Canadian Home Sales in May Down from Year Ago

Canada’s real estate market softened further in May as sales and prices of existing homes declined and listings rose. Canadian homebuyers remained on the sidelines in despite a small uptick in properties available for sale. 

The national real estate association expects activity to pick up this month after the central bank cut interest rates for the first time in four years. “May was another sleepy month for housing activity in Canada, although it may prove to be the last of those now that interest rates have moved lower,” said CREA senior economist Shaun Cathcart.

Sales fell 0.6% between April and May after removing seasonal influences, and the typical home price across the country declined 0.2% to $714,300 on a seasonally adjusted basis. The number of new listings rose 0.5%, pushing the supply of homes for sale to their highest level since the fall of 2019.

The Bank of Canada’s early June interest-rate cut to 4.75% from 5% is expected to bring some pent-up demand back into the market. However, realtors say that that pent-up demand has not yet materialized. Royal LePage president Phil Soper believes sales will pick up nationwide, but “at this stage, it is looking like a slow drip to higher and higher activity, as opposed to a rush of people.”

In British Columbia, the response was slightly different, with many properties getting offers as soon as interest rates dropped. For about two years, housing market activity has been subdued, with most cities and regions having sales below the 10-year average and home prices falling or stagnant.

Source: Globe and Mail
Source: The Star
Source: CREA

Annual Pace of Canadian Housing Starts in May up 10% from April

Canada’s housing starts jumped to the highest level in seven months, as the country’s two largest provinces ramped up construction on apartments, townhouses and condominiums. Canada Mortgage and Housing Corp. reported a 10% increase in the annual pace of housing starts in May compared to April, with 264,506 units, up from 241,111 units in April. “As it stands now, the number of units under construction is trending near record highs in absolute terms, and matching the 1970s building boom relative to the size of the adult population, stated BMO senior economist Robert Kavcic. 

The pace of starts in Montreal and Toronto increased by 104% and 47%, respectively. Compositionally, the number of single-detached homes that began construction during the month was little changed, meaning the gains were concentrated in multiple-unit builds. The pace of starts in Vancouver fell 32% compared to April.

The overall annual pace of urban housing starts in Canada was 246,111 units, up 11% from 221,376 in April. Multi-unit urban starts increased 13% to 203,141, while single-detached urban starts rose 2% to 42,970. The seasonally adjusted annual rate of rural starts was estimated at 18,395. The six-month moving average of the monthly seasonally adjusted annual rate was up 3.8% at 247,830 units in May compared to 238,859 units in April. The federal government is working to improve affordability by implementing new tax incentives and spending to address the housing crisis.

CMHC estimates Canada needs to build at least 3.5 million additional housing units by 2030 to restore affordability. “While this is good news for housing supply, we do expect downward pressure on starts through the rest of 2024,” Bob Dugan, CMHC’s chief economist, said in the release.

Source: Globe and Mail
Source: The Star
Source: Financial Post
Source: CMHC

Building Permits, April 2024

In April, the total value of building permits in Canada increased by 20.5% to $12.8 billion, with construction intentions in the residential sector rising 21.0% to $8.0 billion and the non-residential sector rising 19.6% to $4.8 billion. British Columbia recorded a record high monthly total value of building permits ($3.1 billion), marking the highest monthly growth since June 2023.

Record High Levels in British Columbia’s Multi-Unit Residential Construction Intentions and Non-residential Sector

Residential building permits increased by 21.0% to $8.0 billion, driven by record high levels in the multi-unit component, which reached a record high of $5.4 billion. The single-family home component also saw a 2.4% increase to $2.6 billion. 

British Columbia led the growth in the multi-unit component, reaching a record high of $1.9 billion in April. Ontario also supported the monthly growth in the component. In April, 4,300 new single-family homes were authorized across Canada, while 22,600 new multi-unit dwellings were approved through building permits, an all-time high. British Columbia’s record 7,200 new multi-unit dwellings contributed to this growth. However, the 12-month cumulative total of 267,700 units authorized from May 2023 to April 2024 saw little change.

Non-residential permits’ value rose 19.6% to $4.8 billion, driven by commercial, institutional, and industrial growth. British Columbia’s broad-based growth, totalling $149.9%, drove the increase in the non-residential sector in Canada.

Source: Statistics Canada 

Investment in Building Construction, April 2024

Investments in building construction decreased 2.0% in April, reaching $20.5 billion, with the residential sector dropping 2.7% to $14.2 billion and the non-residential sector falling 0.5% to $6.3 billion, and a constant dollar basis decrease of 1.9% to $12.6 billion. 

Investment in Residential Sector Declines

Residential building construction investment in Canada decreased by 2.7% to $14.2 billion, with declines in 9 provinces and territories, mainly Ontario and Alberta. However, Saskatchewan saw an increase in investment. Single-family home investment fell 4.7% to $6.9 billion, with Saskatchewan reporting a 17.7% increase. Multi-unit family investment fell 0.6% to $7.3 billion, with decreases in six provinces and one territory. Despite the decline, gains were made in Nova Scotia and Quebec. Overall, the market experienced a mixed performance.

Non-residential Construction Investment Edges Down 

Non-residential construction investment decreased by 0.5% to $6.3 billion. However, a slight increase in the institutional component offset the declines in industrial and commercial components. Seven of the 13 provinces and territories reported gains in institutional construction investment, with Manitoba leading the way with a 10.2% increase. The value of institutional construction investment in Manitoba nearly doubled from $40.0 million in April 2023 to $79.8 million in April 2024.

Source: Statistics Canada

‘The Condo Market Right Now Is a Ghost Town’: Toronto Has a Record Number of Units for Sale. Here’s Why They Aren’t Selling despite a Housing Crisis

Toronto’s housing crisis has led to a record number of homes for sale that are not being purchased. The condo market is now considered a ghost town, with no actions being taken. The market has flattened, with smaller units being sold to investors. This is seen as evidence that the provincial government’s efforts to address the housing crisis have failed, as it has primarily benefited developers, investors, and speculators rather than ordinary people in need of affordable housing. 

As of May, Greater Toronto had the highest number of condos for sale in recent history, with 8,183 units available. Pre-construction condo sales have also declined by 74% this year compared to the 10-year average.

Toronto’s housing market has prioritized micro-sized condos for investors over the past 20 years, leaving no housing for future families, according to John Pasalis, president of Realosophy, a Toronto-based real estate brokerage. This trend has been driven by the desire of mom and pop investors for small units, without any intervention from policymakers.

Condo listings in Toronto have increased by 30% since May, with suites in the 500- to 599-square-foot range growing by 49% year over year. The average list price is $593,000. The market has been dominated by investors, leading to high prices per square foot. The average price for a resale condo in downtown Toronto is $1,000 per square foot, while presale condo units are substantially higher at $1,500 due to increased labor and construction costs.

The construction of small, investor-geared condos in Ontario has been a significant issue since 2020, with many buyers planning to sell them on assignment. The City of Toronto has released guidelines for developers to consider young and growing families when designing “vertical communities,” but cannot force them to make larger suites. The provincial government has been cutting development charges, which further incentivizes investor and speculator parts of the market.

The province has stated that the only true solution to the ongoing housing supply crisis is to increase the amount of available housing to meet the needs of all Ontarian’s. The government’s initiatives to build more homes are designed to encourage the construction of a balance of housing types, including development charge exemptions on not-for-profit and affordable housing, as well as reduced development charges for purpose-built rental units with further discounts for family-friendly units.

While the Bank of Canada cut its key interest rate by 25 basis points to 4.75 per cent, it is still not enough to help many qualify for new mortgages. Realtors expect many buyers to remain on the sidelines for several more months until the central bank issues more rate reductions. In the meantime, sellers might consider spending a little more money to take their best shot at moving their condos. However, buyers shouldn’t expect prices to budge dramatically, as listings are at an all-time high, and the market is technically a balanced one.

