Canadian homeowners are expected to spend $40.7 billion renovating their homes this year, according to Clayton Research, a Toronto-based firm that tracks the housing industry. "Dumpsters and bobcats will remain fixtures in your neighbourhood this year and next as homeowners continue their love affair with the renovation," states the May issue of the Clayton Housing Report. The real estate economics consulting firm is forecasting that spending on renovations will surpass spending on the building of new homes this year. The renovation sector is being boosted by low interest rates, a growing number of owner households, strong home sales, equity withdrawals from homes and need from a generally aging housing stock, according to the report. Contractors are doing two-thirds of renovation work while do-it-yourselfers are tackling one-third of the projects.

Canadians have an inflated idea of how much renovations will boost the resale value of their homes, according to recent reports. The craze for renovations continues unabated across the country, with an 8% rise in spending on home improvements last year and 7% increases forecast for this year and next, according to the market analysis firm Clayton Research Ltd. A recent CIBC survey found that homeowners believe each $100 they put into major renovations will return them $140 in added value. "In reality, returns may be slimmer," Clayton Research reports. "A survey of its membership by the Appraisal Institute of Canada has found that while projects such as kitchen and bathroom renovations probably break even in terms of adding value to the home, others such as recreation rooms, new windows and flooring upgrades return little better than 50 cents on the dollar." Every province in Canada experienced positive growth in renovation spending in 2004, in every case above the rate of general economic growth, Clayton Research reported. Total spending was $38 billion in 2004 and is forecast to rise to $41 billion this year and $43.5 billion next year.

A new survey from Re/Max says home prices across the country have risen more than 50% over the past decade, a return the people from the real estate company referred to as "impressive" yesterday. Peter Norman, a vice-president with Clayton Research, which provides independent real estate analysis, said "in the long term, stock market returns are always much higher than real estate, but the stock market has more peaks and valleys." Mr. Norman said even though the stock market will likely continue to outperform housing in the long run, home ownerhip will always have its advantages. "For some people, it amounts to a forced savings in their home through principal payments [of their mortgage]," said Mr. Norman, also noting there are no capital gains taxes on housing as compared with stock market profits. Mr. Norman said the past four years have definitely seen the pendulum swing in real estate's favour, with returns clearly outstripping those in the stock market.

Talk to most people in the housing industry, and they'll tell you that a 'flip' is not happening - the final phase in the real estate cycle before the bubble bursts. That's what happened in Toronto's red-hot condominium market in the 1980s. Prices were shooting up so fast people bought condos and sold them within weeks. It was easy to make money. Peter Norman, an economist with Clayton Research in Toronto, figures the total transaction costs on any deal are in the 8% range once you factor in the 5% commission real estate agents get, plus legal costs and land transfer taxes. "Flipping is not really an issue. You have to remember from 1986 to 1989, prices were up 33% in a year in Toronto. In that environment, you can sell and cover your costs," Mr. Norman said. The best example is called the 'renovation flip' and it's not really the same thing. "You buy a house, fix it up and six months later sell," Mr. Norman said. But that's not really a true flip. A true flip is when you sell the property before you've even taken possession, he said.

Seems like everyone and their dog has bought homes in the past four years. Prices keep creeping up and the Toronto market isn't showing any signs of losing steam. Feeling left out? Relax and don't feel pressured to rush into a deal you may later regret, says Peter Norman, a real estate economist with Clayton Research Associates Ltd. Extremely low interest rates, particularly on those tempting variable-rate mortgages, have been a key driver in Toronto's current housing boom. Once you crunch the numbers, people may be better off renting and investing the extra money they'd spend, says Norman.

Canada is the second-largest country in the world but a new report maintains we are running short of land. Clayton Research, a Toronto real estate consulting company, says the shortage will lead to even higher home prices. The report said serviceable land - land that is connected to sewers, water and roads - is the most critical problem facing builders trying to keep up with the insatiable demand for new homes. "Land is the one crucial input into new housing which does not respond directly to the market signals," Frank Clayton, president of Clayton Research said. "Bringing more serviced land onto the market is primarily the responsibilities of the municipalities, at times with the aid of the province." Mr Clayton said supply of serviced land lags demand in rising markets unless the government in charge tries to anticipate future housing needs. He said the Ontario government has not done that. Mr. Clayton said the worst land shortage will occur in and around Toronto because of the freeze on development. "They are already contributing to higher land prices," he said of new government policies.

