Building Permits, April 2023
The total monthly value of building permits in Canada dropped 18.8% to $9.6 billion in April, the lowest level since December 2020. On a constant dollar basis (2012=100), the total value of building permits fell 18.5% to $5.6 billion in April 2023.
Non-residential permits down following the strongest month on record
Following a record high in March, the total monthly value of non-residential permits fell 34.6% to $3.4 billion in April. The drop was observed across all components but was most pronounced in commercial (-40.2% or – $1.1 billion) and industrial (-49.6% or -$663.8 million) construction intentions.
On a seasonally unadjusted basis, the average commercial permit was valued at $433,000 in April compared with $901,000 in March. Similarly, the average industrial permit was valued at $413,000 in April compared with $1.7 million in March. The significantly lower average permit values show that the monthly declines in April are attributed to exceptionally high volumes of large-scale projects in March.
Residential construction intentions down for eight provinces
The total monthly value of residential permits declined 6.1% to $6.1 billion, sliding for the second consecutive month. Declines were posted for both the single-family and multi-dwelling components.
Ontario (down 10.5% or -$296.4 million) greatly contributed to the monthly decrease in the residential sector. Meanwhile, British Columbia (up 2.6% or +$35.1 million) and Saskatchewan (up 45.0% or +$15.2 million) were the two provinces to post monthly growth in residential construction intentions.
Source: Statistics Canada
Home Sales up 25% From Last Year, but Supply Remains Low
The slowdown in Toronto’s housing market continued to slip away in May as home sales came in higher than they were in 2022 and prices edged closer to pandemic highs. The Toronto Regional Real Estate Board found May’s home sales amounted to 9,012, up 25% from 2022 and 20% from April.
Jason Mercer, TRREB’s chief market analyst, took the numbers as a sign that demand for home ownership has picked up markedly in recent months, after many prospective buyers moved to the sidelines, when interest rates were hiked eight times in a rapid succession. “Many homebuyers have recalibrated their housing needs in the face of higher borrowing costs and are moving back into the market,” he said, in a release. “In addition, strong rent growth and record population growth on the back of immigration has also supported increased home sales.”
However, sellers appear to still be awaiting higher prices and have not moved to list their homes at the same pace as buyers have shifted back to the market.
However, the month also showed that supply is not keeping up with demand as new listings were still well below May 2022’s level. May’s new listings totalled 15,194, almost 19% lower than they were a year prior.
“The supply of listings hasn’t kept up with sales, so we have seen upward pressure on selling prices during the spring,” Mercer said. The average selling price of a home hit $1,196,101 in May, about 1% lower than it was in May 2022 but up close to 4% from April. The composite benchmark price was down by 6.9% year-over-year in May, but up by 3.2% on a seasonally-adjusted basis, when compared with April.
TRREB’s numbers showed that the average price of a townhome moved up 2.5% to $1,003,152 between May 2022 and 2023, while detached homes increased by under 1% to $1,556,566. Semi-detached homes were down slightly from 2022 at $1,198,185, while condo prices fell by 3% over the same period to $748,483. The average home price seen so far this year is about $1,135,595 compared with $1,189,730 in 2022 and $1,095,475 in 2021.
Ahead of TRREB’s release, Toronto broker Cailey Heaps said she had seen an increase in prices in the city’s central core. “With price appreciation in recent months, we have certainly closed the gap on the bottoming out of the market in late 2022 and early 2023, but overall we’re not quite back to peak prices of early 2022,” she said, in an email.
She believes the price appreciation the market saw over the previous three months is now stabilizing and brokers are shifting to new selling strategies. “Instead of ultra-low asking prices with offer dates and hopes for bidding wars, sellers are adjusting asking prices to be more in line with expectations.”
Source: The Star
Montreal Home Sales Down 8% in May from 2022
The Quebec Professional Association of Real Estate Brokers says Montreal home sales were down in May compared to 2022 but showed signs of picking up from recent lows. The association says the 4,428 homes sold in May which amounted to an 8% drop compared with May 2022. The activity was an improvement from April sales, which were down 26% from 2022.
Improved sales came even as new listings were down 11% to 6,196, though the total number of active listings were up 46% to 16,089. The median price of a single family home was down 4% at $550,000 compared with 2022, while condo prices slipped 2% to $403,000.
The association’s market analysis director Charles Brant says the month showed buyers were returning to the market, encouraged by the stabilization of interest rates and prices.
Source: The Star
Vancouver Home Sales Rise in May, Nearing 10-Year Average
The Real Estate Board of Greater Vancouver says May home sales rose 15.7% from 2022. The B.C. board says Vancouver’s housing market is showing signs of heating up heading into the summer, as prices increased for the sixth consecutive month. The board says sales for the month totalled 3,411, which was 1.4% below the 10-year seasonal average of 3,458.
