Toronto, Vancouver, Calgary and Montreal Housing Markets Close Out Pandemic’s Second Year With Record High Sales and Prices


Toronto Home Sales Lead to Record 2021 Despite Weaker December

A resurgence in demand for Toronto homes contributed to record residential real estate sales and prices in 2021 despite a dip in December. The Toronto Regional Real Estate Board said that a record 121,712 homes were sold through its MLS system in 2021, up 28% compared with 2020 and 7.7% above the previous 2016 high of 113,040.

The average selling price set a peak of $1.095 million, up 17.8% from the high the prior year of $929,636 as new listings didn’t keep pace with sales. “Despite continuing waves of COVID-19, demand for ownership housing sustained a record pace in 2021,” stated TRREB president Kevin Crigger. He said job creation and extremely low borrowing costs contributed to the sales growth. “These factors supported not only a continuation in demand for ground-oriented homes, but also a resurgence in the condo segment as well.” 

Sales in December decreased 15.7% to 6,031 from the record of 7,154 set in December 2020. Average selling prices increased 24.2% to $1.16 million as new listings decreased 11.9% to 5,174.

Source: The Star

Real Estate Board Says Metro Vancouver Home Sales Hit Record in 2021

Home sales in Metro Vancouver hit an all-time high in 2021 spurred by changing housing needs during the pandemic, the Real Estate Board of Greater Vancouver says. The board says sales in 2021 rose 42.2% to 43,999 compared with 30,944 in 2020. The previous record was set in 2015 with 42,326 home sales.

Keith Stewart, the board’s economist, says in a news release that Metro Vancouver residents have been assessing their housing needs and options in record numbers in the last few years. “Home has been a focus for residents throughout the pandemic.”

The record year came as home sales in the region in December totalled 2,688, down from 3,093 sales in December 2020, while 3,428 homes sold in November 2021. “While steady, home listing activity didn’t keep pace with the record demand we saw throughout 2021. This imbalance caused residential home prices to rise over the past 12 months,” Stewart says. The benchmark price for all residential properties in the board’s coverage area increased 17.3% from 2020 to $1.23 million.

The total number of homes listed for sale on the Multiple Listing Service to start 2022 is 5,236, the lowest level seen in almost 30 years, Stewart says. “With demand at record levels, residents shouldn’t expect home price growth to relent until there’s a more adequate supply of housing available to purchase.”

Sales of detached homes in December 2021 totalled 794, down from 1,026 sales in December 2020. Attached home sales fell to 430 in December compared with 593 a year earlier and apartment home sales dipped to 1,464 in December, from 1,474 a year earlier. Areas covered by the board include Vancouver, Burnaby, Coquitlam, Maple Ridge, New Westminster, North Vancouver, Pitt Meadows, Port Coquitlam, Port Moody, Richmond, South Delta, Squamish, the Sunshine Coast, West Vancouver and Whistler.

Source: The Star

Calgary Home Sales Up 45% in December, Year Ends With Record Sales

The Calgary Real Estate Board says December sales climbed by nearly 45% year-over-year as 2021 ended with a record number of homes changing hands. The Albertan board says Calgary saw 1,737 homes sold in December 2021, up from 1,199 during December 2020.

December’s home sales brought the year-end total to 27,686, nearly 72% higher than 2020 and more than 44% higher than the 10-year average. The average home price increased by 10% in December to reach $477,977, while the average price across 2021 was $492,704. While new listings for December sat at 1,230, up almost 5% from December 2020.

CREB’s chief economist Ann-Marie Lurie say the figures indicate that the market is beginning 2022 with some of the tightest conditions seen in more than a decade. “Concerns over inflation and rising lending rates likely created more urgency with buyers over the past few months,” she said, in a release. “However, as is the case in many other cities, the supply has not kept pace with the demand causing strong price growth.”

Source: The Star

Montreal Residential Real Estate Market Sees Second-Busiest December on Record

Montreal’s residential real estate market saw its second most active December on record in 2021. The Quebec Professional Association of Real Estate Brokers (QPAREB) says according to its Centris provincial database, 3,675 homes were sold in the Montreal metropolitan area in December. That’s a 19 per cent drop from the same period in 2020, which was an all-time record year. But December 2021 was still strong in historical terms, ranking second overall for sales for that month despite the lowest number of listings ever recorded in the area.

The median selling price for a single family home in Montreal in December was $525,000, up 22 per cent from the same period in 2020. A typical condominium sold for a median $379,950, up 17 per cent from December 2020.

