Single Homes Drive Increase in Residential Sector

The total value of building permits rose 1.7% to $8.1 billion in August, driven by an increase in the residential sector in Ontario and Quebec.

Single homes drive increase in residential sector
Permits issued for single family homes rose 9.9% to $2.5 billion in August, continuing the upward trend observed since May. Eight provinces reported increases in this component, with Ontario accounting for more than half of the national gain, mostly due to permits issued in the census metropolitan areas of Toronto (+12.7%), Oshawa (+94.2%) and Brantford (+257.4%). Despite the majority of provinces reporting declines in the value of permits issued for multi-family dwellings, the total value of permits issued for multi-family dwellings rose 5.0% nationally, mainly as a result of permits issued in Ontario and Quebec. Overall, the total value of residential permits increased by 7.1% to $5.6 billion.

Commercial and institutional permits fall in August
The total value of non-residential permits fell 8.6% to $2.5 billion in August, largely due to permits issued in Ontario (-15.7%). Only Quebec (+9.9%), Prince Edward Island (+82.2%) and Nova Scotia (+16.7%) posted increases in this sector.

Commercial permits fell by 14.7% to $1.4 billion in August, following a notable gain in July reflecting the half-billion dollar permit for Project Python in Ottawa. Overall, the total value of permits for commercial buildings was lower for January to August of 2020 when compared with the same period in 2019. In particular, the unadjusted value of permits issued for office building renovations fell 14.1%. 

Institutional permits declined for a second month, falling 5.8% to $603 million. Ontario (-27.9%) recorded the most significant drop in the value of permits issued of all the provinces, more than offsetting gains in Quebec (+30.3%).

Following two months of decline, the total value of industrial permits increased in August, up 7.5% to $528 million. Permits issued in Ontario (+41.4%) and British Columbia (+61.5%) accounted for most of the gains.

Source: Statistics Canada

New Single-Family Home Sales for Toronto Region Soar 355% in August 

The pandemic and record low mortgage rates have played out in a blockbuster summer for the Toronto region’s new construction home market, according to numbers released by the building industry on September 29. August sales of single family homes – a category that includes detached, semi-detached, link and town houses (stacked town homes excluded) – soared 355% year over year in August, outstripping the gains of condos, which also saw a 159% year over year boost in sales last month.

Although the benchmark price of newly built and pre-construction homes dipped slightly compared to July, condos still sold for 15.7% more year over year at $972,859, and single-family homes were up 8% annually to $1.17 million.

“We have seen spring push into summer,” said David Wilkes, CEO of the Building Industry and Land Development Association (BILD). “The spring sales that didn’t happen because of the pandemic are happening now and are being added on to the sales that would usually occur at this time of year.”

This year there have been slightly more than the average number of single-family home sales to date — 9,678 versus 9,342, the average between 2014 and 2020. The average number of condo sales in the same period was 14,500. This year to date there have been only 13,008. The total 22,776 new construction home sales this year to date remains below the 2017 peak of 29,531 sales, according to data supplied to the industry by Altus Group.

The 1,150 detached houses sold last month is the highest number for August since 2011 with the most – 425 – sold in Durham Region. But the 4,762 detached homes sold this year to date remains below the 10-year average.

While this year’s numbers don’t veer significantly from the average, there has definitely been a shift this year to ground-level housing, said Wilkes. Low mortgage rates have also helped some buyers afford a house rather than a condo. But, he said, “The demise of the condo market – certainly it’s not there at this point. As people are looking at home prices they look at the carrying costs as much as anything else. So it’s a combination of having more affordable money. We did see a dip in prices this year,” said Wilkes.

But he said the industry and the government need to continue to watch the supply side of the housing industry where demand has long outstripped supply. Inventory – new construction homes that are either built or in the selling or construction phases – is down year over year. There were 10,776 new condos available for sale at the end of August, compared to 12,079 last year at the same time, he said. Inventory of single family homes was down to 3,555, from 4,450 a year ago.

“To me the solution to affordability will be addressing the long-term supply challenges. There needs to be continued effort to address some of the structural challenges that we’ve had in the market where demand has outstripped supply for so many years,” said Wilkes.

Source: Toronto Star

Softening Lumber Prices Offer Hope for Homebuyers, Renovation Project Builders

The recent softening of record high prices for lumber could translate into relief for homebuyers and do-it-yourselfers while continuing to spur high profits for producing companies, analysts say. The higher cost of lumber has translated into about $10,000 or more in extra costs for each typical single family home, said CEO Kevin Lee of the Canadian Home Builders Association. He added that shortages of certain products have made it difficult for builders to complete projects on time this summer.