In the highly competitive mortgage lending environment, one company is getting creative with a product previously unheard of in Canada: a mortgage that only demands payment of interest. "There's a lot of demand [for homes] out there, and there's a lot of borrowing that's taking place, but there are also a lot of financial institutions who are trying to lend money to homebuyers. It's a very competitive market," said Peter Norman, vice-president of Clayton Research in Toronto. Mr. Norman added that principle-free mortgages are already popular in the U.S., making up 5%-10% of all mortgages, but that they are "unheard of in Canada". Theoretically, a homebuyer could renew the mortgage every five years and never put money toward their home, Mr. Norman said. "The risk is that people are not managing their non-real estate assets well... Somebody could easily take this mortgage and not grow their non-real estate assets at all, and then when it comes down to pay the mortgage, their only option would be to sell the home," said Mr. Norman.

A rising loonie has been "real estate's best friend" by keeping interest rates low and saving Canadians money. Peter Norman, an economist with Clayton Research in Toronto, says that while it may be worrisome that Canadians are borrowing more than ever at riskier short-term rates, the reality is their assets are also worth more than ever before. Mr. Norman also said price increases have been relatively tame. 

We are a nation of pack rats with outdated homes in need of a fix-up before they are put on the market, according to a new real estate poll. The poll, commissioned by Royal LePage Real Estate Services, found 75% of Canadians classify their homes as current or somewhat current. But 45% classify themselves as pack rats. With most real estate commentators predicting some type of pullback in a market that set a record for sale activity last year, sellers need to work a bit harder to get their house sold. "When you improve your house a bit it might not necessarily get you a better price, but in many cases it will help sell the house a lot quicker and that's what people want," said Frank Clayton, president of Clayton Research, which provides real estate analysis.

Clayton Research says rising vacancy rates are eating into profits from rental housing. The real estate research firm said rental housing was the worst real estate investment class last year. Clayton said more apartment units are sitting empty with no income coming in, cutting into profits. At the same time, landlords are forced to advertise and pay inducements to get tenants, which also eats into profits. Returns may be down now as many renters have turned into homeowners, but the sector will come back when the housing market slows.

Although Canada's housing industry posted its strongest activity last year since 1987, national levels are expected to decline this year. Job growth, consumer confidence and low interest rates were some of the reasons behind last year's 233,000 housing construction starts. The latest Clayton Housing Forecast says it's not likely to continue. The forecast is predicting 216,000 starts this year due to things like rising home prices. But continued low mortgage rates will limit the decline, so starts will drop just 7%, it says.

Dr. Frank Clayton, one of the foremost housing economists in Canada, admits in his recent newsletter that he was one of those who "expressed concern" about the state of the GTA new condominium apartment market. "One year later, we're happy to report that the market has undergone somewhat of a turnaround," Clayton states in the most recent edition of the Clayton Housing Report. The factor that was concerning Clayton at the beginning of 2004 was unsold condominium inventory, which had risen to 14-months supply. Throughout 2004, as sales exceeded new openings, the unsold inventory dropped to an 11-month supply, representing a more balanced and healthy market.

A greenbelt around greater Toronto wouldn't necessarily force up housing prices, argues the program director of the Pembina Institute for Appropriate Development. Countering arguments that the greenbelt would result in soaring property values, Mark Winfield says there are additional factors at work besides land cost that affect housing prices. Housing economist Frank Clayton earlier this week told the Ontario Association of the Appraisal Institute of Canada that the province's plan will lead to higher land and property values. The resulting ripple effect would see: increased commuting from outside the greenbelt, increased costs for land-intensive businesses and a redistribution of wealth from potential future homeowners to existing property owners. "These consequences will be negative for economic growth of the province as a whole," Clayton said. "It is incorrect to assume that restricting the future land supply of single-detached homes inside the greenbelt, even severely, will have no effect on growth outside the greenbelt. Our expectation is that buyers will move outward to find more affordable housing," he argued.

Canada's residential construction boom added two more records to its credit in December, with permits for single-family homes hitting a new monthly high and annual numbers breaking new ground for the second year running, Statistics Canada said yesterday. While most observers continue to predict a gradual slowing in the housing market this year, the latest numbers illustrate that Canadians' love of real estate still runs deep. Toronto-based housing economist Frank Clayton said the love affair can't last at its current torrid pace. "Our view is the cycle peaked last year," Mr. Clayton said. Rising prices, he commented, are chipping away at affordability, even if interest rates are low and the rate of population growth means that demand has to moderate. "There are only so many houses you can buy," he said. Still, Mr. Clayton expects the housing sector in Western Canada to continue to grow this year, led by the hot B.C. market.

