Housing Bulletin Monthly Report

June 2010

Issue HIgHlIgHts

of Montreal) It looks as though Canadian residential construction activity has peaked for the time being and will recede in the months ahead (Bank of Montreal). It looks as though Canadian

H o u s i n g s ta Rt s are Co o li n g o f f as t eM p eRat u Re s Ri s e

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Alberta is in Growth Mode( Royal Bank of Canada)

Rental MarketVacancy rates rise across Alberta.

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Housing AffordabilityCost of home ownership improves in Alberta.

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Mortgage RatesCanada becomes first to hike rates.

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• Alberta’sMay2010preliminaryhousingstartsdecreased15.4percentoverApril2010butwere116.7percenthigherthaninMay2009.

• AccordingtoATB’sChiefEconomist,duetotheprobabilityofrisingmortgageratesandglobalturbulenceshakingenergyprices,realestateinAlbertamayremainabitflatfortherestoftheyear,butisnonethelessinbettershapethanlastyear.

* Datareflectscentreswithapopulationof10,000andoveronly.Source:CanadaMortgageandHousingCorporation

• Canada’stotalpreliminaryhousingstartsforMay2010wereup3.5percentoverApril2010andup49.8percentoverMay2009.

• TheslowdowninstartsacrossCanadaisconsistentwithCanadaHousingandMortgageCorporation’sforecastof182,000totalhousingstartsin2010.

• TheDeputyChiefEconomistattheBankofMontrealnotesthatwhilespringandsummeraregenerallythebusiestbuildingseasons,constructionisexpectedtoslowmarkedlyasaresultofcoolingdemandinCanada’shousingmarket.

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Pre l iminary Hous ing st ar ts in A lber t a* and Canada*May 200 8 to May 20 1 0

AlbertaCanada

2

nal vacancy rates (CMHC) rental construction and competition from the condominium market added upward pressure on national vacancy rates (CMHC). rental construction and competition from the cond

apaRt Ment VaCanCy Rat es H i gH eR aCRoss

the p RoVi nCe• ThemostrecentdatashowsthataverageprivaterentalvacancyratesacrossAlberta’slargemajorurbancentres**haveincreasedmorethan30percentoverthepastyear.

• AmongAlberta’ssevenmajorcentres,GrandePrairiehadthehighestvacancyrateinApril2010(14percent).

• Edmontonhadthelowestaveragevacancyrate,up5.2percentinApril2010from4.7percentinApril2009.

• VacancyratesintheWoodBuffaloRegionnearlydoubledfromApril2009(6.9percent)toApril2010(13.2percent).

• AccordingtoCanadaMortgageandHousingCorporation(CMHC),employmentlossesinEdmontonandCalgary,coupledwithinterprovincialmigrationlosseshavedampeneddemandforrentalunits.

14.0% 13.2%

5.2%

6.0%

8.7%

5.3%5.8% 10.7%

Average Apar tment Vac ancy Rates*Apr i l 20 1 0

* Averagevacancyrateforallunittypes(i.e.,Bachelor,1-Bedroom,2-Bedroomand3-Bedroom+).** Dataincludescentreswithapopulationof10,000andover.Source:CanadaMortgageandHousingCorporation

AVeRAge APARtMent VACAnCy RAtes* % Change from april april 2007 april 2008 april 2009 april 2010 2009 to april 2010

Calgary CMA 0.5% 0.2% 4.3% 5.3% 23.3%

Edmonton CMA 1.1% 3.4% 4.7% 5.2% 10.6%

Grande Prairie CA 0.9% 8.8% 8.5% 14.0% 64.7%

Lethbridge CA 1.3% 0.8% 3.1% 5.8% 87.1%

Medicine Hat CA 1.7% 2.0% 4.3% 10.7% 148.8%

Red Deer CA 2.1% 3.2% 3.9% 8.7% 123.1%

Wood Buffalo CA 0.2% 0.1% 6.9% 13.2% 91.3%

Alberta** 0.9% 2.9% 4.6% 6.0% 30.4%

3

tment rents (CMHC) for the first time since april 2007, lower demand in both Calgary and edmonton contributed to a decline in average apartment rents (CMHC). for the first time since april 2007, low

Rents deCRease for fi Rst t iMe si nCe 2007

• TheaveragerentforallunittypesacrossAlberta’slargecentres**was$937permonthinApril2010,downfrom$962oneyearearlier.

• AveragerentintheCalgaryCensusMetropolitanArea(CMA)decreasedfrom$1,006inApril2009to$970inApril2010.Thisyear-over-yeardecreaseisinlinewithCanadaMortgageandHousingCorporation’s(CMHC’s)fall2009forecastthatelevatedvacancyrateswouldpreventtheaveragerentfromrisingacrossCalgaryinto2010.

• AsvacancyratesincreasedacrosstheEdmontonCMA,rentalratesedgeddownwardslightlytosustainoccupancylevels.InApril2010,theaverageapartmentrentdecreasedto$911from$928inApril2009.

