Housing Starts Continue to Trend Higher in October

In October 2023, housing starts in Canada increased by 1% to 256,280 units, according to a 6-month moving average of monthly seasonally adjusted annual rates. Montréal and Toronto experienced a 43% and 24% decrease in total SAAR housing starts, respectively. Vancouver saw a 35% increase, primarily due to a 40% increase in multi-unit starts.

Canada’s standalone monthly SAAR of total housing starts increased by 1% from September, reaching 274,681 units. Urban starts saw a 2% increase to 257,357 units, while multi-unit urban starts reached 209,887 units. Single-detached urban starts rose by 9% to 47,470 units. Rural starts reached a seasonally adjusted annual rate of 17,324 units.

“Despite the upward trend in October, driven once again by persistent multi-unit starts activity off-setting declines in single detached starts, actual year-to-date starts are down. We will need to find innovative ways to deliver more housing and close the supply gap in this challenging economic environment,” said Bob Dugan, CMHC’s Chief Economist.

Source: CMHC
Source: Cision Newswire

Canadian Home Sales See Downward Trend Continue in October

Canada’s biggest housing markets saw a “sizable decline” in sales during October, according to the national real estate body, as would-be buyers and sellers alike increasingly put their plans on hold. The Canadian Real Estate Association (CREA) said  that home sales recorded in October were down 5.6% from September, as activity slowed in “most” of Canada’s largest markets.

On a non-seasonally adjusted basis, the national average sale price for a home in October was $656,625. That’s up 1.8% annually and slightly above figures seen in September.

Another key metric, the sales-to-new listings ratio, showed Canada’s housing market continued to trend in favour of buyers at the negotiation table. This ratio slowed to 49.5% in October, reaching a 10-year low, CREA said. That compares to an all-time high of 67.9% recorded in April and the long-term average of 55.1%.

A higher sales-to-new-listings ratio implies a tighter housing market in favour of sellers; the lower the figure goes, the more choice and power buyers tend to have in negotiating transactions.

Rishi Sondhi, senior economist at TD Bank, said in a note to clients that the sales-to-new-listings ratio in Ontario is the lowest its been since the 2008-09 financial crisis. Alongside similar easing in British Columbia, Sondhi forecast that “prices will head lower in these two markets over the next several months, dragging down the nation-wide average price.”

Housing market chill expected until spring: CREA

But the trends towards a buyers’ market come as higher interest rates from the Bank of Canada limit buying power for many Canadians.

Darren King, economist with National Bank of Canada, noted that housing affordability is on the decline thanks to higher borrowing costs tied to the central bank’s elevated rates. That’s expected to keep sales “subdued” in the months to come, he said.

Larry Cerqua, chair of CREA, said in a statement on November 15 that “it appears many would-be buyers have already gone into hibernation” by November. A slowdown in the number of new listings in October also shows that sellers might be “shelving” their plans, Cerqua said. He added that “there are still a lot of people active in the market and looking to get deals done this year.”

King noted that the proportion of cancelled listings continued to rise in October, limiting the overall boost to supply in the market.

CREA senior economist Shaun Cathcart said that while housing demand is still “extremely high” across the country, October’s data is showing that pressure is likely to be suppressed until spring 2024 “at the earliest.”

“It will really come down to whether the Bank of Canada has to increase interest rates again, or whether by next March it’s simply a matter of how soon we’ll see the Bank make its first cut,” Cathcart said in a statement. He projected that the level of activity seen this past spring, when sales and prices jumped in many markets as the Bank of Canada’s rate cycle was on pause, could be what’s in store six months from now if there are signs the central bank is ready to cut rates.

To view the full results, visit the CREA website. 

Source: Global News
Source: CBC

Value of Building Permits Shoots Up 37% in B.C

New data from Statistics Canada shows British Columbia is leading the provinces when it comes to the rising value of residential construction permits. The report shows the value of residential permits climbed 37.2% for September compared to August as the value in the province climbed to $1.48 billion. The value is also up 8% compared to 2022.

The data also shows that 77.3% of the added value comes from projects in Vancouver, Kelowna and Victoria, as the three cities represent 79.9% of the new housing projects authorized in the province in September.

Newfoundland and Labrador, Prince Edward Island and Nova Scotia each also saw more than 10% gains in permit value for the month.

Overall, Canada added permits for 21,700 new housing units for the month and 64,400 in the third quarter. Permit value climbed 3.4% in the quarter, according to StatCan.

The figures come as the federal government pushes for more housing construction to offset affordability issues in the sector, including cutting the GST on new rental builds and plans to convert some federal property into 29,200 new homes by 2029.

A 2022 report from the Canada Mortgage and Housing Corporation found Canada must add 5.8 million new homes between 2021 and 2030 to achieve affordability.

When it comes to non-residential properties, the total value fell 21% to $4 billion from August to September, but climbed 18.7% compared to 2022. The total value also climbed 7.3% in the third quarter.

