That the passage of a year can make a difference in economic fortunes for Canada and Manitoba was the message of the guest speakers at the WinnipegREALTORS® annual forecast breakfast on January 19.
In 2009, the international financial crisis meant no one felt entirely confident about their own circumstances. Of course, some of the concerns were well justified and still are worrisome heading into 2010, notably significantly greater debt taken on by the higher levels of government to combat the economic downturn.
Greg Dandewich, the vice-president and director of economic development for Destination Winnipeg, said Manitoba was affected by the economic crisis in 2009, but not to the same extent as other provinces and other countries.
There certainly was truth in a local credit union sign saying that Manitobans chose not to participate in the recession.
Dandewich said four key attributes helped Winnipeg weather the economic storm: its diversity, stability, resilience and predictability. All were a factor in softening the blow of a tough North American and global economy, he added.
Winnipeg ended up second to Halifax in 2009 for staying above water with 0.8 per cent growth, while most cities were merely treading water.
Winnipeg’s building permits fell off from some previous impressive annual results. However, the Winnipeg Construction Association recently said it had a record 131 new projects listed in December, the busiest month in its 100 year history. It appears the hesitancy to proceed at the beginning of the year has all but dissipated.
Keynote speaker Sean Barnes, the district manager of PCL Constructors Canada Inc, which placed the successful bid for the Disraeli bridges and is progressing on schedule with the Canadian Museum for Human Rights (CMHR), ran through numerous projects in Manitoba over the next few years and beyond that will amount to billions of dollars worth of construction activity. The projects are diverse in nature and will lay the foundation for future economic and construction activity. A case in point is the rapid transit corridor. Wherever such corridors have been built, all sorts of opportunities for new and denser infill development has arisen.
According to Barnes, just one project can have significant economic impact.
Barnes said the CMHR construction project will at its peak have 250 tradespersons working on-site, contributing:
• 3,500 person years of employment in Manitoba.
• 6,000 person years of employment (all areas).
• $133.9 million in labour income in Manitoba.
• $423.3 million in provincial income and sales tax.
• $171.4 million contribution to Manitoba’s GDP.
The Winnipeg Richardson International Airport terminal being completed this year will add $300 million to the local economy, while Wuskwatim will add another $1 billion. Bristol Aerospace is taking on more business and hiring additional staff.
Dandewich said the workers spend their disposable income on all sorts of products, including big-ticket items such as housing.
Due to the demand for skilled workers, Barnes quipped PCL needs to go to the engineer store at U of M to recruit 25 more engineers.
What does this all have to do with real estate? A lot in fact. This point was made by Canada Mortgage and Housing Coporation (CMHC) senior analyst Jeff Powell. In more general terms, he discussed how the economy coupled with immigration helps fuel demand for housing.
He said the demand cuts across all housing segments — rental, existing or newly-built homes.
Powell confidently predicted new housing starts will rebound in 2010.
Peter Squire, MLS® market analyst for WinnipegREALTORS®, said the numbers forecast at the start of 2009 were uncannily similar to the final results for home sales and condo price increases, but slightly lower for home prices and dollar volume.
The big surprise of 2009, he said, was how well the MLS® market recovered later in the year. Home sales finished off only three per cent down from 2008, while MLS® dollar volume sales overtook 2008 in November 2009 and at year-end set a new annual record of close to $2.5 billion.
Highlights for the past decade include an average annual residential-detached and condo price increase of 12 per cent and 14 per cent, respectively. The final five years of this decade also had sales consistently over 12,000 (2007 eclipsed 13,000), only matched previously in 1987.
Condo activity showed increased strength, enjoying its highest market share ever in 2009 with 12 per cent of all MLS® sales.
In 2000, 61 per cent of residential-detached and 78 per cent of condo units sold for under $100,000, whereas in 2009, the percentages for this same price range dropped to 10 per cent and six per cent, respectively. Conversely, 61 per cent of residential-detached sales in 2009 were from $100,000 to $249,999 and 62 per cent of condos sold from $100,000 to $200,000.
It is also worth noting that 2009 had the most million-dollar-plus sales — 13 residential-detached and one condominium. The previous best was in 2008 with eight million-dollar-plus sales.
The average residential-detached sale price in 2009 was $217,000 and the average condo price was $185,000. Despite the price increases, the fifth annual Demographia International Housing Affordability Survey in 2009 showed Winnipeg as one of the top-10 Canadian cities for affordable housing.
The survey compared the median house price with the gross annual median household income. A median multiple of 3.0 or below is judged to be affordable.
Markets in six countries outside Canadda are three times the affordability median, pricing many residents out of the housing market.
The author of the annual survey acknowledged Winnipeg’s housing market as being very affordable.
In 2010, Squire foresees single-digit percentage increases in sales and prices.
While concern has been expressed about rising interest rates, a possible hike is not expected until July, if not later in the year.
CREA’s chief economist Gregory Klump remains positive about the local MLS® market in 2010, predicting it will reach new heights in both sales and dollar volume. Klump said Manitoba is the only province in 2009 expected to have positive growth.
Wayne Johnson, a former chair of WinnipegREALTORS® commercial division and author of the Johnson Report, a biannual assessment of local commercial market activity, highlighted five key results for the year:
• Apartment sales were $50,000 per door.
• Industrial buildings were $70 per square foot.
• Industrial vacancy rate was seven per cent (2.5 per cent overall).
• Downtown office vacancy rate was six per cent.
• Retail vacancy rate was 3.5 per cent.