Blog entries will be posted in the language in which they were written.
May 31st, 2011

Window on the Market

Posted by Joan McGuigan
 The Importance of Tracking Consumer ConfidenceThe vitality of the residential real estate market is influenced by three main factors: 1) performance of the labour market; 2) changes in mortgage rates; and 3) consumer confidence. This last factor reflects consumers’ perceptions about current and future economic conditions. In Canada, the Conference Board of Canada publishes an index that measures these perceptions using a monthly survey among households from different provinces across the country. The survey consists of four questions regarding households’ views about the labour market, their personal finances and their feelings about making a major purchase. This last aspect is particularly relevant for forecasting the evolution of the real estate market, as households are asked to answer the following question: “In your opinion, is now a good time to make a major purchase, such as a home?” Here, we are interested in the proportion of households that responded affirmatively to this question. For example, in April 2011 (see the whole document)

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 Despite a Declining Market, Sales of Luxury Homes are Increasing in the Montréal Area Between January and April 2011, sales of single-family homes in the Montréal Metropolitan Area fell by 14 per cent compared to the same period last year. However, the number of homes sold for more than one million dollars increased by 13 per cent since the start of the year. There were 108 MLS® sales in this price range, including 97 on the Island of Montréal. This trend did not carry forward to the luxury condominium market, as the number of condominiums sold for more than $500,000 decreased by 4 per cent in the Montréal area in the first four months of the year, at 180 sales.

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 Côte-Nord: Announcement of the Largest Private Investment in Québec in More Than 12 YearsThe ArcelorMittal mining company announced on May 20 that it is investing $2.1 billion in the Côte-Nord area of the province. This is the largest private investment since the construction of the Alcan aluminum smelter in Saguenay, which began in 1998. Some 8,000 direct and indirect jobs will be created and several economic benefits are already being felt – and will continue being felt – mainly in Fermont and Port-Cartier, the two towns that will benefit the most from this investment. We can therefore expect a certain buoyancy in the real estate market in the coming years, particularly since housing is already a rarity in this area. Between 2005 and 2010, the median price of properties in the Sept-Rivières and Caniapiscau RCMs, where the towns of Fermont and Port-Cartier are located, increased by 64 per cent (to $155,750 in 2010), which is higher than the provincial increase for the same period (33 per cent) .

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 Affordability Decreases in Québec According to RBCAccording to the Royal Bank of Canada (RBC), housing affordability decreased slightly in Québec in the first quarter of 2011, due primarily to the increase in property prices. In the last two quarters of 2010, affordability had improved thanks to decreases in interest rates, but this was not the case in the first quarter of 2011. The RBC anticipates that increases in interest rates during the year may further increase the cost of homeownership and therefore slow buyer demand. The RBC’s housing affordability measure is based on the proportion of median income before taxes that a household wanting to become homeowners must devote to the mortgage, property taxes and other public services. In Québec, in the first quarter of 2011, this proportion was 35.6 per cent for a standard bungalow, 43.2 per cent for a standard two-storey home and 28.9 per cent for a standard condominium. Click here to read this study.

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 Many Canadians Buying Properties in the United StatesAccording to a study by the National Association of Realtors, Canadians were the most active foreign buyers on the U.S. residential real estate market for a fourth consecutive year. Canadians accounted for 23 per cent of property purchases made by foreigners in the United States in the period from April 2010 to March 2011. The Chinese came in second at 9 per cent. Canadian buyers were especially active in the states of Florida and Arizona. The strength of the Canadian dollar compared to the U.S. dollar, the affordability of properties and property value appreciation possibilities were the main reasons behind this phenomenon. To read this study, click here.

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 Canada‘s Inflation Rate Stayed High but Stable in April According to Statistics Canada, consumer prices rose by 3.3 per cent in Canada over the 12-month period ending April 2011, matching the increase recorded in the previous month. Note that the inflation rate increased from 2.2 per cent in February to 3.3 per cent in March 2011 to reach the highest rate since September 2008. Rising energy and food prices were the main contributors to price increases in April. Energy prices advanced 17.1 per cent during the 12 months to April 2011, particularly because of the 26.4 per cent increase in gasoline prices. Finally, Canadian consumers paid 3.7 per cent more for food in April 2011 compared to April 2010.

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 Main Economic Indicators – April 2011
 
 (1) Proportion of people who responded “Yes” to this question.
Note: Green arrows indicate good news and red arrows indicate bad news. The two arrows indicate stability.
Sources: Bank of Canada, Statistics Canada, Conference Board of Canada and CMHC.
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© 2011 Québec Federation of Real Estate Boards. All rights reserved.
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