• TheLethbridgeCensusAgglomeration(CA)wastheonlymajorcentreinAlbertawhereaveragerentsincreased,risingfrom$784inApril2009to$792inApril2010.AccordingtoCMHC,Lethbridge’srelativelylowvacancyandhigherrentalratesareattributabletoitswell-diversifiedeconomy,whichreliesontheenergysectorlessthanothercentresaroundtheprovince.

$808 $1,968

$911

$937

$787

$970$792 $649

Average Month ly Apar tment Rent a l Rates* Apr i l 20 1 0

AVeRAge MontHly APARtMent RentAl RAtes* % Change from april april 2007 april 2008 april 2009 april 2010 2009 to april 2010

Calgary CMA $925 $992 $1,006 $970 -3.6%

Edmonton CMA $795 $908 $928 $911 -1.8%

Grande Prairie CA $1,039 $979 $914 $808 -11.6%

Lethbridge CA $672 $740 $784 $792 1.0%

Medicine Hat CA $596 $634 $654 $649 -0.8%

Red Deer CA $734 $798 $799 $787 -1.5%

Wood Buffalo CA $1,607 $2,193 $2,088 $1,968 -5.7%

Alberta** $847 $953 $962 $937 -2.6%

* Averagerentalratesincludesallunittypes(i.e.,Bachelor,1-Bedroom,2-Bedroomand3-Bedroom+).** Dataincludescentreswithapopulationof10,000andover.Source:CanadaMortgageandHousingCorporation

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e d M o n t o n R e s a le aC t i V i t y d i p p e d i n M ay 2 0 1 0yeaR-to-yeaR C o m paR i s o n o f H o u s i n g R e sale aCtiv ity i n e d m o nto n

i n tH e m o ntH o f may

te Board) a declining number of first time homebuyers and rising monthly carrying costs have contributed to the marked slowdown in the Calgary market (Calgary real estate Board). a declinin

C a l g a Ry ’ s R e s a le M a R k e t s ta B i li z i n g a f t e R p e a k i n g i n e a R ly 2 0 1 0

yeaR-to-yeaR C o m paR i s o n o f H o u s i n g R e sale aCtiv ity i n CalgaRy i n tH e m o ntH o f may

sIngle-fAMIly dwellIng CondoMInIuM

month new days month new days average end listings on the average end listings on the price inventory added sales market price inventory added sales market

May 07 $497,523 3,716 3,652 1,995 25 $332,237 1173 1,332 887 24

May 08 $479,564 7,099 3,432 1,368 42 $311,816 3,308 1,538 577 50

May 09 $436,427 3,861 2,235 1,584 45 $275,212 1,952 998 653 51

May 10 $483,240 5,649 2,966 1,262 38 $304,662 2,656 1,221 518 43

• Thenumberofsingle-familyCalgaryhomessoldinMay2010fell20percentcomparedtoMay2009,althoughpriceshaverisenby10.7percent.

• Listingsforsingle-familyCalgaryhomeswereup32.7percentinMay2010comparedtoMay2009,butdownslightly(4.0percent)fromApril2010.

• Onaverage,asingle-familyhomesatonCalgary’smarketfor38days,down15.6percentfromMay2009.

aveRage pRiCe average year to monthly date single- days sales to sales to family duplex / on the Residential Residential listings listings dwelling Condominium Rowhouse market listings sales Ratio Ratio

May 06 $284,992 $172,545 $224,743 24 2,474 2,344 94 92

May 07 $424,400 $266,507 $344,521 23 4,790 2,645 55 71

May 08 $385,230 $263,785 $327,566 53 4,272 1,854 43 38

May 09 $366,619 $243,744 $292,288 52 3,186 2,266 71 51

May 10 $390,583 $248,526 $320,204 44 3,670 1,682 45 46

• Theaveragepriceofasingle-familydwellinginEdmontonincreasedby6.5percentfromMay2009toMay2010.Thesameupwardtrendwasfoundinthecondominium(2.0percent)andmulti-family(9.6percent)sectors.

• ListingsinMay2010increased15.2percentoverMay2009,whilesalesweredown25.8percent.

• AccordingtotheRealtors’AssociationofEdmonton,financialincentives,changestomortgagerulesandthethreatofrisinginterestratescausedthelocalmarkettopeakearlierin2010,leavingthecustomerbasealittleleanerinMay.

• Condominiumsalesfellby20.7percentfromMay2009toMay2010.Salesarestillwellbelowpeakdemandlevelsof2007,with37percentfewersingle-familyhomesand42percentfewercondominiumssoldinMay2010comparedtoMay2007.

Source:CalgaryRealEstateBoard

• Asingle-familydwellingsatforsaleonEdmonton’smarketforanaverageof44daysinMay2010.Thisrepresentsa15.4percentdropoverMay2009andsignalsbalancedmarketconditions.

