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New home sales in the Greater Toronto Area (GTA) continued to ease in June.

According to a new report from the Building Industry and Land Development Association (BILD), the total new home sales of 1,694 units were down a notable 56% from June 2021 and 52% below the 10-year average.

The data is generated by Altus Group, BILD’s official source for new home market intelligence, and reveals a telling tale of the current climate — one where the frenzied pandemic-inspired real estate drama is decidedly a thing of the past (at least, for now it is).

“New home sales numbers for June reinforced the expected easing of sales from last year’s exceptionally fast pace,” said Edward Jegg, Research Manager at Altus Group. “With interest rates continuing to rise, high inflation, affordability pressures and general economic uncertainty, many buyers are adopting a wait-and-see attitude that is expected to run through at least the summer months.”

 

Sales of new condominium apartments — including units in low, medium and high-rise buildings, stacked townhouses, and loft units — with 1,519 units sold, were down 44% from June 2021 and 36% below the 10-year average. Single-family homes, including detached, linked, and semi-detached houses and townhouses (excluding stacked townhouses), accounted for just 175 units sold, down 85% from last June and 85% below the 10-year average.

While new home sales may be down, prices are up, says BILD.

The benchmark price for new condominium apartments in June was $1,189,894, which was up 12.4% over the last 12 months and the benchmark price for new single-family homes was $1,843,595, which was up 31.2% over the last 12 months.

Total new home remaining inventory increased compared to the previous month, to 11,639 units, comprised of 9,717 condominium apartment units and 1,922 single-family lots, representing 3.5 months and 2.7 months of inventory respectively. A balanced market would have nine to 12 months of inventory.

“While many prospective home buyers in the GTA are delaying purchasing the homes they need in the midst of economic uncertainty, our region’s fundamental challenges around housing supply remain unresolved,” said Dave Wilkes, BILD President & CEO. “Shorter-term demand-side economic conditions and inflationary pressures cool demand but increase the costs of new builds simultaneously. This will continue to impact overall supply. Now is the time for bold decisions by all levels of government to ensure we provide the housing supply and choice future generations of GTA residents will need.”

 

While interest rates have been on the rise for the past few months, the Canadian housing market continued to see price growth during the first six months of this year, according to the latest “Price Per Square Foot” survey by CENTURY 21 Canada.

The increases were particularly notable in suburbs and smaller communities outside metropolitan centres, spurred by a flight from the mounting unaffordability of the Greater Toronto Area and Greater Vancouver regions.

“While some markets have cooled after the boom that occurred during the COVID-19 pandemic, prices overall have continued to remain elevated for the start of the year,” CENTURY 21 said.

Long-term growth is also expected to continue despite fears surrounding higher interest rates.

“The highest point of the boom may have passed, but the trend is still towards higher prices, especially in suburbs where younger and first-time home buyers are looking to escape competitive metropolitan areas now that remote work has become more common,” said Brian Rushton, COO of CENTURY 21 Canada.

Rushton said that more volatility is not out of the question as the full impact of rate hikes will become clearer as the months go on.

“What will be interesting is to compare the data we’ve received from the first half of this year with the data we gather in 2023 to see how the rising rates impact the market for the next six months,” Rushton said.

“We don’t want to get ahead of ourselves, we’re going to keep seeing how the market performs and whether or not it cools down after the frenzy of the past year. With inflation on the rise, folks may be less able to purchase but even a slight dip would only take us to the level of a few years back, possibly the 2018-2019 period.”

 

Today, the City of Toronto announced the launch of an enhanced Home Energy Loan Program (HELP) that will offer zero-interest loans and incentives to help Toronto homeowners make their homes more energy-efficient and reduce the emissions contributing to climate change. The HELP program has been offering low-interest loans to homeowners since 2014.

Currently, homes and buildings are the largest sources of emissions in Toronto, generating approximately 57 per cent of total community-wide emissions, primarily from the burning of fossil fuels (natural gas) for heating and hot water.

For a limited time, through the enhanced HELP program, Toronto homeowners will be able to access:

  • Zero-interest loans of up to $125,000 for terms of up to 15 years; 20-year terms are available for retrofits that include rooftop solar PV, geothermal, new windows and electric heat pumps.
  • Incentives for specific measures including electric heat pumps, which can replace a home’s natural gas furnace and air conditioner; rooftop solar PV and deep retrofits that significantly reduce a home’s emissions.

 

The Government of Canada provided funding to enhance the program through the Green Municipal Fund, administered by the Federation of Canadian Municipalities (FCM), including a loan of up to $9.712 million to fund the zero-interest loans and a grant of up to $4.856 million. A portion of the funds will support the development of training, education and resources for homeowners, contractors and other industry stakeholders, including training for Toronto contractors to become a Net Zero Renovator, qualified by the Canadian Home Builders’ Association.

The new zero-interest loans and incentives will be available until the funding allocated for each is fully subscribed, after which homeowners can continue to access low-interest loans.

Home improvements eligible for financing include electric heat pumps, insulation (attic, wall, basement), upgraded windows/doors, air sealing, geothermal systems, rooftop solar PV, tankless water heaters, solar hot water systems, EV charging stations, battery storage and more.

Eligibility has been expanded to include tax-exempt properties (e.g. non-profit homes, supportive housing, rooming houses) in addition to the currently eligible detached, semi-detached, row/townhouses, and duplex and triplex apartment buildings.

Improving the energy efficiency of homes is one of the most substantial things that homeowners can do to help address the climate emergency. The highest impact measures include replacing a home’s furnace with an electric heat pump (which can provide both heating and cooling), insulating from attic to basement and upgrading windows and doors.

In addition to the loans and incentives available through HELP, homeowners may also be eligible for the federal government’s Canada Greener Homes Grant of up to $5,000.

The City’s HELP program supports the goals and objectives of the City’s TransformTO Net Zero climate action strategy, which set Toronto on a path to reduce community-wide greenhouse gas (GHG) emissions to net zero by 2040, and its Net Zero Existing Buildings Strategy which recognizes the need to transform housing. The accelerated climate strategy was adopted by Toronto City Council in December 2021. Toronto’s net zero target is one of the most ambitious in North America. The HELP program has supported 245 home retrofit projects since it was launched in 2014.

The City’s BetterHomesTO program further supports homeowners with a one-stop website with information about a range of home energy improvements – everything from air sealing and windows to insulation, heat pumps, green roofs and rooftop solar – including tips on what to look for when purchasing, cost estimates, and a list of all of the incentives and rebates available from all sources.

“Improving the energy efficiency of our homes and buildings will be key to reaching our net zero target by 2040 and advancing our TransformTO Net Zero climate strategy. Ongoing investment and action from all levels of government will be required to address the climate crisis and I thank the federal government and FCM for this funding. I encourage Toronto homeowners to take advantage of HELP financing and incentives, as well as the federal Greener Homes grant, to make their homes much more efficient and reduce the emissions that are changing our climate.”
– Mayor John Tory

“Improving energy efficiency and decarbonizing our homes is one of the biggest things that homeowners can do to help address the climate emergency. It will also create a better, more resilient future for our city. I encourage all homeowners to make a plan to improve their homes and explore the loans and incentives available through City’s HELP program and other sources.”
– Councillor Jennifer McKelvie (Scarborough-Rouge Park), Chair of the Infrastructure and Environment Committee

“Today’s $14.5 Million investment will enable the City of Toronto to build on the Home Energy Loan Program’s (HELP) legacy of retrofitting hundreds of homes, in line with Toronto and Canada’s ambitious climate targets. This is a tangible step towards bringing energy efficiency, job creation, and affordability to communities across Ontario and Canada.”
– The Honourable Jonathan Wilkinson, Minister of Natural Resources

“It’s critically important to have everyone in the climate fight. Municipalities across Canada are doing their part with innovative solutions that create jobs and climate resilience. Green infrastructure investments in Canadian communities will make our air cleaner, our economy stronger, and set us on the path to a net-zero future.”
– The Honourable Steven Guilbeault, Minister of Environment and Climate Change

“Energy-efficient homes are more affordable to heat and cool, while reducing emissions and allowing us to adapt to our changing climate. We are working as a partner to our cities to help Canadians make their homes more energy-efficient. “
– Julie Dabrusin, Parliamentary Secretary to the Minister of Natural Resources and to the Minister of Environment and Climate Change, Member of Parliament for Toronto-Danforth

“Municipalities are on the front lines of climate change and climate action, and communities of all sizes are showing climate leadership at a time when we need it most. The Green Municipal Fund empowers them to get results on the ground. We deliver results with our federal partners – supporting cities like Toronto build a greener, more sustainable community, create jobs and helping Canadians make their homes more comfortable and affordable. Together, we are on the path to net zero.”
– Taneen Rudyk, President, Federation of Canadian Municipalities

Although there have been signs pointing to a cooling housing market, Canada’s rental markets have never been hotter as the majority of metro areas went up in monthly value in July, according to the Zumper Canadian Rent Report.

