Building permits, January 2021

January rang in the new year with a record high total value of building permits issued, rising 8.2% to $9.9 billion and surpassing the previous record of $9.6 billion set in April 2019. These gains were driven primarily by the residential sector.

Residential sector surges to new heights

The value of permits issued in the residential sector increased 10.6% to $7.1 billion in January—rising past the previous peak of $6.5 billion posted two months earlier. Provincial highs were reported in Ontario, Quebec, New Brunswick and Manitoba.

The majority of the rise in the residential sector was attributable to single-family homes, which climbed 15.1% to a record $3.5 billion—the eighth increase in nine months. Continuing the upward trend observed since October, the value of single-family permits issued in Quebec soared, rising 40.3%. Much of the gain came from regions outside of census metropolitan areas (CMAs).

Multi-family permits increased 6.5% to $3.5 billion, mainly driven by higher construction intentions in Ontario (+17.1%), where several permits in excess of $100 million were issued for condominium apartments in the CMA of Toronto. Conversely, the value of multi-family building permits in Quebec fell for a fifth consecutive month in January.

Non-residential sector up modestly in January

The total value of permits issued for non-residential buildings rose 2.6% to $2.8 billion in January after a 10.8% drop in December.

Following three consecutive monthly declines, industrial permits bounced back to average 2020 levels, increasing 31.7% to $535 million in January. High-value permits for an Amazon warehouse in Lachine, Quebec, and for two Eglinton Crosstown light rail transit stations in Toronto helped reverse the downward trend.

The value of commercial permits increased 3.3% to $1.5 billion. Six provinces posted increases in this component, led by Ontario (+14.7%) and Quebec (+20.4%).

Within the institutional component, municipalities issued permits worth $781 million, 11.8% lower than December. Values in Newfoundland and Labrador returned to typical levels following a $170 million hospital renovation permit issued in Corner Brook the previous month, pushing the national total lower.

Source: Statistic Canada


Hot Markets in Toronto and Vancouver See Rise in Home Sales as Condo Market Rebounds, With Low Rates Driving up Prices

Toronto

The average price of a home sold in Toronto breached $1 million for the first time in February, with gains accelerating in the suburbs around Canada’s largest city. Prices in the Toronto region shot up 14.9% from the year before to $1.05 million as bidding wars broke out on properties that came up for sale, according to a release on March 3 from the Toronto Regional Real Estate Board. It’s the second Canadian city to join the million-dollar club after Vancouver.

“It’s clear that the historic demand for housing experienced in the second half of last year has carried forward,” Lisa Patel, president of the Toronto real estate board, said in a statement accompanying the report. “The supply of listings is not keeping up with demand, which could present an even larger problem once population growth picks up following widespread vaccinations later this year.”

The COVID-19 pandemic caused an unexpected boom in demand for housing, with the ubiquity of remote work spurring demand for larger homes even as record low mortgage rates increased people’s ability to pay for them. 

Ground-level homes in the suburbs were the drivers of February’s price gains. In the City of Toronto, the detached houses sold for $1.7 million on average — a 13.2% annualized increase. Detached homes in the 905 area code, which surrounds the city of Toronto, rose 27.8% to $1.3 million.

The market is getting so frenzied it’s even bringing life to the downtown condo market that has been hardest hit by the flight to bigger homes. Though average condo prices were still down in February, that segment led the way in sales growth, with transactions surging 64% as bargain hunters piled in, the data show. 

“In the absence of a marked uptick in inventory, the current relationship between demand and supply supports continued double-digit average home price growth this year,” the real estate board’s chief market analyst, Jason Mercer, commented in the report. “If we continue to see growth in condo sales outstrip growth in new condo listings in Toronto, renewed price growth in this market segment is a distinct possibility in the second half of the year.”

Vancouver

The Real Estate Board of Greater Vancouver says the market is heating up so fast that  February sales in the B.C. region totalled 3,727, a 73.3% increase from the 2,150 sales recorded the year before and a 56% spike from the 2,389 homes sold the month before. The month’s sales were so strong that REBGV said they were 42.8% higher than February’s 10-year sales average and are helping the market shift in favour of sellers.

Tirajeh Mazaheri, a real estate agent with Coldwell Banker Prestige Realty in Vancouver, characterized the pace of the market as “insane.” She’s heard of buyers lining up down the street just to view homes in North Vancouver and of a property in the Shaughnessy neighbourhood that sold for $1.2 million more than asking.

The total number of homes listed for sale in the region during February was 8,358, a 9.1% decrease compared to the 9,195 in the year prior and 0.6% increase from the month before. The region also saw 5,048 new listings in February, up from 4,002 the year prior.

Townhomes, REBGV chair Collette Gerber said, were experiencing the region’s most pronounced case of supply outstripping demand. For all property types, she said the sales-to-active listings ratio for the month was 44.6%, but townhomes alone had a ratio of 61.8%. The sales-to-active listings ratio was about 41% for both detached homes and apartments.

Home prices often experience upward pressure when the ratio surpasses 20% over several months. The MLS home price index composite benchmark for Metro Vancouver reached just over $1 million in February, a 6.8% increase from the year before and a 2.6% jump from the prior month.