“Buyers are trying to take advantage of very low mortgage rates before the announced increases take effect in 2022,“ said Charles Brant, director of market analysis for QPAREB, in a news release. ”Consequently, the ongoing marked market imbalance in favour of sellers continues to result in a sharp rise in prices on the outskirts of the Island of Montreal.“

Source: The Star

Canada’s Next Wave of Immigration Set to Add More Fuel to Overheated Housing Market

The federal government has increased its annual immigration targets to the highest levels on record, creating the conditions for a surge of new permanent residents, which Canada needs to fill job vacancies. These new immigrants will add to the country’s population and immediately boost the need for housing in major job centres and nearby cities. This will ramp up competition for homes at a time when national real estate prices have jumped 40% in the past two years.

“Canada’s strong population growth is a factor driving our home prices upward at a faster pace than in many other economies,” said Bank of Montreal chief economist Douglas Porter, who analyzed the relationship between population growth and home prices in 18 developed countries. He found that countries with faster population growth have had greater home price inflation than those whose populations have remained stable, or decreased.

One reason immigration may be pushing up Canadian home prices is that Canada’s policies cater to newcomers with wealth and job skills. Many new permanent residents arrive with hefty bank accounts, or with enough professional expertise to make money quickly. And, like anyone else with means, they buy real estate.

New research from Statistics Canada suggests that in many cases it’s pre-existing wealth, not Canadian income, that is behind pricey real estate purchases by immigrants. For example, in Richmond, B.C., a typical immigrant buyer in the lowest wage quintile, with median annual income of just $11,100, spent a median of $763,000 on a home in 2018, according to data from Statscan’s Canadian Housing Statistics Program (CHSP). In contrast, a typical Canadian-born buyer in British Columbia in the lowest income quintile, with median annual income of $32,300, spent a median of $396,000 on a home in 2018, according to CHSP, which analyzed land registry information, property assessments and tax filings.

CHSP observed that in 2018 the majority of immigrant buyers across B.C. had moved to Canada prior to 2009 and had been admitted through the country’s various economic immigrant programs, which are designed to attract skilled workers and those with wealth. “If you are an economic immigrant and you don’t have other opportunities, real estate becomes one of the fastest wealth generators,” said Andy Yan, director of the city program at B.C.’s Simon Fraser University. “They are wealthy. But when they try finding a job, it goes south.”

Other factors that have contributed to high home prices in Canada include low mortgage rates, a flood of domestic investors looking for high investment returns, and millennials increasingly forming families and seeking properties. In the Toronto region, the country’s largest job centre, the average price of a home is above $1-million and many of the surrounding cities are nearing or above that price. That has pushed Canadians and newcomers out of Toronto and into smaller regions in Southern Ontario. Some have left the province altogether for more affordable areas such as Regina, Saskatoon, Winnipeg and Halifax.

Canada’s six largest metropolitan areas – Toronto, Vancouver, Montreal, Edmonton, Calgary and Ottawa – used to be the top destinations for immigrants. But that has been changing. In 2002, Canada’s largest cities took in 88% of the country’s immigrants and non-permanent residents. In 2019, the proportion was just 68%, according to Canada Mortgage and Housing Corp.

Over that same period, net international migration to those cities grew by 43%. But in the rest of Canada it soared by 370%, with particularly strong growth in Ontario locations such as Niagara, London, Kitchener-Waterloo and Cambridge.

Today, there is an acute shortage of housing in those smaller cities. In Kitchener-Waterloo, Cambridge, London and the Niagara-St. Catharines region, the typical price of a home is 60% higher than it was two years ago, according to the Canadian Real Estate Association home price index, which adjusts for higher-priced homes. The flow of new permanent residents will put even more pressure on those places. If prices continue to rise, the higher cost of living could discourage newcomers.

“We need the immigration for the labour market. But if we don’t get the immigration for the labour market because they can’t afford to live in the community, that’s a significant challenge,” St. Catharines Mayor Walter Sendzik said.

The federal immigration target for 2021 was 401,000 new permanent residents. The goal for 2022 is 411,000. For 2023, it’s 421,000. By comparison, the number of new permanent residents admitted to the country in 2019 was 341,180.

Anthony Passarelli, a CMHC senior analyst, said that if immigration reaches these record-high levels and Canada doesn’t respond by increasing its housing supply, the effects on the housing market could be noticeable. “We will likely go through a similar situation, where you see another price surge and the ripple effects of people getting priced out of the larger population centres and moving further out,” he added.

