Derek Abma
Sun

The pace of Canadian home construction for 2009 peaked as the year was coming to an end, closing out the first year in what is expected to be a markedly different era for the sector than the period that preceded it.

Canada Mortgage and Housing Corp. said Monday that housing starts were up 5.9 per cent in December from the month before, to an annual rate of 174,500 units, the most since October 2008. Most economists expected between 160,000 and 165,000 units in December, following an upwardly revised 164,800 starts for November.

CMHC is scheduled to officially report totals for 2009 next month. However, based on what the federal agency has already reported, calculations by Canwest News Service indicate the yearly tally will come in at about 145,000, marking the first time in eight years the figure has been less than 200,000.

CMHC chief economist Bob Dugan noted that the normal rate of household formation in Canada is about 175,000 a year, meaning the rate of housing starts for most of the last decade was out of whack with demographic trends.

He said it will likely be a while before 200,000 or more housing starts are seen in one year. Dugan said it will take another extended period of home building that falls well short of household formation — as happened in the 1990s — to create ideal conditions for another home-building boom.

“Somewhere in the 170,000-to-175,000-unit range is probably where we’re going to see starts for most of the year in 2010,” Dugan said. “We’re getting back to equilibrium, where housing starts are back in line with that level of household formation.”

Urban housing starts were up 6.6 per cent to 157,100 units in December, CMHC said. Within this category, multiple-unit starts totalled 77,700, up 6.7 per cent from November, while single-unit starts totalled 79,400, up 6.4 per cent from the previous month.

Rural starts were unchanged at 17,400 units.

Ian Pollick, economics strategist at TD Securities, said in a report: “It is increasingly looking like the ‘fever’ in the existing-home sales market is starting to catch in the new residential housing market.”

Marco Lettieri, economist with National Bank Financial, noted that December housing starts were up almost 50 per cent from their April lows. He attributed this to low interest rates, strength in the Canadian job market, and a “wealth effect” created from rising property values and stock-market gains.

“This said, we are currently concerned over the elevated levels of inventory of new unoccupied multiple-family dwellings,” Lettieri said in a research note. “This points to a current oversupply of inventories and could be an indication of a coming slowdown in multiple starts down the road.”

CMHC’s Dugan said he is not overly concerned about inventories of multiple-housing units, though he did acknowledge they are at “relatively high levels.” He said builders, for the most part, have been responding to shrinking demand.

© Copyright (c) The Vancouver Sun

Property Act, privacy regulations must be observed

Tony Gioventu
Province

Dear Condo Smarts: Our strata council passed a rule that it would only receive correspondence through our management company. The rule states that any applications for rentals, hardship applications, requests for alterations, hearings of council, and any related strata business must be addressed only to the strata management company.

As owners, we have been fine with this, except council members themselves don’t abide by the rule, and routinely send out e-mails to owners in the complex regarding bylaw violations and official notices.

We heard that the changes to the Strata Act will permit e-mail as notice, but who does that have to be e-mailed to in order for the e-mail to be valid? What happens if the strata doesn’t provide an address, but the council members e-mail an owner? Can they officially reply back to the council member?

–Karen T, Vernon

Dear Karen: It is easy to understand why a strata corporation wants to maintain only one official address for receipt of notices and sending of notices. If everyone sends their correspondence to council, as well as the strata agent or president, you could end up with eight or more potential mailing addresses and e-mail addresses. It would make it extremely difficult to manage notices of meetings and requests of owners and tenants and agents.

However, the act does permit an owner to leave a notice or request for forms or documents required with a council member by mailing it to the recent address on file in Land Titles for the strata, by putting it through a mail slot or in the mail box used by the strata, by faxing or e-mailing it to a number or e-mail address provided by the strata corporation, or fax number or e-mail address provided by a council member for the purpose of receiving the notice.

An example of the complications of notice often arise when an owner gives a notice of a hardship application to a council member. Under the Strata Property Act, this is deemed to be proper notice, and if the council member ignores the notice and the council does not respond in writing after two weeks of the request, the exemption is automatically allowed.

E-mail is obviously going to become a common method of notice. The strata corporation and council members will only have to officially receive e-mails as notice if their e-mail address functions for the purpose of receiving notice. Likewise, the strata corporation can only send notice to an owner or tenant by e-mail if the owner or tenant has provided an e-mail address for that purpose.

If a strata is considering using e-mail for notices sent and received, it would be a prudent management decision for the councils and managers to create and maintain only one strata-identified e-mail address.

The strata corporation must ensure that the e-mail is checked daily as requests such as a payment or information certificate, or a hardship application, are all time-sensitive.

Council members, owners, tenants and strata agents all need to exercise caution when using e-mail.

Not only do the provisions of the Strata Property Act apply, but also the provisions of the Personal Information Protection Act. Always exercise caution in what you write in an e-mail. You cannot guarantee the security of sensitive or confidential information once you hit the send icon.

The updated changes to the Strata Property Act & Regulations are available on the Internet at bclaws.caor choa.bc.ca.

Tony Gioventu is executive director of the Condominium Home Owners’  Association. Send questions to him at [email protected].

© Copyright (c) The Province

Not the best time to invest in the market as economy begins rebuilding

John Morrissy
Province

Bruce Cran, president of the Consumers’ Association of Canada, is urging people to cautiously enter into the housing market, considering that interest rates will likely rise. Photograph by: Arlen Redekop, The Province

As Canada’s red-hot real estate market shows no signs of slowing down in 2010, analysts are beginning to caution some buyers that their best move may be to step to the sidelines.

“If you’re somebody in a situation that you have only five per cent down and you’re stretching to get in the market with a 35-year amortization, I think that would be a very precarious situation right now,” said BMO Capital market economist Robert Kavcic.

Conversely, he said, “if you’re sitting on a pile of cash and looking to move into the real estate market, it would almost be a no-brainer to just wait for lower prices.”

Notes of caution simmered to the surface this week after realtor Royal LePage forecast home prices would continue to “appreciate significantly” during the early months of the year.

Already in 2009, they’re up 19 per cent, according to the Canadian Real Estate Association.

The trouble is that while prices are rising, incomes are not.

Yet rock-bottom borrowing costs continue to lure buyers, and investors are rushing in — despite a shortage of listings — for fear that if they don’t get into the market now, they’ll miss their chance.

“It’s absolutely not debatable that housing prices cannot rise faster than incomes over the long term,” said Will Strange, who is professor of real estate and urban economics at the Rotman School of Management.

Sooner or later, incomes have to rise, or home prices fall, for balance to be attained.

Many analysts argue that home prices are not yet out of line with the incomes it takes to pay for them, Strange said.

Yet with the job market still weak, and unlikely to drive new employment and higher wages, odds are that if something’s got to give, it will be prices.

“If I didn’t personally have most of my wealth tied up in housing, this would not be the time that I would choose to jump in,” Strange cautioned.

At the same time, interest rates have nowhere to go but up, which could leave some buyers in a position similar to U.S. homeowners, who had houses worth less than their mortgages after the subprime bubble burst and house prices crashed.

“We’re certainly urging people to error on the side of caution,” said B.C.’s Bruce Cran, president of the Consumers’ Association of Canada.

“If you’re paying an amount of money, whatever that might be, that you couldn’t sustain if interest rates rose by say 25 or 30 per cent — I can see that being a problem for a lot of people.”

Canada‘s not headed for anything similar to the U.S. subprime mess because lending standards here are higher and because people can’t just walk away from their homes as they can in the U.S., other than in Alberta.

But there may yet be an economic impact if home prices turn down, as home values relate directly to the economy, fuelling spending as they rise and tightening personal budgets as they fall, Strange said.

For now, many observers are predicting, as does Royal LePage, that the market will find its balance later this year as rates rise and more listings come on the market.

In the meantime, there are still many good reasons to buy a house, Strange said, “but don’t buy it because you think the price is going to go up.”

© Copyright (c) The Province