer cautiousness and less con- struction of high-value homes. As the economy recovers in 2010, new home prices will increase by 3.5 per cent.

In the longer term, new home construction is expected to increase. Migration will be a dominant element in increasing demand for new homes. With land constraints raising prices in other areas and improved transportation and infrastructure projects making Peterborough more accessible to Toronto, it’s expected to see more in-migration to Peterborough. Aging baby boomers will increase their movement to Peterborough, seeing it as an attractive place for retirement. Furthermore, improved economic conditions and job prospects in the region in the next several years will reduce out-migration.

As home prices and mortgage carrying costs rise, the demand for the more expensive homes will be tempered. More interest will be seen for higher-density forms of housing in coming years. Even though demand for single-detached homes will slow, this type of housing will remain the product of choice for homebuyers. Single-detached homes demand in Peterborough is supported by mature migrants mainly coming from Toronto, availability of land and the price differential comparing to other centres in Ontario.

Demand for resale homes is expected to moderate by four per cent in 2009 to 2400 from 2506 recorded in 2008. In 2010, we will see the same trend. Sales will register 2300 sold homes, a decrease of four per cent from 2009. Low carrying costs, a relatively low unemployment rate and affordable prices will help to limit the decline in demand in 2009. Some purchases, initially planned for 2010, will take place in 2009 as people buy before anticipated mortgage rate increases raising sales in 2009 and lowering them in 2010.

In 2009, sellers have been hesitating about entering the housing market. As a result, new listings will decrease by 13 per cent in 2009. Moreover, the fall of new listings will outpace the decline of sales. In 2010, more new listings will flow into the market as sellers respond to rising prices.

The combination of declining new listings and improving sales by mid- 2009 meant that the sales-to-new- listings ratio, a barometer of future housing price growth and a measure of market conditions, moved up. Peterborough’s resale housing market has been balanced through much of 2009, but moved into sellers’ territory during some months. In 2010, the market is expected to be in balance for most of the year. A balanced market is characterized by price growth around the rate of inflation. Peterborough prices will increase by about four per cent in 2010, faster than in 2009. Resale prices are expected to increase by 1.7 per cent this year to $234,500 from $230,656 registered last year.

On the real estate front, the Newfoundland Government released their take on Newfoundland housing market conditions. While most of their data is from CREA and previously discussed earlier on this blog, I thought it important to “cut and paste” the PDF of the real estate section from the Economic Research and Analysis website as it recapped and touched on a number of important areas and facts.

Housing market conditions were robust in 2008. Housing starts increased to a level not seen since the early 1990s. Residential sales activity and prices reached record levels. Other capacity indicators like rental vacancy rates are at, or remain near, historical lows. Increased housing demand stemmed from strong economic performance, low interest rates, optimism about future major projects, and household formation.

Housing Starts

During 2008, housing starts totalled 3,261 units, up 23.1% compared to 2007. This was in contrast to activity in the Maritimes and Canada, where starts declined by 7.9% and 7.6%, respectively. While urban areas account for approximately two thirds of housing starts in the province, both urban and rural areas recorded significant gains in 2008. Urban housing starts were up 22.1% to 2,229 units and rural starts were up 25.2% to 1,032 units. Total housing starts are expected to fall to 2,648 units in 2009 as the global recession and slumping housing market in the rest of Canada weakens local consumer confidence. Since 1989, housing starts have averaged 2,333 units per year. Therefore, even with the decline expected this year, housing starts will be at relatively high levels for the local industry.