The composite benchmark price for all residential properties in Metro Vancouver was $1,188,000 in May, down 5.6% from 2022 but up 1.3% from April. There were 5,661 new listings in May, an 11.5% decrease compared with a year ago and 4.3% lower than the 10-year seasonal average of 5,917.
Andrew Lis, the board’s director of economics and data analysis, says in a release that prices are increasing because there are more buyers than sellers in the market, keeping resale homes in short supply.
Lis says the higher sales in May nearing historical averages were a “surprising twist” amid higher interest rates and slower new listing activity. “If mortgage rates weren’t holding back market activity so much right now, I think our market would look a lot like the heydays of 2021/22, or even 2016/17,” he says.
Source: The Star
Calgary Home Sales Reach New May Record, New Listings Down
The Calgary Real Estate Board says the market hit a new May record for sales as the number of properties that changed hands reached 3,120. The Albertan board says the sales amount to an almost 2% increase from May 2022, when sales totalled 3,063.
Despite the record, year-to-date sales are still almost 30% behind where they were in May 2022 and the board says the market has still not shifted completely away from the declines seen at the start of the year. The board says it continues to see fewer new listings than in 2022, with the number of properties listed on the market in May 2023 dropping 15% to 3,652.
The market’s benchmark price was up almost 3% at $557,000, while the average price pushed up roughly 6% to $551,853.
The board’s chief economist says the numbers reflect a higher interest rate environment and recent rental rate gains, which are driving more people to seek apartment and condo units.
Source: The Star
Canada’s Home Building Activity Slows in Recent Months Due to Tight Labour Market, High Borrowing Costs
Canada’s residential construction activity has slowed in recent months due to a tight labour market and higher borrowing costs, a factor that could thwart government plans to reduce a housing shortfall and add to the recovery in home prices.
That would be bad news for the Bank of Canada as it seeks to lower inflation but also a problem for Prime Minister Justin Trudeau who has vowed to improve housing affordability. While a federal election is not due until 2025, housing affordability is among the top concerns for Canadians who have grappled with supply shortages.
The Liberal Party government’s ambitious plan to welcome 500,000 immigrants per year by 2025, or about 1.25% of its population, is expected to fuel robust demand for housing. A slowdown in residential construction “is absolutely at odds with plans for the supply of housing to increase to keep step with immigration”, said Randall Bartlett, senior director of Canadian economics at Desjardins.
In April 2022 the federal government announced plans to double housing construction over the next decade. Housing starts, however, will decline to 212,000 units in 2023 from 262,000 in 2022, held back by labour shortages, the high cost of materials and increased financing costs for developers, Canada Mortgage and Housing Corporation, the national housing agency, projected in May. “When combined with the surge in demand as a result of immigration, this lacklustre supply will put further upward pressure on (home) prices,” Bartlett said.
On May 30 the Canadian Home Builders’ Association said 64% of builders expect to have fewer starts in 2023 than in 2022, while investment in residential building construction, after adjusting for inflation, fell in March to its lowest level since June 2020.
Interest rates could rise further after new data showed stronger-than-expected economic growth, while there are other obstacles to new home construction, such as environmental opposition to building on protected land, and resistance to urban density, said James Laird, co-founder of mortgage rate comparison site Ratehub.ca. “The ‘not in my back yard’ mentality applies throughout every city,” Laird said. “That really slows things down.”
After a year-long slump, the average home price has jumped 17% in the three months since January, when the Bank of Canada signalled a pause in its tightening campaign. Coupled with higher mortgage rates, a recovery in home prices would make it more costly for Canadians to buy homes.
Source: Globe and Mail
Most Canadians Waiting for Mortgage Rates to Drop to Re-Enter Housing Market
The housing market may be heating up again, but most Canadians are still waiting on the sidelines for mortgage rates to drop, with some giving up on the idea of buying a home entirely, a recent poll by BMO suggests. Concerns about interest rates, inflation and a possible economic recession have affected Canadians’ approaches to home buying, according to the report.
Home prices have started to firm up again and sales increased by 11.3% in April — the largest monthly rise since 2009, BMO said. But the combination of still high prices due to past gains and higher mortgage rates has left affordability near the worst it has been in more than 30 years, it said.
“Amid this challenging and changing market, homebuyers are keeping a keen eye on interest rates,” Hassan Pirnia, head of BMO’s personal lending and home financing products, said in a press release. “Regardless of when buyers are planning their purchase, it’s essential they have a clear understanding of budget and affordability at the start of their home buying journey.”
The survey, published on June 5, found that 68% of Canadians plan to wait for lower rates before they purchase a home. It said half of Canadians are deferring their home purchases because of their concerns about the economy, while 20% are no longer sure if or when they will buy a home at all.
Meanwhile, it said the majority of Canadians feel buying a home is more out of reach for them compared to their parents. Over 70% of those aged 18 to 24 are most likely to have this outlook, followed by younger millennials (ages 25 to 34) at 69% and older millennials (ages 35 to 44) at 65%.
