Canadians Leaving Big Cities in Record Numbers: Statistics Canada

Canada’s biggest cities are experiencing a record-breaking loss of people as urbanites move to smaller bedroom communities in search of affordable homes. According to a new Statistics Canada report, Montreal and Toronto both saw a record loss of people from July 2019 to July 2020 as urban-dwellers moved to the suburbs, smaller towns and rural areas. 

Toronto lost 50,375 people over those 12 months while nearby Oshawa, Ont. saw its population grow by 2.1% — the fastest population growth in the country. Kitchener–Cambridge–Waterloo in Ontario and Halifax were tied for the second-fastest growth, at 2%. Over the same period, Montreal lost 24,880 people, while nearby communities such as Farnham, Que. and Saint-Hippolyte, Que. saw their populations rise.

Experts say the pandemic has accelerated the urban-to-suburban trend as more employers shift to a work-from-home model and young, first-time buyers look beyond the city for more affordable properties. 

This shift has also inspired plenty of competition in communities where bidding wars are anything but typical. “With the low supply issues that we are seeing in a lot of the major markets across the country, that is creating some challenges if you want to buy a home just because there is less to choose from,” said Geoff Walker, an Ottawa realtor.

Despite urban areas posting overall population growth due to international migration, the report found that high numbers of people from Toronto, Montreal and Vancouver chose to move away.

And despite border closures during the pandemic, international migration from July 2019 to July 2020 accounted for 90% of the growth in Canadian cities. That number drops to just over one-third of growth in other regions. 

Real estate markets in Canada’s biggest cities continued to grow during the past year, but Robert Hogue, a senior economist at RBC, expects some of that action to calm in the year to come.”The very high levels of activity in the late stages of 2020 are probably going to settle down through the course of 2021,” said Hogue. 

Source: CTV News

Pandemic Housing Market to Stay Hot in 2021, but Economists Expect a Hangover Later in the Year

2021 is forecast to be another brisk one overall for Canada’s housing market, but economists also see reason to believe that the rush for residential real estate will start losing momentum as the year drags on. The housing market “likely had its strongest year ever in 2020,” Royal Bank of Canada economist Robert Hogue wrote in a report released on January 13.

Even with coronavirus raging, RBC estimated home resales in Canada increased about 13% last year to 552,300 units, blowing past the previous record set in 2016 of 539,100. The bank’s economics division also projected those sales will hit an even-higher high level in 2021, to 588,300 units, as low interest rates, space-seeking buyers and a high level of household savings keep demand going. 

“The strong annual tally will mask a gradual cooling in the market through the year, however,” Hogue added. “We expect low supply to become a growing constraint, pandemic-induced market churn (resulting from changes in housing needs) to wane, and a slight rise in longer-term interest rates and material erosion of affordability to cool demand by a few degrees.”

Resales on an annualized basis will slow some by the end of 2021, RBC predicted, to somewhere closer to 515,000 units. After an 8.5% jump in the aggregate benchmark price for a home in 2020, the lender’s economists see 8.4% growth in a gradually softening 2021, to $669,000, “setting the stage for a more modest” 3.9% gain in 2022.

A hot start that gives way to a cooler close is how several other economists see 2021 going for the Canadian residential real estate market. The continuing pandemic also means a more unpleasant surprise is not out of the question. 

Capital Economics projects house price inflation will increase past 10% in the first quarter of 2021 compared to a year earlier, driven by strong demand and low mortgage rates. However, the research firm sees home-price growth slowing to 5% by the end of 2021, and to 2% by the end of 2022. 

Mortgage rates over the past two years have fallen, meaning the average person can essentially afford to pay around 25% more for a home, while house prices are up around only about 10% over the same period, according to Stephen Brown, senior Canada economist at Capital Economics. So that, combined with people seeking more space amid the coronavirus pandemic, could still give the housing market a boost.

Yet those trends won’t last forever. Cities such as Halifax and Montreal have absorbed the effects of lower mortgage rates quickly, Brown said, and others such as Toronto and Vancouver are still dealing with weaker immigration levels, which weigh on rents and investor interest.  The economics unit at Bank of Montreal said it sees housing sales cooling nationally, but home prices being supported by the lack of supply and still-low interest rates.

BMO’s economists forecast the MLS Home Price Index would increase 7% this year, “with the first half of the year still characterized by outsized strength in single-detached homes, especially in smaller markets, partly offset by sluggish condo prices,” they wrote. “Whether or not that rotation persists after the vaccine is widely administered is probably a question for the 2022 outlook, but we suspect core urban markets will ultimately find a solid footing again after further underperformance in the meantime,” they added in their Dec. 23 outlook.

