Value of Canada Building Permits Down 14.0% in December

The total value of building permits in Canada decreased 14.0% from November to $9.2 billion in December, the lowest monthly level since October 2020. Declines were recorded in both the residential and non-residential sectors. On a constant dollar basis (2017=100), the total value of building permits declined 14.2% to $5.8 billion in December.

The residential sector saw higher intentions for the single-family component, but it was not enough to overcome the decline in the multi-unit component, while both the industrial and commercial components were up in the non-residential sector. The value of building permits were down in nine provinces, with the largest decrease recorded in Ontario.

Annual review of 2023: Record high in institutional construction intentions largely due to investments in hospitals and long-term care facilities

Year over year, the total current dollar value of building permits fell 3.2% to $132.2 billion in 2023. However, rising material and labour costs inflated nominal building permit valuations. On a constant dollar basis (2017=100), the total annual value of building permits decreased 8.9% from 2022 to $84.2 billion in 2023.

To read the full report, visit the Statistics Canada website.
Source: Reuters
Source: Statistics Canada

Real Estate Industry Left Playing the Waiting Game After Bank of Canada Hold

The Bank of Canada’s decision to keep its key overnight interest rate steady at 5% for the fourth time was widely expected by the real estate sector, but whether it will be enough to bring buyers back to the market remains up for debate.

“(The) decision to hold rates is certainly a welcomed one for many Canadian homebuyers,” ReMax Canada president Christopher Alexander said in response to the central bank’s Jan. 24 announcement. Alexander, who pointed to the rush into the market in the early days of the pandemic, said he is hopeful the hold will be enough to induce more activity, “especially for those that have been taking a ‘wait and see’ approach and are waiting for the right time to re-enter the market.”

Mortgage strategist Robert McLister, however, pointed to a different recent historical precedent. “Last January [2023] we saw CREA’s average home price rocket 19% in just five months following the bank’s first rate pause. That’s an extraordinary move,” McLister said. “Will we see the same this spring? It’s not the expectation but if mortgage rates slide into the mid-to-low-four-per-cent range, I sure as heck wouldn’t bet against it.”

James Laird, co-CEO of and president of CanWise mortgage lender, said if the central bank had revealed specifics about a cut that would have jump-started the housing market. “Any indication of rate cuts from the Bank of Canada would have put upward pressure on home prices immediately,” he said.

Without them, there could be a shift in the opposite direction, given that lenders had been holding off raising mortgage rates after the recent rise in bond yields. “Lenders will consider moving fixed rates higher since there is no new information from the bank,” Laird said.

One factor working against a prolonged surge in home prices could be the Bank of Canada itself: Central bank governor Tiff Macklem said a jump in home prices could induce the bank to renew its interest rates hikes.

According to the Canadian Real Estate Association (CREA), home prices are forecast to rise in 2024 and 2025, after the MLS Home Price Index (HPI) ended 2023 up 0.7% in December. The average price was also up 5.1% over the previous December to $657,145.

Should there be a resurgence in the real estate market, McLister said rate relief would likely be more gradual. “If housing activity sizzles more than expected, mortgage rates could remain at a higher altitude, for longer. That doesn’t mean prime rate will hold at 7.20%, but it would imply less rate relief ahead,” he said. “The pace of cuts could be slower and the trough in rates could be higher.”

According to McLister, if housing demand continues to contribute to inflation, the Bank of Canada will face a difficult decision. It may have to choose between tolerating higher home prices or risking negative effects on the broader economy by maintaining high-interest rates.

Source: Financial Post

Sales of Newly Built Homes Hit Lows Not Seen Since 1995

Sales of newly built homes in the GTA fell to lows not seen for nearly three decades in 2023, a new report from the Building Industry and Land Development Association has found. 

And potential buyers of new homes are expected to stay on the sidelines until interest rates decline, said Justin Sherwood, BILD’s senior vice-president of communications and stakeholder relations, something he said may happen as soon as this spring. “I think we’re going to be in a hurry up and wait situation until we start seeing a signal from the Bank of Canada that (interest) rates are declining,” Sherwood said. “So demand is sort of getting bottled up.”

According to the report, 19,252 newly built homes were sold in the GTA during 2023 — more than 6,000 fewer homes than in 2022 and the lowest number since 1995. That’s in line with the resale real estate market, as earlier in January a report from the Toronto Regional Real Estate Board said home sales hit a 23-year low in 2023.

Sherwood said the sluggish figures for new homes, which are half of what he would expect for a typical year, can be attributed to high interest rates and challenges for potential homeowners in qualifying for a mortgage. On January 24, the Bank of Canada held interest rates at 5% and announced that interest rates are likely to come down later this year.

Sales of newly built single family homes were up 34% in 2023 over the previous year, with 5,869 sales in the past year. Condominium sales, however, fell by 36% compared to 2022 with 13,383 sales.

Sales for the month of December were sluggish, with 554 total sales — only two homes more than the same month in 2022. There were 400 condos sold, a 2% decrease from December 2022, and 154 single family homes, a number which rose by 6% from the year prior. “December (and) pretty much the whole fall was fairly consistent, which was it performed below the 10-year average,” he said. 

The benchmark price for single family homes in December fell 8.5% from the previous year to $1,604,997. The price fell 7.5% for condos, to $1,047,288.

