Canadians Put Off Plans to Buy a Home Until the Bank of Canada Cuts Rates
A survey by the Bank of Montreal has revealed that 72% of Canadian homeowners are waiting for the Bank of Canada to cut interest rates before buying a home. This is up 4% from 2023 due to growing concerns about the cost of living, inflation, and financial situation.
Among the nearly 40% planning to buy a home in the near future, only 13% plan to buy in 2024 and 26% plan to buy in 2025 or later. Canadians are expecting a rate cut in the second half of this year, which should bring some buyers back to the market and firm up sales.
However, rates have a long way to fall before affordability is restored to recent norms. The Bank of Canada held its benchmark interest rate at 5% this month, but signalled that a cut in June or July was possible. Forces at home and abroad could delay that decision. The central bank will be closely watching consumer price index data before its June 5 meeting.
A standoff between inflexible sellers and budget-constrained buyers is developing, and while 62% say owning a home is one of their biggest aspirations in life, more than half feel that dream is unattainable.
Source: Financial Post
Has the Great Toronto Condo Boom Finally Hit a Wall? / New Condo Sales in the Toronto Area Hit 15-Year Low
New condo sales in Toronto have fallen by 85% in the first quarter of 2024, with just 1,461 units sold, a decline of 71% from the peak recorded in the first quarter of 2022. Construction has also slowed, with only 2,361 units beginning construction, down 52% from last year. The total number of condos under construction is at its lowest level in over two years at 91,590 units.
Sluggish demand for condos resulted in fewer units sold last month than any March in the past decade. Justin Sherwood, BILD’s senior vice-president of communications and stakeholder relations, said buyers are struggling with affordability and high interest rates, which are now expected to come down from five per cent in June.
This slowdown in home construction in Canada has hindered efforts to make housing more affordable. With average monthly rent at $2,000 and typical homes selling for over $700,000, many Canadian residents struggle to afford housing. The slowdown in new condo sales will lead to less investment in housing, despite governments’ efforts to make housing more affordable.
The decline is attributed to the pullback in new project launches by developers, with only four projects totalling 958 units brought to market in the first quarter. Urbanation president Shaun Hildebrand believes this cautious approach is indicative of current market conditions. Although anticipated reductions in interest rates in the second half of the year may lead to some improvement in market conditions for new condominiums, activity is likely to remain subdued as the industry works through current inventory and digests recent government housing policies.
The slowdown in pre-construction projects is affecting developers ability to secure financing for construction. In Q1 2022, pre-construction projects sold only 50% of their units, compared to 61% in Q1 2023. This is due to lenders requiring developers to sell 70% of their units for construction financing. The longer it takes to sell pre-construction condos, the longer it will take to get financing and start construction, ultimately leading to fewer homes being built.
The federal government recently allowed first-time homebuyers to take out a 30-year mortgage for pre-construction homes with a deposit less than 20% of the purchase price and mortgage insurance. The old mortgage rules did not allow insured-mortgage borrowers to take out a loan longer than 25 years. However, given that Toronto region developers typically require a 20-per-cent deposit, the longer amortization is not expected to make a big difference in the new-home market.
Source: Financial Post
Source: The Star
Source: Globe and Mail
Entry to Housing Market Feels Out of Reach for 76% of Non-Owners: CIBC Poll
A recent poll for CIBC reveals that 76% of Canadians who don’t own a property feel the housing market is out of reach but more than half are holding onto their goal of owning a home. The survey found that 70% of non-owners cited overpriced markets as a main barrier to homeownership, while 63% cited the inability to save for a down payment as their major barrier.55% of non-owners said they’ll only be able to afford a new home with an inheritance or gift from their family.
The survey comes on the same day the federal government announced longer amortization periods for certain first-time homebuyers. The government will nearly double the amount first-time homebuyers can withdraw from RRSPs to buy a home to $60,000.
Current homeowners are also facing challenges as they deal with higher interest rates. 51% of variable-rate mortgage holders have been cutting back on everyday expenses, while 21% are putting lump sum payments toward their mortgage.
