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Ranked: These Are 10 of the World’s Least Affordable Housing Markets

These Are 10 of the World’s Least Affordable Housing Markets

It’s become increasingly difficult for middle-class families to purchase a home over the last few years—and the global pandemic has only made things worse.

According to Demographia’s 2022 Housing Affordability Report, the number of housing markets around the world deemed “severely unaffordable” increased by 60% compared to 2019 (prior to the pandemic).

This graphic looks at some of the least affordable housing markets across the globe, relative to median household income. The report covers 92 different cities in eight nations: Australia, Canada, China, Ireland, New Zealand, Singapore, the United Kingdom, and the United States.

The Least Affordable Housing Markets
Before diving in, it’s worth outlining the methodology used in this report, to help explain what’s classified as a severely unaffordable housing market.

To calculate affordability, a city’s median housing price and divided by its median household income. From there, a city is given a score:

  • A score of 5.1 or above is considered severely unaffordable
  • 4.1 to 5.0 is considered seriously unaffordable
  • 3.1 to 4.0 is considered moderately unaffordable

All the cities on this graphic are classified as severely unaffordable⁠—and, for the 12th year in a row, Hong Kong takes the top spot as the world’s most unaffordable housing market, with a score of 23.2.

One reason for Hong Kong’s steep housing costs is its lack of supply, partly due to its lack of residential zoning—which only accounts for 7% of the region’s zoned land. For context, 75% of New York City’s land area is dedicated to residential housing.

Sydney moved up one spot this year, making it the second most expensive city to purchase a home on the list, with a score of 15.3. Besides Hong Kong, no other city has scored this high in the last 18 years this report has been released.

There are several theories for Sydney’s soaring housing rates, but industry expert Tom Forrest, CEO of Urban Taskforce Australia, boils it down to one fundamental issue in an interview with Australia Broker—supply isn’t keeping up with demand:

“Housing supply has been consistently not meeting demand in the Greater Sydney and across regional New South Wales…if you have supply consistently not meeting demand then the price will go up. That’s what happened and we’re seeing it in abundance.

”TOM FORREST, CEO OF URBAN TASKFORCE AUSTRALIA

The COVID-19 Impact
Middle-income earners were already feeling the squeeze prior to the global pandemic, but COVID-19 only exacerbated housing affordability issues.

As people began to work from home, high-income earners started to look for more spacious housing that wasn’t necessarily in the city center, driving up demand in suburban areas that were relatively affordable prior to the pandemic.

At the same time, supply chain issues and material costs impacted construction, which created a perfect storm that ultimately drove housing prices up.

But with interest rates rising and COVID-19 restrictions easing around the world, some experts are predicting a market cool down this year—at least in some parts of the world.

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Canada home prices – why they’re falling

House prices are set to continue falling across Canada as a result of the current market cooldown, with the only question being by how much, according to a well-known economist.

Benjamin Tal (pictured), deputy chief economist at CIBC World Markets, told Canadian Mortgage Professional that the decline in value was likely to be most evident among low-rise properties, although he said that should be taken in the context of skyrocketing price appreciation in recent years.

“I think [prices] will go down in the low-rise more significantly than in the condo space. It depends where you live, what kind of neighbourhood, but you can see that low-rise is already down by roughly 15-20%, and that’s something that might continue,” he said.

“Remember, we’re talking about extremely elevated levels where prices went up by 50% in two years – so to see a decline of 15-20% is not crazy when interest rates [are] rising as quickly.”

As interest rates rise across the board, and with the Bank of Canada having introduced sizeable recent hikes to its benchmark policy rate, home sales figures have tailed off significantly in many of the country’s main markets.

That’s been accompanied by the first drop in the national home price index since April 2020, by 0.6% between March and April to around $866,700, with Southern Ontario markets such as London and Cambridge posting some of the most marked declines (4% and 3.9% respectively, said the Canadian Real Estate Association).

A new analysis by RBC Economics’ Robert Hogue indicates that recent central bank rate hikes have cooled homebuyer sentiment and are likely to negatively impact home prices in the long run.

“Interest rate hikes [are] straining affordability and weighing on property values, especially in expensive markets,” Hogue said.

House prices are set to continue falling across Canada as a result of the current market cooldown, with the only question being by how much, according to a well-known economist.

Benjamin Tal (pictured), deputy chief economist at CIBC World Markets, told Canadian Mortgage Professional that the decline in value was likely to be most evident among low-rise properties, although he said that should be taken in the context of skyrocketing price appreciation in recent years.

“I think [prices] will go down in the low-rise more significantly than in the condo space. It depends where you live, what kind of neighbourhood, but you can see that low-rise is already down by roughly 15-20%, and that’s something that might continue,” he said.

“Remember, we’re talking about extremely elevated levels where prices went up by 50% in two years – so to see a decline of 15-20% is not crazy when interest rates [are] rising as quickly.”

As interest rates rise across the board, and with the Bank of Canada having introduced sizeable recent hikes to its benchmark policy rate, home sales figures have tailed off significantly in many of the country’s main markets.

That’s been accompanied by the first drop in the national home price index since April 2020, by 0.6% between March and April to around $866,700, with Southern Ontario markets such as London and Cambridge posting some of the most marked declines (4% and 3.9% respectively, said the Canadian Real Estate Association).

A new analysis by RBC Economics’ Robert Hogue indicates that recent central bank rate hikes have cooled homebuyer sentiment and are likely to negatively impact home prices in the long run.

“Interest rate hikes [are] straining affordability and weighing on property values, especially in expensive markets,” Hogue said.

House prices are set to continue falling across Canada as a result of the current market cooldown, with the only question being by how much, according to a well-known economist.

Benjamin Tal (pictured), deputy chief economist at CIBC World Markets, told Canadian Mortgage Professional that the decline in value was likely to be most evident among low-rise properties, although he said that should be taken in the context of skyrocketing price appreciation in recent years.

“I think [prices] will go down in the low-rise more significantly than in the condo space. It depends where you live, what kind of neighbourhood, but you can see that low-rise is already down by roughly 15-20%, and that’s something that might continue,” he said.

“Remember, we’re talking about extremely elevated levels where prices went up by 50% in two years – so to see a decline of 15-20% is not crazy when interest rates [are] rising as quickly.”

As interest rates rise across the board, and with the Bank of Canada having introduced sizeable recent hikes to its benchmark policy rate, home sales figures have tailed off significantly in many of the country’s main markets.

That’s been accompanied by the first drop in the national home price index since April 2020, by 0.6% between March and April to around $866,700, with Southern Ontario markets such as London and Cambridge posting some of the most marked declines (4% and 3.9% respectively, said the Canadian Real Estate Association).

A new analysis by RBC Economics’ Robert Hogue indicates that recent central bank rate hikes have cooled homebuyer sentiment and are likely to negatively impact home prices in the long run.

“Interest rate hikes [are] straining affordability and weighing on property values, especially in expensive markets,” Hogue said.

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47% of Canadian Gen Z Say Returning to the Office Factors into Home Buying Plans

Survey Highlights

  • Nearly half (47%) of urban Canadian Generation Z adults rank proximity to their workplace as a top priority for the location of their first home purchase; however, just 15% indicate that buying in or close to the downtown core is a priority.
  • 40% plan to purchase their first home in a major city, while 42% plan to buy in a suburb outside of a major city. 7% expect to buy their first home in a small town and 3% expect to do so in a rural area.
  • 48% of Calgary’s Generation Z adults plan to buy their first home in a major city, surpassing those who plan to do so in Toronto (37%) and Vancouver (36%).
  • 7 in 10 (73%) of Canada’s urban Generation Z adults plan to buy their first home in their current city of residence or within a one-hour drive, with 41% of all respondents planning to buy their first home in their current city and 32% planning to buy within a one-hour drive of their current city.

 

TORONTO, June 01, 2022 (GLOBE NEWSWIRE) — As employees and employers negotiate new possibilities for remote and hybrid work as the COVID-19 pandemic evolves, a newly released generational trends report by Mustel Group and Sotheby’s International Realty Canada highlights new insights revealing that future housing demand will be underpinned by an expectation for a return to the workplace and office, as well as a balanced preference for urban and suburban living amongst Generation Z home buyers.

