CREA News

The Canadian Real Estate Association (CREA) welcomes the federal government initiatives to stimulate economic growth outlined in the 2009 budget, especially those that will encourage home ownership in Canada. The Association applauds the government for recognizing the economic importance of the housing industry in some of the budget measures.

“The change announced to the popular Home Buyers’ Plan will help Canadians who want to own their own home, and do it in a responsible way that is not a major drain on taxpayers,” says the President of The Canadian Real Estate Association (CREA), Calvin Lindberg.

Research conducted for CREA by the Altus Group shows that each residential real estate transaction in Canada generates $32,200 in ancillary consumer spending. The study also reported that 94,700 full time direct jobs were generated annually by that ancillary or spin-off activity. The study is posted on the www.crea.ca website.

“The federal government has found a way to introduce economic stimulus and housing initiatives for specific groups, and for Canadians who want to buy their first home.” Mr. Lindberg added. CREA had proposed the federal government do that by increasing the limit of the Home Buyers’ Plan (HBP) to help stimulate the housing market.

Introduced in 1992 by a Conservative government and made permanent by a Liberal government in 1994, the HBP has broad political and consumer support. It will now allow first time homebuyers to withdraw up to $25,000 from their RRSP to be used in a down payment on a residential property. The Plan has not had the same impact and relevance it did 16 years ago, when the original $20,000 limit represented 13.3 per cent of the average house price, versus about 6.5 per cent in 2008.

The Association also believes that the success of the proposed home renovation tax credit program will depend on effective administration and promotion.
“The use of tax credits will make the program of interest to many Canadians who own their own home,” adds the CREA President, “but the success will be tied in part to the availability of savings or credit, since the expense has to be paid before the tax credit is issued.”

A survey conducted for CREA by IPSOS Reid in October 2008 revealed that only 12 per cent of homeowners had ever applied to some type of government renovation or energy efficiency program. In that same survey, 36 per cent said they would consider replacing windows as a priority to improving home energy efficiency, while another 27 per cent said it would be adding insulation.
The Canadian Real Estate Association (CREA) also welcomes federal government initiatives that will encourage home ownership and better communities in Canada.

“The announced measures for aboriginal and social housing are welcomed by REALTORS® as steps to help house those who may be in need, and to modernize existing housing resources,” adds CREA President Calvin Lindberg.

CREA first called on governments to address various issues affecting native home ownership during the World Urban Forum in Vancouver in 2006. The Association’s analysis of native housing issues is available in a booklet posted on the www.crea.ca website. “The budget spending initiatives help address the issue of the quality of native housing, and quality of life on Canadian reserves. Equally as important is the transition to market-based housing on reserves, and the government in the budget has committed to the transition to that as well,” adds Mr. Lindberg.

Click here for a full PDF version of this news release. (CREA 27/01/09)

As widely expected, the Bank of Canada lowered its benchmark overnight lending rate by a half of a percentage point to one per cent at its setting on January 20th, 2009. The trend-setting Bank rate, which is set 0.25 percentage points above the overnight lending rate, declined to 1.25 per cent.

The Bank acknowledged the global economy has deteriorated further since it last lowered rates in December 2008, when it announced Canada had entered a recession. “Major advanced economies, including Canada’s, are now in recession and emerging-market economies are increasingly affected,” said the Bank when it again lowered interest rates on January 20th.

The Bank has repeatedly lowered its policy interest rate to support economic growth. Since December 2007, the Bank has cut its overnight lending rate by a total of 3.5 per cent.

“The Canadian economy is widely expected to begin growing in the second half of 2009, as government spending and easier credit begins to lift economic growth,” said CREA Chief Economist Gregory Klump. “Business and consumer confidence are unlikely to improve much until such evidence appears.”

The Bank downwardly revised its forecast for economic growth in 2009, but revised it upward for 2010. It also pushed the goalposts out to the middle of 2011 as to when it expects inflation to climb back to the two per cent midpoint of its target range between one and three per cent. The Bank targets the core rate of inflation at two per cent. The rate has stayed below the target level since October 2007.

