Calgary Alberta Mortgage and Real Estate News

Canada Mortgage and Housing Corporation (CMHC) announced today that it will improve its mortgage loan insurance approval system, through a product enhancement called Self-Employed Simplified, to help more self-employed borrowers realize their dream of homeownership.“Self-Employed Simplified, will make it easier for certain self-employed borrowers to obtain mortgage loan insurance and, as a result, benefit from competitive interest rates,” said Pierre Serré, CMHC’s Vice-President, Insurance Product and Business Development. “This product enhancement will help self-employed borrowers and commissioned salespersons to obtain a CMHC-insured mortgage, much like borrowers who receive a salary or hourly wage from an employer.”

In recognition of the growing proportion of self-employed people in today’s workforce, CMHC has developed tools that help assess the risk associated with borrowers who have difficulty obtaining third-party validation of their income using traditional forms of documentation. Increasingly sophisticated risking models will enable the Corporation to launch this product enhancement effective March 30, 2007.

CMHC Self-Employed Simplified is designed for borrowers who have a minimum of two years in the same type of work and a proven track of responsibly managing their debt. CMHC Self-Employed Simplified will insure mortgages on one- or two-unit homeowner properties and will also be available for refinance transactions, for mortgages up to 90 per cent of a home’s value.

CMHC Self-Employed Simplified

Self-employed people represent a growing proportion of the Canadian workforce. CMHC’s Self-Employed Simplified product enhancement responds to this reality by making it easier for more self-employed borrowers to obtain CMHC mortgage loan insurance, and as a result to benefit from competitive interest rates.

CMHC already has mortgage loan insurance products for self-employed borrowers and commissioned salespersons who can provide traditional documentation to substantiate their income. These products will continue to be available.

CMHC Self-Employed Simplified will help more self-employed borrowers realize their dream of homeownership by making mortgage loan insurance available for borrowers who have difficulty obtaining third-party validation of their income through traditional forms of documentation. However, it will be limited to self-employed borrowers who have a proven track record of managing their debt, and who have worked a minimum of two years in the same type of work, either as an employee or self-employed.

CMHC System Enhancements

CMHC Self-Employed Simplified is possible due to enhancements to CMHC’s emili mortgage insurance approval system. These enhancements will include the use of new predictive models that assess the reasonableness of the income declared by the self-employed borrower. They will also allow for better assessment of mortgage default risk associated with self-employed borrowers who cannot provide traditional forms of documentation to substantiate their income.

The use of these models will help CMHC to insure these mortgage loans in a responsible and prudent manner.

Premium Levels

The CMHC Self-Employed Simplified mortgage insurance premium will vary from 0.8 per cent of the mortgage loan amount for loans with at least a 35 per cent down payment, to six per cent for loans with a 5 per cent down payment.  These levels reflect the absence of traditional forms of documentation to support the current income of the self-employed borrower.

While CMHC Self-Employed Simplified premiums are higher than those paid by borrowers with traditional forms of documentation, it is important to recognize that this product enhancement also allows borrowers to benefit from lower interest rates than would otherwise be the case. 