Residential Sales and Prices

Residential sales activity and prices increased to record levels last year. The number of residential properties sold in the province through the Canadian Real Estate Association’s Multiple Listing Service® (MLS®) during 2008 was 4,695, an increase of 5.0% from 4,471 in 2007.  This performance was in contrast to the national residential market. MLS® sales decreased by 17.1% in Canada and 8.9% in the Maritime provinces during 2008. According to CREA, the number of MLS® sales in the province is expected to decline by 14.8% in 2009 to 4,000.
Strong demand for housing, especially during the summer months, created a buying frenzy in 2008. The average number of active MLS® listings in the province (a measure of housing availability/supply) declined by 38.3% to 1,495 from 2,423 in 2007. Homes were being purchased as soon as they hit the market and sellers were receiving multiple offers — sometimes well above the asking price. As a result of increased demand, housing prices increased. During 2008, the average MLS® residential price was $178,477, an increase of 19.6% compared to 2007. The fourth quarter average MLS® residential price surged 27.2% over the fourth quarter in 2007, representing the only growth market in Canada.
Increased housing demand in recent years is the result of employment and income growth; household formation; low mortgage rates; and a positive business environment, facilitated in part by continued optimism surrounding a number of future major projects. In addition to these factors, industry indicated that demand for residential units was also being fuelled by expatriates living in other provinces and from residents who commute to other provinces for work purchasing property for personal use and/or investment purposes.

Rental Market
Rental vacancy rates are at or near historical lows throughout Newfoundland and Labrador. Vacancy rates in urban areas have decreased from a high of 15.4% in 1997 to just 1.1% in 2008. During 2008, vacancy rates were lowest in the St. John’s CMA (0.8%) and Corner Brook CA (0.9%), followed by Grand Falls-Windsor CA (1.9%), Gander (2.6%), and Bay Roberts CA (4.0%). Although vacancy rates are low, rental prices remain the lowest in Atlantic Canada. In 2008, the average rent for a 2-bedroom apartment in Newfoundland and Labrador was $596 compared to $635 in New Brunswick, $660 in Prince Edward Island, and $795 in Nova Scotia. It is expected that improved labour markets, positive netmigration, higher housing prices, and a lack of new rental construction will keep vacancy rates low and place upward pressure on rental prices.

http://www.stjohnsrealestateonline.com/economy-2009-newfoundland-real-estate-section/

Reviewed by Moishe Alexander, CFC CEO

Also this week,  Re/Max Canada released their Recreational Properties Report.  What they’ve found is:

Generation X purchasers are poised to replace aging baby boomers as the major force in recreational property markets across the country, according to a report released today by RE/MAX.

The demographic shift was noted in the 2009 RE/MAX Recreational Property Report highlighting sales, pricing, trends and developments in 50 Canadian markets. The report found demand from Gen X (those born between 1965 and 1980) has nearly doubled over one year ago. Seventy-four per cent of markets surveyed this year reported a marked trend toward thirty-something buyers snapping up affordably-priced product, ranging from waterfront cottages to resort condominiums, compared to just 40 per cent in 2008.

“After being priced out of most markets for the better half of the last decade, Gen X purchasers now have the financial wherewithal to buy recreational product at virtually every price point,” says Michael Polzler, Executive Vice President, Regional Director, RE/MAX Ontario-Atlantic Canada. “Gen X is ideally positioned to pick up any slack in recreational property markets caused by softer demand from baby boomers and retirees. They represent the next wave of recreational property owners in Canada and they know it.”

The financial strength of the cohort dovetails well with current market realities. Sixty-six per cent of recreational property markets surveyed reported a decline in the number of recreational product sold in the first four months of 2009, while 22 per cent indicated sales were either up or on par compared to one year ago. While the combination of inclement weather and a global recession clearly hampered sales activity earlier in the year, many major centres are currently experiencing an upswing in activity as the traditional cottage season gets underway.

“Much of the activity in the marketplace today has to do with the mindset of this particular generation,” says Elton Ash, Regional Executive Vice President, RE/MAX of Western Canada. “More important than the investment aspect is the commitment to lifestyle. The purchase of a waterfront home or a condominium is more than a simple transaction to Gen X purchasers – owning a recreational property underscores their dedication to family and balance.”

The time to buy has never been better. With four exceptions, recreational property prices have softened in most major markets across the country. Only on the Newfoundland Coast and in Ontario, from Innisfil to Oro, Kingston, and Beaverton, have values increased this year compared to 2008. Starting prices remain similar to one year ago and in some cases are even higher.

“While buyer’s market conditions exist virtually across the board, sellers of recreational properties from coast-to-coast are clearly content to wait out the storm,” says Polzler. “They are in no hurry to unload their product. Many have held on to their properties for generations – they’re fully-owned yet underutilized, which has prompted some aging owners to list them for sale.”

