Annual Pace of Housing Starts in Canada Slowed in July, CMHC Says
Canada Mortgage and Housing Corp. says the annual pace of housing starts in July fell compared with June. The national housing agency says the annual pace of starts fell to 272,176 units in July compared with 281,200 in June.

The drop came as the pace of urban starts edged down 0.65% in July to 249,001. The annual rate of urban starts for apartments, condos and other types of multiple-unit housing projects fell 3.1% to 184,759, while the pace of single-detached urban starts rose 7.1% to 64,242.

CMHC estimated rural starts at a seasonally adjusted annual rate of 23,175. The six-month moving average of the monthly seasonally adjusted annual rate of housing starts was 286,620 in July, down from 293,085 in June.

Source: Globe and Mail
Source: The Star

Canadian Home Sales Continued to Cool in July, Down 3.5% Month-Over-Month: CREA
The Canadian Real Estate Association says home sales cooled for their fourth consecutive month in July as new supply fell in about three quarters of all markets across the country. The association said that seasonally adjusted home sales totalled about 48,686 in July, down 3.5% from 50,459 in June and off 28% from their peak in March. On a non-seasonally adjusted basis, home sales totalled 53,870, down 15.2% from 63,5000 during the previous July.

CREA said the month-over-month decline in sales July delivered was the smallest of four consecutive decreases since March, but the month was still the second-best July on record. Christopher Alexander, Re/Max Canada’s senior vice-president, said the numbers show the real estate market is moving back to a typical cycle, where spring is busy and summer slows, but supply and demand are still unbalanced and people are tired from conditions earlier this year.

“There was such a frenzy in the early spring until halfway through April that turned a lot of people off because you were hearing about multiple offers constantly and huge sums of money over asking price being paid,” he said. “I’ve heard stories of people who are experienced investors, who’ve been looking for over a year and have put in more than 20 offers and still haven’t found the home that they want.”

Those on the hunt for a home had far less to choose from than they did in prior years or months. The seasonally adjusted number of newly listed homes dropped 8.8% to 65,757 in July from 72,137 in June. On a non-seasonally-adjusted basis, 69,322 homes were listed, an 18.9% drop from 85,448 last July.

The decline in new listings was led by markets like the Greater Toronto Area and Vancouver, which are known for being heated and regularly experience a frenzied pace in sales, along with Montreal and Calgary.

While recent months have cooled the overall markets, there are still signs of strain. The conditions seen in July tightened the sales-to-new listings ratio despite sales activity also slowing on the month, CREA said. The national sales-to-new listings ratio reached 74%, up from 69.9% in June.

“The slowdown we’ve seen in home sales over the last few months has not been surprising, given that the level of activity we were seeing back in March was unsustainable,” said Shaun Cathcart, CREA’s Senior Economist. “But we are not returning to normal, we are only returning to where we were before COVID, which was a far cry from normal. The problem of high housing demand amid low supply has not gone anywhere – it’s arguably worse. And after years of everyone agreeing that medium-density housing was the future, we are still referring to it as the ‘missing’ middle.”

The tightening of market conditions in July tipped a majority of local markets back into seller’s market territory, reversing the more balanced nature many markets exhibited in June, said CREA.

The association found that the average price of a home sold reached $662,000 in July, up 15.6% from the same month last year. Excluding the GTA and Vancouver, the average price was $132,000 less, CREA said.

Alexander believes the next few months will be interesting because interest rates remain low and buying power is high, but prices are still expected to rise in many markets. For example, the Toronto Regional Real Estate Board predicts the average home price will be $1,070,000 by the end of the year.

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

COVID-19 Has Led Young Canadians to Reassess Their Home Ownership Strategies
Before the pandemic, Adam Silverman, 22, imagined himself buying a detached home in downtown Toronto. When the pandemic caused prices to soar, he decided to forego downtown living in favour of cheaper cottage country real estate.

Housing affordability marked its sharpest deterioration in 27 years in the second quarter of 2021, with the median house in Canada costing $89,000 more than a year ago, according to a recent study from the National Bank of Canada.

Young Canadians such as Mr. Silverman have seen their attitudes toward real estate reshaped by the pandemic. Rising prices and the feasibility of working remotely have many considering the alternatives, which include renting for longer, moving back home or even moving outside of the expensive urban centres. For others, forced to work from home in cramped rented space and lured by low mortgage rates, the pandemic prompted a sooner than expected leap into home ownership.