“The Bank’s revised forecast for economic growth and inflation means it won’t raise interest rates anytime this year, but credit conditions have tightened, which will mute the benefit of the Bank of Canada’s recent interest rate cuts for consumers, business, and the economy,” said Klump.

Echoing previous messages about for the potential for additional interest rate cuts when it next meets in March to set its policy interest rates, the Bank also said it “will continue to monitor carefully economic and financial developments in judging to what extent further monetary stimulus will be required to achieve the two per cent inflation target over the medium term.”

When the Bank cut interest rates on January 20th, the advertised five-year conventional mortgage rate stood at 6.75 per cent. This is down 0.74 per cent from one year earlier, and 0.2 per cent below where it stood when the Bank made its previous interest rate announcement on December 9th, 2008.

The ongoing credit crunch has led mortgage lenders to reduce discounts on advertised mortgage interest rates, and in some cases these have been completely eliminated.

“Sales activity and prices will decline this year, as many buyers hunker down and put off buying decisions during the economic recession,” said Klump. “Housing market prospects will improve in 2010 in tandem with a rebound in economic growth.” (CREA 20/01/2009)

The Canadian Real Estate Association is calling on the federal government to include several housing initiatives in the upcoming budget. The association believes the proposals are even more important in today’s recessionary times, based on the impact housing has on the overall economy and the reported results of MLS® residential sales in 2008.

“Bay Street needs to take a back seat to Main Street in the next federal budget,” says the President of The Canadian Real Estate Association, Calvin Lindberg. “The government has already moved to help credit markets and our chartered banks, now it’s time to take direct and immediate action to help ordinary Canadians.”

Statistics released today by the CREA show that the residential housing market sales volume withdrew in 2008 to levels not seen since 2002. More importantly, the most recent statistics from December 2008 show that sales activity reached its lowest level for the month of December since 2000. Some 434,477 homes traded hands via the MLS® systems of real estate boards in Canada in 2008, down 17.1 per cent from the record 523,855 properties sold in 2007.

“We are pleased the Minister of Finance and the government have recognized the need for action by ranking housing as one of the top six issues in its pre-budget consultations,” Mr. Lindberg added.

CREA has met with senior government officials and proposed several measures to help stimulate the housing market, both for residential and commercial investors.

For residential homebuyers, CREA proposes the government increase the limit of the Home Buyers Plan (HPB). Introduced in 1992 by a Conservative government and made permanent by a Liberal government in 1994, the HPB has broad political and consumer support.

The HBP allows first time homebuyers to withdraw up to $20,000 from their RRSP to help purchase a residential property, which must be repaid over a period of 15 years.

Unfortunately, the HBP has not kept pace with inflation or home prices. As a result, the HPB does not have the same impact and relevance it did 16 years ago, when $20,000 represented 13.3 per cent of the average house price, versus about 6.5 per cent today.

“The government should immediately raise the HBP limit from $20,000 to $25,000 and it should keep pace with annual inflation. Additionally, it should be available to all home buyers, not just first time buyers,” the CREA President added.

To address issues facing the commercial and investment property markets, CREA is seeking amendments to the Income Tax Act to promote increased reinvestment in real property. The CREA proposal calls for the deferral of capital gains taxes and the capital cost allowance recovery for all real property investments when an investment property is sold and the proceeds are re-invested in another real property within the subsequent year.

“Our proposal has benefits across the board for the economy, for rental housing and for the small investor, as well as some significant environmental benefits as old buildings are renovated and made more energy efficient. The budget is the perfect time for this sort of stimulus,” Calvin Lindberg added.

Studies show that more than 29 jobs are created for every $1 million invested in property renovation. A study prepared by Altus Clayton for CREA also shows that each residential MLS® transaction generated an additional $32,200 in consumer spending. Commercial and investment property transactions can generate even higher levels of economic spinoffs.

Canada Mortgage and Housing Corporation (CMHC) reported that rental construction is not growing fast enough to offset demand. At the same time, the Ontario Housing Supply Working Group has found that tax changes, such as the proposed rollover, “will not only lower the rent threshold at which a new project will be viable…new supply will help reduce demand pressures and…increase the supply of vacant units in existing stock.”