When the GST was introduced in 1991, it was decided that new homes only, not resales, would be included in the tax base, but at a preferred rate of 4.5% on homes prices up to $350,000. Between $350,000 and $450,000, that preferred rate would diminish to the point where homes priced more than $450,000 would be subject to the full 7% GST. At that time, the government of the day committed that these thresholds would be reviewed regularly and be adjusted to reflect increases in house prices. Since that time, the new house price index in Canada has increased by at least 25% (expert analysts such as Frank Clayton suggest that the index is grossly understated), yet the rebate thresholds have not budged. The net result is that homebuyers today are getting less house for the same money.

Home sales in 2004 represented the highest total in the 84-year history of the Toronto Real Estate Board, a 6% rise from the previous record year of 2003, which saw 79,898 homes change hands. At the start of 2004, economists forecast a much slower year than in 2003. "Without a doubt, we thought it would be a different year than it turned out to be," said Peter Norman, housing economist with Clayton Research. "Interest rates were the big factor in 2004, staying a lot lower than we expected." Strong income and employment growth underpinned by low interest rates have created the perfect brew for a healthy housing market, the economist said. Most economists feel 2004 was the peak year in the cycle and that the market will cool this year. "I think there is a definite possibility that there may be some slowdown in job creation because of the elevated levels of the Canadian dollar in relation to the U.S. dollar," Norman said.

Builders should feel buoyant about 2005, based on the generally upbeat forecasts by economists and industry analysts. Although there may be concerns about slowing economic growth due to the strong Canadian dollar, a diminishing supply of first-time buyers and uncertainty about rising interest rates, the Ontario home building industry should produce another good year. Peter Norman, vice-president of Clayton Research Associates Ltd. in Toronto, believes the industry should see close to 80,000 starts in 2005. "From a historical perspective, there has been a very strong growth trend. We've seen housing starts rise about two-and-a-half-fold since 1995, when they bottomed out at about 36,000, but the market could be peaking, as we've had a long cycle," Norman says, adding that pent-up demand in the late 1990s has been a key driver for the housing industry. Going forward, though, "we can't continuously make up for conditions in the 1990s."

The vast Peel Region subdivision community is as affordable as it gets in the GTA when it comes to the single-detached home. Although price increases in Brampton have been brisk, they haven't been in the same league as comparable 905 communities like Pickering and Aurora, where new home prices have grown at such a rate as to have effectively left many first-time buyers out of the single-detached equation. The one enormous advantage Brampton has is that it's largely unaffected by the province's determination to freeze urban boundaries and, thus, subdivision development, along the Golden Horseshoe. "When you have restrictions on land availability, it pushes prices up," said Robert Feldgaier, vice-president of residential services for housing consultants Clayton Research. "In some cases, it's individual municipalities that are slow to approve development for designated lands. Across the GTA, we're seeing the effect of land constraints and anticipated land constraints." Brampton doesn't have that problem, he added, and while prices go up, it is still the most relatively affordable pocket in Peel and York Regions. "Brampton has had pretty good land supply, land is being brought on stream quickly, and land is serviced well," said Mr. Feldgaier.

If you bought a home this year, you helped inject more than $150 milion in spinoff purchases alone into the London economy. Buying a home is just the start of big spending, a survey by Toronto consulting firm Clayton Research shows. On average, Canadians spend $19,760 on spinoff purchases when they buy a home, the 2003 survey found - a number not out of line for London, observers say. Nationally, spinoffs are valued at about $7.5 billion across Canada, generating more than 101,000 jobs. There are also indirect spinoffs including everything from wood and raw materials to computers used by banks and real estate brokers, the report says.

Add the respected voice of Frank Clayton, president of Clayton Research, to the list of people raising questions about the Ontario Liberal government's plans to limit growth in the GTA. "As an economic observer of the Canadian urban scene for almost 40 years," says Mr. Clayton, "I am concerned about the rush to impose this new planning regime without any public discussion of the economic costs. In my opinion, the initiatives could cause a significant rise in housing and industrial land prices, impose a disproportionate burden on first-time buyers and immigrants, and needlessly threaten the pace of economic growth of the GTA.".

According to a recent report by Toronto-based Clayton Research Associates, real estate transactions in our country contribute greatly to our economy, generating notable spending above and beyond the sale of a property. The report entitled "The Economic Impact of MLS Home Sales" was initiated by the Canadian Real Estate Association in 1994 and updated in 2003 to determine the economic impact of home sales and purchases generated through the Multiple Listing Service. The purchase and sale of homes through MLS generates taxes and fees to government as well as to professionals such as lawyers, appraisers, surveyors and, of course, realtors. However, they also drive other expenditures, including moving fees, new appliances, carpeting, landscaping and renovations. During the period between January 2000 and November 2002, it's estimated that a total of $19,760 was generated by the average housing transaction.

