With only a small rise in inventory in 2010, the growth in prices in the existing home market was higher than expected (approx 15% since 2009). For 2011, average house prices are forecast to increase across Atlantic Canada from a high of close to four per cent in Newfoundland and Labrador (NL), three per cent in Nova Scotia (NS) and close to one per cent in New Brunswick (NB). Prices in Prince Edward Island (PEI) are expected to rise less than one per cent in 2011. Existing home sales are expected to decline modestly.
Sales declines will vary across Atlantic Canada from one per cent in NS, close to four per cent in NB and NL and nearly eight per cent in PEI.
Although the economic forecast remains positive, recent concerns regarding the global outlook have tempered the possibility of stronger growth in 2011.
For Newfoundland and Labrador, energy and mining development will continue to be the main source of future growth. Several major capital projects will continue to inject stimulus into the local economy and contribute to a positive outlook.
Growth in commodity prices has also provided a lift to mining companies in the interior of the province. Stronger income growth compared to the other three Atlantic provinces has also helped support the level of consumer spending, as well as the stronger than expected level of housing activity. The fishing industry will continue to pose a challenge for Newfoundland’s rural economies, but population losses will moderate over the forecast period due to improving economic conditions in St. John’s. Natural declines in offshore oil production will restrain GDP growth, although increased royalties received by the province will offset the effects of production declines on economic growth overall.
Economic Performance 2009
- Real GDP declined 8.9%.
- Employment fell by 2.5% and the unemployment rate increased to 15.5%.
- Retail sales grew by 2.6% – the strongest performance in the country, with Newfoundland and Labrador being one of only two provinces to record sales growth.
- Labour income increased by 4.2% – the second best performance among provinces.
- Housing starts of 3,057; the second highest in 20 years.
- Capital investment growth ranked fourth among provinces.
- Personal income growth of 3.9% and disposable income growth of 4.7%.
- Population of 508,925 as of July 1, 2009, an increase of 0.5% and the largest percentage increase since 1983.
- Non-resident travel and tourism visitors increased 0.7% to 483,200 with expenditure growth of 1.4% to $375 million.
- 2010 Economic Outlook
- Real GDP forecast growth of 4.0%.
- Employment growth of 2.3% to 219,900.
- Unemployment rate forecast to decline 0.6 percentage points to 14.9%.
- Personal income and disposable income growth of 3.9% and 3.3% respectively, aided by wage gains and employment growth.
- Retail sales growth of 5.0%.
- Increase in population of 0.5% due to positive net migration.
- Capital investment expected to increase by 23.0% to $6.2 billion.
- Housing starts expected to increase 1.5% to 3,102. Residential construction spending of $1.6 billion, an increase of 3.5%.
- Value of mineral shipments expected to increase about 60%, to $3.1 billion.
- Total overnight tourist visits expected to increase by 1.3%.
2010 Investments in Infrastructure
Funding for the Conception Bay South Bypass extension, Team Gushue Highway extension and completion of the Torbay Bypass;
2010 Investments in Diversification
More than $126 million in funding for initiatives under the Departments of Finance, Business and Innovation, Trade and Rural Development including:
- $61 million in tax credits and incentives;
- $11 million in the Regional/Sectoral Diversification Fund;
- $2 million in the Aerospace and Defence Development Fund;
- $1 million for the Innovation Enhancement Fund plus $1 million in the Commercialization Fund, both under the Innovation Strategy;
- $1 million in the Oil and Gas Manufacturing and Services Export Development Fund as part of a two-year $3 million commitment;
- $4.9 million under the five-year Oceans of Opportunity Strategy to advance the ocean technology sector; and
- Other programs including the Small and Medium-sized Enterprise Fund, the Business Attraction Fund, and the Business and Market Development Program.
Oil is the talk of the province once again in Newfoundland. This morning news reports can be read throughout the internet outlining the tenative agreement expanding the Hibernia Oil field. Newfoundland Labrador will have a 10% stake (through crown owned Nalcor Energy) in the Hibernia South expansion. Great news as oil is currently hovering over $71 a barrel. Premier Williams made the accouncement this morning during the Newfoundland & Labrador Oil and Gas Industires Association (NOIA) conference in St. John’s.
What effect do you think this has for real estate in St. John’s?
Complete news articles can be found below
VOCM.com – Big Day for Oil Patch
Globeandmail.com – Newfoundland gives Hibernia New Life
Thetelegram.com -Hibernia South worth $10 billion to the province: Premier
Here is a snippet straight from Royal Bank’s March Provincial Outlook outlining where Newfoundland & Labrador stand during this harsh global economic times.
“The Newfoundland & Labrador offshore oil industry celebrated a milestone in January with the production of its one billionth barrel of oil. This was yet another reminder of the long road traveled by energy developments off the province’s coast and their tremendous contribution to the transformation of Newfoundland & Labrador into a dynamic economy. Nonetheless, the nosedive in energy prices since last summer and declining production at the province’s maturing production wells have cut any festivities short. The real cheers might have to wait until late this year or early next when the White Rose project expansion enters into operation, giving the industry — and the provincial economy — a shot in the arm. In the meantime, decreasing oil output and lower-than expected crude prices will be a substantial drag on economic activity in the province, and the main reason for our projected decline in real GDP in 2009 (down 1.2% following estimated growth of 1.3% last year). Further contributing to the weakness will be an expected drop in mineral production (partly the result of market-related downtime), as well as the recent closure of the Abitibi Bowater newsprint mill in Grand Falls.
