“After two consecutive quarters of deterioration, Canada’s housing affordability has improved modestly in the third quarter, according to the latest Housing Trends and Affordability Report released today by RBC Economics.
Elevated uncertainty relating to the European sovereign-debt crisis and the downside risk for economic growth have contributed to keeping interest rates at low levels,” said Craig Wright, senior vice-president and chief economist, RBC. “The lower interest rate environment – which also includes mortgage rates – has played a part in slightly reducing the costs of owning a home in Canada in the third quarter.”
The RBC housing affordability measure captures the proportion of pre-tax household income that would be needed to service the costs of owning a specified category of home at going market values. During the third quarter of 2011, measures for the national level fell for all housing categories tracked by RBC (a fall represents an increase in affordability).
Earlier this year, deterioration in affordability at the national level was skewed by substantial increases in homeownership costs in Metro Vancouver. In the third quarter, RBC measures in the majority of provinces and cities experienced modest declines (less than 1 percentage point). More remarkable improvements materialized in a few local markets across Canada, including Montreal (for two-storey homes and detached bungalows), Manitoba (for two-storey homes), and Vancouver (for detached bungalows).
“Housing affordability levels are quite good in most parts of Canada and will pose little threat to overall housing demand,” added Wright. “The Vancouver area market continues to be a major exception, with sky-high property values in upscale neighbourhoods making it both extremely unaffordable and the most at risk of a downward correction.”
Going forward, RBC forecasts that interest rates will remain exceptionally low in Canada until mid-2012 and rise gradually after that.
“We expect to see further slowing in the pace of home price increases next year, as housing demand levels out,” said Wright. “These factors will set the stage for a period of relative stability in affordability trends in Canada.”
The RBC report indicates that the cost of owning a home at market value remains close to historical norms in the majority of markets outside of British Columbia, implying that local markets are, for the most part, at worst, slightly ‘unaffordable’. Affordability tensions emerged earlier this year in Toronto, Ottawa and Montreal (particularly in two-storey homes) and continue to be in a slightly uncomfortable range.
RBC’s housing affordability measure for the benchmark detached bungalow in Canada’s largest cities is as follows: Vancouver 90.6 per cent (down 1.5 percentage points from the previous quarter), Toronto 52.1 per cent (up 0.1 percentage points), Montreal 40.9 per cent (down 1.3 percentage points), Ottawa 40.8 per cent (down 0.6 percentage points), Calgary 37.6 per cent (up 0.5 percentage points) and Edmonton 33.2 per cent (down 0.6 percentage points).
Sky-high rents. Heavy demand for downtown office space. A magnet for company headquarters. It may sound like Toronto, but this commercial real estate hotspot is decidedly farther west.
Despite erratic markets and a lingering world recession, Calgary’s office and commercial real estate market rivals Toronto as the most robust in the country, driven predominantly by the continued growth plans of energy companies.
“We’ve got a vibrant downtown core, a strong commodity-based economy, low tax rates in Alberta and [many] corporate head offices in Calgary, most of those tied to the energy sector. Calgary is a dynamic place to be right now,” says Joe Binfet, managing director of Colliers International in Calgary.
Indeed, the Toronto Board of Trade’s 2011 Scorecard on Prosperity, which compares 24 of the world’s most prosperous urban centres, gave Calgary third place, just below Paris and San Francisco. Toronto came in eighth.
Don R. Campbell, president of the Calgary-based Real Estate Investment Network, says that on a per capita basis, Calgary has already redefined itself as a leader in commercial and office space.
“Jobs are pouring in, population is growing and businesses are flourishing – and this is during the world’s economic downturn,” he says.
When it comes to downtown office space, the demand in Calgary seems boundless of late. “One year ago, the vacancy rate in the downtown office market was 16 per cent; today, it’s under 8 per cent,” says Mr. Binfet. “We’ve had over two million square feet of positive absorption in the downtown office market for this year, to date.”
According to Mr. Binfet, in the past 12 months Colliers has leased more than one million square feet in Eighth Avenue Place, a Platinum LEED-certified development in the downtown core, with pre-leasing interest bubbling up for a second, 600,000 square-foot tower. And Eighth Avenue is far from the only hot property – the 1.9 million square-foot Bow Tower has been completely rented by energy giants EnCana and Cenovus, who are now looking for more space.
Oxford Properties, having completed Centennial Place in 2010 (two towers totalling 1.2 million square feet), has announced plans for a new 25-storey tower in the Eau Claire neighbourhood, which would create another 600,000 square feet of office space.
“Energy companies are expanding,” explains Mr. Binfet. “They’re securing space not only for today, but for their future growth.”
“If company ‘A’ is currently [occupying] 50,000 square feet, the presidents that we talk to are saying, ‘Given our growth plan, we need 75,000 square feet,’” said Greg Kwong, regional managing director of CB Richard Ellis Ltd. in Calgary.