The report also found that while lowball offers are on the rise, very few meet with success. Through tough negotiations with multiple sign backs, purchasers who are serious tend to find out the hard way that sellers are serious too. As a result, the sales-to-list ratio remains relatively high in most recreational property markets across the country.

“The prospect of greater stability down the road is creating cautious optimism in the marketplace,” says Ash. “Purchasers are seeking to buy quality product, whether it be situated on lakes, rivers, or ponds, before values start to once-again edge up.”

Highlights:
• Supply is adequate in most markets, but heated activity in the lower-end has resulted in tight inventory levels for entry-level product in 18 per cent of markets including: Bancroft, Combermere, Honey Harbour/Port Severn, West Kawarthas, Orillia, Flesherton, North Saskatchewan, and Salt Spring Island.
• Older cottage owners, many who own their properties outright, are selling to younger purchasers with families.
• Some American cottage owners in Canada are taking advantage of the stronger dollar to cash out of the market.
• American purchasers have largely fallen off the radar, with some exceptions: Lake Winnipeg, Shediac Bay, and Sault Ste. Marie.
• Pent-up demand is a factor in the marketplace, as those purchasers who had intended on buying recreational properties in the latter half of 2008 deferred their purchases to 2009.
• Older Canadians continue to seek secondary homes in warmer parts of the U.S such as Florida, Arizona, California, and Nevada.
• Generation X purchasers are prepared to spend their hard-earned dollars on recreational properties, but at the end of the day, they want to know that they’ve negotiated the best deal possible.
• The upper-end has somewhat softened in markets across the country.

The full in depth report can be downloaded here .  I highly recommend giving it a read, as it covers cottage towns all over Canada. If you’d like the names of some great cottage property sales reps, send me an email, I’d love to help!

reviewed by Moishe Alexander, CFC CEO

Interesting news, presented by Moishe Alexander, CFC CEO

The Royal Bank says the Canadian economy will shrink by 2.4 per cent this year, due in part to the substantial 5.4 per cent annual GDP contraction in the first quarter.

That’s the worst quarterly economic performance since 1991 and likely the worst in the current recession.

“Our forecast is for the second quarter’s contraction to be smaller, although, like the United States, Canada is facing the headwinds from the auto industry’s problems,” the bank says.

“The outlook for the consumer for the remainder of this year is a mixed bag. Spending has sagged in recent months as the financial market crisis and job cuts took a large bite out of confidence and sent consumers to the sidelines. However, with interest rates falling to all-time lows and impending government spending programs expected to limit the number of jobs lost, a moderate rebound in spending is likely later this year.”

It also said activity in Canada’s real-estate markets has already picked up, with sales of existing homes rising 11.2 per cent in April, marking the third monthly increase compare car insurance rates.

The Royal predicts growth will return next year as the U.S. and Canadian economies benefit from low interest rates, firmer credit markets and government stimulus programs.

“Export demand is likely to rise as commodity prices stabilize and the U.S. economy (still Canada’s biggest trading partner) climbs out of recession. However, tempering this source of future strength will be an attendant rise in imports, reflecting both increasing Canadian domestic demand and an appreciating loonie.”

In a forecast of the provincial economies in Canada, the bank says growth will hit 2.5 per cent next year.

After shrinking this year because of lower energy prices, Newfoundland will lead all the provinces in growth in 2010, while Ontario and Prince Edward island will have the slowest growth.

The bank says the national jobless rate will hit nine per cent, compared with an average of 8.5 per cent this year.

Given that sales will fall and listings will rise, the market will ease slightly over the coming year. Average resale prices will continue to increase, but more slowly than in recent years.

A higher proportion of condominium sales will take place in the suburbs and in the less expensive sectors on the Island of Montréal, which will contribute to limiting the growth in prices. For the market overall, prices will therefore rise by 4 per cent in 2008 and by 3 per cent in 2009. Still, on the whole, the market will remain favourable to sellers in the short term and gradually ease toward more balanced conditions in 2009.