Asked whether Canada should slow the pace of immigration until the country has enough affordable housing, BMO’s Mr. Porter said: “I suspect policy will be little swayed by housing market concerns. Having said that, at the very least the impact on housing should be taken into consideration when determining immigration targets.”

Source: Globe and Mail

Building Permits, November 2021

The total value of building permits increased 6.8% to $11.2 billion in November. Seven provinces, led by Alberta (+20.6%) reported increases. Construction intentions in the residential sector rose 12.0% while the non-residential sector declined 3.4%. On a constant dollar basis (2012=100) building permits increased 6.3% to $7.6 billion.

Residential sector up for a third consecutive month

Construction intentions for the residential sector increased 12.0% to $7.8 billion at the national level, reaching the highest level since the record set in March 2021. Growth in the sector was driven mostly by British Columbia (+31.7%).

The total value of multi-family permits bounced back 20.2% after the previous month’s 8.5% decline. A $256 million permit for the Plaza One residential tower in Surrey pushed British Columbia 53.9% higher for the month.

Permits for single family homes rose 3.3%, reflecting strength in Ontario (+4.2%) and Quebec (+8.3%). In Nova Scotia, the value of single-family permits rose 35.9% to a record value of $118 million in November.

Institutional component weighs down non-residential sector

The value of institutional permits fell 49.2% in November to $613 million, reversing October’s strong growth. This was the lowest level for institutional permits since April 2020.

Construction intentions in the commercial component rose by 14.3%. Alberta (+140.2%) led the growth, with a $316 million permit approved for the BMO convention centre expansion in Calgary.

Industrial permits rose 45.1% in November following a strong downturn in October. Much of the growth was from Ontario (+98.0%), where permits reached their highest level since August 2019.

Despite notable growth in the commercial and industrial components, the non-residential sector declined 3.4% overall in November.

Source: Statistics Canada

Housing Markets in Canada Continue to Defy Gravity and the Pandemic

Housing sales in Canada for 2021 surpassed the total sales registered in 2020, once again proving forecasts of a housing bust to be grossly overstated, if not outright wrong. Some 630,634 residential properties had already transacted by the end of November, topping the previous record of 552,423 sales in 2020, according to Canadian Real Estate Association (CREA) data.

An increase in prices accompanied the increase in sales. CREA’s quality- and size-adjusted house price index reported a year-over-year increase of 25.3% in November. Prices grew at a much faster rate in smaller towns near populous urban centres. For example, the housing price index in Greater Vancouver increased 16% year-over-year, while prices in Fraser Valley were up 30.3%.

At the onset of the pandemic in 2020, many housing market forecasts painted doom and gloom by projecting sales and prices to decline. But the reverse has happened, and record high sales and prices are a familiar fixture of most regional housing markets.

To forecast the future, one must first predict the past or, at the very least, determine why the gloomy housing market forecasts have proven to be so drastically wrong. Some explanations are readily apparent. First, governments globally decided not to let the pandemic kill the economy and responded with unprecedented stimuli, collectively injecting trillions of dollars into the economy. Canada was no exception. Income support programs and mortgage and rent relief during the early stages of the pandemic buttressed the residential real estate sector.

Ultra-low mortgage rates also made monthly mortgage payments very affordable even as housing prices climbed. As a result, new homebuyers rushed in, and existing homeowners traded up.

Intelligent forecasters would have correctly anticipated the impact of quantitative easing and lower interest rates on housing markets. Indeed, some market observers were quick to warn such moves would put the Canadian housing market on steroids. What others missed is how the pandemic altered the valuation models for housing — a hitherto poorly understood phenomenon.

COVID-19 drastically increased the demand for homeownership and, as a result, working from home increased the intrinsic value of housing. Housing is now an extension of one’s workplace, the last step on the last mile of online retailing, the rendezvous for one’s leisure and, intermittently, the classroom for one’s children. Simply put, housing means much more now than it did before, so prices merely reflect the greater significance of dwellings in pandemic-infected markets.

Therefore, higher sales and prices are essentially an outcome of the imbalance in the demand and supply of housing. In November, the sales-to-new listings (SNL) ratio was 77%. Although that was slightly lower than the 79% recorded in October, suggesting a slight decline in demand relative to supply, it was still much higher than the long-term average of 54.9%.