Among prospective homebuyers, millennials and Gen Z are the most likely to consider alternative regions and communities, according to a report by research firm Leger commissioned by Re/Max.

According to a recent survey by research firm Abacus Data for the Ontario Real Estate Association. 46% of prospective Ontario home buyers under the age of 45 are considering moving out of the province in search of an affordable home.

Josh Young, 23, from Barrie, Ont., is taking it one step further: he’s looking at properties in the United States. “The cost of housing down there is ridiculously cheap,” he said, noting that he had seen properties in small American towns selling for less than $100,000 … He hopes to buy property outright and later rent it out as an income stream.

Young Canadians are also considering alternative ways to get on the real estate ladder. For Avi Grondin, a 24-year old entrepreneur, that meant taking advantage of new deposit structures to start paying for a new condo currently under construction. He will contribute around $30,000 annually until the building is complete in 2023, he said. Until then, he is living at his parent’s home in Toronto. Before the pandemic made remote work possible, he said, he would not have considered waiting. For others, alternative home ownership also means renting out a portion of their residence.

Estimates of how many young Canadians get help with down payments from their parents ranges – figures show from half to three-quarters depend on what has become known as “the bank of mom and dad.” Deepening economic inequality means those who can depend on the “bank of mom and dad” are seeing their head start growing. Job losses were concentrated among young and low-income workers, a disproportionate amount of whom are renters, according to a May, 2021 report from the Canada Mortgage and Housing Corporation (CMHC). According to Statistics Canada, high-income families are more likely to work from home.

For young Canadians without financial support, the pandemic has exacerbated existing inequalities, according to Nancy Worth, associate professor of geography at the University of Waterloo, who has studied young people’s perspectives on housing. “When we look at who is able to get into the housing market right now, it’s unlikely that it’s just because of individual saving,” Prof. Worth said. “Family wealth is really becoming a larger and larger factor – but we don’t all have grandparents that are going to leave us an inheritance.”

Prof. Worth’s recent research focuses on the experience of Canadian freelancers trying to afford homes. For workers who are self-employed, mortgages can be hard to secure. Vancouver-based Connor Wilson, 24, recently left his full-time job to focus on his start-up business. However, as a recently self-employed worker, he has a hard time qualifying for a mortgage. “We may eventually just put all our stuff in storage and just live out of long-term Airbnb stays for months at a time,” Mr. Wilson said. Putting off home ownership, he said, will allow him to search farther afield for homes more affordable than those in downtown Vancouver.

Source: Globe and Mail

It’s Not Just Demand, Growth in Housing Supply May Have Also Peaked in Canada After a Burst of Activity
Residential construction investment hit a record $43.4 billion in the second quarter of 2021 — surpassing $40 billion for the first time — but may be starting to cool off after a period of sustained growth. According to new data from Statistics Canada, investment in residential construction decreased by 5.8% to reach $13.8 billion in June, following a 3% decrease in May. All provinces reported drops except for Manitoba and Yukon territory. The decline follows a six-month run up in investment, which peaked in April.

Despite the slowdown, residential construction investment in the second quarter was 9.3% higher than the first quarter, stemming primarily from single-family home investments in the larger provinces.

While investment in single-family homes decreased by 7.3% in June, to $7.5 billion, they remain “well above” pre-pandemic levels, the agency said. The June decline was largely due to decreases in Ontario and Quebec, a reversal from Ontario’s position-leading national growth since May 2020.

According to Stat Can, investment in residential multi-unit construction was also down by 3.8% in June, to $6.2 billion. More than half of the provinces reported declines, with Quebec posting the largest — mainly in Montreal — followed by Ontario and British Columbia.

The cooling in residential investment comes as housing sales dropped for a fourth straight month in Toronto, but a shortage of available properties kept prices close to the highs they had climbed to earlier this year, according to the Toronto Regional Real Estate Board. Meanwhile, Vancouver’s real estate board said new listings in July were 12.3% below the 10-year average for the month. The number of sales and properties on the market also declined in Montreal.

It’s clear the market is still “incredibly healthy and positive,” said Kevin Lee, chief executive officer of the Canadian Home Builders’ Association, in an interview. “The fact that we’re slowing down a little bit, we’re slowing off compared to record levels and are still certainly much further ahead in terms of investment compared to prior to pandemic,” he said.

