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Housing, apartment growth stagnant

Guy Quenneville
Northern News Services
Published Wednesday, March 4, 2009

SOMBA K'E/YELLOWKNIFE - The number of newly-built Yellowknife houses, apartments and townhouses declined sharply last year, due in part by slowed population growth in the city and an ample supply of old housing, according to the Canada Mortgage and Housing Corporation (CMHC).

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Richard Goatcher, senior market analyst for the Canada Mortgage and Housing Corporation, said the Yellowknife housing market has slowed due to stagnant population growth and uncertainty on the part of buyers over the financial markets. - Guy Quenneville/NNSL photo

During the CMHC's 10th annual Yellowknife housing forum, held last week at Explorer Hotel, Richard Goatcher, senior market analyst for Yellowknife, said the housing market has slowed considerably, especially for new homes.

"There's very little of that under construction right now," said Goatcher, who said he knew of only one new house start so far this year.

If the number of new homes erected this year plummets, it will continue a trend that began last year, according to the statistics he unveiled.

In 2008, only 10 new homes went up, compared to the 27 built in 2007.

"It's the overall economic climate," said Goatcher of the housing decline. "When you look at migration statistics for the NWT, you can see that there's very little population growth going on right now."

More than 750 people left the territory in 2008, according to the NWT Bureau of Statistics, compared to the 250 people who left in 2007.

"Even in cases where you don't have a lot of net migration, you still get a certain amount of household formation," but not in Yellowknife, said Goatcher.

"The growth levels aren't there like they were a couple of years ago, where we had a lot more people coming into the community," he said. "That means household formation is lower ... and demand for housing is largely being satisfied by the existing stock - people leaving town and freeing up units."

Goatcher predicted Yellowknife will get between 10 and 15 new homes this year, though he said he will definitely have to revisit that forecast at the end of the first quarter.

"It looks like there's not going to be a huge demand for new home ownership units, largely because there's a fair amount of supply in the existing market," he said. "We're probably looking at a number that's going to be pretty similar to last year. It could even be lower."

Home growth in Yellowknife has been held back partly by Bayview Estates, which underwent partial construction of 16 of 126 planned condo units off Niven Lake in 2007 but has been caught in development delays, said Yellowknife Mayor Gord Van Tighem.

"They ran into a number of difficulties during the initial construction process and construction has stopped," Van Tighem said of developer Bond Street.

That project's status has consigned many potential home owners to renting, he added.

"Bayview Estates pre-sold a certain number of homes. Some of the people that made the down payment on them sold their homes and are living in apartments."

Despite a dismal 2008, Van Tighem is confident the number of new starts will rise this year. He pointed to the September selling of five to six new homes in Niven Lake, as part of the neighbourhood's Phase 7 development. And there are 25 left to sell, he added.

"Those people's contractors are looking at building permits and things," he said of the sold homes.

The number of resold homes in Yellowknife took a sharp dive in the fourth quarter of 2008, according to the CMHC.

Approximately 65 homes sold in the fourth quarter, down from more than 140 houses selling in the third quarter.

That was hardly a surprising statistic for Shane Clark, co-owner of Homelife Sunrise Real Estate. He said hesitant buyers in the last quarter of 2008 have increased the pool of potential buyers this year.

"We're getting a bit of an accumulation of purchasers that are holding on right now," he said. "They're just seeing what's going on with the market, what's going on with the economy. "

Despite a weak fourth quarter for the sector, the average resale price increased in 2008 to $318,000 from $304,000 in 2007. While Goatcher originally predicted the average resale price will go up again in 2009 to $325,000, he said dipping prices in the south could foretell a similar softening of prices in Yellowknife.

In this climate, the buyer will benefit, he said.

"The buyer has more advantage now than they had two years ago," he said. "It's an opportunity for people who have been thinking about getting into the marketplace ... there's more opportunities now than there were two years ago when prices were soaring and interest rates where higher."

But if prices eventually do go down, it won't be for long, said Clark.

"I think initially we'll see a slight dip in pricing, but I think our market will turn around and will probably stick very close to what (Richard's) projections are," he said.

Van Tighem said Goatcher's original projection may have been put together "a little too early. You could see there's more activity in certain quarters than in others, and we haven't reached the active ones."

So far this year, between Homelife, other real estate companies and private sales, Clark knows of at least 10 re-sales - most of them in the less-than-$400,000 bracket. But the market for more-than-$400,000 houses will pick up, he said.

Goatcher is more hopeful that the number of new "units" - apartments, townhouses, suites - will rise in the coming year, he said. Only two new units went up in 2008, compared to 20 in 2007.

"We saw virtually nothing last year, and not a very big amount in 2007 (27), so there's opportunity here for some development," he said.

There's plenty of demand, given the current apartment vacancy rate of 0.9 per cent, which Goatcher predicted will rise to one per cent this year.

"Both the townhouse market and the apartment market are very tight," he said.

But relief is on the way, according to Van Tighem. Though he declined to name the developer, he said there is a company planning the construction of a multiple-unit apartment building near downtown.

"Any of this building come begin as early as April," he said.

If one building goes up, that will likely be it for a while, said Goatcher.

"That often is part of the jockeying that goes on," he said. "The firms that are involved, like Nova Construction and other firms like that, they don't want to be competing against each other when they've got new buildings.

"The other person will sit back and go, 'Oh, I missed my window of opportunity. Now I better wait. '"

For current renters, rates will likely go up this year, but only slightly, said Goatcher, using the average two-bedroom apartment as his model. Last year, the average two-bedroom apartment cost $1,411; that will go up to around $1,450.

Despite lower fuel prices, property owners will find other ways to justify the hike, said Goatcher.

"Quite often, they've got things that they have to upgrade or prepare for," he said. "Older buildings have lots of cost associated with them that the average person doesn't see but the owner has to prepare for."