MLS(R) sales and new listings came in strong for
the month of February 2007, according to figures released by the Calgary Real
Estate Board.
    February combined residential sales totaled 3,348, a 9.66 per cent
increase over February 2006 when sales were recorded as 3,053, and a 27.25 per
cent increase from January 2007, when the sales were 2,631. The breakdown of
the February 2007 combined sales was, 2,319 single-family residences, 1,011
condominium, and 18 mobile homes. February 2006 sales in the same categories
were, 2,152; 895; and 6, respectively.
    February 2007 saw 3,731 new listings coming to the market, an increase of
15.62 per cent from February 2006, when the new listings were 3,227, and
showing a decrease of 6.96 per cent from last month’s 4,010 new listings.
    The average combined residential sale price for February 2007 was
$393,307 a 29.14 per cent increase over February 2006, when the average price
was $304,550, and a 4.7 percent increase over the January 2007 average price
of $375,646. Broken out, the following is a comparison of single-family,
condominium, and mobile home average sale prices for the month of February
2007 over 2006: single-family $435,802 / $342,412; condominium $301,777 /
$215,301; mobile home $59,556 / $37,417.
    Condominium sales in February maintained a steady pace with 1,011
condominiums changing hands. This is a 12.96 per cent increase over February
2006, when the condominium sales were 895 and a 21.22 per cent increase over
last month’s sales of 834. The average price of a condominium in February 2007
was $301,777, an increase of 40.17 per cent from the same period last year,
when the average price was $215,301 and a 5.55 per cent increase over
January’s average price of $285,918.
    “With February statistics now on record, it is clear that our strong
balanced market is going to continue,” explained CREB(R) President, Ron
Stanners. “With sales 9% above February 2006 numbers, it would appear that we
are heading into a stronger market than last year. Our saving grace is that we
have almost twice as many residential listings at the end of February this
year as compared to February 2006. This should keep our market balanced, but
anticipate prices moving up through March. This is where the true value of a
REALTOR(R) can help you whether you are buying or selling. Contact your
REALTOR(R) for professional assistance,” concluded Stanners.
    Average price information can be useful in establishing trends over time,
but does not indicate actual prices in centres comprised of widely divergent
neighbourhoods or account for price differentials between geographical areas.
The median price is determined by selecting the middle number of total sale
prices - the combined residential median for February 2007 was $363,000; up
35.45 per cent from February 2006, when the median price was $268,000 and up
7.72 per cent from last month’s median of $337,000.

Resale housing activity in Canada’s major markets set a new record in January 2007 according to statistics released by The Canadian Real Estate Association (CREA).Seasonally adjusted MLS® home sales in Canada’s major markets totaled 30,359 units in January 2007. Led by gains in Vancouver, Edmonton and Toronto, seasonally adjusted activity rose by 3.4 per cent from December 2006 and surpassed the previous monthly record set in August 2005 by three per cent.

Seasonally adjusted activity set new records in Edmonton, Saskatoon, Ottawa and Saint John. Sales also reached their second highest monthly level on record in Calgary, and their third highest level on record in Toronto.

Seasonally adjusted MLS® residential new listings numbered 48,035 units in January, up 3.1 per cent from 46,579 units in December. The monthly increase resulted largely from an increase in new listings in Vancouver and Toronto.

The monthly increase in sales was slightly larger than for new listings, which caused the resale housing market to become slightly tighter in January compared to the previous month. Markets in Toronto and Montreal became tighter in January than in any other month in the past year.

The major market MLS® residential average price in January rose 11.2 per cent year over year to $299,318. Average price reached its highest monthly level on record in Calgary, Edmonton, Saskatoon, Hamilton-Burlington, London & St. Thomas, and Quebec City.

“Unseasonably warm weather in some regions may have boosted MLS® home sales activity in January,” said CREA Chief Economist Gregory Klump. “Transactions also rose in each of the three previous months. That clearly shows that resale housing activity continues to be supported by the same factors that have boosted the housing market over the past several years.”

“Low mortgage interest rates, high employment, rising incomes and upbeat consumer sentiment will keep the housing market on a strong footing for the foreseeable future,” he added.

Toronto home owners are paying more for repairs - and helping drive up inflation - in large part because many skilled workers are being drawn into Alberta’s red-hot housing market, making an already fierce trades shortage even worse.

An 8 per cent rise in the cost of home repairs across Canada helped nudge inflation up slightly last month, Statistics Canada reported Tuesday.

The annual inflation rate rose to 1.4 per cent in November from 0.9 per cent the month before. It was pushed up by higher mortgage and house repairs, but kept in check by the lower cost of new cars, gas and heating oil. In Toronto, the rate rose to 1 per cent from 0.7 per cent, while the provincial rate rose to 1.1 per cent from 0.6 per cent.

Statistics Canada said the rise in home repairs is the driving force behind the inflation hike; the first time in three months that the annual inflation rate has climbed over 1 per cent.

Analysts were quick to point to the flight of skilled trade workers to the boomtowns of Calgary and Edmonton - where home repair costs have jumped 45 per cent in one year.

“Alberta has seen an absolute explosion in housing which is drawing skilled workers from around the country and making the labour shortage in the trades even worse and driving up costs,” said Doug Porter, deputy chief economist of BMO Capital Markets.

In Toronto, contractor Jeff Mowder says a shortage of skilled workers has sent home repair costs “skyrocketing in the past couple of years.