The investment gains has helped to begin chipping away at Canada’s housing supply shortage, Lee said, “but we still have a lot of catching up to do to get enough supply into markets to really help Canadians and help quell increasing house prices.”

The CHBA’s latest housing market index also points to “strong builder confidence in the coming months.” The agency’s residential construction industry indicator found that sentiment in the second quarter among single-family builders stood at a bullish 82.9 points and for multi-family 83.9, on a 100-point scale. The index is based on a panel of Canadian builders who rate market conditions for the sale of new homes now and in the next six months, and the traffic of potential homebuyers.

The CHBA noted the single-family market sentiment had dipped slightly from the first quarter, when it sat at 83.2, but said the change was indicative of a “slight levelling out of sales after the spring rush, and a reflection of ongoing challenges with building material availability.”

The association noted 80% of builders have reported increases in lumber costs of over $20,000 per house, and 30% saying they faced increases of over $40,000 per house. 42% of builders reported construction cost increases of more than $20,000 over and above lumber.

The multi-family market sentiment rose 2.3 points since the first quarter, which the association attributed to a “rebounding” market after a slowdown during the pandemic. “We have seen price increases in just about every construction material, and there was an expectation that would start to affect things a bit,” Lee said, noting rising costs have also hit renovation projects and the do-it-yourself market.

Source: Financial Post

Condos Are Getting Hot Again in Canada’s Biggest Cities as Rental Demand Surges
Condominium markets in some of Canada’s biggest cities have rebounded strongly this year, and agents and analysts say the market could once again return to pre-pandemic red-hot conditions as rental demand surges and inventories evaporate. The condo market, which had been hot for years, cooled quickly during the pandemic as investors fled, spooked by the exodus of renters from cities to live with families or find cheaper places elsewhere. Short-term rental demand dried up and first-time buyers flocked to the suburbs and smaller towns to work from home.

This year, the rental market is rebounding on the prospect of white-collar employees and students returning to offices and universities and a strong bounce back in immigration to make up for pandemic-driven declines. Younger buyers are also returning to condos after prices for bigger homes surged during the pandemic.

“Market confidence has rebounded very quickly,” particularly in Toronto’s downtown core, said Shaun Hildebrand, president of Toronto real-estate research firm Urbanation. In the second quarter, the downtown market made up the highest proportion of greater Toronto area condo resales in a decade.

About 12,700 condos sold across the greater Toronto area from January to April, surpassing the 10,300 transactions ahead of the previous market peak in 2017. And while they fell following a March high, they remained 15% higher than pre-pandemic levels.

Across Vancouver, where condo sales previously peaked in March 2016 at more than 2,250, they rose to almost 2,700 in March. Sales in July, while down from March, were 36% above pre-pandemic levels.

Prices have pulled back from March highs, largely due to continued lockdowns in some areas and seasonal trends, raising concerns in some quarters that the market has peaked. But real estate agents said a tightening rental market should boost investor demand, giving the market another leg up.

“We’ve seen a lot more investors slowly inching back” this year as vaccinations and economic reopenings increase confidence, said Steve Saretsky of Vancouver-based Oakwyn Realty. “As people see stability, that will draw in more investors over time,” he said.

The jump in demand has helped rapidly absorb last year’s glut of rental properties. Rental supplies in Toronto have fallen to half a month of inventories from about three months’ worth in November, said Realosophy Realty President John Pasalis.

He said demand might get another lift as people who moved to outer suburbs have second thoughts as they are summoned back to downtown offices. “Even with a hybrid (work) model, it will be hard for a lot of people who bought two hours out the city,” he said. “I wouldn’t be surprised if some people say ‘I made a mistake,’ and want to move back to the city.”

Shrinking available supply is further boosting the condo sales market. Construction started on about 1,143 apartment and condo units in June in the Toronto metropolitan area, down over a third from a year ago and almost half the level of two years ago.

And while ongoing construction of condos was at a record 86,149 units in the second quarter, about 92% of this was already pre-sold. The pullback in demand last year, combined with a dearth of land downtown, has dampened the launch of new projects, Hildebrand said. “Developers are somewhat reactionary,” he said. “Now that demand for downtown condos has returned, we will see more condos launching.”

Source: Financial Post