From 2000 to 2003, the province's Green Tide Summit estimated the marijuana industry cost Ontarians $260 million. That's a little under $60 for every household in the province. Many insurance companies have excluded such operations from coverage, whether the owner of the property was aware of what was happening inside the home. For the criminals, it's simply on to the next house or apartment. That in itself has a broader impact on the public, said Peter Norman, vice-president of real estate consulting company Clayton Research. His company hasn't crunched numbers on the phenomenon, but Norman was confident the pot-growing industry is making its mark on the price of property. "I think estimates are something like 100,000 of these operations are underway across Canada," Norman said. "My instinct is you can't really take 100,000 units out of the product stock of housing and not have an impact on the way the market works."

The Greater Toronto Home Builders' Association heard from one of the most respected housing economists in the country this week. Frank Clayton, president of Clayton Research, spoke on the belief that a greenbelt in the Golden Horseshoe would drive up housing costs. Clayton quoted recent research by the Centre for Spatial and Real Estate Economics in the U.K. which says "an effective greenbelt in planning terms will... cause the value of the land and the price of housing to rise within the contained urban area. It will probably also result in an increase in the length of some commuter journeys as people are forced... to live on the other side of the greenbelt and commute to work." Clayton calculates that if the greenbelt causes home prices to rise by a mere 3% per year, the total added housing price paid by first-time buyers and migrants to the GTA over the next 10 years will amount to $29 billion dollars.

The Liberal government first tabled its plan to protect 1.8 million acres of greenspace across southern Ontario last month. With the population across the Golden Horseshoe expected to balloon by more than 4 million people over the next 25 years, the government believes a greenbelt is essential to protecting Ontarians' quality of life. However, Frank Clayton, president of Clayton Research told a forum on the province's new legislation that a greenbelt would lead to a land shortage and eventually price many future homebuyers out of the market throughout the GTA. He added that house prices would rise by more than 30% around the GTA by 2014. It's bad news for homebuyers and people moving to the area. "The most vulnerable people in the market... will pay more for housing."

At the annual economic outlook dinner for members of the Greater Toronto Home Builders' Association last week, discussions were made on the Liberal government's obsession with the land development industry. For example, in just one year, the province has frozen (and partially thawed) one major development, slapped a one-year moratorium on urban boundary expansions in the GTA, introduced two land-related bills (planning reform and the Greenbelt legislation) and issued four discussion papers dealing with everything from the Ontario Municipal Board to growth management. Picking up on the land supply/demand issue, Frank Clayton bluntly stated that the provincial government is "screwing up" the land supply for single-family homes in the GTA. "There is considerable danger that the cumulative effect of the various planning and land use initiatives of the province will create an imbalance between the location and types of land available to accommodate future growth and the demands of housing and the marketplace," Clayton said. "The result will be a significant rise in land and real estate prices with negative consequences for housing affordability, housing choice and growth in the business employment base."

Canadians looking to move to the United States could face serious sticker-shock when they see the price of a home there, according to a new survey from Coldwell Banker. Peter Norman, vice-president with Clayton Research Associates, said most businesses looking at the cost of moving their operations have noted housing in Canada is substantially cheaper than elsewhere in the world. Mr. Norman said the gap between the U.S. and Canada has continued to grow over the past 7 years with the Canadian housing market unable to keep up. House prices in the U.S. are up 60% over the past 7 years compared with 24% for Canada during the same period, he said. "The cost of living in Toronto is much lower in general than cities like Chicago and New York and that is true across the country," Mr. Norman said.

It wasn't long ago that Pickering and Ajax were considered the most affordable home markets in the GTA. However, prices are rising quickly; new home prices have gone up 31% since last year in Pickering, according to the Canada Mortgage and Housing Corporation. Ajax has risen less dramatically but shows no signs of flattening. Among characteristics shaping the market in these pockets are more move-up buyers looking for bigger homes. But broader market conditions such as land supply, not buyer preferences, will continue to play a large role in price increases. Some observers have noticed that developers are transplanting their higher-end developments to Durham Region from other sites in the GTA due to land constraints elsewhere. "Part of the [price increase] is just reflecting the types of projects built," said Robert Feldgaier, vice-president of residential services for consultants Clayton Research. "Some of them are more upscale in the Durham Region context."

At first glance, investing in apartments these days might seem like a resistable urge. Vacancy rates are high, rents are wobbling, financial returns are wilting and selling prices are in sticker-shock territory. However, investors haven't been fazed by tenants leaving in droves to become homeowners thanks to low interest rates and a strong economy given apartment buyers tend to look 10 years out and, besides, people have to live somewhere (more than 40% of the GTA and nearly 50% in Montreal are renters). Frank Clayton, president of independent research organization Clayton Research in Toronto, has a less rosy view. He points to the example of Canadian Apartment Properties Real Estate Investment Trust of Toronto, the country's largest residential rental real estate investment trust (24,300 units in 14 cities). It has a 4% vacancy rate on its portfolio midyear, up from 1.9% a year ago. The June 2004 issue of Clayton Housing Report noted "returns on residential rental investment in Canada dropped last year to 5.1% from 9.9% in 2002. Residential rental property was in fact the worst-performing property sector last year, well under returns on industrial and retail properties and even the office sector."

Mississauga, the city that has come to define suburbia, finds itself running out of sprawl space. The city of 680,000 persons recently bumped up development charges and has said that the dwindling availability of land for residential use will mean that by 2010, the city essentially will be fully built. Mississauga's changing growth patterns are already being felt by home buyers, says Robert Feldgaier, vice-president of residential services at housing consultants Clayton Research. "As the supply gets tighter, it tends to drive up lot prices," Mr. Feldgaier says. "That's true across the GTA, but in relative terms, Mississauga is going to feel it more."

Recent interest rate hikes won't get in the way of record-high housing starts and booming sales of resale homes this year, according to Peter Norman, a real estate economist with Clayton Research. Norman suggests that the proportion of family income required to purchase a home should be around 25%, and for there to be a dramatic impact on this affordability proportion, interest rates would have to rise by at least 2%, or incomes would have to drop by 15%, or house prices would have to rise by 17%. First-time buyers provide fuel for the housing market, but Norman cautions that this buyer segment may be running out of steam, and suggests the number will drop next year. Renovation and repair should remain strong in the near future - the most popular renovations are the addition of a room, complete interior or exterior renovations, bathrooms, kitchens and basements.

Another interest rate hike from the Bank of Canada last week has raised the ante as consumers bet on whether to go short-term or long-term with their mortgages. Go short and you get a prime rate of 4%, but it could rise if the Bank of Canada raises rates as is expected. One of the latest products to hit the market allows you to take 50% of your borrowed amount and place it in a fixed rate product and the other 50% in short-term debt. While the banks have been accommodating, some say it's somewhat of a smoke and mirror show. "It sounds like the same sort of product you can already get," said Peter Norman, a vice-president of Clayton Research, a real estate research firm. Mr. Norman notes consumers can already buy products linked to prime that guarantee a rate will not go above a certain percentage. "You pay for the privilege. Splitting up a mortgage [between long and short-term rates] is like getting a blended rate," he said. "This is just another marketing technique."       

Prices of key building materials have been heading skywards in recent months. However, economist Frank Clayton of Clayton Research in Toronto said that, at least in the short term, house prices are not necessarily determined by costs because builders are competing against resale housing. "So just because lumber prices go up doesn't mean a builder can automatically pass it through," Mr. Clayton said. Instead, the overriding factor in the equation is land prices. In the 1980s and 1990s, Mr. Clayton said, successive provincial governments kept land prices down by forcing regional and municipal governments to bring more raw land to the housing market. But the current Liberal government has placed a controversial one-year moratorium on opening up new land for development in the GTA, despite continuing strong demand. With supply constrained and demand still strong, this means prices have to rise, Mr. Clayton said.      

With vacancy rates at their highest in three decades and a rent-increase guideline of 1.5% - the lowest in the history of rent control in Ontario - it is a renter's market and many tenants are staying put. Peter Norman, a Toronto-based housing economist with Clayton Research, warned that a return to a government-controlled "rent regime" aimed at taking more "stringent control" of the rental market will have an immediate impact on development. "We're going to start seeing the taps turn off on development right away. Of course, the cascade effect of that decision is quite dramatic. We'll be right back to where we were in the mid-1990s in terms of rental market, which is not a positive environment for renters." Mr. Norman added that a halt in the development of rental and condo properties in Ontario ultimately will hurt tenants who enjoy the perks of a renter's market. "That's the big irony here. Would you like to be in an environment where there's virtually no vacancy and where a lot of people are staying in substandard units? Or would you like to be somewhere where landlords are bending over backwards to try to entice you in?"      

Home ownership costs continue to increase as the percentage of household income needed to carry a debt load inched closer to uncomfortable levels for banks, a new study said yesterday. The Royal Bank of Canada study found that, in the second quarter, the average household with a typical bungalow-style home was paying 31.7% of pre-tax income on home ownership costs that include mortgage, utility and property taxes. Peter Norman, vice-president of Clayton Research, said the affordability concerns hit first-time buyers hardest and they have been driving this housing market. "They are the grease on the wheel of this market. If they can't afford to buy your home, then you can't afford to move up," Mr. Norman said. Most first-time buyers are apartment renters and with wealthier segments already having purchased homes, the people still renting are generally lower income. "The pool of first-time buyers is getting pretty strained," he said.     

