Autumn Numbers to Crunch, Condominium Market Update, Nov 2014

The Canadian Mortgage and Housing Corporation (CMHC) started the ball rolling with its report that housing starts were up in September – 197,343 units, up from an upwardly revised 196, 283 in August. The crown corporation noted that condominiums led the way, as more developers broke ground on multiple unit dwellings.

Even as this news broke, there was some evidence that the long awaited soft-landing might be on the horizon, or actually might’ve already happened. BMO’s Senior

Economist Robert Kravic said in a recent note to investors that he believed the bulk of the condo boom is over. He reported that Toronto condo starts hit a “4 ½ -year

low” in Q3 to 16,500 annualized units, which he noted may be a part of an overall balancing out process. Meanwhile, Credit Suisse had reported by mid-October that the government’s tightening of lending rules for mortgages appears to have its desired effect as housing price increases appear to have moderated.

This seemed to fly in the face of a warning from the International Monetary Fund when earlier in the month, it repeated its earlier assertion that Canada’s housing

market was overvalued by 10% and added that “measures” may need to be taken to slow demand.

According to Royal LePage, the Canadian housing market was at a “goldilocks market” – not too hot; not too cold. In the same instant, the real estate company also confirmed earlier reports that the hard-charging Calgary and Toronto markets continued to buck the moderating trend with continued market growth.

A report from the non-profit Toronto Foundation highlighted affordability issues. The Foundation noted that 63.5% of pretax household went to cover the average cost of home ownership in Toronto in Q1 2014 (30% of pretax income is considered affordable), beaten only by Vancouver at 86.5%. Good news, however, came from CIBC’s Chief Economist Benjamin Tal, who observed this month that 30-40% of Canadian households are now paying back their mortgage principal faster, taking advantage of lower interest rates and the ability to accelerate mortgage payments.

Late-breaking news in Q3 came with arrival of Chinese developer Greenland Holdings Ltd. in the Toronto market. The deep-pocketed sovereign with over $1 billion in annual profits and ranked 268th on the 2014 Fortune 500, purchased the King-Blue project in September for an amount in the $100 million range. Shanghai-based Greenland has residential projects in the U.S., U.K., and Australia.

Rental markets seemed to be in a bit of a flux in Q3. As opposed to earlier in the year, the actual number of condominium rentals dropped, reported market watchers Urbanation. The first two quarters of 2014 had recorded an annual increase of 20% in the num-ber of condo leases being signed. In Q3, how-ever, the rise was more moderate at 10%. Average size – good news for renters – was up in Q3 – 767 sq. ft. from 755 sq. ft. in Q2. The number of condos rented was 7, 132 – was a record – but demand seems to be slowing.

Average condo rent remains unchanged at $1,870 monthly year over year, Meanwhile, the Toronto Foundation reported that in 2013 the average rent for a two bedroom apartment in Toronto was $1,225, up from $1,106 in 2009.

Toronto has always been welcoming to people coming from other countries. The London-based Boston Consulting Group’s Decoding Global Talent survey, reported out of ten world cities, Toronto ranked eighth among choice destinations for expats to live and work in. Toronto, which was the sole Canadian city listed, ranked above Singapore and Rome, while London, New York, and Paris remained favourites. Overall, Canada ranked third as a preferred destination for expats.

November 2014