Here is the break down of the report:

• Mortgage rates are expected to be relatively stable
• Resale market will be moderately slow
• Condominiums will maintain more demand than single family houses
• Supply of home listings with increase slightly.
• Affordable homes are expected to register increases in starts.
• Prices for single family homes and plexes will go up by an average 4 % in 2009
• Condo prices are expected to grow by 3%

Now, let’s take a look at the details…

Change of pace for the economy

In 2009, despite the anticipated decrease in residential construction, several nonresidential projects announced by the different levels of governments, such as the replacement of the Turcot Interchange and the modernization of Notre-Dame Street, will boost employment growth in the construction sector.
However, the level of activity in the manufacturing sector will moderate.

Mortgage rates are expected to be relatively stable

“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.”

**Note: The Back of Canada already made cuts to the interest rates. Check the December 9th press release.
The next scheduled date for announcing the overnight rate target is 20 January 2009.

Resale market to slow moderately

The growth in prices will be slower for existing homes than for new homes, which will widen the price gap between them and consequently prompt more buyers to turn to the resale market.
While slightly less active, the resale market will still remain strong. The sales levels forecast for 2008 and 2009 will exceed the annual average of 39,000 transactions recorded for the period from 2002 to 2007.

Condominiums will maintain the upper hand

Condominiums—the only housing type that will register an increase in sales in 2008—will sustain a less significant decline in demand than single-family houses or plexes 2009.
Affordable housing types, such as condominiums, and homes located in less expensive geographic sectors, are managing better.

Slightly more supply on the market

This is good news, says Moishe Alexander

Montreal Listing Trends 2009

Currently, the supply of homes is growing. Listings started to rise again in the second quarter of 2008, and there is every indication that they will end the year up by 7 per cent over 2007. As well, we forecast that they will maintain this momentum in 2009, with an increase of 9 per cent. At the end of 2008, an average of 22,300 active listings per month will have been registered in the GMREB MLS® system for the Montréal CMA.

Affordable homes will again stand out

Overall, total starts will fall this year. However, the opposite will hold true for more affordable housing types, which are expected to register increases in starts. After having exploded in 2007, with a gain of 35 per cent, semi-detached and row housing starts will maintain their momentum this year and rise by 14 per cent to 2,200 units.

Condominium starts will increase, to a lesser extent.

In 2009, these two housing types will again stand out. Semi-detached and row home starts will stay at the same level as in 2008, while condominium starts will register a smaller decrease than the declines that will be recorded for single detached home building and rental housing construction. In all, 7,700 new condominium units will be started next year, or 4 per cent fewer than in 2008.

The downward trend in single detached home starts

Single Detached Housing Starts

It began a few years ago, will continue. Because these houses are more expensive, also because the population is aging and households are getting smaller, the need for more spacious homes is less significant than before.

January 9, 2009 — The seasonally adjusted annual rate1 of housing starts was 177,300 units in December, down marginally from 178,000 units in November, according to Canada Mortgage and Housing Corporation (CMHC).

“Housing starts in December were almost unchanged compared to November,” said Bob Dugan, Chief Economist at CMHC’s Market Analysis Centre. “At an estimated 212,366 units, housing starts in 2008 breached the 200,000 unit mark for a seventh consecutive year.”

Pent-up housing demand which built up over the 1990s enabled Canadian housing starts to exceed long run demographic demand for the majority of this decade. This excess demand has gradually decreased and CMHC expects construction levels in 2009 to be more aligned with long run demographic demand.

According to Moishe Alexander CEO of Canadian Funding Corporation, the seasonally adjusted annual rate of urban starts decreased 0.5 per cent to 150,100 units in December. Urban multiple starts increased 3.2 per cent to 87,400 units, while urban single starts eased 5.1 per cent to 62,700 units in December.

December’s seasonally adjusted annual rate of urban starts moderated in three of the five regions in Canada. Urban starts declined 12.6 per cent to 36,700 units in Quebec, 6.3 per cent to 25,100 units in the Prairies, and 3.6 per cent to 8,100 units in the Atlantic Region. British Columbia urban starts rose 9.9 per cent to 19,900 units and Ontario urban starts climbed 8.6 per cent to 60,300 units.

