Tuesday, June 11, 2013


Condo demand stronger among older Canadians: BMO
Business News Network May 30, 2013

Think the condo market is a young man's game? Think again, a report from BMO says the demand among potential homebuyers for purchasing a condo is greater for Canadians over the age of 50.

Among prospective buyers over the age 50, about 30 percent said they were willing to buy a condo over the next five years, compared to just 17 percent for Canadians under the age 50, the survey said.

The condo market in Canada's cities is also being divided into the haves and have nots, the survey noted.

In both Toronto and Calgary the appetite for buying a condo is on the rise, while demand is falling in Montreal and Vancouver.

About one-third of prospective buyers surveyed in Toronto said they were planning to buy a condo in the next five years, an increase of 11 points from a survey conducted in the fall.

In Calgary, 33 percent of buyers said they were considering purchasing a condo in that time period, up 8 percent from a previous survey.

But the story in Vancouver and Montreal is the complete opposite, with the percentage of buyers thinking of purchasing a condo falling to 28 percent from 33 percent in Vancouver and down 3 points to 24 percent in Montreal.

"Condos remain an affordable alternative to the pricey detached market in some major cities," said Sal Guatieri, senior economist at BMO Capital Markets. "For example, a typical Toronto condo today requires just 22 percent of a median family's income to service; Vancouver condos - while more expensive - are still affordable at 28 percent of income.

The report from BMO comes amid a debate among economists and other investors whether the country's housing market is headed for a U.S.-style crash. While many economists on Bay Street say the country is moving towards a "soft landing," a number of investors say that call is too optimistic.

The condo market in major cities such as Toronto and Vancouver, has attracted significant negative attention.

On Wednesday, the Organization for Economic Cooperation and Development (OECD) in its twice-yearly Economic Outlook warned of a potential for a pullback in housing prices in Canada. The OECD said Canada is one of three countries in the 34-member group where "houses appear overvalued but prices are still rising." The Toronto condominium market is the agency's "number one concern."

While a dramatic collapse in the housing market is unlikely, Jarrey said it can't be ruled out completely.

"Nobody saw the huge decline in the United State coming either five or six years ago – not nobody, but very few – and we could be having something very similar but it's not a very likely outcome," he said.


‘It’s boom time in Alberta’: New home construction at a five-year high (graphic)
By Mario Toneguzzi
Calgary Herald June 10, 2013

CALGARY — New home construction picked up in the Calgary region in May with Alberta’s level at a five-year high.

It’s a sign that the housing market is heating up.

Canada Mortgage and Housing Corp. reported Monday that total starts in the Calgary census metropolitan area reached 1,078 units during the month, which was an increase from 949 in May 2012.

“The trend of total housing starts increased slightly in May, due to strong construction in both the single-detached and multi-family markets,” said Richard Cho, CMHC’s senior market analyst for Calgary.

Multi-family starts rose to 519 in May from 466 a year ago while the single-detached market saw starts jump to 559 from 483 last year.

“While softer energy prices may be moderating overall economic growth this year, it appears that home builders didn’t receive the memo. Judging by the most recent statistics, it’s boom time in Alberta,” said Todd Hirsch, chief economist at ATB Financial.

Builders started construction on 41,438 new homes in Alberta in May — the highest this year and the first time since early 2008 that the figure has risen above the 40,000 mark.

“What’s more, the trend over the last several months clearly suggests that the housing market is heating up,” added Hirsch. “Between May 2012 and May of this year, housing starts are 14.1 per cent higher than they were in the previous 12-month period.

“What’s causing this boom in home construction isn’t any big mystery: population growth. Even if overall economic growth has slowed somewhat, the inflow of people into our province hasn’t.”

The latest Labour Force Survey, released last week, points to a surge in the labour force, which has grown by 59,400, or 2.6 per cent, over the last 12-months.

“Interprovincial and international migration to Alberta is driving some of the demand for new homes. High wages, low unemployment and a younger population are also contributing factors,” said Hirsch.

“The strong housing starts number ... is supported by another figure from Friday’s employment report — the number of construction jobs is also rising. Even if jobs in the energy patch and manufacturing have eased back a bit, employment in construction continues to provide some great work opportunities.”

Robert Kavcic, senior economist with BMO Capital Markets, said multi-unit housing starts in Canada came storming back in May “after falling precipitously through the winter months.”

“Still, the six-month trend in overall Canadian housing starts sits very close to demographic demand, further hinting at a soft landing,” he said.

Total Canadian housing starts rose by 13.8 per cent in May to 200,178 annualized units, the strongest pace in six months, added Kavcic.

The multi-unit segment rose by 22 per cent.

He said Alberta posted a modest gain, and activity in the province now sits at the highest level in five years.

“With the six-month moving average now more in line with the rate of household formation, May’s sharp jump in the pace of new home construction is unlikely to be sustained,” said Dina Ignjatovic, economist with TD Economics, about the national picture. “Indeed, slower price growth in the housing market could lead to lower homebuilding activity in the coming quarters. Moreover, the overbuilding that has taken place over the last 10 years could lead to new home construction falling below this demographic need for a period of time. This should, however, help to prevent further overbuilding and a consequential sharp correction in the housing market.

“Overall, we expect new home starts to gradually trend down over the next 12-18 months, suggesting that the Canadian economy will not be able to count on residential investment to prop up growth over that time frame.”

For Graphs: