Toronto condo completions rose 124% this summer, construction activity remains near record high

Construction crews were busy completing work on 6,816 condo units across the Toronto region this summer.

The third quarter total represented a huge leap over last year, rising 124 percent above the 3,038 units completed in 2019’s third quarter, according to new data from research firm Urbanation.

The surge in condo completions over the summer pushed the total completed through the first nine months of this year to 17,596 units, 47 percent higher than through the same period in 2019.

What’s most impressive, according to Urbanation, is despite this substantial rise in completions, there are still 78,156 units under construction in the Toronto region. The firm said that it expects 5,411 units to be completed in the final quarter of the year, bringing the annual total to a record-breaking 23,007 units.

A similar completion total is expected for 2021, with 70 percent of completed units located in Toronto-proper.

The city’s pipeline of new construction condos has been burgeoning for several consecutive quarters now, but the record-breaking completion numbers are somewhat ill-timed from a demand perspective.

Condo resale listings have risen considerably through the summer and fall while the city’s rental market is also seeing a sharp increase in units listed, forcing investor-owners to slash prices in order to woo renters.

In the same report, Urbanation said that new condo sales remained strong in the third quarter, but sales levels diverged when the suburban 905 area surrounding the city and the Toronto-proper 416 area were compared. New condo sales rose 106 percent in the 905 in the third quarter, while the 416 saw sales decline by 16 percent.

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Seven Ways COVID-19 Is Affecting Canadian Housing: RBC Report

Among the seismic shifts the pandemic has spurred across the Canadian economy, few are as profound as those that have rocked Canadian real estate. The battle to control the spread of COVID-19 has not only altered how and where Canadians work, but also led many to question where and how they want to live. Rural and suburban areas that once lagged desirable city addresses are now roaring hot as homebuyers wearied by lockdowns seek bigger yards and larger living spaces. Tight downtown condo markets that previously commanded expensive rents are now thick with supply. And the flow of immigrants that typically fuel demand for housing of all types has slowed to a trickle. In just months, the landscape of Canadian real estate has been shaken to its core. Whether the changes are permanent or transitory is an open question, but one thing is certain, 2020 has been a year like no other for Canadian housing markets. Here we look at seven ways COVID-19 has affected housing.

Peak home resale activity shifted from spring to summer

Lockdown orders sent a shock through the housing market in March, suspending open houses and flat-lining sales during what is typically a high season for the market. Spring activity wasn’t lost though. As social distancing restrictions were relaxed in the summer, the market sprang back to life. This led to record-high activity over the July-September period. Pent-up demand was largely exhausted by September and we expect a return to more normal levels later this fall.

Rental markets cooled in some of Canada’s largest and least affordable cities

Following years of steady increases, rent is now declining in Toronto, Montreal and Vancouver, especially in higher density, downtown locations. Underlying the shift: is a surge in rental supply as the short-term rental business dries up and new purpose-built rental and condo units are completed. It all comes at a time when many renters have come under heavy financial pressure. Renters tend to earn less than homeowners, and it’s been lower-income and younger Canadians who suffered the most job losses during the pandemic. Demand near post-secondary institutions has softened too, due to the switch to online study and the closing of our border that kept many foreign students abroad.

Condo investors are looking to sell

As rents soften and vacancies rise, condo listings are spiking in Toronto, Montreal and Vancouver—albeit from low levels. New, stricter regulations in Toronto are adding to the impulse to sell – at a time when new condo completions are bringing more units to the Toronto and Vancouver.

City-dwellers are pulling up stakes on a quest for larger living spaces—often in cottage country

Big-city living has lost some of its luster with social distancing measures severely restricting cultural life and socializing opportunities. Working and studying from home is now a reality for many, further eroding the attachment to big cities. Meantime, affordability issues are driving many Canadians further afield into smaller towns and cottage country, where larger living spaces are available. Clearly COVID-19 has lit a fire under cottage country real estate.

A silver lining? The pandemic made it ‘more affordable’ to own a home

With the Bank of Canada’s overnight rate cut to close to zero and sharp declines in bond yields mortgage rates have been pushed to their lowest levels on record. This slightly reduced mortgage payments on a home priced at market value despite prices continuing to rise at an accelerating pace in most of Canada. Generous government income support programs for households most affected by COVID-19 also made it easier to carry mortgage payments. Overall, Canadian households received more money ($56 billion) from government aid programs such as CERB and other transfers in the second quarter than they lost in wages and salaries due to the pandemic ($23 billion). On net, household disposable income spiked 11% in Canada. This substantially increased buyers’ purchasing power.

A key pillar of Canadian housing demand has been shaken: immigration

COVID-19 has severely disrupted the flow of immigrants moving to Canada—a major source of housing demand. In the second quarter of 2020, the number of new permanent residents plummeted 64% and more non-permanent residents left our country than came to it. The impact was dramatic: total net migration collapsed 94%. With the border poised to remain closed to all but essential travelers, and most post-secondary students continuing to study at home until immunization from COVID-19 reaches high levels in Canada and abroad – immigration is unlikely to rebound soon. To date, weak in-migration has had minimal impact on Canada’s overall housing market. But if sustained, we expect it will temper rental demand in larger markets as immigrants tend to rent in their first 5-10 years after landing into our country. This could have negative repercussions for condos and longer term, an extended period of weak in-migration could deplete future cohorts of first-time homebuyers.

The pandemic put many homeowners on the defensive

The sheer economic shock of COVID-19—with unemployment soaring to unprecedented highs—directly impacted many Canadians and put many others on the defensive. Almost 780,000 people opted to defer mortgage payments since the start of the pandemic, representing 16% of mortgages in bank portfolios. By the end of August, the vast majority of mortgage holders whose deferral period has expired had resumed regular payments. However, it remains unclear how many will ultimately be able to continue as outlook for jobs remains bleak for many Canadians. This poses a risk for the housing market, especially in areas where the economy is shakiest. Financial strains could potentially unleash a wave of properties for sale.

Robert Hogue is a member of the Macroeconomic and Regional Analysis Group, with RBC Economics. He is responsible for providing analysis and forecasts for the Canadian housing market and for the provincial economies. His publications include Housing Trends and Affordability, Provincial Outlook and provincial budget commentaries.

Disclaimer (RBC)

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Canada’s housing market has fully recovered from pandemic shock: RBC

Even the most bullish housing observers would have had a tough time anticipating just how quickly Canada would bounce back from the pandemic shock that froze up market activity in the late winter and spring.

But, after what RBC Senior Economist Robert Hogue calls a “spectacular rally,” the market has fully recovered and then some. National home sales hit an all-time high for September, climbing over August and up 46 percent over 2019’s total for the same month.

What comes next, however, is still shrouded in uncertainty.

In commentary published earlier this month, Hogue said that while the summer housing rally had been extended into September, the market has likely expended all the pent-up demand that had accumulated from earlier in the year at the height of the pandemic shutdowns.

The economist wrote that the market is set to cool off without the pent-up demand to keep it aloft. Tight supply relative to current demand for housing will also have an impact on sales numbers through the fall.

In what will be long remembered as a bizarre year for Canada’s housing market, it’s far from unusual for home sales to slow as the year winds down. But Hogue believes the next few months should at least offer some clues as to where the market is heading in 2021.

“We’ll see whether low interest rates and changing housing needs can keep demand boiling hot, or whether the exhaustion of pent-up demand and plummeting immigration will cool things down,” Hogue wrote.

“We’ll also learn how many current homeowners will be in trouble once mortgage payment deferrals expire and are forced to sell,” he added.

RBC has maintained a relatively positive outlook on the country’s housing market through the pandemic. Hogue said that answers to these questions, as well as a better view into how the second wave of COVID-19 plays out, should provide a better understanding of the risks as we move into the second calendar year of a pandemic-affected housing market.

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Canadian home sales up nearly 46%, shattering September record

It was another record-breaking month for the Canadian housing market. September sales rose 45.6 percent over the previous year with no obvious signs of slowing after several months of remarkable levels of buyer activity.

Sales rose in almost all Canadian housing markets in September, amounting to a nationwide total high that was enough to beat the previous record for the month by a margin of 20,000 transactions, according to data published today by the Canadian Real Estate Association (CREA).

September records were broken on the pricing side as well, with the national average sale price increasing by 17.5 percent over the previous year to $604,000. This marked the first time that the national average exceeded $600,000. CREA noted that the soaring average sale price is heavily influenced by robust activity in the country’s two most expensive markets — Toronto and Vancouver.

CREA Senior Economist Shaun Cathcart wrote that the usual suspects were driving the record-breaking levels of activity in the country’s housing markets, with pent-up demand, government income support, rock bottom low interest rates and job losses being concentrated on lower wage workers all cited.