Toronto's resale market continued strong in June, with average prices in the second quarter surpassing those in the same period last year by 9.7% for 2-storey houses, and 3.8% for condos according to Royal LePage. At the same time, Clayton Research reports that people with mortgages are handling increasing levels of debt without much difficulty, but that people buying properties to rent them out have seen a sharp drop in return on their investments. This month's issue of the Clayton Housing Report says there is no reason for Canadians to worry that their household debt-to-income ratio is running at 117%. Average mortgage debt has indeed gone up, but mortgage rates remain low, house values have increased and much of the increase in average household debt is the result of people switching from renting to home ownership. The only buyers taking a hit now are those buying to rent, says the report. Yet, rental investment is still a good bet in the long run, with average annual profit for residential rental property being 12% over the past 19 years, outpacing industrial, retail and office investment. 

Builders say huge development fee increases like those this month in Toronto could threaten the new-home market. But there is little indication construction will slow significantly based on demand. If anything, the increase in fees is just a case of government taking advantage of the housing boom by collecting more cash for infrastructure. Frank Clayton, president of real estate research firm Clayton Research, said it has become a guiding principle of development that new growth must pay for its own infrastructure. That said, Mr. Clayton agrees there are indications some municipalities are taking advantage of market conditions to throw some huge development fees on to new homes. 

While Durham Region remains probably the best value for standard, detached new homes in the GTA, analysts and developers are predicting that that won't be the case for long unless more land is made available for development. Disputes over environmental protection are affecting supply. The former provincial government gave developers a portion of the 12,000 acre Seaton parcel to compensate them for stopping development on the Oak Ridges Moraine. But the City of Pickering has called for a detailed environmental assessment of land before development can take place. The privately controlled Duffins Rouge Agricultural Preserve is also embroiled in controversy. "It's difficult to look at one municipality in isolation," says Robert Feldgaier, vice-president of residential services for Clayton Research. "The longer it takes to bring Seaton on stream, the more pressure is placed on Ajax and surrounding areas." Developers who do have projects underway are pushing ahead with planned communities instead of detached homes., such as enclave developments. "We're seeing more community-type development here," Mr. Feldgaier says. "[Developers] are looking for more than just a run-of-the-mill subdivision, and there are many different ways to do this."

Almost ten years ago, Caledon developed a plan that put limits on growth and defined exactly where it was to take place. When a consortium of developers challenged the plan, the town won a favourable ruling from the Ontario Municipal Board, the province's arbiter on planning issues. In 1997, the town spent $500,000 to defend its plan during the three months of OMB hearings. Frank Clayton, head of Clayton Research, testified at the hearings in support of the developers. He believes the town underestimated its potential in that "Bolton could have (had) the jobs and the housing and kept most of the land pristine," he says. Caledon has capped its population at about 85,000 by 2021, but Clayton says its share of the GTA should be about 200,000. Unless the GTA wants to become a no-growth area like Winnipeg or Regina, or an enclave for the rich, no community can escape the demands of new development, he says. 

Every seven years, the average Canadian family will spend $20,000 to get a new postal code. "Few people think of the cost of moving," said Peter Norman, vice-president with Clayton Research. Instead, most consumers are focused on making sure they sell their home for more than they bought it, usually forgetting to factor in inflation. Among costs of reconnecting utilities and cable, you'll have to pay a commission to your real estate broker. If you're selling and buying another home you'll have to fork over an average of 5% of the sale price to the agents working the deal. Considering the average sale price of a home in March was $239,042 across Canada, that's almost $12,000. The problem is moving is not really a financial consideration as much as it is a lifestyle choice, he added. About the only way finances figure into a move is when people refuse to sell in a market when prices have fallen. "That's one of the reasons the market was so stagnant in the 1990s," said Mr. Norman.

Job growth may be slowing this year, but gains in employment last year will fuel housing construction and sales in major urban markets through 2005, predicts Clayton Research. "Job growth is a key driver of new housing demand, but typically acts with a lag," stated the latest issue of Clayton Housing Report. It said that through the first three months of this year, home resales are up from the same period last year in seven of the nine urban centres and by at least 10% in five - Vancouver, Toronto, Edmonton, Calgary and Ottawa. Only Halifax saw a drop in sales, while Regina posted no change. Job growth is expected to slow sharply next year in all urban centres other than Toronto-Oshawa and Montreal, which will benefit from the recovery in the U.S. that will boost manufacturing and technology jobs.

