Located at the hub of the Maritime provinces, Moncton, New Brunswick, enjoys a strategic position in the centre of the Atlantic Trade Gateway.
That spot has helped the region become a transportation and distribution hub for road, rail and air cargo. In fact, in the 70s and 80s, CN Rail called Moncton home and set up its headquarters in the pretty province, which was a huge driver in the area's economy and vitality.
So when CN closed its doors, the city of Moncton was hit hard.
“It was devastating for the local economy,” says Ben Champoux, director of community business development for the City of Moncton. “It would be like if a town in northern Ontario lost its mine. So we had two choices – we could disappear or roll up our sleeves and reinvent ourself.”
And like any good Maritimer knows, this wasn't a choice at all. Atlantic Canadians are renowned for their hard work, resilience and non-defeatist spirit. And 25 years later, the city's and people's efforts have paid off. The city has transformed from a blue-collar community with an uncertain future to one of the most diversified and fastest-growing areas in Canada.
“We don't have more than 9% of workers in one particular sector,” says Champoux. “That's the beauty of Moncton – we don't have all our eggs in one basket.”
Transportation still plays a big role in the city's economy - in fact, the city is home to three of the top 10 trucking companies in Canada along with the Greater Moncton International Airport, which offers daily flights to New York City along with nine flights a day to Toronto and Montreal. However, Moncton is also home to one of the most diversified economies in Canada and the region continues to see growth in its technology-based sectors. Moncton is home to a number of world-class firms in gaming technologies, knowledge-based industries, health care and advanced manufacturing.
Moncton’s back office cluster is one of the most successful in Canada and features companies such as UPS, FedEx, Purolator Courier, Royal Bank of Canada, Camco and ExxonMobil.
“Our diversified economy and different industries attracts people from all over,” says Champoux. “There isn't one particular sector that's fuelling our economy and this makes us solid and constant.”
In fact, since the city's economy is thriving, Moncton has added more than 25,000 jobs to its workforce since 1990. Moreover, annual employment in Moncton remains strong in historical terms (70,200 in December 2010).
And the numbers are projected to continue to climb.
The unemployment rate is at an historical low at about 6% throughout the last five or six months. The city is facing a familiar challenge as many Canadian hubs – it has a booming employment sector and an aging Canadian population.
And to fill the gap, Moncton has been looking outside its borders for new members to join its workforce. With a 6.5% population growth (which outpaced the national average of 5.4%) between 2001 and 2006, Moncton is the fastest growing urban centre in Atlantic Canada and the 10th fastest growing CMA in Canada. Moreover, Moncton has always attracted at least three times more people every year than any other New Brunswick county.
“The number of immigrants has increased exponentially over the years,” says Champoux. “We're not a Montreal or a Toronto but we're focused a lot on attracting people from outside the country. There have been recruitment missions to places like South Korea to bring back people and workers.”
People and workers that will need a place to live.
The real estate market
The number of homes sold in Moncton set new annual records consecutively each year from 1999 through to the all-time high set in 2007. That momentum continued through the first half of 2008, but like other regions elsewhere in Canada, the recession sideswiped sales activity and resulted in the first annual decline in Moncton’s sales activity in 10 years.
Activity recovered throughout much of 2009, but fell short of 2008 levels because activity never regained the kind of strength the city saw in the first half of 2008. Activity rebounded by 1% in 2010 and just over 2,400 homes traded hands over the MLS® system of the Greater Moncton REALTORS® du Grand Moncton last year, marking the fourth best year on record.
“Prices, meanwhile, have climbed sharply since 2002 -- but it’s important to remember they were fairly stable for a decade before that,” says Dwayne Hayes, Realtor and president of the New Brunswick Real Estate Association. “Average price has shown signs of plateauing, with 2010 having posted the smallest annual increase since 1998, with the average home price hitting the highest annual level on record.”
The average price change in Greater Moncton was approximately 5% annually over the past decade. The majority of the price growth occurred between 2002 and 2007 and the annual growth during this period was approximately 7%.
The average price of an existing home in Moncton in 2010 was $152,250, up from $150,000 in 2009. New homes are more expensive. The average price of a new home in Moncton in 2010 was $257,000, compared to $227,000 in 2009.
Today, Hayes says sales activity has been volatile over the past few years for a number of reasons, including the new mortgage rules that came into effect in March 2011. “That said, the beginning of 2011 has seen Moncton’s housing market firmly entrenched in balanced territory,” says Hayes. “A decade’s worth of price gains has elevated affordability as an issue, particularly given tightening mortgage rules and expected increases in interest rates. That’s a story that’s playing out across the country. As in many other housing markets across Canada, price gains are expected to diminish while other housing market fundamentals, such as household incomes, catch up to price increases.”
