CMHC Reports Annual Pace of Housing Starts in November Climbs to 301,279
Canada Mortgage and Housing Corp. says the annual pace of housing starts in November rose 26% compared with October as starts of apartments, condos and other types of multiple-unit housing projects climbed higher. The national housing agency says the seasonally adjusted annual rate of housing starts was 301,279 in November, up from 238,366 in October.
The increase came as the annual pace of urban starts rose 29% in November to 279,396 as multiple urban starts gained 41% to come in at 221,153 units. The annual rate of single-detached urban starts fell one per cent to 58,243. CMHC estimated rural starts at a seasonally adjusted annual rate of 21,883 units.
The six-month moving average of the monthly seasonally adjusted annual rates of housing starts was 267,365 in November, up from 264,583 in October. “The six-month trend in housing starts was higher from October to November, with total starts rebounding from their declines in prior months,” said Bob Dugan, CMHC’s chief economist. “On a trend and monthly SAAR basis, the level of housing starts activity in Canada remains high in historical terms. Among Vancouver, Toronto and Montreal, Vancouver was the only negative market, while Toronto had a significant gain in total SAAR starts in November, due to the multi-family segment more than doubling from the prior month.”
Canadian Housing Heating Up Again Heading Into 2022 (November Home Resales)
Statistics released on December 15 by the Canadian Real Estate Association (CREA) show national home sales edged up slightly in November, holding onto all of the gains made in October. Highlights:
- National home sales rose 0.6% on a month-over-month basis in November.
- Across the country, sales gains in Calgary, Edmonton, the B.C. interior, Regina and Saskatoon offset declines in activity in the GTA and Montreal.
- Actual (not seasonally adjusted) monthly activity edged down just 0.7% on a year-over-year basis.
- The number of newly listed properties climbed by 3.3% from October to November.
- The MLS® Home Price Index (MLS® HPI) rose 2.7% month-over-month and was up a record 25.3% year-over-year.
- The actual (not seasonally adjusted) national average sale price posted a 19.6% year-over-year gain in November.
On a year-to-date basis, some 630,634 residential properties have traded hands via Canadian MLS® Systems between January and November 2021, far surpassing the annual record 552,423 sales for all of 2020.
“November provided another month of evidence that the housing supply/demand issues facing the country have not gone away,” said Cliff Stevenson, Chair of CREA. “Even at what is traditionally the slow time of year for housing, conditions and price trends are at the same record levels we saw this spring. Things may calm down a bit through the balance of December and January, but next year’s spring market will no doubt be an interesting one,” continued Stevenson.
Shaun Cathcart, CREA’s senior economist said, “[t]e fact is that the supply issues we faced going into 2020, which became much worse heading into 2021, are even tighter as we move into 2022. Interest rate hikes will make it even harder for new entrants to break into the market next year, even though activity may remain robust as existing owners continue to move around in response to all of the changes to our lives since COVID showed up on the scene. As such, the issue of inequality in the housing space will remain top of mind. One wildcard will be what policymakers decide to do with the national mortgage stress test, which could act as a kind of cushion against rising rates for young and/or first-time buyers. It could also make things that much harder for them.”
The number of newly listed homes rose by 3.3% in November compared to October, driven by gains in a little over half of local markets, including the GTA, Lower Mainland, Montreal, and many markets in Ontario’s Greater Golden Horseshoe. With new listings up by more than sales in November, the sales-to-new listings ratio eased a bit to 77% compared to 79.1% in October. The long-term average for the national sales-to-new listings ratio is 54.9%.
About two-thirds of local markets were seller’s markets based on the sales-to-new listings ratio being more than one standard deviation above its long-term mean. The other one-third of local markets were in balanced market territory.
There were just 1.8 months of inventory on a national basis at the end of November 2021, tied with March 2021 for the lowest level ever recorded. The long-term average for this measure is more than 5 months.
