ARMINE YALNIZYAN
Other

Two findings stand out in the National Household Survey (NHS) data released Wednesday, both critical in this post-recession era of uncertainty:

1) A quarter of Canadian households spent 30 per cent or more of their pre-tax income on shelter, the official measure of housing affordability.

2) There was virtually no change in the rate of home ownership between 2006 and 2011. It was 68.4 per cent in 2006, and 69 per cent in 2011.

I’ll explain the significance of both; but first, let’s consider how this information was collected.

The federal Conservative government spent an extra $22-million to replace the long-form census questionnaire with the survey, going from a 20-per-cent sample of households receiving the long form in which responding was mandatory, to a 30-per-cent sample of households who could answer the questions if they felt like it. Why? The feds insisted the census was a coercive instrument of government that violated of your privacy. (I know. See my blogs from summer and fall 2010 here. Statistics Canada has a peerless record in assuring complete confidentiality in both voluntary and mandatory information-collecting.)

Of course, non-response rates are higher with voluntary surveys, and various studies show there is a predictable bias to those who are less likely to respond: The rich and the poor; those who are not fluent in either official language; Aboriginal populations; and people with disabilities.

In places where more than half the sample didn’t respond, StatCan suppressed the findings. Fewer than 60 per cent of Saskatchewan’s census subdivisions had useable information.

For these reasons, Statistics Canada made clear that you can’t compare NHS findings to previous census or other surveys they have conducted. The NHS is a family portrait with a lot of people missing.

That means we can’t ask the important questions about the differences in how we fared before and after the 2008 crisis on critical issues such as housing affordability. We also don’t really know how big our problems are, and to what degree they are widespread or localized.

So when we read that a quarter of Canadian households are paying more than 30 per cent of their pre-tax incomes on shelter, we know it’s a conservative estimate (if you’ll pardon the pun) because of the higher non-response rates among low-income households. When we read that twice the proportion of renters than owners are paying more than 30 per cent of their pre-tax incomes on shelter (40 per cent of renters versus 18 per cent of owners), we know that this understates what’s going on, because more renters are low-income than home-owners.

And how many Canadian households are renting? It’s not clear that we even have that basic question right. Statistics Canada notes some unexpected results with the NHS. It should be the inverse of the 69 per cent of owners – that is, 31 per cent of Canadian households rent their dwelling. But the proportions may be off.

It’s odd that the NHS shows the rate of growth in home ownership fell precisely when interest and mortgage rates dropped to historic lows between 2006 and 2011. (After all, interest rates weren’t this low even in the 1930s, and mortgage rates are lower than at any time since the 1950s, when authorities started collecting the data.)

Home ownership is the way many people create economic security and maintain purchasing power when incomes fluctuate. Tracking that variable authoritatively can tell us whether troubling levels of household debt are being driven by a rising incidence of home ownership (perhaps not such a bad thing), higher housing prices (bigger mortgages), or other causes. The census did that.

Census results also alerted us to systemic over-crowding in First Nations and Inuit housing. The NHS slapped blurry goggles on our vision. We know less than before about the living conditions of these communities now. Same story for immigrant and newcomer communities.

These are the two nodes of future population growth in Canada – where the evidence we do have suggests that troubles are brewing.

The main finding of the NHS is that, with weaker ability to track change or measure a growing portion of society, we’re losing sight of the Canada we’re becoming.

© Copyright 2013 The Globe and Mail Inc.

Other

OTTAWA – Mortgages have continued to help make owning a home a reality for a majority of Canadians, with almost 60 per cent of homeowners in Canada also holding a mortgage, according to newly released statistics.

Data from 2011 National Household Survey revealed that 5.3 million of the country’s nine million homeowners – not including households on farms or reserves – had a mortgage.

The rate of 58.6 per cent was little changed from 2006 census results that revealed 57.9 per cent of homeowners held a mortgage, although the data is not directly comparable due to differences in methodology.

Douglas Porter, chief economist with BMO Capital Markets, cited some of his own data that showed the value of mortgages in Canada rising about 8.5 per cent annually, on average, between 2006 and 2011. He said this jump stems from a combination of more mortgages being taken out and higher values attached to them.

Porter said historically low interest rates in recent years have encouraged increases in home ownership and spurred more homebuyers to seek mortgages. He added that mortgages are more often being used, not just for buying homes, but to unlock the value of properties to finance other purchases at relatively low interest rates.

“Increasingly, I tend to think that because interest rates have been so low, many households have been trying to consolidate their debts in their mortgages,” he said. “With those exceptionally low rates, it may have encouraged some people to extract equity in their home and make other big-ticket purchases like renovations or a vehicle. . . . I do think households have become a little wiser in how they handle debt.”

