Building Permits, December 2021

The total value of building permits decreased 1.9% to $11.2 billion in December. Declines were reported in both the residential and non-residential sectors. On a constant dollar basis (2012=100) the total value of building permits decreased 3.1%.

Residential sector pulls back slightly following strong month

The total value of residential permits decreased 2.7% to $7.7 billion following a strong November (+13.3%). Multi-family permit values declined 6.0% to $4.1 billion, with British Columbia (-20.3%) responsible for most of the national decline, reversing November’s gain.

Construction intentions for single family homes were up 1.3% to $3.6 billion, led by Quebec (+14.6%). This was the third consecutive monthly increase for this component at the national level.

Institutional and industrial gains cancelled out by commercial component

The total value of commercial permits fell 7.9% to $1.9 billion in December. Most of the decline came from Alberta’s 55.6% drop, reflecting the BMO Centre permit issued the previous month.

Construction intentions in the industrial sector rose 8.4% to $762 million. A $46 million aluminium mining building renovation permit in Quebec (+49.9%) contributed notably to the component.

The value of institutional building permits increased 17.2% to $720 million. Eight provinces reported increases, led by British Columbia.

Overall, the total value of non-residential permits remained unchanged at $3.4 billion as movements within the various components cancelled each other out.

Fourth quarter of 2021 hits new heights

The total value of building permits in the fourth quarter of 2021 jumped 10.3% to a new high of $33.1 billion. This surpassed the previous record of $31.5 billion set in the first quarter of 2021.

The residential sector increased sharply by 11.9% to a record $22.7 billion, contributing almost four-fifths of the overall total building permit value increase. Both permit values for multi-family and single family components rose strongly compared with the third quarter, with the multi-family component exceeding $12 billion for the first time.

The non-residential sector rose 7.0% to $10.4 billion in the fourth quarter, 2.3% below the pre-pandemic peak set in the fourth quarter of 2019. Commercial permits were up 9.9% to $5.9 billion, while institutional and industrial permits rose 3.1% and 4.0%, respectively.

Annual review of 2021: a hot residential market

The total value of building permits surged 25.6% to $126.5 billion in 2021, the strongest annual growth ever recorded. However, material price and labour cost increases in the construction industry accounted for almost two-thirds of the increase. On a constant dollar basis (2012=100) the total value of building permits still increased by a robust 9.3% to $88.5 billion.

Construction intentions in the residential sector in 2021 were up 29.9%, reaching a record $87.2 billion. Single family permit values jumped 41.5% to $40.7 billion, representing 81,000 new units—the most since 2013. Canadians showed interest in moving away from larger city centres over the course of 2021, with smaller census metropolitan areas (CMAs) such as Peterborough (+134.1%), Barrie (+107.5%), Oshawa (+79.0%) and Kelowna (+75.8%) reporting large gains in construction intentions.

Multi-family permit values also hit a record high for the year, rising 21.1% to $46.5 billion. Similar to the trends in single family construction, the multi-family component also saw faster growth in smaller CMAs such as Kelowna (+175.1%), Lethbridge (+159.0%), Saguenay (+145.1%) and Trois-Rivières (+120.3%).

The non-residential sector in 2021 was up 17.1% to $39.6 billion, continuing its recovery to 2019 levels. Only the institutional component exceeded pre-pandemic levels, while the commercial and industrial components were both roughly 8% below 2019 totals.

Source: Statistics Canada

Latest Toronto-Vancouver-Calgary Home Sales Information

Toronto home sales fell 18% in January While Average Home Price Hits Record $1.3-Million but Expected to Slow

Greater Toronto Area home sales tumbled as fewer properties were listed and market conditions tightened in January, weighing on the regional real estate board’s sales forecasts for the year, but not dampening its price predictions. The Toronto Regional Real Estate Board said that 5,636 homes were sold In January in the area, an 18% drop from 6,888 January 2021.

New listings fell by more than 15% to 7,979 in January from 9,438 during January 2021, while active listings took an even bigger hit, plummeting 44% to 4,140 in January 2022 from 7,396 a year earlier. “There’s buyers out there. They’re just having a hard time getting the deal done,” TRREB’s chief market analyst Jason Mercer told a news conference. “Homes aren’t necessarily even there for them to look at and continue making an offer on…You have got to have the inventory there for people to purchase at the same time.”

TRREB believes the slower pace of sales and fewer homes to buy will likely see 110,000 properties change hands in 2022 compared with 121,693 in 2021. Some of that decrease will be triggered by an expected drop in first-time buyers, prompted in part by interest and lending rates that are poised to rise in the coming months.