Looking into 23 of the most populous metros, Zumper.com found that 18 metro areas experienced a monthly increase in rent, five experienced a decrease and one remained flat in pricing.

The most expensive markets aren’t too surprising: Vancouver continues to top the list as one-bedroom rent climbed 2.7% to $2,300, while two-bedroom rent remained flat at $3,300.

Next is Toronto, hitting a two-year high with one-bedroom rent at $2,100 and two-bedroom rent at $2,700. Burnaby comes in as the third most expensive, with one-bedroom rent at $2,060 and two-bedroom rent at $2,750.

“The majority of the priciest markets, besides Toronto, have either hit or surpassed their respective pre-pandemic rent prices, which shows that the mounting demand for rentals has not been met with enough supply in many markets,” Zumper said.

Zumper added that the upward trend is expected to continue as employment and interest rates soar amid the “summer moving season.”

Windsor, Quebec and St. Catharines experienced the largest monthly changes in rent price as the 17th, 20th and 11th most expensive cities, respectively. In particular, Windsor saw a 6.3% jump to $1,350 for one-bedroom rent, Quebec a 6% jump to $1,060 and St. Catherines a 5.4% jump to $1,550.

Similarly, Quebec and Windsor take the lead for the largest year-on-year growth, along with Halifax in third place.

The three markets to note a slip in rent prices are Abbotsford, Kelowna and Barrie, falling 6% to $1,400, 5.7% to $1,650 and 5.1% to $1,670, respectively. Meanwhile, Saskatoon is the lone area to remain flat in its monthly one-bedroom rent at $990.

The breakneck pace of new home construction in the Toronto area continued in June, according to new data from the Canada Mortgage and Housing Corporation.

But that could soon be coming to an end, according to some economists.

“Long-term, I think the home construction market is going to remain strong, but the next six to 18 months, there will be some weakness. We’re not going to see numbers like this continue,” said economist Mike P. Moffatt, an assistant professor at Western University’s Ivey School of Business.

Monday, the CMHC said new housing starts in the Toronto area hit 49,860 in June, a 27 per cent rise from May’s 39,381.

Across the country, there are already signs of a housing construction slowdown. Nationally, there were 273,841 housing starts in June, a three per cent drop from May’s 282,188.

Rising interest rates, prompted by the Bank of Canada’s efforts to slow down runaway inflation, will likely prove to be a double-whammy for homebuilders, Moffatt argued.

“Not only are their financing costs for projects going up, there’s also lower demand from consumers,” said Moffatt. “It will be interesting to see what happens in the fall.”

Last week, the Bank of Canada shocked observers by hiking its key overnight lending rate a full percentage point to 2.5 per cent, a huge change from the 0.25 per cent it began the year at. The Bank of Canada also hinted it would need to raise rates again before the year is out.

Most economists and bank watchers had expected an increase of three quarters of a percentage point.

BMO senior economist Robert Kavcic agreed that there could well be a slowdown in construction, prompted partly by rate hikes, but also by falling prices for resale homes.

“The interesting part will be how construction responds to higher interest rates, compressed margins and a clear sharp pullback in resale demand. We could very well start to see some project cancellations and a pullback in activity through next year,” Kavcic said in a research note Monday looking at the CMHC data.

But, he added, there’s no immediate sign that the slowdown in resale housing prices is moving to new-builds.

“All in, unlike the resale market, new building activity is running strong — but this segment of the market lags, so any cracks wouldn’t realistically begin to show in the data until later in the year,” Kavcic said.

On Sunday, Kavcic said the Bank of Canada rate hike is “hammering” the resale market.

“The Bank of Canada’s 100 bp rate hike sets us up for an even deeper correction in housing through next year. The fact that the market had already cracked after the BoC’s initial move in rates only reinforced how sentiment-driven the market was, and how quickly that can change,” Kavcic said.