Rural starts were estimated at a seasonally adjusted annual rate of 27,200 units in December2.

For the year 2008, actual starts in rural and urban areas combined moderated by an estimated 7.0 per cent, compared to the same period last year. Year-to-date actual starts in urban areas have decreased by an estimated 3.3 per cent compared to 2007. Actual urban single starts for 2008 were 18.1 per cent lower than they were a year earlier while urban multiple starts were up by 9.8 per cent over the same period.

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.

For more information, please see:

http://www.cmhc-schl.gc.ca/en/corp/nero/nere/2009/2009-01-09-0815.cfm

NEW HOME MARKET

Moishe Alexander says: Total starts down 15 per cent on lower multi-family construction

This year will see total housing starts in the Winnipeg Census Metropolitan Area reach 2,875 units, a decline of 15 per cent from 2007. The reduction in total starts will be due entirely to a substantial change in multi-family construction that countered the modest gains in the single-detached sector.

The outlook for the Winnipeg new home market is mixed. While there are several economic and housing market headwinds facing the housing industry at the close of 2008 and into 2009, they are in opposition to a number of positive influences such as record migration and 2008’s impressive rate of full-time job growth. The challenges will cause some sectors of the housing market to back off the growth rates that have become the norm in recent years. However, there will be pockets of strength in Forecasts overcome the uncertainty facing the economy as a whole.

Moishe Alexander says that in 2009, single-family construction will remain strong early in the year as builders have commitments from buyers that will carry them through the first six months of 2009. The second half of the year will see modest declines and higher carrying costs and a modestly slowing economy take their toll on buyers.

Multi-family starts will moderate as builders re-evaluated the viability of projects in the face of rising inventories and concern over increased credit market uncertainty.

Single-detached construction poised for another strong year

This year, builders across the Capital region will surpass both the 1,737 single-detached homes started in 2006 and the 1,870 started in 2007, by pouring foundations for 1,925 homes.

Moving into 2009, the CMA will see 1,850 single-detached homes started, a modest four per cent decrease from 2008.

Moishe Alexander says that demand for new single-detached units in Winnipeg remains strong and builders are confident that volumes can be maintained through the early part of 2009. Pent-up demand for single-detached housing, and delays in bringing on new lots in high-demand areas, has forced builders to push starts into 2009, despite the fact that contracts have been signed in 2008. In addition, persistent labour shortages in many of the construction trades has been a limiting factor for builders who must also compete with the renovation sector for tradespeople. While there remains an adequate supply of lots in each of the four quadrants of the city, delays in smoothly bringing on new lots in the desirable Waverly West are responsible for some of this temporal shift. It is also one of causes of the geographical shift in single starts that will continue into 2009.

While volumes in 2009 will be similar to 2008, the location of the starts will shift somewhat. Buyers have increasingly begun to focus their attention outside of Winnipeg City to some of the surrounding Rural Municipalities (RM’s). In the third quarter of 2008, more than 30 per cent of total single-detached starts occurred in one or more of the ten RM’s that ring the city. This trend will continue over the forecast period. There are several factors responsible for the shift. While lifestyle and financial considerations are at play for some households, the delay in delivering serviced lots in the more desirable areas of the city is causing some buyers to look outside the city limits.

Moishe Alexander comments that the price of a new home in Winnipeg has risen significantly over the last few years. 2009 will see some moderation in that growth rate. The moderation, however, will not match that of the resale market as new lots that will be available for purchase in 2009 will be predominantly in the higher price ranges. The New House Price Index (NHPI) will rise 6.7 per cent in 2008 and a further 6.5 per cent in 2009. Both years will remain above the long-term average for the index. Average prices will reach $340,000 in 2008 and $365,000 in 2009. While price growth in most areas of the housing market will move toward long-term average levels, the NHPI will be boosted by the fact that many of the lots that will be made available for building in the coming years will be more expensive than in the past, even those located in the same neighbourhood.

Multi-family starts reflect shifting conditions and need for apartment units

Winnipeg will finish 2008 with a substantial reduction in multi-family starts from the 1,501 recorded in 2007. The year will see 950 foundations poured, a 37 per cent reduction from 2007 before contracting further to 850 units in 2009. Despite the lower level of activity, the two-year average would be just below the 1,040 units that saw construction begin in 2006.