In line with some of the tightest market conditions ever recorded, the Aggregate Composite MLS® Home Price Index (MLS® HPI) was up another 2.7% on a month-over-month basis in November 2021. The non-seasonally adjusted Aggregate Composite MLS® HPI was up by a record 25.3% on a year-over-year basis in November.
Year-over-year price growth across the country;
- Nearly 25% in B.C., though it remains lower in Vancouver, on par with the provincial number in Victoria, and higher in other parts of the province.
- Mid-to-high single digits in Alberta and Saskatchewan, while gains have risen to about 13% in Manitoba.
- Ontario growth hit 30% in November with the GTA continuing to surge ahead.
- Greater Montreal remains at a little over 20%, while Quebec City was only about half that.
- New Brunswick is running above 30% (higher in Greater Moncton, lower in Fredericton and Saint John).
- Newfoundland and Labrador is now at 10% year-over-year (lower in St. John’s).
The MLS® HPI provides the best way to gauge price trends because averages are strongly distorted by changes in the mix of sales activity from one month to the next.
The actual (not seasonally adjusted) national average home price was $720,850 in November 2021, up 19.6% from the same month last year. The national average price is heavily influenced by sales in Greater Vancouver and the GTA, two of Canada’s most active and expensive housing markets. Excluding these two markets from the calculation in November 2021 cuts $158,000 from the national average price.
Canadian Housing Sales to Moderate in 2022, but Prices to Remain High (CREA Updates Housing Market Forecast)
The Canadian Real Estate Association says housing sales will moderate in 2022, but prices aren’t expected to ease any time soon. The association said in its 2022 forecast released on December 15 that it expects tightening supply conditions to push housing costs even higher in 2022.
CREA’s forecast indicates that the heated conditions that have plagued the country for years and been exacerbated by the COVID-19 pandemic won’t fully subside soon. While interest and mortgage rates are expected to rise and temper some market activity, the forecast suggests appetite for home ownership will still be strong and the lack of properties available will mean people won’t get much of a break on costs.
In November alone, the MLS Home Price Index rose 2.7% month-over-month and was up a record 25.3% year-over-year. CREA has projected that the national average home price will have risen by 21.2% on an annual basis to $687,500 by the end of 2021. This is higher than its previous forecasts and CREA said it reflects the unprecedented imbalance of housing supply and demand, which has left the country with about two months of inventory instead of it’s typical five months.
With supply continuing to hit “fresh lows” every day, CREA predicted the national average home price will rise by 7.6% on an annual basis to around $739,500 in 2022. It warned that the forecast is “conservative” because in November 2021, the national average price was almost $721,000.
CREA said the highest prices will be seen in B.C. and Ontario, where it forecasts average home prices to reach $990,038 and $971,080 respectively. The lowest will come in New Brunswick and Newfoundland where average prices are predicted to hit $275,190 and $286,341 respectively.
CREA expects sales to remain “historically strong” but ease more toward typical levels as they fall in every market but New Brunswick. “Limited supply, higher prices and higher interest rates are expected to tap the brakes on activity in 2022 compared to 2021, although, increased churn in resale markets resulting from the COVID-19-related shakeup is expected to continue to boost activity above what was normal before COVID-19,” CREA said in its forecast.
CREA predicted national home sales will fall by 8.6% in 2022 to around 610,700, making it the second highest year on record for sales. “This easing trend is expected to play out across most of the country with buyers facing both supply and affordability constraints, while at the same time, the urgency to purchase a home base to ride out the pandemic continues to fade.”
CREA’s predictions came as the organization released its November sales figures. BMO Capital Markets senior economist Robert Kavcic interpreted the figures as signs of a “market that is feasting on low interest rates and reinforcing itself with expectations of price gains.”