Newly released Mustel Group/Sotheby’s International Realty Canada survey results reveal that nearly half (47%) of urban Generation Z adults in Canada’s largest metropolitan areas rank buying a home “close to work” as being a top priority for the location of their first home purchase, although just 15% indicate that purchasing in or close to a downtown core is a priority. Proximity to work is surpassed only by neighbourhood safety as a key location characteristic, with safety being cited by 56% of survey respondents overall. Other priorities for a first home locale include proximity to a grocery store (39%), transit friendliness (36%), living close to family (35%) and walkability (34%). According to survey results, the lowest neighbourhood priorities for a home purchase are cycling friendliness, cited by 8% as a key factor, and living near nightlife such as clubs and bars, reported by 5%.

Survey findings also reveal an almost even distribution between urban Generation Z adults who plan to purchase their first home in a major city, reported by 40%, and those who plan to buy in a suburb outside a major city reported 42%. Approximately one in 10 expect to buy their first home in a small town (7%) or rural area (3%). 8% remain undecided as to the community type of their first home.

Furthermore, survey results reveal a preference for urban Generation Z first-time buyers to remain in or close to their current cities of residence. 41% plan to purchase their first home in their current city of residence while 32% plan to buy within a one-hour drive of their current city. A further 11% plan to buy further afield but within Canada; this includes 6% who plan to buy their home more than a one-hour drive from where they currently reside and 5% who expect to purchase in a different Canadian province. A nominal 1% plan to buy outside of Canada, while 13% are still unsure where they will buy their first home.

“Location, Location, Location: Generation Z Trends Report” is the third report in a multi-part series based on Canada’s first in-depth study of the housing intentions, aspirations and preferences of Generation Z. The report is based on a survey of 1,502 Generation Z Canadians who are over the age of majority and between the ages of 18 and 28 in the Vancouver, Calgary, Toronto and Montreal Census Metropolitan Areas, and focuses on this cohort’s priorities and criteria for the neighbourhood and location of a first home.

Previously released research by Mustel Group/Sotheby’s International Realty Canada reported that 75% of urban Canadian Generation Z adults say that they are likely to buy and own a primary residence in their lifetime. Approximately half of urban Generation Z adults are most likely to purchase a higher-density housing type as their first home, with 25% reporting that their first home purchase will likely be a condominium, 18% saying that their first home will be an attached home/townhouse and 7% stating that their first home purchase will be a duplex/triplex. 39% reported that they are most likely to buy a single family home as their first residence. According to earlier reports, 37% of urban Generation Z adults in Canada expect to purchase their first home in less than five years, while 43% anticipate buying between five and ten years from now. 30% expect the purchase price of their first home to be $350,000–$499,999, while 26% expect to pay $500,000–$749,999.

“Previously released results from Mustel Group and Sotheby’s International Realty Canada survey of urban Generation Z adults have already revealed that young Canadians have a high level of confidence in real estate and intend on purchasing a home,” says Josh O’Neill, General Manager of Mustel Group. “This new report uncovers insights into where they plan to buy their first home, and the factors that are driving this important life decision.”

According to Sotheby’s International Realty Canada experts, surprising divergences have emerged in the neighbourhood and location preferences of different generations of home buyers as pandemic restrictions ease, and as engagement in social and community activity renews across the country. Evolving workplace and work-from-home preferences are driving new and evolving trends not only in the workplace but in housing demand, particularly amongst Canada’s youngest generation of first-time home buyers.

“During the pandemic, the desire, need and ability to work remotely influenced and enabled some Canadians to relocate to outlying suburban or recreational regions to achieve more space and a more desirable lifestyle. This helped drive record real estate sales activity across the country. While the question of work-from-home flexibility remains a defining workplace issue for the foreseeable future, attitudes about remote work amongst employees and employers are shifting as pandemic restrictions relax, and there are differences in perspectives between generations that will affect housing demand,” says Don Kottick, President and CEO of Sotheby’s International Realty Canada. “Younger Canadians are more likely to prefer a hybrid of working in the office and working from home, compared to older Canadians who are more likely to prefer remote work. Our research signals that for Generation Z, buying their first home in a neighbourhood close to their workplace will remain a top priority, regardless of whether they plan on purchasing in a major city or suburb. This has significant implications for how cities and suburbs should approach planning in order to enhance the quality of life and housing for future generations.”

Kottick cites research from the Angus Reid Institute that reveals generational differences in Canadians’ workplace preferences, with three in ten (29%) of 18 to 34-year-old adults reporting a preference to work from home entirely, compared to two in five (42%) of those over age 54 saying the same. Statistics Canada also reports that as of April 2022, 19% of Canadian workers usually worked exclusively from home, down from 24% in January 2022; however, the share of employees working at home whether exclusively or through a hybrid arrangement varies significantly across Canada’s metropolitan areas.

“As the cost of housing and the cost of living becomes increasingly challenging for young people in major cities, government, the real estate industry and the private sector will be challenged to consider Generation Z’s demands for real estate close to their workplaces, and in communities, they can afford,” says Kottick. “This may require planning for a future where jobs and office spaces are distributed beyond downtown cores and hyper-concentrated business centres in central municipalities, with smaller peripheral municipalities and suburban areas playing a more significant role in hosting both commercial and residential real estate opportunities.”

Market Highlights

Vancouver

In a metropolitan area that saw its employment rate climb to 64.4% in April 2022 as its unemployment rate held steady at 5.4%, newly released Mustel Group/Sotheby’s International Realty Canada survey results reveal that a significant percentage of Vancouver’s Generation Z adults are integrating plans for working outside of their homes into considerations for their first home purchase.

As in the case of other metropolitan areas, Vancouver’s Generation Z adults rank buying a home “close to work” as being a top priority for the location of their first home purchase, with 43% citing this as a major neighbourhood consideration, however, only 11% indicated buying in or close to the downtown core as being a priority. Neighbourhood safety is the only location characteristic to surpass proximity to work as a priority neighbourhood consideration and was reported by 54% of Vancouver survey respondents as such. Other leading location priorities include proximity to family (40%), transit-friendliness (39%), proximity to a grocery store (38%) and walkability (31%). The lowest neighbourhood priorities for a home purchase are cycling friendliness, reported by 7% as a key location consideration, and proximity to nightlife such as clubs and bars, reported by 6%.

While 36% of Generation Z adults in the Vancouver metropolitan area plan to buy their first home in a major city, 44% say that they will do so in a suburb outside of a major city. 9% plan to buy their first home in a small town, while 4% plan to purchase in a rural area. 6% are still undecided on the community type of their first home.

Survey findings also show that a significant proportion of Vancouver’s Generation Z first-time home buyers plan to remain in or close to their current city of residence: 45% plan to purchase their property in their current city of residence while 28% plan to buy within a one-hour drive. 10% will buy their first home more than a one-hour drive from where they currently reside, while 3% plan to buy in another Canadian province. 0% plan to buy outside of Canada, however, 13% are still unsure of where they will buy their first home.

Calgary

Bolstered by the revitalization of the local economy which has propelled the employment rate to 66.7% as of April 2022 even as the unemployment rate declined to 7.2%, Generation Z adults in Calgary are amongst the most optimistic of Canada’s major metropolitan markets about their prospects for primary homeownership. Encouraged by housing prices and costs of living that remain affordable relative to other major Canadian cities, 78% report that they are likely to own a home during their lifetime, with 53% indicating that they are “very likely” to do so, according to previously released Mustel Group/Sotheby’s International Realty Canada reports.

According to newly released survey results, Calgary’s Generation Z adults rank buying a home “close to work” as being a leading priority for the location of their first home purchase, signalling their expectation of working outside of the home in some capacity. 47% report proximity to work as a major neighbourhood consideration, however, just 16% indicate that buying in or close to the downtown core is a priority. Other leading priorities for a home location include neighbourhood safety (62%), proximity to a grocery store (49%), as well as walkability (34%) and proximity to parks and nature (34%). The lowest neighbourhood priorities for this generation in Calgary when buying a first home are proximity to schools, reported by 8% as being a key factor, cycling friendliness (9%) and proximity to nightlife such as clubs and bars (9%).

Calgary’s Generation Z adults are more likely than those in Toronto and Vancouver to buy their first home in a major city at a rate of 48%, compared to 37% of their counterparts in Toronto and 36% of those in Vancouver who plan to do so. 38% of those in Calgary say that their first home will be purchased in a suburb outside of a major city, 4% plan to buy their first home in a small town and 5% plan to buy their home in a rural area. 4% remain undecided.

