Canada Building Permits Fell 2.1% in August From July

Canadian building permits fell in August, driven by a drop in residential construction intentions in the provinces of Ontario and British Columbia. The total value of building permits in August declined 2.1% on a month-over-month basis to a seasonally adjusted 9.66 billion Canadian dollars, or the equivalent of $7.64 billion, Statistics Canada said on October 4. On a year-over-year basis, the overall value of permits issued in August advanced by 16.9%.

Highlights from the report:

  • Residential permits decreased 8.3% to $6.4 billion in August, the lowest level since March. Ontario and British Columbia drove most of the decline.
  • Construction intentions for multi-family units fell 15.9%, largely reflecting Ontario’s decline (-24.3%). 
  • Single family intentions were up slightly (+1.2%), led by a 15.7% gain in Quebec. Additionally, Newfoundland and Labrador (+0.7%) reported the first provincial increase in this component after six consecutive monthly declines.
  • Non-residential building permits rose 12.3% to $3.3 billion, led by higher construction intentions in Quebec and Alberta.
  • Commercial building permits were up 14.9% nationally.
  • The value of institutional building permits rose 21.9% in August. Much of this growth came from Quebec (+78.0%), largely reflecting a $116 million permit for an expansion of a hospital building in the city of Verdun.

Building permits provide an early indication of construction activity in Canada and are based on a survey of 2,400 municipalities, representing 95% of the country’s population. The issuance of a permit doesn’t guarantee that construction is imminent.

Source: Market Watch
Source: Statistics Canada

Canada’s Housing Market Overheated, Overvalued and at Risk of a Downturn, CMHC Warns

Canada Mortgage and Housing Corp. says the country’s housing sector moved from a moderate to high degree of vulnerability during the second quarter, with Toronto, Ottawa and Montreal among the markets shouldering the most risks. The federal housing agency attributed the escalation in vulnerability to price acceleration and overvaluations across the country and said the shift was largely a reflection of intensified and persistent imbalances in several local housing markets across Ontario and Eastern Canada.

“Even though we’ve seen a little bit of a moderation in some of the housing market statistics in the third quarter, when looking at the second quarter results … activity was still much stronger than even it is today,” said Bob Duggan, CMHC’s chief economist. “Housing market activity is very strong, price growth is still very strong and price levels are very high.”

Duggan and CMHC’s quarterly assessment released on September 28 assigns low, moderate or high vulnerability ratings to the entire country and 15 major cities based on four factors — overheating, price acceleration, overvaluation and excess inventories. If those factors become imbalanced or risks increase in several areas at once, the agency posits that markets could be more vulnerable to troubles and people could begin struggling with their mortgages.

CMHC’s second-quarter assessment of the Canadian market found moderate degrees of vulnerability, when it examined the country’s risks of overheating, price acceleration and overvaluation. It found a low level of vulnerability linked to the country’s excess inventories rate, but still gave the country a “high” vulnerability ranking overall.

In the two prior quarters, Canada’s housing market landed a “moderate” degree of vulnerability, but Duggan warned of pressure from rural areas like Ontario’s cottage country and the Niagara, Bancroft and North Bay regions, which don’t receive vulnerability ratings but contribute to the national analysis.

CMHC’s individual market assessments for the second quarter showed Toronto,  Hamilton, Ottawa, Montreal, Moncton and Halifax have high degrees of vulnerability. All of those markets were ranked high in the prior quarter, except for Montreal, which was previously assessed as moderate and is seeing overvaluation becoming a more pressing issue.

CMHC kept Victoria, Edmonton and Calgary at the moderate level they were at before, while Vancouver, Saskatoon, Regina, Winnipeg and Quebec City were assessed as having low degrees of vulnerability. The low ranking was new for Vancouver, which was previously said to have a moderate vulnerability level.

At the national level, CMHC noted moderate evidence of home price over-valuation, housing supply at critically low levels, and said price appreciation was starting to accelerate. In another sign of how high demand is relative to supply, the agency saw 85 per cent of newly built homes sold upon completion — the highest ratio since the early 2000s.

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

New Construction House Prices in GTA and Condo Sales Hit Record Levels in August

Newly constructed single-family homes in the GTA hit a new benchmark high price of $1.52 million in August — 30% more than a year earlier — as supply hit near historic lows in the Toronto region. But a flood of new condos offerings pushed sales of those units to an 11-year August record, according to the Building Industry and Land Development Association (BILD) that represents homebuilders.

The benchmark price for condominium units dipped to $1.07 million in August — a 10% annualized increase but down from July’s $1.09 million benchmark. The 3,162 condos that sold in August — including stacked townhomes and lofts — was 129% above the 10-year average. It was also 35% more than August 2020 sales but BILD is warning against reading too much into last year’s numbers, suggesting that market was distorted by the pandemic.

August condo sales remained below the June 2017 overall record of 5,170. “As the supply was made available to the market the demand was still there, which resulted in the record sales,” said BILD CEO David Wilkes.

Market demand is also driving prices on the single-family home side of the market — a category that includes townhomes, semi-detached and detached houses. Only 605 of those homes were sold in August, 15% below the 10-year average, according to the industry statistics supplied by Altus Group.

“We saw single-family sales being lower than they had but that was a function of lack of supply as well,” he said. “As product became available the market responded. On the other side, when there is no supply, the market reacts accordingly.”

Wilkes blamed slow approvals and a lack of designated land on the shortage of homes and warned that the situation can’t be fixed overnight when it takes 10 to 11 years from start to finish to build a new home in the GTA. Wilkes said that the current situation is the proof that solving the region’s affordability issues depends on injecting more housing stock into the market. This year to date there have been 9,947 single-family home sales, around the 10-year average. The 20,507 condo sales this year to date is well about the 10-year average of about 15,000. 

On a per-square-foot basis, the average condo sold in August for $1,143 per sq. ft. and was 936 sq. ft. in size. Condo inventory increased in August to 9,967 units and the number of single-family homes under construction, in the pre-construction phase or built but not yet occupied, shrank to 1,354 units, down 244 units since July.

“It’s taken decades to get into this problem,” Wilkes said of the supply issues. “It’s going to take years to get out of it. I think we have the political and market will to correct this challenge.”

Source: The Star

There Has Never Been More Housing Construction in Canada – but the City That Needs It Most is Missing the Boom

Canada is in the midst of a record housing construction boom, but Toronto is notably absent from this surge, according to the Royal Bank of Canada. A report by the Royal Bank of Canada found that housing starts over the past 12 months were at their strongest since 1977 and the number of new housing units currently under construction is at an all-time high.

In the past year, as many as 260,500 housing units began construction with their foundations poured, defining the housing start. The report added that this is a building boost of about 26% compared to the average pace set in 2015 to 2019. The last time construction activity was buzzing this much was in the mid 1970s.

There have also never been so many housing units under construction, with nearly 320,000 in progress. Robert Hogue, senior economist at RBC and author of the report, expects that housing completions should accelerate over the next year.

“This is by far the highest number, and a 12% (or more than 30,000-unit) increase from the end of 2019. About three-quarters of the total are apartments (mostly condos but also rental),” Hogue noted. While any number of scenarios could blunt the escalation of home completions, analysts at RBC believe as many as 240,000 units could be completed nationwide in 2022.

Smaller markets, such as rural and smaller urban areas, are the first to see the pick-up in pace. This is largely due to the types of homes being constructed in these areas, which were ground-oriented, single-detached homes that have a quicker turnaround time than the larger multi-unit towers that are more common in large metropolitan areas. The housing frenzy throughout the pandemic underscored the widening gap between supply and demand.

Toronto did not contribute to the supply construction surge, seeing its housing starts rise by only 1.4% (or 500 units) compared to the 2015 to 2019 average. The report points the finger at Ontario’s Fair Housing Plan in 2017 which preceded a steep drop in pre-construction condo sales between 2018 and 2019. The boost in issued building permits may have the market turning the corner on this slump, but without a meaningful growth in unit development, there will be fewer housing options for renters and buyers.

While the ramp-up in construction was more elevated in places like Vancouver (10.3%), Calgary (7.2%), and Edmonton (4.1%) in the same timeframe, their rates still fall below the national average of 26%.

Despite the home construction boom, there are still many challenges to building a move-in ready home, particularly in this climate. Rising construction costs for materials like lumber are only climbing further, making these projects expensive and leaving the completed product less affordable for Canadians. The projects are also taking longer to finish, with the average timeline for housing completions more than doubling during the past two decades from nine to 21 months. Finally, the choppy supply chain is making it more difficult to reliably access the materials needed for these projects, lengthening and elevating the prices for an already time-consuming and expensive process. 

Strong immigration with growing targets every year and an increasing need for more housing options for younger Canadians means that the stakes are high to build more units and build the right type of housing. The report suggested that given the high costs of home construction that will demand higher prices once they hit the market, it is unlikely that the types of homes built will fill the gap for Canadians with a modest income.

Source: Financial Post