“When I’m looking for people in the specialty trades - tin ceilings, trim work, cabinet work - there’s a real lack of skilled workers, and the rising costs do get passed on to the customer,” said Mowder, president of Mowder Construction.

Add this to Toronto’s own competing renovation boom, especially in high-end neighbourhoods, and the demand for skilled workers is higher than ever, said Michael Tafts, owner of G. Pederson and Associates Construction.

“We’re stretched thin on trades with the amount of business we’re seeing in neighbourhoods like Rosedale and Lawrence Park - partly because of the renovation boom but also partly because consumer taste for renovation has gone up. Everyone wants the bells and whistles and they’re biting off more than they would have a few years ago,” said Tafts.

Even north of Toronto, contractor Scott Wootton has had to raise his pay for entry-level carpenters twice this year after losing five of them “in a mass exodus to a competitor who was paying more.

“In 20 years I’ve never had this kind of attrition — ever. But the bar is being raised for entry-level workers because there’s such a shortage,” said Wootton, president of Kawartha Lakes Construction Co. and chair of the Ontario Home Builders’ Association’s Renovation Council.

“There’s also the rising price of metals like copper and steel - which affect your plumbing and electrical trades - and sheet goods have gone up as much as 12 per cent.”

Yet customers often don’t realize the effect this has on their overall bill, notes Mowder.

“You don’t want to be a general contractor out there today - the costs of material have skyrocketed in the last couple of years, but homeowners are still back in the 1980s with what they expect to pay, and even I get surprised some times.

“They’re still looking for drywall to be installed for $2 or $2.50 per square foot when it’s actually about $3.50. We’re all a little ‘old school’ when it comes to the new prices.”

The Consumer Prince Index also reflected the fact that restaurant meals cost more last month, as did electricity. But auto purchases and the prices of gasoline, heating oil, natural gas and computers all went down.

Gasoline prices fell only 3.1 per cent between November 2005 and last month after dropping more than 14 per cent during the previous two months.

The core inflation rate, which is used by the Bank of Canada to gauge underlying inflation pressure in the economy, was at 2.2 per cent last month.

This core rate discounts volatile items such as energy and food and ignores changes in indirect taxes such as July’s GST cut. In setting interest rates, the bank aims to keep the core inflation rate at two per cent.

Apartment vacancy rates in Calgary have dropped to record lows and there’s little relief in sight, according to numbers released by the Canada Mortgage and Housing Corporation yesterday.

With 0.5% of rentable apartments sitting vacant in the city during October, Calgary tied its previous record for lowest vacancy rate, in October 1997, said CMHC senior market analyst Lai Sing Louie.

Calgary’s scorching economy is behind the slim apartment pickings, she said.

“The substantial inflow of people to Calgary seeking job opportunities has elevated the demand for housing and many of these people have found their accommodation in the rental market,” said Louie.

And the dwindling demand is already having an effect on the amount prospective renters are paying for apartments, she said.

Compared to the $723 average renters paid for an apartment last October, an average apartment in the city this October cost $851.

“The increased operating and maintenance cost that landlords were absorbing in the past are to some extent being recouped this year,” she said.

Although Calgary’s apartment vacancy rate is the lowest in the country, with Vancouver second with 0.7% vacancy and Edmonton third with a 1.2% rate.

Torontonians pay more for an apartment than anyone else, according to the CMHC.

But the situation is not as dire as the numbers may indicate, said the Canadian Federation of Apartment Associations.

The vacancy rate in Calgary is low, but the availability of suites is actually healthy, said the CFAA, explaining because of turnover, there were 733 units for rent in the city this October, even though only 241 rental suites were actually vacant.