The lag between the resale market and new home construction is particularly keen in multiple unit buildings such as condos, where builders typically only go forward with construction once the majority of units are paid for, according to Chris Zakher of the CMHC.

“A lot of this was sold pre-construction, so this really reflects demand and sales from two or three years ago,” said Zakher, Toronto market analyst at the CMHC. “This is a lagging indicator.”

Still, even if new home construction dips, there will still be plenty of demand in the long run, argues Phil Soper, CEO of real estate giant Royal Lepage.

Immigration is starting to bounce back to pre-pandemic levels, Soper said. And so are the numbers of international students attending Canadian universities. Both, Soper said, drive demand for condos, in particular. So, too, does the fact that many office buildings are gradually reopening; people who ditched their downtown condos and bought a house with a yard in a smaller city during the pandemic are starting to come back.

“People are coming back to offices, even if it’s two days a week,” said Soper. “And they’re finding it difficult to live in St. John if they’ve got to be in Toronto two days a week.”

 

For first-time home buyers, it can feel intimidating when you want to try and buy a home. Beyond the work of seeing houses and facing competition in the market, you also simply need to have enough money saved to cover your down payment. Many first-time buyers are younger and haven’t had as much time to save or reach their high-earning years in their careers, making even a minimum down payment feel out of reach.

Making enough money for a home will never be easy, but luckily there are some programs to help make it at least a little bit easier for first-time home buyers. One popular program is the Home Buyers’ Plan (HBP), which allows buyers to collect tax savings using their Registered Retirement Savings Plan (RRSP) to fund a home purchase.

The HBP is undoubtedly not a bad option, and many Canadians have used it to help buy their first home. However, it may not be for everyone. You need to be aware of some downsides before you withdraw money from your RRSP to buy a house.

In this article, we will explore funding a home purchase with your RRSP, how it works, and look at some of the advantages and disadvantages of using the Home Buyers’ Plan to buy your first house.

What is an RRSP?
Before you can understand the Home Buyers’ Plan, you need to know how your RRSP works. Hopefully, if you have been contributing to your RRSP, you already know this, but maybe you haven’t begun using an RRSP yet or need a refresher.

In brief, your Registered Retirement Savings Plan (RRSP) is a tax-deferred retirement savings account, so any RRSP contributions you make for the year are deducted from what you owe on taxes. An RRSP is not truly tax-free, as you will need to pay taxes when it comes time to withdraw the money you have saved.

You also will not be taxed on any capital gains made within the account, such as through investments, as long as the gains remain within the account. The idea is to help Canadians save money while they are in their prime earning years while also getting a tax break and then withdraw it in retirement when your marginal tax rate is lower.

As long as your RRSP isn’t locked-in, you can still withdraw the money whenever you want, but you will simply need to pay taxes on the amount like any other income. You will also lose any contribution room used when you put the money into the account.

RRSPs are one of Canada’s most popular registered accounts, so many people have a lot of money saved within one. If you are many years from retirement, it can be tempting to dip into a bit of that money, especially if you want to buy a house. Luckily, the CRA provides you with an option to do just that.

What is the RRSP Home Buyers’ Plan?
The Home Buyer’s Plan is a federal program designed to help Canadians buy their first home with funds from their RRSP. Under the home buyers plan, you can use money from your RRSP while still enjoying the tax savings. However, there are some significant limitations to this option.

How much you can withdraw
First, your withdrawal under the home buyer’s plan is limited to $35,000 per buyer. Your spouse may also withdraw that amount for the same home purchase, allowing you up to $70,000 for your down payment. You also need to have saved that money in the first place unless you choose to go with an RRSP loan.

The amount you withdraw does not incur any taxes and can be put toward a home purchase. When withdrawing money through your Home Buyers’ plan, you will need to provide your financial institution with a T1036 form indicating the purpose of the withdrawal. Otherwise, it may not count towards your HBP loan, and you may end up paying tax on the money you take out.

Repayment rules
Using the home buyers plan, you have 15 years to pay back the amount, with a one-year grace period before repayment starts. You will not need to pay interest, and because the value of the loan and the repayment period are fixed, you will have the same yearly payment for the entire 15 years. If you withdrew the maximum amount under the home buyers plan, you would pay about $2,333 per year for 15 years or around $194 per month on top of your mortgage.