“But I think another wildcard factor to consider, which has no historical precedent, is the value of one’s home during this time. Home has been our workplace, our kids’ schools, the gym, the park and more. Personal space is more important than ever,” Cathcart said in a media release.

Commenting on yet another release of record-breaking housing market data, TD Economist Rishi Sondhi noted that increases in the supply of homes for sale and a pandemic-driven slowdown in population growth that was less severe than anticipated likely played a role.

“Also, instead of travelling during the traditional July and August vacation periods, people stayed home on account of the pandemic. This gave them more opportunities for buying and selling, which they likely took advantage of,” Sondhi wrote.

The past three months have been a remarkable show of strength during an economically tumultuous period, but many market experts believe that this pace cannot be sustained over the long term.

BMO Senior Economist Robert Kavcic wrote in response to the CREA data that while the bank doesn’t “subscribe to the deeply bearish view on Canada’s housing market,” there are enough headwinds building that the market should cool down in the months ahead.

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Wuhan, Former Pandemic Center, Emerges as Tourist Hot Spot

Wuhan, the city at the center of the coronavirus pandemic, had the most tourists of any Chinese city during a public holiday in October. Wuhan is overcoming its pandemic past and benefiting from its hero-city status to become a top travel destination

 

 

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From Downtown to ‘Urban Centre’, Why Mississauga Could Be the Move to Make

Buyers flocking to the 905 also want an urban experience, making condos in the growing urban centre of Mississauga the perfect choice.

Mississauga real estate is on a tear, reflecting the considerable efforts the city has put into its livability factor, transforming it from commuter suburb to urban centre, without the stress of downtown Toronto living.

Of course, prices are rising in tandem with popularity, so many who want a less frenetic lifestyle outside of downtown Toronto are considering a condo in this neighbouring city.

The Great Migration

There has been a steady stream of people moving to the 905-region as of late. Figures from the Toronto Regional Real Estate Board (TRREB) in August showed the region outperformed the 416-area in both sales and the number of new listings.

Summer activity was explained, by many in the industry, as pent-up demand being released, as those who sat on the sidelines in the spring due to the pandemic went on a buying spree. But September figures kept the trend going, with the number of sales across all housing categories up by 42.3% in the GTA from the same time last year. And the 905 continued to outperform the 416 in September.

Affordability is one of the key factors driving buyers into the 905 area. The average price for all housing types in the 905 is $931,834, according to the latest TRREB figures. For the 416, the average price was $1,022,051. There is also more choice for buyers: there were 11,731 new listings of all housing types in the 905 in September, compared with 8,689 in the 416.

In the sales figures especially, it’s clear that buyers are voting with their feet (or moving vans). There were 7,528 sales of all housing types in the 905 in September, versus some 3,555 in the 416.

Urban Living Outside Toronto

While the 905 area encompasses a wide region, for those who want a more urban experience with close proximity to Toronto, Mississauga is a particularly coveted location.

The city’s Downtown Strategy aims for a growing, walkable downtown, where people can live, work and play.

“One of things we find … is that people moving to Mississauga want to be in the suburb but also want access to Toronto,” says Asha Singh, president of the Mississauga Real Estate Board (MREB). There are also the people who want to “feel like they are living in a city.”

Mississauga is a diverse cultural community, Singh says, with city-sponsored cultural events, many restaurants, and live-performance venues (the latter of which are waiting patiently for those days to return).

For those who enjoy the outdoors, Mississauga is filled with green space, Singh says, and for cyclists, there are “more than 400 km of on-road bike lanes.” There are golf courses and parks along the Credit River where people can actually see salmon run, she adds.

Though there is quick access to major highways such as the 401 and the 403, transit is also well served with the GO train, Miway buses, and the Light Rapid Transit line still being built out. For families, there are many excellent schools, libraries and play fields, she says. With Sheridan College and the University of Toronto’s Mississauga Campus, higher education is also accessible throughout the community.

With denser, mixed-use planning, as well as an emphasis on public transit, Mississauga is growing into an urban landscape.

Condo Life and the Perla Project

While the migration to the 905 region encompasses buyers looking for all housing types, condos remain the most affordable option when it comes to enjoying urban living. They also offer several advantages: maintenance is taken care of and buildings offer many amenities, for instance.