Sherwood foresees a change coming soon in the market — when interest rates start to come down, he believes demand for new homes will pick up substantially. During 2023, the number of pre-construction homes began to fall, and Sherwood says the market could struggle to keep up with renewed demand for new homes in future.

He said that interest rates may start to come down in the next few months, leading to a better market for buyers. “I think the spring housing market will be a good housing market,” he said.

Source: The Star

Leon’s Furniture Plans to Build New Toronto Neighbourhood With Nearly 4,000 Housing Units

Leon’s Furniture Ltd. says it’s planning to build upwards of 4,000 homes on land around its head office at the intersection of two major Toronto highways. It will be Leon’s first foray into residential building. Leon’s Furniture Ltd., or LFL, owns 430 acres of land across the country and is figuring out how it can make money from its vast acreage.

The furniture retailer says it has already secured a rezoning of the 16.2-hectare parcel of land in Toronto to allow housing development, which had previously been reserved for employment use. Leon’s says next steps include completing a secondary plan with the City of Toronto and building a new flagship store at the site, with development of the master-planned community to follow. It says the residential plan for the site, southeast of where the 400 and 401 highways intersect, includes townhouses, mid- and high-rise buildings and community space.

Leon’s chief executive Michael Walsh says the plan to densify the property will help meet the overwhelming demand for additional housing in the city, while generating value for shareholders. 

Currently, LFL has 303 stores, 22 warehouses and eight distribution centres in the country. Nearly three-quarters of LFL’s 430 acres is pretty much vacant with parking lots, fields or farmland. LFL has already said it wants to hive off some of its real estate into a publicly-traded REIT, or real estate investment trust. “It’s about making the best use of the land,” said Mr. Walsh.

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

Toronto’s ‘Excessive’ Document Requirements for Reno Permits Could Be Hurting Housing Supply, Report Suggests

Toronto is one of the worst cities in Canada to get a renovation permit due to “excessive” documentation, resulting in even further headaches for those wishing to build a second suite on their lot to boost much-needed housing supply, a new report has found. For Canada to meet its need for an additional 3.45 million homes by 2030, increasing densification in cities is a meaningful way to reach that target, the Canadian Federation for Independent Business said in its new report.

Increasing supply from existing units can play a significant role in addressing the current housing shortage, as a large portion of seniors will opt for aging in place, rather than putting their current houses on the market, the report added. “However, onerous permitting processes across Canada’s municipalities must be addressed if governments hope to capitalize on this possible solution,” it said. 

Using a “simple” bathroom renovation as a starting point, the study shows the hurdles homeowners experience when deciding to build a secondary suite on their lot, said Francesca Basta, research analyst and report co-author, adding that the hurdles could deter people from pursuing projects that could support new builds. “The report addresses the barriers households face, but they’re a huge part of the solution. Building secondary suites is one of the ways to address the crisis and there are many ways municipalities can improve.”

All 12 municipalities examined in the report require various documents from homeowners, which include site plans, floor plans, construction plans, and building and trade (plumbing, electrical and gas) permits, to be submitted for a bathroom renovation, ranging from five documents in Edmonton, Calgary and Charlottetown, to 10 in Toronto and 11 in Vancouver. On average, seven documents are required for a $20,000 bathroom renovation project.

“These documents can be considerable sources of red tape, with some municipalities requiring forms that necessitate the services of an engineer or other professionals,” the report said, “adding to the overall cost of the application.” 

The renovation processes in Toronto and Vancouver were the most burdensome in terms of documents (forms and permits) required in an application, the report said. 

Required documents include forms such as floor plans, an application to construct or demolish, even a review by an architect and engineer, which could add anywhere from 5% – 20% of the construction cost depending in which municipality the renovation takes place, on top of the permitting costs and the $20,000 budgeted for the renovation. The document requirements do not just add time and possibly lengthy delays to the renovation process, but also significant cost, Basta said. 

According to a 2023 study from the Building Industry and Land Development Association (BILD), approval delays can add 8% – 14% in additional construction-related costs annually, amounting to between $9 and $19 per square foot, or roughly $21,000 to $58,000, the study said. 

Streamlining the application process is one of the easiest ways the city can improve wait times, Basta said, and reduce the number of documents needed for a project. A spokesperson for the City of Toronto said the city is “committed to streamlining processes and enhancing efficiency in all municipal services, including building permit approvals, and continuously assesses and updates procedures to align with the needs of our residents and businesses,” in an emailed statement on Monday afternoon. 

Around 70% of the regulations are necessary, Basta said, but noted 30% of the red tape can be reduced.

Digitizing the application process and ensuring documents aren’t doubling up on required information are just a couple fixes, she said, as well as auto approvals for permits online for “small jobs” such as furnace or radiator fixes. The auto approvals are a “game changer” which can “unclog” the system and has already been adopted in the City of Richmond, B.C. 

However, in Toronto homeowners don’t need permits to replace furnaces, the city spokesperson said. In 2023, Toronto launched the Express Services program to have less red tape for permit applicants proposing smaller, less complex projects. Roughly 90% of applications are being reviewed and issued within three business days, they said. 

The City’s Building Division is undergoing an “organizational” and “service delivery model transformation,” the city’s statement said, “to modernize operations and enhance customer experience. This client-centric transformation is already addressing recommendations suggested by the CFIB to provide clients with a clear, consistent and predictable experience.” 

Source: The Star