Canada’s Home Sales Surge in October After Previous Month’s Supply Bump
Canada’s real estate market experienced a surge in sales in October, reaching its highest level in over two years. The Canadian Real Estate Association (CREA) reported 43,294 transactions across the country, a 7.7% increase from September and the largest volume since April 2022, when the pandemic’s real estate frenzy began to ease due to the Bank of Canada’s interest-rate-raising campaign. The association attributed the spike in sales to the abundance of properties on the market.
Sales have been slow for over two years, with prospective buyers not making purchases even after the central bank cut its benchmark interest rate in June, July, and September. Mortgages were still relatively expensive, and would-be buyers could not qualify for a large enough loan. More homeowners were also putting their homes up for sale, leaving buyers with more choice and time to make a decision. However, with another interest-rate cut in late October and easier mortgage policies soon coming into effect, buyers have started to transact.
In Toronto, home sales rose by 14% from September to October, while transactions rose nearly 20% in the Vancouver region and Fraser Valley in B.C. Other areas saw an increase in sales. However, fewer homeowners decided to put their homes up for sale last month, with the number of new listings falling 3.5% from September.
The slowdown in sales and lack of competition has given buyers more negotiating power, which has been reflected in real estate values. Provinces with cheaper properties, such as Newfoundland and Labrador, New Brunswick, Quebec, Saskatchewan, and Alberta, have seen home prices increase year over year.
CREA chair James Mabey added that October’s strong sales numbers “suggest buyers have been in the market since rates began to fall in early summer, but they were waiting for the right property to come up for sale, which didn’t happen in a big way until September.”
Source: Globe and Mail
Source: The Star
Source: Financial Post
Source: CREA
Annual pace of housing starts in Canada up 8% in October, CMHC says
Canada Mortgage and Housing Corp. reported an 8% increase in the annual pace of housing starts in October compared to September. The seasonally adjusted annual rate of housing starts was 240,761 units, up from 223,391 units in September. The increase was primarily due to the 6% increase in urban housing starts to 223,111 units.
“Actual year-to-date housing starts are similar to last year, but we continue to see higher activity in the Prairie provinces, Québec and the Atlantic provinces, while Ontario and British Columbia have seen declines in all housing types. The increases in the monthly SAAR in Toronto and Vancouver are a promising sign for Ontario and British Columbia, as they drove the national SAAR increase in October. Despite these results, we remain well below what is required to restore affordability in Canada’s urban centres.” said Bob Dugan, CMHC’s Chief Economist.
Multi-unit urban starts, such as apartments, condominiums, and townhouses, gained 7% at 175,705, while single-detached urban starts increased 1% at 47,406 units. Rural starts were estimated at 17,650. The Prairies, Quebec, and Atlantic provinces saw higher activity this year, while Ontario and British Columbia recorded declines. However, affordability in Canada’s urban centres remains below what is required.
Actual year-to-date housing starts between January and October 2024 were up 12% in Montreal, while Vancouver saw an 18% drop after a record-high year in 2023. Toronto saw a 21% drop from 2023. The six-month moving average of the annual rate of housing starts was flat in October at 243,522 units.
TD economist Rishi Sondhi (who recently spoke at the CHPTA-COPA “Discovering the Future of Consumer Behaviour” fall conference) said October’s “healthy” level of starts contributed to overall economic growth in the fourth quarter. However, the outlook for housing starts remains “soft,” largely due to the expected weakness in Ontario.
Source: Globe and Mail
Source: CMHC
Building Permits, September 2024
In September, the total value of building permits in Canada rose by $1.3 billion to $13.0 billion, reaching the second-highest level since January 2017. Ontario’s construction intentions grew by $1.2 billion to $5.9 billion in September 2024, leading gains in both the non-residential and residential sectors. The total value of building permits rose 11.6% on a constant dollar basis (2017=100).
Ontario’s institutional construction intentions drove the non-residential sector, increasing by $797.5 million (+18.0%) to $5.2 billion in September. However, industrial (-17.6 million) and commercial (-9.9 million) construction intentions edged down. Ontario’s institutional component reached $801.2 million in September, a second series-high level, which drove national gains. The Ontario government announced in the 2024 Budget to continue efforts to increase the province’s long-term care capacity.
The residential sector saw a rise in construction intentions by $540.7 million (+7.5%) to $7.7 billion in September, led by the multi-unit component (+$505.5 million). The single-family component contributed modestly. Multi-unit construction intentions were driven by Ontario (+$812.3 million), specifically by large multi-unit permits in Toronto, Barrie, and Mississauga.
Ontario’s industrial construction intentions drove the non-residential sector to a quarterly series high in the third quarter, with the total value of building permits rising by $1.9 billion (+14.6%) to an all-time high of $14.6 billion in the third quarter. The overall growth in the non-residential sector was also supported by increases in the institutional component (+$590.1 million), but it was tempered by a slight decline in the commercial component (-$89.9 million).
In summary, the total value of building permits in Canada rose 11.6% in September, with Ontario’s institutional and residential sectors experiencing significant growth.
Source: Statistics Canada
In Canada, Owning a Home ‘Feels Like a Luxury’ for a Sizeable Majority
Canada’s housing market is dire, with 84% of surveyed respondents stating that owning a home feels like a luxury. This sentiment is not limited to one group, with 82% of baby boomers, 86% of generation X, 87% of millennials, and 84% of generation Z agreeing that buying a home is a luxury.
The crisis is also causing hardship across society and in younger generations, with 82% of people concerned that the lack of affordability and high home prices are negatively affecting their mental health and well-being.