The industry’s hope is that prices will fall and supply firm up as the summer construction season comes to a close, allowing builders to take advantage of what’s expected to be a continuing high level of demand from people working from home. Earlier this year, many lumber producers temporarily shut down mills due to the pandemic, reducing inventory levels as demand rose for renovations and new homes.

A US$14 drop to US$941 per thousand board feet in the North American framing lumber composite price on September 25 represents the first weekly decline noted by industry watcher Random Lengths since April 10, said RBC analyst Paul Quinn in a report. In the same week last year, the price was just US$367.

“Buyers largely stepped to the sidelines as prices began to fall,” Quinn said. “We would not be surprised to see continued declines in the coming weeks, but would note that the November lumber futures contract increased US$28 week-over-week to US$607 per thousand board feet.”

Lumber prices are still high by historic measures but a little more weakness is starting to creep into the market and there is “some downward pressure,” said Kevin Mason, managing director of ERA Forest Products Research. “With these very high prices, you are seeing an impact on demand. So there are some projects that are getting postponed,” he said, adding some multi-family developments could be looking at millions of dollars in additional costs from higher building product prices. However, he said the change in prices will simply drop lumber producers from “astonishingly profitable” to “remarkably profitable” levels, adding he expects robust financial results for the remainder of this year and likely through 2021.

Source: Toronto Star

Optimism About Canadian Housing Market Climbs Even Amid Second COVID-19 Wave 

Canadian households continue to be increasingly optimistic about housing, even as the country suffers through a second wave of coronavirus cases, polling suggests. About 44% of respondents expect the value of real estate in their neighbourhood will go up over the next six months, according to the latest weekly survey by Nanos Research for Bloomberg. That’s the highest percentage since March 13, before full pandemic shutdowns began and one of the strongest readings for this question in the past seven years. The share of Canadians who expect home prices to drop slid to 27%, also the lowest since mid-March.

The residential real estate market has been a bright spot in Canada’s economic recovery from COVID-19. Although the market has defied expectations, economists predict the gains will peter out in line with other data that shows a slow down in activity as cases rise and restrictions get reimposed.

Strong expectations on housing have been shoring up overall consumer confidence levels, the polling suggests, helping offset declining sentiment around the broader economic outlook. The share of Canadians who expect the economy will strengthen over the next six months dropped to 19%, the lowest since June, after Prime Minister Justin Trudeau warned parts of the nation are already experiencing a second wave of cases.

Every week, Nanos Research surveys 250 Canadians for their views on personal finances, job security and their outlook for the economy and real estate prices. The Bloomberg Nanos Canadian Confidence Index, a composite measure of financial health and economic expectations based off the polling, has been little changed since the end of August after recouping more than four-fifths of its pandemic-related losses. Sentiment is highest in Quebec and lowest in the energy-rich Prairie provinces.

Source: Toronto Star

Home Prices Could Fall 7% in 2021, Hitting Prairies Hard: Moody’s Forecast  

Home prices across Canada could tumble about 7% in 2021, as unemployment dampens the hot real estate market, according to a forecast by Moody’s Analytics, Inc. There is a “dangerous” oversupply of new, single-family homes in Calgary and Edmonton, on top of affordability issues in Vancouver and Toronto, the financial intelligence company said in a report. “The housing market will no longer be able to escape the poor condition of the labor market,” said the report, which used data from a Brookfield Asset Management Inc. subsidiary, RPS Real Property Solutions Inc.

Moody’s report did not go into detail on how it created the forecasts, but said that its 2021 home price index also calls for a 6.7% decrease for single-family homes and a 6.5% decline in condo apartments. The prediction from Moody’s comes after the Canadian Real Estate Association reported record-shattering home sales in July and August amid low mortgage rates.

Some optimists expect this record run to continue. A survey of RE/MAX brokers earlier this month suggested that average residential home prices could rise 4.6% by the end of 2020. But Moody’s forecast says the real estate sector will lose its momentum in the first half of 2021, and it’s not alone. Canada Mortgage and Housing Corp. economist Bob Dugan also predicted that housing prices will fall going forward. “Moody’s Analytics expects that the shortlived burst of growth in the third quarter will produce too few job gains to meaningfully reduce unemployment,” the report said.