Paying your Home Buyers plan loan will not affect your RRSP contribution limit, as the money has already technically been contributed. This means you can still contribute your yearly amount on top of your loan repayment. However, any amount you repay on the loan is not deductible, as you already saved the tax on those dollars when you first contributed them to your RRSP.

The penalty for missed repayment on a Home Buyers plan loan is not very severe. When you fail to make a payment towards your Home Buyers plan loan, the missed payment amount will simply be treated as any other withdrawal from an RRSP and will be counted as taxable income for the year. Your principal still goes down, and you will simply owe more come tax season.

Also, be sure to designate any repayments as such, or you risk the Canada revenue agency counting it as a regular contribution. This can lead to you missing your payment and potentially exceeding your contribution limit.

Who is qualified for the Home Buyers’ plan?
To take advantage of the Home Buyers’ Plan, you must meet some qualifying criteria. First and most obviously, you will need to be a first-time home buyer, meaning you or your spouse have not owned a home in the last four years.

You will need to be a Canadian citizen or permanent resident, and you will need to withdraw funds all at once or in multiple installments within a single calendar year. You must use the money for a home purchase, so you can’t spend it on just whatever you want. The funds you withdraw must also be in your RRSP account for 90 days prior to withdrawal, which will be essential to know if you are borrowing or being gifted money into your RRSP.

You must also occupy the home you plan to buy, so you can’t use the Home Buyers Plan to buy an investment property you won’t live in.

Advantages of using the Home Buyers Plan
There are clear advantages to using the Home Buyer’s Plan to buy a home.

For one, it allows you to save income tax on a significant amount of your down payment, which can mean a lot of extra money in your pocket. It is also an interest-free loan, meaning the amount you borrow is the amount you will pay without any added costs. Finally, you have a long time to pay it back, meaning not only is the financial impact spread out, but you also still get to have that money in your RRSP when it comes time to retire.

Disadvantages to using the Home Buyers Plan
Savings required
One of the biggest issues with using the Home Buyer’s Plan is that it requires a significant amount of savings to be most beneficial. Those with an extra $35,000 saved can make the most of the Home Buyers’ Plan. The higher your income, the more you can save, and your income tax rate will be higher, making the HBP’s advantages even greater. However, for those who make less and save less, the benefits of the Home Buyers’ Plan will be reduced.

Long term loan
The Home Buyers’ Plan repayment is fixed at 15 years, meaning you commit yourself to a long-term loan repayment schedule. This means 15 years of increased home costs and 15 years when you could potentially miss your repayment and be charged taxes.

This may also be a problem if you plan to retire and use your RRSP within 15 years. The one upside is that you can prepay early for no penalty.

Missing out on RRSP income
Saving into your RRSP is one thing, but making the most of it is another. Many people choose to invest in their RRSP. When it comes to investing, it’s always best to have as much as possible as early as possible to take advantage of compound interest. Though retirement may seem far away, the number of years until you retire are limited, and every year counts in investment growth.

By taking $35,000 out of your RRSP, you miss out on the potential growth of that money if it were invested. Though it will be back in your account after 15 years, that’s 15 years you missed out on investment growth. On the other hand, this money is technically being invested in your home, so you may still see some returns. This is not necessarily a downside, but you must consider where your money is best spent based on your expected investment returns and personal goals.

Repaying your Home Buyer’s Plan loan may also limit your ability to continue contributing to your RRSP further, leading to years of playing catch up. In this case, you would also be missing out on the tax benefits of the RRSP for future years.

Is it right for me?
Though there are downsides to using the Home Buyer’s Plan to borrow from your RRSP, they are far from deal-breakers. The Home Buyers plan will not be for everyone, but it is an excellent option for some. The person who will get the most out of the home buyers plan is anyone with a large amount of savings already in their RRSP and who makes a significant income.

This means that you will be able to withdraw the maximum amount and benefit most from the tax savings of having contributed. In addition, a high income will help with repayment and allow you to contribute at the same time, allowing you to continue making tax deductions.