Downtown Toronto condo sales actually rose in December to their highest level since May 2019, increasing by 26% month-over-month and 102% year-over-year, according to Shaun Hildebrand, president of research firm Urbanation Inc. Yet for the Greater Toronto Area housing market more broadly, Urbanation also sees a slowdown coming later this year.

“A lot of demand is being pulled forward due to low rates and distorted buyer psychology as many that weren’t planning on moving are now wanting a change and others think they need to get into the market now before it’s ‘too late,’” Hildebrand said in an email. “An eventual recovery in the economy and immigration will be important for the market as vaccines are introduced — but they will have a lagged effect and we could be dealing with a bit of a hangover later this year, specifically for (Toronto’s suburban) houses.”

Source: Financial Post

Canada’s Housing Market Surges, Closing Out 2020 With Record Sales and Prices: CREA

Canadian home sales jumped 7.2% in December from November, setting a new record amid surging demand in the Greater Toronto and Vancouver areas, the Canadian Real Estate Association said on January 15. The industry group said actual sales, not seasonally adjusted, rose 47.2% from a year earlier, while the group’s Home Price Index was up 13.0% on a year-over-year basis and up 1.5% from November.

For 2020 as a whole, CREA said some 551,392 homes were sold, up 12.6% from 2019, and a new annual record. In December, the seasonally adjusted annual rate of home sales was 714,516, topping 700,000 for the first time.

The actual national average home price was a record $607,280 in December, up 17.1% from the final month of 2019. CREA said excluding Greater Vancouver and the Greater Toronto Area, two of the most active and expensive markets, lowers the national average price by almost $130,000.

The industry group noted that the number of homes listed for sale in Canada on Jan. 1 was the lowest on record, which coupled with new restrictions amid a surge in COVID-19 cases and lockdowns, pointed to further supply tightness in 2021.

“So we have record-high demand and record-low supply to start the year. How that plays out in the sales and price data will depend on how many homes become available to buy in the months ahead,” said Shaun Cathcart, senior economist with CREA.

Regionally, the markets with the largest year-over-year price gains – up more than 30% – were in smaller Ontario towns and cottage communities outside of Toronto. Followed by satellite cities around Toronto. Homes in British Columbia and the prairie provinces were up by 5% to 10% on the year, with Alberta home prices gaining less than 3%.

Source: Globe and Mail
Source: Toronto Star
Source: Financial Post

CMHC Reports Annual Pace of Housing Starts Down in December

The annual pace of housing starts in December fell compared with November, according to Canada Mortgage and Housing Corp. The monthly seasonally adjusted annual rate of housing starts for all areas in Canada, excluding Kelowna*, B.C., fell 12.2% in December from November, CMHC said on January 18.

The annual pace of urban starts fell 12.8% in December as urban starts of apartments, condos and other types of multiple-unit housing projects dropped 15.1%. Single-detached urban starts fell 5.5%. Rural starts were estimated at a seasonally adjusted annual rate of 22,373 units.

“December’s decline is unsurprising as some pullback from November’s massive level was to be expected,” wrote Rishi Sondhi, economist at TD Economics, in a note to clients. “Still, homebuilding ended [2020] on solid footing, buoyed by gains in past home sales and population growth, a declining inventory of unsold new homes, as well as low interest rates.”

Despite the drop in December, CMHC says the six-month moving average of the monthly seasonally adjusted annual rates of housing starts climbed to 239,052 units for the final month of 2020, up from 236,334 in November. Bob Dugan, CMHC’s chief economist, said that the pace of housing starts in 2020 surpassed 2019 in total, despite “pandemic-induced” declines early in 2020.

“Regionally, the December drop was concentrated in Ontario and Quebec, though both provinces saw the best year since 2004,” wrote Priscilla Thiagamoorthy, economist at BMO Capital Markets Economic Research, in a note to clients. “That’s quite remarkable, especially for Quebec, given the fact that restrictions in the province forced the sector to grind to a halt in April.”

Sondhi of TD Economics wrote that despite a new wave of COVID-19 restrictions in Ontario and Quebec, homebuilders should be relatively unscathed. “Focus now shifts to January, where, in the battle against the pandemic, Ontario’s government recently shuttered ‘non-essential’ construction activities,” Sondhi’s note to clients said. “Notably, condo projects are allowed to continue, as can other residential projects for which a permit has been granted.”

