1. Canadian housing starts meander up, sales fluctuate
Canadian housing starts surged in September compared with August, surpassing market expectations, data from CMHC showed on Tuesday. The seasonally adjusted annualized rate of housing starts rose to 220,617 units in September from a 184,201 unit rate in August, according to a report from the Canada Mortgage and Housing Corp. That was well above analysts’ expectations for a slight rise to 190,000 units.
The gains were broadly based, with construction of multiple units – typically condos and rental apartments – up 22.3 per cent to 137,803 units, and single-detached urban home starts up 14.5 per cent to 64,045 units. Homebuilding rose in all regions except Ontario, where multiples softened to levels the CMHC said were “more consistent with household formation.”
Canada’s housing market has enjoyed a long expansion, but the start of a 15 per cent tax on foreign buyers in Vancouver in August has cooled that market, while the largest market, Toronto, continues to boom. Analysts said the building boom should cool soon.
Currently, the Toronto real estate market is showing no signs of slowing down. But the latest numbers suggest the suburbs are continuing to catch up — with the average price of homes in some areas outside of the downtown core rising more than 25 per cent. The Greater Toronto Area continues to see double-digit growth in the third quarter of 2016 with the aggregate price of a home rising 13.6 per cent.
The search for affordability in the Toronto region’s hyper housing market is changing the character of some traditionally blue-collar communities in the 905 area code around the city. The average Toronto-area home price rose 13.6 per cent to $693,154 in the third quarter compared to the same period last year. That compares to a national year-over-year increase of 12 per cent to an average cost of $545,414.
The strongest Toronto-area growth was in the communities surrounding the city, with 10 out of 11 communities in the 905 area reporting double-digit growth. Those already owning homes in Mississauga and Brampton should be delighted with the latest news about the GTA’s red hot housing market as Brampton prices rose by 12 per cent over last year while in Mississauga, the increase was 9.6 per cent.
Overall, housing starts in the Ontario region were trending at 71,289 units in September, down from 74,244 units in August. The trend is a six month moving average of the monthly seasonally adjusted annual rates (SAAR) of housing starts.
In the east of the province, home prices in Ottawa continue to rise at roughly twice the city’s inflation rate, but are still a bargain compared to many other urban centres across the country. Housing starts in the Peterborough census metropolitan area were trending up at 656 units in September compared to 524 units in August.
Heading west, construction of new single detached homes in Waterloo region have hit a new six-year high as house hunters turn to new builds in an increasingly competitive housing resale market. Housing prices in Hamilton continue to rise as homebuyers look for cheaper alternatives to the GTA. Home sales are so hot in Grey Bruce Owen Sound that 2016 is easily on pace to the be the “best year ever”.
Meanwhile, the total housing starts in the Windsor Census Metropolitan Area was stable at 1,436 units in September, compared to 1,420 units in August and housing starts in Thunder Bay Census Metropolitan Area were trending at 194 units in September, up from 161 units in August.
Though Winnipeg’s real estate market prices have remained stable for another quarter, young buyers are worried their chances at getting financing for their first homes will soon be in jeopardy. Winnipeg listing prices rose by about 2.3 per cent from July through September — a stable increase compared to the national average of about 12 per cent.
The running estimate of housing starts in Regina and area for this year reached 1,781 in September, up slightly from a prediction made in August. Housing starts in the Saskatoon census metropolitan area were up in September. But, a new survey of housing prices paints a mixed picture of real estate prices in Regina and Saskatoon over the last year — some up, some down.
September was the most active month so far this year for housing starts in Calgary but 2016 remains especially slow for home building in the city, according to data released Tuesday. The price of a home in Calgary took a bit of a dip year over year but it wasn’t as sharp a decline as many had feared. The aggregate price of a home in Calgary is $457,044, down 1.6 percent from the year before.
Not all is lost though. British Columbia’s new tax on foreign buyers in the Vancouver region is expected have mild ripple effects in other Canadian markets, with cities like Calgary and Montreal positioned to attract some non-resident purchasers. Not surprisingly then, real estate market activities in Greater Montreal Area continued to strengthen.
Speaking of Vancouver! Starts in the Vancouver Census Metropolitan Area were trending at 29,741 units in the month, up from 28,123 units in August. Housing starts in the Kelowna area cooled off in September – trending at 1,859 units, down from 2,073 in August. But, September was a good month for Prince George housing starts. The city has recorded 259 new housing starts in 2016.
2. Mortgage stress test stressing people out
Ottawa has no further plans to clamp down on Canada’s housing market, although the government remains fearful of the dangers of a continuing rise in residential real estate prices. Meanwhile, potential homebuyers grapple with the federal government’s stricter mortgage rules. The latest reforms, which are set to go into effect on Monday, are designed to cool the country’s housing market and ensure homeowners do not take on too much debt.
Bank of America Corp. cut growth forecasts this quarter and next on the view Morneau’s measures — which apply a more strict standard to borrowers and close a loophole on foreign buyers — will hurt sales. The new rules will cool the markets in Toronto and Vancouver and improve credit quality, according to the Fitch ratings agency, while most Canadian banks are still evaluating the impact of the new measures and will closely monitor housing market data.
The chief executive at one of Canada’s biggest banks is supportive of the new package of federal measures aimed at easing risks in the country’s real estate system. CIBC’s Victor Dodig said Wednesday that government changes announced last week, which include tightening mortgage lending rules, are “prudent” and will help shore up the housing system.
But, Canada’s new mortgage rules are going to make it harder for non-bank lenders to operate. This could see Canadians pay higher rates on their loans, mortgage brokers claim. Financial institutions warned that the rules will cause mortgage rates to balloon, which in turn might push consumers towards unregulated lenders. Some non-bank lenders have suspended their mortgage lending operations amid new rules that, among other things, require a “stress test” to ensure homebuyers can still make their payments if interest rates go up.