CREA’s proposed deferral and reinvestment will help the small investor disproportionately. Research based on the 2006 tax year indicates that 58 per cent of those reporting real property gains had net incomes of $50,000 or lower.

CREA’s detailed proposal for the Home Buyers Plan is available on www.crea.ca.

CREA’s capital gains proposal is also posted on www.crea.ca.

A podcast with CREA President Calvin Lindberg is also available on www.crea.ca. (CREA 15/01/09)

The number of properties sold via the MLS® systems of real estate boards in Canada edged down further in December 2008 to reach the lowest level for the month since December 2000, according to statistics released by The Canadian Real Estate Association (CREA).

Seasonally adjusted residential MLS® sales activity numbered 27,357 units in December 2008, a decline of 1.8 per cent compared to the previous month.

However, seasonally adjusted activity was up in more than half of Canadian housing markets. Activity declines in Montreal, Calgary and Edmonton more than offset a rebound in the number of transactions in Vancouver, resulting in a small monthly decline in national sales activity.

The small month-over-month decline in national MLS® seasonally adjusted sales activity in December followed double digit declines in September (-14.9 per cent) and October (-12.1 per cent). Activity plummeted 22.2 per cent in the fourth quarter of 2008 to 86,879 units, with seasonally adjusted quarterly declines in activity in all provinces. The sharp drop in fourth quarter activity accounted for over half of the decline in transactions since the peak in 2007.

Year-over-year declines in the MLS® average home price were reported in about half of local markets in December. Lower activity and average prices compared to one year ago remain most pronounced in Canada’s more expensive housing markets. This continues to weigh on the national MLS® residential average price.

The national average price of homes sold via the MLS® in December 2008 declined by 11 per cent from where it stood a year ago. The major market price trend was similar to the national trend, down by 9.9 per cent year over year in December 2008.

The price trend is similar but less dramatic for the weighted national MLS® average price, which compensates for changes in provincial sales activity by taking into account provincial proportions of privately owned housing stock. The weighted national MLS® average price dropped 6.2 per cent year-over-year in December 2008, while the weighted major market average price declined 2.9 per cent.

“Moderating home prices in Canada should not be confused with the downturn in the U.S. housing market,” says CREA President Calvin Lindberg. “But any local real estate market is not immune to global economic challenges, and that is what we face today. Low prices are not the concern as much as the perception of doom and gloom. Buyers are waiting to see if the real estate market has hit bottom, and that is a very complex thing to try and calculate. Most of us will only be affected by the market correction psychologically, because the majority of Canadians will not buy or sell property in the coming year.”

Seasonally adjusted new MLS® residential listings numbered 72,931 units in December, down three per cent from levels recorded in November. New listings are trending lower. In December, they stood 8.1 per cent below the peak reached in May 2008.

Resale housing market balance is represented by sales as a percentage of new listings. The rise in the number of new listings in the first half of last year along with declining sales activity, particularly in the fourth quarter, resulted in an increasingly balanced resale housing market over the course of 2008.

Sales as a percentage of new listings in the fourth quarter of 2008 fell to the lowest level since the mid 1990s. New listings are trending down from the peak reached in the second quarter of 2008. If this trend continues, the balance of supply and demand will stabilize in 2009.

“Average prices will remain under downward pressure during the Canadian economic recession,” said CREA Chief Economist Gregory Klump. “Shaky financial market confidence is pulling down business and consumer confidence. The consensus economic forecast predicts the economy will rebound in the second half of 2009, so housing market trends should strengthen next year.”

“There has been a fundamental shift in consumer confidence, with job insecurities prevailing in every region of Canada,” CREA’s Chief Economist added. ”That is unlikely to change until the worst of the recession is behind us.”

More detailed information is available at the following links:
Unit sales
Dollar volume
Average price
New listings

A full PDF version of this news release is available here.
[CREA 15/01/09]

National MLS® resale housing activity in Canada in 2008 pulled back from the record setting levels of the previous five years and fell to the lowest level since 2002, according to statistics released by The Canadian Real Estate Association (CREA).