Mustel Group/Sotheby’s International Realty Canada survey findings reveal that a significant percentage of Calgary’s Generation Z home buyers plan to do so in their current city of residence, at a rate of 48%, while 25% plan to buy within a one-hour drive. 4% plan to buy their first home more than a one-hour drive from where they currently reside, while an additional 6% specifically plan on doing so in another Canadian province. 1% plan to buy outside of Canada, while 12% are still unsure of where they will purchase their first home.

Toronto

According to newly released survey findings from Mustel Group/Sotheby’s International Realty Canada, Toronto’s Generation Z adults are not only primed for homeownership, the majority are also ensuring that their first home purchase integrates plans for a return to the workplace or office.

While the employment rate of the nation’s largest metropolitan area economy rose to 63.5% in April 2022 and the unemployment rate fell to 6.3%, newly released survey results reveal that Toronto’s Generation Z adults rank proximity to work as a top priority for the location of their first home purchase, indicating clear anticipation of their return to the workplace or office in some capacity. 46% report that buying a home close to work is a key consideration for the purchase of their first home, however, only 16% report that buying in or close to the downtown core is a key location priority. As in the case of Vancouver and Montreal, neighbourhood safety is the only location characteristic to outstrip proximity to the workplace as a priority consideration for the location of a first home purchase, reported by 56% as such. Other top priorities include proximity to a grocery store (39%), transit friendliness (35%) and walkability (35%). For Toronto’s Generation Z, the lowest neighbourhood priorities for a home purchase are cycling friendliness (9%) and proximity to nightlife such as clubs and bars (3%).

37% of Toronto’s Generation Z adults plan to buy their first home in a major city compared to 42% who say that they will do so in a suburb outside of a major city. 8% plan to buy their first home in a small town, while 3% plan to purchase in a rural area. 10% remain undecided on the community type of their first home.

Findings from the Mustel Group/Sotheby’s International Realty Canada survey reveal that a significant percentage of Generation Z home buyers in Toronto plan to do so in their current city of residence, at a rate of 40%, while 36% plan to buy within a one-hour drive. 7% plan to buy their first home more than a one hour drive from where they currently reside, while an additional 3% specifically plan on doing so in another Canadian province. 1% plan to buy outside of Canada, while 13% are still unsure of where they will purchase their first home.

Montreal

In Montreal, 79% of Generation Z adults say they are confident that they will buy a primary residence in their lifetime with 37% expecting to buy their first home within five years and 46% expecting to do so in five to ten years, according to a previously released Mustel Group/Sotheby’s International Realty Canada report. Newly released survey results now indicate that they are poised to do so with a return to the workplace and office in mind. The results are released at a time when the employment rate in Montreal rose to 63.3% in April 2022, while the metropolitan area’s unemployment rate fell to 4.8%.

Generation Z adults in Montreal report that proximity to work is a leading priority for the location of their first home purchase, signalling that working outside of the home in some capacity is anticipated by this cohort. While 50% report that proximity to work is a major location factor in their home purchase, just 17% say that buying in or close to the downtown core is a priority. Other top location priorities for a home include a neighbourhood’s safety (57%), proximity to a grocery store (38%), being close to family (36%) and transit friendliness (35%). For this generation of home buyers, buying in a cycling-friendly neighbourhood or one that is close to nightlife such as clubs and bars, rank as the lowest location priorities, with 8% and 6% indicating that these are priorities respectively.

43% of Montreal’s Generation Z adults report that they plan to buy their first home in a major city, while 41% say that they their first home purchase will be in a suburb outside of a major city. 7% plan to buy their first home in a small town, while 2% plan to buy their home in a rural area. 8% remain undecided on the community type for their first home purchase.

According to Mustel Group and Sotheby’s International Realty Canada, 38% of Montreal’s Generation Z home buyers plan to do so in their current city of residence while 32% plan to buy within a one-hour drive. 5% plan to buy their first home more than a one hour drive from where they currently reside with an additional 8% specifically planning to buy their first home in another Canadian province. 3% plan to buy outside of Canada, while 14% are still unsure of where they will purchase their first home.

The report is based on findings from a survey employing an online methodology using a robust panel of 1,502 Generation Z adults between the ages of 18 and 28. in the Vancouver, Calgary, Toronto and Montreal Census Metropolitan Areas (CMAs). The panel is maintained to be representative of the Canadian population and provide high quality data. Panelists are recruited by a double opt-in method from large databases of reputable channels using industry standards of panel quality assurance, validation, verification and best practices for panel management. The sample was weighted to match Statistics Canada census data based on age, household income and home ownership within each CMA and to bring the total sample into proper proportion based on relative populations. While margins of error only apply to random probability samples, the margin of error on a random probability sample of 1,502 respondents is ±2.5 percentage points, 19 times out of 20, and ranges from ± 4.5 to 5.4 points for 325 – 476 respondents). Data for this report series was gathered from October 25 to November 10, 2021. Please note that percentages cited may not add to 100% due to rounding.

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Toronto home sales down 39 per cent in May from last year, prices up almost 10 per cent

The Greater Toronto Area housing market is becoming more balanced as May home sales dropped 39 per cent from a year earlier and prices rose almost 10 per cent, the Toronto Regional Real Estate Board said Friday.

The Ontario board found last month’s home sales totalled 7,283, down from 11,903 in May, 2021, and 7,989 this past April.

The board and brokers attributed the drop in sales to higher borrowing costs that materialized because of interest rate hikes and were coupled with inflationary pressures that weighed on spending.

However, they found buyers had more negotiating power last month as the market started to balance out.

“The activity has slowed and in some places, close to a halt,” said Natalie Lewin, a Toronto agent with Re/Max Hallmark Realty Ltd.

“Interest rates are weighing on them and a lot think that the prices are going to drop a lot further and they’re holding out for that. It appears that it’s going towards a buyer’s market, so they’re not anxious to make a decision now.”

In recent weeks, realtors have noticed the pace of sales is not as torrid as it was at the start of the year. Many sellers now garner fewer offers and bidding wars for their home, pushing some to accept a lower price than they may have seen months ago.

The average home price hit $1,212,806 in May, up more than 9 per cent from $1,108,124 during the same month last year.

However, the average home price was still lower than $1,253,567 in April, the third consecutive month where the market experienced a drop.

“Buyers are sitting on the sidelines right now and trying to take stock of what’s really happening,” said Ms. Lewin.

“Their decisions are taking a lot longer than they have in previous years.”

Where earlier this year properties were snatched up as soon as or not long after being listed, Ms. Lewin has seen many sit for weeks and even months.

She listed a property in Brampton for about $749,000 in a neighbourhood where homes were marketed for about $900,000 before. It has sat for two months.

“We’re not getting any action. It’s pretty much like crickets,” she said. “And it’s a great neighbourhood and it shows well.”

She’s seen a similar reaction with a renovated condo in Toronto she listed.

The average price of a detached home in the city of Toronto, which is linked to the 416 area code, rose by 12 per cent since last year to hit more than $1.9-million in May, while semi-detached properties increased by about 8 per cent to reach more than $1.4-million.

Townhouses were up by roughly 10 per cent to total slightly more than $1-million, while condos also saw a 10 per cent increase to an average $793,000.

Detached homes were up about 8 per cent to more than $1.4-million in the 905, an area surrounding Toronto that includes municipalities such as Vaughan, Mississauga and Brampton.

Semi-detached properties and townhouses in the area were up by 14 per cent each to reach more than $1-million and $950,000 respectively.

Condos in the 905 saw 20 per cent growth to an average $722,000.

“There is now a psychological aspect where potential buyers are waiting for a bottom in price. This will likely continue through the summer,” Kevin Crigger, TRREB’s president, predicted in a release.

His board also found the number of homes people had to choose from was little changed from a year ago. May saw 18,679 new listings, down less than 1 per cent from 18,593 during the same month in the year prior.

Looking forward, Mr. Crigger doesn’t feel the changing market will trigger a drop in demand for housing.

“As home buyers adjust to higher borrowing costs, housing demand will be supported by extremely low unemployment, high job vacancies, rising incomes and record immigration.”

Source: The Globe and Mail

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A Bubble, Eh? Scotiabank’s “Very Pessimistic” Outlook Is Real Estate Prices Rise 10%

Canadian real estate is so bubbly a large bank sees prices soaring in a downturn. Scotiabank (BNS) reported earnings today, filing the bank’s macroeconomic forecasts. These forecast scenarios help to determine outlook, and include a base case, optimistic case, and two pessimistic ones. Even in the bank’s worst case scenario, they forecast home prices will still rise at a breakneck speed.