A recent study by Jones Lang LaSalle, a financial and professional services firm specializing in real estate, found that Calgary’s Third Avenue commands rents for office space that are among the highest in North America.
Law, energy, and oil companies pay rent averaging $47.51 per square feet on Third Avenue. The study placed the street’s rents at 13th highest in the continent, a few slots below Toronto’s Bay Street, which came in at No. 9.
Todd Throndson, managing director of Avison Young in Calgary, says rents in the downtown core have jumped around 50 per cent this year, which has made it difficult for some companies to find space.
“It’s creating some struggles for the smaller organizations as rents go up and opportunities go down,” he said. “We have an AA market that’s around 2 per cent, and an A-class around 4 per cent, and those are very, very low vacancy levels, especially in a market like ours, which has such large tenants and the capacity to grow quickly.”
Although Toronto is still the top dog when it comes to the overall number of major corporate headquarters, Calgary is starting to nip at the city’s heels.
According to Calgary Economic Development, Calgary has 9.3 head offices per 100,000 people, nearly twice Toronto’s figure of 4.7 head offices per 100,000. And while Calgary is experiencing an increase in the number of headquarters heading its way, Toronto is experiencing a decline.
In addition to its proximity to the lucrative energy market, Calgary is also attractive for companies to set up shop because of what the city and its citizens have to offer, says Mr. Campbell.
“[Calgary has an] educated work force to draw from, a high level of highly educated professionals,” he said. “And the size and infrastructure of the city allows employees to have additional free non-commute time, which leads to better and healthier lifestyles and therefore happier employees staying longer term.”
In terms of future growth, Mr. Kwong says the commercial real estate industry in Calgary is feeling very “bullish” right now, despite continued economic uncertainty here and abroad.
“The recession hit us just like everyone else, and it was very much a soft landing here and we bounced back a lot quicker than elsewhere in Canada,” he says. “We are very driven by the price of oil and the demand for oil, and until someone invents an alternative energy source to replace oil, Calgary and Alberta need to be here.”
“If oil continues to be priced above 60 dollars, then I believe the financial statements of the big energy companies, which are very positive,” says Mr. Throndson. “They have lots of cash and they are going to be very focused on growing their business opportunities, so I think we’re looking at a very healthy time period where Alberta is going to be strong economically.”
As for being “the new Toronto,” Mr. Binfet says it’s not a comparison many in his city would relish.
“I don’t think Calgary likes being compared to Toronto,” he says. “Calgary stands on its own, with an entrepreneurial attitude, a can-do spirit and a culturally diverse, vibrant downtown.”
This is great news for those of us in Alberta – we already knew we are booming. The rest of Canada is finding out as there were 26,000 new people added to Calgary this year. Almost the same as the boom in 2006. That means more people looking for homes or to rent and that demand will take up the housing slack.
Alberta leads North America in economic freedom: report
FILE – An oilsands mine facility seen from the air near Fort McMurray, Alta., Monday, Sept. 19, 2011. THE CANADIAN PRESS/Jeff McIntosh
Date: Tuesday Nov. 22, 2011 2:02 PM ET
Quebec and Ontario lag far behind their Western cousin Alberta and many U.S. states when it comes to economic freedom in North America, according to a new report.
While Alberta finished first of all Canadian provinces and U.S. states, Ontario finished fifth among the provinces and a dismal 49th when U.S. states were factored in.
Quebec finished eighth among the provinces — ahead of only Nova Scotia and P.E.I. — and a sluggish 58th overall in the analysis by the Fraser Institute titled Economic Freedom of North America 2011.
The report measures the economic freedom of 50 states and 10 provinces based on indicators such as size of government, taxation levels, and labour market freedom.
It found a direct connection between the states and provinces with the most economic freedom, and those where residents earned the most.
“The 12 Canadian and American jurisdictions with the highest levels of economic freedom had an average per-capita GDP of $54,435 in 2009, compared to the 12 lowest-ranked jurisdictions in North America, where average per-capita GDP in 2009 was $40,229,” the report stated.
Following are the top five finishers:
- 1. Alberta
- 2. Delaware
- 3. Texas
- 4. Nevada
- 5. Colorado
After Alberta, Saskatchewan was the second-highest Canadian finisher, but came in at only 32nd overall. Newfoundland and Labrador followed as the third-place overall Canadian finisher at 37th place.
B.C. came in 43rd overall, Ontario finished in 49th, and the bottom five spots on the entire list were dominated by the following Canadian provinces:
- 56. Manitoba
- 57. New Brunswick
- 58. Quebec
- 59. Nova Scotia
- 60. P.E.I.
Improvements in Canada
But the news wasn’t all bad for Canada. On average, the report found that levels of economic freedom increased in Canada between 2000 and 2009.
And in Newfoundland and Labrador and Saskatchewan, levels of economic freedom rose significantly in that same period.