COVID-19 and economic measures were fuelling some of the frenzy, said Gerber. “Low interest rates remain a key driver in today’s market,“ she said. “We’re seeing steady numbers of first-time homebuyers and move-up buyers entering the market.”

Mazaheri has been telling clients it’s a seller’s market and if they have a one-bedroom home, they should take advantage of low interest rates and upgrade to a two-bedroom. If they have a two-bedroom property, she suggests switching to a townhome.

She believes the market won’t settle down unless the government hikes interest rates or brings in cooling measures, so her current advice is to act fast. “For the time being, I see things just going up higher and higher.”

Calgary

On March 1st, the Calgary Real Estate Board said that the market has faced low inventory levels compared to sales for the past several months, while prices continued to climb.The board’s February numbers show that prices jumped by about 8% to reach an average of $485,870, up from $446,690 the year prior. Sales totalled 1,836 last month, a more than 54% increase over February 2020 and a volume not seen since February 2014. 

New listings, however, didn’t keep up the pace. They amounted to 2,848, a 13% increase from 2,517 the year before. CREB estimated the area now has fewer than three months’ worth of homes on the market.

Conditions are particularly tight in the detached sector, especially for homes priced below $600,000, said CREB. That portion of the market alone has less than two months of housing supply, but is also experiencing the most significant price gains. Detached home sales in February amounted to 1,123, up from 678 the year prior, while prices edged up to $572,670 from $526,084 previously. New listings for the category were up about 17%, but inventory was down by almost 30%.

At the other end of the housing spectrum, apartments and condos have a relatively high level of inventory compared to sales. CREB said 272 apartments sold in February, up from 209 the February before. Inventory in the category reached 1,433, a slight dip from 1,470 the year prior.

Potential Headwinds for 2021

Canada Mortgage and Housing Corp. predicted that housing prices in big cities like Toronto will continue to climb through 2021, though the national housing agency warned that at least some of those gains could be at risk depending on the course of the pandemic and whether companies continue to support work-from-home policies once it’s safe to go back to the office. If they don’t, that could lead people who have moved further from the city centre to reconsider their choice, said CMHC officials.

RBC has also said that there are at least four major headwinds that could cool down this market, in a note titled ‘Super-strong housing market is far from risk-free.’

  1. Policymakers respond – In the past, British Columbia and Ontario governments have intervened to calm their real estate markets, and RBC expects them to respond once again, especially as housing affordability becomes a distant dream for most Canadians living in the main cities.
  2. Rate risk – Interest rate risk could rise if the economy outperforms expectations. The Canadian economy jumped 9.6% in the fourth quarter, suggesting a strong rebound. 
  3. Weak immigration flow – Decline in the influx of immigrants could slow down housing activity over time, making the condo market especially vulnerable.
  4. Jobless recovery – Canada’s unemployment rate remains stubbornly high at 9.4%, and that could lead to market weakness would pose a risk.

Source: Globe and Mail
Source: Financial Post
Source: Toronto Star
Source: Financial Post
Source: Toronto Star
Source: Toronto Star


CMHC Acknowledges ‘Errors’ on Last Year’s Prediction of Housing Collapse

The head of Canada’s national housing agency defended his organization’s prediction that the COVID-19 pandemic would cause a sharp decline in the residential real-estate market after it unexpectedly boomed instead.

“I’ve been taken to task for pessimistic housing forecasts last spring,” Evan Siddall, president and chief executive officer of Canada Mortgage and Housing Corp., said on March 1 in a thread of posts on Twitter. “At the time, I felt responsible to share what my colleagues were predicting. Times were uncertain and I felt that a warning about house prices was responsible. Indeed, I don’t recall anyone predicting accurately what actually transpired.”

In May 2020, after resales fell by 57% and the average selling price dropped by 10%, CMHC issued an outlook saying the average selling price of a home could fall between 9% and 18% in the worst-case scenario. The agency said mortgage arrears could soar and that housing starts could plunge.The market instead powered to a record year for sales and prices.

In his posts, Siddall said the earlier forecasts didn’t anticipate how pandemic-related job losses would be concentrated among low-wage workers more likely to rent their homes than buy. He also said they’d failed to predict the sudden surge in demand for larger properties from more affluent people forced to work from home, and able to avail themselves of record low mortgage rates. Siddall said policy makers remained concerned about what could happen if some of these trends reverse, particularly when combined with elevated levels of household debt among Canadians and continued economic adjustments to a post-pandemic world.

“We never pretended to have a crystal ball,” Siddall said. “Nor are we all-knowing on housing. We meant to contribute to a discourse, even though it was hard to be precise about future. In hindsight, we could have made that clearer.”

Source: Globe and Mail
Source: Financial Post


Sales of New Single-Family Homes Set 15-Year Record in January

The search for more space indoors and out has continued into the new year with single-family houses continuing to dominate new-construction home sales in January. The 1,506 detached homes, semi-detached homes and townhouses sold in January in the Toronto area was the highest number for that month since 2006, said the Building Industry and Land Development Association (BILD).