The average rental apartment vacancy rate
in Canada’s 28 major centres(1) decreased slightly by 0.1 of a percentage
point to 2.6 per cent in October 2006 compared to last year, according to the
Rental Market Survey released today by Canada Mortgage and Housing Corporation
(CMHC).
    “Solid job creation and healthy income gains helped to strengthen demand
for both ownership and rental housing,” said Bob Dugan, Chief Economist at
CMHC’s Market Analysis Centre. “High levels of immigration were a key driver
of rental demand in 2006, as was the increasing gap between the cost of home
ownership and renting. These factors have put downward pressure on vacancy
rates over the past year.”
    “However near record levels of existing home sales and the high level of
housing starts in 2006 show that home ownership demand remained very strong,
and it continues to apply upward pressure on vacancy rates”. Adding to this is
the high level of condominium completions in some centres. Condominiums are a
relatively inexpensive type of housing for renters moving to home ownership.
Also, some condominium apartments are owned by investors who rent them out.
Therefore, high levels of condominium completions have created competition for
the rental market and have put upward pressure on vacancy rates.
    The centres with the highest vacancy rates in 2006 were Windsor
(10.4 per cent), Saint John (NB) (6.8 per cent), and St. John’s (NFLD)
(5.1 per cent). On the other hand, the major urban centres with the lowest
vacancy rates were Calgary (0.5 per cent), Victoria (0.5 per cent), and
Vancouver (0.7 per cent).
    In British Columbia, vacancy rates declined in Vancouver (down 0.7 of a
percentage point to 0.7 per cent) and Abbotsford (down 1.8 percentage points
to 2.0 per cent) between October 2005 and October 2006, but were unchanged in
Victoria (0.5 per cent). The rapid growth of British Columbia’s population and
the higher cost of homeownership continue to fuel strong rental demand. For a
third year, Victoria remains one of the tightest metropolitan rental markets
in Canada.
    In the Prairies, vacancy rates were down in four of the five metropolitan
areas. Very high net migration to the region and a significant jump in
mortgage carrying costs due to higher home prices put downward pressure on
vacancy rates. Edmonton’s vacancy rate decreased by 3.3 percentage points to
1.2 per cent between October 2005 and October 2006 - the sharpest drop among
Canada’s major centres. Vacancy rates decreased to 3.2 per cent in Saskatoon
(down 1.4 percentage points) and to 0.5 per cent in Calgary (down
1.1 percentage points).
    In Ontario, vacancy rates were lower in five of 11 major centres and
unchanged in two. The rising cost of homeownership, high immigration, and
improved job prospects for youth were largely responsible for boosting rental
demand across the province. These factors helped offset upward pressures on
vacancies triggered by higher condominium and rental apartment completions.
The vacancy rate in Ottawa decreased by one percentage point to 2.3 per cent,
while in Toronto the vacancy rate declined 0.5 of a percentage point to
3.2 per cent.
    Vacancy rates went up in three of Quebec’s six major centres and remained
unchanged in one. Low mortgage carrying costs continued to draw renter
households toward homeownership. This, combined with weak job opportunities
for youths, held back growth in rental demand. Completions of rental units
targeting seniors also helped boost vacancy rates in some Quebec centres.
Gatineau’s vacancy rate increased from 3.1 per cent in October 2005 to
4.2 per cent in October 2006, while the vacancy rate in Montréal increased by
0.7 of a percentage point to 2.7 per cent over this period. Québec saw a
modest 0.1 percentage point increase in its vacancy rate to 1.5 per cent.
    In the Atlantic region, vacancy rates increased in both St. John’s (NFLD)
(up 0.6 of a percentage point to 5.1 per cent) and Saint John (NB) (up
1.1 percentage points to 6.8 per cent). The vacancy rate in Halifax edged down
by 0.1 of a percentage point to 3.2 per cent. Slower employment growth,
out-migration, and low mortgage carrying costs have weakened demand for rental
housing and put upward pressure on vacancy rates in Atlantic Canada.
    The highest average monthly rents for two-bedroom apartments in new and
existing structures were in Toronto ($1,067) and Vancouver ($1,045), followed
by Calgary ($960) and Ottawa ($941). The lowest average monthly rents for
two-bedroom apartments in new and existing structures were in Trois-Rivières
($488) and Saguenay ($485).
    By excluding the impact of new structures built since the last survey and
conversions from the calculation, we can get a better indication of the rent
increase in existing structures. The greatest rent increases occurred in
markets where vacancy rates were lowest in 2006. Rents in existing structures
were up 19.5 per cent in Calgary, 9.9 per cent in Edmonton, 5.1 per cent in
Greater Sudbury and 4.4 per cent in Vancouver. Overall, the average rent for
two-bedroom apartments in existing structures across Canada’s 28 major centres
increased by 3.2 per cent between October 2005 and October 2006. Excluding
Calgary and Edmonton, the average rent for two-bedroom apartments in existing
structures was up only 2.4 per cent in 2006 compared to 2005.
    With the release of its 2006 Rental Market Survey, CMHC has broadened its
coverage of the rental market to include apartment condominiums offered for
rent in the following centres: Vancouver, Calgary, Edmonton, Toronto, Ottawa,
Montréal, and Québec. In 2006, vacancy rates for rental condominium apartments
were at or below one per cent in five of the seven centres surveyed. Rental
condominiums in Vancouver and Toronto had the lowest vacancy rate at 0.4 per
cent. On the other hand, Québec and Montréal registered the highest vacancy
rates for condominium apartments at 1.2 per cent and 2.8 per cent in 2006,
respectively. The survey showed that vacancy rates for rental condominium
apartments in 2006 were lower than vacancy rates in the conventional rental
market in all the surveyed centres, except Montréal and Calgary. The highest
average monthly rents for two-bedroom condominium apartments were in Toronto
($1,487), Vancouver ($1,273), and Calgary ($1,257). All surveyed centres
posted average monthly rents for two-bedroom condominium apartments that were
higher than average monthly rents for two-bedroom private apartments in the
conventional rental market in 2006.
    In Toronto, Montreal, and Vancouver, the scope of CMHC’s Rental Market
Survey was further extended to gather information on monthly rents in dwelling
types(2) other than private apartments and condominium apartments such as
duplexes and accessory apartments. The results showed that the average monthly
rent for a two-bedroom unit in the secondary rental market was lower than the
average rent in both the conventional and condominium apartment markets in
Montréal and Vancouver. In Toronto, the average monthly rent for a two-bedroom
unit in the secondary rental market was slightly higher than in the
conventional rental market.
    Starting in 2007, CMHC will be conducting a rental market survey in the
spring, in addition to the one conducted in the fall. The results of the
spring survey will be published in June and will provide centre-level
information on key rental market indicators such as vacancy rates and average
rents.