Benjamin Tal, deputy chief economist with CIBC World Markets, said it’s an indication of people “getting more financially savvy. It’s an effective way of using debt. (Mortgages are) the cheapest debt there.”

Still, Statistics Canada said the average shelter costs of households with a mortgage – $1,585 a month – were three times higher than owner households that were mortgage-free. The federal government has taken several measures in recent years to curb the growth of mortgage debt in Canada, including reducing the maximum amortization period on government-insured mortgages to 25 years from 40 in three separate moves between 2008 and 2012.

Tal said there have been signs in recent years that the overall growth of mortgages is slowing, “reflecting the fact that people are compromising” on things such as the size of their homes.

The National Household Survey showed that about 20 per cent of those who bought homes between 2006 and 2011 did so without accessing a mortgage.

It also showed that a majority of homeowners in most provinces and territories held mortgages – the lone exception was Newfoundland and Labrador, where just 73,956 homeowners were making mortgage payments compared to 87,445 that were mortgage-free.

Porter said the financial crisis that occurred in late 2008 and early 2009 might have had mixed results on the mortgage market. For example, money lost on stock markets may have necessitated the need for some people to turn to mortgages for financing.

“Although the counter to that is if confidence was badly shaken, you would think people would have delayed making a major investment, like buying a house. So it could have cut both ways on that front,” he said.

The voluntary nature of the National Household Survey leaves gaps in the data from groups that tend not to respond to voluntary surveys, including aboriginals, new immigrants and low-income families. While experts believe the data should provide a fairly accurate big-scale picture of Canada, statisticians and economists warn the smaller the group surveyed, the less reliable the information.

© Copyright (c) Postmedia News

Garry Marr
Other

Low interest rates are helping to boost property markets across the globe and Canada is no exception, says a new report from the Bank of Nova Scotia.

However, future gains in Canada are no guarantee, the report from economist Adrienne Warren says.

“Canadian housing activity remains buoyant, though the underlying fundamentals for continued gains are becoming less favourable,” she said, noting average inflation-adjusted home prices jumped 2% in the second quarter from a year ago.

Ms. Warren says low borrowing costs and balanced market conditions have brought buyers to the Canadian housing market, although slowing job growth and a recent jump in fixed long-term mortgage rates will likely cool the market for the rest of 2013 and into next year.

On a regional basis, she says Alberta continues to have the strongest housing market, aided by population increases and growth in full-time jobs. By contrast, B.C. prices remain some of the softest.

© 2013 National Post

Robert McLister
Other

The idea that low mortgage rates are gone forever sent Canadian home shoppers into a panic this summer. Thousands rushed to use their rock-bottom pre-approved mortgage rates and buy a home, contributing to a 20 to 50 per cent spike in sales last month in Canada’s biggest housing markets.

But how logical is rushing to buy a house simply because mortgage rates have risen?

Rates today

For the past few months, consumers have been bombarded with comments like this:

“I think this is the real thing. This is the end of extremely low interest rates.” – Benjamin Tal, deputy chief economist at CIBC World Markets

Not surprisingly, many folks who read such comments head immediately to their bank or broker and lock in a rate for 90 or 120 days. Those 90-120 days fly by, which adds to their perceived urgency to buy.

But the reality is that by all historical measures, mortgage rates are still extraordinary and could remain so for a while. Take for example the most popular term, the five-year fixed, for example. Data from RateHub.ca shows that since 2006, the average discounted five-year mortgage has been 4.11 per cent. (See this attached chart for more details.) Since 1991 (the modern era of monetary policy), the average has been north of 6 per cent, reaching a high of more than 10 per cent in 1991.

Yet, even after this summer’s big bump in rates, it’s still possible to snare a five-year rate at 3.39 per cent or less. That’s just a short stroll from the historically low 2.99 per cent rates that garnered headlines for months.

And while the uptrend in rates may continue, there’s nothing to say they won’t reverse lower. We’ve seen three major fake outs in rates over the past five years and we remain in a low-inflation modest-growth environment. Until it’s clear that the Bank of Canada will start lifting its key lending rate, fixed mortgage rates will gyrate to the ups and downs of the bond markets and North American economy.

Pay less interest. Pay more for a home?

“Buying the same house will be more expensive this fall than this spring,” National Bank Financial’s Peter Routledge told the Globe and Mail last month. But analysts point to a range of factors that could moderate home prices in the next six months, including higher interest rates, growing supply, modest income growth and stricter mortgage regulations. Canada’s banking regulator is weighing new mortgage rules as we speak.

Rates are the biggest wild card and the No. 1 factor that could put the brakes on home prices. Higher mortgage rates immediately make it harder for budget-strapped buyers to qualify for a mortgage. That’s why – other things being equal – as rates increase, prices usually decrease.

So if home prices potentially face headwinds, does it really make sense to run out, compete with a stampede of other buyers and purchase a home?

Economists like Toronto-Dominion Bank’s Craig Alexander project another half-point rate jump in five-year fixed rates next year. Based on CREA’s average Canadian home price and a 5 per cent down payment, that half-point would cost home buyers $8,900 more interest over five years versus today’s rates, assuming an equally priced home.

What are the chances that rushing to buy now will cost you at least $8,900 more and/or cause you to settle for a less than ideal property?

The right strategy

Knee-jerk decisions tend to be costly when it comes to personal finance, be it with investing, buying insurance, or getting a mortgage. If you’re in the market for a new home, get one or more 120-day pre-approvals to protect yourself from rate increases and reset them every few months as necessary.

Then take your time, block out the rate chatter, and wait for a property that’s the perfect long-term fit… and good value. Canadians live in their homes an average of five to 10 years. That’s a long time to live with a rushed decision.

© Copyright 2013 The Globe and Mail Inc

Other

Canada Mortgage and Housing Corp. says the pace of housing starts was down in August compared with the previous month but remained within the forecast range.

The monthly seasonally adjusted rate fell to 180,291 units last month, down from 193,021 in July. The six-month average also dipped to 187,197 units in August from 187,324 in July.

Housing starts in urban areas fell by 5.8 per cent from July’s level, mostly because of fewer multiple-unit projects such as condos or apartments, the Ottawa-based federal Crown corporation reported Tuesday.

“The trend in total housing starts continued to be relatively stable for a sixth consecutive month, remaining within a narrow range of roughly 182,000 to 188,000 units since March 2013. This is in line with our forecasts,” said Mathieu Laberge, CMHC’s deputy chief economist.

However, the decline was bigger than others expected. Estimates compiled by Thomson Reuters had forecast the August seasonally adjusted rate would be 189,500 units.

BMO economist Benjamin Reitzes said Ontario was one of the few bright spots, with starts up 14 per cent. That was offset by declines in the other regions, with the Prairies down 21 per cent, B.C. down 18 per cent, Quebec down 9 per cent and Atlantic Canada down 7 per cent.

Alberta accounted for the bulk of the drop in the Prairies, leading Reitzes to suggest efforts to clean up from devastating floods in late July may have diverted resources away from new home construction.

“Canada’s housing market remains in good shape despite the larger-than-expected decline in August housing starts,” Reitzes said in a commentary.

“Indeed, through the first eight months of 2013 starts are averaging 183.2k, essentially right on demographic demand.”

“Building permits have also remained healthy in recent months, hinting at some near-term upside for starts.”

Reitzes said that higher mortgage rates will restrain housing sector activity in the second half of 2013, but it seems the industry is headed for a “soft landing” – rather than a major downturn that some observers had predicted.

© Copyright 2013 The Globe and Mail Inc.

Naoibh O’Connor
Van. Courier

The fourth and final draft concept for potential redevelopment of the Pearson Dogwood Lands, located at 59th Avenue between Heather and Cambie streets, will be unveiled at open houses Sept. 12 and 14.
Vancouver Coastal Health owns the 25-acre site. It envisions a mixed-use development, which will include health care housing and related services, housing, community amenities and park space. Building heights could range from three to 28 storeys. Towers would be clustered along Cambie Street and the northeastern portion of the site. The concept also includes a new transit station at West 57th and Cambie on the Canada Line.
The City of Vancouver is working on a planning program with VCH, which will produce a policy statement that will guide redevelopment. City staff expect to bring the policy statement to council for approval in December or early next year. If council approves it, VCH can file a rezoning application.
Initial open houses were held last January, followed by another set in June when three redevelopment options were presented. The best ideas were consolidated into the fourth concept being released at this week’s open houses, explained Brad Foster, the real estate consultant for VCH who’s working on the project.
“The goal is to leverage the value of the land for reinvestment into health care. Capital dollars are tight with the province obviously, so we’re looking at ways in which we can generate value from our land assets more creatively so that we can fund the rejuvenation of residential care throughout Vancouver Coastal Heath and specifically the two facilities that exist on this site – the George Pearson Centre and Dogwood Lodge – and [fund] other health care operations [on the site] like a new community health centre, a new therapeutic pool and a whole range of independent housing options for people with disabilities,” he said.
Foster estimates the land value at about $100 million. There are no plans to sell.
“Ideally we don’t want to sell because it is a public asset. The model that we’re looking at is similar to what UBC has done where they’re able to lease the land to developers for 99-year leases. By doing that you generate cash flow and capital from the land but the health authority, and the province in effect, is able to retain the land asset long term so you don’t lose that public value,” he said.
Foster said reaction has been positive so far, noting a 20-person community advisory group has been involved.
Matt Shillito, the city’s assistant director of community planning, said the zoning is actually a duplex zoning, which is unusual for a site that’s an institutional use. The 1995 Oakridge-Langara Policy Statement talked about redevelopment of the property in the future, but it didn’t anticipate the Canada Line. During Cambie Corridor planning, the land was identified as among sites that had significant development potential beyond existing policy and that it should be looked at through a major projects process, which is what’s underway.
Open houses run from 5 p.m until 8 p.m. Sept 12 and from 10 a.m. until 2 p.m., Sept. 14 at Pearson Dogwood Redevelopment Project Office at 601 West 59th.