As your savings amount and income go down, so does the feasibility of the Home Buyers’ Plan. However, it may still be a good idea if you expect your income to increase in the coming years. You can save the taxes now, and your loan will become even easier to service over time, meaning there are few downsides if you keep on top of your payment schedule.

Suppose you are deciding between using the Home Buyers’ Plan or withdrawing directly from your RRSP and paying the tax. In that case, it will be in your best interest to use the HBP as you can retain the contribution room by repaying the plan, which is not an option with a straight withdrawal.

If you are considering using the Home Buyers’ Plan for your first home purchase, consider talking to a tax professional or financial advisor. They can offer you a more in-depth understanding of how the program can benefit your particular financial situation.

The topic of housing supply isn’t front and centre of the affordability discussion like it was just a few months ago.

Despite housing affordability in the first quarter posting its worst decline “in a generation,” according to recent data from National Bank of Canada, the public’s focus is now squarely on inflation, rising interest rates and falling home prices.

And for good reason. Inflation is at a 30-year high, mortgage rates have more than doubled from their record-lows of last year and the average national home price is down 8%, as of April, from its February peak. In many local markets, prices are down well in the double-digits.

However, the lack of new housing supply remains the root cause of housing un-affordability in Ontario. At least that was the consensus of a virtual panel discussion last week hosted by Teranet.

Its panelists included Tim Hudak, CEO of the Ontario Real Estate Association (OREA), Jason Mercer, chief market analyst for the Toronto Regional Real Estate Board (TRREB), and Joe Vaccaro, founder and president of RIOS Real Estate Operating System.

All three were in agreement that new housing construction isn’t keeping up with demand, in large part due to the province’s rapidly growing population.

“Most new Canadians want to be in the Greater Golden Horseshoe because it’s where the opportunity is,” said Mercer. “Also, unlike previous generations of immigrants, today’s new Canadians are coming with education and money to invest in homeownership. So, the market is getting bigger every year and the supply doesn’t change.”

Ontario welcomed 107,865 immigrants between July 1, 2020, and June 30, 2021, and that was down from the previous year due to COVID restrictions. In 2019, over 150,000 people moved to Ontario.

Hudak reminded the panel that demand pressures aren’t just being felt in the GTA.

The topic of housing supply isn’t front and centre of the affordability discussion like it was just a few months ago.

Despite housing affordability in the first quarter posting its worst decline “in a generation,” according to recent data from National Bank of Canada, the public’s focus is now squarely on inflation, rising interest rates and falling home prices.

And for good reason. Inflation is at a 30-year high, mortgage rates have more than doubled from their record-lows of last year and the average national home price is down 8%, as of April, from its February peak. In many local markets, prices are down well in the double-digits.

However, the lack of new housing supply remains the root cause of housing un-affordability in Ontario. At least that was the consensus of a virtual panel discussion last week hosted by Teranet.

Its panelists included Tim Hudak, CEO of the Ontario Real Estate Association (OREA), Jason Mercer, chief market analyst for the Toronto Regional Real Estate Board (TRREB), and Joe Vaccaro, founder and president of RIOS Real Estate Operating System.

All three were in agreement that new housing construction isn’t keeping up with demand, in large part due to the province’s rapidly growing population.

“Most new Canadians want to be in the Greater Golden Horseshoe because it’s where the opportunity is,” said Mercer. “Also, unlike previous generations of immigrants, today’s new Canadians are coming with education and money to invest in homeownership. So, the market is getting bigger every year and the supply doesn’t change.”

Ontario welcomed 107,865 immigrants between July 1, 2020, and June 30, 2021, and that was down from the previous year due to COVID restrictions. In 2019, over 150,000 people moved to Ontario.

Hudak reminded the panel that demand pressures aren’t just being felt in the GTA.

 

The construction of office space is declining in Canada amidst runaway inflation increasing construction costs.

A new report from Colliers Canada has found that although the number of under-construction offices is still very robust, with more than 15.7M sq. ft being built, that number is down from its earlier peak.

The office space that is going up is largely concentrated in downtown Toronto and Vancouver, Colliers notes. And there’s plenty of interest for it in those markets. In Toronto, downtown office occupancy is up 24%, compared to just 7% at the beginning of the year. And as the report states, employee attitude towards both travel and work safety has improved.