Though less dramatic, B.C. and Alberta have also shown signs of improvement, which has allowed them to surpass several U.S. states in the rankings.
“It’s no coincidence that the provinces showing increased levels of economic freedom are also the provinces whose economies have been the most vibrant and shown the most growth in recent years,” said Fred McMahon, Fraser Institute vice-president of international research and the co-author of the report, in a statement.
“A common theme among provinces with high levels of economic freedom is a commitment to low taxes, small government, and flexible labour markets. These conditions foster job creation and greater opportunities for economic growth.”
Conversely, he said, provinces with low levels of economic freedom result in lower standards of living and reduced opportunities for families.
The report states that Quebec, Ontario, Manitoba, Nova Scotia and New Brunswick have all shown declines in economic freedom between 2000 and 2009.
Particularly troubling, McMahon said, is the fact Canada’s two most populous provinces, Ontario and Quebec, have fared so poorly.
“If governments in these two provinces want to boost prosperity and improve the standard of living for their residents, they should look to the successful policies of provinces where economic freedom has increased,” McMahon said.
More good news on the market outlook.
November 6, 2011. 8:33 pm
Pay attention. Something’s happening here,” says Don Campbell, president of the Real Estate Investment Network in Canada.
Campbell is paying attention to the all the reports coming out these days showing some positive economic news for Alberta and Calgary. Good economic growth. In-migration levels rising. And employment growth leading the way in Canada.
The real estate market lags the economy by about 18 months, he says.And the economy is in recovery. We’ve now seen the job growth and the population growth starting to affect the rental vacancy rates which have gone down, resulting in rents rising.
Campbell says that by the spring of 2013, and perhaps by the fall of 2012, there will be a real strong upward pressure on demand for resale homes in Calgary and surrounding areas.
He predicts there will also be a jump in listings at that time which will keep a little bit of a cap on the price increases. So will continued world economic turmoil.
But even with that Calgary should expect strong price growth in the value of resale properties.
“I think you’re going to see a nice steady eight to 10 per cent increase in 2013 in average sale price for Calgary (year-over-year),” says Campbell, one of the authors of the book Secrets of the Canadian Real Estate Cycle.
This is cool.
Containers are built to ISO 9000 standards so they are all the same and made to the same standard. Neat.
The Glennon family’s retirement home might just look like a stack of shipping containers of all different colours from the outside.
But once it’s complete, it will be a sprawling, 5,000-square-foot, four storey building — two levels above ground, a walkout basement and another level below — with four bedrooms, five bathrooms, a games and media room, garage and workshop, and two enclosed decks.
A massive garden with a potato crop, chickens, and a trout pond, will surround the residence on the eight-hectare property just outside Rimbey, about 180 kilometres north of Calgary.
And the shipping containers won’t be visible forever — the plan is to cover the exterior with stucco.
“It’s just going to look like a regular home,” said homeowner Bill Glennon.
Except most regular homes aren’t made of Sea-Can shipping containers — and the Glennon’s might be the only one in North America built with the containers from the footings all the way up to the roof, he said.
After years of touring show homes, checking out homes on the market, and attending home and design shows, Glennon said he never found anything he liked under $1 million.
By chance, his wife Roseann spotted a newspaper article about a shipping container home several years ago, which sparked their interest.
Putting his construction abilities to work, the former scaffolder and carpenter started drawing up plans to build his own home out of 30 shipping containers, each weighing about 5,000 kilograms with a load capacity of about 30,390 kilograms.
Besides being “really tough,” the containers are economically sound and structurally practical, Glennon said, though it can be a challenge to cut and grind materials, he added.
The couple, in their late 50s, started excavation in September 2009. A month later, 30 containers were shipped from Calgary to their property for a cost of about $3,000 per container.
Ever since, the couple and their 19-year-old daughter Kala, with help from Glennon’s brother Bruce and sister Colleen, have been hard at work welding, putting in the insulation and roof truss system, painting, installing weeping tile, lighting, and tending to the garden.
The family also hopes to live “off the grid completely” and has installed energy efficient windows, a wind generator, a 4.8-kilowatt solar panel system. A solar hot water heater, which will be their main source of heat, will come later, Glennon said.
The wooden interior walls will be insulated for extra warmth, though the fact that much of the home is underground means it will be fairly easy to heat in the winter, he added.
“Right now, we’re trying to insulate the outside, and we’re still waiting for the concrete to be poured on the roof, backfill the garage, and get some plumbing in,” Glennon said last week. “We’ve got a long ways to go.”
Glennon declined to disclose the exact cost to build the entire structure, though he offered that it works out to about $125 per square foot.
He indicated he hoped to have the entire exterior finished by next spring.
The long-term goal is to convert the residence into a bed and breakfast. After all, the Glennons already receive enough guests — both friends and strangers — driving in to catch a glimpse.
“We’ve got a lot of people come up from Calgary just to see it,” he said. “They think it’s pretty incredible.”