Discussions with builders have revealed concerns over credit market uncertainty and building inventories that will result in a more cautious approach in the coming year. This will extend well into 2009, and possibly beyond, depending on how these two issues resolve themselves over that period. Multi-family starts will not fall precipitously, however, as they will be supported by continued demand for an expanded rental market universe. At 1.1 per cent in 2008, Winnipeg’s vacancy rate will be among the lowest in history. Meanwhile, record levels of migration will keep the household formation rate high, necessitating construction to house them.

In addition, while much of the condominium construction over the last two years has been priced at $250,000 and above, a shift to more modestly priced units will be met favourably by the market. First-time buyers, facing average resale prices in excess of $200,000, are increasingly facing affordability issues. Given Winnipeg’s historically affordable resale market, condominium builders have not been able to build units to compete with that market as they do in other cities. The price escalation in the Winnipeg CMA now makes it possible for multi-family developers to fill a niche of price points below average resale prices.

RESALE MARKET

Price gains will moderate as move to balanced market continues

After six consecutive years of double digit price growth, the resale market in Winnipeg will move to more balanced conditions in 2009.

Moishe Alexander says that price growth will moderate from the pace set in 2008, but will remain buoyed by demographic trends and the relative affordability of Winnipeg’s resale market. Increased listings will also be responsible for the moderation in the growth rate of average MLS® prices, while allowing sales to remain strong. Average MLS® price will reach $200,000 in 2008, an increase of 14.8%. A further four per cent gain in 2009 will push the average resale price to $208,000.

A key factor in the remarkable price growth over the course of the last five years has been the limited number of listings available. This situation reached a head in 2008 with record low levels of homes on the market during much of the first quarter. The second half of the year, however, saw listings move toward ten-year average levels, a sign that sellers will no longer hold nearly so much power in their negotiations with buyers. In large part, this is a function of the increased completions brought about by the elevated levels of new construction over the last two years. As these new units are absorbed, people are listing their homes in order to make the move.

The sales-to-active listings ratio (SALR), which is a measure of the balance between supply and demand, has come off its high of 2007. While still above 69 per cent in August 2008, there are signs that listings are moving slowly upward. As such, the average home sells in a little over a month. As 2009 wears on, the SALR will continue to fall, improving the demand-supply balance over the course of the year. While this important measure will show signs of softening, it will not move in the dramatic fashion that has been seen in some other Canadian centres.

This year will finish with 12,000 MLS® residential sales in the Winnipeg CMA, down 2.6 per cent from 2007. Higher listings and firm demand will facilitate a modest improvement in sales next year, reaching 12,100 units.

Despite the run-up in the value of their homes, Winnipeggers have been reluctant to put them on the market as they have in other markets in Western Canada. Some of this reluctance comes from seniors who would be happy to move into an adult lifestyle condominium in their area if one were available. In addition, Winnipegers have the highest propensities to renovate of the citizens of any of Canada’s major centres, according to a CMHC study on renovation intentions, suggesting that people are satisfied to modify their existing homes to suit their needs rather than looking to the resale market.

RENTAL MARKET

Universe will expand in 2008, vacancies remain tight

According to Moishe Alexander, while Winnipeg will see a continued scarcity of rental units relative to the demand for such accommodations, the strain will be less than in previous years. As such, the overall apartment vacancy rate will exit 2008 at 1.1 per cent and finish 2009 at 1.3 per cent. Such vacancy rates will represent a loosening of a rental market that has seen rates drop as low as one per cent over the last year. Despite the easing, prospective tenants will require advance planning for a move to, or within, the rental market.

Winnipeg’s status as a destination for international immigrants to the province will provide most of the impetus for low vacancy rates in the CMA. With 3,800 new Winnipegers expected in 2009, demand for rental accommodations will remain strong.

Even in the event of a widespread economic downtown, Winnipeg will remain an attractive destination for immigrants to Canada. With a labour market that is more favourable than the national average and an economy growing faster than the rest of the country, Winnipeg’s position as an economic leader relative to the rest of Canada will remain intact.