Ipsos consumer polling TRREB found fewer people in the suburban 905 area code surrounding Toronto will wade into the market for the first time this year, though its research also uncovered that first-time purchases could actually increase over 2021 in the 416 area.

Mercer expects a divergence in first-time home buying intentions between the 905 and 416 because of the types of homes each area supports. “A first-time homebuyer can only buy homes that are available at the price they can afford…and that means a condo because that’s more affordable than a row home than a single-detached home,” he said. “Where are those (condos)? They’re in Toronto.”

TRREB and Ipsos’ data showed in Toronto there is a higher share of intending buyers — first time and otherwise — focused on condos and high density, lower rise home types. The board expects detached houses to remain most popular with intending buyers, especially in suburban areas.

Those on the hunt for a home this year will notice the share of existing homeowners very likely to list their home for sale in 2022 will be down across the GTA, TRREB also said. It attributed the unwillingness to sell to a “vicious cycle,” where homeowners will decide not to list because they fear they will not be able to find another home that meets their needs.

Those that list will find they can fetch more for their sale. Prices will creep up to an average $1.2 million for the full year, a jump from an average of almost $1.1 million in 2021, TRREB predicted. 

Toronto’s average home price set another record in January, nearing $1.3-million, a roughly 29% increase from $966,068 in January 2021, and the sharpest monthly price increase since the region’s previous real estate boom in 2017. But the local real estate board expects price growth to slow this year as the Bank of Canada gets set to hike interest rates and raise the cost of borrowing. January’s seasonally adjusted price of $1,290,297 was 7% higher than in December, the biggest monthly jump since the 8% gain of February, 2017.

Ipsos also found immigrants willing to pay even more than other buyers in some segments of the market and is forecasting that they will have even greater home buying intentions than domestic purchasers. It said immigrants were willing to pay about $100,000 more on average for a home, but noted that many of these buyers might not hold that property for long as they will likely move up to a bigger home in a few years.

Source: Globe and Mail
Source: The Star

Vancouver Home Sales Slowed in January From Record-Setting Pace Last Year

The Real Estate Board of Greater Vancouver says January 2022 home sales slowed from a record-setting pace in 2021 as the number of properties available dropped. The B.C. board says home sales totalled 2,285 in January, an almost 5% decrease from 2,389 in January, 2021, and a 15% fall from 2,688 in December, 2021. However, the board says sales were 25.3% above the 10-year January average.

The board also recorded 4,170 new listings in January, down almost 7% from 4,480 homes in January 2021, but more than double December, 2021, when 1,945 homes were listed.

The benchmark price for all residential properties in the region reached more than $1.2-million in January, up 18.5% from January 2021 and 2% from December 2021.

The board’s economist Keith Stewart says conditions in the market remain tight because there is a lack of supply and a lot of people taking advantage of low interest rates. “Our listing inventory on MLS is less than half of what would be optimal to begin the year. As a result, hopeful homebuyers have limited choice in the market today,” he said, in a statement. “This trend is causing fierce competition for a scarce number of homes for sale, which, in turn, increases prices.”

Source: Globe and Mail
Source: The Star

Calgary Housing Market Heats Up as Homebuyers From Ontario and BC Help Fuel Growth

The Calgary Real Estate Board says housing inventory sank to its lowest level since 2006 last month as tight market conditions continued. The Alberta board says the number of homes for sale in the region for the month fell more than 35% to 2,620 homes compared with 4,038 a year earlier.

Sales for the month totalled 2,009, a 66% increase from 1,207 during January 2021. New listings climbed by about 10% to increase to 2,476 last month from 2,250 the January before.

The average price was $510,701 in January 2022, up about 8% from $472,020 at the same time last year. CREB’s chief economist Ann-Marie Lurie attributed the increased prices and sales to people rushing to purchase homes now before interest and lending rates rise in the coming months. “We did see more listings this month, but it did little to change the market balance or take any pressure off prices,“ Lurie said, in a release. “This was expected, as these conditions should persist for several more months.”

Realtors based in Calgary told the Financial Post that demand in the market is being driven in part by buyers from Ontario and Vancouver, who have been flocking to the city in search of more affordable homes for their families or as investment properties. Jared Chamberlain, a realtor and the owner of Chamberlain Group, has been working in Calgary real estate since 2004 and said he’s seen many booms and busts, mostly tied to the energy sector. “This time, it’s not an oil boom, it’s just people moving here,” Chamberlain told the Financial Post. “I don’t ever recall seeing this quick an increase (in prices).”

There are two stories playing out in the Calgary market right now, according to Chamberlain: investors looking to grow their money in real estate at a lower price point, and families or young couples in Toronto and Vancouver who have been priced-out of their cities, but have a down payment ready for a Calgary home. “It seems like it’s a transfer of money from other places that have had increases to now Calgary,” Chamberlain said.