He feels the next test for the housing industry will be rising interest rates and 100 basis points of tightening he expects from the Bank of Canada next year. “Is that enough to seriously cool the market?” Kavcic said, in a note to investors. “It will certainly be a dampener, but the job market is very strong, wage growth is picking up and, after adjusting for inflation or house-price growth expectations (which have been allowed to harden), those mortgage rates would still remain negative in real terms.”
Canada’s Red-Hot Housing Market to Lose Steam in 2022, but Affordability Will Only Worsen
Canada’s double-digit house price inflation will lose steam in 2022, but affordability is still almost certain to worsen in one of the world’s hottest property markets, according to a Reuters poll of analysts. A rush to purchase homes ahead of expected increases in Canadian interest rates in 2022 is boosting the housing market in the final quarter of 2021, with prices skyrocketing 18.2% in October compared to the year-earlier period.
Extra froth in the market, driven by investors fuelling perceptions that prices will keep rising, has prompted the Bank of Canada to recently warn of an increased risk of a correction.
“Affordability is unlikely to improve next year as prices should march higher, even as interest rates creep upwards as well,” said Rishi Sondhi, economist at TD Economics, who expects house price inflation to slow considerably next year. “We think rate hikes will weigh on, but not upend, demand, as the macro backdrop should remain supportive for sales.”
Average house prices in Canada are expected to rise 18.6% this year, up from a 16.0% rise predicted in an August poll. But those increases were forecast to slow significantly, to 5.0% in 2022 and 2.0% in 2023, according to the poll of 15 market analysts which was conducted from Nov. 17 to Dec. 6 and released on December 7. That compared to rises of 3.2% and 2.6%, respectively, in the August poll. Only two respondents expected prices to fall in 2023, and by modest amounts.
Asked what would have the biggest impact on house prices in 2022, nine of 14 respondents said higher interest rates or tighter monetary policy. The remaining five cited supply constraints. A follow-up question on how many basis points of interest rate hikes would significantly slow housing market activity had a median forecast of 100, with predictions in a range of 75 to 175 basis points.
Canada’s central bank is expected to start raising interest rates by the end of the third quarter 2022. “One or two rate increases is unlikely to have a meaningful impact, but if we see four or more rate increases in 2022, this should take some demand out of the market, especially from interest rate-sensitive investors,” said John Pasalis, president of brokerage and research firm Realosophy Realty.
For many first-time home buyers, prices have climbed beyond their reach and a supply shortage of housing units has only aggravated their woes. “Investors, house ‘flippers,’ and speculators, who according to the Bank of Canada account for over 20% of home purchases, have aggravated the severe demand-supply imbalance, boosted prices even higher and made housing more vulnerable to a correction,” said Tony Stillo, director of economics for Canada at Oxford Economics.
All 15 analysts who answered a question about affordability over the next two to three years said it would worsen. “Out-of-reach housing prices will invariably lead more Canadians to rentals, especially if they have to live close to where they work. However, people who can work remotely will continue to migrate out of more expensive urban centres and ‘drive until they qualify,’” Stillo said.
Montreal Real Estate Prices Soar 21% Amid Lower Listings in November
The Quebec Professional Association of Real Estate Brokers says November home sales and new listings fell in Montreal as prices soared by more than 20% compared with a year ago. The association says sales for the month totalled 4,402, a 17% drop from 5,296 in November 2020. New listings amounted to 5,056, down 14% from 5,848 November 2020.
The median price of a single-family soared by 21% compared with a year ago to reach $525,000, while condos went up by 18% to hit $374,000 and plexes with two to five units had a 15% spike pushing them to $725,000. Apart from condominiums, which saw a slight decline, the association says the median prices were also up from October 2021.
Charles Brant, the association’s director of market analysis, says he noticed a lack of supply and persistently high demand in November that placed pressure on prices and encouraged potential sellers to get into the market. “The announcement of an earlier-than-expected rise in interest rates no doubt motivated potential sellers to advance their project in order to benefit from the sustained activity and the opportunity to sell at the best price,“ he said in a statement.
Source: The Star