*The December survey was not conducted in Kelowna due to the COVID-19 pandemic, but CMHC said Kelowna’s exclusion didn’t impact the overall trends for the month.

Source: Globe and Mail
Source: Toronto Star

Canadian Home Prices Rise 0.6% in December From November

Canadian home prices rose 0.6% in December from November, the strongest increase for a December since 2009, led by gains in Victoria, Halifax and Ottawa-Gatineau, data showed on January 20.

The Teranet-National Bank Composite House Price Index, which tracks data collected from public land registries to measure changes for repeat sales of single-family homes, showed price gains in 10 of the 11 major metropolitan markets. Prices rose 1.3% in Victoria, 1.2% in Halifax and 1.2% in the national capital region of Ottawa-Gatineau. The index was down 1.1% in Quebec City, the first major market to show a decline in four months.

On an annual basis, the index was up 9.4% in December, the fifth consecutive acceleration and the strongest 12-month gain since November 2017. Ottawa-Gatineau led year-over-year gains, up 19.7% from December 2019, followed by Halifax at 16.3% and Hamilton at 15.1%. Calgary home prices are down 1.5% on the year.

Source: Globe and Mail

CMHC Says W-Shaped Recovery Would Be ‘Very Severe’ Without Government Assistance

A W-shaped recovery from the COVID-19 pandemic could trigger a nearly 50% drop in housing prices and a peak unemployment rate of 25%, if the government doesn’t offer relief, says the Canadian Mortgage and Housing Corporation. A W-shaped recovery is when an economy begins to rebound from a recession quickly but then rapidly falls into another period of downturn before recovering again. “That scenario is very severe and implausible in nature, but it’s very important to understand,” CMHC’s chief risk officer Nadine LeBlanc said in a media briefing on January 21.

The scenarios Ms. LeBlanc discussed are not meant to be predictions or forecasts tied to what CMHC sees headed for the country as it continues to grapple with COVID-19, but the agency runs the tests anyway to help with risk mitigation and offer transparency for Canadians. It began the tests at the onset of the pandemic, giving them a more realistic feel, but in past years has studied its ability to cope with sustained low oil prices, a global trade war, earthquakes, major volcanic eruptions and cyberattacks on financial institutions.

Of all the scenarios CMHC looked at this year, the W-shaped recovery without government support is the most implausible, but likely to cause the severest effects, Ms. LeBlanc said. She predicted CMHC’s solvency and capitalization would likely be challenged in a W-shaped recovery where the government doesn’t step in to offer relief. CMHC found that a W-shaped recovery with government support would curtail the severity, be more manageable and only cause a roughly 32% in home prices and a 24% unemployment rate.

If the W-shaped recovery with government support was coupled with a severe cyberattack targeting the country’s whole financial industry, CMHC stress test results show a 37% decrease in home prices and a 24% unemployment rate would be likely. In that scenario, cumulative insurance claim losses would reach $8.4-billion – roughly half the amount CMHC said the country would see in a W-shaped recovery with no government assistance.

CMHC also looked at a U-shaped recovery, where a recession gradually improves. In that scenario, they found house prices would fall by almost 34%, the peak unemployment rate would be nearly 15% and cumulative insurance claim losses would reach $9.6-billion. That scenario was the most plausible and would likely generate the most moderate effects, Ms. LeBlanc said.

Many economists have been predicting Canada will see a K-shaped recovery from the COVID-19 pandemic, where the rich get richer and the poor get poorer. It wasn’t on CMHC’s radar when it started looking at stress testing last March, but there is some interest in it, Ms. LeBlanc hinted. “We’re obviously not out of this crisis and so CMHC continues right now running stress testing and one that’s looking very interesting to us is the K-shaped scenario.”

While stress testing the system for liquidity is basic due diligence for an organization like CMHC, it probably doesn’t actually serve much purpose, argues John Andrew, executive director of the Queen’s University real estate roundtable. “They’re doing that because if there are defaults on mortgages they’ve insured, they have to foot the bill. But we didn’t even see a significant amount of mortgage defaults in the early ’80s, when interest rates were around 20%,” said Andrew.

Another sad reality of the current COVID-19 recession, said Andrew, makes the stress testing even less relevant. “Who’s been hardest hit by this recession? Younger people and many lower-income people, a lot of whom are in the service industry. And a lot of those people don’t have mortgages because they don’t own their homes,” Andrew said.

Source: Toronto Star
Source: Globe and Mail