Inter-provincial migration data backs up his observations insofar as Ontario is concerned. That province has seen an outflow of migrants for most of 2021, while Alberta recently saw a multi-year exodus reverse course. In the third quarter in 2021, 22,013 migrants came to Alberta from other parts of Canada and only 17,524 left, for a net gain of 4,489 people, according to StatsCan data.

A report from RE/MAX at the end of 2021 showed that through the end of October 2021, Calgary house prices had risen 8% for the year, trailing some of the country’s hottest markets. But sale volumes at the time were 76% ahead of 2020’s pace, the largest increase in Canada.

That newfound momentum faces a challenge from the possibility that the Bank of Canada will hike its overnight rate in the coming months, but Chamberlain said he is not overly concerned. “I don’t think that’s going to stop these types of buyers and what’s happening right now,” Chamberlain said. “I think the biggest concern is just a lack of supply.”

Source: Financial Post
Source: The Star

Bank of Canada Inaction on Rates Adds More Heat to Housing Market

The Bank of Canada’s decision on January 26 to keep interest rates near zero at least until early March will continue to add fuel to the country’s overheated housing market, with competition remaining fierce for the few properties for sale. The central bank’s benchmark interest rate has been at 0.25% for nearly two years, allowing Canadians to amass large mortgages for buying real estate. Although the Bank of Canada said it “expects interest rates will need to increase,” the cost of borrowing will continue to be cheap over the near term.

“The housing market will remain highly competitive,” said Laura Martin, chief operating officer of mortgage brokerage Matrix Mortgage Global. “A small rate hike will not deter home buyers in general, particularly when the opportunity cost of waiting to buy could be much higher,” she said. Economists and mortgage experts say it would likely take several interest rate hikes to significantly slow demand for homes, and the central bank’s decision to hold rates steady for now means the start of that cycle has been delayed.

Since the COVID-19 pandemic started, home prices have appreciated at its fastest pace on record as home buyers looked for big properties in the suburbs and small cities. The typical price of a home across the country jumped 26.6% to $811,700 in December 2021 compared with a year earlier, according to the Canadian Real Estate Association’s home price index, which adjusts for pricing volatility.

Over the past two years, the price of a home in Canada is up 43%, with less populated cities shouldering steeper price gains than large ones. The typical price of a home is 70% more expensive in London, Cambridge, Barrie and Brantford in Ontario, according to CREA data. In more expensive cities such as Oakville, just west of Toronto, the home price index is up 57%, or $550,000 to $1,516,800, since December, 2019.

Douglas Porter, chief economist with Bank of Montreal, said the Bank of Canada’s no-rate-hike announcement may send an “all-clear” signal to the housing market just ahead of the start of the spring selling season, traditionally the busiest period to buy and sell real estate. This year started with record low number of houses for sale, making it more difficult for prospective buyers. Realtors say homes have been snapped up in January within days of being listed.

“Buyers have come back to the market with renewed energy and interest,” said Cailey Heaps, who has been selling homes in Toronto for more than two decades, and demand is unprecedented. This month, one of her clients’ houses received 46 showings in six days, drew five offers and sold $352,000 over the asking price at $3,647,000.

In its statement accompanying the rate decision, the central bank referred to the country’s housing market just once, saying the “elevated housing market activity continues to put upward pressure on house prices.” The bank’s next scheduled interest rate announcement is March 2.

Some economists have said a series of interest rate hikes is the only measure that will slow the rapid price increases. The most popular type of mortgage in Canada – the five-year fixed rate mortgage – is already slightly more expensive than in 2021. “As soon as rates rise, we’ll see five-year mortgage rates head higher, with the anticipation of additional rate hikes starting to slow the housing market,” said Katherine Judge, a senior economist with CIBC.

After the country’s real estate boom in 2016, policy makers took steps to slow housing resale activity. Ontario and B.C. imposed real estate taxes on foreign buyers. The federal Finance Department and Canada’s bank regulator, the Office of the Superintendent of Financial Institutions, made it harder to qualify for a mortgage from a bank. And the Bank of Canada hiked its benchmark interest rate five times in 2017 and 2018. Those policy moves contributed to weaker home price increases in 2018.

Source: Globe and Mail

Economists Expect Hot Spring Housing Market as Buyers Scramble to Get in Before Interest Rates Rise

The Bank of Canada’s decision to keep interest rates low on January 26 sets the stage for another hot spring real estate market as homebuyers jump in before rates are hiked later this year. After nearly two years of record-low interest rates, which helped Canadian home prices grow at their fastest clip on record, economists and mortgage experts are expecting a rate hike as soon as March that could finally slow the overheated housing market by raising the cost of borrowing.