To view the full results, visit the Statistics Canada website. 

Source: BNN Bloomberg
Source: Statistics Canada

Ontario Housing Starts Up, but Still Far Off Levels Needed for 1.5 Million New Homes

Ontario’s fall economic statement showed that projections for housing starts are up from what the province had expected when the spring budget was tabled, but still well short of the pace needed to build 1.5 million homes. The Progressive Conservative government has pledged to build that many homes within 10 years, by 2031, but at no point in the next few years does the province expect to even hit 100,000 new homes per year.

Finance Minister Peter Bethlenfalvy’s fall economic statement shows the province expects to see almost 90,000 housing starts in 2023, more or less the same levels for the next two years, then up to about 94,000 in 2026.

Municipal Affairs and Housing Minister Paul Calandra wrote in a letter to municipalities that the province was aiming for 110,000 new housing starts in 2023, ramping up to 125,000 in 2024, 150,000 in 2025 and 175,000 per year in each subsequent year.

But Bethlenfalvy said he’s not willing to say the government’s target of 1.5 million homes is not achievable. “No, you’ve got to keep going … It’s not about are we going to build 1.4, 1.6, 1.5 (million). The issue is that municipally, federally, provincially, we’ve got to work together to try to do the best we can.”

Calandra, who became housing minister in September, recently reversed two of the key moves on housing made by his predecessor, Steve Clark.

He introduced legislation to return portions of the protected Greenbelt that had been removed for housing development after reports from the auditor general and integrity commissioner found the process favoured certain developers.

He also walked back plans to expand some municipalities’ urban boundaries, saying it had become clear the previous minister’s office was too involved in the decisions.

The fall economic statement also includes a new Housing-Enabling Water Systems Fund, which would make $200 million over three years available to municipalities for the repair, rehabilitation and expansion of water, wastewater and stormwater projects.

Green Party Leader Mike Schreiner noted that the Association of Municipalities of Ontario has estimated that due to a recent provincial law, municipalities will be out $5.1 billion in money they need to fund critical infrastructure for housing, such as sewer lines and roads.

“If you talk to local municipal leaders, they will tell you that when the government took $5.1 billion away from them, that’s the money they need to service homes,” he said. “I don’t know about the rest of you, (but) I want to live in a home that when you turn the tap on, water comes out. When you flush the toilet, it goes somewhere.”

The government said the new water systems fund complements the Building Faster Fund, which is set to dole out $1.2 billion over three years to municipalities that meet at least 80% of their provincially assigned housing targets.

It was announced after municipalities had been raising concerns for months about a provincial law that cuts some of the fees developers pay, which the communities use to fund housing-enabling infrastructure. The former municipal affairs and housing minister had contended that municipalities were sitting on billions of dollars in reserve funds and launched third-party audits of municipal finances to see if the municipalities do indeed have a shortfall.

Source: Financial Post

Bank of Canada Says It is Not Seeing the Decline in House Prices It Had Expected

The Bank of Canada says higher interest rates have not dragged down home prices as much as expected, because a shortage of homes in the country is keeping values elevated.

The central bank kept its benchmark interest rate unchanged in October at 5%t – up from just 0.25% in March, 2022. Over that same period, the typical price of a home across the country has fallen 13%.

“Normally, house prices move pretty lockstep with interest-rate increases,” Bank of Canada senior deputy governor Carolyn Rogers said at a news conference that, “[w]e’re not seeing the decline in house prices that we would expect,” she continued, adding that there is a “structural lack of supply” of housing in Canada, and that until it is fixed, “interest rates on their own are not going to help us get back to a housing affordability situation or solution.”

Bank of Canada Governor Tiff Macklem, at the same news conference, said structural problems in the housing market are contributing to high inflation and impeding the bank’s efforts to cool growth in consumer prices.

The typical home price across the country fell as much as 17% after the Bank of Canada started raising interest rates in 2022. But home values started to rebound in February 2023 after the central bank said it would take a break from hiking rates. That break lasted four months, and home prices have started to fall again. The country’s typical home price was $741,400 in September, according to the Canadian Real Estate Association’s home price index.

The average monthly rent in Canada has topped $2,000, and typical home prices in Toronto and Vancouver are more than $1-million. The cost of housing in smaller cities is significantly higher than it was before the pandemic, with home prices up by at least 50% in places such as Guelph, Cambridge and Barrie in Ontario.

The federal government has taken steps intended to spur the creation of more housing. It recently announced a tax break designed to help developers build more rental units, along with plans to boost government-backed financing for the sector. The Ontario government has also cut taxes for new rental home construction.

Ms. Rogers welcomed these government efforts. Ms. Rogers noted that the bank’s target is not to reach a specific level of interest rates or mortgage rates. The focus, she said, is on bringing inflation back under control.

Source: Globe and Mail