The inability to buy a home is exacerbating the wealth gap, and 66% of gen-Zers have considered delaying starting a family due to inadequate housing. “Canadians are sending a clear message: the housing crisis is no longer just about housing,” Pedro Barata, chief executive of Habitat for Humanity Canada, said in a release. “This is particularly evident for young Canadians, who are rethinking or delaying major life decisions to achieve homeownership, signalling a deep and lasting impact on future generations and society as a whole.”
Source: Financial Post
Bank of Canada Rate Cuts Rescued Housing Market from ‘Implosion,’ Says Costar Economist
The Bank of Canada’s recent interest rate cuts may have saved the housing market from collapse, but they won’t be enough to restore previous levels of activity, according to Carl Gomez, the chief economist of real estate analytics giant CoStar Group Inc.
The housing market is expected to revive but not blow up again like it did before. Most mortgages and debt used to buy real estate are priced off of bond yields, which are dictated by the market, not the Bank of Canada. The Bank of Canada policy rate currently sits at 3.75 per cent, after four consecutive cuts this year.
The Government of Canada 10-year bond yields, a benchmark proxy for longer-term bond yields, have stayed around 3.5 per cent, meaning that even though the Bank of Canada has been cutting interest rates, the long-term bond yields that determine the market have remained around that 3.5 per cent. CoStar Group released its 2025 outlook for Canada, highlighting Canada’s weakened economy, which is currently growing well below its potential output.
Source: Financial Post
Toronto’s First-Time Homebuyers Have Saved up and Are Finally Ready to Buy — But There’s One Thing Holding Them Back
First-time homebuyers are motivated to buy property before the spring 2025 market, which is forecast to bring back bidding wars, offers with no conditions, and escalating prices. Condos are typically entry-level homes, but for many first-time buyers, it’s the wrong supply. The majority of the thousands of units on the market were built with investors in mind to rent out, as smaller units generate better cash flow.
The Bank of Canada has had four consecutive rate cuts since June, bringing the key interest rate from 5% to 3.75%. While the average selling price for all property types in the GTA has dropped by 15% since the February 2022 peak, it’s still 38% above 2019 levels.
Affordability is still a big obstacle for first-time homebuyers, as rents are also dropping and there’s a lot of rental supply on the market. Many are choosing to rent, save, and then buy. Ten years ago, small condo units were enticing for first-time buyers, costing around $390,000 in Toronto.
The two- and three-bedroom condo market is experiencing a surge in demand, with most listings being 600 square feet or less. However, the majority of listings are selling within a reasonable amount of time, with anything larger than 800 square feet selling quickly. Some first-time buyers are skipping condo purchases altogether due to the market bottoming out and the fear of increased interest rates from the Bank of Canada.
Entry-level freehold homes priced between $1 million and $1.4 million are becoming competitive, with many attracting multiple bids. There is not enough supply of single-family homes below $1.5 million, making this home type a hot commodity. Recent federal government changes to mortgage rules could stoke greater competition among first-time buyers looking at entry-level single-family homes. First-time homebuyers can extend their amortization to 30 years instead of the standard 25 years and provide less than 20 cent as a down payment for a home costing up to $1.5 million. However, there are concerns that increased competition could raise home prices and saddle buyers with greater debt for a longer period of time.
Source: The Star
Toronto’s Housing Market Will Boom in 2025, Royal Lepage Head Says — Making It the Most Expensive Market in Canada
Toronto’s high-priced real estate market will possibly surpass Vancouver in the coming months, according to Royal LePage president and CEO Phil Soper. Despite recent challenges, the fundamentals that drive real estate markets are solidly established in the city. As declining interest rates spur activity across Canada, Soper believes Toronto’s real estate industry is poised for a booming 2025. Toronto is still a great deal compared to Greater New York, let alone Manhattan and home prices weren’t rising, while wages, salaries, and savings were.
In the short-term, Soper says declining interest rates will kick off Toronto’s next housing market boom, which will see the city take the crown from Vancouver as the country’s most expensive market. In the long term, relatively high incomes, immigration, and interest in home ownership will allow Canada to maintain some of the top home ownership rates among the G20, even if some are priced out of Toronto.
Canada’s birth rate fell to 1.26 last year, but the country has a strong immigration system with 60%+ economic immigrants coming with skills or capital. This is compared to 25% in the United States. The housing market feels broken partly because it suffers the same issues as those in the United States, Australia, Germany, and advanced nations around the world. Canada has been under building relative to organic needs for years, but there are other subtleties that complicate the picture as well.
Canada is behind the curve on housing needs, but demand has been masked by the post-pandemic slowdown. The last two-and-a-half years have been a much-needed breather, but most of that slowdown was in the lower mainland of Vancouver and the GTA. Toronto’s condo market has been one of the slowest markets in the country for the last couple of years due to the sharp rise in borrowing costs, keeping first-time buyers on the sidelines. Independent investors were also affected, as interest rates have been high and values have been falling, providing them little incentive to hold a property. That being said, condo values were only down 2.4% this year, so there is not a crash scenario.
Falling rates are expected to bring more first-time buyers, which will edge up condo values by the first quarter of 2025. Investors are expected return due to low vacancy rates and rising rents. Young people, particularly millennials, are better informed about real estate thanks to social media.
While first-time buyer age is creeping up, 54% of those in their 30s believe home ownership is an achievable goal. This would give them about the same home ownership rate as Gen Xers and Baby Boomers.
Source: The Star
