NEW YORK--(BUSINESS WIRE)--Canadian CMBS will likely perform positively in the near term, Fitch Ratings says. We expect retail and office properties to be positive but slightly lower than they have in recent years. Also, Canadian transactions have had extremely low default rates over the past 15 years. In 2Q13, we calculate a cumulative default rate of 1.9% of issuance by balance. The U.S. rate for the same period was 13.7%. In our view, more conservative lending, the commonality of recourse loans, and the relatively small amount of Canadian CMBS issuance and lending explain much of the difference.
Our view of the office market is rooted in our expectation that Canadian unemployment will remain stable through 2015 at approximately 7%. Nationwide the average vacancy rate in the second quarter was 8.7%. Rents have been growing in Montreal (4.2%) and Vancouver (3.0%) over the prior year.
Over the longer term, we observe some trends in multifamily housing that could slow its growth. The vacancy rate at the end of the second quarter was under 3%. But an oversupply of condominiums in Vancouver and Toronto may be forming. Those markets also have higher youth unemployment rates than the rest of Canada.
We expect the Canadian economy to grow 2% annually from 2013 to 2015. Much of the strongest growth has been in Alberta, Manitoba, and Saskatchewan and is partially attributable to the expansion of the oil and gas industry in those provinces.
Additional information is available on www.fitchratings.com.
The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article, which may include hyperlinks to companies and current ratings, can be accessed at www.fitchratings.com. All opinions expressed are those of Fitch Ratings.
ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.