At least 45% of homeowners with fixed-rate mortgages anticipate they’ll cut back on daily expenses as their loans come up for renewal in the next two years.
Source: The Star
Source: Globe and Mail
Source: City News
March Home Sales in Canada, Average Price Up From Year Ago: CREA
Highlights:
- National home sales edged up 0.5% month-over-month in March.
- Actual (not seasonally adjusted) monthly activity came in 1.7% above March 2023.
- The number of newly listed properties declined 1.6% month-over-month.
- The MLS® Home Price Index (HPI) dipped 0.3% month-over-month but was up 0.7% year-over-year.
- The actual (not seasonally adjusted) national average sale price posted a 2% year-over-year increase in March.
The Canadian Real Estate Association (CREA) has revised its forecast for the national average home price to climb 4.9% annually to $710,468, more than double the hike it had predicted at the start of 2024. The association now expects 492,083 homes to trade hands this year, a 10.5% increase from 2023. In its January forecast, CREA had expected a 10.4% increase in home sales this year and a 2.3% rise in the average home price for 2024.
The revised forecast comes as the number of home sales in March rose 1.7% compared to a year ago, with the average price of a home sold last month amounted to $698,530, up 2% from March of 2023. On a month-over-month basis, home sales in March were up 0.5%. The number of newly listed homes declined by 1.6% on a month-over-month basis in March.
Conrad Zurini, owner of Re/Max Escarpment Realty, said that consumers are waiting for borrowing costs to come down, and they are thinking there’s brighter skies ahead. CREA chair Larry Cerqua said that while home sales levels for March were “quite flat” on a month-over-month basis, anecdotal evidence from late last month and early April suggests activity is ramping up. Zurini said that an appreciation in the value of homes on the market due to higher demand could wipe out the savings of a modest interest rate cut when purchasing a home.
Source: The Star
Source: Globe and Mail
Source: CREA
Annual Pace of Housing Starts in Canada Down 7% in March From February: CMHC
Highlights:
- The monthly SAAR of total urban (centres 10,000 population and over) housing starts decreased 7%, with 220,743 units recorded. Multi-unit urban starts decreased 8% to 180,229 units, while single-detached urban starts decreased 4% to 40,514 units.
- The rural starts monthly SAAR estimate was 21,452 units.
- Total SAAR housing starts were up 27% in Vancouver, driven by an increase in multi-unit starts. Toronto and Montreal declined 26% and 5%, respectively due to decreases in multi-unit starts.
Canada Mortgage and Housing Corp. (CMHC) reported a 7% decline in the annual pace of housing starts in March compared to February, with the seasonally adjusted annual rate of housing starts at 242,195 units. Year-over-year, actual housing starts in large urban centres increased by 16% to 17,052 units, driven by higher multiunit and single-detached starts.
Toronto-Dominion Bank economist Rishi Sondhi said housing starts continue to trend “at a solid pace,” despite the month-over-month decline in March. However, he cautioned that further decreases to the number of starts are likely in the months to come due to recent weakness in pre-sales activity and industry analysis suggesting that financing for purpose-built rental units currently under construction could be impacted.
Month-to-month starts can fluctuate significantly due to the launch of larger multiunit developments, with Vancouver seeing an increase in multiunit starts in March, while Toronto and Montreal declined 26 per cent and 5 per cent, respectively, due to decreases in multiunit starts. To provide a clearer picture of the upcoming housing supply trend, CMHC also reports a six-month moving average of the adjusted rate.
Desjardins economist Kari Norman said that the slight decline in multi-unit housing starts in March likely reflects the volatile nature of large projects. The gradual unwinding of interest rate hikes expected to begin this June will bring cautious optimism to housing starts, but challenges such as construction labor shortages, inflation in building materials costs, and weaker home builder sentiment could potentially slow the momentum seen in early 2024, despite a favourable shift in monetary policy.
Source: Globe and Mail
Source: The Star
Source: CMHC