Source: The Star

Rate Cut Had Almost No Effect on Toronto Housing Market, Agents Say. Here’s What It Would Take To Get It Moving Again

Real estate experts and economists have debated the impact of the first Bank of Canada interest rate cut, with some believing buyers would return to the market. However, weeks after the cut, the drop has had little effect. 

Toronto’s real estate market is at a standstill, with affordability reaching near a record high, hindering first-time homebuyers from entering the market. Sellers continue to price their homes above market value, hoping the rate cut would spur a run up in prices. The 

Bank of Canada’s housing affordability index is at its highest since the 1990s when a real estate market crash hindered first-time homebuyers from entering the market. 

Some realtors are seeing a shift in consumer mindset post-rate cut, especially with low rise housing, as select Toronto neighbourhoods see a higher volume of transactions. Industry insiders predict one or two more rate cuts by the end of the year, and a rate cut in July could give buyers and sellers more confidence that the rate cut cycle will be faster than anticipated.

The condo market in the city is also experiencing a slowdown, with sales trending downward even after the rate cut and listings increasing. The pre-construction sector faces challenges in deals closing, as many buyers struggle to qualify for a mortgage at higher interest rates. 

Developers have worked with buyers to help close deals, but some buyers have just walked away from large deposits or put their units up for significantly reduced prices in the assignment space. If more people continue to off-load their units for lower costs, it could depreciate the building’s value, which is not what developers or existing homeowners want.

Over-leveraged investors are not looking to return to the market with elevated interest rates, as skyrocketing rent may not cover the cost of a mortgage and other maintenance fees. However, there is “huge opportunity” in the condo market for investors willing to take on some risk, as there are multiple offers for rental, and if they are willing to get into the market, they could be rewarded long-term.

Source: The Star

‘Nothing Is Moving’: GTA Sales of Newly Built Homes Plummet in May

The Toronto real estate market is experiencing a chill, with high prices and heightened borrowing costs preventing prospective buyers from purchasing new homes. A report from Altus Group analysts and the Building Industry and Land Development Association (BILD) shows that 936 new homes sales in May were recorded, including 539 condominium units and 397 single-family homes. New condo sales dropped by 75% compared to May 2023, while sales of new single-family homes fell by 65% year over year. BILD executive Justin Sherwood is concerned about the lack of activity in the market, as he warns that slowed sales could lead to fewer homes hitting the market in the future.

Despite this, new home inventory is still rising, with an increase of 20,427 new homes on the market in May. The report estimates that this inventory will last for 14.5 months. However, the market is starting to shift, with a slowdown in housing starts expected to accelerate.

The freeze-out of new buyers is the latest development in a housing market that has frustrated buyers and renters for years, with competition pushing prices beyond the reach of average families. The Altus and BILD report noted a slight easing of prices for newly built homes compared to last year, with new condos selling for 5% less and new single-family homes down 7%.

A average condo in Toronto would require a household to save around $200,000 to make a 20% down payment, and a fixed-rate mortgage agreement could leave a family paying around $5,000 per month or more. For a benchmark single-family home, a 20% down payment alone would be more than $320,000, plus thousands of dollars per month in carrying costs. Even as home prices have dropped from their pandemic peak, it has gotten more expensive to be a homeowner in the region, with variable rate mortgage holders spending around 30% more monthly. 

The Bank of Canada recently dropped its key overnight rate from 5 to 4.75 per cent, but industry players have reported little effect on sales activity across Toronto. Sherwood believes a major drop is unlikely, barring significant interventions citing forces from limited land to higher construction labor and materials costs. Even if the Bank of Canada continues to slash its key rate, he fears the brakes have been pumped enough in the real estate market to create a lasting ripple over the coming years, limiting new supply and preventing further run-ups in sale prices.

Source: The Star