The moderation of the single-family housing market in the Greater Toronto Area has not dampened the market for residential land.

Demand and prices remain strong as population growth meets with constrained supply. That means increased competition for residential land which will in turn impact home prices.

According to a new report from CBRE Canada, residential land investment volume in the GTA totaled $6.8 billion in 2017, more than three times the volume seen a decade earlier and the highest on record.

As a stark example of the surge in prices, an acre of low-density residential land would have cost an average $382,000 in 2008. In the first half of 2018, that same piece of land would cost more than a million dollars.

Year-to-date in 2018, the average price per square foot of buildable high-density space is $87, compared with $42 in 2008.

“Despite rising home prices and new mortgage qualification rules, supply issues are propelling residential land deal volumes and prices to all-time highs in the GTA as developers and investors are willing to pay for this sought-after asset,” commented Mike Czestochowski, Executive Vice President, Land Services Group at CBRE Canada. “Land investment activity reflects strong developer and investor confidence in a housing market that is faced with the challenge of accommodating a rapidly growing population amid serious government-imposed constraints.”

Deals for low-density land set new record
The number of deals involving low-density residential land totalled 149 in 2017 CBRE’s data shows. It was the best year on record for these transactions and a 39% increase from 10 years earlier.

The strength of the market has carried into 2018 with $754 million of investment in the first half of 2018, although the full-year will be short of 2017’s record-breaking $2.4 billion.

“There is sustained investor confidence in this city, owing to the GTA’s strong fundamentals, specifically the 100,000 new residents a year and strong employment growth, with 93,000 jobs added in the Toronto CMA between June 2017 and June 2018,” added Czestochowski. “It’s not hard to see why the GTA continues to be a prime destination for investor capital, both domestic and foreign.”

OTTAWA — Canada Mortgage and Housing Corp. says the country’s real estate market is expected to moderate over the next two years as the growth in housing prices is expected to slow to more in line with economic fundamentals.

In its 2018 housing market outlook released today, the national housing agency projects housing starts and sales are both expected to decline in 2019 and 2020.

TORONTO _ Strong sales in the condo and higher-density low-rise markets helped drive home prices in the Greater Toronto Area higher last month, compared with a year ago.

The Toronto Real Estate Board says the average sale price was $807,340 in October, up 3.5 per cent from $780,400 year-over-year. Adjusted seasonally, the average selling price last month was up one per cent compared with September.

The MLS HPI composite benchmark price jumped by 2.6 per cent compared to October 2017.

TREB says there were 7,492 sales in October 2018, up six per cent versus a year ago. On a preliminary seasonally adjusted basis, sales were down one per cent compared to September 2018.

The growth in sales and prices came as the number of new listings fell compared with a year ago, says the country’s largest real estate board. Last month, there were 14,431 new listings, down 2.7 per cent compared with October 2017.

The board says this suggests that real estate market conditions in the Greater Toronto region continue to become tighter as sales growth has outpaced listings growth for the past five months.

The Canadian Press

A recent report revealed that, despite admitting to making some compromises, most modern families in key urban areas throughout Canada are satisfied with their property purchases.

In a recent report released by Mustel Group and Sotheby’s International Realty Canada on home ownership trends among modern families, 82% of families surveyed believed that they made some compromises in their purchase. However, 93% said that they were ultimately satisfied with their decision.

The 2018 Modern Family Home Ownership Trends Report surveyed 1,743 young families, whose eldest adult is between 20 to 45 years old, across the Vancouver, Toronto, Calgary, and Montreal metropolitan areas.

“This is the first Canadian study to focus on the home buying preferences and habits of this segment of young families, with findings based on actual home ownership data rather than purchase intentions,” said Josh O’Neill, general manager of Mustel Group.

“Results from the survey uncovered new data and trends within this key demographic.”

The report also showed that, if money wasn’t an object, eight out of ten modern families would prefer a detached single family home over a condominium unit. However, 43% of families who already own property that isn’t a single-detached home have given up on ever owning one.