Among those that think current mortgage rates have affected their decision to move, 18% are holding off as a result of market uncertainty and volatility, the report said.
A different housing poll released by CIBC on the same day found that despite concerns about affordability, Canadians continue to see homeownership as an important goal and a great source of pride.
With the current housing market, however, 66% of current homeowners say they are not looking to move anytime soon and are likely to stay in their home longer than expected, the CIBC report said. Only 31% of people polled by CIBC say they are in their “forever home,” while 40% say they may consider selling their home when economic conditions stabilize.
Some homeowners expressed regret about the timing of their house purchase, it said, with 37% wishing they had bought their home when mortgage rates were lower and 30% wishing they had sold their home during the recent housing market peak.
The report also said 63% of those surveyed with children at home say they plan to help their kids with a down payment someday, with 79% citing fears about future home affordability for their children. “Many Canadians recognize that homeownership could be out of reach for their children, unless they have help with a down payment,” said Carissa Lucreziano, vice-president, financial and investment advice at CIBC.
Source: Financial Post
Modular Housing Gains Traction as Canada’s Immigration Numbers Soar
According to a 2023 Desjardins report, Canada needs to increase its housing starts by 50% immediately to keep up with surging immigration levels. In 2022, Canada welcomed 437,180 new permanent residents and plans to introduce almost half a million permanent residents each year between 2023 and 2025. Yet, current construction rates are unable to meet expected demand, leaving an estimated shortfall of 3.5 million housing units by 2030, according to Canada Mortgage and Housing Corp. (CMHC).
One touted fix is offsite construction, known also as modular or prefabricated construction. This includes homes or building panels that are manufactured in large, controlled factories. Once complete, sections called modules can be rapidly assembled at the construction site.
Modular buildings are already popular in cities such as Vancouver and Toronto, where they’re being tested as a solution to homelessness. Amid the looming threat of a federal housing crisis, how will modular homes fare on a national scale?
At a glance, the benefits of modular housing appear plentiful. Timelines for the prefab construction can be up to 50% faster than traditional builds, CMHC has said.
Andy Berube, vice-president of business development at NRB Modular Solutions agrees that modular construction is fast, but says it isn’t necessarily less expensive upfront. Much of the saved cost, Mr. Berube says, comes from reduced schedules, which in turn bring reduced risk, reduced labour costs, averted weather and supply chain issues, and less community disruption around the construction site.
Some companies, including Vancouver-based Nexii, have also created modular panels that are non-toxic, energy-efficient, fire, pest and water-resistant, which may reap cost savings down the line.
Former Vancouver mayor Gregor Robertson, who now serves as the executive vice-president of strategy, partnership and impact at Nexii, says that “[h]omes and buildings are the last and only product we build from scratch onsite – everything else is manufactured. [Construction] is the last industry to embrace much higher efficiency, and getting away from custom, bespoke design for each unit.”
Nexii recently completed its 30th building, and is working on 23 projects on the New York State Thruway. But Mr. Robertson says scaling the firm’s housing arm has been a challenge. While Nexii raised $200-million in its early years, worsening economic conditions have made it tough to find new investors.
That aside, government investment is increasing. Since 2020, the government of Canada has pledged $4-billion as part of its Rapid Housing Initiative (RHI), a program aimed at the rapid construction of new housing in Canada. This includes over 10,000 housing units and 3,200 modular units, which are currently “in different stages of construction,” CMHC told The Globe and Mail.
For NRB Modular Solutions, the biggest barrier to adoption is interest and acceptance of offsite construction by architects and general contractors. Still, Mr. Berube says, interest is growing, in part because of more political attention at all levels of government.
Kevin Lee, CEO of the Canadian Home Builders’ Association (CHBA), has also noted increased demand for modular housing. Mr. Lee says that the CHBA’s housing market index found that 29% of builders across Canada are using some sort of factory-built, prefabricated approach. This mostly involves panelling, or sections of walls, he says, rather than fully built homes. Over the next three years, 90% of those surveyed are considering a modular-based approach.
For Mr. Lee, innovation is just one of many factors in slowing the housing crisis. Labour remains a top concern – especially with 22% of the CHBA’s residential construction workers set to retire over the next decade. The wave of immigration that could strain the country’s housing stock could also help fill it out.
“We’re losing people,” Mr. Lee says. “We need to rely heavily on immigration to backfill some of those spots moving forward.”
Most agree there is no singular answer to the housing crisis. Benjamin Tal, managing director and deputy chief economist at CIBC Capital Markets Inc., says Canada needs concentrated efforts between private and public partnerships to incentivize purpose-built rentals, encourage research and development in the construction space, and act quickly to fill gaps within the trade labour shortage to improve onsite productivity.
“My fear is that the [housing] crisis will lead to some sort of anti-immigrant sentiment,” Mr. Tal says. “But it’s not about the number of immigrants, but [rather] the number of immigrants in trades and construction.”
“Newcomers must be part of the solution,” he says.
Source: Globe and Mail