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Residential, non-residential construction activity in Canada to diverge in 2017

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In its latest outlook, The Conference Board of Canada stated that residential starts and non-residential construction in Canada will see notable deviations from each other in 2017, with the former slowing down and the latter exhibiting stronger activity.

“Not only is the residential construction industry seeing a downturn in housing starts, spending on home renovations is now showing signs of weakness too. In all, we expect price-adjusted spending growth in the residential construction industry to average less than one per cent per year through 2020,” the Board’s director of industrial trends Michael Burt said. “A slowdown in multi-unit construction, particularly in the apartment and row house segment, is expected to drag down industry output by 0.2 per cent in 2017. Signs of this downturn have already shown up in recent housing starts data, with multi-unit housing starts down 2.3 per cent in 2016. Multi-unit housing starts will take another step back in 2017, and will struggle through 2021,” the Board said in its announcement. However, “despite weaker residential construction activity, pre-tax profits are forecast to grow by 4.7 per cent this year to reach $4.2 billion.” Meanwhile, “non-residential construction output is forecast to expand by 3.7 per cent this year, led by growth in the institutional segment,” as well as “increased investment in warehouses and hotels.” “Providing support to the industry’s commercial segment is the rise of online shopping, which is beginning to see a faster rate of adoption in Canada. This will help support a U.S.-style buildup in warehouses across the country, although Southwestern Ontario will be a key beneficiary,” the Board added. “Industry profitability is expected to improve slightly over the next five years. Pre-tax profits are expected to reach $2.2 billion this year and grow by an average of more than 4 per cent between 2018 and 2021.” Related stories: Mortgage professionals’ organization reluctant about foreign buyers’ tax in GTA Record year for Canadian commercial sales points to a robust 2017 – CBRE

RBC: Toronto and Vancouver housing affordability still at high-stress levels

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Statistics on the housing market combined with monopoly houses.Monopoly and the housing market. Some plastic ‘monopoly houses’ (in red and green) are placed on some tables and graphics showing the situation on the real estate market.

RBC: Toronto and Vancouver housing affordability still at high-stress levels The fourth quarter of 2016 saw Canadian housing costs remain at overheated levels despite the imposition of various federal and provincial measures to address the prevalent issue of home affordability, according to a fresh report released by RBC Economics Research last week. In the latest edition of its Housing Trends and Affordability Report, RBC stated that affordability levels for the final quarter of 2016 remained essentially unchanged from Q3. “Owning a home at market price in Canada still took an abnormally large bite out of household income, but RBC’s aggregate affordability measure was unchanged in the fourth quarter after a string of six quarterly increases,” RBC senior vice-president and chief economist Craig Wright said. Toronto affordability worsened to 64.6 per cent, from 63.8 per cent in the third quarter. “Further policy intervention would be wise to cool surging home prices in Toronto, as the market has become disconnected with economic fundamentals,” Wright explained. “The last time affordability in Canada’s largest city was this poor, in 1990, the housing market subsequently fell into a deep and prolonged slump.” Meanwhile, affordability saw a marked improvement in Vancouver for the first time in over three years, up to 84.8 per cent (from 90.0 per cent in Q3). However, RBC hastened to add that would-be buyers in Vancouver are still labouring under the greatest affordability hurdle in Canada. As of Q4, the affordability measure stood at 44.2 per cent nationwide. RBC noted that this is the most stressed level of Canadian home prices since late 2008. Related stories: Sousa: Ontario is reaching its limit in handling overheated Toronto market Impact of foreign buyers’ tax on Vancouver prices still up in the air

New survey shows Canadians turning part of their homes into Airbnb units to cover their mortgage

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Canadians facing ever increasing house prices — and debt — are turning to short-term rentals to make ends meet, according to a new survey. AltusGroup, which provides real estate research, said its FIRM survey from the summer of 2016 found four per cent of all households had used a short-term rental accommodation service in the past year. The number rises to seven per cent for those with a mortgage. “There has been a lot of speculation lately about potential investor involvement in short-term accommodation rental services like Airbnb,” said Altus in its release. “But focusing on households rather investors, how extensive is the practice of short-term rentals of space in principal residences?” Related Millennials won’t move out, but they will do their own taxes: report Giving them the boot: How to get rid of your millennial children in five easy steps Altus noted impact is even greater among millennials, those under 35 years of age, living in Canada’s four largest cities — Toronto, Vancouver, Calgary and Montreal. In large cities, 15 per cent of all millennials said they used a short-term accommodation service to rent out part of their homes. Millennials in those cities, who also had a mortgage, rented out space short-term 22 per cent of the time. Even renters seems to taking advantage of the demand for short-term accommodation. In large cities, 12 per cent of renters 35 and under reported they had used a short-term accommodation rental service to rent out part of their home. Among the general population, four per cent of all renters across the country had sublet part of their home. Financial Post
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