What to expect in 2022? First, let’s look at the market fundamentals. Many would-be buyers who failed to outbid others in 2021 will re-enter the market next year. Moreover, the demand for housing will get an additional boost as immigration flows are expected to resume and the economy shows more profound signs of recovery.

Interest rates are expected to rise, but their impact on housing prices is likely to be modest. Short of a significant policy change resulting in tighter lending standards, the likely scenario for 2022 is an increase in housing prices, with demand continuing to outpace the supply. Royal LePage has already projected housing prices “to rise strongly again in 2022, however at a slower pace compared to 2021.”

During a health and economic crisis, the strength and resilience of Canadian housing markets should have been a welcome sign. However, the disconnect between incomes and housing prices has been a source of great resentment for thousands of families. The counterfactual scenario of falling housing prices and sales during the pandemic could have posed even greater hardship on Canadians, most of whom are homeowners, and housing is their largest investment and the preferred channel for savings.

Improving homeownership prospects for low- and mid-income households should be the goal for future government interventions. This, however, should not require a drastic drop in housing prices that would leave most Canadians worse off.

Source: Financial Post

Five Market Predictions in the Wake of the Hottest Year in Canadian Real Estate

In a new report, online realtor Zoocasa makes five market predictions after an extraordinary year that will be remembered for record-breaking sales and price gains of over 20%.

1) Low housing supply is not a quick fix

Low inventory of homes for sale proved a major driver of prices in 2021. Zoocasa said the Canadian Real Estate Association cites only four times in history when the national total months of inventory on the market dropped below two months, and they were all in 2021.

When there were quieter months in the market in 2021 it was not because of waning demand but because there were fewer homes for sale. “Put simply, we are seeing record-breaking low levels of inventory, where there are significantly more buyers in the market than there are properties to buy,” said Zoocasa CEO Lauren Haw. “Supply will be a critical metric to watch heading into the new year – especially knowing that we may see a hotter January and February than usual, as buyers look to lock in a mortgage rate before next year’s anticipated increases.”

Nor do housing experts expect this to change anytime soon. “The 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,” said Shaun Cathcart, CREA’s senior economist.

2) Mortgage rate hikes may not be so bad this time

Interest rate hikes, signalled by the Bank of Canada to come in mid-2022, are on the minds of home buyers and home owners alike. But how bad will it be?

To find out Zoocasa looked back to the last time Bank of Canada rates rose in 2018. That year there were three hikes and real estate activity did slow, with prices falling 4.9% year over year and sales down 19%. But housing experts say the decline was mostly brought on that year by the introduction of the stress test, which cut affordability for the average home buyers by 20%, said Zoocasa.

“Although the last time interest rates rose we saw sales activity cool down, it’s important to remember that this change went hand in hand with the implementation of the mortgage stress test, which dramatically impacted the amount that prospective buyers could qualify for,” said Haw. “And, because Canadians have been stress tested to qualify for their mortgages at rates upwards of 5%, we have been prepared as best as possible to weather an increase in rates.” Under current stress test rules, fixed mortgage rates would have to rise to 3.25% for the amount buyers are qualifying for to change, she said.

3) Home prices will keep going up

The race to beat mortgage rate hikes, continuing COVID restrictions and the low supply of homes on the market are expected to keep driving prices higher in 2022. CREA predicts national prices will rise 7.6% by the end of the year. Realtors’ forecasts aim higher, with RE/MAX predicting a 9.2% increase and Royal LePage, 10.5%.

Zoocasa said, judging by the 2018 experience, it will be the more affordable homes, like condos and townhouses, that will see the most price growth, as interest rates rise. In 2018, the prices for condo townhomes and apartments in Toronto rose by 9% and 10% respectively while detached home prices decreased by 4% year over year. Royal LePage also predicts that in 2022 condo prices will lead growth in Toronto with a 12% rise.

4) Virtual home hunting is here to stay

Even after COVID-19 restrictions eased in the second half of 2021 and open houses resumed, virtual home hunting has remained popular, said Zoocasa. With access to online tours and able to browse listings on real estate apps, buyers “aren’t necessarily in a rush to go back to the old way of buying houses.”

5) Housing will be an election issue — again

Housing affordability was a big issue in 2021’s Federal election, but Ontario voters can expect to hear more promises in provincial and municipal elections slated for 2022. Voters might want to pay attention because much of the policy that actually affects housing, such as planning and zoning laws, is managed at provincial or municipal levels.

Source: Financial Post