The outlying municipalities and regions north of the city have an average of only eight years worth of land supply within their boundaries for detached homes. City planners and councillors are partly motivated by conservation concerns in the Smart Growth drive, but they're also strapped for cash. Servicing new subdivisions is not cheap, even with development charges of $12,000 added to each dwelling. "Depending on what the provincial government decides to do, there's going to be [land] supply constraints going forward," said Robert Feldgaier, vice-president of residential services for Clayton Research. Municipalities in the Oak Ridges Moraine area have sensed that allowing massive lots on what once seemed an endless supply of developable land might not be the best use for it, and have been slower to process construction permits for new subdivisions as land becomes more scarce, according to Mr. Feldgaier. 

These days lenders are luring homeowners with products, loyalty-card bonus points and cash back as complements to taking out a mortgage with them. In days gone past, homeowners would simply be grateful for getting a mortgage loan from a lender, nevermind asking for a better rate nor Air Miles. Why has the marketplace changed? "Twenty years ago, the posted rate was the posted rate. Now there's some scope for negotiation," comments Patricia Arsenault, an economist with Clayton Research in Toronto. Ms. Aresnault believes the shift began in 1994, when the housing market slowed down, and lenders had to scramble for the few potential borrowers who were actually looking. Lenders were forced to start discounting their posted rates to get a competitive edge. However, once all the lenders began offering similar discounts off posted rates, something new was needed to differentiate lenders which is where the new perks come in. However, these perks come with a warning that they aren't all they're cracked up to be. For example, if you walk away before your term is up, you may not only be subject to a penalty, but also have to repay the original cash bonus you received in full. 

There was some moderation in Canada's housing market in the first three months of 2004 than a year earlier, but average prices increased in most markets and spring should deliver strong sales amid mortgage rate uncertainty. Mortgage rates aren't expected to change dramatically, and Frank Clayton, president of real estate consulting firm Clayton Research, says it would take a big jump of a couple points at least in mortgage rates in order to dampen housing demand. While first-time buyers have been snapping up homes, "there are still about a million renters out there under the age of 50 who could afford to buy, and who are in the pool of potential buyers in Canada," he said. "That's about three times as many renters who have sufficient incomes to buy an average-priced house now than 10 years ago."

More than 250 delegates gathered to attend the 48th Annual General Meeting of the Aggregate Producers' Association of Ontario to discuss topics relevant to the province's aggregates industry. One of the most anticipated speakers at every AGM is Patricia Arsenault of Clayton Research, who presents her annual outlook. Arsenault noted that aggregate production has been relatively flat in recent years, although average annual production of 168 million tonnes so far in the 2000s is outpacing the averages seen in the past two decades. Roadbuilding accounts for about 43% of all aggregates consumed, and Arsenault points out that projected job growth is positive for underlying demand for road and other infrastructure. More jobs mean more homes, fuelling demand for new subdivision roads and sewers, generating more property tax dollars to fund infrastructure spending. More people commuting means increased wear and tear on roads, and strong vehicle sales and severe winter weather will increase demand for aggregates. Arsenault forecasts a modest increase in production to 174 million tonnes in 2004, compared to an estimated 169 million tonnes in 2003 and 165 million tonnes in 2002.

House prices across Canada in February rose an average of 10.4% from a year ago, as sales climbed in the face of industry predictions that the market has likely peaked. Sales activity also defied earlier predictions, climbing 2.6% to 24,880 in February from last February. Another interest rate cut by the Bank of Canada in early March has yet to show up in housing sales data, as the latest results were only to the end of February. Peter Norman, vice-president at Clayton Research, says as the year continues prices will rise less dramatically. "It's not going to happen overnight but we are going to see the level of activity begin to cool," he said. But Mr. Norman added that interest rates for consumers are going to be better than analysts had expected. "It's a softer outlook now even on the long end. Growth has been weaker than expected and, because of that, interest rates will likely be [lower] than expected and that will provide stimulus for homeowners."

New low-rise housing developments in the GTA can't really hold a match to the condominium boom, but they are on the rise. The City of Toronto Official Plan identifies redundant industrial land as prime spots to open up new townhouses, row houses, or semi-detached homes as long as they blend in with the local community. New low-rise developments have never been easily embraced in established residential pockets, but residents who are there now largely welcome well-planned new housing because improved services and retail are generally likely to follow, not to mention improved property values. "The main thing is that the project has to be compatible with the existing area," says Robert Feldgaier, vice-president of residential services for Clayton Research. "You're more likely to see intensification in certain areas [rather than demolition and replacement] so you reduce your chances of delay in the approval process. When developers try to blend in the architecture styles to those of the existing communities, most of these infill projects tend to do pretty well."