There were 660 detached house sales with a benchmark price of $1.79 million. Nearly half of those, 302, were sold in York Region.

The 51% year-over-year increase in transactions was 66% above the 10-year average for what is traditionally a slow month in new-home sales. The benchmark price for new single-family homes rose 24.2% year-over-year, to $1.36 million.

Condo prices also rose 10.4% compared to last January, to a benchmark of $1.02 million. Measured on a per-square-foot basis, condo prices rose 8.5% year-over-year to a benchmark $506, compared to $419 in January 2020.

There were 665 new condos sold. The category that includes apartments was down 39% compared to sales in January 2020 — that was 28% below the 10-year average. In January 2017, there were 1,606 condos sold. The combined sales of ground-level homes and condos sold in January was 4% above sales in the same month last year.

“The 2021 new-home market has started the year where it left off in 2020, with strong demand continuing for single-family homes and fewer new condominium apartment openings, which impacted condominium sales volumes,” said Ryan Wyse, manager of analytics, data solutions for Altus Group, the company that tracks new-home sales and prices for BILD. “Given the ongoing pandemic and uncertainty, it’s not surprising to see few new project openings this early in the year,” he said.

That has served to reduce the inventory of new-construction homes available for sale in the Greater Toronto Area to 12,774, down from 13,171 in December, said BILD. Inventory includes homes under construction, pre-construction units and those in completed buildings.

Source: Toronto Star


CMHC Reverses Course and Predicts Home Sales Shifting Towards Pricier Housing in Major Markets

Buyers are spending more money on home purchases in several major Canadian cities, even as the COVID-19 pandemic causes layoffs and income reductions across the country. On February 25, the Canada Mortgage and Housing Corp. said that home sales have shifted toward more expensive housing types in Vancouver, Toronto, Ottawa and Montreal in recent months.

The federal housing agency attributed the shift to fewer new immigrants, government relief programs that helped Canadians manage costs and pandemic-related employment troubles, which disproportionately kept younger and lower-paid Canadians out of the market. “It’s higher income households that are continuing to manage to cope with the pandemic, have kept their jobs and their salaries are increasing, so demand at the higher end of the market probably reflects this,” said Aled ab Iorwerth, CMHC’s deputy chief economist. “The other aspect that … may be happening is that people are selling condos at the city centers, looking for more single-detached housing further out in the suburbs or in rural communities, and those prices are generally higher.”

His comments came as CMHC released a report analyzing the Vancouver, Calgary, Edmonton, Toronto, Ottawa and Montreal real estate markets throughout the pandemic. The agency found the COVID-19 pandemic was no match for these markets, which saw prices, sales and housing starts soar above expectations during the health crisis. The flurry of housing activity and increases were driven by government relief programs, variations in lockdown measures and pent-up demand for homes and show that many Canadians weren’t letting increased restrictions or dramatic economic situations deter them from buying.

CMHC’s analysis of the year revealed that lockdowns and other restrictions caused a sharp decline in sales and price levels in the second quarter of 2020, but they had rebounded, moving higher than pre-pandemic levels by the end of the third quarter. In more recent months, CMHC has seen the number of sales outpace new listings, placing upward pressure on prices and keeping prospective buyers of more affordable housing out of the market. CMHC found early in the pandemic, sales fell faster than new listings in Vancouver, Toronto, Ottawa and Montreal, but this changed in the third quarter, as strong growth in new listings was outpaced by stronger growth in sales.

Depending on how long the trend lasts, ab Iorwerth worries what it will mean for people looking for entry-level or less expensive housing. He believes there may be people that lost their jobs permanently in the retail sector or others that have been hit hard by the pandemic, but the scale of those losses and their impact on housing is difficult to ascertain at the moment, he said.

While he predicts people will return to their normal spending habits and once more frequent restaurants and other urban entertainment venues as the virus is quelled, he said it’s too difficult to predict how long it will take the housing market’s lower-end to rebound. He said, “We are really in the hands of the pandemic.”

The report comes a day after Bank of Canada governor Tiff Macklem suggested there were signs of “excess exuberance” in real estate, with people buying homes based on the belief that prices will continue to rise. But he said the market is not yet at the level of frenzy Toronto saw five years ago before governments stepped in with cooling policy measures.

Christopher Alexander, RE/MAX Ontario-Atlantic region’s chief strategy officer, said it’s difficult to gauge how far off that fever the Toronto market sits — a lot of people aren’t listing their homes simply because they don’t want to host showings during the pandemic. “The big issue is serious demand, not enough (listings) and people have saved a lot of money and you can really stretch it with these lower interest rates,” he said. “Most of the people who were affected by the pandemic were in the service sector. Executive positions weren’t too affected. Couple that with rock-bottom interest rates, it’s kind of a perfect storm.”

Desmond Brown of Re/MAX Hallmark Realty says he “absolutely” has concerns about the possibility that some home buyers may be overextending themselves: “There could be a bubble — probably more on the outskirts than we’re going to see in the City of Toronto. It’s definitely something to be concerned about,” he said. “The Bank of Canada is still keeping the interest rates low. But what it’s doing is just driving up prices,” he said.

Source: Toronto Star
Source: Toronto Star