Scotiabank Is Forecasting A Base Case of Home Prices Rising 16.6%
Let’s start with what the bank thinks is the most probable outcome — the base case. This involves everything carrying on as is, with no improvement or deterioration. In the base case, the bank has forecast annual growth of 16.6% from April 2022. In contrast, they had forecast annual growth of just 9.9% back in January. Higher rates have somehow accelerated their forecast. Which is a little odd since they’re also forecasting the higher end for interest rates.

In The Best Case Scenario, Real Estate Prices Rise Nearly 20%
The best case, or optimistic scenario, sees slightly higher growth than the base. Home prices are expected to show annual growth of 19.5% for April. This is a huge jump from the 12.5% seen in January.

Scotiabank’s Worst Case Scenario Is Prices RISE 9.8%
The worst case scenario, called a “pessimistic scenario” at BNS, involves another downturn. They split this one up into two, and the first one involves short-lived stagflation. In this scenario, home prices fall… uh, whoops. BNS doesn’t actually see prices falling in their worst case scenario over the next 12 months. Prices are seen rising 11.4%, up from the 3% in January. Since the last forecast, a conflict broke out, inflation soared to a multi-decade high, and interest rates are climbing. Somehow this boosted their outlook.

Then there’s the “very pessimistic” scenario for BNS, in which things become unhinged. It involves high commodity prices, financial uncertainty, supply chain disruptions, and people eating each other in the streets. Okay, everything but the last part, but the point is this is a terrible economy in this case. BNS sees this driving home prices 9.8% higher, accelerating from the 3.5% drop forecast in February.

A Bubble, Eh? Scotiabank’s “Very Pessimistic” Outlook Is Real Estate Prices Rise 10%

The strangely high forecast is at odds with their interest rate forecasts. BNS has one of the highest forecasts in the industry and has been outspoken about inflation. Somehow reducing leverage doesn’t impact their outlook.

In the bank’s eat-your-face-off-by-zombies style pessimistic case, prices actually rise. Not a little either but an increase of 9% over the next year. It’s bubbly for mom & pop investors to think downturns make them rich now. It’s another level when a big bank sees the system working that way too, assuming economic downturns lead to 3x the long-term growth average.

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Canada’s Housing Starts Rose 8% in April

There’s some good news on Canada’s housing supply front; the country’s housing starts rose 8% in April.

According to the Canadian Mortgage and Housing Corporation (CMHC), the trend in housing starts was 257,846 units in April, up from 253,226 in March, when they had declined slightly from the previous month.

The trend measure is a six-month moving average of the monthly seasonally adjusted annual rates (SAAR) of housing starts.

“On a trend and monthly SAAR basis, the level of housing starts activity in Canada remains historically high, hovering well above 200,000 units since June 2020 and increased from March to April,” said Bob Dugan, CMHC’s Chief Economist. “The increase in monthly SAAR housing starts in Canada’s urban areas was driven by higher multi-unit and single-detached starts in April. Among Montreal, Toronto, and Vancouver, Toronto was the only market to post a decrease in total SAAR starts, which was driven by lower multi-unit and single-detached starts.”

CMHC uses the trend measure as a complement to the monthly SAAR of housing starts to account for notable swings in monthly estimates and to obtain a clearer picture of upcoming new housing supply. However, the measure should be taken with a degree of caution. “In some situations, analyzing only SAAR data can be misleading, as the multi-unit segment largely drives the market and can vary significantly from one month to the next,” warns the CMHC.

The standalone monthly SAAR of total housing starts for all areas in Canada in April was 267,330 units, an increase of 8% from March. The SAAR of total urban starts increased by 10% to 245,324 units in April. Multi-unit urban starts increased by 14% to 178,092 units, while single-detached urban starts increased by 1% to 67,232 units. Rural starts were estimated at a seasonally adjusted annual rate of 22,006 units.

At a time when many fingers point to a lack of supply as the main culprit behind Canada’s housing crisis, this is some encouraging news for Canada’s market.

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Canadian housing starts rose in April – CMHC

The annual pace of new home construction in April surpassed analysts’ expectations

 

The annual pace of new home construction in Canada was up 8% in April compared with the previous month, the country’s national housing agency has revealed.

Canada Mortgage and Housing Corporation (CMHC) said the seasonally adjusted annual rate of April housing starts was 267,330 units, up from 248,389 in March, with the annual rate of urban starts increasing by 10% to 245,324 units.

Multi-unit urban starts registered a 14% annual rate increase to 178,092, and the pace of single-detached urban starts was also up – rising 1% to 67,232.

The six-month moving average of the monthly seasonally adjusted annual rate of housing starts, which came in at 253,226 units in March, rose to 257,846 units last month, while rural starts saw a seasonally adjusted annual rate of 22,006 units.

The overall seasonally adjusted annualized rate of housing starts surpassed analyst expectations, with forecasts having come in at 246,000 units ahead of the CMHC announcement.

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National home sales, prices fall in April

The news marks the latest stage in Canada’s housing market cooldown

National home sales and prices fell across Canada in April as the country’s housing market continued to cool following two years of record-breaking activity, according to the Canadian Real Estate Association (CREA).

Home resales were down 12.6% across the country from March to April, with the home price index also falling by 0.6% to $866,700. That marks the first time that measure, which accounts for pricing volatility, has declined since April 2020, just before the housing market began its unprecedented pandemic-era surge.

The actual national average home price was around $746,000 in April, CREA said, meaning that figure has now declined for two months in a row after peaking at over $816,000 in February. Still, prices remain around 7% higher than the same time last year.

CREA chair Jill Oudil said in a press release that many housing markets across the country had cooled off “pretty sharply” over the last two months, with the steady climb of interest rates and buyer fatigue two of the main reasons for the slowdown.

On a year-over-year basis, national home sales plummeted by 25.7% after setting a record for the month of April in 2021. The number of newly listed homes declined by 2.2%.

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A record number of new condos in Toronto are selling out before they’re even built

Though the latest stats from April show the beginnings of what might be a downturn in the GTA real estate market at large, it seems that one housing type is still in huge demand, at least when looking at the first quarter of this year so far.

While many stakeholders predict a cooling of prices and activity in Toronto’s ever-more-fervent market sometime this year, the numbers from the experts at Urbanation show that condos, particularly new units, have been selling very well this quarter across the region.

The first three months of 2022 marked the hottest Q1 on record, according to the firm’s latest report, with 8,253 units sold — a big jump of 55 per cent since Q1 of last year.

This is interestingly contradictory to the numbers that the Toronto Regional Real Estate Board reported for April specifically, during which the number of transactions for not just condos but all home types in the GTA plummeted 27 per cent from March 2022 and a massive 41.2 per cent from April of last year.

But, as anyone in Toronto can attest to, new condo buildings have been going up like wildfire in recent years, which would also explain another staggering stat from the Urbanation report: the fact that last quarter’s numbers exceed the 10-year average of new condo sales per quarter by 60 per cent.

With the housing type being the only reasonable entry for many into the city’s ultra-pricey market — that is, for many among the few who are able to get into home ownership at all — it makes sense that residents are vying to get their hands on condos in particular, especially when they are potentially cheaper pre-build.

They are also extremely appealing to investors both foreign and homegrown, who tend to hog multiple homes and sit on them to sell for profit later, or rent it out short- or long-term

This may be why a record high 94 per cent of all the new units in development in Q1 of this year were sold, making available stock hit an 18-year-low.

“New condominium demand has been far outweighing supply during the past two quarters, as total sales far exceeded the total number of units launched for presale,” Urbanation notes.

“Despite the strength in pre-sale demand, the level of construction activity underway in the GTA also declined for the first time in two years.”

Interestingly enough, downtown Toronto had the slowest price appreciation in the GTA for new condos — so unlike us! — at 14 per cent over the last year, compared to 23 per cent in Etobicoke, North York, Scarborough, and the 905.

For resale units, average prices downtown increased by 13.7 per cent year-over year, 21.6 per cent in the outer-416 and 27.8 per cent in the 905.

The price for the average resale condo across the region has also now hit more than $800,000 for the first time, showing just how ridiculous the market here remains.

