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Housing Market Overview
Toronto and Ontario Housing Market Forecast Canadian Real Estate Market Report Greater Toronto Area Real Estate Market Ontario Real Estate MArket Update Canada’s housing market displayed signs of cooling during the first quarter of 2013, as total sales declined 15.3% year-over-year. Prices remain higher year-over-year as the overall market remains in balanced territory with stable supply/demand dynamics. While comparing year-over-year metrics can be useful, we believe it can be misleading given we are coming off record volume years. The CMHC expects total sales for 2013 to reach 451,100, unchanged vs 2012 and 3.4% below the long term average of 467,100. Industry experts fully expect that headlines will continue to focus on how sales remain down from last year, but are quick to point out that those same numbers have held steady since the last round of mortgage regulations took effect in July 2012. Although transactions remained down from year ago levels in more than 90% of all local markets, the gap diminished in a number of large urban markets including Greater Vancouver, Calgary and Montreal. Edmonton was the only large urban market which had sales that surpassed those of a year ago. The national market remains firmly in balanced territory as inventory declined to 6.6 months at the end of April from 6.7 months in December. The decline was a result of an increase in sales combined with a decline in the overall supply of homes for sale. The national average price for homes sold in April was $380,588, which represents a 1.3% increase from the same month last year and a 4.6% increase from the average sale price in 2012. Greater Toronto Area Real Estate Market In the GTA, resale activity slowed during the first four months of the year with a 11% decline in total sales compared with the first four months of 2012. Shortage of listings in some market segments, stricter lending guidelines and the additional land transfer tax is likely to have played a role in the decline. The largest year-over-year decline amongst any segment was the resale condo market which was down 13.9% from the first four months of 2012. This decline was spread evenly between the “416” and “905” regions in the GTA. Prices continue to be supported by overall supply/demand dynamics as the average selling price during the first four months was $513,895 which represented a 2.8% increase from the same period one year ago. The average selling price in April was led by townhomes and highrise condo apartments which both saw a 3.1% year-over-year price increase followed by semi-detached homes where there was a 2.7% increase. The average selling price has rebounded to start the year after experiencing two consecutive down months to close 2012. GTA Year-Over-Year Summary For April Source: TREB Taking a closer look at the condo market in the GTA, there was a total of 4,133 sales reported through the MLS System in the first 3 months which was down 17% from the first quarter of 2012. New listings were also down 5.3% year-over-year. According to the Toronto Real Estate Board, condo buyers benefited from a substantial amount of choice in the market especially in comparison to low-rise home types. But given that new listings were down in the first quarter, this suggests that the market may become tighter moving forward. Inventory numbers continue to remain low amongst low-rise homes as the number of newly listed homes continue to decrease. At the end of April, there was just 1.8 months of inventory in this segment compared to over 3 months at the end of 2012. Condo inventories also felt the effects of fewer listings, as inventory fell to under 3.5 months for the first time since May 2012. The national inventory number is 6.6 months. Historical Home Sales and Average Price in the GTA Source: TREB Months of Inventory Between Highrise Lowrise Housing in GTA Source: TREB Ontario Real Estate Market Update Existing home sales in Ontario stabilized during the first quarter of 2013 after trending lower in each of the prior four quarters. A total of 39,330 homes were sold during the first three months which represented a 4.9% increase from the fourth quarter of 2012 and a 13.6% decline from the same period one year earlier. Modest job growth across the province coupled with more out-migration over the past year contributed to sluggish resale demand. New home listings dropped province wide for a third consecutive quarter as weather conditions and less upward pressure on prices discouraged homeowners from putting homes on the market. Row and apartment housing remained well supplied while single and semi-detached housing experienced less obliging supply conditions. The hottest market was Thunder Bay due in large part to lack of supply options. Hamilton, Barrie and Oshawa are markets which have tightened due to incoming demand from households bypassing the more expensive GTA market. Despite the presence of balanced market conditions, Ontario home prices still managed to grow above the general rate of inflation during the early part of 2013. The average selling price during the first three months was $393,170 which was a 2.4% increase over the first quarter of 2012. The price gain was supported by the fact that mid to higher end homes continue to dominate a large part of the entire market. This phenomenon is consistent with the tighter market conditions for singles and semi-detached housing in some of the major markets across the province. Ontario’s tightest resale markets posted the strongest price gains so far this year with Thunder Bay leading the way. Comparison of Select Markets in Ontario Source: CMHC Ontario saw a decline in the number of newly constructed residential homes during the quarter with most of the weakness concentrated in the multi-family home sector, with singles posting modest declines. Momentum in the residential construction sector has been less intense since last spring due to better supplied resale markets and high level of units under construction. Residential construction has declined most in Kitchener, Kingston and Windsor while holding up better in Barrie, Thunder Bay and St. Catharines-Niagara. Average Annual Home Prices in Ontario Source: CMHC
Similar Housing Demand Conditions in Canada and US
Housing markets in Canada and the US are sizzling. Recent headlines have used superlatives to describe housing market conditions in both countries and the data do back this up. Still, a closer look reveals some interesting distinctions as well. Home price and sales metrics show that while the US market is hot, Canadas is hotter. For example, existing home sales, which make up the majority of overall sales in both countries, is well above historical averages, but Canadian home sales have outperformed. As of March 2021, home sales in Canada were 75% higher than the average over 2018 and 2019, while it was 13% above in the US. Likewise, home prices also spiked. In Canada, the average home sold was 32% more expensive than what it was a year ago, and it was 17% higher stateside.
From a high level, the list of commonalties across markets during the pandemic is longer than the areas of difference, particularly on the demand side. Perhaps the most influential demand-side driver has been historically low mortgage rates. Responding to the impacts of the pandemic, the Bank of Canada and the Federal Reserve slashed rates and enacted large quantitative easing programs early last year, resulting in a sharp drop in borrowing costs. Given that the US conventional mortgage rate is a 30-year rate compared to Canadas 5-year benchmark, borrowing costs fell faster in America as flight to safety flows lowered longer term yields at the onset of the pandemic.
CANADA HOUSING MARKET and new stress test
Canadian home sales took a turn in April 2021, declining by 12.5% (sa m/m) from the highest level on record in March 2021. Listings followed suit, falling by 5.4% (sa m/m). While both sales and listings decreased in April, the smaller decline in listings further eased the national-level sales-to-new listings to 75.2% from record high readings earlier this year (the highest being 91% in January). While this is a move in the right direction towards a better supply-demand balance, the ratio is still significantly higher than its long-term average of 54.5%. As a result of this persistent tightness in the housing market, the composite MLS Home Price Index (HPI) rose by 2.4% (sa m/m). This is a deceleration in price gains from paces observed over the last two months, owing in the most part to a slowing in prices for single-family homes and townhouses. Apartments, which had remained relatively close to pre-pandemic levels before accelerating earlier this year have maintained momentum in April.
Movements in the housing market this month continued to be broad-based rather than market-specific, as declines in sales were spread out across much of the country.
The Office of the Superintendent of Financial Institutions (OSFI) also announced that, effective June 1, the minimum qualifying rate for uninsured mortgages (i.e., residential mortgages with a down payment of 20 percent or more) will be the greater of the mortgage contract rate plus 2 percent or 5.25 percent.