However, despite price gains, Shirley Powell, owner of Let's Deal Real Estate Ltd and president of Greater Moncton Realtors du Grand Moncton, says the new home market is staying strong in Moncton.
“During the past decade, the new home market followed a similar trend, with single detached starts peaking in 2008,” says Powell. “The highlight of the new home market has been semi-detached starts. Starts for these units have been growing rapidly throughout the decade. They are aimed mostly at first-time homebuyers. In fact, nearly 400 semi-detached units were started in 2010, which accounted for nearly 30% of total housing starts.”
The rental market
According to the CMHC 's October 2010 Rental Market Survey, the vacancy rate in the Moncton CMA was 4.2% up from 3.8% last fall. The number of vacant units in Greater Moncton stood at 417 compared to 375 units at the same time last year.
The vacancy rate for the more popular two-bedroom style units was consistent with the change in the overall vacancy rate, climbing from last year’s rate of 3.6% to 4.3%. This was not unexpected, however, as two-bedroom units account for approximately two-thirds of the rental universe in the Moncton CMA.
The vacancy rate for one-bedroom units inched down 0.3 percentage points to 3.7% in the fall of 2010. In recent years, a preference for the increased living space provided by two-bedroom units reduced demand for one-bedroom units. As fewer new, one-bedroom units were added to the local universe, supply did not keep pace with existing demand, contributing to the lower vacancy rate in 2010.
The rental market is also spurring development of multiple starts.
According to CMHC's Fall Housing In Greater Moncton, multiple starts nearly doubled during the third quarter with 350 units, up from 181 units during the same period in 2009. Typically, new home construction tends to diminish as the year winds down, partially due to increasingly difficult weather conditions.
For 2010, however, the highest quarterly total for multiple starts was recorded during the final three months of the year. A rapid expansion in two specific market segments led to the fourth quarter increase in multiple starts. The rental market was the most obvious benefactor of the increased activity. Province leading net-migration and a relatively low vacancy rate continued to provide an incentive to local developers, who responded with increased activity in this market segment. As a result, apartment starts totalled 194 units during the fourth quarter, nearly triple the fourth quarter output of 65 units recorded in 2009.
The other industry leading submarket in Greater Moncton, semi-detached units, posted a 35% year-over-year increase in the fourth quarter.
This strong quarterly performance closed off a year when semi-detached starts rebounded after recording their first annual decline in a decade in 2009.
Rents in Moncton have also risen. The average rent in the city in 2010 was $661 up from $649 in 2009. And since Moncton City accounts for approximately 80% of the total rental universe in the Greater Moncton Area, investors should look there as well as the surrounding areas where there is strong growth in construction, in the housing market and the retail and commercial sector, as well as new schools being built, which Powell says is happening in the north end of the city as well as the downtown.
Where to buy
“The north end of the city has lead the way in growth for a few years now and investors are excited to be part of this growth,” says Powell. “There is a lot of rebuilding and there is lots happening in the downtown section of Moncton with more to come. It's an upbeat section of town for investors to be considering!
When Moncton downtown developments are completed, it is going to be the envy of our neighbouring cities.”
Downtown Moncton has historically been a regional destination and the centre for tourism, commercial, and business activity. Within the boundaries of downtown Moncton there are over 800 businesses employing over 15,000 people. The city's plan for its downtown is to maintain and enhance buildings, landmarks, and landscapes that contribute to the heritage character of the area; to significantly increase the density of downtown in order to enhance the quality of urban living and the pedestrian realm, and to create a more sustainable approach to city building; and lastly to develop a strong retail corridor at grade level that is supported by a mix of uses .
The average house prices in Moncton North for new construction ranges from $264,000 to $399,000; while existing homes in the area sell for less at $179,000 to $329.000
Downtown Moncton's existing homes sell for $179,000 to $279,000
Rents in Moncton North range from $660 to $ 900 per month, while downtown rents garner $660 to $690 a month in older buildings.
“The tenants are folks who choose modernly priced apartments that come with just the essentials that can't afford home ownership yet or folks that are new to the city and want to know the city well before buying,” says Powell. “ Where the higher-end rentals are for the folks like retirees who no longer wish to maintain home ownership but enjoy all the features they are accustomed to enjoying in their everyday lifestyle.”
Looking forward, the future is bright for Moncton.
“A cross current of housing market fundamentals will shape sales activity in the next year or two,” says Hayes. “Interest rates are forecast to rise slowly. Together with home prices at or near record levels, affordability for first-time home buyers remains an issue. However, interest rates are anticipated to rise within the context of an increasingly entrenched economic recovery, so economic growth, hiring, and income growth will offset higher interest rates. That’s supportive for housing, especially with interest rates expected to remain within short reach of current levels. We’ll likely see start to see some stability emerge. We may not match the record levels reached before the recession any time soon, but housing market stability is expected and welcomed.”
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