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Anti-flipping proposal may get bogged down with exemptions

This article will appear in the forthcoming May issue of Investment Executive.

Ottawa’s proposed new anti-flipping rule represents a significant change in real estate taxation, providing the Canada Revenue Agency (CRA) with clarity regarding when profits on a home sale are subject to full taxation and limiting access to the principal residence exemption (PRE).

Under the proposed rule introduced in the 2022 federal budget, an individual who sells a residence within 12 months of acquiring it will be deemed to have flipped it unless they qualify for an exemption due to a “life event.” Any profit from the sale of residential real estate (including rental property) within a year would be taxed as business income and be ineligible for either the 50% capital gains rate or the PRE.

Under current rules, if the CRA thinks you’re flipping houses, they must argue that was your intention, said MaryAnne Loney, a partner with McLennan Ross LLP in Edmonton. Under the proposed rule, “if you’re under a year and you don’t fall into one of those carve-outs — that’s it, you have business income, there’s no further debate.”

Armando Minicucci, a tax partner with Grant Thornton LLP in Toronto, said the proposed rule, with its defined time threshold, gives the CRA “clarity” in deeming profits from a sale as business income.

Tax experts suggest, however, that the anti-flipping rule is unlikely to achieve the government’s stated goal of curbing speculation. Taxpayers will work around the new rule, either by delaying the sale of a home beyond a year or by attempting to qualify under one or more of the eight life-event exemptions.

“There are so many exemptions that it’s hard to see how this is going to apply to too many people,” said Mike Moffatt, assistant professor with Ivey Business School at Western University in London, Ont.

Said Loney: “I think you’re going to end up with a lot of people who are selling at 13 months who might have otherwise sold earlier.”

Under the proposed rule, life events that qualify for exemptions include property sold in cases of death, disability, the birth of a child, a new job, divorce, insolvency, personal safety or natural disaster. The government indicated that details regarding the exemptions would be set out in upcoming rules and that it would consult on draft legislation, which is pending.

The government could still tax profit from the sale of a home as business income if the property is sold after a year or a homeowner is eligible for an exemption, but would have to make the case that the seller was flipping. That can be a heavy burden and take a lot of time, Loney said.

In the budget, the Liberal government argued that “property flipping — buying a house and selling it for much more than what was paid for it just a short time prior — can unfairly lead to higher housing prices.” The proposed anti-flipping rule would “ensure profits from flipping properties are taxed fully and fairly.” The proposed rule would take effect Jan. 1, 2023.

In an email to Investment Executive, a spokesperson for the Canadian Real Estate Association said it was seeking more information about the anti-flipping rule and the implications, but did not say whether the association supported the proposed measure.

Moffatt suggested the exemptions could make it challenging for the CRA to administer the rule: “Whenever you come up with subjective rules that force CRA to make a decision, [the agency] can get themselves into trouble.”

The CRA could take a lenient approach, Moffatt suggested, and “wave through a bunch of borderline cases,” compromising the effectiveness of the proposed rule, or take a stricter approach and risk denying an exemption “that they should allow — and you know that’s going to be a front-page story.”

The government’s proposed anti-flipping rule fits with measures taken in recent years to enforce eligibility rules governing the PRE. Beginning in 2016, for example, the government began requiring taxpayers claiming the PRE to report details of the sale in their annual tax return. Previously, if a property was a taxpayer’s principal residence for every year they owned it, they didn’t have to report the sale on their tax return to claim the PRE.

“The CRA had no insight into what was going on out in the market” prior to the reporting change, Minicucci said.

In recent months, the government has sent education letters to individuals who may have applied the PRE in error, providing the taxpayers with the opportunity to correct or amend their returns.

The PRE is an expensive measure for the government in terms of forgone revenue, said Dino Infanti, a partner and national leader, enterprise tax, with KPMG Canada in Vancouver. Considering the significant gains realized in the housing market in recent years, the government is trying to ensure that those who are claiming the PRE are, in fact, eligible.

Minicucci said the CRA may have some justification for the new anti-flipping rule, “as much as I hate to admit it. By keeping it to 12 months, you’re narrowing [application of the rule] to people who are blatantly in the market to flip properties.”

Nevertheless, the rule could hurt people who sell homes but are not engaging in flipping, Minicucci said. He cites the example of a client who sold a cottage in 2021 within a year of purchase after they realized “cottage life just wasn’t for them.” With the recent run-up in prices, the client sold the property for significantly more than what he paid, resulting in a capital gain. Under the proposed new rule, because the client had sold within a year, the profit from the sale would have been fully taxable as business income.

Moffatt expressed skepticism about the effectiveness of the proposed rule, saying that most speculation occurs on secondary properties, not primary residences, and that the 12-month threshold might not deter flippers. He suggested, however, that the government could expand the scope of the rule in the future.

“I do wonder whether this is the thin edge of the wedge,” Moffatt said. “You start out with a system that would apply to almost no one and then over time start to eliminate some of the exemptions, extend the period from 12 months to 24 months to 36 [months], and so on. I think that’s a real possibility here.”

Minicucci agreed the government could adjust the proposed rule if it isn’t successful. However, he believes rising interest rates could curb speculation even before the proposed rule becomes effective.

“The main goal was to try to calm the market with respect to the constant increases in house values,” said Minicucci, speaking in late April. “After the past few weeks, that probably occurred anyway.”

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Canadian buyers returning to major cities, expecting to spend more: BMO survey

A new home finance survey from the Bank of Montreal has found that, among other things, more Canadians are looking to buy in major city centres as business picks up once again at urban offices.

The survey notes that interest in buying a home in a major city centre has risen 5% since last year. This comes after many Canadians began looking beyond the boundaries of large cities for their housing choices, spurred on by work-from-home arrangements and rising home prices in the last two years. Now, not only are city centres attracting more interest from buyers, but BMO notes that preference for moving further from the city has seen a similar decline.

Those aren’t the only changes in Canadian’s buying plans according to the survey. Across the board, results seem to indicate that Canadians have become increasingly prepared to change their plans in response to rapidly changing housing conditions.

According to Hassan Pirnia, Head of Personal Lending & Home Financing Products, BMO Financial Group, “Financial hurdles are having a major impact on the purchase plans for these consumers in terms of what they will buy and when they will buy. Most understand that they will need to spend more; the impact on timelines is split, with some buying sooner before prices go up more and some holding off to see if prices come down.”

The results of the survey indicate that 68% of respondents were willing to change how much they spend on a home purchase, with 73% of those willing to spend more. The reasons listed for spending more on a home include increased home prices, growth in income, and increased savings because of the pandemic.

More than one-third of respondents expect to pay 10% or less for a down payment and two-fifths are relying on help from family to have enough funds.

Overall, the survey found that the amount Canadians expect to spend on their homes has increased 26% in just the last year with the average spend coming in at $588,000. Buyers in Ontario had the highest expected spend at $790,000 and the highest increase from last year, going up over $200,000.

Finally, more Canadians are rushing for mortgage pre-approval amid the uncertainty of rising interest rates. 30% of survey respondents said they are already pre-approved to buy, up 8% from last year, with another 43%3 planning on getting pre-approved in the future.

“Market conditions are quickly changing,” said Robert Kavcic, Senior Economist, BMO Capital Markets in the report. “We could see much more balanced conditions very soon as the Bank of Canada is expected to raise interest rates further through the remainder of the year. That will bite into affordability and possibly temper market psychology. Longer term, underlying fundamentals are still strong thanks to a firm job market and demographic support.”

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Ontario Budget Earmarks $2B for Infrastructure and $19B for LTB, OLT

Ontario’s provincial budget, released late this afternoon, was short on new housing measures but nevertheless earmarked $2B to build community infrastructure.

The funds will be invested in the Ontario Community Infrastructure Fund over five years and will be deployed across 424 small, rural and north communities in the province, where old roads, bridges, water and wastewater infrastructure will be both rehabilitated and built anew. A total of $1.3B in provincial relief will support critical municipal services like public transit and shelters through new federal-provincial investment of $632M, of which the province is asking the federal government to be a full partner.

The budget also announced that Doug Ford’s Progressive Conservative Party will spend $230M through 2023 to augment health care capacity, including critical care in hospitals across the province of Ontario.

The budget also promises to expedite development timelines for all housing types in a bid to deliver homes faster, although the budget did not specify how it would achieve this ambition.