In the meantime, homebuyers will likely be motivated to take advantage of low interest rates before it’s too late. Benjamin Tal, deputy chief economist at CIBC World Markets, expects the average number of home sales to increase 20% over the next few months, from approximately 50,000 monthly sales to 60,000. “We could see relatively strong activity in the spring until the market slows down in the second half of the year,” he said.

Already, realtors were expecting a hotter-than-usual spring market. According to Royal LePage, more than half of Canadian property markets — 61% — saw a quarterly increase of 3% or more in the final quarter of 2021, a time when the market is typically at its slowest pace. 

The average home price jumped 26.6% in December 2021 to $811,700 compared with a year earlier, according to the Canadian Real Estate Association. Homebuyers have shown surging interest in suburban homes and rural areas, pushing up prices in cities including Cambridge, Barrie and Burlington by double-digits.

“The spring market is hotter than I’ve ever seen it, and people are going to keep rushing into the market in the hopes they’re not the last buyer in before prices come down,” said Daniel Foch, a broker at Foch Family Real Estate. “Now it’s a race.”

The Bank of Canada’s decision to hold interest rates at 0.25% was accompanied by clear messaging that Canadians can expect rates to rise later this year as central bankers seek to cool inflation, which hit 4.8% in December 2021 compared with the previous year. Some economists expect the first rate hike to come in March, when the central bank hopes the Omicron variant of COVID-19 will have concluded its Canadian tour, followed by four to six subsequent hikes in the following 12 months. That would lead to an increase of more than 1% in the central bank rate, driving up the cost of mortgages.

With several rate hikes, the housing market could finally start to cool as homebuyers find it increasingly difficult to secure affordable mortgages, said Tal. “If the bank moves six times, it will generate activity in the market that won’t be positive. Sales will go down, some investors might exit the market,” he said.

Throughout the pandemic, many homebuyers have opted to keep monthly mortgage payments as low as possible by taking out variable-rate mortgages — loans that offer the lowest initial interest rates but automatically rise along with the central bank’s borrowing cost. So if the bank hikes rates significantly, homeowners will have significantly more to pay on their mortgages.

Until those hikes are announced, though, Canadians can expect real estate valuations to soar. “The early stages of this spring market are going to be extremely strong, we know that for sure,” said Robert Kavcic, an economist with BMO Capital Markets.

Source: The Star

Prices of Newly Built Houses in Toronto Soared Nearly 40% Last Year. Will They Go Higher?

The price of a new construction single-family home in the Toronto region soared 38.5% year-over-year in December 2021 to a record $1.8 million. The price growth capped a year in which builders saw the most new home sales since 2002 and inventory levels of single-family homes hit a new 12-year low of 776 by year’s end. The 46,651 new houses and condos sold in 2021 was 27% above the 10-year average, the Building Industry and Land Development Association (BILD) reported.

Condo sales far outstripped single-family home transactions. The 32,919 condo apartments sold last year was 40% above the 10-year average and only 125 units short of the 2017 record. The benchmark price of condos rose 13.5% year-over-year in December to $1.16 million.

Prices, particularly in the single-family home category of town house, semi-detached and detached housing, are a function of dwindling inventory, said Ed Jegg of Altus Group, which tracks sales and prices for BILD. Usually lower priced homes sell first, leaving the more expensive units on the market in the end, he said.

There are typically fewer developments launched at the end of the year but inventory of about 2.3 months (which refers to the time it would take to sell the current inventory at the current sales rate) was a record low for December. A balanced market would have nine to 12 months of supply. New home inventory includes pre-construction homes, those currently being built and those in completed buildings.

Jegg would not speculate on whether new home prices could cross the $2-million mark this year. But without an increase in inventory and with demand that will be further fuelled by immigration, he said there is room for price growth.

“I don’t want to say we’re going to get to $2 million, but you know there’s still room for some growth there given the underlying factors,” said Jegg. Interest rates that would raise mortgage costs will, however, also factor into consumer sentiment, he said. The widening gap between the price of single-family homes and condos — now about $600,000 — could shift some purchases to the more affordable side of the market, easing some of the pressure on single-family homes, said Jegg.

BILD senior vice-president Justin Sherwood said some housing developments that were planned for December and January may have been delayed due to COVID-19 restrictions but it’s likely there will be more highrise units on the market as the year goes forward. But lowrise, single-family homes are a different story, he said.

“There just is a dearth of serviced lots ready to go out there. The benchmark price that you’re seeing in single-family is a reflection of really low inventory levels and the product mix that was available at the time.”

Source: The Star