Despite the challenges, the mood in the province remains relatively upbeat. Huge investment projects — including the C$2-billion hydromet nickel processing facility in Long Harbour — are still going ahead and the provincial government recently announced a significant increase in spending on infrastructures.
According to Statistics Canada’s P&PI survey, non-residential capital expenditures in Newfoundland & Labrador are set to increase the fastest among all provinces in 2009 (up by almost 13%). Residents who had departed the province earlier are flocking back . This stimulates demand for housing and consumer goods and services. Housing markets have been very tight until recently, and prices continue to show among the strongest year-over-year increases in the country. Home building is expected to remain relatively steady this year, with housing starts forecast to move a touch above last year’s 19-year high of 3,200 units. Such relatively robust domestic activity is expected to persist next year and be the dominant factor returning the provincial economy back into positive growth once oil production is stabilized by White Rose’s expansion.”
CMHC has released the following report.
Strong fundamentals such as a solid local economy, continued immigration and favorable employment will sustain the demand for housing within the St. John’s region throughout the remainder of this year and in 2009. Accordingly, the housing market will continue to perform well. The renovation sector will build on its recent strength, exceeding $800 million annually over the forecast period. With home ownership costs increasing, some prospective buyers remain sensitive to prices when considering the purchase of a home. However, personal income growth and a tight labour market will continue to provide support to the overall level of demand for both new and existing homes. Furthermore, energy related announcements such as Hebron and growth throughout the Newfoundland oil industry continue to fuel the housing market, with unprecedented buyer demand supporting current and future house price appreciation.
Having posted record sales for several years in a row, the St. John’s resale market is expected to continue this trend, eclipsing the 4,000 unit mark this year and in 2009. Accordingly, the forecast calls for MLS® sales of 4,800 units this year, with 4,400 sales expected in 2009. With many new homes selling through the MLS® system, solid numbers for housing starts will have a positive impact on total MLS® sales over the forecast period.
Unprecedented housing market activity this year has been characterized by higher than normal unit sales, constrained listings supply and sharp price increases. In fact, active listings are approximately 40 per cent lower this year versus last year and with demand expected to remain high over the forecast period, unit sales growth will be constrained by fewer listings in 2009. While favorable for sellers, very tight resale market conditions have proved challenging for buyers, resulting in multiple offers and offers above list price on choice listings.
Strong economic performance is fueling sales of luxury homes priced in excess of $400,000 in St. John’s this year. Year-to-date MLS reported sales over $400,000 have climbed 78 per cent, reaching 50 units in the first seven months of 2008, compared to 28 at the same time in 2007. The increase in sales activity of luxury homes extends much further than the MLS statistics reveal considering the present record volume of new executive home construction.
Under the leadership of Premier Danny Williams, Newfoundland has flourished. Strength in the energy sector has bolstered the local economy and residential housing sales. Unemployment is at a record low and wages continue to rise. The average price of a home has increased significantly, prompting unprecedented move-up activity. Sales are up across the board with price points climbing in more and more communities. Once a rarity in Newfoundland, homes sales are now beginning to occur over $1 million.
Although a considerable amount of new home construction exists in St. John’s, demand for new homes continues to outpace supply. A shortage of skilled trades is the trouble point within the marketplace, as many skilled trades people have migrated to Alberta for work in recent years. This factor burdens the ability to satisfy the demand for new homes. The construction period for production of an average single family dwelling that would typically require a five to six-month schedule is now taking double the amount of time to complete.
Inventory levels are up in the $400,000 plus price range, but quality listings are few and far between with a shortage in key luxury neighbourhoods. Sought-after locations in St. John’s and surrounding areas include Churchill Square, King William Estates, Waterford Valley, Country Gardens, Hogan’s Pond, and specific regions within the communities of Topsail and Manuels, where properties are priced from $500,000 to $2 million.
Luxury homes priced at fair market value tend to sell within 30 days, while excessive overpriced listings stagnate. Well-priced properties in coveted neighbourhoods are experiencing multiple offers.
The majority of buyers are young professionals in their late 30s and 40s. Many are employed by the oil and gas industry, or hold high-paying jobs in business, engineering, and medicine. Transfers from out-of-province and international buyers represent a significant presence at the top-end of the market, with many investing in established neighbourhoods, the urban core, and ocean view or pond frontage properties.
Price appreciation has experienced a huge jump in recent years with values up as much as 35 per cent over the last two years in the luxury market. The majority of upper-end sales occur at the $500,000 to $900,000 price points. Currently, the highest priced residential listing is $1,475,000.
The offshore development of Hebron, Newfoundland’s fourth oil field, located just 350 kilometers from St. John’s, is forecast to further impact the local economy. In the foreseeable future, the province is expected to receive significant royalties from offshore oil activity. The revenues will help diminish the highest per-capita debt in the country and secure Newfoundland’s economic outlook and that of the residential real estate market.
Leading the country in terms of percentage increase in luxury home sales are Regina (up 306 per cent); Winnipeg (up 89 per cent); St. John’s (up 78 per cent); Saskatoon (up 72 per cent); Kitchener-Waterloo (up 47 per cent); Ottawa (up 36 per cent); Halifax-Dartmouth (up 20 per cent); London (up 14 per cent); Greater Vancouver (up five per cent); and Victoria (up four per cent). Solid performance is likely a result of consumer confidence, particularly in provinces like Saskatchewan, Manitoba, Newfoundland, Nova Scotia, and parts of Ontario where solid economic fundamentals helped to bolster the number of homes sold in the upper-end.