The Landlord Tenant Bureau (LTB) and the Ontario Land Tribunal will receive $19.2M over the next three years to help alleviate their backlogs. In the former’s case, hearings were backlogged by around four months before the COVID-19 pandemic, but it has grown to somewhere around seven months.

There were 48,422 applications filed with the LTB in 2021 — down from more than 160,000 over the two previous years — of which 24,481 were requests to evict tenants who weren’t paying rent. With such massive caseloads, it remains to be seen if the government’s money will relieve the backlog.

“One of the defining affordability challenges of our time is housing. Our province is growing and every year, people from across Canada and around the world choose Ontario to build their careers and raise their families, here in Ontario. But every single year, they’re putting pressure on our housing supply and the dream of homeownership becomes further and further out of reach,” Provincial Finance Minister Peter Bethlenfalvy said. “In fact, as part of our plan, we’ll increase the housing supply by building 1.5M new homes over the next 10 years. It’s time to put more housing options within the reach of families who so badly need them. When we talk about building new homes for families, we say, let’s get it done.”

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What is the average age of a first-time homebuyer in Canada?

Homeownership is one of the major values that many Canadians share. After all, it’s often seen as a major milestone in one’s life to be able to buy your first home. This is not surprising when you consider the many benefits of homeownership both financially and for quality of life.

Among Canadians, it’s the older generations who have the highest levels of homeownership, largely due to the fact that older people have had longer to become financially established. Similarly, younger people tend to have the lowest levels of homeownership as many are still working to become established financially and save for a down payment.

Most people who are saving to buy a home naturally want to do so as soon as possible, but this can take a long time. Statistics show that young people are buying homes often, though most first-time buyers are well into their 30s before they enter the housing market.

In this article, we will look at when the average first-time buyer purchases their home, how much they spend, and other important statistics of homeownership as it relates to age.

What is the average age of a first-time buyer?

If you are a young adult eager to make your way into homeownership, you may want to have some patience. According to a study conducted by Money.co.uk, the average age of a first-time homebuyer in Canada is around 36.

While that’s not too old, it’s pretty late when compared to other major life milestones. The average Canadian university graduate is around 25 years old. On average, mothers are about 29 when they have their first child and the average age for a Canadian couple to get married is around the same age. This means that buying a home may very well be one of the later major steps you take in life.

That doesn’t mean some aren’t buying homes younger. Statistics Canada indicates that around 43% of Canadians aged 20-34 own their home, however, this is about 30% lower than any other age demographic. They also note that young people today are getting into the real estate market at a much slower pace than older generations such as the baby boomers and increasingly more people are living with parents or family later in life.

How much do first-time buyers spend?
The same Money.co.uk study that determined the average age of a first-time homebuyer also polled buyers on how much they spent on their purchase. According to the results, the average first-time home buyer in Canada spent about $340,000, though this figure is a couple of years old and value will depend a lot on the area where the purchase is made. A more recent poll from the Bank of Montreal found that first-time buyers in Atlantic Canada planned to pay the lowest for their first homes, with those in British Columbia and Ontario expecting to spend the most.

A more recent market insight report from Teranet shows that first-time buyers spent the least of any buyers in Ontario. Their average home value was above $500,000 and over $600,000 in Toronto specifically.

The rapid increase in house prices in Canada has led many young people to feel that saving for a down payment is exceedingly difficult. As a result, some have had to turn to other options in order to purchase a home. For example, the number of first-time buyers using gifted money for a down payment has risen to just under 30%, while at the same time, the sizes of these gifts have risen as well according to a report from CIBC. Younger people also tend to make less money, and as a result, are more in the market for cheaper homes with both lower down payments and lower mortgage payments.

Beyond affordability issues, the discrepancy in home values may also simply be a reflection of lifestyle values for younger buyers. Many of the youngest buyers, will not yet have large families who need as much space and may opt for smaller homes. Young professionals without children may be more likely to buy comparatively cheaper condominiums, whereas growing families tend to prefer larger more expensive properties.

Furthermore, those who are buying a home at an older age are more likely to be moving from a home they already own, making it easier for them to leverage their existing equity into larger homes.

Who is buying the most houses?
While we explained earlier that young people tend to have a lower level of homeownership in Canada, this doesn’t tell the whole story. Remember, many people will buy their homes to live in for many years, some even for their whole lives. This means that though more older people own homes, they aren’t necessarily on the market right now.

This is backed up by a recent report from the Bank of Canada, which indicated that about half of all purchases from 2014 to 2021 were by first-time homebuyers, with the other half divided between repeat homebuyers and investors. However, the overall share of first-time homebuyers has been falling, especially in areas like Ontario and British Columbia where investor activity has been on the rise. The same internet report from before indicates that in Toronto, where home prices are some of the highest in the country, first-time buyers made up just 27% of sales with 24% alone going to multi-property owning investors.

How old should you be to buy your first home?
There is no right age to buy a home – it simply depends on when you can afford it based on your own circumstances. Based on the data covered in this article, we can offer some advice for first-time homebuyers hoping to begin their home buying process:

Buying young if you can
First of all, if you can afford to purchase a home and plan on living in it for many years to come, most experts would say to go for it. It can be one of the best financial investments you will make and will provide numerous lifestyle benefits as well. And, the sooner you buy, the sooner you can pay off your debt and the longer your home can build equity.

Be patient with yourself
For those still looking to buy or trying to save for a down payment, be patient. As covered before, purchasing a home can happen much later than many other life milestones, so don’t feel like you are behind if you don’t buy in your twenties and don’t feel too late if you are older than 36. Everyone achieves goals at different ages in their life so don’t feel the need to compare yourself to others too harshly. There is no set timeline for everyone to accomplish certain things.

 

First-time purchases are made easier with smart decision making
First-time homebuyers can make their purchase more attainable through careful choice of what they want to buy. The varying amounts of first-time buyers in different regions and the generally low spending of first-time buyers indicate that those who are successful in buying their first home made smart decisions about what and where to buy. Be realistic about your budget and remember you can always scale up later as your requirements change. Also, consider looking to buy in a cheaper area that may help you buy sooner.

Take advantage of first-time buyer programs
Finally, keep in mind there are many things you can do to help make your home purchase a little easier. Especially for first-time buyers, there are programs and incentives in place to ease your financial burden. Naturally, those who can get financial help will be the best off, but other federal, provincial, and municipal programs can go a long way to helping you get there faster.

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The average price of a GTA condo has jumped $145K from Q1-2021

Condo buyers in the Greater Toronto Area might have noticed that the price of units have jumped considerably across the region this past year.

New data released by the Toronto Regional Real Estate Board (TRREB) shows that there were double-digit annual price gains between Q1-2021 and Q1-2022. The average GTA condo apartment selling price increased 22.5 per cent from $645,303 to $790,398 year-over-year. This marks a $145,095 annual hike to the average GTA condo price.

“The GTA population will grow at or near record levels over the next few years, supported by a strong regional economy. The condominium apartment segment will be an important source of housing, both for people looking to purchase a home and also those looking to rent,” said TRREB’s chief market analyst, Jason Mercer, in the report.

“This will continue to support price growth, but the pace of price appreciation may moderate as the market becomes more balanced over the next year,” he added.

Condo prices in the City of Toronto shot up $133,874 — a 19.8 per cent increase — year-over-year, rising from $675,979 to $809,853 in Q1-2022. Out of the six individual markets TRREB analyzes, Toronto is the most expensive to buy a condo in, followed closely by Halton Region, where the average condo suite now costs $805,859.

Condo apartment prices in Durham Region grew the most over a year, where the average price increased from $447,246 to $658,860 annually, a $211,614 or 47.3 per cent difference. York Region ranked behind Durham Region for the most annual price growth, where the average condo price jumped $176,275 or 28.9 per cent from $609,754 to $786,029 between Q1-2021 and Q1-2022.

Condo sales fall 15% from Q1-2021

GTA condo sales “remained strong historically,” last quarter, but were down from Q1-2021 levels.

In Q1-2022, TRREB recorded 7,932 sales through the MLS systems, down 15.6 per cent compared to the record 9,399 transactions that took place in Q1-2021. Although first quarter sales were down, TRREB explained in its report that new condo apartment listings were “basically flat,” which meant that condo buyers felt some relief in terms of market conditions.

“Condominium apartments represent a key market segment in the GTA, providing housing for an array of households. Many first-time buyers see condos as an affordable entry point into homeownership,” said TRREB president Kevin Crigger.