“Young families are much more influential in Canada’s metropolitan real estate markets than many realize,” said Brad Henderson, president and CEO at Sotheby’s International Realty Canada. “With 9.1 million Canadian millennials now entering the partnership, marriage and parenting stages of the family life cycle, the ranks of these ‘modern families’ are swelling.”

“Our research dispels several urban myths about the housing preferences of this group. It suggests that the wave of demand for single family home ownership will continue to rise in spite of mounting affordability challenges. Moreover, it highlights the fact that cities will continue to face significant pressure to overcome these challenges with solutions that go beyond the addition of higher density housing.”

According to a report released this week, private lenders funded 20% of mortgage refinances in the second quarter of this year, highlighting how profitable mortgage investment is becoming.

The joint report between Teranet and Realosophy also revealed that private mortgages during Q2 2018 jumped 67% compared to the same period two years ago. While much of that can be attributed to new mortgage rules, says Laura Martin, COO of Matrix Mortgage Global and director of Private Lending Hub, there’s nary a reason for concern because the quality of private mortgage borrowers has improved dramatically over the last decade.

“The mortgage default rate in Ontario in 2017 was 0.24%,” Martin told CREW. “The mortgage stress test of plus-2% on the contract rate, as mandated by OSFI [Office of the Superintendent of Financial Institutions], has meant a reduction of 20% in purchasing power. High net worth individuals typically have at least 30% of their investments in real estate holdings. They enjoy the liquidity of an investment that matures every year so that they can reinvest, as well as monthly cash flow that is secured on an inherent and tangible value from the real estate asset.”

Private mortgage investors, according to Martin, make 8-10% returns on their investments, even with lower loan-to-value ratios.

“The average private mortgage amount in the GTA for Q1 2018 was $179, 280,” she said. “The typical term of a private second mortgage is 10% interest-only monthly payments, which amounts to $1,494 times 12 months, which equals $17,928, plus the entirety of the principal loan amount back.”

Private mortgage funding has been marred by a few predatory lenders, but according to Zahra Marani, principal of Marani Law, the stigma is dissipating largely because people realize the mortgages are registered against the properties.

Moreover, in light of the Guideline B-20 mortgage rules taking effect at the beginning of the year, the private mortgage space has burgeoned thanks to an expansive clientele.

“Private mortgages are an ideal investment for those who don’t want the responsibility of owning their own property, as well as for those who wish to diversify their portfolios,” said Marani. “Our lender clients are lending to borrowers such as business owners, builders, investors of preconstruction condos, and others, many of whom previously qualified with A and B lenders, and who can still afford the mortgage payments, but no longer qualify with those lenders.”

A decision to put the brakes on mandatory home energy audits has been welcomed by Ontario Realtors.

The government’s decision to repeal the Green Energy Act 2009 is good news for home sellers who would have been required to include results from the audits on their listings.

David Reid, president of Ontario Real Estate Association says that mandatory energy audits would be an unnecessary burden on sellers.

“These energy audits can take weeks to schedule and perform, often adding an unnecessary layer of red tape and making it more difficult for Ontarians to sell a home. This is especially true in Northern and rural communities, where many homes heated using wood, gas and oil-based furnaces would fail a home energy audit,” he said.

He added that those who were forced to sell due to changes in their circumstances would incur delays in their sale with additional mortgage payments and bill payments as a result.

“And this scheme would punish seniors and low-income families the most, who don’t have the money to fund expensive green retrofits recommended by a government mandated home energy auditor,” Reid said. “This is why we, as Realtors support Bill 34 and it’s protections from costly red tape and unnecessary runaround for Ontario homeowners.”

Condo prices continue to rise in the Greater Toronto Area even as new supply eases inventory pressures.

The average selling price of actively-marketing projects in the third quarter of 2018 was $745 per square foot, up 11% year-over-year. For unsold units, asking prices gained 19% to $972 psf on average.

Urbanation’s Q3 2018 condo market report also reveals that average resale condominium prices grew by 6.5% year-over-year to $690 psf, or $577,000 based on an average size of 837 sf; a sharp deceleration from the 27% annual pace recorded in Q3-2017.

