Real Estate News Clippings

The Calgary Market (February 19 2007) The Calgary Real Estate market has undoubtedly been one of the hottest in Canada for several years with house sales rising over 25% on average from the 2004 figures according to the MLS reports. The booming Albertan economy has brought a huge influx of newcomers both from within Canada looking to reap the rewards of the boom and immigrants from all over the world. With Calgary finally crossing the 1 million residents in 2006, the city reached a big milestone and is now considered "a big" city. Market hot but cooling ahead (March 2007) New home starts and resale activity have been solid nationwide so far this year, as have prices increases, but a cooling trend is expected. That’s the consensus of Scotiabank’s Canadian Real Estate Outlook and Trends forum, which gathered together housing experts to provide updated forecasts for 2007. Keynote speaker, Phil Soper, president/ CEO of Royal LePage Real Estate Services, said the year has been more active than originally expected. “Fuelled by solid economic conditions including moderate interest rates, high employment and strong consumer confidence, Canada’s housing market was quick out of the gate this year,” said Soper. “Early indications point to a stronger-than-forecast spring market, the most important trading period on the annual real estate calendar. “We expect that this resilient market will continue throughout 2007.” Adrienne Warren, senior economist at Scotiabank, described the national market as “the rabbit that keeps on going and going.” She presented the findings of her latest Real Estate Trends Report. “Warmed by mild winter temperatures, housing starts in January jumped to a 2 1/2-year high, while home resales climbed to a new record. The trend in national new and existing home prices, while off the highs of last spring, is still averaging about 10 percent year-over-year.” Looking at national figures does not give the story of the housing market west of Ontario. Warren acknowledged the booming Western provinces were the hottest markets in the past year, with home price appreciation averaging 18% year-over-year — four times the pace in the East. Under an even tighter microscope, the average resale home price in the Calgary CMA rose 29% from February 2006 to February 2007. The average new home price, at absorption, rose 18% from January 2006 to January 2007 and is expected to hit $487,000 by year end. Significant regional disparities are expected to continue throughout 2007, and beyond, with the Western provinces expected to again lead in average house price increases and construction, supported by tighter market conditions, record employment rates and continued strong in migration. Last year, Western Canada’s active resource industries and tight labour markets attracted more than 70,000 people to Alberta and B.C. from other parts of the country, a number that is expected to be exceeded this year. Repaying mortgage high priority (February 2007) Canadians, for the most part, take their debt repayment responsibilities seriously, according to the 2006 Mortgage Survey, conducted by Canada Mortgage and Housing Corporation. Three-quarters of all respondents to the survey indicated their goal is to pay off their mortgage as quickly as possible, with 50% agreeing, whenever possible, any extra money would be used to pay down their mortgage. “This study suggests Canadians are fundamentally cautious when it comes to their mortgage debt,” said Pierre Serré, vice-president, Insurance Product and Business Development at CMHC. “This is particularly true among young, first-time homebuyers.” A vast majority of Canadians choose Canadian financial institutions for their mortgages — 86% of respondents indicated it was somewhat or extremely important their lender be a Canadian company. Similarly, 84% of those surveyed said they are satisfied with the service they receive from the mortgage industry in Canada. While loyalty to their original lender is a big factor with Canadians — the majority of mortgage consumers remain loyal to their current lender — last year saw a slight increase in the percentage of customers who switched to a different financial institution when it came time to renew the mortgage. Most mortgage holders — 71% — who refinanced their mortgages last year did so before the scheduled renewal time. Among those who refinanced, the most common reasons were home renovations and improvements, while almost one-in-three of those refinancing used the funds to consolidate debt. The survey found the proportion of purchasers using the services of mortgage brokers has remained unchanged from last year’s level of 27%, the number of consumers who turned to mortgage brokers for renewal and refinance transactions increased in 2006. Having a personal relationship with a lender was rated very high among respondents, with face-to-face meetings being the most common activity consumers engage in when shopping for a mortgage. A familiar lender/loans officer is felt to be a reliable source of information by 69% of respondents, with 82% saying they look to their present loans officer for guidance and information, finding the information provided to be useful. CMHC’s Mortgage Consumer Survey is conducted each fall to examine consumer behaviour, attitudes and expectations when acquiring, renewing or refinancing a mortgage. The survey is based on a national probability sample of active mortgage consumers comprised of first-time buyers, repeat buyers, mortgage renewers and refinance consumers. The results for the entire sample are accurate within 2.1 percentage points 19 times out of 20. Competition for land driving up prices (March 2007) Calgary’s red-hot economy and rapid growth are catching the attention of a lot of out-of-town developers and speculators. Several groups from Vancouver have purchased plots of land in the Beltline and downtown core and are moving ahead with residential and commercial projects. Developers from Toronto and Montreal are headed west to build family homes in Airdrie and mixed-used residential/commercial towers downtown. There is also a rumour making its way around town of a major developer arriving soon from the southeast part of the U.S. The bottom line created by these newcomers is adding to the price of new homes, says Richard Priest, past chairman of the Urban Development Institute-Calgary and vice-president of Apex LP. “There is a lot of institutional capital in the market, including pension funds, and other huge money coming into Calgary and the competition is driving up land prices,” says Priest. “It has affected the demands vendors are asking in terms of closing times. They want to be paid in 60 to 90 days. For some deals inside the city, the buyer has 30 days for due diligence and then 30 days to cut a cheque. “You just cannot financially model that and make it make sense.” The competition from companies coming into Calgary will continue to put pressure on prices and affect the way business is done, says Priest. “The conventional way of tying up property and using your own equity is changing and we’re looking at more creative methods of raising capital,” he says. “There is a lot of money out there — institutions can’t find enough places to put their money and some guys can just write cheques.” On top of competition for land, labour and materials price increases are driving up servicing costs, with little or no relief on the immediate horizon. “I think the worst is yet to come,” says Priest. “We’ve had a pretty good run over the last three or four years when our contractors managed to hold the line. Now there are price pressures from a lack of aggregate gravels, it takes a lifetime to get new permits which affects costs adversely, fuels used in asphalt manufacturing are getting increasingly expensive as are the machines we use — right down to the labour.” Priest says the industry is concerned about new home costs and how they are affecting affordability. “We’re looking at how are we going to provide that sector of housing and it really bothers me to see the level of dissatisfaction of people who have moved here,” he says. “Imagine people coming in here now, trying to buy their first house. “Everything I hear and everyone I talk to, affordability is their number one concern and we’re asking ourselves ‘how can we slow down the price increases?’ Nobody wants to be the most expensive city in Canada for housing.” Soaring land prices inside the city limits have spilled into the land scheduled to be annexed by the city, says Priest. “Outside the city in the annexation areas, the costs are around $150,000 per acre, but you can typically get better terms on those,” he says. “The prices aren’t subject to annexation going through, because everyone is confident annexation will happen.” Don’t expect annexation to cause land prices to fall, but it will hopefully stabilize costs, which should reduce the rate of price increases. Starts expected to ease off just a little bit (May 2007) Canada Mortgage and Housing Corporation has released its Spring 2007 Calgary Housing Market Outlook, and while the market is slowing, it’s like slowing to 110 km/h from 120 km/h on the Deerfoot. Lai Sing Louie, senior market analyst for CMHC in Calgary, expects about a 10% decrease in new home starts in 2007, compared to 2006. “Last year was a record for new home starts, reaching an all-time high of 17,046, which included 10,482 single-family and 6,564 multi-family homes — the highest figure for multis in 25 years,” says Louie. “We are forecasting starts to pull back to 15,500 this year, including 9,250 single- and 6,250 multi-family homes, which will still be the second-highest number of annual starts on record.” The expected decrease in starts this year is the result of slow sales in late 2006 and earlier this year, as well as a record number of homes under construction. “At the end of March, more than 6,000 single-family and 8,185 multi-family homes were under construction in the Calgary CMA, among the highest total on record,” says Louie. “This will, to some extent, inhibit the number of new foundations poured in the first half of 2007, as builders work feverishly to reduce construction durations.” Louie predicts the average cost of a new, single-family home to reach $487,500 by the end of the year, but also expects the rate of price increases to moderate from the torrid pace of the last 18 months. “We’re beginning to see a moderation in the new home price escalation and have noticed the new house price index has trended downward from its peak last year,” he says. “Prices increased 60 percent last year over 2005, but the average price of an absorbed single-family home in March was $423,711, up 29 percent from March, 2006. “By the end of the year, we’re projecting increases to be around 18 percent, year-over-year.” Louie adds a caution when quoting average price. “While the absorbed average price reflects the price of homes completed in March 2007, units that were recently absorbed were likely priced before construction began last year,” he says. Since then, builders have been faced with further increases in the costs of labour, materials and especially land — costs that are reflected in current prices. Driving the new homes market is record-breaking in-migration, with people from all over Canada, especially Ontario, moving to Calgary to fill the thousands of job vacancies. “We expect Calgary’s net migration numbers to peak this year at 32,500 when the city census is published in July,” says Louie. That compares to a net migration of 