Housing starts in the Calgary area jumped 36% last month from a year ago, according to the Canada Mortgage and Housing Corp.

The November activity brings the number of year-to-date housing starts in the city to a total of 15,547 units, up 22% over the first 11 months of 2005.

“Apartment and semi-detached construction were both very strong in November,” said Lai Sing Louie, CMHC’s senior market analyst for Calgary.

“You would have to go back to the late 1970s to see apartment and semi-detached volumes exceeding this level of production in November.”

Multi-family starts climbed to 771 last month, more than double the number in November 2005.

Single-detached starts for November, meanwhile, were slightly higher than a year ago, rising to 726 units.

“With November’s activity, single-detached starts have already set a new annual record level of production and there is still one more month in this year to raise the total,” said Louie.

Across Alberta, construction began on 46,600 units last month, a 47% increase from October.

And nationwide, Canadian housing starts were stable, edging up 0.8% from October to November.

“With just a single month remaining under wraps, it is safe to say that 2006 has been a very good year for Canada’s housing market,” said TD economist David Tulk.

“With a cooling economy on the horizon, the spotlight has begun to shift to the future and while this year’s estimated tally of 228,000 starts may be a tough act to follow, 2007 will likely deliver a solid performance.”

Tulk is forecasting 205,000 starts across the country next year and 195,000 in 2008.

The numbers are expected to be buoyed by low inventories of new and existing homes and strong demand, driven by low unemployment, growth of disposable income and continued immigration.

The value of Canadian building permits soared to near record highs in October, propelled by an increase in demand for multi-family and commercial dwellings. 

Strong performances by Alberta and British Columbia pushed construction intentions past the $6 billion mark for the second time on record. 

Calgary has already set a record for yearly totals with two months left to go. The last time the value of Canadian permits was this high was last December, when they were valued at $6.3 billion. 

In Toronto, the value of building permits rose by 3.5 per cent from September to pass the $1 billion mark for the second time this year. 

But despite the city’s strong performance, the picture was murkier in Ontario as the value of permits declined by 1.8 per cent from $1.96 billion in September to $1.92 billion this month. 

