Average Canadian house price rose to $716,000 in April — up by $100K since January
After plunging due to interest rate hikes throughout last year, the average price of a Canadian resale home has now increased for four months in a row. The Canadian Real Estate Association said on May 15 that the average selling price of a home that sold on its MLS system in April went for $716,000. That’s the fourth monthly increase in a row, and it marks a collective increase of more than $100,000 since the start of the year.
After peaking at just over $816,000 in February 2022 — right before the Bank of Canada began its aggressive campaign of rate hikes — Canada’s housing market went ice cold for much of last year, as drastically higher mortgage rates made it more expensive to finance the purchase of a home. Average prices bottomed out a few months later, at just under $630,000 in July.
But after moving essentially sideways until the start of 2023, the market has seemingly resumed its upward momentum ever since. Much of the rebound stems from an uptick in sales in the Greater Toronto Area and B.C.’s Lower Mainland, two parts of the country that saw both the biggest gains during the early days of COVID-19, and also the largest drawdown once rates went up.
If numbers from those two markets are stripped out, the national average price drops by more than $144,000, to an average house price of $572,000 in places that are not Toronto or Vancouver.
CREA, which represents more than 100,000 realtors across the country, says the number of homes that sold during the month increased by 11% from March’s level to 44,059, and it’s now back up to its highest level since last June. But it’s still almost 20% below what it was during the feverish market of spring 2022.
“Home sales continue to bounce back (with some force) from the multi-decade low observed at the beginning of the year,” TD Bank economist Rishi Sondhi said. “Support has come from solid job markets, lower interest rates and improving buyer psychology from a central bank that’s on pause [but] affordability remains significantly strained [and] subdued supply is probably playing an even larger role in pushing prices higher.”
CMHC Reports Annual Pace of Housing Starts Up 22% in April
Canada Mortgage and Housing Corp. says the annual pace of housing starts in April rose 22% compared with March, powered by an increase in starts of multi-unit urban homes. The national housing agency says the seasonally adjusted annual rate of housing starts in April came in at 261,559 units, up from 213,780 in March.
The overall increase came as the annual pace of urban starts rose 26% to 241,585 units in April, while the annual rate of multi-unit urban starts rose 33% to 201,621 units. The annual rate of single-detached urban starts fell 2% to 39,964.
The annual pace of housing starts in Vancouver was up 36%, while Toronto’s climbed 54%. Starts in Montreal gained 43%.
The annual rate of rural starts was estimated at 19,974 units.
The six-month moving average of the monthly seasonally adjusted annual rate was 240,403 units in April, down 0.2% from 240,876 units in March.
Canada’s Building Permits Rose 11% In March
The Bank of Canada’s decision to pause interest rate hikes coincided with a flurry of building permits issued across Canada. That spike in activity, however, was focused away from housing.
The total value of building permits issued in Canada during March rose 11.3% to $11.8 billion, led by a sharp increase in non-residential construction. Statistics Canada said that the monthly value of non-residential building permits gained 32% in March to reach a record-high of $5.2 billion. The largest construction project during the month was a new $570 million General Motors (GM) cathode active materials facility in Bécancour, Quebec.
Building permits in the commercial (up 41.5%) and institutional (up 29.5%) construction sectors also helped to support the record-high month for the non-residential sector in March.
The gains in non-residential building permits were partly offset by a slowdown in residential construction, said Statistics Canada. March saw the value of new residential building permits decline by -0.9% to $6.6 billion. Nationally, residential building permits for 21,400 new dwellings were issued during the month.
The total value of building permits in the first quarter of 2023 increased by 4.8% from the previous quarter to $32.4 billion, ending three consecutive quarters of decline.
Looks Like Canada’s Housing Market Has Finally Turned the Corner
The speed of Canada’s housing market correction in 2022 surprised forecasters. Now its recovery is too.
There had been signs that the market would hit its bottom this spring, but “April pretty much sealed the deal,” said RBC assistant chief economist Robert Hogue. “Early results from real estate boards gave strong indications local markets turned a corner last month.”
Sales were up in most markets and prices edged higher, led by Vancouver, Toronto and Calgary. Montreal sales, which have been in a deep slump, were up 12% from the month before. Toronto sales jumped by 27% in April from March. New listings also rose but not enough, and demand-supply conditions are now as tight as they were before the correction, said Hogue.
With new listings lagging, the sales-to-new-listing ratio soared in most cities. Hogue says the coming months should be interesting. The upturn in the market could bring out more sellers, adding much-needed supply to historically low inventories. Buyers, wishing to avoid potentially higher prices later on, are also likely to jump back in, adding momentum to April’s gains.
