by Neil Sharma

Six months into legalization, cannabis is breathing new life into small, struggling markets.

According to Altus Group, once-depressed tertiary markets are enjoying resurgence, thanks to the arrival of marijuana production facilities that are priced out of urban markets. One such example is Leamington, Ontario, where Aphria Inc. set up shop in an erstwhile Heinz Ketchup processing plant. Elsewhere in the province, Smith Falls welcomed Canopy Growth Corp., which moved into an old Hershey’s plant.

According to an Altus Market Update report, both communities previously struggled with prolonged periods of abnormally high unemployment.

“Now, cannabis companies have sparked economic growth in these regions due to the rise in cannabis tourism and workers relocating to these communities,” read the report. “Other markets such as Kelowna, British Columbia, are also expanding this cannabis footprint. The Kelowna council recently approved the expansion of Flowr Corporation’s campus on the Okanagan Rail Trail across from the Agricultural Land Reserve (ALR) and approved a recommendation to rezone the land from heavily industrial to general industrial in order to facilitate the construction of new residential buildings.”

It isn’t just employment that’s benefited from the legalization of pot. In Leamington, land valuations have surged—the average price of unimproved farmland between 25 and 200 acres was $8,000 in 2013, however, by 2018 it rose to $30,000. Moreover, the average price per acre for improved greenhouse operations increased to $250,000 from $150,000 during that same span.

“This is not happening in all tertiary markets,” continued the report, “only the ones like Leamington and Smith Falls, where you have access to labour and low land prices.”

According to Altus Group’s Ray Wong, vice president of data operations and data solutions, certain fundamentals already existed in Leamington and Smith Falls, and the prosperity has carried over into other segments of those real estate markets.

“You have this workforce already in place and the land is a lot cheaper there compared to prime markets, so we’ve seen some good increase in agricultural land prices because of that demand,” said Wong. “It’s having a positive impact on the housing sector, based on employees working in those industries.”

Cannabis has also buoyed once struggling retail outfits, as well. However, there’s still residual stigma.

“It’s reviving some neighbourhoods where retail hasn’t been that strong,” said Kruti Desai, Altus Group’s manager of national research insights and data solutions. “The other thing to look at is not just the bylaws that are in place, but the investors too. Some landlords may not want that type of use based on the existing draw of customers in their existing retail spaces.”

by Steve Randall

The federal government announced Thursday that it is adding more strength to the National Housing Strategy.

The right to adequate housing for all Canadians will be supported by several key initiatives:

• Requiring the adoption and maintenance of a National Housing Strategy (NHS), that prioritizes the housing needs of the most vulnerable and requires regular reporting to Parliament on progress toward the Strategy’s goals and outcomes.
• Establishing a National Housing Council with diverse representation, including persons with lived experience of housing need and homelessness. The Council, supported by CMHC, will provide advice to the Minister on questions related to the NHS with the aim of improving housing outcomes.
• Creating a Federal Housing Advocate, supported by the Canadian Human Rights Commission, to identify systemic housing issues facing individuals and households belonging to vulnerable groups, and provide an annual report to the Minister with recommended measures, which will be tabled in Parliament.

“Through the National Housing Strategy, more middle-class Canadians – and people working hard to join it – will find safe, accessible and affordable homes. Our proposed human rights-based approach to housing, as well as the resource centre, will help strengthen the National Housing Strategy, ensuring that it delivers concrete results for the benefit of all Canadians,” said Jean-Yves Duclos, Minister of Families, Children and Social Development and Minister Responsible for Canada Mortgage and Housing Corporation.

Resource centre
Also announced, is a new resource centre from CMHC which will be managed by the Community Housing Transformation Centre to build a strong and resilient community housing sector.

CHTC will receive $68.6 million for administering the resource centre and two important initiatives under the NHS:

• A Sector Transformation Fund to provide non-repayable contributions that support building a strong and resilient community housing sector.
• A Community-Based Tenant Initiative to provide contributions to local organizations whose purpose is to assist people in housing need, support tenants in accessing information on housing options, and encourage better participation in housing decisions that affect them.

“When CMHC held public consultations to develop the Strategy, we heard that Canadians believe everyone deserves to have the dignity of a home. The most promising way to sustain this approach for future generations is to protect it through legislation. Enshrining the need for a National Housing Strategy in law inherently acknowledges the value of a coordinated approach, a shared vision and real accountability. It is a way to bring housing and “rights” closer together. This idea really is central to our thinking at CMHC: housing matters,” said Evan Siddall, President and Chief Executive Officer Canada Mortgage and Housing Corporation.

by Steve Randall

 April 9, 2019

The share of Canadians who believe the housing market is favouring sellers and those who think it favours buyers is aligned.

Just 2 percentage points divide the two opinions, making it the first time in 5 years that a balanced market is perceived according to a survey by RBC.

Roughly a third of respondents fall into each group: those who say it is now a buyers’ market (36%) and those who say it’s a sellers’ market (34%).

But those who are buying are not the traditional partner/spouse couples with 28% of potential buyers saying they intend to do so with family members and 32% buying solo.