“Coupled with the warmer weather, this has led to a renewed vibrancy in the streets of the downtown core,” the report reads. “In the face of uncertainty regarding hybrid work, tenants have turned to experts in real estate and design to explore options for creating appealing and functional spaces for their employees, with flexibility and future-proofing at the forefront of tenants and designers’ minds.”

In Vancouver, demand is outpacing office supply, pushing the city’s office vacancy rate to fall to 5.8%.

“Larger office tenants form the most active segment but face a limited number of available options which continues to shrink,” the report reads. “Smaller tenants appear to be taking a wait-and-see approach as larger companies navigate the complexities of return to office strategies.”

But not everyone is jumping right back into the office real estate market. As the report says, the three already-implemented Bank of Canada interest rate hikes are causing significant drains on people’s wallets, giving pause to tenants and investors alike.

“Both tenants and investors have felt the impacts of the recent Bank of Canada interest rate hikes and their effects on consumer spending,” the report reads. “Tenants who do not have immediate space needs are taking the ‘wait and see’ approach to leasing, while higher interest rates have increased the cost of borrowing, leading to a smaller pool of buyers.”

Canada’s industrial market is similarly on the rise, experiencing a “bull run driven by fulfillment centres,” the report says. Across the country, rents are rising and vacancy has dropped below 1%. In major markets, the vacancy rate is even lower, hitting a minuscule 0.1% in Vancouver and 0.2% in Toronto.

Industrial rent prices are also on the up and up, rising 30% annually in some markets. In the Greater Toronto Area in particular, asking rental rates are up 35% year over year. Colliers notes that typically in the past, net rental rates would be discounted if tenants leased more space, but that discount is being offered much less frequently, if at all.

A new report from the Canada Mortgage and Housing Corp. says the country’s housing stock would need to climb to over 22 million units by 2030 to achieve affordability for everyone living in Canada.

The housing agency notes that two-thirds of the supply gap is found in Ontario and British Columbia, two markets that have faced major declines in affordability.

Around 2003 and 2004, an average household would have had to devote close to 40 per cent of their income to buy an average house in Ontario, and close to 45 per cent in British Columbia. As of 2021, that number is close to 60 per cent.

The report says additional supply would also be required in Quebec, as affordability in the province has declined over the last few years.

Achieving housing affordability for everyone in Canada will require developers to become more productive and make full use of land holdings to build more housing, CMHC says.

The agency also says governments must make regulatory systems faster and more efficient as well.

 

Developers could cancel the construction of approximately 5,000 new condominium units in Toronto in response to rising material and labour costs, an analysis conducted by the real estate research firm Urbanation has found.

Urbanation President Shaun Hildebrand shared the results of the analysis with CP24 on Tuesday.

He said building costs that are up approximately 20 per cent year-over-year are now rising “much faster” than real estate, which could result in some projects “no longer being economically feasible to proceed with.”

Rising labour costs amid record low unemployment are also a factor, according to Hildebrand.

“This is being exacerbated by supply chain issues caused by the pandemic and the war in the Ukraine and it is contributing to very, very strong increases in costs to the point now where construction costs for condos are up 20 per cent year-over-year and they are growing much faster than prices,” he said. “It is not just the 5,000 units that are already in the market that could cancel, it is all of the projects that should have launched over the next little while that are no longer going to be entering into the market. So that puts the supply squeeze not only on today but years down the line when these projects ultimately get delivered.”

Real estate prices have already started to soften amid an aggressive interest rate tightening cycle being taken by the Bank of Canada.

Hildebrand said that Toronto has been in the midst of a “condo boom” for some time, so overall supply should remain strong with about 87,000 units currently under construction and 33,000 more in the pre-construction stage.

But he warned that there will be some “collateral damage” due to the fact that “costs are rising very quickly at a time that prices are starting to soften.”

In that case he said that buyers will be entitled to have their deposits returned to them under Ontario law, but not necessarily with appreciation.

“Unfortunately, it could be years between when that deposit is paid and when they actually get their money back and in the interim prices could have escalated quite a bit and they are not usually able to get that appreciation from that deposit, which in some cases shoves the purchasers out of the market,” he said.

Data from the Toronto Region Real Estate Board has previously suggested that home prices have now fallen for three straight months. The average price of a Toronto home was, however, still up 10 per cent year-over-year in May.

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.

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.

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.

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

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.

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.

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.

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%.