For instance, Moody’s said that housing starts – a closely watched statistic that has rebounded sharply this summer – partly reflects investments made before the pandemic. “Builders have spent too much money on the projects to abandon them,” the report said.

While home prices would fall in every region under Moody’s model, the impact would be uneven and would favour small, affordable markets. While lower immigration may hurt condos in urban markets, Moody’s suggested that buyers seeking more space may look to Oshawa, Ont. as prices rise in other Toronto suburbs like Mississauga.

Moody’s forecast hits especially hard the Prairies, amid fading government supports, the end of mortgage payment deferrals and ongoing struggles with consumer debt and joblessness. The report notes that bankruptcy filings and insolvency proposals have been rising since late 2018.

“The pandemic will lead to even further widening in economic inequality, including housing,” said the Moody’s report. “While demand for single-family homes with ample space and large pantries may rise, so too might demand for smaller apartments and condos given the struggle many families will face in saving for a down payment.”

If a COVID-19 vaccine comes out in the back half of 2021, the report suggests that home prices will bounce back in 2022. “A second leg downward in the labor and financial markets caused by a renewed wave of COVID-19 this fall and winter could spur a greater than expected decline in house prices,” the report said. “The development and broad deployment of a highly effective coronavirus therapy or vaccine remains the greatest wild card in the forecast. If a vaccine is delayed, then so too is the timing of the recovery.”

Source: Toronto Star

Toronto Condo Dwellers Flock to Exurbs, Creating Domino Effect Across Southern Ontario Real Estate  

A flood of Toronto residents leaving their downtown condos in search of more space and greater affordability is causing a domino effect across Southern Ontario real estate that is being felt as far away as Fort Erie, according to multiple brokers and agents in the province. After COVID-19 reached Canada and made working from home the new norm for thousands, the first domino fell in Toronto’s downtown core as swaths of residents left their condos behind in search of affordable homes with backyards and office space.

That led many to Hamilton. The demand drove Hamilton’s market into a frenzy and agents in the region say some residents there are taking advantage to cash in and move farther east to the Niagara Region. The same phenomenon is occurring in turn in Niagara, with agents identifying Fort Erie as the destination of choice.

“It’s this domino effect where people are moving further and further out,” said Conrad Zurini, a Hamilton-based broker of record at Re/Max Escarpment Realty Inc. “It’s this flight to affordability and greater value.”

In turn, Toronto’s condo market is finally cooling off. Sales of units in the second quarter were down more than 50% from the same time last year, according to the Toronto Regional Real Estate Board. The number of pre-sale condos has slipped further, falling 85% because investors who are usually responsible for gobbling up two-thirds of these units, are playing it safe.

Realizing that they’d be spending more time at home changed what those condo owners valued, Zurini said. And knowing they’ll no longer need to fret about a two-hour commute into the city has helped. Zurini said millennials make up the majority of those leaving Toronto for Hamilton. There, the average house price sat at $662,257 as of the end of the August, according to the Realtors Association of Hamilton-Burlington. The additional interest from Toronto has turned it into one of the hottest markets in Ontario.

The latest statistics compiled by the Realtors Association of Hamilton-Burlington show just how much the market has changed in a year. Average house prices are up 21% in the city and homes have stayed on the market for 7.7 fewer days. Zurini’s own numbers point to 46% of buyers coming from outside of Hamilton.

New listings are also up by nearly 12 %. And here’s where the second domino falls: Hamilton residents, as a result of the higher prices, are also deciding to leave the city. Hamilton millennials are being priced out of their own city and now have to move to Welland and St. Catharines for affordable options. Zurini’s clients, who are pre-retirees in their late 40s and early 50s, are taking advantage of the frenzy to upsize in the Niagara Region.

Niagara’s market has also quietly been hot, according to Niagara-based Royal LePage sales representative Kelley Milan. According to the Niagara Association of Realtors, sales were up more than 37% in August, while listings were up nearly 10%. Likely as a result of the increased demand, the composite benchmark price for the region was up 15%.

According to Michael St. Jean, CEO of Michael St. Jean Realty, not only is Niagara dealing with an influx of buyers from Hamilton, it’s also drawing interest from Greater Toronto Area buyers who are skipping over Hamilton and setting their sights on St. Catharines and Welland, he said. With prices increasing there, the third domino is falling. The pattern is already developing where sellers in more urban areas of Niagara are moving to Fort Erie, Ont., which sits right on the Canada-U.S. border.

Source: Financial Post