Building Permits, January 2024

In January, the residential sector in Canada experienced a 12.6% increase in permits, reaching $6.5 billion. The increase was primarily driven by a rebound in multi-unit construction intentions, particularly in Toronto, Kitchener-Cambridge-Waterloo, and London. Quebec and British Columbia also saw significant gains in multi-unit permit values. 

However, the overall residential growth was tempered by a decline in the total value of single-family dwelling permits, with declines occurring in nine provinces. Across Canada, 15,200 new dwellings in multi-unit buildings and 4,000 new single-family dwellings were authorized in January.

In Quebec, the total monthly value of non-residential permits increased 14.8% to $4.2 billion, following a 4.0% decline in December. The growth was attributed to the commercial component, which increased 34.5% to $2.3 billion, the highest monthly level recorded since April 2023. A $200 million permit for a new data centre in Lévis, Quebec, significantly contributed to the growth observed in January 2024.

Source: Statistics Canada

Sidelined Homebuyers Just Waiting for the Bank of Canada to Cut Rates

The Bank of Canada’s recent interest rate hikes have forced millions of potential homebuyers to the sidelines, with 56% of Canada’s adult population postponing their property search due to higher rates. A Royal LePage survey found that 51% of these buyers plan to jump back into the market if interest rates reverse. 10% state that all it would take is a 25 basis point cut, 18% are waiting for a cut between 50 and 100 bps, and 23% need a reduction of more than 100 bps before they will return to the market. The big question for many is when interest rates will start to go down. Most economists think the first cut won’t come until June.

Despite January’s inflation numbers being an improvement, the Bank of Canada still has reason to be patient. Policy makers will likely want to see several months of deceleration before pulling the trigger. The Bank may also be concerned about the recent signs of strength in the housing market, as house prices rebounded relatively strongly as we head into the busy spring season.

There is also the risk that the Bank of Canada will decide to wait beyond June if the economy rebounds, and market bets reflect this uncertainty. While the market sees a 30% chance of a cut in April, it has not fully priced in a 25 bps cut for June.

In the meantime, homeowners with a mortgage will continue to struggle, with nearly 80 per cent of borrowers renewing a mortgage may face “significantly higher payments” by the end of this year.

Source: Financial Post

CMHC Ends First-Time Homebuyer Incentive, a Program Critics Say ‘Made No Sense’

Canada’s housing agency, Canada Mortgage and Housing Corp., is ending its first-time homebuyer incentive program, which was criticized for being unhelpful. The program aimed to help first-time buyers by offering a loan of 5% or 10% of the purchase price to help with a larger down payment, reducing monthly payments. 

The incentive is due to be repaid after 25 years or when the property is sold, with the amount adjusted to reflect property value changes. However, the program faced eligibility issues, including limits on household income and the size of a mortgage the buyer could take on. 

James Laird, co-CEO of and president of CanWise mortgage lender, said the program was not useful as it didn’t help buyers put together a minimum down payment and the restrictions meant some borrowers qualified for smaller amounts than they otherwise would. 

The government-ownership component added complications to the convoluted program, which was poorly thought out. The government already helps first-time buyers by backing uninsured mortgages, but allowing amortizations to be stretch out over 30 years could lower monthly costs and eliminate a complicated co-ownership agreement. 

Personal finance author Clay Jarvis argues that assisting first-time homebuyers should remain a priority. “Even though the incentive failed, I hope it doesn’t discourage the government from trying innovative ways to get people into houses of their own,” he said. “Canada is never going to build enough homes to keep up with demand, so finding ways to help first-time home buyers afford what’s available needs to be a priority.”

The first-time homebuyer incentive was launched in 2019 with a $1.25-billion commitment.

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