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Residential Sales: Do June and July Mark the End of the Downward Trend?


Paul Cardinal, Manager of the QFREB’s Market Analysis Department, offers a picture of the current real estate market across the different regions of the province and explains why the market has been growing since the beginning of the summer season.





 
 
 

Also in this issue

 
 

The City of Montréal renews its housing subsidy program

Significant Rebound in Sales in the Gatineau and Saguenay CMAs in July

Households in the 35-44 Age Category Benefited Most From the Average Increase in Net Worth Between 1999 and 2012

2013 was a Financially Positive Year for Canadian Households

The relative net worth of Canadians has been drawing closer to that of Americans since 2006

Employment in Québec: An Increase Rather Than a Decrease in July

Main Economic Indicators


 
 
 
 

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The City of Montréal renews its housing subsidy program


The City of Montréal announced on August 18 the renewal of its own home ownership and renovation subsidy program. You may recall that following the provincial government’s lack of participation in the Renovation-Québec program, the City of Montréal suspended all new applications for financial assistance on July 14.


The City of Montréal will offer grant applicants 50 per cent of the previous levels budgeted under the old program for the purchase of a new home, major home renovations, renovations à la carte and foundation repairs. As regards social housing projects and the reimbursement of transfer taxes, the City of Montréal will still provide grants at 100 per cent.


The administration also stated that new grant applications will be processed as soon as the terms and conditions of the new program are accepted by city council.


Details will shortly be published on the City of Montréal website.


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Significant Rebound in Sales in the Gatineau and Saguenay CMAs in July


After a difficult start to the year, the Gatineau and Saguenay Census Metropolitan Areas (CMAs) stood out in July 2014, as residential sales levels returned to growth. You may recall that sales fell by 13 per cent in Gatineau and by 9 per cent in Saguenay for the first six months of the year, the largest decreases among the province’s six CMAs. However, against all expectations, sales rose by 14 per cent in both of these areas in July, for a total of 369 transactions in Gatineau and 106 transactions in Saguenay. In comparison, sales increased by 3 per cent for the province as a whole compared to July of last year.


In the Gatineau CMA, sales of single-family homes were up by 14 per cent compared to July 2013, with a total of 298 transactions. In addition, 41 condominiums changed hands, a 17 per cent increase compared to the same period last year. Finally, 30 plex sales were concluded, a 3 per cent increase. Meanwhile, the median price of single-family homes ($232,000) and condominiums ($163,900) fell by 2 per cent and 7 per cent respectively in July, while plexes (2 to 5 dwellings) registered a 9 per cent increase in median price to reach $285,000. Finally, market conditions continued to give buyers the upper hand for all three property categories.


In the Saguenay CMA, 91 single-family homes changed hands in July, a 14 per cent increase compared to July of last year. In addition, 8 condominiums and 7 plexes were sold. However, the median price of single-family homes decreased slightly by 1 per cent, with half of all listings selling at a price higher than $175,000. As for the number of months of inventory, market conditions gave a slight advantage to buyers of single-family homes.


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Households in the 35-44 Age Category Benefited Most From the Average Increase in Net Worth Between 1999 and 2012


The Royal Bank of Canada (RBC) published in August 2014 an analysis of Canadian household indebtedness based on data from surveys conducted between 1999 and 2012 among people from different age groups.


In its report, the RBC notes that the net worth of Canadian households jumped by 66 per cent between 1999 and 2012, an average annual increase of 4 per cent, excluding employer pension plans. This significant increase is mainly attributable to the aging of the population; households in the 55+ age category are more likely to have a higher average net worth than the other age cohorts.


The survey results also reveal that an increase in real estate equity accounted for 60 per cent of the increase in Canadians’ total net worth between 1999 and 2012. More specifically, households in the 35 to 44 age cohort in the 2012 survey benefited most from the increase in average real estate equity. However, this age category significantly increased its debt compared to 1999 and the other age groups. This can largely be explained by the fact that this generation was composed primarily of first-time buyers between 1999 and 2012, according to the RBC. Real house prices increased by an average of 4.6 per cent during this period, which also contributed to increasing the indebtedness of first-time buyers while, in contrast, those who were already homeowners benefited from an increase in their equity.


Finally, RBC notes that Canadians between 35 and 44 years of age during the survey would be more vulnerable to future economic shocks, such as an increase in interest rates or a drop in property prices. However, this scenario is considered unlikely to materialize in the near future, as the real estate market is expected to undergo a soft landing in the coming years. To read the full analysis, click here.


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2013 was a Financially Positive Year for Canadian Households


The company Environics Analytics just released its most recent database, entitled Wealthscapes 2014. It includes financial statistics on the assets, liabilities and wealth of Canadians for the year 2013.


According to Environics Analytics, the positive results in 2013 indicate robust fiscal health, as Canadians’ net worth grew by 7.7 per cent compared to 2012. Furthermore, both the rich and the poor benefited from this increase; households that represent the richest fifth of the population and the poorest fifth of the population registered respective increases in average net worth of 8.1 per cent and 8.7 per cent.


The average value of real estate holdings increased by 5.9 per cent from 2012 to 2013, to reach $335,834 per household. At the same time, mortgage debt increased by 3.3 per cent, but remained manageable for the majority of Canadians thanks to low interest rates. Furthermore, assets increased by 8.3 per cent to reach an average of $56,557 per household, while total investments rose by 10.4 per cent ($145,348).


British Columbia ($591,047), Alberta ($531,067) and Ontario ($523,969) were the top three provinces in terms of average net assets of households in 2013. However, although British Columbia ranked first on the list of richest provinces, it also registered the smallest growth compared to 2012. Results for the province of Québec were not as good, with a more modest increase of 6.3 per cent and average net assets of $288,207.


Environics Analytics also revealed that the cities of Vancouver, Toronto and Calgary remained the country’s richest in 2013, primarily due to high property prices. The city of Montréal outperformed the rest of the province of Québec with a 7.2 per cent increase in net worth compared to 2012. Similarly, Montrealers’ savings rate increased by 3.8 per cent, which is twice as high as that registered for the province as a whole (1.9 per cent). To read the press release, click here.


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The relative net worth of Canadians has been drawing closer to that of Americans since 2006


Statistics Canada released in August 2014 a research paper on the evolution of the relative net worth of American and Canadian households between 1970 and 2012. According to the organization, while the net worth per capita in Canada was 60% to that of Americans in 2006, the level stood at 74% of the average net value recorded in the United States in 2008 and then rose to 77% from 2009 to 2012.


Although as regards purchasing power parity, the net worth per capita in the United States and Canada generally increased at a similar rate during the study period, the report notes that some differences emerged with the 1973 oil shock and especially with the collapse of the U.S. housing market in 2007, which significantly reduced the net worth per capita in the United States. The collapse of the housing market has also resulted in liabilities in Canada rising from 46% in 2004 to 69% in 2012. Compared to the U.S., Canadian households continued to take out mortgages unlike Americans who preferred to repay their loans.


Statistics Canada concludes that the increase in the net value recorded from 1970 to 2012 was largely attributable to the increase in property values. Financial assets were also an important reason for the fluctuations in net worth, while in contrast the debt did not play a significant role for both the U.S. and Canada.


Click here to view the full report.


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Employment in Québec: An Increase Rather Than a Decrease in July


On August 15, Statistics Canada published revised employment statistics after an updating error occurred. According to the organization, employment in Canada increased by 41,700 jobs (+0.2 per cent) in July 2014 compared to June, in seasonally adjusted data. Similarly, employment in Canada over the past 12 months grew by a total of 157,000 jobs, an increase of 0.9 per cent.


In Québec, employment increased slightly by 1,900 jobs in July 2014. Over a 12-month period, from July 2013 to July 2014, employment rose by 16,300 jobs.


Compared to June, four out of the province’s six Census Metropolitan Areas (CMAs) registered an increase in employment in July: Sherbrooke (+100 jobs), Saguenay (+1,000 jobs), Trois-Rivières (+800 jobs) and Québec City (+5,100 jobs).





In Canada, the unemployment rate was down by 0.1 percentage points to reach 7.0 per cent in July, as there were fewer people looking for work.


In Québec, the unemployment rate remained unchanged at 8.1 per cent in July. The unemployment rate dropped in two of the six CMAs: Sherbrooke (-0.6 percentage points) and Trois-Rivières (-0.8 percentage points). The Saguenay CMA showed stability compared to June, while the three other CMAs registered increases ranging from 0.1 to 0.4 percentage points.


Over the past 12 months, only the Sherbrooke (-0.4 percentage points) and Trois-Rivières (-2.1 percentage points) CMAs saw a decrease in their unemployment rate. The province’s other CMAs registered increases ranging from 0.2 to 1.7 percentage points.


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Main Economic Indicators - July 2014



(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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