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Happenings in national real estate
Jun 24, 2005

It is quite easy to get caught up in local real estate market happenings and be oblivious to developments in other markets throughout Canada. 

This is especially true this year because Winnipeg’s MLS® market is on fire — a property could potentially receive 25 offers. And, nearly half of all residential-detached listings sold over-asking price in May with another 11 per cent achieving full price offers.

June is continuing the torrid pace with MLS® sales in excess of 700 in only two weeks and dollar volume eclipsing $100 million, a level more commonly associated with an entire month of market activity. Over one-third of the total inventory in June has turned over while sales-to-new listings are at 80 per cent even though listings are coming on the market in greater quantities than last year.

Canada Mortgage and Housing Corporation, our national housing agency,  certainly provides a good source of information about the state of Canada’s housing on its website www.cmhc.ca. It includes free, as well as, special market reports for a subscription fee.

If you go to this site, you will find half way down the home page, the 2004 Canadian Housing Observer, which examines current housing market forces, trends and issues. The report begins by stressing how important housing is to people, to communities, to the environment and the economy. 

A home is often the single largest investment of one’s lifetime and is seen by many Canadians as a source of wealth, especially as they plan for retirement. The report tells us home equity accounted for 36 per cent of homeowner household average net worth in 1999. On a macro-scale, housing is a major force in the economy with huge spin-offs in terms of jobs and economic output.

The report documents record sales activity through the Canadian Real Estate Association’s MLS®. There were 439,000 dwellings changing hands in 2003 with an average MLS® price increase of just under 10 per cent. The report notes the highest ever average MLS® resale home price attained at $216,000. Fast forward to the present and a recent CREA press release indicates an average of $269,127 to buy a resale home in May, the highest level ever.

Spending on residential investment and home repairs contributed $73.3 billion to the Canadian economy in 2002, with new construction and related cost accounting for 45 per cent of this total. These numbers have likely increased for 2004 given the record level resale and construction/renovation activity. Locally, should anyone be surprised that Home Depot is confident in going ahead with construction of its fifth store in Winnipeg?

The average vacancy rate for rental housing in Canada’s largest urban centres increased from 1.7 per cent to 2.2 per cent in 2003. It still varies considerably with St. John at 5.2 per cent and Quebec City at 0.5 per cent. Winnipeg was at 1.3 per cent in 2003. The fact vacancy rates went up meant the average monthly rent for a two-bedroom apartment only rose 1.1 per cent from 2002 and was well below the 3.6 per cent increase recorded the year earlier.

Condominium starts grew by 33.7 per cent in 2003 and represented one-in-four urban housing starts. They are becoming an important source for both owner-

occupied and rental housing supply. For example, 30 per cent of the condominium apartments built in 

Vancouver between 1990 and 2000 are rented out. 

Note: Condominium resale activity in Winnipeg accounted for less than nine per cent of total MLS® sales and 11 per cent of the total residential-detached sales in 2004.

Mortgage rates continued to decline in 2003, making them as attractive as they were in the 1950s. This means reduced interest payments with the ability to pay off mortgages quicker, enabling more Canadians to qualify for a larger mortgage for a home purchase. The report indicates posted five-year mortgage rates have declined by  almost two percentage points since 2000. On a $100,000 mortgage, it equates to $9,500 in accrued savings over the five-year term. In 2003, $138 billion in mortgage financing was approved for 1,110,000 units of new or existing housing in Canada which works out to an average of $124,400 a unit.

An estimated 1.7-million households were identified in the 2001 census as having a core housing need. These are households where the home is in need of repair, the size of the home is inadequate for the size and makeup of the household, or it costs the family 30 per cent or more of their total income and they are not able to rent an alternative unit that meets certain standards for less than this percentage. It is estimated that one-third of these households with a core housing need were spending 50 per cent or more on their before-tax incomes on housing. 

In referencing the 2001 census, the CMHC 2004 housing report identified where core housing need is most prevalent: seniors aged 65 or over living alone, single parents with children, aboriginals and one -third of new immigrants. Thus, housing affordability is a major challenge since the continuation of low incomes among certain segments of the population leaves them unable to access suitable housing.

Homeownership continues to grow with 66 per cent of the housing stock in Canada owner-occupied in 2001. The 2006 census result will inevitably show another spike in the homeownership rate due to the boom in housing activity over the past few years. 

At 78 per cent, single-detached homes are by far the most common owner-occupied housing stock. Newfoundland and Labrador has the highest rate of owner-occupied homes at 78 per cent while Quebec has the lowest at 58 per cent. Condominiums in 2001 represented six per cent of the owner-occupied national housing stock, although less than one per cent of the housing stock in rural and small centres across the country.

(Next week’s column will look at the United States housing market. It will be drawn largely from the 2005 State of the Nation’s Housing report put out by the Joint Center for Housing Studies of Harvard University.)