Sales gain in Q3 but YTD is down from record high
Third quarter new condo sales were up 4% to 4,738 units in Q3-2018, reaching the third highest Q3 volume of the past 10 years.

Year-to-date sales of 14,055 units were down 46% from the record high of 25,839 sales recorded during the same period last year

Meanwhile, resales gained for the first time since Q1 2017, with a 2% rise year-over-year to 5,253 units.

Construction started on a record 8,150 new condominiums in Q3-2018, raising the total number of condos under construction to a new high of 67,581 units in 236 buildings. Projects under construction were 95% pre-sold on average.

“The condominium market has performed exceptionally well during its transition from an overheated 2017. Low supply and stabilized demand should continue to provide structural support for prices. However, signs of a slower pace of price growth ahead from factors including rising interest rates and higher completions should be factored into decision making with respect to purchasing investment units”, said Shaun Hildebrand, President of Urbanation.

Housing affordability issues south of the border have driven down sales of newly built homes across the US.

Figures released Wednesday by the HUD and US Census Bureau shows a 5.5% decline in new home sales in September compared to August (which was revised downwards) – a seasonally adjusted annual rate of 553,000 units.

Only the Midwest posted gains month-over-month (6.9%) while the South declined 1.5%, the West declined 12%, and the Northeast saw a 40.6% drop.

Year-over-year though, sales were up 3.5% with all regions posting gains except the Northeast which saw a 16.5% decrease.

“Home price gains and rising interest rates are slowing down the housing market, particularly in high-cost areas and among entry-level buyers who are sensitive to price increases,” said NAHB Chief Economist Robert Dietz. “Builders need to provide homes at different price points to address these affordability concerns. Meanwhile, overall job and economic growth should help support the housing market in the months ahead as it adjusts to higher mortgage interest rates.”

Market shifts to lower priced homes
The median sales price of new homes has declined year-over-year as the market has shifted to lower priced homes. The median in September 2018 was $320,000 compared to $331,500 a year earlier.

Inventory of new homes for sale was 327,000 in September.

“New home sales activity has slowed this summer as housing affordability remains a serious issue,” said Randy Noel, chairman of the National Association of Home Builders (NAHB) and a custom home builder from LaPlace, La. “However, sales are up from this time last year and builders continue to report consumer interest in housing.”

There was an improvement in sales of newly-built homes in the Greater Toronto Area last month.

Data from the Building and Land Development Association (BILD) shows that 1,747 new homes were sold in September, up sharply from the 974 in August.

There was an improvement in sales of newly-built homes in the Greater Toronto Area last month.

Data from the Building and Land Development Association (BILD) shows that 1,747 new homes were sold in September, up sharply from the 974 in August.

“It appears more buyers—and builders—are starting to come in from the sidelines,” said Patricia Arsenault, Altus Group’s Executive Vice President, Data Solutions, the official source of data for BILD. “The increase from August in both new condominium apartment sales and the number of units in new projects launched was somewhat stronger than the typical September bump alone would suggest.”

Year-over-year sales remain subdued with condo sales down 20% to 1,494 – 20% below the 10-year average – and single-family detached sales down 28% to 253 – 77% below the 10-year average.

David Wilkes, president & CEO of BILD, says that inventory is a continued issue for GTA new home sales with only around 5 months of supply of condos (8,820 units).

This narrowed the gap between the prices of condos and single-family homes.

In September, the benchmark price for condo apartments increased to $789,643, up 19.4% over the last 12 months, while the benchmark price for single-family homes softened again slightly to $1,119,533, down 7.1% over the last 12 months.

“In the lead-up to the municipal elections, BILD succeeded in raising housing supply and affordability as major election issues,” said Mr. Wilkes. “Now we look forward to working with our municipal partners to address the barriers that stand in the way of building the housing our region needs to accommodate growth. Some straightforward steps include making sure that government charges on new homes are fair, funding and building critical infrastructure, cutting red tape and speeding up building permits and inspections.”

September New Home Sales by Municipality: