Canadian Home Prices Rise in September as Housing Market Firms, According to Teranet Data

Canadian home prices posted across-the-board monthly gains in September, led by the Ottawa-Gatineau and Quebec City markets, for the second-strongest September on record, data showed on October 20. The Teranet-National Bank Composite House Price Index, which tracks data collected from public land registries to measure changes for repeat sales of single-family homes, showed prices rose 1.1% in September from August.

In addition to the 11 major markets included in the index, Teranet also tracks 20 other cities across the country. All 31 posted gains for the month, the first across-the-board monthly gain since tracking of the current bundle began in 2009. Prices were up 2.3% in the capital region of Ottawa-Gatineau and 2.2% in Quebec City, with Montreal and Hamilton both up 1.9% in September from August.

On a year-over-year basis, the index was up 6.7% in September, rising at a faster pace than the previous month. The 12-month gain was also lead by Ottawa-Gatineau, up 14.3%, followed by Halifax at 12.2%. Calgary prices were down 2.6% on the year, while Edmonton prices were 0.8% lower. Price gains in Hamilton and in six of the seven other Golden Horseshoe cities around Toronto were higher than in the Greater Toronto Area itself, reinforcing the view that many urbanites are fleeing to satellite cities for more space amid the coronavirus pandemic.

Source: Globe and Mail

CREA Reports Canadian Home Sales Set Record for September, up 45.6% From Last Year

Canadian homes sales set a monthly record in September and the national average price soared  to $604,000, up 17.5% from last year, the Canadian Real Estate Association reported. There were 45.6% more sales compared with September 2019, according to CREA, and home sales were up 0.9% on a seasonally adjusted basis compared with August.

“Many Canadian housing markets are continuing to see historically strong levels of activity as we enter into the fall market of this very strange year,” CREA chair Costa Poulopoulos said in a statement. In addition to a shortage of property listings in a number of regions, there’s been “fierce competition” among buyers, Poulopoulos said.

CREA senior economist Shaun Cathcart said other factors included pent-up demand due to early pandemic-related lockdowns, low interest rates, and government COVID-19 supports. The largest price gains were in smaller Ontario cities and in the capital region of Ottawa, with further flung Toronto suburbs and Ontario cottage towns also showing very strong year-over-year gains. “Home has been our workplace, our kids’ schools, the gym, the park and more. Personal space is more important than ever,” said Cathcart.

Douglas Porter, chief economist for BMO Capital Markets, said September’s price increase wasn’t a fluke as the average gain over the first nine months of 2020 was 11.6%. But Porter raised doubts as to whether the “recent sizzling strength” can persist. “The underlying economic conditions simply do not support such a piping hot market over a sustained period,” Porter wrote.

CREA said the national average price would be about $125,000 lower if sales in Greater Vancouver and the Greater Toronto Area are excluded. But Porter noted that the MLS Home Price Index, which adjusts for different type of properties sold, has risen 10.3% in the past year. In September, the MLS HPI was up 1.3% from August.

CREA attributed the modest month-over-month increase in the number of homes sold, compared with August, to declines in the Greater Toronto Area and Montreal. Those were offset by gains in Ottawa, Greater Vancouver, Vancouver Island, Calgary and Hamilton-Burlington.

Source: Toronto Star
Source: Financial Post
Source: Globe and Mail

Tiny Condos Now the Biggest Losers in Toronto Real Estate Market Shakeup

According to research firm Urbanation Inc., sales of condos sized at 500 sq. ft. and under were down 20% year-over-year in September, while sales for units of other size ranges were either flat or still positive. These micro units are also the only condos on the market to have experienced a price decline thus far. And, thanks to a tumbling sales-to-new-listings ratio, they’re the only form of housing that is firmly in buyer’s-market territory. “It’s become clear that COVID-19 has caused two shifts in demand: A desire for more space and more value-oriented homes outside the core, both of which negatively impact the market for small condos,” said Shaun Hildebrand, president of Urbanation.

Pre-COVID-19, these condos were the hottest on the market. Investors flocked to them as the only housing in Toronto under $500,000 and the high probability of making profits in rent. Most of them were snatched up on the pre-construction market and as investors became more emboldened by their returns, they bought more units, Hildebrand said.

Now they’re the ones flooding the market with listings. In September, new listings for micro units were up 165% year-over-year and active listings now represent 5.2 months of supply. 

COVID-19 turned the tide on the momentum surrounding these condos. The same people who were living in these units no longer need to be near their downtown office; they also can no longer enjoy the benefit of being steps away from theatres, sports arenas or restaurants. As the Financial Post recently reported, many former Toronto condo owners and renters have left Toronto altogether for Hamilton.

The pandemic has all but erased the premium that tenants once had to pay for living in the downtown core, Hildebrand said. That premium usually meant paying an additional $400 in rent for an identical unit outside the core. Now, it stands at $50.

Micro-condo owners are struggling to sell and rent their units because two of the main groups of people they once attracted — recent immigrants and students — are no longer clamouring for them. Immigration has slowed to a crawl during the pandemic, while the majority of university classes are being held online.

There is still some interest in the units, particularly from first-time homebuyers who were previously renting and took advantage of a down market, multiple realtors told the Post. But that interest is scant. That the units are hard to distinguish from one another because the floor plans are rarely unique only compounds the problem.

“We’ve had a few that we have taken off the market recently because there’s a glut,” Frank Polsinello, a broker of record at RE/MAX said. “We’re constantly monitoring the inventory. If we see there are six, eight, 10, 12 of these things that are all identical, (buyers) have the pick of the litter and it’s going to keep driving the price down.” And that means that for the first time in years, buyers are in control.

On the pre-construction market, Sergio Menezes, a sales representative at Condo Connect, said developers are attempting to draw investors back into buying their micro units. Many have introduced what he referred to as a drawn out deposit structure. Normally, investors have to put down 15% in one year to secure these units, he said, but now, they’re being given the choice of paying 5% each year over a period of three years. Cheaper lockers and parking spaces have also been placed on the negotiating table.

Moving forward, Hildebrand expects further weakness in the market for micro condos. Although sales prices have dropped, they’ve only done so by 1%  so far. The current supply on the market suggests that further drops could be coming, he said, especially as developers wrap their work on pre-construction units and bring more of them to market. How quickly the market recovers will be directly tied to COVID-19, he said

Source: Financial Post

Canada’s Housing Market Defies a Pandemic

Even a once-in-a-century pandemic isn’t enough to cool the Canadian housing market, with prices nationwide now forecast to end the year higher than where they started. The median home price in Canada is expected to reach $693,000 by the end of the year, a 7% increase from the end of 2019, according to a projection from brokerage Royal LePage. 

The market continues to show strength across the country, with 97% of regions reporting higher home prices in the past three months, the company said. In Toronto, which UBS says has one of the greatest housing bubble risks of any major city in the world, the average price reached $975,980 by the end of September, up 11% from the same period a year before.

The resilience of Canada’s housing market is not unique: home prices in many parts of the developed world have been defying the gloom of the COVID-19 recession. Buyers, able to borrow money at historically low rates, have looked to suburbs and smaller cities in the hunt for more space, driving up prices. Still, with elevated consumer debt levels and a sharp slowdown in new immigrants, Canada’s real estate market stands out as vulnerable, with prices far in excess of what many workers can afford.

In a sign the pandemic may be starting to shift homebuyers’ behaviour, the biggest price gains in Canada were seen not in Toronto but in suburban cities, including Oshawa, Hamilton and Mississauga, and in smaller cities like Windsor, Ontario, across the border from Detroit. Windsor had the biggest average price appreciation in the country in the last three months at 17 %.

Condo trouble
Toronto’s condo market is trailing other kinds of housing in the city, with 4.9% price appreciation in the July to September period. New data released last week showed a 215% increase in condos listed for sale in the city’s downtown at the end of September, a sign that outright price declines may be on the way in some pockets.

“The overall housing system seems to be dividing in two, and this is where risks start to appear,” said Aled ab Iorwerth, deputy chief economist at Canada Mortgage & Housing Corp., the country’s national housing agency. CMHC made one of the most bearish market forecasts in May when it said prices could fall between 9% and 18% this year.

While prices have gone the opposite way instead, ab Iorwerth points to falling rents, the growing preference for suburbs over downtown locations, and prolonged economic weakness as causes of potential softness in the condo market in particular, which could end up bringing down other house values too. “All this suggests there’s going to be pressure on condo prices, and that can drag down other prices in the single detached or other types of housing units,” he said “So there’s a fragility there now.”

Source: Toronto Star
Source: Financial Post

CMHC Reports Annual Pace of Housing Starts in Canada Fell 20% in September

Canada’s homebuilding activity remained historically strong in September even though the annual pace of starts plunged 20% from August. Canada Mortgage and Housing Corp. said the seasonally adjusted annual rate of housing starts was 208,980 units in September, down from 261,547 units in August but in line with average readings in 2019. The decrease was driven by weakness in Ontario and British Columbia and lower starts in condos.

However, the six-month moving average of the monthly seasonally adjusted annual rates of housing starts rose slightly to 214,647 in September, up from 212,609 in August. COVID-19 has resulted in volatility in multi-family starts, especially in Toronto. 

“We expect national starts to trend lower by the end of 2020 as a result of the negative impact of COVID-19 on economic and housing indicators,” Bob Dugan, CMHC’s chief economist said in a news release. Broader demand trends remain resilient in the near-term with the level of starts remaining strong by historical standards, said RBC economist Claire Fan. “Average starts from January to September were 1% above the same period in 2019 — despite COVID-19 containment measures that shut down wide swaths of the economy in the spring,” she wrote in a report.

Fan noted that the issuance of permits has remained strong, “suggesting still-solid momentum for housing starts in the near-term.” Housing starts averaged 237,300 units in the third quarter, up 22.2% from 194,100 units in the second quarter.

“Moving forward, past pre-construction sales gains and low rates should ensure that starts remain elevated through next year,” TD economist Rishi Sondhi wrote. “Afterwards, some slowing may take place as softer population growth brought upon by the pandemic weighs on housing demand, and ultimately, homebuilding.”

The annual pace of urban starts fell 21.1% in September to 195,909. Housing starts were down in eight of 10 provinces:

  • Ontario fell by nearly 37,000 units to 78,700
  • B.C. fell by 10,900 units to 30,700 units
  • Quebec dropped by 7,500 to 48,000 units
  • Alberta’s urban starts climbed by 5,700 to 24,800 units, offsetting losses in Saskatchewan and Manitoba
  • Starts in Atlantic Canada slipped with declines in every province but Nova Scotia

The pace of urban starts of apartments, condos and other types of multiple-unit housing projects decreased 27% to 146,005 units, while single-detached urban starts increased 3.4% to 49,904. Rural starts were estimated at a seasonally adjusted annual rate of 13,071 units.

Source: CTV News