“At the other end of the spectrum, condos provide a luxury alternative for many households. It is also important to note that investor-owned condominium apartments have been an important source of rental supply over the past decade,” he added.

In Q1-2022, the City of Toronto reported the most condo units sold. Last quarter, the city recorded 5,384 transactions, down 16.8 per cent from Q1-2021’s 6,474 unit sales.

Annual sales dropped in all of TRREB’s markets with the exception of Durham Region, where the number of condo that traded hands grew 6.8 per cent yearly from 176 to 188 units sold. York Region reported the biggest drop in sales, which fell 20.6 per cent from 1,116 to 885 transactions between Q1-2021 and Q1-2022. The ‘Other Areas’ market came close to York Region’s levels, where annual sales fell 20.4 per cent from 49 to 39 transactions.

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New construction GTA condos hit record price of $1.25 million in March

While the price of a new construction condo reached record highs in the Greater Toronto Area during March, sales in the region saw a change from the market’s “breakneck pace,” of the past few months.

According to the latest information from the Building Industry and Land Development Association (BILD), there were 4,115 total new home sales in March, a 21 per cent drop from the same month last year. Yet, the number of sales in March was still 12 per cent above the region’s 10-year average.

Condo apartment sales accounted for most of the product sold last month, recording 3,277 transactions for units in low-, medium- and high-rise buildings, stacked townhouses and loft suites. March’s condo sales were down seven per cent from March 2021 and 34 per cent above the 10-year average. The majority of March condo sales were logged in Toronto, where 2,124 transactions took place.

New single-family homes — which includes detached, linked and semi-detached houses and townhomes but excludes stacked townhomes — reported 838 homes sold in March. Compared to the same period last year, new single-family home transactions decreased 50 per cent and were 32 per cent below the 10-year average. York Region reported the most single-family home sales in March, with 254 properties exchanging hands.

Year-to-date, 10,974 new GTA homes have sold during the first three months of 2022. There have been 2,089 single-family home sales (down 61 per cent from 2021) and 8,885 new condo sales (a 50 per cent annual increase) so far this year.

Edward Jegg, research manager at Altus Analytics at Altus Group, noted in the monthly BILD report that total new homes sales stayed strong in March, “[but] signs of slowing are emerging, as higher interest rates alongside record prices start to impact demand.”

The price of a new condo apartment in the GTA hit a record in March, reaching a new benchmark of $1,252,515, a 17.7 per cent increase over the last 12 months. Single-family units experienced an even higher rate of annual price growth, rising 27.3 per cent over the past 12 months to a benchmark of $1,838,396.

Demand continued to outpace supply in March. Although nine condo apartment projects were opened last month, remaining condo inventory dropped year-over-year for the tenth month in a row down to 7,220 units. Remaining inventory for single-family homes was more than 50 per cent lower compared to March 2021, falling to 830 units. Remaining inventory is defined as units in pre-construction projects, developments currently under construction and completed buildings.

“Although new home sales eased in March compared to the exceptionally strong pace of the past few months, demand continued to outpace the supply of new homes, leaving the region with an inventory shortfall,” said Dave Wilkes, BILD’s president and CEO, in the report. “We cannot let short-term market variations mask the root causes of the housing supply and affordability challenge in the GTA. We need to keep our eyes on the long-term solution—building more new homes.”

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Ontarians on the Move, 2022 Edition. #4 -Housing completions did increase after the 2015 Ontario population boom, but mostly outside of Toronto.

Fourth in (what I hope) will be a series on population growth, migration, and what’s going on with Ontario’s housing market.
TL;DR: Although housing completions did not keep up with population growth from 2015–19, they did increase. However, despite the GTA being the prime destination for international talent, the housing completion growth largely happened outside of Toronto CMA.
Earlier this week, Smart Prosperity published a report authored by Mohsina Atiq and me called Forecast for Failure: How a broken forecasting system is at the root of the GTAH’s housing shortage and how it can be fixed. Among other things, it examines how Ontario experienced rapid population growth from international sources after 2015, and how Ontario’s Growth Plan that governs the Greater Golden Horseshoe (GGH) failed to both forecast and accommodate this growth:

There have been a number of thoughtful comments and questions around the release of the paper, one of which is, “how did housing completions across Ontario respond to this increase in population?”
If we look across Ontario, housing completions did go up somewhat after 2015. I’ve broken the data down into apartments (which includes both ownership, including condos, and rentals) and everything else.

But where were these units built? That’s a tougher question to answer than it should be, because our data is terrible. Well, that’s not entirely true — the data is out there, but the user interface to access the data is atrocious. Completions data, at the Census Subdivision (CSD) level, is available from CMHC but it’s impossible to access a time series, for every CSD. So that limits my analysis.
If anyone can figure out how to scrape the CMHC website to get housing completions data, for every CSD in Canada, I’ll be eternally grateful. I’ll even pay money!
Because of this limitation, I decided to get data for the City of Toronto, Toronto CMA, and Ontario as a whole. The boundaries of Toronto CMA are shown here in grey:

First, let’s start with apartment units. I’ve divided the data into the City of Toronto, Toronto CMA excluding the City of Toronto, and the rest of Ontario.
We’ve seen an increase in the number of units, in all parts of Ontario, in the last couple of years.

That City of Toronto spike in 2015 is wild. I’d love to learn more about it.
For the last few years, the proportion of apartment units built outside of Toronto CMA has been fairly steady at 30% or so.

Next, let’s consider all forms of housing excluding apartments. These include single-detached, semi-detached, and row housing. Very few of these units are built in the City of Toronto itself, primarily due to land constraints. In the rest of Toronto CMA, there were elevated completions in 2017, and 2018 was right around 2011–14 levels. Since then, housing completions have been under the level seen at the beginning of the decade.
Contrast this to the rest of Ontario, where housing completions, last year, are now 50% higher than they were at the beginning of the 2010s.

As such, the proportion of non-apartment housing units built outside Toronto CMA has risen from 55% a decade ago to over 75% last year.

Here is another way to look at the data. We’ll compare two five-year periods: 2011–15 to 2016–20 (so we’ll exclude 2021). Completions of non-apartment units went down in Toronto CMA, but up a fair margin in the rest of Ontario.

It’s really not hard to figure out why we’ve had so many young families drive until they qualify to the rest of the province.

 

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Priced out of Ontario, which market are homebuyers turning their attentions to?

Homeownership is getting out of reach for many

As Ontario’s sizzling real estate market puts home ownership out of reach for many Canadians, a growing number of prospective buyers are looking west in hopes of achieving their white-picket-fence dreams.

Like newlyweds Vineet Mrug and Kushbu Mistry, who relocated to Calgary from their hometown of Toronto last year, some residents of the GTA and other hot Ontario markets are moving to Alberta for what they believe is their last opportunity to own an affordable piece of real estate in a large Canadian city.

“We entertained the idea (of staying in Toronto), but it was very short-lived, just because of the sheer price of homes,” said Mrug, adding he and his wife made the move with the intention of starting a family soon.

“In Ontario, especially Toronto, within our budget we were restricted to a two-bedroom condo. And that really would not have cut it for us, with the kind of plans that we had.”

Mrug and Mistry ultimately purchased a 250 square metre home with a walkout basement and a large backyard in Calgary’s northwest neighbourhood of Valley Ridge.

“We got three times the amount of house for the same amount of money,” Mrug said. “We’re very happy with our decision.”

Mrug and Mistry’s experience is not unique. A quick perusal of housing-related forums on online mediums like Reddit turns up dozens of recent inquiries from GTA residents asking about weather, commute times and popular neighbourhoods in Alberta cities, especially Calgary.

Realtors in the western province are also buzzing with anecdotes about what they say is an unusually high number of inquiries from Ontario. Those stories appear to be backed up by Statistics Canada data, which says Alberta led the country in interprovincial migration in the fourth quarter of 2021, for the first time since 2015. On a net basis, the majority of Alberta’s new interprovincial migrants in the fourth quarter came from Ontario.

“We’re starting to see that migration based on affordability,” said Don Kottick, president and chief executive of Sotheby’s International Realty Canada. “I think we’re seeing some of this driven by the old FOMO, the fear of missing out. People are going to look where you can still afford a house.”

The benchmark price for detached homes in Calgary rose to $620,500 in March, which is over $73,000 higher than December levels and 20% higher than levels recorded last year. Many homes are receiving multiple offers and selling over the asking price.

