Ryan Hodgson

The London Free Press had an article detailing London's construction industry. It is a good read and is posted below. It touches on London's diverse economy weathering the economic uncertainly in Ontario and paints a good future for the construction industry and London's economy.

With the manufacturing industry really struggling and all the negative news we hear in the media, it's good to keep things in perspective and understand where London is now and where it will be in 5 years or 10 years down the road.


The value of construction in London is about to top $800 million for the first time, despite the region's economic slump.

"This is going to be the biggest year ever. We are at $640 million now with four months to go, we will top $800-million," Rocky Cerminara, the city's director of building controls, said yesterday.

That is startling, considering the city has an unemployment rate of 6.7 per cent, higher than the national and provincial average. In August, London had 244,600 people working compared to 247,000 in 2007, a decline of 2,400 workers.

The boom is buoyed by $100-million in construction at the London Health Sciences Centre.
"I believe it shows that we have a diverse economy," Cerminara said. "If one sector takes a hit, the other sides will hold us up."

Gerry Macartney, general manager of the London Chamber of Commerce, agreed London's diversity has kept it moving along.

"We do enjoy a balance and, frankly, we are able to weather these economic conditions better than most," he said. "We have steady, incremental growth."

As for the hospital construction that has lifted the building totals, expect much more to come, said Dave Crockett, vice-president of facilities management for LHSC and St. Joseph's Health Care London.

The $100 million issued this year is for the completion of the Children's Hospital of Western Ontario and Grace Donnelly Women's Health Pavilion, the latest stage in what has been a $250-million project at both LHSC and St. Joseph's. But there will be another $300-million wave of building from 2009 to 2013, he said.

"This is important because of its scope and size and (because) it will bring more services, including 76 beds, to capacity. This will help a lot," Crockett said.

There are 300 construction workers at the Victoria Campus and 100 at St. Joseph's, which is also doing renovation work because some programs will shift there. The reconstruction of that hospital began in 1999. The first phase -- a $350-million project -- ended in 2006.

Brian Waltham, vice- president at EllisDon Construction, which is building the hospital tower, wasn't surprised by the boost in building, saying the industry has been steady and he doesn't anticipate a letdown.

"There is doom and gloom in the media, but the building that is going on will keep things going for a while. We are ecstatic."

According to building figures from January to August, not too many sectors appear to be taking a hit.

Institutional building this year stands at $224.8 million compared to $104 million over the same period in 2007. Surprisingly, industrial -- the sector that has been hit hardest by layoffs and plant closings -- is also up, with $59.6 million compared to $44.1 million last year, thanks to a new manufacturer, Hanwha, and the development of new industrial space that will be leased to tenants.

Residential building spending is up to $307 million over $285 million in 2007, driven largely by apartment building. Detached home building dropped 33 per cent.

Commercial building showed the largest decline, with $45 million in permits issued from January to August compared to $64 million last year.

TOP FIVE 2008 PERMITS

LHSC, $90 million. (It also has a second $10-million permit).
$18.5 million, Fanshawe College residence.
$18.3 million, seniors care facility.
$16.5 million for Hanwha, a Korean building supply company.
$16 million, seniors apartment building.

THE NUMBERS

Value of building permits
2008: $800 million+ (projected)
2007: $722 million.
2006: $773 million
2005: $622 million
2004: $648 million

London/St Thomas Association of Realtors has released stat information for the end of August. The market is still doing well. Homes are selling. We are in a much more balanced market now compared to past years. Below is the official news release. For a complete stat pack, click HERE.

I bolded two important parts - 1st showing the real estate market is having a very healthy year. And the second showing why we are in a balanced market (buyers having more selection making it easier to buy) with the continued large number of homes sales.

Last month, 762 homes exchanged hands in the jurisdiction of the London and St. Thomas Association of REALTORS® (LSTAR), including 607 detached homes (down 11.8% from August 2007) and 155 condos (down 15.3%). Year to date, 5,043 detached homes and 1,307 condos have been sold - down 9.2% and 10.2% respectively compared to the same period in 2007.

"It's important to keep these direct comparisons to last year's figures in perspective," advises Bruce Sworik, LSTAR President. "A total 9,378 homes were sold in 2007, making it far and away the best year for real estate sales since our Association began keeping records in 1978; the previous record of 8,916 sales was set in 2006. Between January and August 2007, a total 7,009 homes had already been sold - 442 units more than during the same period in 2004 (the next highest total). Sales so far this year may be down 9.4% compared to the same period in 2007, but 2008 has actually seen our third-best February, our second-best May (also our third best month ever) and our second-best July on record! Year to date sales are just 3.3% below the five-year sales average and currently stand 6.5% above the ten-year average."