Source:Realtors’AssociationofEdmonton

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a lB e R ta o n ly p R oV i n C e t o s e e i M p R oV e M e n t i n H o M e ow n e R s H i p a f f o R da B i li t y

a lB e R ta’ s p o p u l at i o n g R ow t H w i l l R e ly o n i n t e R nat i o na l M i g R a n t s

• Theshareofhouseholdincometakenupbythecostsassociatedwithowningasingle-detachedbungalowinAlbertadecreasedslightlybetweenthefourthquarterof2009(33.7percent)andfirstquarterof2010(33.0percent)andissubstantiallylowerthantheCanadianaverage(41.0percentinQ1**2010).

• ComparedtootherselectCanadianmajorcentres,homeownershipremainsmoreaffordableinEdmonton(32.0percent)andCalgary(36.5percent)thaninMontréal(39.7percent),Ottawa(40.3percent)andVancouver(73.4percent).

• Theproportionofnethouseholdincomerequiredtomaintainasingle-detachedbungalowinCalgaryfell0.6percentagepointsfromfourthquarter2009tofirstquarter2010.Overthesameperiod,theshareofincomeneededinEdmontondecreasedby0.9percentagepointsfrom32.9percentto32.0percent.

ada) significant deterioration in affordability occurred once again...across all provinces. alberta was the sole exception, registering small improvements in the first quarter (royal Bank of Canada). significant

• AccordingtoFinanceandEnterprise,Alberta’spopulationisexpectedtogrowby68percentfromanestimated3.7millionin2009,toover6.1millionby2050(underamediumgrowthscenario).

• Inthisprojection,futurepopulationgrowthwillbedrivenmainlybymigration,particularlyinternationalmigration.Theshareofpopulationgrowthcomingfromnetmigrationisexpectedtorisefrom50percentin2010toalmost90percentby2050.

• Increasingnumbersofinternationalmigrantswillbringnewhousingpreferencesandfamilysizes,whichmayshapedemandforhousing.

Source:AlbertaFinanceandEnterprise.

* Proportionofregionalpre-taxmedianhouseholdincomerequiredtoservicemortgagepayments,propertytaxesandutilitiesforasingle-detachedbungalow.

** Q1=JanuarytoMarch;Q2=ApriltoJune;Q3=JulytoSeptember;Q4=OctobertoDecember.*** Populationweightedaverage.Source:RoyalBankofCanadaEconomicsResearch

0

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payments, property taxes and utilities for a single-detached Bungalow

Q1**2009Q4**2009Q1**2010

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CIatIon) Canada is widely believed to be entering a typical demand-driven downturn due to recent price increases and rising interest rates (CanadIan real estate assoCIatIon). Canada is widely believ

a lB e R ta’ s n ew H o M e M a R k e t R e M a i n s s t R o n g w h i l e o t H e R p R a i R i e p R oV i n C e s ’ w e a k e n

• Overall,Alberta’snewhomemarketpickeduppaceby13percentinthefirstthreemonthsof2010comparedtothesameperiodin2009,coincidingwithrisingconsumerconfidenceacrosstheprovince.

* Theterm“absorbed”meansthatanewlybuilthousingunitisnolongeronthemarket.Thisusuallyhappenswhenabindingcontractissecuredbetweenabuilderandaqualifiedpurchaserbyanon-refundabledeposit.** Q1=JanuarytoMarch;Q2=ApriltoJune;Q3=JulytoSeptember;Q4=OctobertoDecember.Source:CanadaMortgageandHousingCorporation.

• FewernewlybuilthomeswerepurchasedinManitoba(-53percent)andSaskatchewan(-15percent)duringthefirstthreemonthsof2010,comparedtothelastthreemonthsof2009.Albertahowever,buckedthisPrairietrendas3percentmorenewlybuilthomeswerepurchasedinQ1**2010thaninQ4**2009.

• WithinAlberta,morenewhomeswereabsorbedinGrandePrairie(72percent),RedDeer(43percent),andEdmonton(14percent)whencomparingQ4**2009toQ1**2010.Conversely,fewernewlybuilthomeswereabsorbedinLethbridge(-47percent),MedicineHat(-17percent),andCalgary(-13percent).

inteRest Rates staRt to Rise

• ThetargetfortheOvernightLendingRateisthemaintoolusedbytheBankofCanadatoconductmonetarypolicy.WhentheBankchangesthetargetfortheOvernightLendingRate,thischangeusuallyaffectsotherinterestrates,includingmortgageratesandprimerateschargedbycommercialbanks.

• Forthefirsttimesince2007,theBankofCanadaraiseditstargetfortheOvernightLendingRateby0.25percentagepointsto0.50percentonJune1,2010.TheBankhadmaintaineditsmaininterestrateat0.25formorethanayeartostimulateCanada’seconomyandspurrecovery.

• AsofJune1,2010,theadvertisedfive-yearconventionalmortgageratestoodat5.99percent.

• TheBankofCanadaisexpectedtomakeitsnextannouncementonJuly20,2010.Source:BankofCanada

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Bank of Canada Interest Rates, January 2005 to May 2010

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s Quar ter ly Absorpt ions* o f s ing le-det ached Homes in Pra i r ie Regions(Q1** 200 9 , Q4** 200 9 ,Q1** 20 1 0)

Q1**2009Q4**2009Q1**2010