The spring surge has Capital Economics rethinking its forecast. “With sales now taking off, there are clear upside risks to our forecast that house prices will be little changed over the rest of this year,” wrote deputy chief North America economist Stephen Brown in a note.
One reason the housing market is bouncing back faster than expected is that borrowers are coping with higher interest rates, Brown said. Mortgage delinquency rates declined in 2022 even as borrowing costs rose, according to data from the Bank of Canada.
A strong labour market is also lending support. Job gains have been beating expectations and wages continue to rise, up 5.2% in April compared to 2022. While wage growth is a worry for the Bank of Canada in its efforts to tame inflation, the recent decline in job vacancies and evidence that labour shortages are easing suggest its pace will slow, said Capital.
But even if it does cool over coming months, the Bank of Canada won’t be inclined to cut rates when housing prices are soaring higher. “Housing, rather than the labour market, is currently the key risk to our forecast and the market-implied view that the Bank will cut interest rates by the end of the year,” said Brown.
Source: Financial Post
Why a Program for First-Time Home Buyers Fizzled in Toronto and Vancouver
Over more than three years, only 385 households have used the First-Time Home Buyer Incentive in Toronto, Vancouver and Victoria areas areas, according to a Globe and Mail analysis of figures that were recently tabled in Parliament. This amounts to a minuscule fraction of home purchases in those parts of Ontario and British Columbia.
Despite the low uptake, Ottawa extended the program through May, 2025. Even with that longer timeline, it is not on pace to help as many people as envisioned.
Under the program, the federal government contributes as much as 10% toward the purchase of a first home, reducing the buyer’s monthly mortgage payments. Ottawa is eventually paid back for its stake in the property.
The FTHBI was announced with much fanfare during the 2019 budget. The federal government said it would help as many as 100,000 families purchase a first home, allocating $1.25-billion to Canada Mortgage and Housing Corp. to disburse over three years.
But since the program was launched in September, 2019, relatively few people have used it. Around 17,500 buyers across the country have received roughly $325-million in financial assistance as of early this year. Hundreds more have been approved, but have yet to receive their funding.
“We think this is a flawed policy,” said James Laird, the president of CanWise Financial, a mortgage lender. “We certainly have never promoted it to our customers.”
Several real-estate professionals say the program was basically doomed from the start. In its first iteration, the FTHBI allowed households with a maximum annual income of $120,000 to borrow four times that amount. For someone making a minimum down payment, the most expensive home they could purchase was $505,000.
Because of the program’s lending restrictions, most buyers could spend more by avoiding the program altogether. And with home prices rising quickly, fewer properties were cheap enough to purchase with the incentive.
Two years ago, the federal government tweaked the program for those in the Toronto, Vancouver and Victoria areas. Now, first-time buyers in those places can borrow 4.5 times a maximum annual income of $150,000. This effectively raised the maximum purchase price of a home to $722,000 for someone who earns the most allowed under the program and makes a minimum down payment.
Despite these changes, the program has sputtered. In the Toronto area, 176 buyers had received the incentive as of early this year, 167 in the Vancouver region and 42 in Greater Victoria.
The 2021 updates took effect as prices were accelerating again, fuelled by low-rate mortgages. Despite a recent slump in real estate, benchmark home prices remain well above $1-million in the Toronto and Vancouver areas.
Mr. Laird said home buyers generally aren’t keen to share equity in their properties with the federal government. Participants in the FTHBI have to repay Ottawa when the home is sold or after 25 years. The government shares in the appreciation of a home’s value over time, though last year it capped the gains it could receive.
Mr. Laird also noted that buyers need to save enough cash for the minimum down payment, before Ottawa kicks in more money. Put another way, the federal government isn’t helping people save for a down payment.
In some markets, the FTHBI has proved relatively more popular. Nearly 2,700 buyers have received the incentive in Edmonton, the most of any municipality. Calgary follows at No. 2 with around 1,300 recipients. Over all, Quebec has more than 6,100 recipients of the incentive, the most by province.
Even so, these more affordable markets have generally experienced large price bumps in recent years, making the incentive program less viable than it used to be. Numbers provided by CMHC show that approvals under the FTHBI peaked early in its existence, but dropped significantly in 2021.
The incentive “is just one of a suite of programs through the National Housing Strategy to make housing more affordable for Canadians,” Mahreen Dasoo, a spokesperson for the Minister of Housing and Diversity and Inclusion, Ahmed Hussen, said in a statement.
Mr. Laird said it would be “refreshing” if the federal government acknowledged the program isn’t working and wound it down. The incentive is “what you would come up with if you didn’t understand how mortgages actually work in Canada,” he said.
Source: Globe and Mail