Homes in LSTAR's jurisdiction continue to maintain their affordability compared to other major Ontario and Canadian centres. According to the Canadian Real Estate Association's Major Market Release for July 2008 (the most current available), the average price January 1, 2008 - July 31, 2008 year to date for:

􀂃 London and St. Thomas was $213,705;
􀂃 Calgary was $414,213;
􀂃 Durham Region was $274,525;
􀂃 Edmonton was $338,511;
􀂃 Hamilton-Burlington and District was $285,065;
􀂃 Kitchener-Waterloo was $273,473;
􀂃 Ottawa was $293,385;>􀂃 St. Catharines & District was $221,646;
􀂃 Toronto was $387,470; and
􀂃 Greater Vancouver was $610,306.

"The number of new listings of homes for sale on the Multiple Listing Service® (MLS®) eased in August 2008, down 18.2% from the 1,568 new listings taken in July. However, new listings are up 3.7% compared to August 2007," observes Sworik. "More significantly, our active listings - the number of listings which are active on the MLS® at the end of the recording period, in this case, August 31, 2008 - currently stand at 3,543, up 25.5% over the same time last year."
Sworik adds: "Compared to this time last year, listings are up, average prices are up, and sales are down by less than 10% from that record-breaking total of 7,009 unit sales ... we'll take it! There's certainly no real estate bubble bust taking place here in LSTAR's jurisdiction!"

Stats released by the London St. Thomas Real Estate Board show that May was the third best month ever for the board - based on number of sales. While conditions are still favorable for homebuyers, the key factor is the increase in the number of available listings.

The total number of listings available for May was over 3,600 - to put this in perspective, I believe 3 and 4 years ago, the active listings were around 2,500. This is giving homebuyers options and selection, and making it easier for them to purchase a home. And this is why home prices only increased 4.3% from May 2007. A more balanced market is great news for everyone.

Also, apartment vacancy rate has decreased, which is surprising given all the recent new construction. This is great news for all the developers who've built highrise rentals in London over the past 5 years. They were right in their market projections that the London market could handle all the new apartment construction.

The strong resale market and apartment vacancy numbers defy expections from those who say the real estate market is going to bust. As mentioned in previous posts, the market conditions in London should allow for a steady market for the next couple of years, as the market balances out - rather then a fallout or correction as some fear.

Here's the Free Press Article

And with all the negative news the manufacturing sector has taken in the London area over the past year, there are some positive stories of new business opening up in the area. Here's Another One

After attending a seminar featuring a representative from CMHC (Canadian Mortgage and Housing Corporation) I'll touch on some key points they talked about in regards to the current and future real estate market in London, Ontario.

They project price increases of 4% in 2008 and 3% in 2009. (Which I consider very encouraging)
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Employment

Full time employment increased from 2000 to 2008. Unemployment 6-7% in the same time period, much lower then the stagnant 90's.

Service sector is strong in London. These jobs pay well.

The highest paying jobs in London come from the Public sector, Education, Manufacturing, and Construction. Out of these 4, manufacturing is the only one taking a hit at the moment in London. This reinforces my previous thoughts on a well balanced economy in London overcoming any major concerns from the manufacturing sector.

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Population Growth

Growth in London was 5% from 2001 to 2006. Ontario's rate was 6% during the same time. London's natural birth rate is lower. Net migration makes up for it. These people come from other countries or other parts of Ontario. Reasons for this are affordable home prices and the realization that jobs are now available in London.

I think you will see the %'s for London increase after 2006 for both population growth and birth rate:

Population by age

• 45-64 increased as expected - because of the baby boom.
• 25-44 was the largest segment of population to increase. This is very encouraging. These are the people who are going to be starting families, working, and buying homes in London in the future.

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Mortgage Rates

Project interest rates in 2008 and 2009 to remain stable.

Monthly payment average. 2002-2006 was around $900/month. 2009 it will be around $1000-$1100/month. This is one of the reasons why the market will balance out. Sales will still be strong, but not record breaking strong and price increases will stabilize ie. 3% increase as mentioned already. Overall, still more affordable then the 1990's.

Consumer confidence is to remain above average.

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To summarize:

• Sales will edge down as prices increase.
• Demand will remain strong thanks to fundamental demographics and solid economy.
• Supply will continue to grow.
• Price growth will moderate.

Please click on the link below to see comprehensive report on the London Ontario real estate market. Updated reports, graphs and statistics detailing home sales and listing information from the past decade.

Market Report