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Archive for October, 2019

Many Canadians spend as much as half of their incomes on rent

Around 800,000 households across Canada set aside more than 50% of their incomes on rental fees, a recent analysis by the BC Non-Profit Housing Association has found.

Overspending has increasingly become a feature in the Canadian housing market rather than a bug, with the advent of easy credit. Approximately 1.8 million households nationwide are also dedicating more than 30% of their incomes on housing expenses.

“Paying too much for rent has become the new normal,” association CEO Jill Atkey said in an interview with Global News. “That takes a real toll on health, on time and quality of life.”

Additional data from the Credit Counselling Society indicated that this spending is a major driver of anxiety, especially considering the pressures of inflation and rising costs of living.

One out of three Canadians admitted that their debt loads have increased since last year, and that they are spending more than their net income. Fully 43% are forced to live paycheque to paycheque, while 83% indicated anxiety over growing daily living costs.

“Canadians continue to rely on their credit cards or lines of credit to supplement costs of living,” CCS president Scott Hannah said. “If the economy continues to slow amidst trade tensions and other factors, Canadians need to prepare now for a potential recession in the future.”

During Q2 2019, Canada’s average household debt ratio dropped to 177.1% of disposable income, slightly lower than the previous quarter’s reading of 177.6%. Canadians are also shouldering a debt load of an average of $30,000 each – far above the $12,000 level just 20 years ago.

by Ephraim Vecina

23 Oct 2019

There were 54,000 more jobs in September

The Canadian labour market remains strong despite concerns over a global slowdown.

The latest data from Statistics Canada shows 54,000 jobs were added in September as full-time roles increased. Employment increased by 111,000 in the third quarter (0.6%).

On an annual basis, employment grew by 2.4%, adding 456,000 jobs, while total hours worked were up 1.3%.

The unemployment rate was down 0.2 percentage points to 5.5%.

Ontario (41,000) and Nova Scotia (3,200) both posted increases in jobs in September while the other provinces held steady. Men and women of core working age (25-54 years) were the drivers of the overall increase.

There were more self-employed Canadians and more workers in the public sector, health care and social assistance, and accommodation and food services. But there were fewer working in information, culture and recreation, and in natural resources.

Adjusted to US concepts, the unemployment rate in Canada was 4.4% in September, compared with 3.5% in the United States. Compared with 12 months earlier, the unemployment rate declined by 0.4 percentage points in Canada and 0.2 percentage points in the United States.

by Steve Randall

15 Oct 2019

Is this the future of affordable living for young professionals?

A real estate investment fund believes it has the future of housing for renters in markets with sky high home prices.

Investment firm DTZ Investors and co-living developer The Collective have launched their fund to raise around C$1 billion (£650m) for multiple projects in London, UK.

The fund hopes that the co-living niche will become mainstream as more single people seek affordable options; the developments will offer small rooms or apartments with shared amenities and target young professionals.

While the actual space provided may be smaller than a typical studio or one bedroom apartment, the burgeoning sector offers something more important to these tenants than space.

“We are very focused on the quality of the space we design, and by sharing, you get access to so much more,” The Collective’s CEO Reza Merchant told Bloomberg. “The company runs events designed to combat loneliness and bring people together, while its buildings have amenities ranging from cinemas, libraries, spas and, in the case of the Collective’s Canary Wharf site, a rooftop swimming pool.”

He added that while financial return is important, the business also wants to have a social impact.

by Steve Randall

15 Oct 2019


Better supply should take priority over stronger purchasing power

In its attempts to solve the housing affordability crisis, the Canadian government has preferred to take steps in improving consumer access to currently available housing.

Indeed, most of the steps pledged by this election’s candidates are focused on adjusting mortgage terms and further penalizing wealthy foreign buyers – pledges that a significant proportion of would-be buyers have lauded.

However, a new analysis by the International Monetary Fund has argued that affordability can be truly achieved only through the construction of a much greater number of homes.

“Even well-meaning policies that aim to improve housing affordability by increasing households’ capacity to borrow may unintentionally raise house prices—ultimately resulting in homebuyers having to borrow more and leading to higher household debt,” the IMF stated.

In particular, governments at all levels should work towards speeding up the delivery of development-ready land, and streamlining the permits/re-zoning approval process.

Canadian authorities should also ensure that construction projects are not delayed, and provide incentives for the development of more purpose-built rentals

Most importantly, Ottawa should consider “re-evaluating rent control policies to improve the supply of rental properties and give households more dwelling choices.”

These steps are potentially more effective in the long run, because stronger purchasing power does nothing to address the fact that there are not enough homes to begin with.

“So, any increase in households’ ability to borrow will increase demand for housing, increase house prices, and ultimately make houses less affordable than they otherwise would have been.”

Said phenomenon has become especially apparent in Toronto and Vancouver.

“Homebuyers have been able to borrow more money over time due to rising incomes and a significant decline of mortgage interest rates over the past two decades.  As a result, increases in borrowing capacity have been quickly reflected in higher house prices,” the IMF explained. “Overall, this has contributed to a rise in the size of down payments as a share of income and a push towards higher loan-to-value ratios.”

by Ephraim Vecina

09 Oct 2019

Year-to-date employment growth the largest in nearly two decades

From January to September, Canada saw its largest infusion of new employees for that nine-month period since 2002, with the addition of 358,100 jobs during that time frame.

Last month accounted for 54,000 of these new jobs, while the national unemployment rate plummeted to a near-record low of 5.5%.

September’s increase considerably paced earlier expert predictions of just 7,500 new jobs and a flat unemployment rate in September.

CIBC World Markets Inc. chief economist Avery Shenfeld argued that this shows the Canadian economy’s insulation against the worst effects of global trade turmoil.

“Canada’s labour market seems to have been vaccinated against the global economic flu going around,” Shenfeld wrote in an investor note last week, as quoted by Bloomberg.

The September employment growth accompanied a 4.3% annual increase in hourly wages, exceeding the 3.7% growth observed in August. Total hours worked also went up by 1.3% year-over-year last month, slightly up from the 1.2% in August.

In its mid-September report, the Canadian Real Estate Association adjusted its home sales projections upward due to the influence of lower rates for longer-term mortgages.

For 2019, overall Canadian home sales will likely recover to 482,000 units, growing by 5% from the five-year low registered last year. This was 19,000 transactions greater than CREA’s previous forecast, although it’s still considerably below the annual record of nearly 540,000 set in 2016.

For 2020, the CREA predicted 7.5% growth, up to 518,100 units sold. While a bit lower than expected, much of this will be due to “a weak start to 2019 rather than a significant change in sales trends out to the end of next year.”

by Ephraim Vecina

16 Oct 2019