Many people are simply wondering why the federal Liberal government wants to make it harder for young people to buy houses. That’s going to be the consequence of the new mortgage rules. The changes will make mortgages tougher to get for those who have a down payment of less than 20 per cent. New buyers will be most affected. Under the revised rules, homebuyers must be able to afford not only the actual five-year mortgage they are seeking, but the same mortgage at the Bank of Canada’s posted rate, which is about twice what banks charge. This is going to radically reduce affordability. For example, a person with a $50,000 pre-tax income could qualify for a $277,434 mortgage now. Under the new rules, that drops to $222,617. The change makes buying the $300,000 starter townhouse significantly less achievable.
On the plus side, new rules aimed at cooling Canada’s housing market may lead to increased sales in the C$15 billion ($11 billion) market for commercial paper backed by residential mortgages, analysts said. Woo-hoo!
3. BC Real Estate Council interested in “public interest”
The Real Estate Council of B.C. has nine new “public-interest members” chosen by the provincial government. The new appointments, announced Wednesday, are the first since Premier Christy Clark announced the council would no longer have the right to self-regulate the province’s real estate industry. Several of the people appointed to the council do not work in the real estate sector.
The council will become one of several real estate boards that will be overseen by the Office of the Superintendent of Real Estate, which will be report to superintendent of real estate Mike Noseworthy beginning on October 17. Well that’s good, it’s not like Noseworthy’s inbox is already higher than Tommy Chong.
A new property transfer tax on foreign buyers in Greater Vancouver may have slowed home sales activity, but prices continued to skyrocket 30.6 per cent in the third quarter in one “final hurrah,” a new survey released Thursday said. Repeat home sales prices were up 24% year-over-year in Vancouver in September—the highest gain of all major cities across the country. This even though foreign buyers dropped to one per cent of the Vancouver resale market after being as high as 19 per cent, according to a new report from Canada Mortgage and Housing Corp..
Don’t worry, Vancouver’s housing market will continue to cool, but won’t collapse as some have predicted. The 15 per cent tax on foreign real estate buyers enacted this summer may have dampened foreign interest and will continue to do so in the short term, but Vancouver will remain attractive to investors from other countries, according to an RBC Economics report released October 12.
Noseworthy can at least be heartened by the knowledge that reconstruction of the publicly-owned Heather Place rental property on the west side of Vancouver may start next year. But first he will need to deal with The Okanagan Mainline Real Estate Board, which said Morneau’s rule changes could slow down the Okanagan’s hot housing market.
He might also want to have a chat with the man on the phone, who is cheery and confident, with the practised ease of someone accustomed to calming anxiety. There is no need to worry, he says. Buying a home in Vancouver is simple.
4. Increase in homelessness pops housing bubble for many
The impact of Vancouver’s famously high real estate prices on the home-ownership dreams of young people is anything but simple. And it could affect the Canadian economy for decades to come, according to one housing policy expert. Scottish economist Duncan MacLennan will be one of the international panellists participating in the City of Vancouver’s re:address conference on housing affordability later this month. He said housing is about more than just human rights.
Meanwhile, homelessness advocates are asking the federal government to focus billions in available money for housing on those who need it the most, including aboriginals and the working poor. In a submission to consultations on a national housing strategy, the Canada Housing and Renewal Association says those groups often face greater pressure to find affordable housing.
Not at all affordable, Toronto’s rental market is the hottest it has been in years, with bidding wars breaking out and rents soaring, according to a new study that predicts Ottawa’s new stricter mortgage qualification will make the region’s rental market even less affordable. In related news, a leading Canadian economist is adding his voice to those who argue that the Ontario government’s growth plan is largely to blame for pricing homes beyond the reach of many buyers.
Luckily, Canada’s most populous province is considering measures to enhance housing affordability while avoiding moves to actively lower home prices, people familiar with Ontario’s plans said. It’s clear more housing is needed, for owners and renters alike, in Canada’s largest cities, before a place to live becomes too scarce a commodity.
5. To hell with this housing market
Aaron Urion said to hell with the Vancouver housing market. Many of Toronto’s millennials have had it with the city’s relentless growth in housing costs, with 45 per cent saying they are seriously thinking about leaving the city. You can do the same to both the Toronto and Vancouver markets by checking out how real estate is doing in seven major Canadian markets. Daniel Gable? He said to hell with any house costing more than $10,000.
One group saying to hell with Toronto is Retailers, who will bear a disproportionate burden of a commercial parking levy’s effects if the city decides to implement such a revenue tool — and it will be small merchants that suffer most, says a coalition of real estate and business groups. In November, Toronto’s executive committee is expected to consider the tax among a dozen new ways of bolstering the city’s bottom line. It’s not certain they will adopt any of the ideas. A parking levy of between 50 cents and $1.50 per day on every paid and unpaid parking spot could generate up to $575 million annually. While we’re at it, most Torontonians want to charge foreign buyers of city real estate a special tax, according to a poll commissioned by Scarborough-Agincourt councillor (Ward 39) Jim Karygiannis.
Luckily for the foreign buyers, China’s banking sector has “little to worry about” from its fast growing mortgage lending business, an official with the China Banking Regulatory Commission said on Thursday. More worrying is that Canadian real estate agents scored 45 per cent on a Juwai survey testing knowledge of China. This lands Canada in the bottom half of countries surveyed by the company.
Getting serious again though, some misconceptions about housing must be addressed. Just don’t have the misconception that Airbnb Inc. is to blame for soaring housing prices in Vancouver and Toronto!
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Gavin is a media relations consultant and news junkie based out of Collingwood, Ontario.