“In the non-residential sector, which drove the decline in October, basically it’s the industrial component that declined because commercial and institutional were up,” said Etienne Saint-Pierre, an analyst at Statistics Canada. 

Saint-Pierre noted the value of Ontario’s industrial sector permits fell by 40 per cent from September to $119,300,000 in October. Hurting Ontario, he notes, is its struggling manufacturing sector. 

“I think the big picture is construction is slowing east of Manitoba,” said housing analyst Will Dunning. 

Though Ontario is still close to the peak in construction it experienced during the last two years, Dunning said, “it’s likely to slow a little bit but only very gradually the coming year.” 

On the other hand, Ontario’s residential fortunes have continued to rise as permit values showed a 2.6 per cent increase based on strong gains in proposals for multi-family dwellings. 

In a separate report, the Toronto Real Estate Board said the GTA’s resale housing market remained strong in November.About 6,281 homes were resold last month, compared with 6,646 last year. 

“The market is holding very steady as we progress through autumn and we are seeing a good level of activity across the board,” said Dorothy Mason, president of the board.

OTTAWA — A new study reports that Canadians are spending a greater proportion of their incomes on housing than they used to.
The Statistics Canada report says the vast majority of households live in suitable and adequate housing, but 1.7 million — or 14 per cent — spent 30 per cent or more of their budgets on shelter costs in 2004.
Traditionally, affordability has been based on a ratio of housing costs to total household income, with a household paying 30 per cent or more of its pre-tax income for housing considered to have affordability problems.
The study found 12 per cent of those spending more than the traditional limit spent between 30 and 50 per cent of their incomes on housing, and two per cent spent 50 per cent or more on housing.
The study found that people who rented were more likely to experience affordability problems.
Almost a third (31 per cent) of people who rented spent 30 per cent or more of their budgets on shelter compared with only six per cent of those who owned their homes, and most of them were living alone, relying on government assistance, or had low incomes.
The average shelter cost in 2004 was $9,400, about 15 per cent of the average household budget.

Real estate bidding wars in Calgary have shifted from the residential sector to the office sector.

With virtually no space available for lease in the downtown, the city’s office rental market is on fire. A study from real estate firm CB Richard Ellis Ltd. also added a new title to the oilpatch: most expensive office market in Canada.

Occupancy costs in Calgary climbed to US$53.51 a square foot per annum in the third quarter, according to the real estate company.

That was higher than Toronto, which had occupancy costs of US$52.80.

“It’s extraordinarily tight,” said Damien Mills, a partner with Cresa Partners, a real estate company that represents tenants. “If we get 5,000 sq. ft. come on the market, we will have multiple bidders going for it.

“Calgary needs space and it needs it now.”

CB Richard Ellis surveyed 176 cities around the world and the good news for Canada is only two cities — Toronto and Calgary — cracked the top 50 markets in terms of expense.

Occupancy costs, calculated in U.S. dollars, included base rent, taxes and operating expenses such as heat and hydro.

“Canadian cities remain very, very competitive on the world scene when it comes to occupancy costs,” said Blake Hutcheson, president of CB Richard Ellis.

The most expensive district in the world continues to be London’s West End, where occupancy costs are US$212.03 per sq. ft. Tokyo’s inner central district finished second at US$145.68 per sq. ft. Midtown Manhattan was the most expensive North American district, with occupancy costs of US$62.07 per sq. ft.

While Alberta’s booming energy market has helped spur growth and made demand for office space soar, along with base rents, the real estate company says the city is still a bargain by international standards.

“As would be expected from the continuing high growth in Western Canada, Calgary is the most expensive city in Canada, but is still very, very low in costs when compared with other leading world business centres,” Mr. Hutcheson said.

Edmonton has also benefited from the energy boom, the study says.

Occupancy costs climbed to US$29.58 from US$17.45 two quarters ago.

Toronto’s slip to second place came despite the fact it remains one of the most heavily taxed jurisdictions that CB Richard Ellis studied.

The real estate company said 23% of occupancy costs in Toronto come from taxes, compared with 8% in Calgary.

“Toronto remains highly competitive in terms of costs and would be even more competitive if our commercial real estate taxes were lower and more in line with those of other cities around the world,” Mr. Hutcheson said.