On the higher end of the market, the uptick in activity is even more dramatic. Detached and attached home sales in the $1 million-plus price category in Calgary rose 71% and 258% year-over-year respectively, according to Sotheby’s.

But even as Calgary home prices rise, they pale in comparison to what prospective homebuyers are facing in other parts of the country. In Toronto, the average selling price in March of 2022 was $1.3 million, according to The Canadian Real Estate Association, while the composite benchmark price in Metro Vancouver for the same month was $1.4 million.

While the federal government committed in its most recent budget to taking steps to cool Canada’s overheated housing market, for many first-time homebuyers, it’s too little, too late. Data analyst Ryan Sekulic – who had been working in the UK – accepted a job at Calgary tech company Helcim last year, after looking at opportunities in both Toronto and Vancouver.

“None of the jobs I was looking at in Toronto or Vancouver paid enough to justify living in either of those cities,” said Sekulic. “I did eventually want to be a homeowner, and I’ve bought one now ? which would have been impossible there.”

Canada’s housing affordability crisis has coincided with Alberta’s recovery from years of recession due to depressed oil prices, which may be another reason Eastern Canadians are once again looking west. According to the Conference Board of Canada, Alberta is projected to lead the country in economic growth in both 2022 and 2023 due to surging commodity prices. The province is also working to diversify its economy, with some success – both Calgary and Edmonton have seen rapid growth in their local tech scenes.

Outside buyers also appear to be attracted to Calgary’s proximity to the Rocky Mountains. Recreation properties in Alberta are now the most expensive in all of Canada, outstripping even B.C., according to a recent report from Royal LePage Realty. In Canmore, a desirable mountain town located 80 km west of Calgary, single family home prices have soared 33% year-over-year, to $1.36 million.

While much of that demand is still driven by Western Canadians, local Royal LePage realtor Brad Hawker said a growing number of Canmore properties are being snapped up by Ontario retirees.

“They’re cashing out of a (high-priced) market, leaving segments of Ontario, and coming here for a combination of more affordable real estate and a different quality of life,” Hawker said, adding he doesn’t expect the threat of rising interest rates to slow that specific trend.

“I honestly don’t see it changing. A lot of those buyers are cash buyers,” Hawker said. “They aren’t putting a mortgage on the property anyway, so interest rates aren’t relevant to them.”

 

Source: Bloomberg News

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Inflation hits new three-decade high in Canada

Canada’s annual inflation rate surged to 6.7% in March, a new 31-year record and a higher figure than financial analysts had expected.

Statistics Canada announced that the country’s Consumer Price Index (CPI) rose by a full percentage point last month over February’s figure, surpassing Bay Street’s prediction that inflation in March would come in at 6.1%.

That news comes a week after the Bank of Canada announced an oversized rate hike following its April policy rate meeting, with that half-percentage-point increase taking the central bank’s trendsetting interest rate to 1.0% after remaining steadfastly low at 0.25% throughout the COVID-19 pandemic.

Wednesday’s StatCan announcement indicated that prices had risen in each of the eight categories tracked by its data. Transportation costs posted a particularly noteworthy 11.2% increase over last year, spurred by a rise in gasoline costs of nearly 40% since the previous March.

Homeowner replacement costs ballooned by 12.9% compared with the same time last year, with grocery store prices also recording an 8.7% year-over-year hike.

According to the agency, inflation had also worsened thanks to ongoing supply chain snarls, a feverish housing market and the continuing global crisis caused by Russia’s invasion of Ukraine.

Prince Edward Island posted the highest inflation figure among Canada’s provinces and territories, coming in at 8.9%. Second were Manitoba and New Brunswick at 7.4% each, with Ontario recording a figure of 7.0% and Quebec coming in at 6.7%.

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Home prices have increased 31% since the pandemic started, and will keep growing

Since the COVID-19 pandemic began in March 2020, Canadian home prices have experienced significant upward momentum, a trend that is expected to continue into the spring market.

According to new market reports, the Teranet–National Bank National Composite House Price Index (HPI) has increased 31.2 per cent between March 2020 and March 2022, two years since the onset of the pandemic.

Daren King, an economist with the National Bank of Canada, stated in the monthly report that household preferences for housing have changed dramatically over the past two years, a pattern that has driven market demand up and pushed available home supply down. As a result, extreme price increases have been recorded in many of the composite’s 11 census metropolitan areas (CMAs) during the pandemic. Home prices in Halifax, Hamilton and Ottawa-Gatineau have climbed at the highest rate compared to the other nine CMAs, up 65 per cent, 55.4 per cent and 39.8 per cent since March 2020.

“Judging by the current market conditions, characterized by limited supply, and continued strong demand, prices should continue to rise during the strong spring period – especially since many buyers can still get the mortgage rates that they were guaranteed before the recent increases,” said King. “However, the upward trend in prices is expected to fade in the second half of the year.”

King added that NBC expects housing demand to be less robust and for price increases to become more modest as mortgage rates rise in the coming weeks and poor affordability conditions persist.

Without seasonal adjustment, the composite HPI grew by a record 18.4 per cent year-over-year in March, an increase that matches the record growth seen in August 2021. This increase was mainly driven by Halifax, Hamilton and Victoria, where prices jumped 34.7 per cent, 28.5 per cent and 22.8 per cent from March 2021 to March 2022 before seasonal adjustment.

For the other 20 CMAs not included in the composite HPI, yearly price increases were observed in all of them, ranging from 28 per cent to 37.5 per cent.

Between February and March, the composite index rose two per cent after seasonal adjustment, the second-highest increase on record after May 2021 and higher than the 1.7 per cent increase reported in February. Before seasonal adjustment, the composite HPI was up 2.1 per cent monthly, higher than the 1.5 per cent growth observed in February.

Ten of the 11 CMAs included in the composite HPI reported monthly growth after seasonal adjustment, most notably Halifax (5.4 per cent), Hamilton (3.3 per cent), Toronto (2.7 per cent) and Ottawa-Gatineau (2.4 per cent). Quebec City was the only CMA to report a drop in prices, which were down 0.6 per cent month-to-month. For the other 20 CMAs not included in the composite index, monthly growth was observed in 19 of them.

The Teranet–National Bank HPI is an independent representation of changes to Canadian single-family home prices by the National Bank of Canada and Teranet Inc. The measurement is based on sale price data from property records of public land registries. Using repeat sales methodology, all homes that have been sold at least twice are considered in the HPI calculation, which tracks the price increase between two sales of the same property.

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Ontario Invests $19M to Accelerate OLT and LTB Decisions

The Ontario government has announced that it is investing more than $19 million over the next three years in an effort to help reduce the longstanding backlogs and accelerate decisions at the Ontario Land Tribunal (OLT) and Landlord and Tenant Board (LTB). The funding will help appoint more impartial adjudicators at both bodies, and support additional technology at the land tribunal as a means to resolve cases more quickly.

“We are making even more investments in the Ontario Land Tribunal and the Landlord and Tenant Board to help clear longstanding backlogs and drive faster decisions so we can get more shovels in the ground,” said Attorney General Doug Downey. The investment addresses a key recommendation found in the Report of the Ontario Housing Affordability Task Force that suggests to increase resources at the Ontario Land Tribunal so homes can be built faster.

“This investment will allow the Tribunal to schedule hearing events and issue decisions quicker and more efficiently than before,” said Greg Bishop, Alternate Chair for the Ontario Land Tribunal. (Hirings that started in 2019 of new adjudicators have already helped to reduce a longstanding backlog cases of the Ontario Municipal Board/Local Planning Appeal Tribunal – now the OLT – by more than 60%.)

According to the announcement released by the Province, investments at the OLT will support faster case resolution by increasing the number of full-time adjudicators and case processing staff, by creating flexibility to address caseload trends by appointing more part-time adjudicators, by more than doubling the capacity for the use of expert land use planning mediators to help settle disputes earlier and narrow issues for faster adjudication, and finally, by improving IT platforms to improve access to services online.

Investments at the Landlord and Tenant Board will raise staffing, allowing the Board to more quickly resolve existing backlogs.

“As the ultimate impartial adjudicator, investing in the Ontario Land Tribunal as well as the Landlord and Tenant Board will help break the cycle of delays and appeals – getting homes built faster and helping tenants and landlords resolve disputes,” said Steve Clark, Minister of Municipal Affairs and Housing.

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