In 2017, 49% of buyers intended to do so with a partner or spouse, now it’s just 42%.

“We’re seeing a fundamental contrast in who’s at the buying table,” said Nicole Wells, Vice-President, Home Equity Financing, RBC. “There is a surge in confident, in-control solo home buyers and, on the polar opposite end, those who are saying they can’t do it alone and need the assistance of family.”

Most people won’t overstretch their budget

A small majority (51%0 of respondents said they were not prepared to overstretch their budget when buying a home, essentially making themselves “house poor” by spending 30-40% of their income on homeownership.

However, RBC found that 47% of respondents said that the potential stress of being house poor is worth risking in order to own their own home.

“While many Canadians tell us that house poor may be a reality, it doesn’t have to be. It may require more effort or time upfront, but being more prepared in the home-buying journey can help bring it all together,” says Wells. “Let’s face it, the white picket fence or pride of your name on the deed is a rite of passage and doing it responsibly means there’s still money for the extras in life.”

Fifty-six percent of respondents said they think waiting until 2020 to buy would be a good idea and 45% of those are prepared to push the purchase out two years or more (highest among 18-34 year olds, 55%).

Down payments and interest rates

Asked about down payments, 47% say they plan to put more than 15% down, that’s up 10 percentage points from 2018; while just 16% say they will put down only 5% of the purchase price.

Almost three quarters of first-time buyers say they are concerned about interest rate hikes, compared to 59% of all respondents.

More than half of first-time homebuyers (56%) say they may actually buy sooner because of where interest rates are now and concerns of further hikes.

Other findings

• Eight-in-10 Canadians say a home or condominium purchase is still a good investment (81%).
• Canadians feel it makes more sense to buy than rent (66%).
• Canadians are well positioned to weather a potential downturn in housing prices (71%) or an increase in interest rates (63%).
• Affordability (21%) and being in a safe neighbourhood (20%) top the list of what Canadians must have, while buying in ‘the right’ neighbourhood is less of a concern (6%, steady decline since 2015).
• Canadians are most willing to sacrifice the conveniences of being close to a major highway (16%), dining and entertainment (13%), good schools (11%) and public transit (10%).

The announcement of a new CMHC First-Time Home Buyers Incentive Plan represents a shared equity mortgage program that would give eligible first-time homebuyers the ability to lower their borrowing costs by sharing the cost of buying a home with CMHC.

The incentive would provide funding (equity sharing) of up to five percent of the purchase price of an existing home, or 10 percent of a newly constructed home. No ongoing monthly payments are required. The buyer would repay the incentive, for example at resale. The government has budgeted up to $1.25 billion over the next three years to support this program.

For example, if a borrower purchases a $400,000 home with five per cent down and a five per cent CMHC shared equity mortgage ($20,000), the size of the borrower’s insured mortgage would be reduced from $380,000 to $360,000, helping to lower the borrower’s monthly mortgage bill. This would make it easier for Canadians to buy homes they can afford.

The program limits eligibility to households earning a maximum of $120,000 annually, and lets them borrow no more than four times their annual household income. This limits a home purchase to roughly $505,000. This Incentive Plan will be discussed more fully in the coming days, but it is not expected to begin until fall, 2019. In principle, the increased equity share eligibility for newly constructed homes will help incent new construction and supply across Canada.

Further analysis is needed, however, some aspiring homebuyers, especially at the lower end of the economic ladder, will have greater opportunities to purchase a home with the assistance of this new program.

Also of note is an increase in the eligible RRSP withdrawal amount through the Home Buyers’ Plan (HBP). Previously $25,000, this has been increased to a maximum to $35,000.

The budget included a lengthy defense of the current stress tests but does suggest that adjustments may be made in future. We will continue to discuss this issue with policymakers.

While we did not see immediate movement on the stress tests, and the new Home Buyers Incentive Plan can be seen as an alternate and more targeted response than an insurable 30 year amortization, we are encouraged by the announcements made today.

The forthcoming federal election will provide opportunities to continue the conversations with policymakers and candidates in the coming months. We will continue our ongoing market analysis and maintain our support for a stable housing market for our members and their customers.

Statistics Canada says the amount Canadians owe relative to their income ticked higher in the fourth quarter of last year as the growth in debt slightly outpaced income growth.

The agency says that seasonally adjusted household credit market debt, as a proportion of disposable income, increased to 178.5 per cent in the fourth quarter. That compared with a revised reading of 178.3 per cent in the third quarter.

That means there was roughly $1.79 in credit market debt for every dollar of household disposable income.

Credit market debt, which includes consumer credit and mortgage and non-mortgage loans, totalled nearly $2.21 trillion in the fourth quarter.

Mortgage debt reached nearly $1.44 trillion, while consumer credit and non-mortgage loans combined to total $769.4 billion.

The household debt service ratio, the total obligated payments of principal and interest on credit market debt as a proportion of household disposable income, increased to 14.9 per cent in the quarter compared with revised reading of 14.7 per cent in the third quarter.

The Canadian Press