© Copyright 2013 Courier

Other

OTTAWA – Canada Mortgage and Housing Corp. says the pace of housing starts was down in August compared with the previous month but remained within the forecast range.

The monthly seasonally adjusted rate fell to 180,291 units last month, down from 193,021 in July. The six-month average also dipped to 187,197 units in August from 187,324 in July.

Housing starts in urban areas fell by 5.8 per cent from July’s level, mostly because of fewer multiple-unit projects such as condos or apartments, the Ottawa-based federal Crown corporation reported Tuesday.

“The trend in total housing starts continued to be relatively stable for a sixth consecutive month, remaining within a narrow range of roughly 182,000 to 188,000 units since March 2013. This is in line with our forecasts,” said Mathieu Laberge, CMHC’s deputy chief economist.

However, the decline was bigger than others expected. Estimates compiled by Thomson Reuters had forecast the August seasonally adjusted rate would be 189,500 units.

BMO economist Benjamin Reitzes said Ontario was one of the few bright spots, with starts up 14 per cent. That was offset by declines in the other regions, with the Prairies down 21 per cent, B.C. down 18 per cent, Quebec down nine per cent and Atlantic Canada down seven per cent.

Alberta accounted for the bulk of the drop in the Prairies, leading Reitzes to suggest efforts to clean up from devastating floods in late July may have diverted resources away from new home construction.

“Canada’s housing market remains in good shape despite the larger-than-expected decline in August housing starts,” Reitzes said in a commentary.

“Indeed, through the first eight months of 2013 starts are averaging 183.2k, essentially right on demographic demand.”

“Building permits have also remained healthy in recent months, hinting at some near-term upside for starts.”

Reitzes said that higher mortgage rates will restrain housing sector activity in the second half of 2013, but it seems the industry is headed for a “soft landing” – rather than a major downturn that some observers had predicted.

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OTTAWA – Contractors took out building permits worth $8 billion in July, up 20.7 per cent from June — the sixth month-to-month gain in seven months, Statistics Canada reported Monday.

The July increase came mainly from higher construction intentions for commercial buildings in Ontario, Alberta and Quebec.

In the non-residential sector, the total value of building permits rose 45.5 per cent to $3.9 billion in July, with Ontario, Quebec and Alberta accounting for most of the increase.

Municipalities issued $2.6 billion worth of commercial building permits in July, up 89.2 per cent from June as a result of higher construction intentions for a variety of buildings, including office buildings, retail complexes and recreational facilities.

The value of permits in the residential sector increased 4.1 per cent to $4.1 billion in July following a 12.8 per cent decline in June.

The value of residential permits rose in five provinces, led largely by Quebec, followed by Alberta and Ontario. British Columbia, Saskatchewan and Nova Scotia accounted for most of the declines in July.

“Residential permits didn’t regain full vigour, rising 4.1 per cent after a 12.8 per cent drop in June. But non-residential permits recorded a massive gain, led by an 89 per cent rise in commercial permits, across most provinces, with industrial permits also up 11.6 per cent after a huge June drop,” said CIBC World Markets chief economist Avery Shenfeld in a commentary.

“Overall, this volatile series still seems to have an upward trend heading into Q3, suggesting that construction will still be a growth contributor in the near term.”

Other

“Confidence is returning to the sector as credit availability and strong industry fundamentals create a more stable foundation for deal-making,” says Krista Blaikie, EY’s National Real Estate leader. “Companies that were focused on maintaining stability and operational efficiency are now shifting gears and looking ahead at new investment opportunities.”

Overall, respondents’ optimism is up considerably from 53% one year ago.

“Investors are looking beyond the developed world — with the exception of Canada — and focusing their investment strategies in emerging markets with immense growth potential,” says Blaikie. “Canada, on the other hand, continues to attract the attention of investors searching for a stable political and economic environment not found in the Eurozone.”

Those ready to transact in the year ahead are focused on smaller deals, with 64% of companies expecting the majority of deals to fall between US$51m and US$500m.

“Making the most of transaction opportunities, whether small or large, depends on a thorough understanding of the local market, regulatory environment and culture. Those that perform thorough due diligence and select the right partners will be best positioned for sustainable growth,” says Blaikie.