But size is often an issue, especially now, when space to work from home is an important consideration. Some of the condos in downtown Toronto could only be called “tiny,” coming in at under 500 square feet. In other words, not exactly the size you need to live (and love) your new COVID life that includes working at least some, if not all, your days from home.

Though the shift in demand for real estate in the 905 region started before the pandemic, according to Ryerson University’s Centre for Urban Research and Land Development, more people took a hard look at how much space they needed while spending more time at home.

“With COVID, people want to be in the suburbs, where they can get in the car or go for a walk,” says Singh.

Perla, a new development at Eglinton Avenue East and Hurontario Street, is offering the best of all worlds: urban, approachable condo living, but in much larger than average units that include massive balconies so working from, and enjoying time in, one’s space is easily attainable.

The Pinnacle International project offers 2- and 3-bedroom units from 960 square feet to more than 2,000 square feet. That’s a lot of living space. The development also includes extensive amenities, such as a 24-hour concierge, an indoor swimming pool and hot tub, fully-equipped exercise and yoga rooms, and a party room with kitchenette for better times to come.

While the East Tower is still under construction, occupancies in the West Tower are well under way, with all units including one parking spot and one locker. And with pricing in Mississauga more affordable than in Toronto, condos in the 905 are moving fast, Singh says. “As soon as they come on, they are bought.”

Perla is set in 15-acres of parkland, is just steps to the future LRT, and brings with it the amenities of an urban centre while still being set in the suburban calm of the red-hot 905-region.

To learn more about Perla and how you can register click here.

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Bank of Canada plans to keep interest rate near zero until 2023

Bank is assuming no widespread lockdowns are coming back, and that there will be a vaccine by 2022

The Bank of Canada says it has no plans to change its benchmark interest rate until inflation gets back to two per cent and stays there, something it says isn’t likely to happen until 2023.

The central bank said Wednesday it has decided to keep its benchmark interest rate steady at 0.25 per cent. The news was expected by economists, as although the economy is showing signs of recovering from the impact of COVID-19, things are still a long way from normal, so cheap lending will be needed for a long while yet.

The bank outlined a fairly bleak assessment of the worst case scenario when it laid out its last Monetary Report in July. But the roughly eight months since COVID-19 began in Canada have given the bank a clearer picture of how things are shaking out, even if the picture isn’t always rosy.

“With more than six months since the onset of the pandemic, the Bank has gained a better understanding of how containment measures and support programs affect the Canadian and global economies,” the bank said.

“This, along with more information on medical developments related to COVID-19, allows the bank to now make a reasonable set of assumptions to underpin a base-case forecast.”

Rocked by COVID-19, the central bank says it expects Canada’s economy will shrink by 5.7 per cent this year, but grow by 4.2 per cent next year, and 3.7 per cent in 2022. Inflation, meanwhile, is expected to be 0.6 per cent this year,
1.0 per cent next year, and 1.7 per cent in 2022.

 

Those growth and inflation projections, however, are based on two leaps of faith: that there won’t be a second — or third — widespread lockdown in Canada, and that a vaccine or some sort of effective treatment will be widely available by the middle of 2022 at the latest.

“The breadth and intensity of re-imposed containment measures, including impacts on schools and the availability of child care, could lead to setbacks,” the bank said in the quarterly Monetary Policy Report that accompanied the rate decision.

Impact on mortgages

The bank’s outlook and rate decisions have real world impact on Canadian borrowers and savers. Fixed-rate mortgages are priced based on what’s happening in the bond market, but the central bank’s rate has a direct impact on variable rate mortgages.

So telegraphing that rates are going to stay low for long presents something of a conundrums for borrowers, says James Laird, Co-founder of Ratehub.ca and president of mortgage brokerage CanWise Financial.

“There is no wrong answer right now,” Laird said.

“Canadians who derive value from certainty should choose a fixed rate. For Canadians who are open to a little more risk, considering a variable rate is certainly appropriate, since the Bank is committed to keeping rates where they are for at least another two years.”

Economist Sri Thanabalasingam with TD Bank says the bank made it clear on Wednesday that the road to a full recovery will be slow.

“There’s a long way to go for the Canadian economy to emerge out of this crisis, ” Thanabalasingam said.

“The path forward is filled with uncertainty, most of which could set the recovery back a step or two, [so] the bank is set to continue to provide monetary support for many years to come.”

 

Source: CBC News
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