Robert Feldgaier of Clayton Research is bullish about the housing market. He notes that the resale market continues to be a sellers' market because of the limited supply of homes for sale, and that puts upward pressure on pricing. Rising land prices and construction costs are also at work in the new home market "even though builders are trying to keep margins tight to keep houses affordable." Demand for housing will slow, however. "We've been through a period of strong employment growth, but we don't expect it to be maintained at the level we've seen."

About 40% of all renters in Canada under the age of 50, or slightly more that one million people, can afford to purchase their own home. That is a dramatic rise from the 300,000 renters who could afford to buy during the interest rate peaks of the early 1990s, according to the Toronto company Clayton Research. Housing affordability is a combination of interest rates, home prices and household incomes. A mere 1% increase in mortgage rates is the equivalent of a 10% increase in house prices, said Clayton Research. For first-time buyers who purchased their home in the last 3 years, the average size of downpayment was about $25,000.

The effect of renters turning into homeowners has softened the apartment market and the impact on real estate investment trusts has been pretty clear. Apartment REITs have stalled in the middle of a fantastic overall run for Canadian REITs due to higher apartment vacancies and potentially lower cash flows. Clayton Research says rising housing prices - nationally, they've gone up about 10% in each of the past 2 years - is doing little to discourage renters from buying because of record-low mortgage rates. "Over one million renters in Canada under the age of 50 [about 40% of the market] could afford to purchase an average-priced starter home," the company said. With that type of flexibility, plus the opportunity to shop around for suites in new condo buildings, renters are becoming very picky, and are paying less when they sign a lease. The result for apartment REITs is that the long-time competitive advantage they've held on other REITs is beginning to shrink. Apartment REITs have traditionally traded at lower yields because of their perceived stability.

House prices across the country continued to climb in January, with the average price of a Canadian home reaching $227,416, 10.4% higher than January of last year, according to numbers released yesterday by the Canadian Real Estate Association. With the exception of Toronto, where house prices increased an average of just 5.2%, most other major Canadian centres showed year-over-year increases for January in the 11%-13% range. Observers say pent-up demand and a shortage of homes in several Canadian cities are responsible for the continued strength in the market, which has set new price levels for the past four years and is coming off a period of record activity. Peter Norman , vice-president of Clayton Research, a firm of urban and real estate economists, said his long-term outlook was for house prices to continue to climb, albeit at a much slower rate.

The condominium apartment market in Toronto's downtown core has become the soft underbelly of the otherwise resilient real estate expansion that has created tens of thousands of new homeowners and helped drive the economy during the past eight years. More than one year's supply is casting a long shadow over pockets of the city. There were 12,225 unsold units across Toronto at the end of September, double the amount in 2000, according to real estate consulting firm N. Barry Lyon Consultants Ltd., which says this is "the highest volume of unsold inventory we're ever seen in the market". "Investors really need to be careful for sure," says Robert Feldgaier , vice-president of residential services for Clayton Research, which has been expressing caution about condo market conditions for the better part of a year. But even buyers who plan to occupy their units must consider that their own needs may change during the two or three years they wait to take possession, and if they have to sell they may face a weaker market than when they bought, he says.

While it may come as a surprise to some, the value of renovation spending in Canada is actually greater than the value of new home construction. The renovation sector is estimated to be worth $28 billion for 2003 and, according to Clayton Research, "both cyclically and structurally, the renovation market is poised for further growth ahead." According to the Canadian Observer, published by Canada Mortgage and Housing Corporation, activity in the resale market plus relatively low financing costs are the key drivers of renovation activity. CMHC points out that households generally do most renovation work within the first three years of purchasing a home. Even owners of new homes contribute to the renovation market, as the typical new homeowner spends about $10,000 in the first year of occupancy building decks, finishing basements and purchasing everything from lawn mowers to snow blowers.

It took nearly two years of discussing, negotiating and compromising, but wide-shallow lots will finally be available in Whitby. Whitby's planning department, which imposes stringent controls on developments in the town, had previously been opposed to wide-shallow lots, as they didn't meet town planning standards. According to the Clayton Housing Report, one in every three new, single-detached home sales in the GTA for the first half of 2002 was a wide-shallow lot, compared to one in four for semi-detached houses and one in five for townhouses. The report says the distinction between traditional and wide-shallow lots is blurring, as the depth of traditional lots decline. It says many builders do not distinguish between lot types, so a homebuyer may not even realize that a development may include both traditional and wide-shallow lots. The report says that buyers seem to be more interested in the size and design of the house than the lot size. The Clayton report says wide-shallow lots allow for more compact communities, in accordance with smart growth recommendations.