Despite Winnipeg’s multi-decade low vacancy rates, new rental construction had been virtually non-existent for many years leading up to 2005.

In fact, Winnipeg has had a declining universe of rental units every year since a lone increase in 2003, losing 1,796 units, or three per cent from October 2003 to April 2007. The annual reduction in the rental market universe in Winnipeg has occurred in 13 of the last 14 years, further rationale for strong multi-family construction.

With the change to the rent control legislation in 2005 allowing new rental construction a twenty-year exemption from the guidelines, there was a flurry of rental construction in 2006 and 2007. That activity, however, did not carry into 2008. In the first three-quarters of the year, 229 rental units were started, compared to an average of more than 700 annually in the two previous years.

While the more than 1,500 units started over the last three years will be a welcome addition to the rental market universe, the population growth in the city will rapidly take up those units upon completion.

With a number of sizeable rental projects approaching completion and the return of a significant number to units removed for renovations, a long anticipated increase in the rental stock will allow the vacancy rate to inch upward in 2008 and 2009 after having reached a historic low of one per cent in the Spring of 2008. Further completions in 2010 will support continued easing of the vacancy rate.

As a result of supply and demand considerations, average rent for a two-bedroom apartment in the Winnipeg CMA will reach $770 in 2008 and $800 in 2009. While the provincially mandated increases are limited to 2.5 per cent in 2009, average rent increases will exceed that number for several reasons.

Typically, the units that are removed from the rental pool are usually those with the lowest rents. At the same time, units that are added are the most recently constructed or renovated and tend to command higher rents, leading to an upward bias over time even if the number of units in the universe remains constant. Additionally, there are several exceptions to the guidelines which allow for greater than mandated rent increase under certain circumstances.

ECONOMIC OVERVIEW

While headwinds are growing for both the Canadian and Winnipeg economies, the City is poised to weather the storm relatively better than the rest of the country. Slowing sales in the manufacturing and retail sectors are balanced by a jobs picture that includes an unemployment rate that is well below the national average and further expansion in the export sector.

Says Moishe Alexander, the single most important single factor that has driven the housing market in Winnipeg has been the remarkable turnaround in migration to both the province and the city, beginning shortly after 2000. Aided by the highly successful Provincial Nominee Program, Winnipeg will see more than 3,750 new citizens in 2008. That represents about 1,560 new households that will require accommodations of some type.

Though the vast majority of the newcomers are international immigrants, the flow of skilled young people to BC and Alberta has slowed to a trickle. While those immigrants who arrived shortly after the turn of the century were more likely than the average Canadian to be renters, they will now have spent more than five years in the country and will be starting to move into home ownership. This is a trend that shows no signs of weakening, even in the face of a slowing economy.

The employment picture in the CMA remains one of the most attractive in the country. The unemployment rate in Winnipeg is hovering just above four per cent, while the participation rate is near record highs. In addition, every job, and more, that was created in 2008 was a full-time position. While job creation is expected to weaken in 2009, particularly in the manufacturing sector, this will be partly offset by persistent strength in construction employment. The share of new employment devoted to full time work will also weaken as companies look to better manage labour costs in uncertain economic times.

A number of large scale capital projects are set to begin over the next two years even as those that been the drivers of non-residential construction over the last two reach completion. There are several capital projects on the horizon that contribute to non-residential construction now that work on Manitoba Hydro`s $900 million office tower winds down. The floodway expansion continues and plans are in place for the Canadian Human Rights museum and a $125 million mass transit expansion. Planning also continues on a new football stadium for the city, at a cost in excess of $100 million.

The most significant risk to the local economy is in the form of uncertainty regarding the impacts of credit conditions in Canada, and an economic slowdown worldwide, particularly in the United States. Currently, these impacts are unclear, as there is significant volatility in markets across North America. These concerns notwithstanding, Winnipeg is well positioned to weather this storm compared to other markets across the country.

MORTGAGE RATES

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.

For more information, please click the following link:
http://www.cmhc-schl.gc.ca/odpub/esub/64355/64355_2008_B02.pdf