25,557 in the city between April 2005 and April 2006, and Louie expects the number next year to be below that. “When we look ahead, we think net migration will be around 23,200 between April this year and April next year,” he says. If Louie’s projections are correct for next year, it will still be the third-highest annual net migration figure in more than 17 years. On the financing front, short-term mortgage rates are expected to ease as the prime rate heads a bit south in the next 12 months, while long-term rates will rise only slightly. One-, three- and five-year rates are forecast to be in the 5.75 to 6.75, 6 to 7 and 6.25 to 7.25% range respectively. Affordability doesn't top list for condo buyers (June 2007) It's been long reported that condominiums are an affordable option to single-family homes. It's also been said that condominiums have become the starter home in today's environment of rapidly rising prices. So, imagine my surprise when an e-mail popped onto my computer screen telling me that affordability was not at the top of the list of reasons Calgarians are buying condos -- something I and some in the real estate business aren't quite ready to believe. An Ipsos-Reid survey for the TD Bank says only 26 per cent of respondents bought condos because it was cheaper than a detached or single-family home. Most respondents, or 36 per cent, said the maintenance-free condo lifestyle was the key reason for their purchase. "They weren't talking to any of my clients," says a realtor, who requested anonymity. "Price is always a factor. I'd say at least 50 per cent buy because of affordability." Particularly among first-time buyers, it's all about money. "Mind you, second- and third-time buyers are more likely to be in the maintenance group," says another realtor, who also requested anonymity. Here are a couple of other interesting findings from the survey. - Only 25 per cent of Calgarians would consider raising a family in a condo, below the five-city average (Calgary, Vancouver, Toronto, Montreal and Halifax) of 29 per cent and well below Vancouver's average of 34 per cent. "Condos are not a good environment in which to raise kids because there are no amenities for them," says one of the realtors. - Fifty-five per cent of Calgarians agree that too many children living in a condo building would be a reason not to purchase a unit. That compares to 47 per cent as a five-city average. This attitude could change as affordability concerns continue to grow, says one of the realtors. Some families may not have any choice but to buy a condo. - Proximity to public transit is less of a selling point for potential Calgary condo buyers than in the other cities surveyed. About 68 per cent of Calgarians consider it an important factor, compared to the five-city average of 79 per cent. Part of Calgary's Smart Growth strategy is to have increased density (read multi-family housing) in close proximity to the LRT and bus routes, and either in or close to the city core where many of the city's largest employers are located. The choice of condo over detached homes also has a lot to do with the fact that many of Calgary's new citizens come from "condo cities" like Toronto, Vancouver and, to a lesser extent, Montreal, says the first realtor. "For many newcomers, it's a conscious choice that has nothing to do with affordability," he says. "They've always lived in condos and are comfortable with that type of lifestyle." - Among Calgarians who would consider buying a condo, most would be comfortable with a price of $200,000 to $400,000. The survey found that 68 per cent would buy a two-bedroom condo for that price. Another 23 per cent would spend less than $200,000 and only four per cent would spend between $400,000 and $600,000. Mortgage program aimed at green homes (June 2007) Saving for a down payment can be the hardest part of buying a home. Mortgage loan insurance from Canada Mortgage and Housing Corp. helps make it easier for Canadians to buy an energy-efficient home with little or no money down and benefit from mortgage loans at the same competitive interest rates that are available to home buyers who make a larger down payment. Energy-efficient homes can offer significant savings on heating and cooling costs, and are good for the environment. To encourage Canadians to go green when buying a house CMHC is making it easier to purchase an eligible energy-efficient home. CMHC is offering homebuyers a 10 per cent mortgage loan insurance premium refund and extended amortization periods of up to 40 years without surcharges. Which homes are eligible? Homes that fit the bill are those that have an energy efficiency rating of 77 or above on a Natural Resources Canada (NRCan) energy assessment, those that are built under an eligible energy-efficient building program (such as the BuiltGreen Alberta and BC Gold Label Homes, NovoclimatMC, Energy Star and Power Smart) or those that are built under the R-2000 program are eligible. High-rise condo units in buildings that meet Natural Resources Canada's building program requirements also qualify, as can homes being renovated to make them more energy-efficient. If the house does not have a rating or is not built under an eligible program, an energy efficiency rating can be obtained by having an energy assessment completed by an NRCan qualified energy advisor. For more information on CMHC mortgage loan insurance for energy-efficient homes, borrowers are encouraged to contact their lenders or visit www.cmhc.ca and type the search key words, "my energy savings." Canada Mortgage and Housing Corp. In Short: Did you know: - Canadian houses consume 17 per cent of the energy used in Canada. - Basements can be a prime source of heat loss within a house, accounting for 20 per cent to 35 per cent of the total.