By contrast, the number of new MLS® residential listings broke all previous annual records in 2008, making the resale housing market significantly more balanced. Lower sales activity in Canada’s priciest markets combined with higher inventories ended MLS® residential average price growth in 2008 after nine consecutive years of price gains.

Some 434,477 homes traded hands via the MLS® systems of real estate boards in Canada in 2008, down 17.1 per cent from the record 523,855 properties sold in 2007.

“There is a difference between a dead market and a quiet market, and residential real estate markets in Canada are anything but dead,” notes Calvin Lindberg, President of The Canadian Real Estate Association. “These results represent the sixth highest annual sales totals for MLS® residential properties on record, just half a percent below 2003 levels.”

Seasonally adjusted national MLS® resale housing activity declined in every quarter last year, marked by a sharp drop in the fourth quarter. Sinking activity in the fourth quarter accounted for over half of the decline in transactions since the peak in 2007.

Newfoundland and Labrador bucked the national trend in 2008, with MLS® home sales climbing to a new annual record. Activity was down on a year-over-year basis in every other province. British Columbia and Alberta posted the largest activity declines, with transactions down 33 and 21 per cent, respectively. Annual activity also declined just over 15 per cent in Ontario and Saskatchewan.

Lower activity in Canada’s priciest housing markets, particularly British Columbia and Alberta, weighed heavily on the national MLS® residential average price in 2008. This caused the national MLS® average price to edge lower, despite average prices having set new annual records in every province except Alberta.

The national MLS® residential average price edged lower by seven tenths of one per cent in 2008, to $303,594. Average price posted year-over-year gains in the first six months of the year before declining throughout the second half of 2008.

“Sellers are asking why the market value of their home is declining. Buyers want to know if they should make an offer now, or wait for prices to drop even more. Homeowners not in the market want help understanding the impact the current market has on their equity. It can affect things like renovations or retirement plans. First-time buyers want to know how much they need for a down-payment, whether they can afford the monthly mortgage payment, and wonder if they can even get financing,” the CREA President adds.

“There are no easy answers. Real estate is local, and markets are different.”

A weighted national MLS® average price compensates for changes in provincial sales activity by taking into account provincial proportions of privately owned housing stock. Weighted average price trends are similar but less dramatic compared to trends for the conventionally calculated unweighted average price. The weighted national MLS® average price was up by 2.9 per cent in 2008, with year-over-year declines posted in every month from September onward.

New MLS® residential listings rose 7.7 per cent to 919,863 units in 2008 – a new annual record. Seasonally adjusted new listings peaked in the second quarter of the year and have since been trending downward.

Resale housing market balance is represented by sales as a percentage of new listings. The rise in the number of new listings last year combined with lower sales activity resulted in a considerably more balanced resale housing market in 2008.

In line with the trend in sales activity, MLS® residential dollar volume declined 17.7 per cent to $132 billion in 2008. Annual dollar volume set new records in Saskatchewan, Manitoba, and Newfoundland and Labrador last year.

“The beginnings of a Canadian economic recession and a dramatic downturn in consumer confidence late last year means that the housing market is facing significant headwinds in 2009,” said CREA Chief Economist Gregory Klump. “Sales activity dropped sharply and price declines accelerated in the fourth quarter of 2008. The consensus economic forecast calls for an economic rebound in the second half of 2009, so an improvement in housing market trends is likely to wait until next year.”

A study prepared for CREA by Altus Clayton shows that each residential MLS® transaction generates an average of $32,200 in ancillary spending by consumers, on everything from moving costs to renovations and appliance purchases. The 89,378-unit difference in the number of units sold between 2007 and 2008 meant $2.9 billion less in domestic economic activity from real estate transactions. The report is also available on www.crea.ca.

PLEASE NOTE: You can also view the podcast with CREA President Calvin Lindberg dealing with today’s real estate market on www.crea.ca.

A full PDF version of this news release is available here.
[CREA 15/01/09]